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Has the Underground Correction Run Its Course?

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The “FAANG” stocks — Meta Platforms (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (GOOGL) — are getting taken to the woodshed lately.

While that acronym may need an update once Facebook parent company Meta Platforms eventually changes to its new ticker symbol MVRS, that’s beside the point…

In just two weeks, this cohort of mega-cap technology companies has taken a real beating.

FB is down 10.4%…

AMZN is off by 6.9%…

NFLX has tumbled 9.2%, losing nearly a tenth of its value…

And GOOGL is down by 3.6%.

AAPL is the only major tech stock that has been able to hold its ground during this rout.

But it’s up less than 1% over the period.

Take a look at the chart below to see what I mean…Weekly Chart of Louisiana-Pacific (LPX) -- Source: TradingView

Two-Week Performance of AMZN, GOOGL, NVDA, NFLX, FB, TSLA & MSFT — Source: TradingView

Elsewhere, Tesla (TSLA) is down 17.3%, Microsoft lost 7.0% and Nvidia (NVDA) is off by 14.2%.

A Concentrated Market

I’ve talked before about this handful of stocks and their outsized influence on the indexes.

Half a dozen companies shouldn’t dictate the returns of the entire stock market.

But, for the most part, they do.

And that’s been hiding something under the market’s surface.

An underground correction has been going on for most of 2021.

As I pointed out in previous posts, participation has been low and getting lower for several months.

The gains from mega-cap tech stocks have covered up losses from thousands of smaller stocks.

So, it was only a matter of time before the big guys followed suit.

For investors holding these stocks, the last couple weeks have been painful.

But I see opportunity.

As my regular readers know, the biggest gains come after market corrections.

Opportunity on the Horizon

I mentioned recently that I am taking a more short-term, cautious approach to my trading right now, which I think is a prudent move while uncertainty is elevated.

For now, I am mostly in cash.

I took a small position in Tri Pointe Homes, Inc. (TPH) on Monday morning…

And I am still short SPDR S&P 500 ETF Trust (SPY) from Nov. 26.

But I’m ready to start buying again.

For now, I will remain patient and wait for ideal setups.

Once I see them, I will buy.

I will keep you posted on these developments as they happen, so stay tuned. 

Embrace the surge,

Ross Givens

Editor, Stock Surge Daily

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