Seeking Alpha

Momentum stocks tumble, Nasdaq plunges 110

  • The recent selloff in Nasdaq momentum names spilled over to the rest of the stock market today, pulling the Dow and S&P sharply lower from their record highs hit earlier in the session.
  • The S&P 500's 1.2% drop was less than half the Nasdaq's 2.6% plunge, but its 1,865 close was well below the 1,875 some technicians saw as a resistance level.
  • The selling that started in biotechs a few weeks ago has carried over into cloud and enterprise software names, Internet and other high-flying tech names.
  • Looking around Nasdaq, the carnage is evident: ICPT -9.6%, FEYE -8.2%, YELP -6.8%, TRIP -6.1%, TSLA -5.8%, ILMN -5.8%, SPLK -5.5%,NFLX -4.9%, PCLN -4.8%, FB -4.6%, GOOG -4.6%, BIIB -4.5%, CELG -4.3%, WDAY -3.8%, AMZN -3.2%, GILD -2.4%, TWTR -2%.
  • Recent high-fliers also are seeing a surge in volatility to go along with their declines; the implied volatility of the iShares Biotech Fund (IBB -4%) is near its highest level in at least two years.
  • Treasurys rallied as the latest employment report eased concerns that the Fed could raise interest rates sooner than expected; the 10-year yield fell 6 bps at 2.732%.
Comments (54)
  • WallStreetDebunker
    , contributor
    Comments (2637) | Send Message
     
    It looks like March 2000 all over again, but unlike then, value stocks and small caps offer no refuge because they are not cheap this time around. The CNBC talking heads will soon be talking up a new Great Rotation, this time from bubble sectors to cheap value traps (like Cisco), debt-burdened junk stocks (like Coal stocks) and emerging market sandcastles (like China).
    4 Apr 2014, 05:32 PM Reply Like
  • MarketLost
    , contributor
    Comments (2408) | Send Message
     
    I think we've needed a correction for a long time, especially in the mo-mo stocks. It's times like these that my portfolio of steady dividend payers really looks good.
    4 Apr 2014, 06:02 PM Reply Like
  • WallStreetDebunker
    , contributor
    Comments (2637) | Send Message
     
    Be careful what you wish for. With margin interest at all-time highs, programmed trading of ETFs dominating the exchanges, & hedge funds hungry to make some money on the short side--a continued sell-off in momentum names won't likely stop at the door of steady dividend payers.

     

    A 1987 or 2011 type sell-off could happen in the time it takes to read your neighbor's bumper sticker "My Son Is A Dividend Aristocrat Investor!"
    4 Apr 2014, 09:53 PM Reply Like
  • MarketLost
    , contributor
    Comments (2408) | Send Message
     
    @WallStreetDebuker,

     

    I'm fine with that, and even expect it. It just let's me get in for a much better entry point. Same thing I did during the melt-down.
    4 Apr 2014, 09:55 PM Reply Like
  • 6228371
    , contributor
    Comments (4562) | Send Message
     
    "It looks like March 2000 all over again, but unlike then, value stocks and small caps offer no refuge because they are not cheap this time around."

     

    Many emerging market stocks are cheap now. The high market volatility without the markets advancing much in a few months is the perfect climate to invest in closed end funds that write covered calls. I particularly like the IAE and IHD(Ing Emerging market high dividend Fund) as great ways to play the volatility. European stocks also seem like they will perform better than US stocks in general. Some call writing funds with US and European stocks are INB, ETW, BOE, and EXG.
    4 Apr 2014, 05:44 PM Reply Like
  • rickraff
    , contributor
    Comments (316) | Send Message
     
    This is nothing like March 2000...
    4 Apr 2014, 05:58 PM Reply Like
  • mobyss
    , contributor
    Comments (2093) | Send Message
     
    I agree, but it could be like mid-1998. The NASDAQ sold off about 25% then from around 2000 to around 1500.

     

    But I don't think it will be followed by another late 1998 to March 2000, when the NASDAQ soared from 1500 to over 5000 (what the hell were we all thinking then?)

