More of a tech wreck yesterday. Many are out saying it is nothing…it is a blip…just buy. That’s fine. We hope they are right. But evidence in so far is the big money is now selling growth and parking the money in value. We suspect that is something that only lasts a couple of days.
There are many chart breaks on a short term basis…but also on an intermediate and possibly a longer term basis. At the very least, many of these names are going to need time to repair themselves.
Futures off their lows…almost flat.
CAT up almost $5 this morning…in the DOW.
AAPL reports after the close tomorrow.
A ton more names reporting….ones to watch: PFE, PG in the DOW.
RL, SHOP, CHRW, HUM, RCL, SQ, STMP, BABA, TSLA, CTSH, ICE, REGN, YUM, W, ANET, GDDY, SHAK, WTW.
Instead of the NASDAQ/NDX/RUSSELL leading like we have told you they have been leading, we now expect them to lag. This means that the DOW/S&P will actually hold up better.
We are not saying this just because of Facebook or Twitter. We are saying this because we are seeing a lot of growth names showing near-term tops while also seeing the RUSSELL fail to break out and now breaking the support/50 day moving average. We could also add in the strong reactions to Amazon and Google, only to see them sold into.
On the other end, we are seeing money flowing into low beta stuff like the financials and even food, drugs and beverages…which had been lagging forever.
We do not know how long this lasts but we are now entering August and September, not the most thrilling months of the year. We know there is a lot more names to report but we are seeing enough to tell us there is a decent chance we have started the changing of the guard.
On top of Facebook gapping down, lots of other blow-ups.
BIOGEN (BIIB) after gapping up recently…worry over drug news…down $40.
ABIOMED (ABMD) recent leader down $24.
MOHAWK (MHK) big miss, big blow-up.
PAYPAL (PYPL) down only 4% but make note think it would have been worse except for a timely buyback announcement.
Others…TAL, TREE, TPX, NLSN, ALGT, KNX, EFX.
Gaps to the upside in CTXS, AMD, XLNX, UA…SVU up 60% on a buyout.
Futures down…but down most on NDX because of Facebook. This after a strong day yesterday because of TRUMP/EU potential trade deals.
“Gary…I have owned Facebook for a while but giving back most of my gains this morning…should I sell!”
I will never tell people who email me to sell or buy and the same goes for social media…for obvious reasons. Things change and if someone asks me about something today, things may change in a week.
But thought I do some explaining how stocks work.
There was no way of knowing Facebook would, as of this writing, be down $44 from yesterday’s close…more than 20%. I do not own the stock this second. I would have been thrilled with it before the close yesterday and unhappy after the close. My best advice is pick a number YOU are comfortable with and decide for yourself. The biggest issues I see Facebook having right now are:
Because of the stock’s success, it has become over-loved, over-owned and over-leveraged. Most growth funds, big , medium and small, own a ton of the stock. They have not even started their selling because the stock is gapping down. We suspect they will first hold on for dear life but continued weakness will beget even more weakness as they will start selling. We suspect it important the stock takes a stand sooner rather than later.
Facebook has become a controversial company. This is not a problem when the stock is going higher. It is a problem when the stock is being hit. Arguably and maybe not, Zuckerberg was less than truthful when on Capital Hill. On top of that, many believe the company has completely gone away from what Zuckerberg said years ago…that they would not sell user data. Sorry, everything about the company is based on user data.
Because of recent controversies, Facebook is going to make it easier to say bye-bye. In the past, it felt like it took an act of God to get rid of Facebook.,
It is not arguable the younger generation is not as enthralled with the application as others. The company will need this generation to get on board.
Growth is slowing…and looks like it will continue to slow. Going from a high growth company to a not-so-high growth company is not good news. Just remember, once a company gets so big, it is tougher to grow the business. In the past, Coke, Wal Mart and others were high growth companies. The good news is that growth is still strong, just less strong.
We have no blood in the game right now but know how a growth stock becomes not such a growth stock. Will be watching closely as this name has been a major influence on the NASDAQ/NDX as well as all of growth stock land.