Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
While the index I now call NASDAPPLELINE (Apple + Priceline) exists in a different universe at the moment, there is a lot of damage in the broader market outside those 2 stocks. The Russell 2000 has (aside from 2 days in March) now given back all gains since late January. A test of the March lows is close…
Meanwhile the S&P 500 is marching in towards that 1370ish level noted yesterday morning, which is both the 50 day moving average-ish (it has since moved up to 1372) and the 23.6% Fibonacci retracement of the December to April move. To remind, the more typical 38.2% retracement sees the S&P 500 fading to 1340.
These are not areas to strike a pole in the ground and declare a bottom – as the pullbacks are quite mild in NASDAQ and S&P 500 (much more harsh in the Russell 2000), but except for fall 2008, flash crash days, and a few days in latter 2011 things don’t usually go straight down, so these are areas one might expect an oversold bounce to relieve some selling pressure – however temporary. If the market breaks right through those levels, that would show some serious weakness. Conversely, if the market turns on a dime here – however unlikely – and “V shapes” up, you have to applaud.
I’d feel more comfortable with a tradeable bottom if they finally came after Apple and Priceline. We can see the NASDAQ nowehere near as troubled as the other indexes, with Apple now making up over 11% of the index!
Except for those who are extremely nimble, its a preserve capital time.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
