Amazon stock is down 35% this year.
Sebastien Bozon/AFP via Getty Images
Not even the high and mighty are immune from the gravitational forces of bear markets. That is the dilemma facing the so-called FAANG and other Big Tech stocks.
To illustrate why this is so, I created a special index based on the NYSE FANG+ Index, including
(AAPL), Facebook parent
(FB), Google parent
When we plot the group’s relative strength against the
S&P 500 index,
we see that a bear market has already begun. A 7.5-year uptrend was smashed decisively in December. But what was really bearish was the breakdown from a two-year top. With the ratio now below all moving averages, there is no doubt that the stocks are in a relative bear market. Because they are underperforming the market by a widening margin, there is no reason to consider buying this group of stocks anytime soon.
The second chart, which compares the tech stocks to an equal-weight version of the S&P 500, is even more bearish. This is a more representative index because the largest and the smallest stocks are all given equal weight. The tech stocks’ weakness is even more dramatic here. Here too, the group broke down from a two-year top and pierced a 7.5-year uptrend.
There may be a silver lining. These six tech stocks are among the last group of stocks to succumb to selling pressure. When they have finally completed their decline, then the broad market may be in a position to begin a more meaningful advance.
Andrew Addison is the author of The Institutional View, a research service that focuses on technical analysis.
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