The NASDAQ picked up where it left off on Friday closing lower once again. Briefly the index was able to get into positive territory, but was short lived. Sellers were dominate for much of the session and even were able to ward off a rally attempt at the day’s end. Small cap stocks tracked by the Russell 2000 took the brunt of the selling while the NASDAQ was not far behind. Volume on the day was mixed on the composite indexes. It finally caught up with the NYSE Indexes with volume rising in S&P 500 names, but volume fell in the NASDAQ composite names. While the S&P 500 and Dow aren’t as bad as the NASDAQ and Russell 2000 we are in full sell mode until this market can stabilize.
There are so many issues to tackle with this market. Over the weekend in the Big Wave Trading Portfolio review we highlighted various issues. Margin debt is one of them and when you have such a negative credit balance in customer accounts it does not take much to spook a margin call. It is hard to quantify how much or if the market will go down. However, given the downtrend we are in we will at least see lower prices. If margin calls accelerate you’ll likely see panic pick up across the board as investors race to meet those margin calls. Price will always be our number indicator, but given the amount of negative balances in consumer accounts is quite scary.
Momentum names, famously pointed out by our friends at CNBC have had a tough time. Ticker: PDP tracks momentum stocks and is a relatively good gauge to see how our friends are doing. A closer look across the momentum spectrum stocks like SCTY and ATHM who have been beaten up. There are countless other names who have been a victim of this selling. As we are listening to these clues you should too. For those who are confused, come join us and be a part of a well-established community.
Price leads and for now we are seeing a market headed lower. Sure, we are oversold in the short-term and we could see a rally. If this rally turns into to something more powerful than a dead cat bounce we’ll jump aboard. Until then, what is in front of us is not something you want to step in front of just yet.
