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Up 109% in Tech Now... Much More to ComeBy
Tuesday, June 10, 2014
Two weeks ago, in DailyWealth, I told you NOT to sell tech stocks when we were up by 98%.
Now, two weeks later, we're up 109%.
Is it time to sell now?
My answer is simple... NO!!!
Let me explain...
Two weeks ago, I said:
It is shocking to me that investors STILL haven't bought the big tech names yet – names like Apple and Google (which are the biggest stock holdings in XLK, the main tech-stock ETF). I was shocked to see that investor sentiment toward tech stocks is near 12-month lows, according to my friend Jason Goepfert's excellent website, www.SentimenTrader.com.
I did a quick check myself of XLK – the main tech-stock ETF – to see if investors have been piling into tech stocks as the stocks have moved higher.
It turns out, investors have NOT been piling into tech stocks...
Interestingly, while tech stocks have been moving higher in price, investors have been getting less enthusiastic... Specifically, the shares outstanding of XLK have gone down in recent months. Take a look:
 The shares outstanding of ETFs can rise and fall with investor enthusiasm... When investors are extremely excited, the shares outstanding go up. When investors are not that excited, shares outstanding can fall. Right now, investors are not that excited about tech stocks. Tech stocks will peak when everyone is excited about them. Right now, we're seeing the opposite of that.
Yes, tech stocks have soared. Yes, subscribers to my True Wealth newsletter are up 109% on a tech stock ETF.
But I am not worried about where things have been. I'm thinking about where they're going...
Right now, I believe tech stocks have not peaked yet.
The big tech stocks are still reasonably cheap (as I explained two weeks ago), they are hated (as I've explained today), and they are still in an uptrend. All three criteria that I want to see are in place today in tech.
Don't be a seller of tech stocks today just because they've gone up... instead be a buyer. After 109% gains, we still have a great opportunity.
Good investing,
Steve
Further Reading:
Last month, Steve dispelled the myth that it's a bad idea to buy stocks at new highs. "You are better off buying the market when it's at a new 12-month high than a new 12-month low," Steve writes. Find the proof here.
Tech isn't the only sector at new highs that Steve is buying today... He recently told readers why Indian stocks are still a great deal despite their recent rise... "Usually when optimism gets this high, it's time to start thinking about selling, not buying," Steve writes. "However, the upside potential for us is hundreds of percent." Learn more here.
Market NotesRUSSIAN STOCKS ARE RALLYING Have Russian stocks suffered the worst the market can throw at them? That's the question we asked last month. Today's chart shows the answer...
Back in May, we noted that Russian stocks were some of the world's most despised securities. Folks see Russian president Vladimir Putin as a gangster. In response to his actions in Ukraine, western countries have placed sanctions on Russia's businesses.
We track Russian stocks with the Market Vectors Russia Fund (RSX). It's a diversified basket of Russian stocks. In response to the Ukraine crisis, this fund fell from $29 per share to around $21 per share. After the drop, the fund traded in a sideways pattern in the $22-$23 area.
As you can see from today's chart, buying Russia last month has worked well. The RSX has rallied from $24 to $26.50. Just yesterday, shares broke out to a multi-month high. Buying what most people can't stand works!
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