A dull day turned ugly as bids disappeared late in the day and breadth dropped sharply to more than two to one negative. It has been slow trading lately and looked like another dull day, but market players appear to have grown impatient, and a few sell programs probably helped to trigger them as well.
What is most notable about this action is that it doesn't seem to have any relationship to fundamentals or valuation. There just isn't sufficient liquidity to provide good support. All those dip buyers that were so quick to jump on pullbacks have disappeared, and there aren't sufficient bids to absorb the selling pressure.
Quite a few stocks have already fallen substantially from their highs of a few months ago, but there is no way to be confident that they are going to hold support. We have to wonder about this apparent lack of liquidity that is making it impossible to find solid support levels right now.
The good news is that there are many stocks that are getting sold without regard to their individual merits. The best of them will likely see a boost as the focus shifts to earnings and growth prospects.
It is a very tricky market right now. We have been spoiled for a long time with an endless wave of liquidity. It bailed us out even if our stock picks were suboptimal. Currently, even the good picks are struggling because there isn't enough cash out there willing to support them.
Have a good evening. I'll see you tomorrow.
