Many stocks are selling off today and I'm seeing the selling actually picking up. This is not a buying opportunity unless you are short some stocks and want to cover a bit early. But the high fliers are finally buckling, with the Biotech Index being the prominent move.
I'm short stocks like Priceline (PCLN), which is totally overowned (95% by institutions); Biogen (BIIB), which is falling back to test $300; Amazon (AMZN) and Google (GOOGL), both of which are falling prey to the "too far, too fast" dynamic; and Netflix (NFLX) -- just because I'm a glutton for punishment. (Amazon is part of TheStreet's Growth Seeker portfolio. Google is part of TheStreet's Action Alerts PLUS portfolio.)
But the chart that gets my attention more than any of these is the advance/decline line chart.
Much has been made about how the S&P is once again testing the 200-day moving average, and some just tacitly assume that the 200-day moving average will hold. Perhaps it will; and perhaps it won't. Only the fools and the liars know for sure -- the "always confident, occasionally right" experts.
But I'm looking at this advance/decline line as if it were any other chart. And I'm seeing a marked resemblance to how the Dow Jones Transportation Average looked before it imploded, and how the Dow Jones Industrial Average looks right now.
Bottom line is this: I seriously do not know whether the 200-day moving average will hold. But I do know that this market continues to erode, and there are fewer stocks that I'm comfortable owning. In fact, I'm hoping for some kind of rebound off the 200-day moving average so that I can short more overbought stocks.
The thing about oversold stocks is that they tend to get more oversold during times of widespread distribution/liquidation -- which is what's happening now. The thing about overbought stocks is that they tend to stall out and reverse during times of widespread distribution/liquidation.
My crystal ball is broken, but my shorts are working. And that's just fine with me.