A Big Warning for Big Tech
If you thought this week was tough for technology buckle up because a chart showing even more pain ahead for this sector turned mastercard or worth joins us now to break it all down Carter, what are you looking at? You Bet thanks. So I mean before we get to the charges important to say that equities are not annuities right? I mean give backs, dip selloffs corrections the they're a part of investing in. So it's always hard though to figure out how far the decline will go. Let's try to figure that out couple charts. One of five the first one you see here I thought we'd start with this. It's going back to the early nineteen nineties. It's a two panel. Chart on the top. You see the Nasdaq composite. Obviously, it's well above its dot com peak in two thousand. But what's really interesting ironic and telling the bottom panel, the Nasdaq even with all of this has not recouped its relative losses to the SNP. Since the dotcom peaks that bottom panel without circle I drunk, you still haven't made relative high, which just shows how treacherous is to buy into the top of a bubble in any event the here, and now let's go. To the next chart. So now we're looking at a chart of the Nasdaq, no judgments or annotations, and yet what you can see is a clear break in trend I've simply drawn the trend line draws itself, and what we know is we have broken trend. This is the first break of the well-defined trend line that's been in effect since the march low. So where to well take a look at the next, what we know, and this is now the percentage decline were. Down Eleven and a half percent for the Nasdaq index overall. But once you broken trend, what is your reference point of? Could it go down? Thirteen could fifty of course it good. So the next reference point look at the next chart is the January February peak from which the market broke out. We know the S. and P. of course has already gone all the way back to it's generally Feb repeat and so were the market to simply go back to the peak. Of the pre pandemic. Hi, final chart. What it would be is not an eleven and a half percent decline, which is what we've seen so far. But then we're looking at something in the order of about eighteen and so is that a possibility you bet it is. A pretty good testament to first loss. Best loss if something does crack hard, it's usually right to try to take some measures and. Even, as Jeff said, we are not oversold. Okay. So this is specifically Carter for the Nasdaq for the S. and P. Five hundred, which already said breached that pre pandemic level. Is it smoother sailing or because of the tech leadership, we're also GONNA see a decline that that mirrors this but may not be as deep. Well, that's right. So then it's a question about the markets construction we know top by stocks or twenty, five percent. We know that interestingly just before this crack, the top fifteen stocks as a wait just finally exceeded the dot com peak in ninety nine, and so the question is the Nasdaq composite down eleven percent the S. and P. Down only seven percent is there more to go. Well, if the parts composed the whole, the whole comprises the parts if the big parts have more to go the presumption is that the SNP as more nego- Carter to see you, we'll see you later on options action Carter Braxton Worthy Cornerstone Macro Jeff, males you agree with Carter in this call for a decline of eighteen and a half percent on the Nasdaq from the recent peak. Yeah I do and I think the levels he points out or a really clear in that you have the pre pandemic peak but then you also have the upward sloping two hundred day moving average if you look at the triple cues, for example so I think that would be a really natural resting point for this particular correction and I do worry about the overall market just given the weight of some of these names and because I think the rotation and the cyclicality isn't necessarily prime to take off, that may not carry the day. In terms of the broad market I, think in order for that rotation to happen, you need to see things like consumer confidence, the labor market continued to heal. You know we had this divergence between the labor market and how consumers were actually behaving because of this income replacement that is now gone. So I think the uncertainty there needs to heal a lot more before you can see that rotation and have that value cyclicality carry the market higher Steve In cars world in which this decline happens do your cyclical stocks do better than tech? So I would have agreed with Mr Mills a couple of weeks ago that all of them get pole down to General I at the same rate and velocity the general but the the issue that I'm I'm I'm looking at now is that I m seeing if you chart chemicals right now chemicals don't look so bad on their on their ETF while tech does so to the to answer your question chemicals and sickle goals will rally even with the S&P falling out of bed.