Big-Cap Techs — Is the Bear About to Growl?

One of the trends in this market that is definitely not up for debate is the downtrend in large-cap technology stocks as measured by the Nasdaq 100 Index. One look at the chart below and you can see that since the May meltdown began, large-cap techs have been in a world of hurt.

Once again, a key to watch on this chart is the 200-day moving average. As you can see, the price of the index has traded firmly below the 200-day average since mid-May. But that isn’t the real story.

The real story here is the trend of the 200-day moving average. Right now the average is starting to move lower. That means that over the past 200 days, the trend in the Nasdaq 100 is headed downward. In many cases, when an index’s 200-day moving average begins to slope downward, that’s the start of really big trouble for the sector.

Will this happen to the Nasdaq 100? We shall soon see. But what I want you all to do is prepare for the worst. I don’t believe anybody should be holding large-cap tech stocks right now. That means you shouldn’t be holding Microsoft, Intel, Cisco Systems, or Dell. These companies are just too risky at this point, and their upside potential is just too limited. If you own a lot of these types of stocks, protect yourself by shedding them from your portfolio.