While Motorola could have been the catalyst for another sector sell off, particularly in semiconductors, the market ignored this bearish news. Instead, a bullish report from Salomon Brothers chip analyst Jonathan Joseph led to a wild bull run on the Philadelphia Semiconductor Index. This is no less than 30 per cent of the global GDP and constitutes the biggest, fastest erosion of wealth in financial history. With a decline of such magnitude, talk of a stock market bottom or investor capitulation almost becomes academic. It is now no longer good news that ignities violent trading rallies but merely the absence of bad news.
Expectations are so low that even neutral news is good news.
This is the only logical explanation for Amazon's rally, the chip sector's performance last week or Juniper's post-numbers upswing. The key metric to gauge the performance of technology companies is to determine if its Draconian inventory correction has run its course. Then and only then will a credible argument that Nasdaq has made a bottom have any money management significance. However, the trailing earnings on Nasdaq 100 are still high at 50X. Given the flat to negative, growth expectations, it is possible that the forward multiple on the Nasdaq 100 is even higher. It is thus probable that valuation of technology companies are not cheap across all sectors, despite the correction we have seen.