The technology and momentum selling that hit the market on Friday is seeing some downside follow-through this morning. The selling was severe enough to give the dip buyers a bit of pause -- and now they are standing aside, waiting for someone else to step up before they jump in.
The bigger question right now is whether the SPDR S&P 500 ETF (SPY) , SPDR Dow Jones Industrial Average ETF (DIA) and iShares Russell 2000 ETF (IWM) can withstand the selling onslaught. There is still good relative strength in these indices, and breadth is running positive, but there are a few air pockets here and there.
Banks and oils are what is keeping the main indices positive while the carnage continues in big-cap technology. It is very unusual to have this degree of selling in the key momentum names without it having some impact on other areas of the market. Usually, when the momentum names are hit this hard, it impacts the entire market. Most likely, it is just another way that the computer algorithms have changed the way the market trades.
My game plan is to target a few of the big-cap momentum names that I feel have the best growth and valuation. The three top names I'm looking at are Applied Optoelectronics (AAOI) , which is my stock of the week, The Trade Desk (TTD) and Alibaba (BABA) . I'm in no rush to add aggressively, but I am making some small buys into the weakness.
Another stock that I'm watching closely is Health Innovations (HIIQ) . I've mentioned this one several times before, and it is up a buy recommendation and $28 target today. I'll be looking for entry points as it develops further.
I've been waiting for a market pullback to create some opportunity -- and we are finally getting one.