Wednesday, February 19, 2014

Indexes Sell Off No Major Damage Suffered

STOCK MARKET UPDATE

By mid day it seemed the headline for the day would once again be, stocks sell off at the open only to rally into the close. But just before noon, comments from Atlanta Fed President Lockhart that the Fed's asset protection program will be wound down completely by the fourth quarter were met with heavy selling in the indexes. Fed minutes, released at two o'clock, confirmed this sentiment, but left the door open for a slow down in tapering if conditions worsen, but did not indicate what the threshold would be. By the close, all indexes suffered their second distribution day (higher volume selling), but below average volume tapered the sting.

















The pullback was not unexpected. The market had been over extended for four days and setups were thinning. Traders were looking for any excuse to take profits and today they got plenty of them. The only positions that should have been stopped out were new positions initiated the last few days, to protect from losses, and over extended breakouts from later stage consolidations, to protect profits. The pullback is welcome and should be used to add to or initiate new positions.

LEADING STOCKS ANALYSIS

Leading growth stocks consolidated in normal action on lower volume. None suffered any major damage that would be worrisome. The downside was led by energy and internet related stocks, SolarCity (SCTY), Gastar Exploration (GST), Kodiak Oil and Gas (KOG), YY (YY), Vipshop Holdings (VIPS), and Pandora (P).

Even with all the negative action, Taser International (TASR), Spirit Airlines (SAVE), 500.com (WBAI), and Northstar Realty Finance (NRF) broke out on stronger volume. After hours, Tesla Motors (TSLA) and Portfolio Recovery Associates (PRAA) gapped up over 8% on strong earning's reports.

THE SETUPS

Blackstone Group (BX) has doubled in price over the last year and has formed a later stage flat base pullback to the fifty day moving average. A breakout above $32 or 33.50 could produce a nice short term trade.



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