by Bob Stokes
Updated: November 21, 2018
Sometimes a group of stocks become so popular that they're given their own acronym or nickname.
Some market veterans will remember the "Nifty Fifty" of the 1960s and early 1970s, which included Polaroid, Xerox, Avon, ITT and Eastman Kodak. These blue-chip names were largely designated as "buy and hold." Alas, many of the "Nifty Fifty" were crushed in the 1973-'74 bear market.
Today, we have the FAANG stocks, and most investors know that this acronym stands for Facebook, Apple, Amazon, Netflix and Google (or Alphabet).
As you probably know, these major technology stocks have been Wall Street darlings for quite some time.
But, our Aug. 29 U.S. Short Term Update urged caution when it showed this graph and said:
The concentration of the market's rise is the most extreme in the NASDAQ, where nearly half of the index's rally above 8,000 has been due to the FAANG stocks... In fact, it's even more extreme, as Facebook has dropped out of the drag race by virtue of its "airpocket" on July 26. Some celebrate the strength in these issues as signs of the NASDAQ's imperviousness to decline, but in reality it shows how thin the ice is beneath the slope of the NASDAQ's rise.
Then, our Sept. 28 Elliott Wave Financial Forecast provided an update on the tech giants:
The stock market's advance to new highs has been extraordinarily narrow and it keeps getting thinner and thinner. The Journal reports that shares of just two stocks, Apple and Amazon, are responsible for nearly 30% of the S&P 500's 9.2% gain so far this year. ... When the hard chargers exit the party, it is generally wise to cut out with them. We are watching the wave patterns closely in these and the other FAANG stocks.
With that perspective in mind, our analysts have not been surprised by the latest FAANG developments.
On Nov. 19, CNBC ran this headline and subheadline:
The five most important tech stocks are getting slaughtered, with each down more than 20% from highs
Each of the five "FAANG" stocks closed in a bear market on [Nov. 19].
But, big tech names have bounced back before. Is that in the cards again?
Or, is the rally finally over for the FAANG stocks -- just like it was for the Nifty Fifty some 45 years ago?
You are encouraged to read our U.S. Short Term Update and Elliott Wave Financial Forecast for our latest analysis of stocks, which includes the tech-heavy NASDAQ.
Learn how to get started with our generous risk-free offer, just below.
Consider the dot.com bust that started in 2000: A quick glance at the most "busted" chart patterns will show you how many of those stocks were the highest fliers during the dot.com boom.
The set-up is eerily similar now. Plus, today's degree of trend in the stock market is larger.
No exaggeration -- no fooling.
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