Nasdaq & UK Techmark going their separate ways...

[Riz]

Ever since the late April rally it's been attracting my attention that UK is not responding to positive movements in US shares in a proportion that it used to...

This of course is a serious point with regard to trading UK shares especially techs...as UK traders treat UK tech shares almost as Nasdaq sattellites and whichever direction the Nasdaq goes overnight, they expect the UK techs to follow the next morning...

One can clearly see that when comparing the Nasdaq chart to the UK Techmark 100 chart...almost identical...similar tops, similar bottoms...same directions almost in the same percentage...just like couples

Only in the beg. of June the diversion that I mentioned earlier and also on some other posts of mine became obvious and a clear de-coupling started to appear on the charts...

Nasdaq started the first week of June rallying for a week or so, when Techmark went flat the whole week...Nasdaq then went down only to bounce back up and ended June more or less at the same level it started, Techmark however just kept going down (ignoring insignificant bounces) to end the month about -400 points down...

I am attaching an overlayed chart of Nasdaq and UK Techmark to view the de-coupling...

So what do we make of this?

It's obvious that the institutions and fund managers have dumped the Techmark...and hedge funds together with private investors are heavily short on it...and I think it's oversold...

The question is whether it is likely to be more oversold and as it's been so far, that indiscriminately before a proper bounce occur...while Nasdaq seems to be consolidating

That's something the UK techs traders/investors need to work out to bring about more profitable trading or investing tactics/strategies...

Finally, the UK TMT crash that we spotted quite early started with doubts over a US recession, why should it deepen at a time when the US getting less doubtful about their economy? Is the UK Techmark going to re-couple with Nasdaq and if so how soon? And a last one, is it going to happen by pulling the Nasdaq down or by pushing the Techmark up?

Food for thought, eh?

Riz

 

[Ian56]

Riz

Very interesting.
Could you put up a similar comparison chart between the S&P500 and the FTSE250 or 350?

Thanks,
Ian

 

[Riz]

Hi Ian,

I'll work on other comparisons too...but this one is the most obvious example of de-coupling, and as the de-coupling started with the Techmark refusing to response to the Nasdaq rallies, it was a good sign of a possible dip to occur...

In spite of last week's US decline Nasdaq is still nearly 300 points above it's April low and trying to work out whether 2000 is going to be resistance or support level...Techmark however is around 200 points below its year low in April...

That's why I wrote on "This looks like the end of the bear market" about 20 days ago:

"UK seems to be taking things differently, US goes up we go flat waiting to see if the gains are sustained..US go down we go down twice as much beating drums of US recession...

Ever since the rally in April, UK not responding US accordingly...it follows -ve but objects +ve developments...US investors started to look beyond the 3rd quarter long time ago, UK investors not looking at anything but the first 2 quarters, therefore staying away from the market leaving it to traders giving the shorters the upper hand...they've got carried away so much that no share prices can consolidate; take BLM for example, around 40 still the focus of UK shorters, how can the price consolidate on this sentiment..."

The question is still there, is or when the UK Techmark going to re-couple?

Riz

 

[shelman]

Just got back from my hols and i'm thinking i should have stayed for the rest of the summer.
An interesting observation Riz. Remember how slow the UK reacted to the US bear market. Uncle John posted an article, from 'The Times' i think, last summer, in which the author stated that proof of the end of the long bull run was the fact that UK institutions had suddenly started buying US. This turned out to be an astute piece of journalism.
Could a similar slowness be happening in reverse?
If so, we'll have to wait some time to find out, in the meantime i think i'll buy some premium bonds

Steve

 

[Riz]

The UK market is merciless to technology companies that issue profits warnings, far more so than the U.S. and European stock markets...

Since March, the average stock price for a UK tech company has dropped 22 percent since its warning. That compares to a 10 percent to 15 percent drop in the average price for a U.S. or European company that warned, according to London-based equity strategists at HSBC.

65 percent of UK stocks are trading below their after-warning levels whereas in the U.S., the average tech stock is up 9.3 percent since warning...

Another interesting point is that UK exec. directors become victims of witch-hunting soon after PW..."The U.S. warnings, in contrast, largely have been blamed on that anonymous foe: the sharp slowdown in IT spending..."

That's one reason of de-coupling...

Interesting reading:
http://www.ftmarketwatch.com/news/story.asp?guid={3C9E0735-13B2-4D1A-A5B2-B750C121EC5C}

Riz

 

[Riz]

Updating the chart as the gap seems to be getting bigger...

Riz

 

[Riz]

Mind the gap it's getting wider..

As they say in the city...updating the chart to point out that the gap is still there only getting bigger, while Nasdaq consolidating above 2000...

Riz

 

[shelman]

Hi Riz,
Maybe we are smarter than the Yanks... remember how quick we anticipated the end of the long bull run by investing in the US markets last year... our institutions i mean of course.

Steve

 

[Riz]

Updating the chart as it seems that the techmark has started to recouple with nasdaq which is good news so back to the usual, it's easier to work out this way

Steve, it doesn't matter, at the end of the day we have to follow them not the other way round unfortunate or fortunately

Riz

 

[Riz]

chart update

Attaching updted chart

Riz