The major indexes hit highs around the beginning of September. During the three-week period since then, there has been a rotational correction, with the Nasdaq 100/Invesco fund (QQQ) and FATMAAN tech names suffering the brunt of the damage. Many individual stocks and sectors had held up well and had been the beneficiaries of some of the money coming out of the most technically extended names.
That began to shift on Monday when last week's winners started to lag and the oversold big caps enjoyed a dead cat bounce. They continued on Tuesday, and even enticed some buyers with good relative performance on Tuesday morning.
The big picture took a turn for the worse on Wednesday. The rotational action disappeared and there was broad selling with about six losers for each advancer. New 12-month lows picked up, but were still very limited at around 120.
The difference Wednesday was that the selling was much more coordinated and took place without regard to the individual stocks. Market players simply wanted to escape and were willing to take their lumps to do so. It was the first time since the downtrend began that it felt like a full-fledged bear market and not just a rolling correction.
The good news is that many stocks have already undergone relatively deep corrections. This is no longer a frothy and overly bullish market. The pockets of wild speculation cooled off a while ago, and there hasn't been wild momentum for a while. That doesn't mean we can't undergo a much deeper correction but it will help to entice some bargain hunters.
Most active market players are aware that seasonality tends to be quite weak right now and they are likely standing aside but we should see some anticipation of quarter-end window dressing and then earnings season. There is plenty of negative news flow to cause worry and concern, but economic worries do not seem to be a major driving force behind this pullback.
Only about 36% of all stocks are over their 200-day simple moving average at this point, so there are many that are already deep into a correction. There should be some opportunities fairly soon, even if this downtrend gains further traction
Have a good evening. I'll see you tomorrow.