Although the movement in the indexes Friday is relatively sedate so far, there is plenty of chaotic trading activity taking place. The aggressive selling that happened into the close on Thursday continued this morning due in part to the very poor reaction to Netflix's (NFLX) earnings.
The Nasdaq 100 (QQQ) has been lagging Friday due to fear that there may be some other negative surprises from large-cap technology names that are due to report earnings soon.
Breadth hit around 3 to 1 negative Friday morning but has improved and is closer to 2 to 1 negative now. The number of new 12-month lows continues to pile up. There are currently over 1,450 names hitting their low points while there are only a small handful of names at new 12-month highs, and many of those are inverse ETFs.
The action is likely to stay very volatile into the close. Today is option expiry, and that always creates additional volatility as there is pruning and unwinding of gamma. According to Goldman Sachs, there is $1.3 trillion in single-stock options set to expire Friday, which is the second-most ever. That is sure to create some last-minute movement.
The good news is that many stocks have already been hit so hard that they are not sinking quite as fast. We had one brief snapback rally that fizzled out, and now traders are waiting to see what occurs in the closing hour. We have had two very ugly closes the last two days, but with options expiring today, it is likely to be much more mixed action.
Selling momentum has really accelerated this week, but we are still dealing with a situation where a small number of stocks haven't corrected nearly as much as others. That is making it much harder to find a solid low, but the process is progressing. There is light at the end of the tunnel, but it is very important to cultivate patience and keep plenty of cash on hand.