Top 10 Report – February 26, 2020

Market Insight

COVID-19 fears sent the major indexes into death spirals over the last couple days and leading growth stocks broke sharply lower with them. There were a handful of leaders that have held up so far, but the majority finished yesterday’s session in rough shape.

On a positive note, the McClellan Oscillator, Put/Call Ratio and VIX Index all finished yesterday’s session at levels where bounces in the general market tend to occur. When all three of these indicators reach extreme levels at once like they have currently, I pay much closer attention than when just one of them hits extremes.

Remember, market corrections are the breeding ground for the next round of opportunities. So, continue to pay close attention to how rotation takes shape and focus on the strongest names in the strongest groups, with the best fundamentals. These are the stocks you ultimately want to be concentrated in.

Now that the market is back in correction mode, most traders should find themselves down to their core profitable positions and/or cash. This also puts us back on the lookout for a follow-through day to occur on either the NASDAQ or S&P 500, before we begin to accumulate long positions again. Until then, use this time to refresh your watch lists and review old trades.

The Indicies

The NASDAQ gapped down, sold-off and closed below its 50-DMA on heavier volume Monday, then followed through to the downside yesterday by dropping an additional  2.77% on even heavier volume and closing near session lows, which adds two major distribution days to its count.

The small-cap Russell 2000 acted in a similar manner to the DOW over the last couple days. It fell sharply on heavy volume and closed below its key 200-DMA yesterday, which is not at all constructive.

The S&P 500 gapped down, sold-off and closed below its 50-DMA on heavier volume Monday, then followed through to the downside yesterday by dropping an additional  3.03% on even heavier volume and closing near session lows, which adds two major distribution days to its count.

The DOW gapped down and cratered below its 50-DMA on heavier Monday, then proceeded to drop 3.15% and melt below its 200-DMA on even heavier volume yesterday, which is not at all healthy action.



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February 26, 2020