After hitting a new all-time high on September 2, the tech-heavy Nasdaq has fallen -9.5% – just shy of correction territory.
And the tech sector may be in for some more wild swings ahead.
“Earlier in the summer, you had something like 85% or 90% of technology stocks trading over their short-term 50-day moving average,” said Bryn Mawr chief investment officer Jeff Mills. “That’s very healthy, solid momentum. That has broken down now into the mid-50s. But we’re still not oversold.”
“Technology remains 15% above that 200-day moving average,” Mills added. “So, I would wait for a little bit more downside before dipping my toes into tech.”
For tech investor Paul Meeks, that means waiting until the Nasdaq has fallen 20% from is record high before making any big moves.
“For the long-term, I’m uber bullish on tech,” Meeks, the portfolio manager at Independent Solutions Wealth Management, said. “That being said, my concern and really my only concern, is valuation. But it is a pretty big concern.”
Meeks suspects another wave of selling will hit the Nasdaq before the end of the year, dragging some of the biggest tech names even lower, with the difficult relationship between the U.S. and China as a potential catalyst. What’s more, Meeks added that an escalation of rhetoric around the U.S. presidential election is his greatest concern for the tech space.
“Folks don’t realize that the tech supply chain is intertwined between those two nations,” Meeks continued. “It can really never be separated.”
While Meeks anticipates the volatility in the tech sector will persist, he says there’s a 50/50 chance the Nasdaq will fall into bear market territory this year. Still, he’s bullish on the group for the long term.
“The fundamentals going into COVID, the fundamentals during COVID and the fundamentals coming out of COVID will prove to be superior than the other ten sectors that make up the S&P 500,” Meeks concluded.