Pajama traders at it again? It's awfully hard to go to bed thinking that technology is headed for a major downturn, especially when the evening futures indicate further chaos ahead.
Why not?
Yesterday was one of the more bitter sessions we have had of late. We opened up so strong, especially in tech, based on absolutely nothing, nothing at all, on a day when it was clear that the president had just hammered a nail into any potential tech takeover. How in heck could the market be so oblivious to that? How could the buyers be so stupid, so wrong, so out of touch with what was going on? Were they so enamored of the rise in the price of Micron (MU) that they just had to keep buying no matter what? Did the narrative switch from higher estimates to potential Broadcom (AVGO) targets? Didn't it matter that the US had created a new doctrine that said if you do too much business in China you might be a Chinese company?
All of that was ignored. Instead we saw the buyers pile in to all of the usual names, the FAANGs and everything semi as if, somehow, takeovers didn't matter even as many of us would argue that consolidation has been a major driver behind tech's incredible launch in the last year.
By the time the session was over it was pretty clear that the group had gotten overextended and without a new source or reason for buying there didn't seem to be much of a reason to think that the selling could let up.
Then you come in today and the pajama traders say, "let's buy them?" And remember, when I say "them" that's tech because tech is now 26% of the S&P 500 so you are buying a ton of tech when you step up to the S&P plate.
Look, I like tech. I think that when I listen to Applied Materials (AMAT) tell its story about how much more silicon is in these new devices, like voice assisted machines or autonomous cars or virtual reality devices or gaming, I know the stock is way too cheap. I feel the same way about Lam Research (LRCX) . I know that Micron and Western Digital (WDC) are not the same old Micron and Western Digital that we saw before the data center explosion.
But the fact is that a major takeover, Broadcom to buy Qualcomm (QCOM) , is dead and the target's stock is 20 points below where it could have been if the company had simply said yes. Believe me, if it had said yes, I don't think that there would even have been a CFIUS issue since CEO Hock Tan was moving his company's headquarters to the United States. The idea that somehow Broadcom was going to give away 5G secrets if it got Qualcomm had become THE story when it wasn't even A story when this whole gambit started.
Am I saying tech should be going down?
No, I am saying that the pajama traders better get with the program and realize that when they take the S&P futures from being down nine to being up seven and the only thing that has really happened is a small climb in oil, there better be something great happening in tech world, or the whole move up could be erased in a burst of technology stock selling.
