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Investors turned on their favorite group of stocks recently, dumping tech shares in historic numbers and increasing their bets against the sector amid a September sell-off. The move came just before the shares began to stabilize this week, but it remains to be seen whether the bearish tilt represented the kind of capitulation that marks a bottom for a sector.
The Invesco QQQ Trust, which tracks the tech-heavy Nasdaq 100, posted its biggest outflow since October 2000 on Friday, according to Bespoke Investment Group. The massive exodus came amid a 3-day sell-off for the Nasdaq 100 last week.
It’s not just a one-day phenomenon. Inflows into the QQQ hovered near multi-year highs for most of this year as the sector led the six-month comeback from the coronavirus lows. But they have collapsed recently, according to Strategas Research Partners, which tracks the 65-day rolling sum of flows.
Strategas Research Partners
And a growing number of investors are betting against the Nasdaq-100, in another sign of waning confidence. Bespoke notes that the Nasdaq 100 has seen a recent spike in short interest, or the number of shares borrowed to bet against a stock. As of Friday, net short positioning in the Nasdaq 100 reached its highest level since April 2008.
While the Nasdaq 100 remains more than 10% below its all-time high, the index has posted two straight days of gains since Friday, outperforming both the Dow Jones Industrial Average and S&P 500 on Monday and Tuesday.
Some analysts say there hasn’t been enough pain to mark a turn yet, however. Baycrest Partners’ Chief Market Technician Jonathan Krinsky predicts the Nasdaq 100 will see further selling now that it has breached its 50-day moving average, after trading above that level for the past five months. Heavy-hitters in the index like Microsoft and Amazon both closed below their 50-day moving averages on Tuesday, as well.
