Euclid Investment Advisory Blog

SPECIAL EDITION- Review & Analysis after Feb 22 & 23 Sell-Off

Comments

We have gone through selloff days such as yesterday and today. This one is unique in that it is focused (so far) on the Tech sector and the LC Growth style, both of which have been recent highflyers. The rise in 10-year US Treasury interest rates (from 1.20% last week to 1.37%) is being loosely cited by market observers as being the cause. Once the selling starts others pile in creating a cascading effect, hitting sell stops which cause more shares to be dumped on the market, until the market runs out of sellers. This turbulence is against a backdrop of many positives of economic stimulus, deployment of the Covid-19 vaccine, reopen the economy, and the unexpected rise in corporate profits. So, the best thing to do today is nothing. Indeed, using intraday charts, we saw stocks by midday beginning to recover. While the selling of Tech and LC Growth appears unwarranted other than for profit-taking, nevertheless our Models are market-driven, and we do what the market is telling us.

Index Commentary for February 23
1) Ratio of Russell 1000 Growth vs. R1000 Value has R1000 Growth underperforming Value on a daily basis. However, intraday chart shows R1000 Growth: Value ratio bottomed Market Internals.

2) Nasdaq Adv / Dec Issues - almost reached a level well in negative territory where previous downward excursions bottomed and reversed up. Also, Nasdaq Comp. Index fell to the bottom of its channel before recovering almost all of its decline - buyers stepped in buying stocks on sale.

3) NYSE Adv / Dec Issues - declined also but barely got into the negative zone. Also, the NYSE Index fell only to midpoint if its channel before recovering almost all of its decline.

4) Nasdaq % New High, New Low - fell to 74%; warning zone begins at 70%

5) NYSE % New High, New Low - fell to 83%; warning zone begins at 70%

6) % Nasdaq stocks above 50-day moving average: 67.6%; warning level is 50%

7) % NYSE stocks above 50-day moving average: 76.6%; warning level is 50%

8) % NDX-100 stocks above 50-day moving average: 57%; warning level is 50%

9) % S&P 500 stocks above 50-day moving average: 66.4%; warning level is 50%

10) VIX rose to 25 today (a trigger level) then declined to 23.1

11) Ratio of R2000 small cap to S&P 500 large cap still favors small caps; on intraday chart small caps dipped vs. S&P 500 then recovered strength and turned up, so we expect further short-term Russell 1000 Growth gains, which if occurs, would be a better exit point than today. We may see a little backing and filling on Wednesday, but it seems the selling barrage has run its course (for now).

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