Tech Premium narrows - Nasdaq's decline pushed down ration with S&P 500

U.S. tech stocks - as captured by the Nasdaq 100 - are heading back to a kinder, gentler place which investors may find more approachable heading into 2Q earnings season. The Nasdaq 100 is clawing back from a 2.5% drop in June, its worst monthly performance since April 2016. The benchmark fell below its 50-DMA but has almost retaken that trend line, which would hearten technically-oriented traders.

One result - good or bad, depending how you approach valuations - is that the ratio between the Nasdaq 100 and S&P 500's P/E ratio (on a blended 12-month basis) has fallen from June's high, a gap that was the widest since 2014.

The Nasdaq has simply "re-tested its breakout point" relative to the S&P 500, according to MKM Partners chief technical analyst Jonathan Krinsky. There has been "no damage done and if anything, it has now re-set expectations heading into earnings," Krinsky said yesterday in a note.

So the ultimate remedy for FANG flu may be just around the corner.

Source: Bloomberg Pro Terminal

Trader - S. Fuchedzhiev

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