U.S. Stocks closed lower on Tuesday after a volatile session that involved a 200 point range in the Dow. In actuality, the Dow Jones was the best performer of the major averages, which is not usually a good sign. While the Dow Jones sold off by a mere 1.1%, the Russell 2000 was down over 3%. Tech stocks helped the bigger averages, as Apple closed higher by $3.95 per share.
Energy stocks were the big losers of the day, especially the oil and gas drillers. Anything to do with energy that is pulled from the earth took it on the chin today, due to the news that BP's top kill strategy failed to slow the oil leak in the Gulf over the weekend. As a result, the oil and gas drillers as well as mining stocks were taken out to the woodshed. Many of these stocks have lost nearly 50% of their value since the oil rig explosion over a month ago. For day traders that look for short selling opportunities, these stocks and related ETFs have provided big gains in recent days.
Based upon today's action, it looks like the market will likely test the May 25 lows. This may take another week, but a less than stellar employment report on Friday could be the catalyst.
I noted on CNBC today that Art Cashin indicated that mutual fund cash levels are extremely low. As such, any mutual fund redemptions by investors will result in more stock selling.
Scott Cole
www.bestdaytradingstocks.com
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