The primary challenge of the market recently has been poor action under the surface while a few big-caps and the indices hit new all-time highs. The problem was that it was difficult to buy weak small-caps because they could be driven down even more when the indices finally corrected.
The problem is being addressed this morning as very broad selling hits the entire market, and the indices see some of their most severe corrective action in a long time. Breadth was nearly 10 to 1 negative in the early going, and there are only 30 new 12-month highs to over 130 new 12-month lows. The FATMAAN names are all red, and there is no place to hide in the early going.
This sort of correlated selling action is the best way to clear the air and to drive stocks to some good support levels. Many of the small stocks and speculative favorites have been struggling for a while, but now they can finally bottom as the big-caps start to correct as well.
I'm not in any big rush to load up right now, but I'm becoming much more interested in building some positions. One example is AMMO (POWW) which I've discussed many times. We had a great trade on this one, and it has now pulled back from a high of $10.37 to around $8. The company issued increased guidance this morning, and I'm looking to rebuild it as it finds some new support levels in the highs $7's.
Biotechnology is always a favorite group, and I'm nibbling at ASLAN Pharmaceuticals (ASLN) as it sits at its 50-day simple moving average. There should be some data there soon, and I expect that will help to move it eventually.
There are many smaller stocks developing like this now that we finally are seeing the correlated selling that will give us a healthier correction. We need very poor breath and 90% volume to the downside to give us good tradable lows in many stocks.