It was another day of ugliness for the market. The Nasdaq and Nasdaq 100/Invesco fund (QQQ) hit new closing lows for the year. Breadth was around three-to-one negative, and the Dow Jones industrial average rolled over after some recent relative strength. Over 650 stocks hit new 12-month lows, including heavyweights like Disney (DIS) , BlackStone (BX) , AirBNB (ABNB) , Apple (AAPL) , and Amazon (AMZN) .
Investors have given up hope of a “Santa Claus rally,” and they now seem to doubt that there will even be a minor oversold bounce before we wrap up trading for the year. There have been only feeble tries at a bounce.
Typically traders start anticipating the “January Effect” in the last few days of the year. The January Effect is the tendency of stocks to bounce back from a year-end selloff that occurs due to tax-related pressure. But this year the selling may have more to do with gloomy predictions for next year rather than tax selling.
We will see more positioning in the last two days of the year, but the problem now is that so many folks were hoping for a little relief bounce that they will quickly sell into even minor strength at this point.
The good news is that it is tremendously negative and gloomy out there. When a stock that is loved as much as Apple is lagging and hitting new 12-month lows, it is a pretty good indication that we have some extremely pessimistic sentiment. It is hard to use that as a contrary indicator, but it will matter at some point fairly soon.
Have a good evening. I’ll see you tomorrow.
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