Mike Santoli’s market notes: Tech still looks vulnerable, even with a huge bounce

Published Tue, Mar 9 20211:36 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Spec-tech looked washed out, Big Tech oversold and even cheap, Treasury yields eased back and it was enough for an index-boosting mean-reversion bounce in growth stocks while the broader market retains its bid. The market does not always need to be a zero-sum affair of one style of stock feasting and the rest going hungry. It has played that way for a while, with crowded growth leaders and momentum story stocks disgorging their hot money and valuation premium as the marginal dollar raced to be in the right place for a boom in nominal GDP growth. The surge in high-beta (cyclical and leveraged stocks) vs. "quality" growth (Nasdaq 100) really got moving after the Georgia Senate runoff that told the market a fiscal thrust would help run the economy hot. No shift carries on indefinitely in a straight line. Things like value and cyclical stocks go from "neglected" to "noticed" to "favored" to "over-owned" as it proceeds. So we have some switchback action. And maybe with the ARKK-type stocks having taken a genuine drubbing – down 25% to 50% a class – the cocky growth chasers might be sufficiently humbled to allow for a less all-or-nothing tape, as suggested in the weekend column . The violent bounce in growth combined with mild slippage in financials has been enough to push the S & P up through that short-term trend line we've looked at in the past, a good first step for bulls to make the case that this is a completed pullback, at least for now. Tech still has a more vulnerable look, and it makes sense to keep in mind that huge bounces from oversold levels are common in ongoing downtrends. Of the six prior times the Nasdaq popped 2% or more when at least 10% off its record high but still above its 200-day average, three of them were in the year 2000 as a major peak was forming. The other instances more benign, but in any case it tended not to mean the index was up and away from that point. From Quantifiable Edges: Yields settling back modestly, still very much in their uptrend but with room to recede further and still not change the broad look of safe assets being repriced for faster growth. Real GDP estimates hurriedly being revised higher into the high single-digits, some even at 10% for 2021. Nominal growth of 8% to 12% - we've seen nothing like this for a long time and lots of profit forecasts are almost certainly too low. Definite chance for a Main Street-over-Wall Street feel to the year after the reverse in 2020. Credit conditions remain solid, Fear & Greed Index has receded to neutral readings. Seasonal factors start to improve. All reasons it remains tough to be a high-conviction bear, especially after so much of the frothy stuff has been flushed out. Definitely think 4,000 would at least be a "stop and reassess" level for the S & P if it got there soon, and some cycle stuff is pointing to a more consequential top of some consequence before the end of April. Breadth is pretty strong today, though the average stock is lagging the mega-cap-driven S & P. Air is rushing out of the VIX again, leaving it in what has become the elevated-but-not-uncomfortable low-20s.

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Source: NYSE

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.