This week is a busy schedule of earnings and economic releases – Classiarius will help make sense of it.
The Facebook collapse that surprised internet and tech stocks last week, spilled over to Monday raising questions about FANGs (have a look at our audiovisual piece on the Facebook sell-off on Classiarius). We at Classiarius feel that this robust equity engine that has driven stocks for so long might be slowing down. As a result of the social media and internet sell-off, the tech-heavy Nasdaq saw a three-day breakdown of 3.86 percent. Now we are not calling for a massive stock market fall but investors should pay attention to leadership – stocks like Facebook an Amazon might move into a tough trading period.
Note that Amazon declined 2.1 percent, Google-parent Alphabet fell 1.8 percent and Netflix fell 5.7 percent. Facebook continues lower as it fell 2.2 percent. Although volumes are not heavy, participation is enough to suggest that some fund managers may be reallocating from heavy tech positions. This would be natural.
Note that some tech giants are spending money to improve their damaged images and adjust business models. Facebook is leading by investing in systems that ensure people are not abusing its platform. However, some market participants are worried that social media firms are still making mistakes on the issue of free speech.
Possible Stock Rotation? There could be a move to rotate from growth stocks (tech, internet), to value stocks (retail, energy and banks), as this has been suggested by analysts over the past three months. Note that it will be difficult to confirm the start of any trend until after earnings season – which is actually better-than-expected.
We do not give trade ideas but it does make sense that any blue chip name that suffers from capitulation selling, and as a result falls 20 percent or more, should be closely watched as entry levels may fit a 3-month view. We will be updating aggressively this week as the calendar for earnings and economic releases is robust.