Yesterday’s price action is certainly concerning. Heavy volume selling hit the large cap indexes hard as investors seemingly are dumping no matter the cost. Small caps surprisingly have held up quite well given the circumstances. Last year we saw large cap tech stocks or better known as FANG stocks fly high. There was nothing stopping them last year, but fast forward to now and they are getting pummeled. What’s behind the selling? Who cares, as we only care about price action and not at all as to the “why.” The bright spot on Tuesday’s session was we didn’t end up closing on the lows of the session. Sad as it may seem. Focus will turn towards whether or not the Bull Market from the lows of 2016 to now is dead. There is a good chance it is, but while others debate the topic we are preparing for whatever the market has in store for us next.
FANG stocks have had it fought as of late. With, perhaps the exception of NFLX as it still near its all-time high. FB, AMZN, AAPL, and GOOGL have all suffered big time losses with unfavorable volume. These stocks make up majority of the majority of the NASDAQ. Not a good sign when the biggest names in an index are in bad shape price wise. Sure, any of these could reverse at any time. However, it is going to take some heavy lifting by institutional buyers to support these stocks. It is possible and we will be able to tell by volume. At this time, until we see support out of these big tech stocks the NASDAQ will be under pressure for the foreseeable future.
Taking a look at TVIX and UVXY one would think after the past few trading sessions we’d see these ETFs flying high. For now, traders aren’t rushing into these for protection against further volatility. Both finished well off their highs on Tuesday. We did see buyers help the indexes in the final hour, but we did not see traders support these two volatility ETFs. Yes, long term these two ETFs are junk and will eventually go to 0. You can only reverse split so many times and can we point out what happen to XIV a few months back? However, on a very short-term basis these can provide added alpha to your portfolio for those who are more experienced and can cut losses short. It will be interesting to see how these trade over the next few days along with the broader market.
We wish you well in your trading. New traders should sit on the sidelines and observe. This is a great time to catch up on reading the great traders including our Past Big Winners. Study up!
