Who's up for a game of investment chicken?
If you raised your hand Todd Harrison suggests big cap tech may be your play, at least for the next few weeks. Echoing a theme that's largely watched into year-end, Harrison neatly lays out the reasons behind tech's seasonal move higher: Fund managers with lagging performance are chasing gains into 2012.
"They can lose money as long as everyone else loses money," the founder of Minyanville notes. "But God forbid they underperform on the upside because they'll lose their jobs."
As a group, tech is better able to withstand the winds buffeting the financial sector, as evidenced by the late day sell-off Wednesday afternoon. Though the tech companies generally have finance arms, they aren't the companies named when Fitch --the ugliest of the ratings agency stepsisters, points out that there just might be some fallout from the unchecked European meltdown.
Speaking of Buffett, sort of, Harrison notes the Oracle of Omaha's recent disclosure that he's bought over $10 billion in shares IBM (IBM), despite Big Blue near all-times. Harrison thinks an avowed value investor getting long IBM is "style-shift worth noting." He means in a bad way.
Harrison's "tech over S&P" trade has a short shelf-life, both historically and specific to today's tape. Noting that the theme "typically fades into the last couple of weeks," he's playing it cautiously to the point that he's focusing more on the bank stocks as a possible breakout play more than he is pure tech.
"If the banks can get through the BKX 40 level the trade will shift (back to getting long S&P names rather than the NASDAQ)," Harrison notes. Within tech he'd rather play the darlings than the old-school.
"The leaders coming out of a crisis aren't the same as the leaders going in," Harrison offers. "Out of the tech bubble the 'Four Horsemen,' Dell (DELL), Cisco (CSCO), Intel (INTC), Microsoft (MSFT)": He suggests avoiding those long-dead names if you're going to participate in the whole tech rally.
As someone long both the QQQ's (QQQ) and S&P500 via the SPDR etf (SPY), I wouldn't mind a rally in either but the market is obviously a fragile, twitchy beast at the moment. Those hypothetical chasers aren't going to be throwing money at anything if the S&P 500 breaks convincingly below support in the 1,220 area.
Are you trading into the end of the year from the long-side, shorting stocks, in gold, or content to watch this madness from the sidelines? Let us know in the comment section or hit us up on our new Facebook page.