It's the biggest one-day drop in the Social Media Index (SOCL) in 17 months, and while everyone knew it was coming, no one can say for sure why it's happening today.
"It makes sense. It bespeaks a certain level of fear...let's take gains where we have them, build a little cash and just pull our horns in a little bit," my co-host Jeff Macke says in the attached video clip, pointing to the huge gains the group has enjoyed over the past few months. "The higher it's up year to date, the more it's getting smacked today."
Related: #TwitterIPO: Let the Frenzy Begin!
Among the key casualties, shares of Yelp (YELP), Pandora (P), LinkedIn (LNKD), Facebook (FB), Groupon (GRPN) and Netflix (NFLX) are all sliding about five percent or more, after posting eye-watering year to date gains ranging from forty to over four hundred percent.
In fact, the narrowly focused market leadership has been so pronounced this year that Miller Tabak chief market technical strategist Jonathan Krinsky posited the possibility that a new four horsemen of the market was in play. He noted to clients that "the sheer outperformance of Facebook, LinkedIn, Netflix and Tesla (TSLA) seems unsustainable" given their 200% average gain versus a 20% advance for the market.
Clearly fund managers seeking to catch up to a hot market have had little choice lately other than buying into, or chasing, these leaders. But as Macke points out, there's very little conviction in these positions and stop-loss orders have been widely deployed.
The question now, for this sell-off without a name, is whether it continues and worsens or proves to be the entry point that investors have been waiting for.
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- Social & Online Media