After a very brief respite on Monday, steady selling kicked in again on Tuesday. There was no interest in dip-buying, and the action became worse as the day progressed. At the closing bell, breadth was around 1,250 gainers to 7,000 decliners, and there were 122,5 stocks hitting new 12-month lows.
The indexes cut through some key support levels, with the Nasdaq and Nasdaq 100 undercutting the March lows. The Russell 2000 small-cap index closed at its lowest point since December 2020. There has now been well over a year of misery for many growth stocks, small-caps, biotechnology, and other groups.
It is classic bear market action, and it is miserable. This is about as bad as it gets as far as price action, and the best we can hope for in the short term is some sort of counter-trend oversold bounce. It is going to take some time before technical conditions improve for the longer term.
Earnings from Microsoft (MSFT) and Alphabet (GOOGL) are hitting, and they do not look like they will save the day. Microsoft is a slight beat, but Alphabet missed and is down an additional 4% after hours.
As I discussed earlier, it is probably better that these stocks sell off on earnings rather than spike and then reverse downward. There is just no way that anything is going to gain substantial momentum in this environment. We might as well scare out the few bulls that are left.
The one bright spot that I see is that we now have the big-caps finally catching up with the smaller stocks that have been so poor for so long. Many of the secondary stocks on my screen are exhibiting a little relative strength versus the big technology names that held up the indexes for so long.
The best advice I can give right now is don’t try to predict when this market might bottom. Wait for better price action, and if you do make some moves stay very incremental. When the market does improve, there will be plenty of time to put capital to work and make up losses.
Have a good evening. I’ll see you Wednesday.