The Nasdaq 100 (QQQ) is down almost exactly 10% in a week, but finally sees a small rebound on Tuesday — and I’m buying some stocks, too.
Recall that just a week ago the entire market was higher at open based on a better-than-expected Consumer Price Index report, but sales have been steady since then. Despite the intensity of the sell-off, the bounce has barely been attempted, but the dip buyers are finally showing more interest.
In the midst of the action Tuesday, I bought names such as Direxion Daily S&P Biotech Bull 3X Shares exchange-traded fund (LABU), Aehr Test Systems (AEHR), Nio (NIO), Beyond Air (XAIR), and Sensus Healthcare Inc (SRTS), but i will get more aggressive later in the day if the indices can stay positive and the breadth improves. Width is currently about five winners for every three losers, which isn’t bad, but should improve if this bounce starts to gain some traction.
The major difficulty that traders are currently facing is that a lot of oversold assets exist, but we don’t have proper technical support. Many individual stocks, as well as some indices, are about to test their 12-month lows, but they are so oversold after selling out for a week that there is some buying interest.
Apple (AAPL) provides a good illustration of what has happened recently. The stock rose as close to $150 last Tuesday morning and hit a low of $130 this morning, down 13.3%. Buyers finally jumped in this morning and have the stock slightly positive as it bounced back $3 from early lows.
This is not a market likely to produce sustained “V”-shaped moves as we have seen in recent bull markets, but with many stocks deeply oversold and the potential for some seasonality to close out the year, buyers will start catch up the longer the indices stay green. Confidence is always low when a bounce starts, but confidence increases the longer the indices last.
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(Please note that due to factors such as low market capitalization and/or insufficient IPO, we consider some of these stocks to be small-cap stocks. You should be aware that such stocks are more risky than stocks of larger companies, including larger volatility, lower liquidity and less publicly available information, and that messages such as this could have an effect on their share prices.)
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