Gap Down Change of Character

We must have had about 2 weeks before NFP where we only gapped up.  There may have been 9 out of 10 days that gapped up.  And most of those gap ups were not tiny ones.  Most were decent sized non-trivial gap ups.  But during that same time period, it was murder during the regular time trading hours.  Big drops intraday, to only be topped out by the absolute intraday crushing on Friday.

And we get a gap down after a significant down day, a change of character, despite a resilient Asian and European market.  The times are changing.

In the past, gap ups usually signaled that you would get a harmless, non-damage day and you could sleep in.  Not anymore.  The Nasdaq momentum growth names usually don't care so much about what Europe or Asia does.  It is all about what the growth managers and go go hedge funds are doing.  They are already heavily invested in the group.  If they are selling, it doesn't matter if you have a gap up, the names will turn red on the day.

In a particular uncommon situation during the 5 year bull market, you have the Nasdaq massively underperforming the emerging markets.  The most bullish market has now become the most bearish one.  That is why I tweeted this as being a game changer, because it is rare.  It is a strong signal of trend exhaustion in the FB, TSLA, SCTY, YELP, NFLX, AMZN type of stocks.

If those stocks have exhausted the uptrend, then this market can only go up if you get new leadership.  I don't see many willing to pay big multiples on top of already rich valuations in low growth names.  So that means that upside is now limited, which automatically makes shorting more attractive because the odds of getting short squeezed is now pretty small.  It makes it relatively safe to short the rallies.  And we are getting closer to May, when the sell in May crowd will be active and seasonality weakens.
It is now time to be more active on the short side.