A Little Good And A Lot Bad
Jani Ziedins | Mar 03, 2021 12:21AM ET
On Monday the S&P 500 produced its biggest gain since last summer. On Tuesday it gave back a chunk of those gains. Two steps forward, one step back.
There is nothing wrong with a minor step back following such a large up-day. The key is hanging on to what’s left. Stay above 3,850 and everything is fine. Falling under 3,800 so soon after bouncing off this key support level tells us there is a serious demand problem and the selling is only just getting started.
This bull market deserves the benefit of doubt because it hasn’t let us down yet. Until we experience a more material breakdown, expect every dip to bounce within days, if not hours. If this market was fragile and overbought, it would have collapsed a long time ago. (Pro-tip for all the cynics out there, weak fragile don’t keep setting record highs.)
But enough about the indexes. One of the most noteworthy stock performances of the day yesterday came from Zoom Video (NASDAQ:ZM). It announced blowout quarterly results Monday after the close and the stock popped Tuesday morning. Unfortunately, that was as good as it got. Within hours, that impressive 8% opening gain turned into a dreadful -9% closing loss. That’s a 17% swing from the highs to the lows.
There are few things in the stock market that look worse than this. In fact, I cannot think of anything worse than such an epic midday collapse. Rather than cheer the news, most owners did their best impersonation of rats abandoning a sinking ship.
A stock that cannot go up on good news is in desperate shape and destined to keep going lower. ZM is a strong short as long as it remains below $400.
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