Yesterday’s light volume affair was not enough to entice buyers back into the market. The NASDAQ took the brunt of the selling lead by the larger cap stocks within the index. Over in the S&P 500 it was utilities leading the charge lower. Investors appear to be fleeing interest rate names as seen with XLU and TLT. Blue chip names were able to display a bit of relative strength as the Dow Jones Industrial Average finished the day lower by 80 basis points. Volume was up across the board as investors are fleeing the market. We can come up with a few excuses for the selling, but all we care about is how the market acts. Reasons are worthless. This market is not looking good and caution must be exercised.
Last week we prior to the Federal Reserve meeting we noted the unlikely event the Federal Reserve would raise rates. They are boxed in a corner and would be extremely difficult to raise rates. However, they will do their best to give the market the impression it is about to raise rates. We did note to look to TLT and XLU for clues on whether or not the market believes the Fed will raise rates. Secondarily, we can take a look at HYG and JNK. Both high yield ETFs appear to be rolling over and have experienced quite a bit of distribution. At this point price action is hinting at the Federal Reserve is ready to raise the Fed Funds rate. Hard to believe, but we are a slave to price.
Last night QLYS reported earnings and the market was NOT happy with what it read. QLYS was demolished today and weighed heavily across the entire group. The stock was off nearly 33% today and is one helluva punch in the gut. Why it is important to know earnings date and if you do not have a cushion to right size the position or simply cut it. We do not know the future, but we can utilize our risk management process and not expose our portfolio to gigantic losses like QLYS today. Weak day for cyber-security stocks and wiped out decent gains.
The odds of the stock market correcting continue to grow and today’s distribution gives us a strong indication we are headed for a slippery slope. One must act accordingly to the information we have not what may or may not occur. At the moment, risk for a correction is greater than we have seen in a while and we are going to act accordingly. Not sure you can handle a correction come join us at Big Wave Trading. We have been through many market cycles including 2008-09 and can help you thrive. If you are a college student entering in your senior year contact us at admin at bigwavetrading.com.
Amazingly enough, the VIX or fear index remains below the 15 mark. Fear has yet to grip the market just yet. We are approaching oversold levels in the short-term, but we do have a little room to the downside left. Even with oversold conditions given what we have in front of us a multi-week move lower is very likely at this point. No one can predict how far corrections will go or how long. Let alone a stock market crash. Do not be a hero and follow Big Wave Trading.
