Yesterday’s Tech-Wreck – What Will Today Bring?

Readers of this space know that I have a particular focus on technology stocks and often can be charged with placing a little too much importance on their performance (or in yesterday’s case, lack there of) to the overall market.

-Yesterday was a perfect example in my opinion where tech under-performance was the story, and not just by the usual losers (MSFT, GOOG, CSCO & HPQ) but high-fliers (AMZN, PCLN, NFLX, CRM & VMW) which have been driving much of the Nasdaq’s performance, fell apart for no apparent reason.  

-Additionally names like AAPL and ORCL (which are very crowded trades) broke some key near term support and have me eying stocks like IBM, DELL  and INTC that still trade within a few % or so of their fresh 52 week highs.

-And last but not certainly least the volatility in the Chinese Internet stocks seems to be the nail in the coffin for me as I think about the potential for a monster sell off in Tech.  Stocks like SOHU, BIDU, SINA and NTES have seen the air come out of them since the IPO of RENN 2 weeks ago in the U.S.  Demand for RENN was off the charts and the stock which was priced at $14, traded as high as $24 after the open and now wallows below the offering price at ~$12.50.  That action and the company being labeled China’s Facebook was all that some tech investors and speculators needed to see to remind them of the insanity of past Internet bubbles.  Since making all time highs late last month, the stocks have gotten murdered, SOHU is down almost 25%, BIDU down 17%, SINA down 27% and NTES down 17%

Yesterday, I spent the afternoon looking for any leadership that could draw me eyes away from what was the slow motion train wreck of the tech sector, unfortunately there was little elsewhere to draw my attention away……GS stabilized for a bit in the morning after its $10 plunge in the last few days, only 2 close at a fresh 8 month lows.  Citi did a reverse split last week only for the market to kind of split it back the other way a bit, stock also closing at levels not seen since late last year.  Financials would be a sector that in my opinion could help to stabilize things and drive the next leg of any rally as they did not participate when the SPX made a new 52 week high a couple weeks back…….I don’t see this happening if at all until after the summer……the only thing Financial stocks have going for them at the moment is that they are the most hated sector in the market……but timing this is tough as these stocks will most definitely overshoot on the downside.

MY TAKE ON TODAY:  S&P futures are up 30 bps (for now), the market is awaiting some housing data and industrial production at 8:30. I don’t think either are that important and I would expect that if the market opens it will quickly fail and retest yesterday’s lows.  Watch names like AMZN that led the route yesterday, if stocks like this can stabilize than the Nasdaq has a shot of taking a bit of a pause.  AAPL is another very crowded story that has underperformed in the last week or so and is battling with the markets expectations for a new iPhone..  HPQ’s weird negative pre-announcement last night should not help sentiment in technology bit just further confirms what the charts have already been telling us….I am looking to pick on names that havn’t broken yet like IBM, DELL and INTC…..outside of tech a total breakdown of financial stocks appears to be in the offing and I guess continue to keep you eye on commodities…..SLV wlll likely be below 30 sometime very soon and GLD has the potential for fabulous “risk off” sell off…….