There is some very emotional market action Friday as market players deal with a very poor reaction to major earnings from Amazon (AMZN) and Alphabet (GOOGL) . The market was in a "sell the news" mood and this slammed the stocks lower.
When large-cap names like these are sold it tends to drive the ETFs that contain them and has a very broad impact on the market. That is why breadth is very weak with around 1,700 gainers to 5,400 decliners. New lows are more than 1,350.
This sort of action tends to cause a spike in loud predictions about what the market will do next. Some bears are feeling confident that a long-anticipated bear market is finally here. There are plenty of momentum investors who are embracing the negative view as well.
All I know is that we are seeing some pretty typical corrective action with big swings on a daily basis. This makes for some great index trades on a very short-term basis, although this has not been a market for stock pickers. Stocks largely move in tandem because they are being pushed by the index ETFs
One very encouraging sign Friday is some relative outperformance by small-caps, biotechnology, banks and a few other sectors that have lately been the weakest. The poor index action is driven by selling of big-cap technology names but there are signs of bottoming in some of the smaller names that have been under pressure for much longer than the broader market.
One example is Viking Therapeutics (VKTX) , which I have mentioned a number of times. The stock is up over 5% and trading through its 50-day simple moving average. That is the sort of action I want to see as stocks come off a low.
Other names on my radar include NII Holdings (NIHD) , Twitter (TWTR) and ENDRA Life Sciences (NDRA) , which are not flinching in the wake of the index selling pressure. That sort of non-confirmation is the first sign that maybe these stocks have found some good support.
There is much talk that this weak action is occurring on a Friday. I don't see that is being meaningful, however. Some say that the indices don't bottom on Friday. I'm not sure that matters.
This market does look like it is washed out and will be in position for more upside. Whether that occurs Friday or next week we will have to wait to see.
I'm looking to add more long positions this afternoon. I like the action I am seeing in select small-caps that seem to be finding support.
