Four day shakeout | stockbee

8/12/2011

Four day shakeout

Lot of drama has happened in last 4 days:

  •  Monday market down 6.66%
  • Tuesday up 4.74%
  • Wednesday down 4.22%
  • Thursday up 4.63%
A move of 1% plus in a day in Index is not very common occurrence. The average daily moves are below .75%. Only during bear market or panics we get 4% plus kind of moves. 2008 had lot of these daily 4% moves.


It Zigs, It Zags: U.S. Market Rises 4% After a Down Day



Never before in the history of the S.& P. index, which goes back to 1928, had there been alternating gains and losses of more than 4 percent on four days. In most years, there were no such days at all.
There were only two previous times since the Great Depression when the S.& P. 500 moved at least 4 percent in four consecutive trading sessions. The first came in October 1987, when the market crashed, and the second occurred in November 2008, as the financial crisis intensified. But neither of those saw alternating gains and losses. In each of those cases, the pattern was two declines, then two gains.

But after 4 days of up and down action , the market seems to have stabilized here and for the time being the fast selling phase seems to be over.


4 day chart of S&P500

Market is now in a transition period where it will build a range and then the new move will emerge. Breadth will tell you clearly in which direction the move would be. Bottoms involve breadth turnover from bearish to bullish. It is a process. If buying days have good breadth then the breadth trend will change. A 17% correction in market from high to recent low is in line with many corrections in bull market. The 3 year bull move is still intact as of now. But the possibility of more downside still exits after a rally attempt. 

Couple of things will help the market:
  • the market news should disappear from front page of the newspaper.
  • volatility should come down
  • bullish sentiments should not quickly increase (which happened this week)
Lot of people are expecting a V bottom. But historically that is low probability event. Most of the time there is a time gap between the first bounce and the start of enduring rally. 

At this stage severely beaten down stocks are bouncing back. Stocks near 52 week low and stocks down 25% in a month are the one attracting bargain hunters. The momentum kind plays are not yet emerging in large numbers.  But that can quickly change in few days once volatility drops. 

If you are looking for volatile stocks that made big moves in last 3 days then the following 62 stocks and ETF fit that criteria:

AAPL
AGQ
AMZN
APC
AVB
AZO
BGZ
BIDU
BLK
BXP
CF
CME
CMG
COG
CRM
CRR
CXO
DRN
EDU
EL
ERX
ESS
EVEP
FAZ
FOSL
FRT
FSLR
FXF
GMCR
GOOG
GS
GWW
HANS
ICE
ISRG
LNKD
MA
MDY
MTD
NFLX
OIH
OTEX
PCLN
PCP
PRGO
PSA
RL
SCO
SINA
SKF
SLG
SODA
SOHU
SPG
TDG
TQQQ
TVIX
TWM
TZA
URTY
VRUS
WYNN

It is also good time to look at the strongest stocks in each of the indices.

Dow Jones 30

MCD: McDonalds is the stock currently with highest relative strength among 30 stocks. BAC : Bank of America is bottom ranked. 


Nasdaq 100

GMCR is the top ranked stock by relative strength. GMCR, AAPL, GOOG are the top three. RIMM is bottom ranked stock. RIMM AKAM FLIR are the bottom 3 ranked. 


S&P 500

MA: Mastercard is the top ranked stock by relative strength followed by LXK, COG, AAPL, and GOOG. The bottom ranked five stocks are PCS, AKS, GNW, S, and JDSU.



No comments: