Turnaround Tuesday turned into Tumbling Tuesday with today’s aggressive move to the downside by Small Cap stocks and the NASDAQ Composite index. Preliminary volume metrics show volume was higher across the board from Monday’s session as stocks like TWTR move to new lows. TWTR drove quite a bit of volume on the NASDAQ, but over at the NYSE volume was higher without the help of one signal name. Selling picked up just after 1030am and didn’t let up at all even at the market close. In fact, a late day rally just after 3pm was shut quickly as sellers gained the upper hand in the final 30 minutes of trade. The weakness we saw today is certainly indicative of the action we expect from this market as price action has been weak.
Volume wasn’t above average, but it was significantly higher than yesterday’s light trade. The downside continues to be led by small cap stocks while the Dow Jones Industrial average continues to avoid heavy losses. Even though the index was down over 100 points the percentage loss was only .78%. Over at the S&P 500 financials lead the index lower while Oil & Gas names were able to stay in the green. Utilities weren’t down as much as the index, but were sold off despite being the best performing sector for the S&P 500 this year. There has been a shift in this market and while we can’t predict with any accuracy price action is leading us to be position for the market to go lower.
Volatility remains relatively weak for this market as the VIX continues to remain below the 15 level. While the index hasn’t made a new low (undercutting Jan lows) the index continues to show no one is using options to protect them from downside risks. It’ll be interesting to see how expected volatility evolves while actual volatility remains high.
AAPL lost the $600 mark today after closing above it yesterday. The milestone is big for those who own the stock. It has been quite the disappointment despite what you think of their products. GOOGL was a darling in 2013 after running away in October after a gigantic breakout. Currently the stock is under tremendous selling pressure and appears it’ll challenge the 2013 breakout. PCLN follows a similar path just without the tremendous gap up and it too is under a ton of pressure. While GOOGL has had its earnings already PCLN reports prior to the market open on 5/8.
We’ll continue to work our process and right now we are on the short side of the market. Market conditions may change, but for now we are seeing weakness and we are simply following the trend.
