The big tech rally of the 1990's that ushered in what many called the Fourth Industrial Revolution ushered in the notion of a new paradigm for evaluating stocks and investing.
It turns out all the rules eventually caught up with new technology, and even newer investors were drawn to the market with dreams of early retirement and private islands.
I don’t think we are on the cusp of a tech wreck like 2000-2001. There are numerous drivers just beginning to live up to the hype (Internet of Things, artificial intelligence, cloud, big data and 5G), but the recent weakness has been swift and biting.
Talk about “live by the sword, die by the sword.” It’s wonderful when big tech is leaping several percentage points in any given session. However, what can rally like that can come down even faster, and that’s a lesson many have forgotten until this month.
The NASDAQ 100 hit 7,700 on October 1st and began free falling, hitting a low of 7267 yesterday, down 5.6% in one week. Usually, these kinds of moves are yellow, if not red flags, but a glance at the one-year chart suggest this is a normal move to the bottom of the current trading channel.
Nonetheless, big tech has to take a stand even if it means new leadership.
NASDAQ -100
The tech sell-off is a reminder that there are other parts of the economy and investing. It’s investments that harken back to those idyllic days of old when big tech was a couple of tin cans connected by a string.
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It’s not as quaint as the notion that there are slow-moving, but steady names that are looking more attractive as tech takes its lumps.
Monday, the Dow Jones Industrial Average displayed true grit, rebounding from triple-digit declines twice. After opening down 150 points, the blue-chips chipped away to peak into positive territory. Once that rally effort ran out of gas, selling picked up steam and investors braced for massive losses.
Then, for the third session in a row, buyers bought the dip, panic selling became panic buying, and the Dow finished higher.
The S&P 500 was a curious mix as interest-rate-sensitive sectors rallied higher in the face of higher interest rates (don’t forget, the bond market was closed). This tells me investors were more concerned about seeking safety than interest rates.
Adding to that thesis is the fact Financials (XLF) didn’t have a big day, and the big money center banks were essentially flat.
-0.04% | |
-0.33% | |
+0.26% | |
+1.38% | |
-0.08% | |
+0.68% | |
-0.06% | |
+0.25% | |
-0.05% | |
+1.29% | |
-1.13% | |
+0.84% |
Internal Deterioration
Market breadth continues to erode, underscoring the idea investors might be selling losers regardless of fundamentals. This as we enter a difficult period where tax loss selling starts to come into play.
NYSE
- Advancers 1,502 Decliners 1,481
- New highs 35 New lows 332
NASDAQ
- Advancers 1,235 Decliners 1,793
- New highs 24 New Lows 208
Value Emerging
The good news is buyers were aggressively buying NYSE names as the up volume was twice that of the down volume. As investors continue to bail out of Technology (XLK), most of those funds found stocks in other sectors, which were coming off lows.
In fact, many of yesterday’s biggest winners have very attractive charts on the cusp of big breakouts:
Industrials
- (ARNC) Arconic Inc.
- (UPS) United Parcel Service
- (FLR) Fluor Corp.
Consumer Discretionary
- (AZO) AutoZone
- (HRB) H&R Block
- (JWN) Nordstrom’s
Consumer Staples
- (STZ) Constellation Brands
- (HRL) Hormel Foods
- (TSN) Tyson Foods
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