There is a panicky start to the week as market players are now embracing the economic danger of the coronavirus that they have been ignoring for weeks. Despite the panic, there was some routine 'buy the dip' action at the open but we have not seen selling of this magnitude and intensity for quite a while. It is much tougher to shrug off the negative emotions created by this sharp drop but it never pays to underestimate the power of the computer algorithms.
The key technical issue now is that the indices stay above their opening lows. If there is not a lower low, the buyers will inch back in out of fear of missing out on yet another quick bounce.
Breadth is about 7 to 1 negative and the number of new 12-month lows have quickly accelerated to over 400 versus 250 new 12-month highs. That sharp increase in new lows so quickly is a reflection of the fact that many stocks have not been running up with the broad market.
The most bullish thing about this market right now is there are many individual stocks that are not extended. It is the 'glamour' names like Apple (AAPL) , Microsoft (MSFT) , etc., that have pushed the indices higher. These stocks need corrective action but under the surface, there are many good values.
I want to see if the opening lows hold before doing much more. If they are tested I'm likely to add back some of the
ProShares UltraPro Short S&P500 ETF (SPXU) that I sold this morning.