I continue to be taken aback by the "tech is a safe haven" thinking, and in fact, I am going to take advantage of it - while I love the strength, I continue to raise cash and am taking a deep cut into what remains in both Apple (AAPL) and Baidu.com (BIDU). Former in mid $170s, latter in mid $320s. I am holding Research in Motion (RIMM) simply because I was adding around these levels and it has taken some pain of late.
I think by process of elimination the technology sector is being favored, so I am not actively pursuing Ultrashort Technology (REW) right now. Nothing else could explain the "strength". The earlier rotations (out of commodities) during previous corrections led people into housing, retail, and financials. It "appears" it is dawning on the masses that there will be no "2nd half recovery," and hence it is stupid to buy stocks that have no real hope of recovery anytime soon.
Unfortunately we were counting on that "rotation" and built up some stakes in those sectors - but after being burned 4x, the market finally seems to have wisened up on the 5th iteration. So what sector that leave if you flee commodities? You guessed it - technology. So it is a bit of a conundrum - do you stay in those names because they ARE holding up or when you look for names to cull do you cut the strength? I've decided to cull the strength.
I still see a massive gap in the Google (GOOG) chart and as Google goes, so goes tech - so I am using it as a proxy - all these names tried to break out, but have fallen back (yet still in the green). Aside from nat gas/oil names, I'd like to see this group punished before calling any bottom. Unfortunately to fill the gap in the chart (for non-technical types a gap is simply when a stock opens at a higher price than it closed the night before) - Google needs to drop down to $460 (current $540).
Seems impossible huh? Well we've seen a lot of impossible things happen in the past 12 months. If I'm wrong, I can always reverse this, but I am actually cutting a lot of the names holding up "relatively well" instead of the beaten down positions. Again, at this point, I don't agree with the thesis that technology is safe simply because it does not have exposure to oil, but this appears to be a working thesis of the hedge fund computers, so I can understand it from the point of "where else will one put their money if they flee commodities/global growth and no longer want to keep trying - and losing- in homebuilders, retailers, and financials".
If the market correction does end with a waterfall type selloff, prices in technology will also be materially lower. I think such a selloff would create better values elsewhere if indeed they refuse to sell off technology.
Disclosure: Long Apple, Baidu.com, Research in Motion in fund; no personal positions