September is living up to its dismal reputation with more poor action on Wednesday. Unlike Tuesday, small-caps (IWM) are exhibiting slight relative strength, while the big-cap Nasdaq 100 technology stocks (QQQ) are lagging with a loss of around 0.9%. Breadth is about 2 to 1 negative, and there are twice as many new lows than new highs.
Apple (AAPL) , Tesla (TSLA) , and Nvidia (NVDA) are leading to the downside, while oil and discount retailers like Walmart (WMT) are leading to the upside.
The selling pressure is coming from growing concerns about a rebound in inflation as well as worries that growth is slowing. Europe is already hearing talk about stagflation, and China is under intense pressure as the yuan hits its lowest point against the dollar in 16 years. Bond yields softened a bit but are still a major issue.
There really is no way to determine at this point if there is a major change in market character taking place or not. Is this just routine seasonality, or is there a macro shift taking place that will have a significant impact on market action going forward?
The best course of action is to keep tracking price action and tighten up stops. This is not the time to jump in and do substantial buying. The danger of a technical breakdown that puts the market back into a correction is high.
This is the time to think about strategically positioning in names that I want to add to in the future. I may actually make some sales of longer-term positions and look to rebuy them at a lower price if the selling continues. If they don't give me the opportunity, then I'll rebuy and pay an "insurance premium" if my rebuy price is higher.
This is a very ugly action, and indications are that it may continue. The good news is that this is an environment where strategic trading will be rewarded if you stay patient and vigilant.
(AAPL is a holding in TheStreet's Action Alerts PLUS portfolio. Want to be alerted before the portfolio buys or sells stocks? Learn more now.)
