MLR - PMP 3/25/14

Published : March 25 2014 at 8:53 ET

Major averages fell on lower volume though volume levels were above average on the NASDAQ Composite. The NASDAQ closed above its 50-day moving average after breaking through it earlier in the day as it found support off the lows. Leading stocks got hit hard even though major averages were able to claw back part of their losses. Biotech and medical stocks tripped once again with a number of leading names being the loss leaders as some fell through major support. Leading names in other industries were also pummeled including (PCLN) and Netflix (NFLX) which sliced through their 50-day moving averages on big volume. Facebook (FB) closed below its 50-day line for the first time since December of last year while Tesla Motors (TSLA) violated the 228.45 intraday low of its late February buyable gap-up move. As stocks try to find support investors should lay back and wait for signs of stabilization before looking to buy into pullbacks. At the same time, stocks that violate critical support levels should be sold or pared back depending on one's profit cushion.

In prior market corrections, leaders always got hit hard relative to the major averages. But in the current correction, leaders have been knocked harder, even more so than in prior pull backs. This implies market internals are weaker than in past corrections, thus with major averages only off a couple of percent, more downside would not be surprising. With so many leading stocks having sold off deep into their patterns over the past week or so, many are extended to the downside currently, setting up the potential for a reaction rally and bounce which is already taking place this morning. European markets are up over 1% at the time of this writing, and U.S. futures are also up this morning as well.

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