Echoes of 1999

 | Feb 20, 2014 | 7:30 AM EST  | Comments
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Stock quotes in this article:

FB

,

ko

,

pep

,

qcom

,

ntap

Originally, I had intended to write today's column about how my market indicators -- the ones on which I've relied for 30-plus years -- worked wonderfully on Wednesday. However, when I saw that Facebook (FB) had agreed to buy WhatsApp for $19 billion in cash and stock, my mind tumbled back in time to 1999.

I am not a fundamental analyst, so let's be clear on this: I do not discuss valuation. I do not discuss earnings. I don't even discuss the company's products. I look at charts -- and as I stare at the charts of stocks such as Facebook and compare them with those of such companies as Coca-Cola (KO) and Pepsico (PEP), I find myself taking a trip down memory lane.

Below is Coke's chart from February 1999 to February 2000, as I wanted to include January 2000 -- and let's all stop and recall that the Nasdaq rose something like 80% in 1999. Coke, from a June high of $26, sank 30% to an October low of $18. It had started to recover by the time year-end rolled around, but not by much.

Coca-Cola (KO) -- Daily, 1999

Pepsi did not fare much better in that time frame: an August high of $32 to an October low of just under $24, for a drop of around 25%.

Pepsico (PEP) -- Daily, 1999

Now let's look at what was a fan favorite in 1999: Qualcomm (QCOM). If my eyes don't deceive me, that stock went from $3 to $90. It corrected in February 2000 -- to $50! These days, the stock is trading around $75, which means if you had bought at the high, you are still not back to even.

Qualcomm (QCOM) -- Daily, 1999

Another favorite stock from back then, as I recall, was NetApp (NTAP). These shares went from $10 to $60 -- and the stock is now 40. We're talking 14 years later, folks.

NetApp (NTAP) -- Daily, 1999

Why am I taking this trip down memory lane? Have you seen the charts of Coke lately? Pepsi?

Coca-Cola (KO) Daily, Present

Coke and Pepsi have their issues, of course, and many of the other consumer-product names are performing just as well. But there's currently a wide disparity between the stocks of companies that produce food and drink vs. technology names. In fact, the last time I remember the gulf being this wide in 1999. If we start to hear "old economy-new economy" in the coming days, we'll know things have gotten out of hand.

In the meantime, the banks are doing terribly: The KBW Bank Index (BKX) has underperformed since the early February low. The BKX-S&P 500 ratio is now flirting with the November lows.

BKX vs. S&P 500

Meanwhile, the BKX itself has the same pattern as the Dow Jones Transportation Average, which we discussed yesterday -- the big head-and-shoulders top, and the potential for a tiny bottom. The next few days will be make-or-break for this group.

BKX

Meanwhile, if you are wondering how the banks fared in 1999 -- well, you can see they didn't exactly participate in the fun then, either.

JPMorgan Chase (JPM) -- Daily, 1999

HR

 Overbought/Oversold Oscillator -- NYSE

 Overbought/Oversold Oscillator -- Nasdaq

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