Today’s potent sell-off is being blamed on a raft of extremely weak economic data, especially out of China, and rightly so as the data has been dismal. But if we’re being honest, a correction like this has been a long-time-coming. Yesterday was somewhat of a day to take notice as the S&P broke below its 8- and 21-day moving averages but closed off its lows of the day – leading some to believe we could get another resilient bounce back into the upper range. Instead, we got steady and ruthless follow-through to the downside both overnight and during today’s session.
The S&P and Nasdaq both finished down more than 2%, and after a 1.96% loss the Dow completed its work week since 2012 – even despite components Microsoft (MSFT) and Proctor & Gamble (PG) being two of the select few stocks to finish the day positive after earnings.
Emerging markets have bore the brunt of the economic weakness and completed a horrific two days of action. Industrials and Transports were among the hardest hit sectors in US markets as the XLI, XHB and IYT finished down 3.11%, 3.11% and 4.06%, respectively. Dismal earnings from Kansas City Southern (KSU) led to a 15.17% loss for the stock (despite closing WELL off lows of the day), which helped lead to the potent sell-off in the transports.
Money continued to flow back into bonds as the resurgent 20+ Year Bond ETF (TLT) posted gains of 0.65%. Gold (GLD) got some interest but not as much as you might think as GLD finished up 0.41%.
Google (GOOG) closed below its 21-day moving average for the first time since October thanks to a 3.13%, part of which could be blamed on server outages that affected G Mail and other Google services today. Amazon (AMZN), another one of the strongest names in tech, also sold off sharply as it fell 3.07%. 3-D printers also took a beatdown after another bearish report on the sector from Citron Research, this time regarding 3-D Systems (DDD). After the recent technical damage in the sector the likes of ONVO, XONE, and VJET could face a turbulent period.
Today’s sell-off was potent and broad, so the list of stocks that got hit hard is obviously long. The best exercise after a potent sell-off like today is to make a list of stocks that held up best and you have been itching for an opportunity to buy. A few names that maintained relatively bullish composure (held above their 8-day EMAs) after today’s sell-off include Biogen (BIIB), Gilead (GILD), Twitter (TWTR), Tesla (TSLA) and Netflix (NFLX). A laggard name that held up today and looks like it could be trying to find a bottom is Lululemon (LULU), but like with any weak stocks always keep a tight leash (stop) on any position.
Next week is shaping up to be very interesting. Do global markets respond to the US market sell-off over the weekend and continue lower? Does the S&P gap up Monday and not give traders a way back in? Right now, cash is king until we get more clarity, and we’ll monitor the action closely for potential opportunities on next week’s Off the Charts.
Disclosure: No relevant positions