Mega Nasdaq Bubble

Sell This Rally In Tech

If you own any tech stocks with a greater than 30 PE ratio or any of the speculative EV, SaaS, or online retail stocks, you must sell them now. This is a rare moment where speculation exceeds basically every other market in history. The CNN fear and greed index is at 88, which is extreme greed. That doesn’t come close to explaining how frothy the market is. It’s very common to see speculative stocks rise on no news. In fact, when a stock rises hugely, we can assume nothing happened.

One of the most bubbling stocks is the software company Palantir (PLTR). It rose 21.4% on a report it received a $44 billion contract with the FDA. The stock is up 97.3% in the past month even though few people even understand what it does. We have watched the CEO try to explain what the firm does. Retail traders love this stock even though it’s complicated. This isn’t like buying Apple (AAPL) or General Mills (GIS).

The speculative stocks are obviously very frothy, but there is broad-based optimism in this market. As you can see from the chart above, 79.6% of stocks in the Nasdaq are above their 200-day moving average which is the highest percentage since January 2014. Another couple of up days will have us looking further to see what this tech bubble compares to. The cyclical stocks might have a small correction, but they aren’t to be sold. Some investors are still bullish on the industrials, the banks, and energy.

People talk a lot about software stocks being in a bubble, but semiconductors are also in a bubble. The SOXX semiconductor ETF is up 40.4% in the past six months. As you can see from the chart below, since 2013, the small cap semiconductor stocks have never been this far above their 50- and 200 day-moving averages. 

Small-cap semiconductors have also outperformed the S&P 1500 at any point in the past seven years. Obviously, it’s not just small firms rallying. Nvidia (NVDA) stock is up 126.9% year to date.

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