Some market participants will point out that the senior indexes are only a few percentage points from all-time highs, and that they are not even close to the definition of a bear market. But anyone that does a cursory review of individual stocks will quickly discover many pockets of absolute carnage.
The weakness isn't broad enough to impact the senior indexes very much, but it started to spread today and some of the names that have been withstanding the small-cap selling onslaught suffered as well. Breadth was about 1,900 gainers to 6,000 decliners and new 12-month lows grew to over 130.
Many small-cap names and sectors have been undergoing a correction for nearly two months now. Quite a few stocks have been cut in half during that period. For example, the 25 largest SPACs are down about 44% from their highs and many biotechnology names have fallen similar amounts.
Defensive names like Procter & Gamble (PG) and Mondelez (MDLZ) attracted buyers Tuesday, as it is becoming increasingly clear that this corrective action is unlikely to stay isolated to the small-cap names.
It isn't a formal bear market, but enough stocks are acting like it is that it is important to take precautionary measures. That means tighten stops, cutting some losers, not rushing to buy dips, and keeping some powder dry. We are no longer in a bull market that will forgive our mistakes. We will pay a higher price for being wrong and that means we need to be more selective with our trades.
Netflix (NFLX) is the first of the FATMAAN names to report this quarter and it is down nearly 10% after hours. High expectations were not met but we'll see if there is an interest among dip buyers.
Have a good evening. I'll see you tomorrow.