Traders who bought on the dip at the end of last week were a bit early, the market is saying today.
As of noon New York time, the Standard & Poor’s 500 was down 1.91%; the Dow Jones Industrial Average was off 1.56%, and the NASDAQ Composite was lower by a whopping 2.75%.
In the last two days of last week, buy-on-the-dip traders put $1.7 billion into the Invesco QQQ Trust ETF (QQQ.) More “adventurous” traders added nearly $600 million to the ProShares UltraPro QQQ ETF (TQQQ) on Thursday. The TQQQ is a triple-leveraged ETF that aims to deliver three times the daily performance of the Nasdaq 100.
In Tuesday trading the NASDAQ 100 fell as much as 4.3% and is now down close to 10% in three days of selling.
As of noon shares of Apple (AAPL) were down 3.78%. Amazon (AMZN) was off 2.93%. Microsoft (MSFT) had fallen 3.56%. And Tesla (TSLA) plunged 14.41%.
So far today shares of what I call “re-opening dependent” companies were up strongly with park operator Six Flags (SIX) and American Airlines ahead 1.67% and 2.13%, respectively.
The gains haven’t extended very far, though, with Wells Fargo (WFC) down 3.57% and Coca-Cola (KO) lower by 2.59%.
Earlier this morning, there was optimism that the retreat would end once the market gave back its blow off gains above 3500 on the S&P 500.
But with the index falling well below that level I’m now hearing talk of a test of the 50-day moving average at 3306 and maybe even the 200-day at 3094. At noon the S&P 500 traded at 3354.
The market’s problem, as I see it, is that it had become increasingly narrow as the rally continued in recent days with much of the gains coming from a group of just 10 or so big tech stocks and investor favorites. Now that those shares have broken lower, there really isn’t all that much support for the market as a whole from other sectors. In the past three days, the seven biggest U.S. technology stocks have lost nearly $1 trillion in value, according to TheStreet.com. That’s pushed the NASDAQ into correction territory.
My thought is that any recovery in this market will require a recovery in those same tech heavy-weights. There really isn’t a compelling story that I can see that would let another sector take over the lead this market.