The market.
I'm a big proponent of technology, but many technology stocks are priced beyond reality. For example, the SOX was trading below 200 when semiconductor stocks bottomed in the summer of 1998. A typical cycle for these stocks is 15 to 18 months. The SOX is now trading at about 1100 (+~500% from the low) and the bull has been running for 18 months. The SOX closed below the lower daily bollinger band for the first time since December, and if there is any follow through selling tomorrow, I would be out of all semiconductor stocks for the time being. Many so called "old economy" stocks are priced very cheap relative to their fundamentals and the rest of the market. Of course, this could go on forever, but I doubt if it will. Some of the weakness in the Nasdaq today is obviously due to MSFT, but this could also be the catalyst or excuse for a prolonged downturn in many high flying technology stocks. Sometimes an event like this this is all that is needed to change sentiment for other stocks, so it might be time to be more cautious on technology stocks and more bullish on financial stocks, retail stocks, pharmaceutical stocks, and automotive stocks, for example.
Here is how the indexes closed today:
Retail Index: 1008.08 +53.76 (+5.6%)
DJIA: 11,221.93 +300.01 (+2.8%)
OEX: 820.62 +5.56 (+0.7%)
S&P 500: 1505.97 +7.39 (+0.5%)
Internet index: 574.68 -75.04 (-11.6%)
Nasdaq: 4223.68 -349.15 (-7.6%)
SOX: 1094.81 -87.08 (-7.4%)
Only time will tell whether this is a one day event or something bigger. My guess is that the Nasdaq will continue to correct and that many old economy stocks will benefit from sector rotation.
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