     

    If Tesla or Netflix really breaks and drops another 60 to 70%, then it could stampede the entire tech market, which would then spill over into the S&P. -25% in the NAS might mean about -20% in the S&P.
    4 Apr 2014, 06:43 PM Reply Like
  • a1shot
    , contributor
    Comments (318) | Send Message
     
    I am afraid to acknowledge this as just by taking out these two, the domino effect will make a lot of destruction.
    5 Apr 2014, 06:14 AM Reply Like
  • rsbduff@gmail.com
    , contributor
    Comments (438) | Send Message
     
    Confused Coordination?

     

    90% of all stock is owned by 10% of the population.
    Stocks are traded by three different groups.
    1) 401K funds....that only promise to finish your transaction, "by the end of the day."
    2) Hedge and Managed stock funds.
    and 3) Individuals wringing their hands and trading for themselves.

     

    When you ask yourself, "How could a coordinated sell-off occur, one looks at the back door of #2, who can stampede #3, into doing whatever number #2 wants the market to do.

     

    This big sell-off might be warranted, but it's no accident.

     

    RSBDuff
    4 Apr 2014, 06:10 PM Reply Like
  • 6228371
    , contributor
    Comments (4562) | Send Message
     
    I wonder how much less volatile the US stock markets would be if all funds were closed end funds, and there were no open end funds or ETFs. There would be no huge concentrated selling by funds to meet redemptions. Funds would only trim their holdings to raise funds to buy other stocks or to make distributions.
    4 Apr 2014, 06:39 PM Reply Like
  • benitus
    , contributor
    Comments (1971) | Send Message
     
    rsbduff....you're absolutely right, which is what I've been telling people all the time, because corporate and hedge fund traders feed off the emotions of individuals and line their pockets at the expense of the weak and the confused. They drive the trend with every rumor, which is what irresponsible analysts fail to understand when they make wild calls that trigger nervous responses, especially those who work for the hedge funds, banks and corporations. However, the sell-off is long overdue and the correction (which started some time ago) would be healthy, as the tech stocks have been pushed up too much for the past two quarters, making them affordable to the masses, which would bring in more ignorant buyers that will support prices, but not before they level off at lower levels, i.e. they've got more ways to drop.
    4 Apr 2014, 09:08 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (11302) | Send Message
     
    You forgot banks trying to make a profit on their own trading instead of taking risk loaning to the public.
    4 Apr 2014, 11:35 PM Reply Like
  • dezee
    , contributor
    Comments (2199) | Send Message
     
    Banks make money off the yield curve
    5 Apr 2014, 05:00 AM Reply Like
  • Frank Greenhalgh
    , contributor
    Comments (2045) | Send Message
     
    Here is an interesting article about BMW not sure of EVs future.

     

    http://bit.ly/1dV9y9L
    4 Apr 2014, 06:22 PM Reply Like
  • rsbduff@gmail.com
    , contributor
    Comments (438) | Send Message
     
    Profit taking?

     

    Wall street will say, "There was a lot of "profit taking" .....today.
    I wish I had enough Facebook and Google, to both, sell for "Profit taking" today, and then cover.... all my shorts.... "tomorrow." That's what "profit taking," means on Wall Street. The DUMB money is played like a piano.

     

    RSBDuff
    4 Apr 2014, 07:13 PM Reply Like
  • MarketLost
    , contributor
    Comments (2408) | Send Message
     
    << That's what "profit taking," means on Wall Street. The DUMB money is played like a piano.>>

     

    I think that's just one of the many phrases that means the same thing.
    4 Apr 2014, 08:07 PM Reply Like
  • Hamdy Sadek
    , contributor
    Comments (168) | Send Message
     
    What profit taking? This is more like stupid selling that ensures you lose 5% or more of your assets value.
    4 Apr 2014, 11:06 PM Reply Like
  • 6228371
    , contributor
    Comments (4562) | Send Message
     
    It is those stupid stop loss orders that magnify declines of volatile stocks. The same is true for shorting of stocks. Imo both should be outlawed. Those who want to bet against a stock could still use put options though. Put options are a side bet though, and don't directly increase the supply of shares the way shorting does. It seems like when there is a decline in a volatile stock, the players will try to trip many stop loss orders. The selling from the stop losses trigger further stop losses. It is like a row of dominos falling.
    5 Apr 2014, 09:18 PM Reply Like
  • benitus
    , contributor
    Comments (1971) | Send Message
     
