What the Heck Happened?

Playing for a Square Up

I am sure many of you are asking yourself (or me) for an explanation for Friday’s action and the week in general in the markets.  A 5% drop in the Nasdaq 100 in one week after such a stellar months long campaign of buy every dip is bound to raise eyebrows and risk alerts at funds.  Equally, you now have most stocks back to flat $QQQE (equal weighted QQQ) for the year, meaning investors who bought during the rapid 1Q ascent are now under water.  Some call this technical damage, but I call it overhead.  On rallies, it will take a vicious, nearly parabolic move up to reclaim confidence and not result in the average investor wanting to get smaller long on rallies.  

Sure, you are getting more attractive entry points on names you have been feeling like you missed.  But, what if the percentage from their highs is a meaningless statistic and the absolute valuation or P/E multiple needs to come down to respect the year highs in interest rates?  Is there a big difference if Microsoft decides to trade at 30x versus its current 35x EPS?  Yes, a 14% decline that would mean absolutely nothing and the stock would still be well loved.  The same for Nvidia after Friday’s collapse.  Remember our phrase “buyers live higher and sellers live lower?”  That is where we are in the markets.

Still, let’s take a stab below at what happened this week and who to blame!