A wild day on Wall Street as stocks whipsaw all day long, but finally closing higher on the highs of the day. Hitting bear market levels the S&P 500 was able to bounce back along with the rest of the market. The big winner on the day was Small Cap stocks followed by the NASDAQ. At 3:11pm EST the NASDAQ was at 2300, by the close the NASDAQ was at 2404. A hundred point swing at the end of the day was a tremendous move flipping the short-term trend to neutral. For now, cash remains king and we are now on day one of an attempted rally.
It is entirely possible we can build on today’s move and push higher. However, we are lacking the necessary stocks setting up in sound bases. Many remain wide and loose and the few that look good EVERYONE is seeing. For now, patience and cash is the best course of action in this market.
The positives here are obvious, a big volume reversal. If anything today’s move was a warning shot to shorts to get out of the way for the time being. I do want to point out the top 4 gainers on the NASDAQ were the following: ACMR DLGC WHRT BIDZ. Not the picture of quality there. Not one of those stocks trades above $3! Normally, CSCO AAPL ORCL MSFT GOOG dominate the list. This could very well be a blip and turn out to be nothing, but it is interesting the top 4 stocks are junk. Remember, we want to see quality growth stocks lead a new bull market. We had that situation in September of 2010…not the case now.
Covering shorts is a good idea here. We could rally another 4-5% and if you are long the 3x inverse ETFs a 12-15% haircut is a significant. Let’s not forget time decay is another killer for these inverse ETFs. If you are able to be nimble enough to take profits and losses in quick fashion then do so. However, if you are unable to handle the volatility cash remains the best place here. If you miss the first few days of a solid new uptrend, you can certainly make it up with stocks breaking out.