Big tech needs more time to work off major excesses, top money manager Jeff Mills warns

Big tech's record win streak may just be on hiatus.

Bryn Mawr's Jeff Mills believes the group will regain its market leadership. 

But before it does, he warns investors will have to brace for some more wild swings as the group works off major excesses.

"Earlier in the summer, you had something like 85% or 90% of technology stocks trading over their short-term 50-day moving average. That's very healthy, solid momentum. That has broken down now into the mid-50s," the firm's chief investment officer told CNBC's "Trading Nation" on Friday. "But we're still not oversold."

The tech-heavy Nasdaq is coming off its worst week since March 20. It's now just a hair out or correction territory, which implies at least a 10% drop from record highs.

Former high-flying mega cap growth names Apple and Tesla, whose stock splits went into effect on Aug. 31, are among the stocks contributing to the index's major losses.

"Those names have been trading off of this kind of weird game theory," said Mills, a CNBC contributor. "Investors really know that stock splits don't create value, but they believe other investors believe they do. So, everybody piles in, the momentum increases and stock prices go to points that maybe don't make sense."

Technicals aside, Mills contends technology's fundamentals are still intact, and the backdrop supports growth names over cyclical stocks, which are closely tied to economic performance.

According to Mills, there's still too much uncertainty surrounding the economic recovery and political backdrop for a meaningful market rotation to unfold.

"You've had this disconnect between what was going on in the labor market, and how consumers were actually behaving because of this income replacement that we had. Now that's a big question mark," he said. "Until we see a true improvement in those fundamentals, it's going to be very difficult to get a lasting rotation from growth into value."

He doesn't expect to see a rotation into cyclicals from growth stocks, which includes tech, for another 12 to 24 months. So for now, Mills suggests proceeding cautiously.

"Technology remains 15% above that 200-day moving average," Mills said. "So, I would wait for a little bit more downside before dipping my toes into tech."

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