technology sector
How Tech Growth in 2015 Is Different from 2000 (and Why It Will Last)
By George Leong for Daily Gains Letter | Feb 18, 2015
The last time I saw 5,000 on the NASDAQ was way back in early 2000, prior to the collapse of the technology sector and all of the froth and euphoria on Wall Street. If you were trading back then, you would have recalled the staggering froth and frenzy that drove the technology sector to heights that were simply not sustainable and excessive.
Well, it took more than a decade, but it looks like the technology sector is on a roll again. I have been bullish on technology stocks as the top growth area in my outlook for this year and so far, this is panning out.
NASDAQ Push to 5,000 Much Different Now Than 15 Years Ago
The NASDAQ traded at its highest level since 2000 last Thursday, when the index came within 160 points, or 3.3%, of taking out the 5,000 level. A break above 5,000 would be a big deal for the technology sector.
Chart courtesy of www.StockCharts.com
Of course, the ascent of Apple Inc. (NASDAQ/AAPL) to nearly $130.00 a share and a staggering market cap of $741 billion is helping the index, providing stock market leadership.
As we near 5,000, there will be talk again of an exhausted and euphoric technology sector akin to 2000, but things are different this time around. The push to 5,000 has taken much longer and has been steadier versus 15 years ago, when everyone was buying without any thought to valuation or the underlying fundamentals.
I vividly remember seeing the big moves everyday and what I thought was the senseless buying of the technology sector. I recall friends taking out loans … Read More
This Sector Will Drive the Market for the Next Decade
By George Leong for Daily Gains Letter | Aug 20, 2014
It was just a few months ago that the technology sector stocks, specifically the momentum stocks, were getting bashed around and sold off by the stock market.
Since then, the selling has subsided and we have seen a nice rebound in technology stocks to the point where the NASDAQ is the top gainer in the stock market with a 6.88% advance as of Monday. By contrast, blue chips are hurting, with the Dow Jones Industrial Average down 0.55%.
What the stock market is suggesting to us is that the appetite for risk and higher-beta stocks continues to be prevalent as investors seek the potential for higher gains.
During the past five years of the stock market advance, technology has been one of my top areas for finding a growth investment opportunity. (Health care is another.) This remains my view.
The caveat I’d add, however, is that I would continue to be very careful when buying or trading social media stocks, as the inherent risk continues to be quite high.
I suggest continuing to focus on the Internet sector, as this will remain the dominant area going forward over the next decade as technology advances. Here I’m talking about online retail along with the developers of software and solutions for companies.
The benchmark NASDAQ stock market index is at its highest point in more than 13 years and is within 13.4% of its all-time high at just over 5,100. In hindsight, it’s amazing that it took this long to retrace the steps, but then the technology stock market was extremely overvalued and trading at insidious valuation levels back then.
The chart … Read More
Stocks vs. Bonds: Finding the Best Investment Opportunity Right Now
By George Leong for Daily Gains Letter | Jul 9, 2014
The bulls are continuing to ride the stock market higher with minimal resistance from the bears. After some weakness earlier in the year, stocks continue to want to edge higher.
We are not seeing the mass market participation we want to see in a rallying stock market, but this divergence is clearly not a big deal for traders.
The first half of 2014 saw mixed trading, but the stock market managed to edge higher. We saw multiple records set by the DOW and S&P 500, with both indices closing higher for the fifth straight month in June. Not bad given that historical records suggest muted action.
On the charts, the sense is that the stock market is aiming higher. The DOW broke 17,000 last week, while the S&P 500 is eyeing 2,000 and looking higher on the charts, based on my technical analysis. The DOW is riding consistently above its 50-day and 200-day moving averages.
Chart courtesy of www.StockCharts.com
On the plus, small-cap stocks made a strong rally in June as we saw some money flow back into the higher-risk assets, which technically bodes well for the broader stock market. We are also seeing buying return to the technology sector and the high-momentum plays.
But as is always the case after a rally to new heights, many are calling for a stock market correction.
The chart of the S&P 500 shows the potential of a small correction of approximately five percent. I would view this as an investment opportunity to buy on weakness.
Chart courtesy of www.StockCharts.com
The reality is that the stock market is heading higher, but we could … Read More
Chasing Risk? This Market Won’t Be Kind to You
By George Leong for Daily Gains Letter | May 29, 2014
My stock screens have been displaying up signals over the past few days, but I’m still somewhat apprehensive about the most recent stock market rally—and you should be too.
The stock market appears to be edging higher again after the S&P 500 closed above 1,900 at another intraday high on May 23. And while there is some buying support on the stock market charts, I still question the sustainability of any strong upside moves at this time, given the lack of any new catalyst. The reality is that the absence of any leadership and continued concerns towards technology and growth stocks suggest the stock market remains vulnerable at this time.
Where I’m sensing the most risk continues to be the technology sector and small-cap stocks, despite some current relief buying.
Some technical analysts might argue that the move of the Russell 2000 back above its 200-day moving average (MA) is positive; however, I would question the lack of mass stock market participation, given the lighter volume and the questionable and flat investor sentiment, based on my technical analysis.
The chart of volume on the NASDAQ (below) shows how weak the trading volume has been since mid-March, when it was above the 50-day and 200-day MAs. Note the downside bearish crossover of the 50-day MA (blue line) below the 200-day MA (red line) as indicated by the blue oval.
Chart courtesy of www.StockCharts.com
The NASDAQ and Russell 2000 remain below their respective 50-day MAs. Their failure to recover this key technical level is a red flag.
Also what concerns me regarding the NASDAQ is not only the presence of a bearish … Read More
Conservative Investor? Why Now Is Your Time
By George Leong for Daily Gains Letter | May 19, 2014
The best way to make money in the stock market at this time is to avoid growth and technology stocks while you take some profits off the table.
