[Chart Of The Week] The Historic Breakout In Technology
The good news for US Stock Market bulls is two-fold. First, you've probably made a lot of money being bullish, so kudos to you. And secondly, Technology represents over 25% of the entire S&P500. This sector breaking out to new all-time highs for the first time in 18 years is a very good thing. Leaders are leading - what's bearish about that?
For some perspective, a 50% rally from the former highs in 2000, is equivalent to the Dow Jones Industrial Average hitting it's 1958 high, 4 years later. But the Dow continued to rally for another 7 years to hit its next extension target:
I don't think it's exactly a fair comparison between Technology, a sector, and the Dow, which is an index. The bigger point I'm trying to make is that bubbles pop, and that's fine. Extremes in sentiment need natural adjustment. This isn't crazy, it's normal. What is even more normal is that from these collapses in prices, it takes time to repair. A long time.
Look at Japan and how long this one is taking:
Here are Financials relative to the S&P500 doing nothing the past decade since crashing. These things take time to repair:
The bubble in Technology popped in March of 2000, this is not a secret. What's getting missed is that the time necessary to repair that collapse was apparently 18 years. We are now finally moving on from that.
If we're above those former highs from 2000, how can we not stay long Tech?
Cheers,
JC
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