The selling that hit on Tuesday afternoon gained momentum Wednesday as Fed Chair Jerome Powell failed to bolster the "don't fight the Fed" argument and another billionaire expressed bearish views.
David Tepper is the latest mogul to publicly announce his doubts about the market and joins a list that includes Warren Buffett, Sam Zell, Stanley Druckenmiller, Howard Marks, Chamath Palihapitiya, Carl Icahn, Tudor Jones, and Mark Cuban. I find this list more interesting than instructive, but it does indicate that there is likely to be a very vigorous market battle in the months ahead.
Overall, the action Wednesday was a return to typical bear market trading. Stocks traded in a very correlated way and breadth was better than five to one negative. There were not many safe havens but some of the coronavirus plays such as Amazon (AMZN) , Co-Diagnostics (CODX) , Chewy (CHWY) , and Bilibili (BILI) performed well.
The strong level of trading under the surface eased some of the pain today and illustrates that there is still some very driven speculative traders that are looking hard for opportunities even when the overall action is quite poor. It is when that undercurrent of support erodes and market players grow disgusted, that the bear market really becomes painful.
Interestingly, the Russell 2000 exchange-traded fund (IWM) found support almost exactly at its 200-day simple moving average. I'm looking for some support levels to develop fairly quicky, and a trading range to develop in the near term. As the action in financials Financial Select Sector SPDR fund (XLF) shows, the issue of a technical retest is not off the table for some portion of the market.
The key to this market is to be opportunistic rather than bullish or bearish. There are still some good long trades even when the indexes drop 2%
Have a good evening. I'll see you tomorrow.