Weeble Wobble

NASDAQ 05/08/12

Yet again the market has shown resiliency. Not only is every knockdown becoming a standing 8, just when it looks like it's about to drop for the third time in a round the bell rings. After being down nearly 2% for the session, the NASDAQ rebounded off the March 06 low on the highest volume since December 16 and closed positive for the day. On the surface the appearance that this is an orderly correction continues evident by the relatively small number of stocks down 4% on increasing volume --178.

That being said, I continue to be somewhat suspicious of this perspective. While the number of stocks down 4%+ on a daily basis gives little indication of forced liquidation at this point; the fact that this earnings season continues to give 50% off haircuts to many stocks suggest to me that the reason there isn't much selling on a daily basis is due simply to the severity of price shocks. Once a stock gaps down 50% overnight how much more distance should one expect it to move before it starts to become a value play and look attractively priced?  True, some like NFLX, GMCR, and HLF may be permanently damaged and continue to erode further, but this isn't the case for all.

Today the flush was lead by FOSL which dropped nearly 48 points or 37.57%. This led to selling in associated stocks such as MOV, LULU, PVH, UA, RL etc... What's worth noting is that while FOSL closed near the end of its range, many of the others found bids and recovered much of their intraday losses.  This suggest that while there maybe overall weakness in retail, something may be seriously wrong with FOSL.

FOSL

MOV

PVH

RL

MAKO

SNCR

Tomorrow there will be another crop of earnings losers but as of yet there hasn't been evidence of sequential follow through to the downside as the market continues to find supporters. All things considered we are still in a range and although it continues to look tenuous it still holds tenaciously.