Tuesday was a rotten session for the bull case. Up through today there was at least a small subset of stocks that in general were relatively immune to the selling but today those were the hardest hit stocks. The S&P 500 fell 1.23% but the NASDAQ was torched for 2.0%. Recall we have been saying the NASDAQ has been outperforming by a large margin but usually these 2 indexes move much more in line. Well today the NASDAQ began to "catch up" to the S&P 500; of course beforehand we don't know which index will catch up to which; i.e. the S&P 500 could have just as easily outperformed the NASDAQ to the upside ... but that would required our friends in Washington D.C. to be compliant. Economic news flow remained light; it is all about D.C. for now.
With our indexes we saw the S&P 500 "fall out" of the bottom of this descending channel - a serious sign of weakness. It did this twice last week intraday but you can see buyers stepped in to close the index near/at the bottom of the channel; today that did not happen.
The NASDAQ finally joined the party.
The volatility index - which we have highlighted quite a few times recently continues to "break out" - bulls don't want that. It might remain elevated until a resolution in D.C. is finalized, at which time this sort if index usually implodes.
The NYSE McClellan Oscillator is now at an oversold level but with a caveat. There are two oversold levels - the normal ones which is the top shaded box, and then the "extreme fear and pessimism" one which is down there near -100. That level is only reached 1-3x a year in general; we saw one this summer. So if things continue to degrade there is a chance we continue to see this go down.
BeSpoke Investment group had an excellent chart they posted at 2 PM on their site showing that the winners of the 3rd quarter were today's biggest losers; keep in mind this was at 2 PM and it got worse from there.
The stocks that have been the best performers over the last few months are getting crushed today as investors and traders sell their winners. We broke the S&P 1500 into deciles (10 groups of 150 stocks each) based on stock performance from the start of the third quarter through yesterday and then calculated the average performance of the stocks in each decile today. As shown below, the decile of stocks that performed the best since the start of the third quarter is down an average of 1.93% today, which is much worse than any other decile.
We'll use Marketsmith charts today to look at individual stocks and ETFs:
So what have been the main winning groups of late? Social media/internet, biotech, and solars. We will skip solars as its a very small group but all social media / internet, Chinese or U.S. was decimated ...
The "four horsemen"...
... as was the biotechs.
One of the big names....
One of our names...
The latter group is especially important as they are not the fly by night speculative type names you sometimes find in other groups - these are institutional type hideouts and today they took a beating.