The ticks from the market internals were not able to print 750 today.
Once stocks and indexes are under distribution, professional money will seek any excuse to reduce exposure. Smart retail traders learn to use their edge which is the ability to move swiftly to cash and trade only select intraday trades while the market is beaten senseless.
Biotechs, drugs, and medical technology have the best earnings prospects for 2016 based on the work of most industry analysts but this area has seen heavy selling. On Friday these stocks were down 3-4% depending on what you used for large-cap vs. small cap in your index mix. The Nasdaq Biotechnology Index is down 37% from its high while earnings for the industry as a whole continue to grow. Small cap biotech stocks have seen the most ferocious selling with many of them down more than 50% from their highs last year. These stocks are viewed as more risky and in this market stocks with risk are abandoned without regard to earnings. Yes, the small cap biotechs fared better than expected on Friday with the average small cap biotech being down less than expected at just 2%. Amgen fell 3.25% despite a relatively low P/E of 16, a 2.7% dividend, a huge pipeline of drugs, recent positive results in pipeline drugs, expanding margins and good prospects for earnings growth this year.
When funds have a lot of redemption requests they first sell their least favorite stocks and finally they are forced to sell their favorites. The dumping of favorite stocks on Friday that have good earnings prospects in 2016 (FB -6%, GOOG -3.5%, HD -4%, MCD -4.4%, NKE -5%), along with the bottoms in unloved stocks like IBM, CAT, CMI, and IP seem to indicate that the selling has abated for now in the masses of unloved stocks and spread to the fraternity of loved stocks as investors and fund managers are now selling the good stuff. Be it fear or forced redemptions for this selling it has a feel of mounting desperation that may signal that a near-term bottom is approaching. Many market pundits will be heard saying that you need a huge volume day to make a final bottom but the market bottom in March 2009 was not a high volume day or a high volume week. The sellers were all washed out and it was over.