Since he described even the relatively mundane as such, I do not think it would be a stretch to say that Otto Preminger (aka Mr. Freeze) would describe the Market action of the week as "Wild"! Unfortunately the action was quite negative. Whipsaw action was the theme of Wed. and Thursday when a significant gain on Wed. was completely wiped out on Thurs. Action turned even uglier for the Nasdaq on Friday with a huge loss on very heavy volume.
A previous post discussed the importance of reviewing not only the price action of your holdings (the stocks you own) but also the volume, which provides clues to what institutions (e.g. mutual funds, hedge funds, pension funds etc.) are doing. I do not claim to be a market prognosticator and feel the post was a bit premature, as the market was quite agreeable for the past 2 months. However, it may not have been if any of your holdings were displaying characteristics discussed. Additionally, the maddening thing about the market is a nice gain of several weeks can evaporate in just a few rough sessions (which is not uncommon for growth stocks). The upward momentum prior to this week coincided with below average volume. I think that is why we witnessed such a significant drop this week – the buying existed but with lackluster conviction. Without strong conviction, institutions will not aggressively step in to support their positions, or worse, they may become sellers. Review of your current holdings is warranted in this environment.
Please note, I speak in terms of growth stocks only, with small to medium market capitalization (not Value or Large Cap stocks). I am also not a licensed financial consultant, so use this as you see fit.
I got to see Otto in action in an old Batman episode this summer (check the link above - not mine). His catch phrase left an indelible impression on me to the point where I spent a few days referring to most everything as wild. Fortunately, my wife and boys shut me down. This was best, since amusement had turned into compulsion.
Posted by Dan Hebbeln