    622....what you say may be true but many brokers, including mine, impose 24-hr restrictions immediately when their system detects unusually large volumes of short orders, which will prevent any cascading effect. Besides, brokers have to locate shares that can be shorted, which may not be available if everyone else are selling theirs. The greater effect on volatile stocks would be the automatic stop loss orders, which are intended to protect individuals from being wiped out by sudden changes in prices. This is also a good thing because no one wants to be wiped out while he's asleep. In any case, if a stock is that volatile to crash when shorts and stop loss kick in, then they're fundamentally weak and deserve the correction which the market allows, in order to reflect the soundness of the stock, so that innocent individuals may not be misled into loosing their life's savings on a weak stock. As a day-trader, I don't use stop loss orders because I don't want to lose a chunk of my holdings from a rumor or someone's greedy attempt to corner a stock for personal gain. I can take the hit if I have to because it's on paper, which I'll recover from within a week or two. But if it's a general market collapse, then it's every man for himself, which is why I get up before 4am to trade pre-market and I usually clock out for lunch. I only come back to trade after lunch if I don't have anything else to do or the action is too exciting to stay away.
    6 Apr 2014, 08:03 AM Reply Like
  • 6228371
    , contributor
    Comments (4562) | Send Message
     
    "Besides, brokers have to locate shares that can be shorted, which may not be available if everyone else are selling theirs."

     

    Plenty of naked shorting goes on.

     

    "The greater effect on volatile stocks would be the automatic stop loss orders, which are intended to protect individuals from being wiped out by sudden changes in prices. "

     

    The irony is that this is what causes the sudden decline in stock prices.

     

    Some foreign stock markets have a maximum decline that a stock is allowed in a single day. It slows down declines, and gives people a chance to think about things, and for potential buyers to emerge when a stock is crashing. It makes it harder for a few large players to gang up on a stock.
    6 Apr 2014, 08:51 AM Reply Like
  • leebailey85
    , contributor
    Comments (78) | Send Message
     
    Markets are forward looking. This is not history. They don't repeat themselves. Every day, every month, every year, every decade, every market cycle is unique.

     

    The truth is that markets are unpredictable by any means. So stop trying. You won't get rich. There are exactly 0 market timers on the forbes list. How many entrepreneurs?

     

    Don't waste your time trying to get 15% returns instead of 10%. Even if you succeed, you would have been much better off using your time for career advancement or starting your own company.

     

    Buy and forget, the only sane way to use extra cash lying around that you don't have time to put in a business venture right now.
    4 Apr 2014, 07:30 PM Reply Like
  • omooc
    , contributor
    Comments (340) | Send Message
     
    leebailey85's post is superb. "You would have been much better off using your time for career advancement or starting your own company." Very well said. Question: Does 85, a part of leebailey85's name, refer to the author's age? If so, it is a wise advice from a young man. Keep up the good work, young man.
    4 Apr 2014, 10:34 PM Reply Like
  • cobra429
    , contributor
    Comments (12) | Send Message
     
    In your bio you say: " Interested in investing as it's a much more scalable path to wealth than engineering (or career in general) ".
    So please explain me your post above.
    5 Apr 2014, 05:42 AM Reply Like
  • JMajoris
    , contributor
    Comments (1229) | Send Message
     
    Very true. Even Buffett couldn't make a go of market timing which he tried early in his career. The key is to start young and invest in dividend aristocrats. If you're not young, get your kids started young.

     

    <<The truth is that markets are unpredictable by any means. So stop trying. You won't get rich. There are exactly 0 market timers on the forbes list. How many entrepreneurs?

