No need to get too wordy today. The NASDAQ finally moved through resistance at 12,250 last week, albeit in weak fashion. However, a win is a win, and it goes into the W column whether it’s by 1 point/run/goal or 10.
Monday’s action was positive as it pushed the index a little further away from the line of resistance, which now acts as a level of support. Looking at the weekly NASDAQ chart, we see 12,500 as a potential sticking point, but 13,000ish appears to be the most logical, technical destination.
Negotiations over the debt ceiling will be the driver as to whether the recent breakthrough holds or if stocks come tumbling down. A deal, and the NASDAQ could pop to 13k in no time flat. No deal, and the index could slip to the 50-day moving average of 11,935 and rising.
June 1 is the deadline set by Treasury Secretary Janet Yellen, so we still have two weeks of posturing between the House and White House. It’s our opinion that neither side wants the heat, and a compromise will be struck somewhere near the stroke of midnight. In our view, the worst case is a day or two after the deadline, especially if stocks take it on the chin.
For now, index investors might consider Invesco QQQ Trust (QQQ) as long as the NASDAQ remains on the plus side of 12,000.
For the third week in a row, QQQ outperformed SPDR S&P 500 ETF Trust (SPY), which is the order we want to see when we are inclined to be bullish.
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) was the #1 performer with technology owning the next six spots, not surprising under bullish technical circumstances. Software is probably where we want to go as a pair of exchange-traded funds (ETFs), SPDR S&P Software & Services ETF (XSW) and Invesco Dynamic Software ETF (PSJ) were in the first six.
PSJ would be our first choice of the two as it’s above its 50-day moving average, recently broke a downtrend and recent bullish MACD crossover, a technical buy signal. If PSJ turns upside down, then we’d consider cutting losses if the ETF closes below $94. It finished trading on Monday at $97.80.
NetScout Systems, Inc. (NTCT) is PSJ’s tenth largest holding. NetScout Systems provides service assurance and cybersecurity solutions for protecting digital business services against disruptions in the United States, Europe, Asia, and internationally.
The company offers nGeniusONE management software that enables customers to predict, preempt, and resolve network and service delivery problems, as well as facilitate the optimization and capacity planning of their network infrastructures; and specialized platforms and analytic modules that enable its customers to analyze and troubleshoot traffic in radio access and Wi-Fi networks.
NetScout recently reported earnings that surpassed Wall Street’s expectations and might benefit from what is called post-earnings drift. In a nutshell, companies that tend to beat earnings expectations outperform the market until the next report. The reverse is true when a company misses expectations, underperformance could be in store.
NTCT was in a downtrend prior to its earnings news and popped afterwards. If shares can get past $31, it could move to the 200-day average of $31.75. If shares get past the 200-day benchmark, it could eventually challenge its 52-week high of $38.02.
NetScout Systems, Inc. (NTCT) is only appropriate for aggressive investors with at least a 12-month time horizon.