The Question of the Quarter

 | Apr 25, 2014 | 4:00 PM EDT  | Comments
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Stock quotes in this article:

p

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amzn

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twtr

Last week, the Nasdaq hit the 200-day moving average and bounced up. The market had a one-week rally from Tax Day (April 15) and everyone felt great. Again, it was easy to shake off the blahs of the recent downturn in stocks.

However, here we are at the end of this week with more bad news from the likes of Pandora (P) and Amazon (AMZN). Again, the momentum tech stock names are taking a hit today.

So where is the market? I think it is still at risk of breaking below the 200-day moving average on the Nasdaq -- as it has been above it for well over a year. If it breaks below that level, instead of bouncing off it, it could trade down significantly over the coming couple of months.

So, I think caution is still warranted until it's clear that we're out of the woods. That might not come until the Fourth of July.

In the meantime, I'm bearish on plays such as Twitter (TWTR), which is scheduled to report next week. Anything with a stretched valuation could be up for profit-taking.

If the Nasdaq does fall below the 200-day moving average, it will be interesting to see if there is some spillover from the techs and biotechs to the plain old vanilla market. Those stocks have continued to trade well this year for the most part.

Is it a rotation or is it the start of a correction? That's the question of the quarter. It's too soon to know but it's worth being cautious right now.

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