The very oversold NASDAQ led stocks up Tuesday but the S&P 500 lagged in a relative sense; this makes sense as the NASDAQ has taken much more damage in the past few weeks. In fact the NASDAQ had its worst 3 day performance since 2011 coming into the day. The S&P 500 gained 0.38% and NASDAQ 0.81%.
Right now it remains a time for cautious outlook on the market. The NASDAQ has broken a roughly 1.5 year pattern so we have to let a new pattern develop. At the current time that index is creating a series of lower highs on each bounce so that is the first step in reversing the near term downtrend. The damage is certainly less severe as more conservative parts of the market have held up but with damage in momentum stocks, biotech stocks, and small caps lately it is not a market for being aggressive.
We have been highlighting the emerging markets the past few weeks and it remains an area where money seems to be rotating into – here is the ETF which is acting quite well after month of pounding.
Meanwhile in the U.S. the two most conservative sectors – consumer staples and utilities are where money is flowing.
A lot of the stocks bouncing today were those who had been hit the hardest so if you like to buy companies whose charts are strong these are not the names – but if you are a short term trader trying to catch a falling knife names like LinkedIn (LNKD) or Baidu.com (BIDU) represents what was strongest today. Of course catching a falling knife is never easy because unless your timing is perfect you can lose a lot quickly.