MorningWord 11/19/13: At RiskReversal we have been on the record of late (MorningWord 11/4/13: There Is A Bubble Forming In Calling A Stock Market Bubble) that the current environment does not feel like the prior equity bubbles of the last two decades, but there are most certainly pockets of activity that remind us of bubbles past. Look no further obliviously than Web 2.0 stocks, solar and the poster-boy of the 2013 Momentum Madness- TSLA. Yesterday’s price action in all of the above was atrocious, just look at the day end screenshot:
There are 2 groups I want to breakdown here, the first being large cap social media like FB & TWTR and the second being what I deem to be fairly crappy low barrier to entry names like P, YELP, TRLA Z*. The damage was fairly massive and for no apparent reason other than TSLA started the session in the red and cascaded for the balance of the day. Selling begot selling. And as I asked rhetorically in this space last week (MorningWord 11/13/13: How Does a Bull Market Correction Start?), you lose the leadership. That process has begun, the SPX and the Nasdaq both reached new milestones in the last couple weeks, yet very few of the speculative names participated. I have also been on the opinion that this is a fairly healthy rotation if the rally is to have legs, it will need to broaden out.
So TSLA is down for the count, large cap social media like TWTR and FB are struggling, and the P, YELP, Z get drilled at the slightest bit of fear in the market. There is one very speculative sector that bucked the trend yesterday, and that was 3D printing, so maybe the jig is not up just yet:
As for TWTR, this is the one to watch, given the profits that most on the IPO, and the losses that most who bought after, a break lower, could cause a quick move to the mid $30s, leaving some pundits to believe that the new issue was born into a grave, much like FB following its public debut.
* We have bearish positions in YELP & Z (see Recent Trades page)