Another wild day on Wall Street as stocks reached new yearly lows with the Dow Industrials down more than 200 points. The bright side today was the ability for small caps to rebound from deep early losses. Volume rose across the board by more than 20% and with the reversal hints at a potential short-term bottom for this market. Crude oil slid further ending its session with a 26 handle. At the lows the Dow was down more than 560 points, but was able to rebound 210 points to its closing point. Huge swings on the day with the NASDAQ and Russell 2000 leading the rebound. Many are still trying to call a bottom, but without a solid close we are still in search of a positive close to get day one of another attempt at a rally. Patience will pay off for end-of-day traders while there is still plenty of opportunity day trading. For now, it does appear a stock market crash is not imminent.
Two stocks with earnings last night IBM and NFLX both finished lower, but had two vastly different sessions. IBM gapped lower, but found support. However, the stock gapped down nearly 10 points before rallying higher closing just down 6 points. NFLX gapped up at the open, but faced sellers early and often. It wasn’t until 11am until the stock stabilized before getting momentum after 1:30pm EST. It would have been a much better scenario had NFLX been able to close green. Other names we have been mentioning in the chat room, but the volatility is too great to have great confidence in big positions here. Cash still remains king and select trades are the only prudent move. The other prudent move is to come join the Big Wave Trading community. Go to here and use coupon code CRASH to take 30% off all of our subscription prices.
We will say seeing crude oil with a 26 handle is quite something. Last year the talk was how lower oil prices were going to help the consumer and so far we have yet to see this play out. Perhaps all the jobs that have been created were such lower oil prices do not have a positive effect. There were a lot of smart economists as well as market pundits counting on lower oil prices increasing discretionary spending. A valuable lesson to be learned is it pays to follow price and not your opinion.
The rest of the month will be interesting. The mantra of how January performs is how the year will perform will be put to the test. Remember, this is the worse start EVER for the markets. Prior to this year the worse 5 starts ended the market lower 4 out of 5 times. The average loss was 22%. While we don’t have a solid sample size it is not comforting knowing a bad start to the year leads to weak gains.
Let’s see if today was a tradable low.
