Market Is Still Seeing a Correction

by: Jonathan Novinski

After what looked to be another down day Wednesday, stocks managed to turn around. The Nasdaq (NASDAQ:QQQ) gained 0.6%, the NYSE gained 0.5% and the S&P 500 (NYSEARCA:SPY) gained 0.3%. The S&P 600 small-cap index had the biggest gain, surging 1.2%.

Volume was not so impressive though. The NYSE volume was higher, but the Nasdaq's was break even. The volume trend has been a bad signal the past few weeks. On days where the market heads higher volume is weaker, but on days when the market sells off volume is heavy.

The market is still in a correction. To get out of this correction, which started May 4, it will need to show more conviction on up days. Until that day occurs you should take profits on short-term trades. Try to avoid buying any stocks, but continue to build up a watch-list of stocks to buy for when the correction is over. Sectors that seem to offer some value would be healthcare, industrials, and some of the technology stocks.

Three Month Chart of S&P 500

A stock that rose Wednesday was Netflix (NASDAQ:NFLX). The stock rose almost 5% in above average trade. Netflix has managed to hold up nicely during this correction. Another stock that has held up nicely is Lululemon Athletica inc. (NASDAQ:LULU).Check out my recent article on LULU.
Three Month Chart of NFLX
Three Month Chart of LULU
Sodastream (NASDAQ:SODA) was down in heavy trading. The stock had just hit a high the day before and may be seeing profit taking. Sodastream sells home carbonation systems that turns water into sodas/sparkling waters. SODA just reported a blow out 1Q.
Three Month Chart of SODA
In economic news, durable goods orders for April were much weaker than expected. Home prices fell again in March. This has been the biggest quarterly decline in prices in two years. On a more positive front German banks were able to pass stress tests. In my opinion Germany is one of the best countries in the European Union. It will be interesting to see stress test results for other countries.
I would like to send out my condolences to the family members of Mark Haines. He will be missed greatly.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.