Earlier this week I talked about avoiding the need for liquidity today. The potential for a slow trading day or the need for selling could result in a painful whack. Well, we're getting that, however, I didn't anticipate the news of a new COVID variant as the driving factor. Whether you think the variant matters or not, this is the scenario that was setup coming into today. Those wanting out, for whatever, reason, were going to pay a price to do so.
In short, a shortened day of thin trading plus "scary" headlines and we get a selloff. This isn't a 'Market in Crisis' moment though. Indexes had already been dancing around moving average support levels, testing them, and almost playing a game of buyer chicken. The true worrisome spot is what we see happening in the Russell 2000. A 5% drop in a single day is a bit more than risk-off. Even worse, this comes after we've marched lower by 6% over the past several weeks.
We talk about markets not making bottoms on Friday. It's not a law but more of a guideline. What it means is a sharp selloff on a Friday carries more perceived risk into the next trading day than what you see on other days of the weeks. It is really more about the last trading day of the week and multiple days for people to worry or news to drop. And weekends can bring about the extra stress of worrying for two days without much financial news and mainly world news. Most of us know that negative world news gets the eyeballs.
I might throw out some 'what-the-heck' low bids on names I wouldn't mind owning as we head into the last hour, but I don't get the flash crash feel today. I'm not opposed to a flyer or two over the weekend. I'd likely stick with a name that has gone red to green today or something with relative strength. That being said, I'd rather go with something like Global-3 Online (GLBE) if I'm being aggressive than a play like Peloton Interactive (PTON) . I just don't see the original COVID plays as the way to go this time around. Those have had their business surge. Adoption, for those that were adopted, is already in place. My view is to eat some leftovers, let the rest of the day play out, and come in fresh on Monday.
