Where Have all the Tech Leaders Gone?

There’s absolutely no giddy up in the Four Horsemen of Tech, as Apple (AAPL), Amazon (AMZN) and Research In Motion (RIMM) are all on steep slopes with little traction, as their MACDs are pointing straight down. Google (GOOG) got an upgrade from Citigroup, by replacing Expedia Inc. (EXPE) as Citi’s No. 1 choice for its top picks live list (this is Citigroup’s list of stocks to buy or sell Monday). However, this did squat to help prop up the remaining horseman, as GOOG slipped 1.65 (0.31%), and is in danger of losing critical support in the 515-520 range. In fact all the horsemen are in a similar situation - Apple has strong support at 165, and the next stop is gap support at 158.

So, if the leaders have all but gone away, what’s left to prop up this market? It’s hard to find any optimism as every rally is quickly squashed with sellers out-pacing buyers. Decliners lead advancers on the Nasdaq by a 2 to 1 margin, with new lows crushing new highs 8 to 1! In my estimation, the markets are going lower today (Tuesday July 1).

In recent weeks the Tech sector has been propping up the other markets. Investors were gravitating towards growth - with the operative word here being “were.” We all know the financials are already in the hopper, and vying for an even lower station as they are down big in Europe this morning, and Oil keeps pushing and pushing, it’s as though investors are determined to hit $150 a barrel whether there’s demand or not. Perhaps that’s the magic line, and once they hit $150 they’ll let go of the reins? One thing is for sure, Oil is parabolic, so theoretically there’s no price too high before it busts.

Unfortunately this race for the 150 mark, and general dismal market performance is putting incredible strain on the economy causing runaway inflation, the cost of goods and materials are increasing, and jobless claims are on the rise. To compound this, more and more investors to move to the sidelines, and average folks are simply pulling their money out of the market all together. Who can blame them? That has been our stance here on Investor in the Wilderness these past few weeks. The bright spots in are certain commodities like Agriculture and Precious Metals, but they are in risky plays due to their recent meteoric rise. Probably the best place to park your money for the time being is in the stalwarts of down economies, and that’s companies which produce soups, soaps and cereals. These are the essentials that everyone must buy, even in the worst of times.

In such a down market, there’s obviously no long plays, what about shorts? Well, we’re extremely oversold, so you would expect there to be a bounce at any time. The risk is simply too high. So, even though the Investor in the Wilderness community has recommended sitting on the sideline, and going cash for the past several weeks, we haven’t had many plays to profit on, but at the same time we have also avoided one of the worst Junes in stock market history. Thereby living up to our creed of:

 

 Capitalization First, Maximum Profits Second

 

At this point trying to guess a bottom is a fool’s gambit. The S&P has strong support at 1275 and its March low was 1255, the Nasdaq is in better shape, and currently sits at 2293, which is well above its March lows of 2155, and price support at 2255. If the S&P loses 1275, I believe it will drag the Nasdaq down with it to test those March lows. It’s best to play things light, perhaps some Day Trades or Bear put Spreads. The key is to limit exposure. We’ll need that capital when things get moving.

As always, I’ll be providing daily guidance and intraday alerts to members of the Wilderness Investors Group. Check it out, it’s free and there are great discussions among many talented investors.

Disclosure:  The author is long AAPL.

Comments

[Bob J1:]

The 2 extra horseman typically include SAP and Oracle. And both of these companies are in mature industry cycles.

The next wave is with Environmental compliance software companies and/or high growth Heathcare niches.

2008 Jul 01 09:25 AM

[dig:]

well as of 10am looks like aapl's popping against a generally down market.

2008 Jul 01 10:01 AM

[Thoughtful:]

So which is it Ernie? Your disclosure says "LONG". Your article says you're on the sidelines in cash.

2008 Jul 01 10:22 AM

[mollytjm:]

APPL is a good long term investment. It has hundreds of very smart people, the best R & D, tech support,multiple products, innovation and retail space. It has no debt and huge cash reserves. and july 11th is coming and then the Olympics and 2 Apple stores opening in China and roll-outs in many countries. this all bodes well.

2008 Jul 02 11:23 AM