Is This Downside Capitulation for Market?

US markets looked to be digesting the big gap down this morning, but took a nose-dive starting around 11:30am ET. Investors and traders seem to be losing faith in this market after another round of dismal data this morning, highlighted by the Empire State manufacturing reading. The survey results came in at -7.8, compared with expectations for a positive +12 reading.

The fact that the market could not hold yesterday’s big oversold bounce at all is a very bearish sign. And the damage has been much worse than that. The Nasdaq has been particularly weak, retesting its 200-day moving average. Market leader Apple Inc. (AAPL) in particular has been very weak and looks like it will at least test its 200-day moving average.

The agricultural stocks turned very weak when the market got hit, as corn is limit down today. CF Industries Holdings, Inc. (CF), a stock we like and have highlighted several times over the past few weeks, took a big plunge. CF is down 4% today, but is only just testing its 21-day moving average and remains in an upper channel. CF often has big travel ranges and can be volatile before breaking out, so if you are looking to macro swing it, it is important to maintain a level head.

With the weak market Chinese stocks had little hope of holding up, and they succumbed to the pressure after only a one-day bounce., Inc. (BIDU) and SINA Corporation (SINA) looked promising early as the market bounced, but got smacked through yesterday’s lows.

Today’s big market sell-off is triggering a lot of fear, but I urge you not to let that fear paralyze you. Puking positions at the bottom with the rest of the herd is a losing game, rather you want to position yourself to be able to buy into these situations. It’s hard to think, at least in the short term, that the market will get a ton more downside before Friday’s quadruple witching.

By John Darsie

Disclosure: Scott Redler is long BA

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