The stock market opened the week on a downer Monday as major averages ended firmly in the red.
Some attributed the weakness to election uncertainty, while others blamed a big jump in oil prices. Others just called it a continuation of recent selling pressure in the S&P 500. The benchmark index has flashed four distribution days in the past 13 trading sessions.
Whatever the reason, it wasn’t a pretty session as the Dow, S&P 500 and Nasdaq composite ended with losses of 0.9%. Lower volume softened the blow.
The IBD 50 gave up 1.1%, hurt by weakness in Acacia Communications (ACIA) and several China-based names like Momo (MOMO), NetEase (NTES), New Oriental Education (EDU) and Alibaba (BABA).
Acacia raised its Q3 guidance slightly above Wall Street expectations, but dilution concerns were raised on news of a share offering. The four stocks from China didn’t suffer much technical damage at all, as all four remain comfortably above their 50-day moving averages.
The stock market’s action Monday was a reminder that volatility is still out there, where bullish price action one day can be followed up by bearish action the next. Long positions should be monitored closely and new buys should be handled with care.
West Texas Intermediate crude oil jumped just over 3% to $45.93 a barrel, even though an output cut is not expected at Wednesday’s informal OPEC meeting at the International Energy Forum in Algeria. Some think progress is being made, however. Oil stocks generally didn’t participate in oil’s rally.
Major indexes showed bullish price action last week, putting the market back in a confirmed uptrend. The Nasdaq composite gapped up to an all-time high Thursday. On the same day, the S&P 500 gapped above its 50-day moving average.
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Underneath the surface, there are still things to like. The bulls like the fact that the IPO market has sprung back to life. While excessive speculation has been seen at market tops in the past, the speculation is usually in unproven names that aren’t profitable.
Recent IPOs aren’t of that ilk: Many are highly profitable with a new product or service that’s driving growth. If the current seven-year bull market still has more left, it’s a good bet that new leadership will come from newer names. There are plenty of them out there now to consider.
AC Immune (ACIU) debuted strongly on Friday. The developer of drugs for the diagnoses and treatment of Alzheimer’s and Parkinson’s disease is profitable. Rather than buy now, though, it’s best to wait for a base to form. An IPO base can be as short as seven days.
Impinj (PI), a formidable player in the Internet of Things, provides inventory-tracking technology using radio frequency identification (RFID) tags. It’s started to pull back after a big move from its July IPO price of 14.
Glaukos (GKOS) continues to trade well after a breakout over a 36.60 buy point. The company makes the iStent, a tiny L-shaped titanium device used in cataract surgery and to treat the most common form of glaucoma.
Japan-based mobile-messaging app Line (LN), referred to by some as Japan’s Facebook, has been a strong performer since its July debut at 32.75. Its current base shows a conventional entry at 48.20, although some might’ve bought when it cleared a more aggressive entry at 45.44 on Friday. Line is a member of Leaderboard at Investors.com.
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