     

    Don't waste your time trying to get 15% returns instead of 10%. Even if you succeed, you would have been much better off using your time for career advancement or starting your own company.
    Buy and forget, the only sane way to use extra cash lying around that you don't have time to put in a business venture right now. >>
    5 Apr 2014, 06:47 AM Reply Like
  • just read the instructions
    , contributor
    Comments (140) | Send Message
     
    I guess that a lot of the retail people here that "waste" their time on reading, buying and selling are either career-wise in a dead-end, already retired or in the early beginning of their career learning the 101 of investment.
    5 Apr 2014, 09:21 AM Reply Like
  • 6228371
    , contributor
    Comments (4562) | Send Message
     
    "Buy and forget, the only sane way to use extra cash lying around that you don't have time to put in a business venture right now"

     

    Buy and forget might be okay for an S&P500 index fund, however it doesn't seem okay for those who have a relatively small number of stocks.
    5 Apr 2014, 09:20 PM Reply Like
  • DanoX
    , contributor
    Comments (2743) | Send Message
     
    Paid attention to what a company actually does, the (fundamentals), start investing/saving young and keep at it. Most people do not (myself included).
    6 Apr 2014, 01:07 PM Reply Like
  • C.N
    , contributor
    Comments (201) | Send Message
     
    if you own high flyers, it could be 2000 or 2008, but who knows... but if you do not have those stocks, it is time to accumulate non-flyers( PE between 8/20).
    4 Apr 2014, 10:26 PM Reply Like
  • Hamdy Sadek
    , contributor
    Comments (168) | Send Message
     
    Stocks are not just evaluated by their P/E ratio.
    4 Apr 2014, 11:08 PM Reply Like
  • al roman
    , contributor
    Comments (8007) | Send Message
     
    It's not 2000 or 2008 we are not in a trillion dollar war or a meltdown.
    4 Apr 2014, 11:08 PM Reply Like
  • harball
    , contributor
    Comments (297) | Send Message
     
    The truth is that no-one knows. But most of these momentum names are really full of hot air... It's time to go into junior resource stocks, the 3-year bear market has just ended. Cash generating gold, uranium, zinc, copper, lead miners.
    5 Apr 2014, 04:41 AM Reply Like
  • Ordos
    , contributor
    Comments (46) | Send Message
     
    Who knows what the future brings. I did note a distinct flight-to-quality today though. All of conservative dividend holdings were up. It seems at least part of that money is moving from Nasdaq high-flyers to companies with proven track records.
    5 Apr 2014, 05:47 AM Reply Like
  • al roman
    , contributor
    Comments (8007) | Send Message
     
    We need a modern day Global Marshall plan,Now Hiring.
    5 Apr 2014, 07:34 AM Reply Like
  • just sayin'
    , contributor
    Comments (127) | Send Message
     
    To me the important question is who was buying on 4/4 and why were they buying? If no one was buying we would have crashed for real. This was just a little dent.
    5 Apr 2014, 07:39 AM Reply Like
  • al roman
    , contributor
    Comments (8007) | Send Message
     
    Exactly,it's the guys who have their probabilities,combinat... with corp,gov & military.Just the real is for that crew.
    5 Apr 2014, 07:50 AM Reply Like
  • a alto
    , contributor
    Comments (159) | Send Message
     
    I went shopping the last few days , bought UBNT five different times on the way down . So, I'm in the hole by several thousands and it doesn't concern me at all . Momentum stocks in a panick correction are big opportunitys . If a company has a strong balance sheet and a product that is needed and wanted by people throughout the world it's stock will only increase in the upcoming years . Most people are too impatient to be investors .
    5 Apr 2014, 08:15 AM Reply Like
  • rsbduff@gmail.com
    , contributor
    Comments (438) | Send Message
     
    Take Note Jmajoris:
    Warren Buffet is old school. Todays power hedge fund boys have computer modelling. They have so much money.....they can drive the clock for timing.

     

    On Thursday, they held billions in high tech stocks.... Sold short same stocks.....bought billions in (lets say... Utilities...flight to safety stocks).

     

    Friday ("Hey Joey the alarm just went off...sell...sell..sell") They were out early.
    Everyone sought refuge in "utilities."
    They Covered their shorts with cheap high tech.
    .......That's how you make a billion in one day.

     

    Did you ever wonder why they pay these guys $800,000 a year, or more.
    If you hold up a bank for $20 Mill, even Joey the truck driver has to get $800,000....just to keep his mouth shut. This is better than robbing banks.