The reality is that, despite the failure of the Dow Jones and S&P 500 to hold after establishing new record-highs last Tuesday, the stock market wants more reasons to bid stocks higher. The first-quarter earnings season saw about 70% of the S&P 500 companies beat earnings-per-share (EPS) estimates, but the results were largely based on lowered estimates by Wall Street.
Investors took the opportunity to take some profits following the rally last week. This indicates to me that there’s definitely still some vulnerability in the stock market.
Bellwether retailer Wal-Mart Stores Inc. (NYSE/WMT) reported soft results that suggest the global economy is still hesitant to spend after the company fell short on revenues and EPS. And to make matters worse, the company also revised its second-quarter estimates to below consensus. Clearly, the retail sector is struggling, and this will impact gross domestic product (GDP) growth.
On the charts, technology and growth stocks are risky. The Russell 2000 fell back below its 200-day moving average (MA) after failing to hold for the second time in just over a week.
We are seeing some selling capitulation in the small-cap area of the stock market and it could grow deeper.
Companies in the technology sector, specifically the high-momentum stocks, also remain under pressure, helping to drag the broader stock market lower. I don’t expect this to change anytime soon, so this is an area that you need to avoid, liquidate, or protect with put options…. Read More
Investor Beware: More Selling Coming to Tech Stocks
By George Leong for Daily Gains Letter | May 12, 2014
If you’ve been keeping an eye on your screens and portfolio holdings (or if you’ve just taken a look), you are probably aware of the current selling capitulation towards small-cap stocks and the technology sector.
The bloodletting on Wall Street has been unabated and, in my view, it has been overdone. I’m not ready to jump in yet, but I would be on additional weakness in the stock market.
In a period of selling capitulation in the stock market, there is minimal regard for the quality of the stock. Sellers rush to the exits and dump everything along the way. I witnessed this on the stock markets in 2000 and again in 2008.
Yes, there is clearly a technical red flag on the growth stock market indices like the Russell 2000 and the NASDAQ. The Russell 2000 broke below its 200-day moving average (MA) last Tuesday, but managed to rally a bit on Thursday. If the buying support emerging continues, we could see the index rally back to its 50-day moving average; albeit, the risk is there in the stock market.
Just the fact that the technology group, which comprises many high-momentum Internet and social media stocks, is down more than 20% from its highs is worrisome. But at the same time, this isn’t really a surprise, given the advances made in 2013 and the previous years in the stock market.
Even with the stock market correction, we continue to see ridiculous valuations with the likes of such stocks as Yelp Inc. (NYSE/YELP), Groupon, Inc. (NASDAQ/GRPN), Facebook, Inc. (NASDAQ/FB), and Twitter, Inc. (NYSE/TWTR), meaning the bloodletting has not stopped, so … Read More
Déjà Vu of 2000?: Tech Sector Valuations Look Suspect
By George Leong for Daily Gains Letter | Apr 25, 2014
In a recent editorial, I discussed the potential red flags surfacing on the chart of the technology-laden NASDAQ. While I’m cautious, especially after its multiple failures to hold at 4,000, my view is that the technology sector stocks are the most vulnerable at this time, given their recent advance.
In the months leading up to early 2000, I recall the explosive buying in the technology sector was based on assumptions and speculations, rather than concrete, solid analysis.
While the recent buying in the technology sector—especially high-momentum technology stocks—was overdone, it was really nowhere close to what we witnessed back in 1999–2000, prior to the stock market imploding. I recall the surge of technology penny stocks trading under $1.00 to over $10.00, and in some cases to over $25.00, which was absolutely ridiculous at the time.
For some of you who were trading during that time, there was a wireless play called United Broadband Systems that was promoted as the next generation of wireless technology. At that time, technology and wireless were extremely hot and speculative. For one of my speculative market letters at that time, I advised readers to buy United Broadband at $0.25 as a speculative gamble. Heck, there was minimal financial history, but what I liked was the company’s story and that was good enough for me! Remember: the company was based on speculation, not on fundamentals, but we were able to turn an impressive profit.
When I see what is happening in the technology sector today, I am reminded of 14 years ago, but today’s technology sector is in no way as euphoric or crazy as it … Read More
Why the Tech Sector’s at the Top of My 2014 Growth List
By George Leong for Daily Gains Letter | Jan 27, 2014
The technology sector was my top growth area in 2013 and it has been since the reversal out of the recession. The euphoric buying in social media and Internet services stocks in 2013 obviously shows the immense upside price appreciation potential that lies in the technology sector.
The NASDAQ recently broke above 4,200 to a 13-year high and is within 20% of its all-time high of just over 5,100, which it achieved during those crazy and irrational times in late 1999 and early 2000. But we all know what happened thereafter, when the Internet bubble burst.
Now, while we have seen some big-league moves in some of the mobile and social media stocks, the gains are still nowhere near the ridiculous moves made some 14 years ago in the technology sector. I recall some speculators becoming millionaires via buying technology penny stocks that really had no financial history, but these companies were able to cater to the greed in investors to propel the stock market higher.
I doubt these times will surface again, but we will likely see glimpses when stocks rocket higher for no apparent reason except momentum.
Following the Internet bubble, I thought we may not see 5,000 on the NASDAQ for years. But that time has arrived, as the NASDAQ may be set to reach this former pinnacle sometime in early 2015, as long as the investment climate remains positive for stocks.
Take a look at the long-term chart of the NASDAQ below. Notice the record peak in March 2000, when stocks spiked higher.
Chart courtesy of www.StockCharts.com
Since the technology sector imploded and the NASDAQ bottomed … Read More
