On the heels of a rather dovish Fed yesterday and $140 oil today the major market averages fell sharply. The Nasdaq, which had been the clear relative strength leader fell the most, losing 79.89 points (3.33%), closing at 2321.37. It was no day at the beach for the S&P500, which lost 38.82 points, closing at 1283.15, or the Dow either, which lost 358.83 points and closed at 11,453. The selling accelerated into the close, which is often a sign of institutional based selling. Volume was up 7% on both exchanges, which while above the recent average volume figures is not a panic number that would indicate any type of capitulation on the part of investors.
Right now we remain in the clutches of a bear market. In fact, as I look across the market sectors and at individual stocks the only area of significant strength left is in commodity based groups such as Steel, Fertilizers and Oil. Many stocks in these groups are showing great strength and will likely present buying opportunities on pullbacks and breakouts. The financial group continues to show the worst performance as investors confidence sinks in the honesty of the firms. The Fed and Congress are also showing themselves to be inept at dealing with the situation. Finally we have an election cycle, where both sides have a vested interest in making things seem bad and telling us how much better it would be under them.
When markets are down sharply though it presents a very good opportunity for astute investors. The stocks that hold up best in the times when the overall markets have a strong likelyhood of being leaders when there is a recovery. Names like AMED, DV, DRG, V, I.H.S and MORN continue to show strong patterns and each of them also have relatively solid fundamentals as well. Almost Family (AFAM) which I wrote about this weekend has fallen since the breakout and I have gotten out of it for the time being. It's still showing decent strength as compared to the overall market, but at this point there is no reason to stand in front of a speeding train. I'll continue to watch it closely for buying opportunity.