We want a big down opening. We want one bad.
Why? Because I think that anything less than that will bring out sellers galore after Friday's punishing session.
We particularly want to see it if you are talking about stocks like FANG -- Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Alphabet (GOOGL) -- as these stocks are all in freefall because the sellers can't seem to finish and the buyers are, intelligently, not willing to step up the plate. Why go into the batter's box knowing that you are going to get beaned?
(Jim Cramer's charitable trust is long FB and GOOGL. Read the latest report on all the stocks in the AAP portfolio FREE during the Open House.)
I spent a lot of Sunday perusing the charts and except for a couple of utilities and some gold stocks, there weren't many stocks that held support.
(Read Real Money chartist Bruce Kamich's take on the technical picture of New Gold.)
Plus, the proprietary oscillator I use to gauge whether we are oversold or not showed a shocking overbought reading still after Friday's pasting. But the stocks that got hit the most, though, were the remaining high-growth stocks like FANG: Adobe (ADBE), Palo Alto (PANW), Tesla (TSLA), Starbucks (SBUX), Salesforce.com (CRM) and any of the biotechs and you just can't find support for any of them.
The destruction upon so many stocks, especially, in the end, these favorites, has been nothing short of dreadful and there is no weekly or monthly support. When things are this negative you have to recognize that only the technicals are going to create any floor. Unless you are looking for a gold stock or some utilities right now, they are of little solace.
So, what does a down opening do? I think that it is possible to reach a level where no one is doing any selling but the forced kind. Fortunately, we can measure that by looking at the trading between 1 p.m. and 2 p.m. when the margin clerks are done and, again, at 2:45 p.m. when, if there is no rally, there tends not to be one. The former is pretty well known, the latter is something I have just observed over the years.
No matter what, please remember that brokers who handle these sellers are trying to do nothing more than get you a price that's better than the average of the day's trading. That kind of sale puts pressure on the close, given that the brokers know better than to create a rally into the close, which is why it's been so difficult for these high growth stocks to fare well at the bell.
Any pattern can change. But the latter one, coupled with the lack of any broker's willingness to principal stock, meaning buy the stock and then try to sell it to customers because that's now regarded as a potential Volcker rule issue, makes it very difficult to buy a market in freefall.
Which brings me full circle. An up opening attracts sellers who are fighting to stay alive. When the fund managers who bought the up opening see the selling waves come in, they panic and that adds to the avalanche.
So, if we do get an up opening the best possible thing to do?