Does the breakdown in the FAANG names today signal a major market turning point? That is the question that market players are pondering as the group suffers some of the most aggressive selling it has seen in years.
In the past, pullbacks in any of the FAANG names have been buying opportunities. Action Alerts PLUS holding Apple (AAPL) went the longest in recent years without hitting new highs but the other four names have paid off nicely every time they have been bought on weakness like what is occurring now.
There are quite a few pundits saying that this time it's different. The most common thesis is that the market is undergoing a major rotation out of growth names and into value. If that is the case that is not a positive for the overall market as value stocks never offer sustained leadership. Bull market leadership is almost always stocks with high growth. Value names may offer brief periods of relative outperformance but they won't produce much of a bull market.
Should we be looking to buy the FAANG names? While I wouldn't rush into these stocks today, I don't think they are going to totally fall apart. There will be bargain hunters going after them fairly soon but right now there is a shift in sentiment that is creating some downside momentum unlike anything we have seen in a while.
I've been complaining about the poor action in individual stocks for a couple weeks now and we are seeing confirmation of the problems that were brewing in the FAANG names and the relative weakness in the Nasdaq.
The bears have the ball right now and are running with it. The best course of action is to stay out of the way and let the selling play out. Don't be in a big rush to try to catch these pullbacks. When the momentum improves once again there will be plenty of time to jump back in. Good markets last weeks and months, not days, so timing the exact bottom is not important.
The price action is very poor and that is all you really need to know. There are a few things working but it is very narrow so don't be in a rush to put capital at risk.