The massive Fed-driven rally on Wednesday totally collapsed on Thursday morning. The Nasdaq, which gained 401 points yesterday, wasy down over 500 points this morning. The Russell 2000, which gained 2.7% yesterday, was down 3.1% today.
This is classic bull trap action and a very good illustration of why we have to wait for follow-through or some sort of confirmation before we can trust a bounce.
The fact that this bounce failed isn't a huge surprise, but the viciousness and totality of the reversal is quite stunning. This is obviously computer-driven action as virtually everything is moving in synch. For example, I commented yesterday how breadth in the (ARKK) ETF went from totally negative to totally positive. It was back to totally negative this morning. That is not action that is driven by stock picking. It is driven from the top-down, and the merits of individual stocks are meaningless.
One of the most difficult aspects of bear market action like this is that good fundamentals offer no short-term protection. Everything is sold together. Breadth was around 1050 gainers to almost 7000 decliners, so there are few places to hide.
The positive spin is that negativity is going to accelerate to even more extreme levels. This action is going to scare out even more folks. It is bordering on panic right now, and the best course of action is to stay out of the way and let it play out.