April 7 (Bloomberg) -- Last month, we noted that high flying tech names were crashing back to earth. After terrific run ups, companies such as Twitter Inc., LinkedIn Corp., SolarCity Corp., Netflix Inc. and Tesla Motors Inc. all have taken a shellacking.

The setback reflects several concerns: Last year's torrid market couldn't continue at that pace; perhaps corporate earnings are peaking, and may soon reverse. Is the five-year bull getting long in the tooth? Or is the economy running out of gas?

Regardless, the risk appetite for the highest of high flyers appears to have abated. As you can see, they are significantly off their highs of just a few months ago. Twitter off 42 percent, LinkedIn down 34 percent, SolarCity off 33 percent.

     Percentage off from recent highs

     Twitter -42 percent

     LInkedIn -34 percent

     SolarCity -33 percent

     Netflix -26 percent

     Facebook -22 percent

     Tesla -20 percent

     Priceline -14 percent

     Google -11 percent

David Fuller's view

I have used this article as it first appeared today, because I think Barry Ritholtz had the best headline in his first draft.  Yes, is my short answer to the headline question above.  I have observed and said for decades that the lead sector in a bull market usually leads in both directions, partly because in addition to investor appeal, it will attract the most traders, often guided by and also highly attuned to market momentum. 

So, what is the current message from the setbacks of mostly ‘new tech’ shares listed above, and also for the Nasdaq Composite Index (CCMP) (weekly & daily)?

Further to what I said on Friday, CCMP wobbled in January when it had its biggest reaction since mid-2012.  However, January’s pullback was only slightly larger than the mid-2013 setback and it recovered very quickly from both those reactions.  The difference this time is that following an early March high, CCMP has now had a bigger pullback which also includes a lower high and a lower low - the potential beginnings of a downtrend.  CCMP is slightly less expensive as a consequence but it currently trades at a relatively pricy trailing p/e of 31.64 and yields only 1.30%, according to Bloomberg.   

Subscribers may recall that I do not agree with the press definition of a bear market, often defined as a setback of 20%.  We see far too many of these for them to qualify as even statistical bear trends, in my opinion.  However, looking at Barry Ritholtz’s list of 8 tech shares above, you will see that the first six have now fallen by at least 20%.  You will find plenty more that are now underperforming if you just look at shares beginning with the letter ‘A’ listed on CCMP.  Given the high valuations, only a swift recovery will temporarily dispel growing concerns that this small bubble, relative to 2000, has burst.   

We have seen at least a short-term peak in CCMP.  Despite the very positive tailwind of extremely low short-term interest rates, Wall Street is overdue for a 10%+ correction.  I maintain that we are more likely to see this over the next six months than another surge to new highs.  If so, it will present a buying opportunity.