     

    Sorry to be so conspiratorial! Excuse me, I need to go to my bunker, before they think I talked to Joey.

     

    (My insight is worth what I charge for it)

     

    RSBDuff
    5 Apr 2014, 09:24 AM Reply Like
  • pemarangshar
    , contributor
    Comments (14) | Send Message
     
    gild..... 2m patients in japan..... only in a casino like this can news of a 100b market opening cause the value of a company to decline.... looks good on the computer screen will only hold up for so long...... algorithmikly yurs
    5 Apr 2014, 09:43 AM Reply Like
  • Hammad Arif
    , contributor
    Comments (3) | Send Message
     
    Is it time to sell fb or should i hold it and it will eventually come back to $72? Please advise.
    5 Apr 2014, 10:26 AM Reply Like
  • Doc's Trading
    , contributor
    Comments (1438) | Send Message
     
    Never make a trade into an investment. Sell it now... even if it were to rally afterwards.... Next time say to yourself (after a purchase)..."if the stock trades at $X (where I don't expect it to trade) I sell it immediately."
    5 Apr 2014, 11:27 AM Reply Like
  • jpstanley
    , contributor
    Comments (3) | Send Message
     
    read william o'neil's book and subscribe to his daily paper Investor's Business Daily. don't ask people for advice. formulate a system with proven rules that goes back over 100 years. read Jesse Livermore.

     

    IBD will answer your question. buy quality growth stocks breaking out of a sound base. don't buy stocks during a correction. sell at an 8% loss. etc.
    6 Apr 2014, 10:19 PM Reply Like
  • Zenkoan1
    , contributor
    Comments (3) | Send Message
     
    No, it's nothing like March 2000. Valuations, by any rational metric, are nowhere near so absurd as they were then, and many of the Nasdaq players now consist of more than a URL and wishful thinking--they have actual business plans and revenues. More likely, the bulk of the recent sell-off has been driven by HFT, with the rest being anxious selling by impatient individual investors. When prices hit a certain reduced level, the HFTs and institutions will swoop back in to buy many of these momentum and other tech stocks, and prices will recover substantially.
    5 Apr 2014, 10:33 AM Reply Like
  • WallStreetDebunker
    , contributor
    Comments (2637) | Send Message
     
    "Valuations, by any rational metric, are nowhere near so absurd as they were then"

     

    There's less of the obvious fluff that was present in 2000. Still, "real" tech companies like Cisco had a P/E of nearly 200 at its peak in 2000--and Cisco had a dominant business that was nearly certain to have recurring demand for decades. (Cisco is still 75% below its peak share price in spite of solid performance since 2000.) Compare Cisco in 2000 with, say, Twitter, which recently sold for $75/share and is expected to earn 20 cents next year. Twitter could be obsolete in 10 or 15 years.

     

    There's a veneer of plausibility for many of the momentum stocks, but the current valuations of many of these stocks exceed the valuations of hyper-growth companies in 2000. When the next bear market bottoms out, many of the stocks will have lost 65-90% of their recent share price, just like in the aftermath of the 2000 bubble.
    6 Apr 2014, 12:43 AM Reply Like
  • convoluted
    , contributor
    Comments (2004) | Send Message
     
    I've never seen a tree grow to the those puffy white clouds above, but many have proclaimed that their little tree was 'different.' This is why I never bother with momo names on the way up-I typically sell a small number of calls, gradually doubling down as I roll out (if need be). For all the many years I've been in this business, there is ALWAYS, ALWAYS, ALWAYS a reflexive moment such as this.
    It's a trite but popular saying that markets 'climb a wall of worry.' Well, golly gee whiz Batman, why not let those frenetic ants climb the hill-just bide your time and wait for the mound to collapse?
    Oh, I know-that's the ideaology of some pinko, leftist, Stalinist, anti-American, apple-pie hater. The idea is to 'invest' in a going concern-be a part of the growth story. C'mon man, the glass is half full! Actually, I'm perfectly fine with homecoming queens, family reunions and cute little puppies. It's just that my market strategies make a boatload of money-in a fashion that capitalizes on silly human pride.
    5 Apr 2014, 11:09 AM Reply Like
  • Doc's Trading
    , contributor
    Comments (1438) | Send Message
     
