Some very negative news on the economic front got most of the blame for yesterday’s 2% decline in the stock market yesterday, but given that the market had rallied 27% over just three weeks, it was getting ripe for a bit of a breather anyway. In fact, everybody expected that all of these numbers would be horrible, so we would argue that the drop in WTI crude oil below $20 probably played an important role in the decline as well.
Yesterday’s action had good news and bad news in it. On the positive side of the ledger, volume was very low. At 4.2bn shares on the composite volume, it was the lowest reading we’ve seen since March 4th. However, on the negative side of things, breadth was more extreme yesterday than it was during Tuesday’s gains. For the S&P 500 index, it was 12.6 to 1 negative…and 9.3 to 1 negative for the NYSE composite index. Those readings were 6 to 1 and 2.4 to 1 positive during Tuesday’s decline, so given that Tuesday’s rally was much bigger than Wednesday’s decline, the fact that the breadth numbers were more extreme on Wednesday is another concern.
If there’s one thing for sure, the market has certainly become a stock picker’s market…something we’ve been predicting since late March. Most people are (correctly) talking about the outperformance of the NDX Nasdaq 100 index…as several big cap over-the-counter names like AMZN, NFLX & MFST continue to act VERY well…and all three stand in positive territory for the year (with AMZN & NFLX trading at all-time highs). However, we also have names like WMT and CLX trading in positive territory for the year AND at all time highs as well.
So you can see that it’s not just the big cap ...