The sexy nasdaq stocks started to show some wrinkles this week. The four horsemen of the momentum crowd really took in on the chin. GOOG put in the strongest showing by only dropping 6.65%. AMZN also kept its losses in single digits, falling a mere 8.25%. AAPL and RIMM discovered gravity by shedding 11.98% and 10.82% respectively. Tech stalwarts MSFT (down 8.99%) and INTC (5.76% in the red) didn't fare much better.

As a non-apologetic bear, I think these stocks have a lot farther to fall. While INTC and MSFT have relatively reasonable P/E's of 24 and 22, the four momentum darlings are still ridiculously expensive. They sport P/E's ranging from 42 to 91, with an average of 65. To paraphrase Buffet, these bad boys are discounted to eternity.

The market in general has been particularly weak lately and some pretty serious technical damage has been done. I know a lot of the Stokblogs Community doesn't believe in technical analysis, but traders do. Technical damage can work like a self-fulfilling prophecy with traders selling into the weakness just like they bought into the strength on the way up. The weekly chart for the S&P 500 is looking particularly ugly. The index just had its' first weekly close below its' 50 week Moving Average since the summer of 2006. A couple more weeks below this average and the direction will be decidedly down.

In contrast to this general market weakness, the Nasdaq 100 (see chart) is still 6.6% above its' 50 week moving average. Given that this index generally sports much higher valuations than the S&P 500 with little dividend yield to act as support, the only plausible reason for a relatively superior performance would be anticipation of money flows into the index. After this weeks performance, I find that highly unlikely.

SunTzu