This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

This Is Not Your 2013 Snapback Market Anymore


The technology stocks that have been recently leading are old tech such as International Business Machine (IBM), Microsoft (MSFT) and Hewlett-Packard Company (HPQ). That's akin to me asking my grandmother for Tinder advice. The Utilities Sector, (XLU) made an intra-week high not seen since June 2008. The Consumer Staples Index  (XLP) have been underperforming the Consumer Discretionary Index  (XLY) since early March. These are all exhibit signs of a risk-off market environment.

And finally, high beta discretionary, biotechs, and social media stocks are typically the first to get sold when market participants become concerned over a possible correction and for the last couple weeks they have been pummeled.

What All This Selling Means 

Without over complicating things, let's take a look at what is likely going on. We have had a five-year bull run that began in 2009. In the fifth year, last year, the market ended up over 30% on the year. Things got a tad bit stretched, shall we say. They went too far too fast and when that happens within a trend (currently a bullish one), a period of consolidation takes place resulting in some mean reversion. I wrote about that at the start of the year here.

Although the selling may appear excessive at times, when viewed from a broader perspective, it exhibits signs of a healthy market resetting itself. You can see this broader picture with the following monthly chart of the S&P 500.

So Now What? Again, to simplify, the path of least resistance right now is down. Don't over think it. Yes we will see bounces, especially when we get oversold, but until the path of least resistance turns back up, using 2013's playbook will likely be a losers bet. This is no longer your 2013 BTD (Buy The Dip) market. This is your 2014 'failed breakout' STR (Sell The Rip) market. Downside levels of support on S&P 500 for next week are 1850, 1838, and 1825. Resistance on the upside is 1875 and 1897.

We are not even close to being oversold on S&P 500 based on 20-day lows.

We are getting close, but still not yet considered to be oversold on Powershares.


At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $123.84 -0.47%
FB $81.16 -1.30%
GOOG $539.65 -1.50%
YHOO $44.03 -0.91%
TSLA $187.03 -0.92%

Markets

DOW 17,656.64 -119.48 -0.67%
S&P 500 2,056.38 -11.51 -0.56%
NASDAQ 4,865.2190 -35.6660 -0.73%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs