It was a brutal week for the market, as it suffered its biggest losses since March 2020, when everyone was panicked over the Covid pandemic. Nothing was safe this week as the Nasdaq 100 (QQQ) took a hit of 7.5%, and several of the FATMAAN names that have been safe havens for so long fell more than 20% from highs and are now in bear markets.
One of the most shocking statistics about the action comes from SentimenTrader.com, which reports that on the Nasdaq exchange, 42% of stocks are down more than 50% from their 52-week highs. Since 2008 the only other time this happened was during the pandemic from March 12 to April 8, 2020.
Stocks at new 12-month lows have been piling up all week, and they expanded to around 1,650 today on breadth of more than three to one negative.
Although it may not be of much comfort, the stealth bear market I've been discussing for many months is no longer very stealthy. This is obvious bear market action, but it still is not a formal bear market in the indices as they have not yet dropped a full 20%. The Nasdaq is now down more than 10% and in correction. Sentiment has turned, and there is no longer talk about bubbles. There is still a huge disparity in performance, but it is closing fast.
The big question for many market players is how much lower can the stocks that are already down 50% go while the indices continue to break down? That is the trillion-dollar question. There are some compelling values, but this market doesn't care about 'value' at this point.
Earnings season picks up next week when hundreds of bigger cap names report. We are going to find out very fast if the market is in a 'sell the news' mood or will it be looking to buy some good reports.
Trading doesn't get much tougher, but if we keep slogging away, the payoff will eventually come.
Have a great weekend. I'll see you on Monday.
