On my video recap yesterday, I noted that the “monsters” in the rally over the past few months remained very stretched and vulnerable to sharp, sudden sell-offs. Those monsters being the transports, small caps, and financials. Being stretched to the upside is not enough of a reason for me to start short-selling. But it sure does serve as a sign to ease off the accelerator.
On the back of disappointing earnings, major transport FedEx is selling off aggressively today. While the weekly chart below indicates a strong breakout dating back to the beginning of 2013 is still true, conditions were indeed ripe for this type of reaction to any potentially negative news. It could be just a shakeout. But that is not much consolidation for longs riding this lower.
As a result, I would still stay nimble with some of the more extended stocks within the monsters.
Also, kudos to Downtown Josh Brown (@ReformedBroker) for the one-year anniversary of his must-read book, Backstage Wall Street.
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