The market suffered some corrective action Wednesday, but overall it was rather mild. All the major indexes dropped, but none of them more than 1%. Breadth was 2,600 gainers to 4,750 decliners, which is poor, but not terrible. New 12-month lows remain nearly nonexistent with just 24.
Some individual stocks did suffer some hard hits. Amazon (AMZN) gave back some gains and Apple (AAPL) was unable to generate any buying interest after its new product introduction. Some of the high-flying small caps pulled back and after the close, Fastly (FSLY) issued a poor report and was hammered with a drop of more than 25%.
Earnings season is young, but so far the bank stocks that have reported have seen a very poor reaction. Next week, when we start seeing reports from other sectors, we will have a better feel for the mood of the market, but there is some good reason to be cautious when a top momentum name like FSLY can be hit so hard.
Technically, the selling action has been contained and is not a major concern, but that can change quickly if the selling accelerates. What we have to watch for is more correlated selling and a willingness to dump names without regard to their individual merits. Corrective action is healthy, but we have to make sure we don't let those losses pile up too high. Nothing is more unproductive than having to make up losses.
The market continues to be oblivious to big picture news flow. Stocks have been moving mostly on their merits and in anticipation of earnings, which is a good thing. There have been good excuses for selling lately, such as the inability to make a fiscal stimulus bill and the increase in Covid cases, but the market simply is not embracing a negative narrative right now.
I anticipate playing stronger defense tomorrow, but I don't see any reason yet to be bearish.
Have a good evening. I'll see you tomorrow.