Everyone was hoping that we wouldn't see another plunge like Monday's during this pullback...but the market had a different idea. On Thursday, the Dow dropped by more than 4% and over 1000 points for the second time this week, entering correction territory along with the S&P.
Specifically, the Dow lost 4.15% (or 1,032 points) to 23,860.5, which is only slightly better than Monday's decline of 4.6% (or 1175 points). The NASDAQ fell by 3.9% to 6,777.2 and the S&P was off 3.75% to 2581.1.
"Why the nervousness in markets again? Simple. The U.S. 10-year Treasury prices dropped, pushing their yields to a four-year high," said John Blank in Large-Cap Trader. "Until (unless?) the rise in U.S. 10-year risk free rates stabilize, there is unlikely to be a meaningful pickup in the stock market."
The editors fully expect stocks to regain their footing and climb higher (remember, there's no signs of recession). The problem is that no one knows when that will happen. Therefore, the editors continue to pick up strong stocks at bargain prices while also taking profits where appropriate. We saw both of these types of moves in the portfolios on Thursday.
Today's Portfolio Highlights:
TAZR Trader: This new leg down in the market finally offered the portfolio a chance to buy the NASDAQ 100 3X Bull ETF (TQQQ), which Kevin first tried to fill on Tuesday. The editor is still preparing for the move higher once the weak hands are out, and he wants to be bigger buyers of the so-called "FAAMNNG" (Facebook, Amazon, Apple, Microsoft, Netflix, NVIDIA and Google). These tech juggernauts are holding up rather well in all this volatility, and a 5% position in TQQQ will allow the portfolio to keep its "poles in the water" for the rebound. Make sure to read the last couple of commentaries from Kevin to learn all about the specific support levels in the NASDAQ 100. By the way, the editor also used today's drop to add 5% to the allocation in Lam Research (LRCX).
Insider Trader: Energy stocks are following crude lower, so Tracey felt this was a good time to take some profits out of Helmerich & Payne (HP). The editor sold half of this contract drilling company on Thursday for a gain of 31.7% in about 5 months. If crude continues to slide, she'll sell the other half. The portfolio also sold Nexeo (NXEO) today for a profit of 4.7% after a "fantastic" quarterly report.
Options Trader: "Rough day in the markets. But as we've been saying, the volatility is here to stay for a while as the markets carve out a new base.
"But this pullback is transitory in my opinion, and I think we're getting close to the end of this correction (if we haven't already seen it).
"The media will over-sensationalize the recent pullback. Don't listen. This is normal market behavior after a spectacular, correction-free run-up over the last two years. This is healthy. I know it feels terrible. All corrections do. But I believe this is just that - a correction in a historic bull market with lots more upside to go. And not the beginning of the end." -- Kevin Matras
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