SOX loses more than 7%, futures point higher this morning

What occupies me most this morning is the contrast between Friday's deep red session and futures that are already pointing higher again. The Nasdaq 100 lost 3.46% on Friday and the SOX chip index dived 7.2%, a move I had seen coming. Today will be an uneasy session anyway, because tomorrow the United States holds its midterm elections and tonight after the close both Apple and Palantir report earnings. Personally I choose not to think too much about taking positions right now, the risk is simply too big. From Wednesday, when things calm down a bit and we can see how the market looks technically, I will seriously consider doing something again. It is not only the elections that drive prices, the question of who will ultimately pay for all the AI investments stays in the background, and for me that question explains a large part of the weakness in the technology indices. So today mostly patience, we calmly wait for clear momentum.

Chip sector crashes on AI doubts, Intel loses almost a third

The unrest about the high AI spending of the big tech names, which already pressured Amazon and Intel after the close on Thursday, continued throughout Friday's session. Intel plunged 28.58% to $65.76, after Thursday's weak revenue outlook, which is partly related to an explosion at a chip plant in Israel and a disappointing PC market. It is one of the steepest daily losses ever for the stock.

Because of this blow the Nasdaq 100 fell to its weakest session since the end of 2022, while the SOX chip index gave up 7.2% and fell below its 200 day average for the first time in months. During the decline, the technology sector has lost more than $1 trillion in market value over the past weeks. Alphabet and Amazon also slipped further after their own earnings earlier this week.

Investors currently leave little room for doubt about the profitability of the big tech names' AI investments. A weak outlook is punished immediately and hard, as was visible with Intel.

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Wall Street closes deep in the red, chip names hit hardest

The Dow Jones closed 1.09% lower on Friday at 51,770 points. The S&P 500 lost 1.82% to 7,580 points, the Nasdaq Composite fell 2.86% to 25,437 points and the Nasdaq 100 gave up 3.46% to 28,385 points. The SOX chip index took the heaviest blow with a loss of 7.2% to 10,689 points.

Intel was by far the biggest decliner with a loss of 28.58% to $65.76. Palantir fell 6.27% to $184.11, ahead of tonight's earnings. Nvidia declined 4.22% to $204.64 on Friday in the wake of the broader chip selloff. Alphabet lost another 1.40% to $279.84 and Amazon fell 1.41% to $240.35, both still feeling the effects of earlier this week. Apple gave up 1.23% to $344.63, ahead of its own earnings tonight. On Friday Apple did become the largest company in the world by market value, it replaces Nvidia.

The American 10 year yield stands at 4.92% at the time of writing. The 30 year yield is at 5.30%. Gold is at $3,916, silver at $50.25 and bitcoin at $78,264. Brent oil is around $110 per barrel this morning, about 3% lower, after reports of the resumption of tanker traffic at the Strait of Hormuz take the earlier geopolitical premium out of the price.

The falling yields and the higher gold and silver prices point to a cautious flight to safer investments. That Nvidia and Intel both lost heavily shows that the doubt is not limited to 1 single chip company but hits the whole sector.

AEX and DAX hold up better than Wall Street

The AEX closed 0.68% lower on Friday at 1,134.4 points. The DAX lost 0.85% to 25,818 points.

The European chip suppliers took the full blow of the American chip selloff. ASML fell 6.11% to €1,412.80 and ASM International even lost 7.57% to €729.80. On the DAX Infineon gave up 6.39% to €50.56. On the other side were SAP, which gained 1.12% to €211.25, and Adyen, which closed 1.35% higher at €826.90.

That the AEX and the DAX do not match the American losses is mainly because SAP and Adyen largely offset the blow at ASML, ASM International and Infineon. Software companies currently stay out of the doubt that hits the chip sector.

Agenda and outlook for today

The American futures point higher on Monday morning. The futures on the Dow Jones are higher, those on the S&P 500 and the Nasdaq 100 are even considerably higher. In Europe the DAX future is higher, and the AEX future also indicates a higher open.

This afternoon at 4:00 pm our time the Institute for Supply Management publishes the purchasing managers index for American manufacturing for October.

Reporting quarterly earnings after the close today are, among others, Apple and Palantir.

Tomorrow, Tuesday 3 November, the midterm elections take place in the United States, for the House of Representatives and part of the Senate.

My view on today, we take our time

It looks like the markets will recover somewhat this morning after Friday's deep red session. It was an expected move, I had already indicated that in the newsletter and in the weekly update. Still, today will be an uneasy session anyway, because tomorrow the midterm elections take place in the United States. And there is more, because Apple reports earnings today, just like Palantir.

In short, we should not think too much about taking a position right now. The risk is simply too big. From Wednesday, so in the middle of this week, we can consider doing something again, but we still have to see where the market stands and how it looks technically.