    Technical update..... As I said yesterday morning... The market made a gap reversal with the Dow at a new intra-day high....also a triple daily top... I still expect 30 days minimum declining market...
    Sell all rallies.......
    more later........
    5 Apr 2014, 11:32 AM Reply Like
  • Hamdy Sadek
    , contributor
    Comments (168) | Send Message
     
    Can you translate your tech. update to English language? How much of a decline are you seeing on your chart?
    5 Apr 2014, 11:38 AM Reply Like
  • MarketLost
    , contributor
    Comments (2408) | Send Message
     
    @Hamdy, it sounds like Docs is predicting a "Selling stampede". I thought we were heading into one in January, but we pulled out.

     

    http://bit.ly/1kyJbor

     

    Note, this article is from 2010, but it does define the term nicely.
    5 Apr 2014, 11:51 AM Reply Like
  • MrVincent
    , contributor
    Comments (256) | Send Message
     
    FB has a lot further to drop. It's STILL valued as much as companies like Disney.
    5 Apr 2014, 11:41 AM Reply Like
  • Guy in Ithaca
    , contributor
    Comments (422) | Send Message
     
    This correction doesn't surprise me. I've been waiting several months for it to happen. What surprises me a bit is the undervalued stocks like YHOO, MU and others being pulled down along with the overvalued momentum stocks. YHOO with a recent P/E of 30 and P/B of 2.9 cannot reasonably be considered overvalued at all in my opinion. In February of this year FB had a P/E of 105 and a P/B of 10.2 for comparison. It seems that irrational emotion is being mixed generously with reason in this correction. Luckily I'm a long term investor and not a trader and so can afford to wait for logic to return.

     

    The solid substance of Yahoo's turnaround has already been explained better than I could ever dream of doing in the SA article by Helix Investment Research. Yahoo! plunging along with the likes of Facebook and Twitter can only be explained by fluttering hearts and out of control emotions unbounded by reason. Nice discussion.
    5 Apr 2014, 12:34 PM Reply Like
  • EquityInvestor1
    , contributor
    Comments (86) | Send Message
     
    We're at the doorstep of the 1st Qtr earnings. I feel the weather card may get played for all the misses and guidance will be the deciding factor. MOMOs should regain some of their luster the next three months IMO. The second Qtr ER however will be a different story, if there is a hint of weakness then that's when we may see the 15-20% overall market pull back. Let's hope there are no Geo-Political events that triggers that, people get killed in those events, money comes and goes.
    5 Apr 2014, 01:37 PM Reply Like
  • EquityInvestor1
    , contributor
    Comments (86) | Send Message
     
    MrVincent,
    Social Media, whether it's Facebook or Twitter, has a customer base equivalent to Disney, considering movies and such, but a fraction of the distribution and production cost. Engagement is only one factor that decides revenue growth for Social Media, advertisers demand, higher ad budgets in a better economy as well as relevance, will drive this growth. I am personally biased as well as invested in Twitter and not FB and believe in the name regardless of the recent price action.
    5 Apr 2014, 01:45 PM Reply Like
  • al roman
    , contributor
    Comments (8007) | Send Message
     
    If you gained during last open market cycle it shouldn't be a problem.
    6 Apr 2014, 10:05 AM Reply Like
  • DanoX
    , contributor
    Comments (2743) | Send Message
     
    Only for Google, Amazon, Facebook, Tesla, and Netflix maybe.
    7 Apr 2014, 02:42 PM Reply Like
  • barygold
    , contributor
    Comments (31) | Send Message
     
    I would suggest that the very next feature that Tesla should implement is a way for Tesla headquarters to deactivate a specific car. The idea is as follows. A car is stolen. The police are informed. The police contact Tesla headquarters. The car is brought to an immediate stop and all doors are locked. Then the police are informed exactly where the car is located. Then we would not have incidents like the current one in Hollywood while doing 100+ down a city street and crashing into everything in site and causing G-d knows how many injuries.
    4 Jul 2014, 05:43 PM Reply Like
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