Tech stocks have hit the wall
LINK :
http://finance.yahoo.com/news/tech-stock-sell-off-spreads-144344351.html
Tech stock sell-off spreads through world markets
Global stocks plunge as sell-off that began on Wall Street proves contagious
LONDON (AP) -- A sell-off of Internet and technology stocks that started on Wall Street spread around the globe on Monday, with tech companies hammered by worries about excessively high valuations.
Renewed concerns over Ukraine also unsettled investors, particularly in Europe. Pro-Russian separatists who seized a provincial administration building in the eastern Ukrainian city of Donetsk proclaimed the region independent an echo of events prior to Russia's annexation of Crimea. Ukrainian authorities called the move an attempt by Russia to sow unrest.
In Europe, the FTSE 100 index of leading British shares was down 1.1 percent at 6,623 while Germany's DAX fell 1.8 percent to 9,521. The CAC-40 in France was 0.8 percent lower at 4,448.
In the U.S., the Dow Jones industrial average was down 0.5 percent at 16,338 while the broader S&P 500 index fell 0.4 percent to 1,859.
The latest bout of nerves started last Friday when mainstays of the Internet economy such as Google and Netflix that have surged over the past year were hammered as investors had a change of heart and decided prices were too high. The technology-heavy Nasdaq had its biggest one-day drop since February.
"Sentiment remains tricky for investors looking purely at valuations of companies, particularly within the tech-focused sectors," said Joao Monteiro, analyst at Valutrades. "Therefore the upcoming earnings season, which begins in earnest on Tuesday when aluminum maker Alcoa reports, is crucial."
Earlier in Asia, Japan's Nikkei 225 led regional declines, dropping 1.7 percent to close at 14,808.85. Hong Kong's Hang Seng was down 0.6 percent to 22,377.15, while South Korea's Kospi gained 0.1 percent to close at 1,989.70. Markets in mainland China were closed for a holiday.
Investors this week will be looking ahead to some key releases for further clues on the economic outlook. On Tuesday, they'll be awaiting a policy statement from the Bank of Japan that may reveal whether the central bank will provide further stimulus. On Wednesday, they'll be scrutinizing minutes from the Federal Reserve's policy setting committee.
The mood was less choppy in other markets. Among currencies, the euro was up 0.3 percent at $1.3743 while the dollar fell 0.1 percent to 103.19 yen. In the oil market, a barrel of benchmark New York crude was 6 cents higher at $101.19.
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This happens when you are ruled by the Chicken Little mentality. Some smart (deviously so???) hedge fund manager out there is chuckling as he waits for the prices to bottom out.
This year has started to look like a sideways year but not a decline . Now I'm not so sure . Perhaps the bears are starting to growl . Notice that this tech stock hit is global , not just in the US .
BTW hedge funds , if properly set up , make money in both rising & declining markets ...
Someone once said that the markets are ruled by two things-- greed and fear.
Amazing, despite the run-up, the overall trend still seems to be upward... (but ya never know!
).
One of the features of the current market psychology seems to be a preference for "sector rotation"-- a sector fis in favour, has a big run-up, falls out of favur, then goes bck into favour. The shift seems to be more pronounced, and happens faster, than in past years.
The NASDAQ is a fair indication of tech, the DOW less so. Here's how they performed the last 5 days-- tech seems to be more in favour:
And of course one of the most important principles is diversification-- own at least, say, something in 5 sectors, because ya never know...
True. In the past the better ones have done really well. Interestingly, recently they haven't. I think its because they have been too short, planning for both rises and falls in market. And the market seems to just keep going up and up....
Investors can create their own hedge to some degree. Diversification. Some people make it a rule to own at east 5% gold. Not to make money on it-- but as a hedge-- sort of "Insurance". Some stocks aren't hit as badly in declining markets-- for example consumers staples, food, etc. Others are riskier, but have much more upside in rising markets-- a lot of tech and biotech, especially smaller names. Diversification could also include some foreign exposure.
If one had a system to detect when a bottom had occurred this could be a useful precursor for future investments ... Thanks for your observations .
While its prudent to wait for pullbacks to buy, in a long-term bull market if you wait too long you can miss gains. I imagine it pays to research it-- one option might be to sell half of it and find another good one.
Sometimes a well managed fund keeps going up for years. (Unlike a stock, an actively managed well run fund knows when one of their holdings has had too big a run-- and knows to sell and take profits on that stock). So sometimes its good to invest small amounts at regular intervals -- be it $100 four times a year, $500 monthly, etc.
While I still have a big gain in this mutual fund, I keep waiting for a big pullback to invest more and have missed a lot of nice gains:
I'm not sure yet. After the recent run up it looks like it might be more likely to move down than up. But I don't know-- this one may still have more upside...?