The market's big bounce on Friday set up a very ugly bull trap.
Stocks started the week close to flat, but the selling quickly picked up and accelerated. It is one of those days where the action in individual stocks was much worse than what the indexes were indicating. The Nasdaq 100 (QQQ) was the primary loser Monday, with a loss of about 2%. The FATMAAN names and Facebook (FB) in particular were hit very hard.
Growth stocks were dumped into bidless action and many of the small caps that have been showing relative strength recently, fall sharply. The ARK Innovation ETF (ARKK) was hit for a loss of 3.5% and breadth on the Nasdaq 100 was 11 gainers to 90 decliners. Overall market breadth wasn't nearly as bad, but it was growth stocks and a variety of secondary stocks that suffered the most.
The market has been undergoing a correction for about a month, but today was particularly brutal, because of the positive action that occurred on Friday and provided some sense that a bottom was near and also because of the sorts of stocks that lead to the downside Monday.
The positive spin is that disgust levels are building and there is even some capitulation taking place, but there is no choice, but to maintain a high level of caution and protect capital, until we start seeing some positive price action. We have some great opportunities developing but great opportunities can go even lower before they are recognized.
Have a good evening I'll see you tomorrow.