The best bounces tend to occur when emotions are strong and the market become stretched to the downside. That happened overnight as the indices fell sharply after the poor action yesterday but the bounce started a couple hours before the open and most of the energy dissipated shortly after the open. The opening lows were breached that triggered more sell stops and that has helped to set up another bounce but the indices are still mixed.
Breadth is running firmly in the red with around 2,800 gainers to 4,400 decliners and the number of new 12-month lows is over 1,000 again. There is still plenty of selling pressure but there were enough stocks badly oversold to produce some decent bounce action. In my prior note I highlighted a number of biotechnology names that look like they have already corrected much more than most stocks.
There is some stabilization which is a good sign and bonds are seeing some strength which is helped to eliminate the argument about higher rates killing the market. The more important issue now is the there has been some severe technical damage and that usually takes some time to correct.
At some point the market will focus less on the big picture issues that are driving the major moves in the indices and focus more on individual stocks and which ones may present better values. With earnings season fast approaching we should see more focus on individual stock picking very soon. We are in a market right now where the main issue is the direction of the indices that will eventually lead to a stock pickers' market so it's important to do your research now and be ready to act when better conditions develop.
One stock that I've been adding today is Turtle Beach (HEAR) . I discussed this name numerous times earlier in the year when it was the largest gainer in the entire market. The company makes headphones and other devices that have become extremely popular with the battle royale games like Fortnite. The company had a great second quarter but the stock has been trading down since then on concerns that it was hitting peak sales and profits.
This morning Turtle Beach announced that it expects to earn $0.74-0.78 in the third quarter which is sharply higher than the current guidance of $0.44. It is likely that the company will have a massive fourth quarter as well. It sells with a railing PE of just 10 and may not be as cyclical as the market seems to think it is.in several
I've been adding shares and expect that it will continue to see interest into the third quarter report in a month or so.
There are opportunities developing out there for stock pickers but be selective.