Investors turned bearish on their favorite sector tech quickly this month

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. 

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