Markets open lower as tech sell-off continues

Yahoo Finance’s Brian Sozzi and Alexis Christoforous break down today’s market action with miller Tabak & Co. Chief Market Strategist, Matt Maley.

Video Transcript

ALEXIS CHRISTOFOROUS: Let's get back to the markets now and this big selloff, especially in tech stocks, that we continue to see on Wall Street. Let's check in with Matt Maley, chief market strategist at Miller Tabak and Company. Of course, we also have with us Jared Blikre and Brian Sozzi.

Good morning, Matt. I want to start with the tech selloff. Are you bullish in the same way Goldman Sachs is, saying that you know what? These tech stocks still have a lot more to run here, even though we're seeing these terrible selloffs these past few days.

MATT MALEY: Well, I think they have a lot more-- I say a lot more-- I think they definitely have more to go on the downside before they bounce in any kind of meaningful way. One of the reasons is that they just got so ahead of themselves, both on a technical basis, but much more importantly, on a fundamental basis. Yes, as Goldman says, these are great companies-- Apple computer, Microsoft-- go down the list. I mean, some people can question about Tesla.

But Nvidia-- all these companies are great companies. But sometimes they get so far ahead of their fundamentals, whether it be artificial reasons because of this whole situation lately with the call buying and then people talk about gamma and stuff like that. But the people are saying, hey, once that artificial selling gets moved out of the way, these stocks are going to come roaring back.

Well, people forget that-- or, at least, maybe don't even understand that a big part of their rallies to these overvalued levels were because of this artificial buying through the options market. So the fact that they're coming down because of this unwinding of those positions simply takes them back down-- will take them back down to where they should be. So these are great companies on a long-term basis. But since they got so far ahead of themselves, I think they have further to drop. And they won't bounce back as quickly as I think a lot of people think they will.

BRIAN SOZZI: Matt, I remember, and I'm sure you remember too, when 1,000 points down in the Dow is a big deal. And it still kind of is. Should investors just brace for more days like this for the rest of September and even ahead of the election?

MATT MALEY: Yeah, I think-- I think they do. And one of the things we do after-- I mean, jeez, we saw this, of course, in the first quarter. I don't think we'll get anywhere near that kind of 30% to 35% selloff for the simple reason that we know that the Fed is there, ready and willing to inject more if they need to. But I think people have also just assumed that they won't allow any little downturn.

Well, I think the Fed-- they're not-- they have their own trading desks. They have traders. They know what they're doing. They know that pullbacks and corrections are normal and healthy. We certainly saw that in the tech bubble of the late 1990s, where we saw some deep corrections.

And so they're not necessarily going to step right in. But I do think we'll have more of things like this, Brian, between now and the election. And therefore, people who have their plans in place in order to take advantage of that decline is something that I talked about in the first quarter, is that they're the ones that are going to do well. And the ones who don't are going to be the ones who panic and sell at the bottom rather than take advantage of the big dips and see them as a buying opportunity. It's just much harder to do when you don't have that kind of plan in place.

BRIAN SOZZI: Matt, just hearing that, it sounds as if one tip to investors is don't fear the 1,000 point down days on the Dow. As long as the Fed is there, who cares if the Dow goes down 1,000 points, even 2,000 points?

MATT MALEY: Yeah, I mean, obviously, if it happens on one day, then you worry about margin calls and foreselling and things like that. So any kind of-- we'd much rather see it in an orderly fashion. The problem is in today's marketplace, but not just the Robinhood trader, but also with these algorithmic-- the algos, which are definitely momentum based-- not only do they-- they go from all these buy orders. Well, not only do those flip to sell orders, but their bids, their buy orders are canceled. And that can cause some severe downdraft.

So yes, we could have days like that. And again, I don't think it'll be as quite as bad as it was in the first quarter, or anywhere near as bad, actually. But does that doesn't mean-- I mean, 10% to 15% corrections are normal and healthy. They're scary. But they're the ones you can take advantage of if you're-- again, if you have a plan in place.

JARED BLIKRE: Hi, Matt, just want to get your take on the dollar, because it has been creeping higher over the past several sessions off of-- well, the DXY had been at a two-year low versus its basket of currency. But we've seen it broadly weaker for the past few months. Do you think it's reversing to the upside? Where is the pain trade in this?

MATT MALEY: Yeah, it's definitely to the upside. And one of the things that-- even though-- and I believe over on a long-term basis, the dollar will likely go back down again and maybe even test-- not just test, but even break to lower lows. The problem is, much like we had in these tech stocks with the positioning, everybody's on one side of the boat. Everybody was on the long side of the boat.

We saw the same thing in the dollar, only to the other direction, where everybody was short the dollar. And we see this in the COT, the Commitment of Traders data, which tells you what the futures positions are for futures traders. Well, I mean, everybody was short the dollar. Everybody was long the euro.

And those positions need to be unwound, no matter what the long-term fundamental situation might be. When everybody gets so severely to one side of the boat, those people get caught off sides. And they have to reverse those positions. So I think you will see a further rally on the dollar. And, as we've seen, that doesn't necessarily bode well for a US stock market, especially multinational names.

ALEXIS CHRISTOFOROUS: Before we let you go, Matt, is there any particular name among the big tech names that are getting slaughtered here that you find attractive right now, that maybe you were looking to get into, but the valuations were a little high, and these selloffs the past few days has brought that stock down to a more reasonable entry point?

MATT MALEY: To be perfectly honest with you, I think they all have further to go. I mean, it's impossible to catch the exact low. But since they became so overbought and so overvalued, I think they're going to have-- they're going to have to fall in a material way another 5%, 10%, and in some cases even more, before they really bottom. But Microsoft is probably the one that I like best.

And that's the other thing, too, is don't try to catch the bottom. After it falls a little bit more, nibble a little bit. And then when you start to see that flush, that washout trade, then you can be a little bit more aggressive.

ALEXIS CHRISTOFOROUS: All right, nibbling-- good advice. Matt Maley, chief market strategist at Miller Tabak and Company, good to see you.

MATT MALEY: Thank you very much. Have a great one.