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A note from Greg Guenthner
That was ugly.
The morning relief rally began sputtering in the early afternoon. Then, once the averages went negative, the selling really picked up, cascading stocks lower into the closing bell.
The Nasdaq Composite led the way down with a drop of 1.8%. But keep in mind, that’s actually a 3.5% drop from its morning highs. Once again, the tech-growth names that started showing cracks late last month were the stocks that were hammered yesterday.
Bottom line: Yesterday’s action is about as bad as it gets. The absolute worst thing you want to see after a drop is a relief rally where the averages gap higher, then sell off in the afternoon. That’s textbook distribution. Investors are selling the rips… and it’s starting to feel a little panicky out there.
Here are some numbers as I screen through some charts this morning:
More than 830 stocks listed on the Nasdaq are down more than 10% this week. 70 are down at least 20%…
More than 60 S&P 500 components are down double-digits this week as well…
If it wasn't for some of the market's biggest names propping up the averages, this action would appear much, much worse...
Cathie Wood's ARKK lost almost 7% yesterday and is now down more than 20% from its Nov. highs.
We can use ARKK as a proxy for the tech-growth trade. These are the most hyped growth names on the planet...
We could get a kick-save later this week. But overall, this looks like big trouble to me. ARKK has retraced its entire Q4 2020 - Q1 2021 melt-up rally, after consolidating for almost a year. That looks toppy to me. The combination of "lockdown" favorites such as ZM, along with some of the higher-flying software names has proven poisonous here.
In fact, the two "opposing" themes of lockdown and reopen are both suffering. Airlines, travel names, casios, etc have awful looking charts right now. But so do lockdown names like PTON and ZM.
The averages are green right now, but nothing too exciting going on.
AAPL and some chip names are dragging on the Nasdaq, it feels heavy right now.
Careful out there today!
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