Although the indexes took some hits and breadth was quite poor, it was a productive day for stocks. All of the indexes bounced after an ugly gap-down open. They hit intraday highs around mid-day and then weakened into the finish. Breadth was almost 10 to one negative to start the day, but improved to around 1,900 gainers to 6,100 by the finish.
One of the more interesting stats was that new 12-month lows surpassed new highs by a margin of 190 to 120. That is the first time in a while that has occurred and is very unusual in view of the fact that the senior indexes were hitting new all-time highs just Wednesday. This stat illustrates that leadership has been narrow, and a large number of stocks have been correcting for a while.
Market players refused to give up on Amazon (AMZN) , which was one of just one of about a dozen Nasdaq 100 (QQQ) names that were positive on the day. A couple of biotechnology names also did well, but most technology stocks did quite poorly.
The action was productive, because it helped to align the movement. Rather than the indexes hitting new highs on negative breadth, the indexes were under pressure, and breadth was poor. The benefit of that is that the correlated selling helps the corrective process to play out faster.
The most important thing to keep in mind is that due to rotational action, various areas of the market are quite different places as far as being oversold or close to support. Groups like biotechnology have already been handled and are much more likely to bounce back strongly after a flush than the FATMAAN names that are still within a stone's throw of all-time highs. The bounce potential of many small caps is quite good if they are taken down in tandem with the bigger caps.
Although the business media is going to be talking about all the negative action Thursday, it was the most productive day we have had all week from a trading standpoint. We need this poor action to set the stage for some upside as second-quarter earnings news hits.
Have a good evening. I'll see you tomorrow.