People keep asking me, when is tech going to bottom? How can it turn?
I always say, "let the stocks tell you. Let them be your guide."
We got a slew of tech stocks on Tuesday that did get crushed at the opening and then bounced back. They are the most expensive stocks in the market, not stocks like Apple (AAPL) that now trade at almost a market multiple on next year's earnings.
Yep, the winners today? The equities I call the "WoodStocks," in honor of Cathie Wood from Ark (ARKK) . Now you have to understand that her funds own a variety of stocks, but the ones I follow are all the stocks of some pretty great companies, companies like Spotify (SPOT) and Twilio (TWLO) and Square SQ. While the companies themselves were kicking butt, the stocks simply got too high.
They have now given up enough of a percent from their tops that I think you can start positions. That's what today's bounce back says. I think that Tesla (TSLA) can be bought, something we talked about last night in the Larry Williams "Off the Charts" segment. Ideally you want to own it closer to Memorial Day, but they have thrown a ton at it and it is still ticking.
But pulling back, there are two problems to calling a bottom. First, we had really high expectations for personal computer sales this year and we have learned that notebooks have weakened dramatically and that just kills the entire narrative. If we have lower notebooks, what's next? Semiconductors of all kinds go into notebooks, including those of Intel (INTC) and (AMD) . The latter is diversifying away with the purchase of Xilinx, but Intel has no protection. It's the whole food chain that's at stake. Can we trust Micron (MU) ? How about Texas Instruments (TXN) ? Can we buy the red hot Applied Materials (AMAT) and Lam Researches (LRCX) of the world.
Not yet.
When?
Not clear.
2022 could be a down year.
Second, as good as the opening trade is for retail and travel and homes, the closing trade is turning into a nightmare for tech. Just when the home office has been built out, we are learning that many companies are saying enough is enough and we aren't going to take your Zoom (ZM) calls anymore.
That's brutal.
Third, the glut of enterprise software and fintech stocks is so voluminous that you can't possibly separate the bad from the good. You just have such a plethora that unless you have so many things going, like Roblox (RBLX) with loving fans growing exponentially around the globe with user content and a gentle kind venue you may not be able to pop, to stand out.
You can't make enough Roblox. They just don't exist. But maybe there are too many Affirms (AFRM) , too many companies that use technology to differentiate themselves in pretty much identical ways. It's just a very crowded pool without a lifeguard and with plenty of stock coming at you at any different moment.
Plus, don't forget, if rates go higher no one wants anything that's sell at a multiple-to-sales, not profits.
So, the answer on the bottom is case by case. And, sadly, right now, there are more cases that are working than aren't and many more cases that won't work still on the docket.
We're oversold, but until we get closer to Memorial Day I think everything tech might just be a trade.
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