AAPL wasn’t the worse loser in the NASDAQ, but the stock’s decline helped push stocks lower across the board. Volume wasn’t higher, but price action remains weak and hints at further weakness ahead. News of a new round of tariffs targeting autos was the excuse stocks slid. However, the prevailing trend is already in place and it will take some time for us to clear the decks to resume a stable uptrend. We do not know where this market will ultimately end up, but for now from an end-of-day standpoint the market is making it clear to stand down on the long side of the market. Market pundits will use plenty of excuses as to why this market is weak and they may very well be right. Our concern is not with the why, but with the price action of our stocks along with the general market. Our focus is on price because that is what pays us in the end. Knowing the reason why will not help us execute. We are in clear and present danger and we are staying away until the storm clouds part.
The top laggards of the session in the NASDAQ 100 are as follows: ALGN, NVDA, AVGO, and ILMN. All four look to be in some serious trouble with ALGN and NVDA looking as if they are about to lose a lot more market capitalization soon. NVDA was a market darling last year and really since 2015 when the stock sat at $20 in the summer of 2015. On October the 2nd, 2018 the stock hit $292.76. Not a bad return over the course of 3 years, but sadly sellers are rushing in and punishing the stock. ALGN was very similar breaking out in 2016 and finally reaching a peak of $398.88 on September the 25th of this year. These two stocks certainly encapsulate what is going on with the stock market.
To pile on the market the FANG stocks have all finally broken. AAPL the lone ranger left finally broke after reporting earnings. Monday’s action was not favorable, but at least it did not penetrate its 200-day moving average. It would not surprise us to see AAPL find a bit of support here, but at this stage of the game we are not going to stick our necks out here. FB, AMZN, NFLX, and GOOGL continue to display very concerning action for those who are long each stock. Another leg down here isn’t out of the question for these 4 stocks along with the broader market. Caution is warranted.
The one positive we could take away from the market was the Russell 2000 didn’t lead the broader market lower. So far the index has been leading the entire market lower. Perhaps a change in character is taking place. Time will tell and we will be patient. We hope you are avoiding this mess as we will be patient and wait for a better opportunity to present itself.
