It was a very rough week for anyone who passively held long positions. The Nasdaq, Russell 2000 ETF (IWM) and the S&P 500 all lost nearly 4% but the intraday swings were particularly brutal. Just when you might start to think the worst was over another wave of selling would hit.
What was particularly discouraging was the earnings news was a net negative. Microsoft (MSFT) and Twitter (TWTR) had good reports but there were poor reports everywhere from semiconductors to Amazon (AMZN) and Google (GOOGL) . Hope that the pullback into earnings seasons would lower expectations failed to work.
Twice this week there were big bounces after a gap-down open but in both cases the buyers were incapable of taking the market into positive territory. There was dip buying but it was overwhelmed by short-term flippers taking profits and energized bears establishing new short positions.
Technically the market is now in a clear downtrend. A number of key support levels have fallen and most support levels are just wishful thinking. The one big positive is that some of the selling is hitting fairly extreme levels. That is more so in individual stocks than the indices but the bears that are saying that this selling is still in the early stages aren't looking at the carnage in various sectors like biotechnology, financials and semiconductors.
One positive I noticed today was that there actually were a few pockets of positive action in some small caps. It was quite a narrow but stocks I'm mentioned lately like Viking (VKTX) and NII Holdings (NIHD) looked pretty darn good.
Earnings reports continue next week with more small stocks starting to repot but a few big boys like Apple (AAPL) are on the agenda as well.
There is no question that the month of October has been one of the worst months for the market in many years but this volatility is creating some very interesting opportunities. The potential for some good upside trading as we enter November is quite high.
Have a great weekend. I'll see you on Monday.
Long VKTX, NIHD