Tech Selloff: Expert Says ‘Get Your Shopping List Ready' – Stocks ‘Took the Elevator Up and the Elevator Shaft Down’
Micron Technology, Inc. MU | 0.00 | |
Apple Inc. AAPL | 0.00 | |
NVIDIA Corporation NVDA | 0.00 | |
PowerShares QQQ Trust,Series 1 QQQ | 0.00 | |
Spdr Select Sector Fund - Technology XLK | 0.00 |
After months of surging valuations, technology stocks saw a selloff by investors late last week. The selloff sees potential concerns on valuations and has one market expert telling investors to get their shopping list ready.
Tech Wrecks
Freedom Capital Markets Chief Market Strategist Jay Woods has followed the markets for decades, which led to his lack of surprise at last week’s selloff for technology names and a potential market correction.
"The moving averages always come back to play. We had noted that they had gotten too far ahead of themselves and investors should book profits," Woods said in a weekly newsletter.
Woods recalls Micron Technology (NASDAQ:MU) and what he said around earnings for the tech giant.
"One of two things could happen – price trends sideways over time and the averages catch up or price would correct to them. Last week we got the price correction."
Woods uses the old adage of "markets take the stairs up and the elevator down" to explain what happened last week with the tech selloff.
"Seems exaggerated in the case of these high-flying tech names where they took the elevator up and the elevator shaft down."
Corrections are Normal
The market expert says what happened last week was "violent" for the technology sector, but nothing fundamentally has changed. Woods highlights upside to 50-day and 200-day moving averages for several of the big tech stocks.
"The stock market is the only market that has a sale and people rush for the exits. For the more adroit and learned investor, it’s time to get your shopping list ready if this sale continues."
Woods tells investors to know their levels and where they are comfortable buying technology stocks.
The market expert cites Nvidia Corporation (NASDAQ:NVDA) and Apple Inc (NASDAQ:AAPL) as companies that crushed numbers for multiple quarters, but saw their stocks fall, something happening to Micron and others now.
"Even the best results may be baked in. The market anticipates these things and then moves on."
Woods said the recent setback may pass, but if not, the market will correct before going back into bull market territory.
"Corrections come in waves – they are a normal part of the market landscape. Have been for years and will continue to do so for decades to come. We average three 5% corrections a year and roughly one 10% correction as well."
The market expert said we could be in a normal correction right now.
Price Action
The Invesco QQQ Trust (NASDAQ:QQQ) is down 2.6% over the last five days and down 5% over the last month. The State Street Technology Select Sector SPDR ETF (NYSE:XLK) is down 3.6% over the last five days and down 7.9% over the last month.
Compare that to the SPDR S&P 500 ETF Trust (NYSE:SPY), which is down 0.8% over the last five days and up 0.1% over the last month.
In the current market, the S&P 500 is outperforming the Nasdaq 100, which is heavily weighted for tech stocks and the XLK technology ETF.
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