I’ve previously written (e.g. here, here or here) about how the current stock market environment shows a lot of parallels to the late 1990’s bull mania and the 2000 top.
I’d like to guide the reader’s attention to yet another similarity.
Among the strongest stocks at this moment are the following stocks:
- ANET
- PSTG
- EXTR
- SMCI
- VRT
What do they have in common?
Well, they’re all more or less from a single group – computer, server and telecommunication hardware, peripherals, equipment and infrastructure, or as one might refer to them in today’s age that has long lived beyond the computer explosion of the last quarter of the 20th century – computer capital goods.
Many of them have shown strong topping signs (SMCI, EXTR) or very sloppy and choppy trading (PSTG, EXTR), and the only exception I’d be willing to apply might be for VRT, as its behavior suggests a different class of stock.
Quite frankly, for many of them the label “last men standing” should be more appropriate.
Add to that some capital equipment manufacturers of the electronics and electrical industrials space that are still holding up well, and are even being bought up:
- JBL
- CDNS
- FN
- …
and add to that some capital equipment manufacturers of the semiconductor space, for example:
- CAMT
- SNPS
- ONTO
- AEHR
- ACLS
- PLAB
that are still holding up well and some of which are running up from deep and faulty digestions, and a picture is forming.
In 2000, the top of the infamous dot.com bubble, computer companies manufacturing and supplying similar capital goods (PC hardware, telecom equipment) were among the latest movers in that cycle, just before the collapse.
Some of the companies holding up now are actually old names that were already around and running up near the top in 2000 or had exuberant public offerings near that time – for example JBL, ACLS, PLAB, ONTO, CAMT or EXTR.
In fact, one of the many statutes of sector rotation theory is that capital goods will commonly stir only very late in the market cycle.
I wouldn’t give this a second thought if great opportunities abounded throughout the rest of the market, but there’s no such thing right now.
Thus, the weight of evidence keeps creeping more towards negative ever so slightly …
