• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Momentum Fizzled on Thursday But It Isn't Dead Yet

Action like yesterday helps to create new opportunities.
By JAMES "REV SHARK" DEPORRE
Jun 22, 2018 | 07:53 AM EDT
Stocks quotes in this article: IWM, NFLX, IQ

For those that have been focused on the DJIA and the S&P 500, yesterday was just a continuation of recent weakness. The DJIA closed lower for the eighth straight day and finished below its 50-day moving average.

However what was most significant about the market action on Thursday was that key pockets of strength suddenly disappeared. The Nasdaq and the Russell 2000 ETF (IWM) have been producing significant outperformance as traders have piled into FAANG names like Netflix (NFLX) , recent China IPOs like iQIYI (IQ) and a variety of biotechnology, technology and other names.

The excellent action in certain areas of the market has kept sentiment quite positive despite the dismal action in the DJIA and sectors like financials and retail.

The dynamic that has been rewarding individual stock picking and pockets of momentum changed yesterday as aggressive profit taking hit the 'hot' stocks across the board. There was no safe haven on Thursday as breadth sunk to 1800 gainers versus more than 5000 decliners.

Many of the stocks that were hit had become quite extended and were due for a rest. The FAANG fans were downright euphoric on Wednesday and it was a classic response to see Netflix reverse to red after several analyst gave the stock some huge price targets.

The big question that the market is presenting now is whether this reversal in momentum is just a bout of profit taking that will be forgotten as the market regains its footing or is this the start of a major change in market character?

For years now, it has been a mistake to become overly negative after a day like yesterday. The market has consistently done a great job of shrugging off these reversal days and seems to have no memory of any worries from day to day.

In the early going this morning, market players are embracing a number of positives. There is some upbeat economic news out of European, the bond situation in Greece and Italy is improving, there is talk about negotiations with China before tariffs are imposed next month, and oil is up as OPEC seems to be reaching some consensus on an increase in output.

While the action yesterday was uncomfortable for stock pickers and momentum players after a good run, I don't expect them to give up and run for the safety of cash. As the indices stabilize, I expect to see the hunt for setups to accelerate. The longer the indices hold up the more likely that traders are going to start putting money to work.

The action yesterday caused some unhappiness and worry but that may be a good thing. Traders were becoming a bit too overconfident and they needed to be reminded of the fickle nature of the market beast. Action like yesterday helps to create new opportunities and our job is to identify them and go to work.

Right now we have a decent bounce in the early going but the key will be that the indices stay in positive ground after the opening belling. Downtrends are primarily a product of failed bounces and that is what we have to watch for.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, James DePorre had no position in the securities mentioned.

TAGS: Investing | U.S. Equity | Markets | Stocks

More from Investing

I Got the 'SOS', So Here's My Take on the Stock's Saga

Timothy Collins
Feb 28, 2021 6:35 PM EST

Let's try to sort out the details of the complicated story of SOS Ltd. -- and why the short reports might be ... selling you short.

Bearish Bets: 2 Nasdaq Stocks You Should Consider Shorting This Week

Bob Lang
Feb 28, 2021 10:30 AM EST

These names are displaying both quantitative and technical deterioration.

Jim Cramer: What History Tells Us About Bond-Rate Scares Like This

Jim Cramer
Feb 27, 2021 2:01 PM EST

We could have some real pain ahead for some stocks. Five different kinds.

What's Next for Bonds, TLT and Interest Rates?

Bruce Kamich
Feb 27, 2021 12:30 PM EST

Thoughts and observations on Treasuries and the direction of interest rates.

Navigating a Market Correction

James "Rev Shark" DePorre
Feb 27, 2021 10:00 AM EST

The most critical factor in long-term market success is the ability to effectively navigate market corrections.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:51 AM EST REAL MONEY

    Watch Bob Lang and Doug Kass Discuss Short-Selling!

    Bob Lang and Doug Kass with an engaging and educat...
  • 11:32 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Navigating a Market Correction
  • 11:29 AM EST GARY BERMAN

    Where Does the Nasdaq Go From Here?

    Where does the Nasdaq Composite (CCMP) index go fr...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login