The NASDAQ has given up all of its gains and gone negative for the session. This is the very worst case scenario for stocks, one that is sure to spill over into tomorrow’s opening trade.
I’ve been talking about the bad breadth since this morning. Right now, it’s abysmal at 65%.
If you want the market to rally, you’re gonna need breadth upwards of 80%, with crude oil participation.
The downward pressure is the result of margin call liquidations not being met with natural buyers. Institutions and hedge funds most likely entered 2016 with a full slate of investments and little cash. Considering the fact that 25% of stocks are down 20% or more for the year, I’m guessing overexposed managers will use rallies like this to reduce exposure. This rally won’t stick unless managers grow a set of balls.
If the NASDAQ regains its swagger by the day’s end, I will consider this day to be a fine exhibition in resiliency.
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