It did not take long for sellers to take over this market and push the major market averages lower. Volume soared too. Above average on the NASDAQ as healthcare related stocks took a large hit. We are still in a negative seasonality period for stocks. This action is not entirely surprising. Looking at the S&P 500 taking out last week’s low health care stocks were by and far the worst performing sector on the street today losing 2.5% while the next loser materials were down 1.3%. Healthcare is the second largest group within in the S&P 500 and weighs heavily on the index. It will be interesting to see how this market moves forward. Price action today was quite troublesome and while some of our holdings held up we cannot ignore the environment we are in. Stick with your exits.
Small cap stocks took the brunt of today’s selling ending the day down 1.85%. The Dow held up the best, although it is not saying much given the index was still down 1.09%. Distribution is something every market will experience from time-to-time, but given the current context of this market today’s selling definitely gives us some pause. This does not guarantee we fall like we did in October of 1987, but we could see some follow-through on the downside here. We’d rather see this market reverse higher and set new all-time highs. It is much more fun to see this market ripping higher. We understand the market has its ups and downs. Corrections are normal to see and are certainly healthy if we are to see this market push higher into year end. We will clear October soon enough and we’ll have poor seasonality behind us.
Once again we are not dead in the water just yet. This market has been in this position where we are on the verge of a correction only to see it pull itself out and push higher. This time may or may not be different, but we prepare for whatever the market gives us. Yes, we have our exit strategy in place in case the downside picks up. Go with the market rather than fight it. It will make your life easier!
