Les 📈🚀

Bottom Fishers Beware! Technology is extremely oversold, and that is a tempting condition for bottom fishing crowd. The Technology sector trailed the S&P 500 by 11.8% over the 21 trading days ending November 5, marking its worst relative drawdown since 2001. However, Technology’s oversold condition is no guarantee that a sustainable bottom is near. If history is a guide, volatility is more likely than a sustained alpha producing period. The chart below plots every occurrence that Technology underperformed the S&P 500 by more than 10% over 21 days since 1990. While several cases were followed by short-term bounces, most were fleeting, with the average case drifting lower for three months. The biggest exception was 2002, when Technology saw a quick recovery following a selloff associated with the dot-com bust. While every cycle plays out differently, history suggests that a sustainable relative strength bottom may take time to develop. minervini.com