Unshaken belief in tech? Or shaken belief in drug stocks? These are the two sectors that have been acting punk, and I think that it is important to distinguish them because they are doing exactly opposite things.
Tech is experiencing massive profit-taking after some big runs. NDX got too high, too hot, too fast. The cyclicals are catching up, as are the financials. That is just fine, thank you.
The drug stocks, however, are massively for sale without profit-taking being behind the move. There is too much competition and way too much government hoopla involving drug costs and Medicare -- as well as the possibility of a war between the drug companies and the online distributors, which want lower prices for drugs.
That's why I continue to buy tech down on a light scale, meaning that I'm taking advantage of the selling in the
, but avoiding the drugs. (I said the other
day that the Net was too hot and it is cooling, maybe viciously cooling, so I am taking my time there, using 10-point scales down to buy 2,500 shares of my faves. )
And yes, when cyclicals retreat because they are too hot, I buy them, as things are better. Same with Brazil.
I am a trader. I love to buy weakness if it is purely on profit-taking. I hate it when it is secular. Tech is profit-taking; drugs seem secular.
Drugs will be better later. I agree with Peter Canelo of
Morgan Stanley Dean Witter
, who said this morning on "Squawk" that they are too early to buy and may not be any good for several months.
I think he is dead right.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At the time of publication the fund was long Cisco, Dell and Microsoft, though positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending an email to