Over the last week or so, I’ve read countless articles/tweets about the love affair with tech names, specifically the FANG names; $FB, $AAPL, $AMZN $NFLX, $GOOGL, $MSFT. We’ve seen massive net flows (new money) going to the Nasdaq 100, as you can see on the chart below. The FANG names dominate the NASDAQ 100.
Here is another chart that gives looking at a different indicator, 14-week RSI, but it tells you the same story; investors are tripping over themselves to buy tech names.
The daily sentiment index is another indicator that shows a little frothiness.
All this data is great to know, but at the end of the day, the price action is what matters.
These tweets are from last week and were irrelevant to me until today; today is the first day the FANG stocks have a chink in the armor. As a group, they closed below their 5-day moving average for the second time in a week. And this happened while the rest of the market is still above its 5-day moving average. Either the rally is broadening out, or this could be a clue that we are about to sell-off. Only time will tell, but based on the love affair that we’ve seen with these stocks, the Johnny come lately might be in a world of pain pretty soon.
Those of you that are still looking for a retest of the March lows should know that it won’t happen unless these stocks get hit and get hit in a big way. Currently, the ten biggest tech stocks make up roughly 23% of the entire U.S. stock market.