Momentum Stocks Are Falling: Here's What to Do Next

Joining me now to talk and explain and work through all of this is Tim Seymour. He's CIO of Seymour Asset Management and a CNBC contributor. Tim, the most interesting thing to me has been the violence of the correction that went basically unnoticed in the broader world news market and economy unless you were a Korean day trader. >> Yeah, and I and I almost feel that you know, Korea's out there saying I started this. I need to end it and and so we have some room to go still on the Kospi to get back to I would say there's probably 15% more but but this overshoot in momentum on the way up and maybe it's an overshoot on the way down and and you know, well noted by BTIG. It's a thoughtful piece. Momentums at you know, I think now at three-year lows and where we bottomed and where we bounced today on the SMH. This is where we you know, essentially bottomed back in March. It was an important level from which we went on an historic run. And if you look at the Kospi, I think it was a somewhere about a 50% move in 74 days and we've now pulled back you know, half of that and and less than half the time actually more than half of that. So, ultimately, I think there are a number of crosscurrents. I think the Fed has a lot to do with a bit more of the crash yesterday and a bit more of the indecision today as much of Wall Street is not entirely clear on what Fed we have here. We've got a BOJ tonight that also plays a role here. So, yes, fascinating times. >> What what is the BOJ Okay, let's talk about the BOJ for a second. I I blame them for the rise in global bond yields. I blame the ECB as well which has been buying peripheral debt. It's like we this has been this false suppression of long-term bond yields. It is starting to correct itself. How much of that is playing out in the US? How much of this is Warsh's fault? >> Well, I I you know, it's hard to blame Warsh other than we have a new communication regime at the Fed and people don't like how it was communicated yesterday and and maybe there's a question about Fed independence. BOJ seems to have looked past inflation for a long time. What's going on with dollar yen today is fascinating and and it certainly could unlock a number of other trades, especially those to me that revolve around a weaker dollar. So, commodities and and a lot of yeah, a lot of trades that are related to at least the opposite of what's been going on. I'm not sure BOJ is going to hike tonight. The market is behaving as it is. They've also not been shy about getting out there in the market and doing some of the lifting themselves. Maybe that's happening today, but I think the market is struggling with the realities of the fundamentals. You could be a a CMT and and this is a this is about as epic of a time to be a market chartist and technician, but I think it's it's a lot of this is built on fundamentals. Higher yields and more hawkish central banks around the world put big big headwind on momentum trades. >> Okay. That said, you know, if we go back to the 30,000-ft view here, we had to some extent almost a 50% drawdown in some of these areas. And the equal-weight S&P is at all-time highs. Again, this has been it's like a beautiful example. This is not 1999, right now at least. >> No, it's not and and I I would say after almost 9% of outperformance on the equal-weighted, the RSP, whatever you're trading to the S&P from essentially again those March lows, you're right up against a resistance level. So, if I'm if I'm someone that's following charts, yeah, it makes a lot of sense that you would be fading that trade today. I think the fundamentals around market broadening are built on fundamentals. I think they're built on margin growth and EPS growth that's alive and well. Today's GDP number was a little bit weaker than people expected. A lot of inflation pulling back some of those numbers, too, but ultimately, I think we have a broader economy, a more equal-weighted market, and I think that will continue. >> In 10 seconds, what's the playbook now, given everything that's happened? >> Well, I think oversold trades are ones that are kind of interesting here. I think you can probably play semis to to get back another 10% and that that's for traders out there. I like gold, I I commodities, places that I think are going to benefit from a weaker dollar. I do think that the Fed has to step up, but in the meantime, I think those [music] trades were overvalued.