Markets are deteriorating fast. Growth stocks are in a bear market.
Today I’ll cover the relentless selling in technology stocks … and why near-term there could be more downside.
Look, it’s been a rough go in 2022 for most stocks. Last month, I discussed the massive stock selloff in January. It was the largest level of selling since the pandemic lows.
And typically, selling of that magnitude is a wonderful time to go shopping for stocks. If you recall, I laid out my gameplan for an oversold market. I planned for a market bottom on February 11th … clearly Mr. Market had other plans.
The “buy the dip” crew that usually backstops steep declines, hasn’t showed up. So, what’s my gameplan going forward?
First, I’m waiting for any signs of buyers in Technology stocks. That’s because it’s the market’s Achilles heel. As long as Tech sputters, markets will stay soft.
Second, I’m starting to look for deals each leg lower. That means, I’m building a list of amazing companies and naming prices that are at MUST OWN levels.
More on that later.
Now, let’s drill down on the relentless selling in technology stocks.
Relentless Selling in Technology Stocks
Rising interest rates, Fed taper, and out of control inflation are just a few things hobbling markets. Add to the list the latest Russia/Ukraine conflict, and you’ve got a cocktail for big-time volatility.
Daily selling in stocks is dropping the Big Money Index to YTD lows:
As markets continue to deteriorate, the S&P 500 sits well inside correction territory, down -12% from highs. Selling is not only picking up speed, but buying is slowing too. Have a look:
And a lot of that red is relentless selling in Technology stocks. The sector is responsible for just over 23% of all selling in our data in 2022. That’s a huge slice of the selloff pie:
Clearly healthcare, discretionary, and industrials have their fair share of selling too. But a quarter of all selling in a “bear market” is eyebrow raising.
And you may think that 23% isn’t that incredible, but it is when you consider the lack of buying in the sector. As of this morning, only 7% of the tech universe has been bought YTD. Said another way, 93% of all flows we track are for sale.
That tells me there’s literally no bid for stocks right now. Here’s a look at Technology buys and sells the past 6 months:
Notice how the yellow moving average, which measures buying, is near zero. I’m going to zoom in to show you the YTD picture for tech. Look how there are practically no buys in tech stocks this year:
Generally speaking, any given sector usually has some signs of life. But needless to say, there’s relentless selling in technology stocks.
In the coming weeks I’ll be on the lookout for any signs of buying in the sector. My guess is we’ll get a massive flush in stocks leading to a tradable bottom. With the latest news of a Russian invasion of Ukraine, today could be the day.
But until the data gives a signal that selling is slowing and buyers are ready to step in, I’m making a plan. Times like now are when deals show up for the long-term investor.
I’m going to be proactive.
How to Find Bargains in The Market Selloff
When fear and uncertainty is high, I focus on quality. Cash rich companies with wide moats are the leaders of tomorrow.
And as you can imagine, many incredible opportunities reside in the tech sector. And 2 of my favorite qualities to focus on when times get tough are:
- Outstanding fundamentals like growing sales and earnings
- Prior Big Money all-stars
If you’ve been around MAPsignals long enough, you know we love focusing on double-digit sales and earnings growers. We put a high price on what’s under the hood of a company. Many of the best stocks that ever existed had those traits.
But not only that, those stocks regularly attract the money of big institutional investors. I’m talking year after year. A great example is NVIDIA Corp. (NVDA).
They are known for their high-performance graphics cards and more. They have been an absolute beast of a stock for years.
Take a look at all of the blue signals below. These are the times when NVDA was ramping with Big Money buying and scored outstanding fundamentally. Each blue bar indicates when NVDA was on our Top 20 list:
That’s a tremendous chart. As many of you know, I call dozens of blue bars the stairway to heaven. The best stocks ever have this look. And when you look at the fundamentals, it’s clear why the Big Money buys it year after year … quality growth:
That’s a lot of green. The best stocks have strong grades across the board.
These are the types of opportunities I’ll be hunting down given the relentless selling in technology stocks. If you’re long-term minded, I’d suggest you do too.
Let’s wrap this up.
Here’s the bottom line: selling in technology stocks is massive. And odds are it isn’t over. There are practically no buys at all in 2022.
That’s the bad news. The good news is that amidst all this weakness are amazing stocks. Many are down 50%+ from highs.
So, I see 2 options. First, if you’re a dip buyer, take advantage of these drawdowns but always focus on best of breed. Outlier stocks are where the smartest money managers gravitate to when the dust settles.
Second, if you’re a swing trader and looking to buy areas of strength, last week I outlined a few groups getting bought.
No matter what you do, have a gameplan and don’t panic. It’s a very trying time for stocks and the world right now. But eventually the dark clouds will fade. I choose to focus on the opportunity.
Like a great portfolio manager friend of mine likes to say, “great stocks bounce like fresh tennis balls.”
Let’s just say I’ll be swinging my racket in the coming days and weeks.
What about you?
***And if you want even more cool data, check out my latest video: Best Oversold Stocks to Buy for March 2022. Many names are getting to interesting levels.
Always remember that the process is more important than the picks. Hang in there, everyone!
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