Of course it is not only the midterm elections that determine the direction of the market. We are still dealing with the reason why the technology indices are letting us down for now, namely the big question of who will pay for all of that, which keeps coming up.

In short, we take our time and calmly wait for clear momentum before we act.

We try to find the right momentum to send our signals to members by email and SMS. Everyone then decides for themselves which positions to follow and which positions fit their own risk profile.

If you want to follow our updates and positions, then become a member via the offer you see in this update.

The psychology behind this market

A day after a fierce selloff, with an agenda full of uncertainties such as elections and quarterly earnings, a familiar mechanism is exposed, namely a lack of patience. The urge to react immediately to a sharp move, to jump in on the dip or to sell everything in a hurry, feels more logical to many investors than calmly waiting, even when waiting is the wisest choice at this moment.

From the coaching role at Guy Systeem Trading it is therefore pointed out that patience is not a weakness but a skill, something you can train just as well as recognizing a support or resistance level. A market with several uncertainties at the same time, such as elections, earnings and doubt about AI investments, rarely rewards anyone who runs ahead of clarity.

"Patience does not ask you to do nothing now, it asks you to wait until the opportunity does present itself."

Technical view AEX

The AEX closed on Friday at 1,134.4 points, just below the resistance at 1,148, the level the index has run into a few times in recent days. Below the price, 1,123 offers support, with 1,115 and 1,105 as the next safety nets. The price holds above the EMA-20 at 1,131, and well above the SMA-50 at 1,117 and the SMA-200 at 1,057, with the SMA-50 well above the SMA-200. The index stays within the rising price channel of recent months and is testing the top of it again.

Click the chart to view it at full size.

In short. The price is above all 3 averages.

The Bollinger Bands are close together, a relatively calm course.

The MACD is just below the signal line, with a slightly negative histogram.

Momentum is slightly negative, the price does not get above the resistance at 1,148.

The RSI is just above the middle of the range and does not point to overbought. The MACD is just below the signal line with a small negative histogram, and momentum is also slightly negative, a cautious signal within an otherwise still rising trend. The Bollinger Bands are close together, which indicates a relatively calm market without big outliers.

A clear reversal pattern is missing, the AEX has been moving within the same rising channel for months. In the coming sessions the index can make a new attempt towards 1,148, while a pullback to the support at 1,123 is likely as soon as the calm leaves the move for a moment. A close below 1,105 would only then really weaken the short term picture.

Technical view Nasdaq 100

The Nasdaq 100 closed on Friday at 28,385 points, below the SMA-50 at 29,796 and the EMA-20 at 29,642. Just above the price lies 28,900 as resistance, a level that still served as support until the end of last week. Much higher, 29,700 waits as the next hurdle. Below the price, 28,200 offers support. The SMA-200 at 27,927 stays just below the price and keeps the long term trend standing for now.

Click the chart to view it at full size.

In short. The price fell below the EMA-20 and the SMA-50 on Friday.

The MACD and momentum are both clearly negative.

The Bollinger Bands are far apart, a sign of an uneasy market.

The SMA-50 stays above the SMA-200, the price is approaching the SMA-200 quickly.

On the indicator side the RSI at 35 is just above oversold territory, without being there yet. The MACD is clearly below the signal line with a strongly negative histogram, and momentum also stays sharply negative, in line with Friday's fierce decline. The Bollinger Bands are far apart, which fits the strongly increased unrest in the index.

There is no clear reversal pattern yet, the index fell out of the trading range of recent weeks on Friday. In the coming sessions the resistance at 28,900 is the first gauge, the price does not get above it yet. If the support at 28,200 holds, a new attempt towards 29,700 is the next goal, a close below 28,200 would weaken the picture further.

Technical view SOX

The SOX, the American chip index, closed on Friday at 10,689 points, below the SMA-200 at 10,781 for the first time in months. Just above the price lies 11,000 as resistance, a level that still served as support until the end of last week. Below the price, 10,500 offers support. The EMA-20 at 11,575 and the SMA-50 at 11,868 now both lie well above the price, after Friday's fierce decline.

Click the chart to view it at full size.

In short. The price is now below the SMA-200, the EMA-20 and the SMA-50, a solid technical weakening.

The MACD and momentum are both negative.

The Bollinger Bands are remarkably far apart, because of the increased volatility.

The SMA-50 does stay well above the SMA-200.

In terms of indicators the RSI at 36 is heading towards oversold territory, without being there yet. The MACD is firmly below the signal line with a negative histogram, and momentum is also clearly negative, in line with Friday's fierce decline. The Bollinger Bands are remarkably far apart, a direct result of the strong price movement of the past sessions.

The index has been moving in a downward sloping range since the summer, with a sharp acceleration downwards this week. In the coming sessions the support at 10,500 becomes the first and immediately very important gauge, a close below it opens the way to further weakening. If the support holds, a rebound towards the resistance at 11,000 becomes the first goal, but the price does not get above it for now.