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Tech Stocks Can’t Save the Market Anymore

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For a while, the "FANG" stocks - Facebook ( FB ), Amazon ( AMZN ), Netflix ( NFLX ) and Alphabet ( GOOG , GOOGL ) - were doing a lot to keep the S&P 500 at support between 1,890 and 1,850. Along with a few other large, momentum names, the market has seemed to levitate just above support.

If we adjust the S&P 500 to weigh all of its components equally instead of assigning more value to the largest firms, the picture looks a little different.

For example, the Rydex S&P 500 Equal Weight ETF ( RSP ) has formed a classic "head-and-shoulders" reversal pattern, like the S&P 500 itself, except that RSP has already completed a neckline breakdown and retest. Historically, this has been a reliable bearish signal. You can see a chart of the breakdown and subsequent retest below.

Rydex S&P 500 Equal Weight ETF ( RSP ): Chart source TradingView.com

Tech Stocks Getting Hit Hard

If the S&P 500 has largely been held above support by the influence of a few stocks, it makes a little more sense why the selling last Friday and this Monday matters so much. Since hitting a high on Feb. 2, FB lost 17% at its lowest price point on Tuesday, Feb. 9. AMZN also sold off and broke support on Monday, Feb. 8. The stock's subsequent bounce has been relatively weak compared to recent price moves.

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NFLX may have caught a bid recently, following Akamai ( AKAM )'s surprise report. The content-distribution company is considered an important leading indicator for NFLX's user metrics. However, much of the news driving AKAM is related to a stock buyback program and a cost-cutting reorganization. The news wasn't all that good for consumer spending on video and media.

All of the FANG stocks have direct exposure to online media consumption, which can also tell us a lot about consumer behavior. If users are spending less time and money on media, they are likely continuing to spend less on other physical goods.

Declines weren't limited to just the FANG stocks. Investors seem to be souring on risk in general. For example, biotech names like Biogen ( BIIB ) and Regeneron ( REGN ) are still down 6% or 7% for the week. The selling extends further beyond media and biotechnology as well. More than 30% of the biggest gainers in the S&P 500 during the last year are down 10% or more over the last week.

The outlook for stocks seems to be shifting further towards a bearish breakdown. We feel that maintaining a bearish bias in the portfolio is the best strategy at this point.

You can learn more about identifying price patterns and using them to project how far you think a stock is going to move in our Advanced Technical Analysis Program.

InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician ( CMT ) designees, are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next SlingShot Trader trade and get 1 free month today by clicking here.

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The post Tech Stocks Can't Save the Market Anymore appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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