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Sell-Off Not Done Yet as Dow Drops Another 500+

Jim Giaquinto

A 545-point drop in the Dow is certainly better than Wednesday’s 830-point plunge…but it’s still pretty bad. The market wasn’t done selling on Thursday despite following one of the worst sessions of the year. And now this pullback is running right into earnings season, which might be a good thing.

The Dow has now lost nearly 1400 points in the last two days. This session saw a 2.13% drop to 25,052.83, compared to yesterday's 3.15% decline. This time though, the index didn’t plunge right into the close but finished off the low of a 700-point deficit.

The S&P’s losing streak stretched to six sessions with a slip of 2.06% to 2728.37. Meanwhile, tech had another rough outing, but it didn’t lead the market lower as it did on Wednesday. The NASDAQ managed to get out with “only” a 1.25% decline to 7329.06.

One of the more alarming aspects of yesterday’s selloff was the terrible day for the FANGs, which each lost 4% or more and stoked lingering concerns that they wouldn't be able to put the market on their backs anymore. These names didn’t have the kind of comeback you’d like to see, but they did improve dramatically. In fact, Facebook was actually up 1.3% and Netflix cut its loss from more than 8% to only 1.5% today.

The market is reacting to numerous factors right now…not just one. Of course, rising rates looks to be the biggest problem after being so low for so long, but it’s also suffering from fears about trade, tech, the upcoming earnings season and global economic issues.

Speaking of earnings season, it unofficially starts tomorrow with some of the big banks. A lot of attention will be on the country's largest bank JPMorgan Chase and what Jamie Dimon has to say about this quarter and this market in the conference call. Everyone is looking for an end to this pullback; maybe earnings season can come to rescue.

Today's Portfolio Highlights:

TAZR Trader: The FANGs had another rough session on Thursday as the selloff continued. However, these names are just as innovative as ever, which means they’re likely oversold in the heat of this pullback. Kevin sees opportunity with a “starter” position in ProShares UltraPro QQQ (TQQQ). This move gives the portfolio access to FANGs like Amazon, Apple, Facebook and Alphabet, along with Microsoft. He’ll add more to this small position at the next lower level.

In other news, the Dow dipped below its 200-day moving average, which is exactly why the editor picked up ProShares UltraPro Short Dow30 ETF (SDOW) on Monday. But now Kevin thinks the index is due for a reversal. So it’s time to sell SDOW for a nice 17% return in just 4 days! Read the complete commentary for a lot more on today’s moves…and learn more about how Kevin plans to play this correction in the coming days.

Counterstrike: "The correction has been very violent, but after today most of the damage is likely done. We don’t want to just blindly buy here like we have in the past. I would feel very responsible if I bought 3 stocks today that were down 20% only to see them drop another 20% tomorrow. We need to see a signal that shows us selling exhaustion. Perhaps we will see that tomorrow.

"We are very oversold, but due to the 200-day break, there might be further pressure. Add on top of that the issues with the Chinese stock market, you never know what might happen overnight.

"Tomorrow could be the day we finally buy. I would love to see that 2700 level tested and hold. The next couple weeks will likely be insane, so prepare yourself to be nimble."
-- Jeremy Mullin

Options Trader: "There’s no denying the pullback is painful. (Aren’t they all?) And the market is now trading where it was at the beginning of July, effectively wiping out all of the gains made since then. But the economy is even stronger now, and looking better all the time.

"I think the market will soon hit bottom, if it hasn’t done so already. What’s the catalyst? Could be anything from selling exhaustion given the severely oversold conditions, to some friendlier tones coming from China, to the start of earnings season.

"So do not get spooked by this market. This is all a part of trading. The least fun part. But a part of it nonetheless. And I’m expecting a rebound shortly.

"Looking out further, I’m expecting a strong finish to the end of the month, and the end of the year. So make sure you’re fully taking advantage of this pullback by getting into stocks at prices you only wished you could have gotten in at before."
-- Kevin Matras

Until Tomorrow,
Jim Giaquinto

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