U.S. Stocks Falter As Techs Tumble and Options In Focus: Just VIX’ing Again

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City of Industry, CA Techs led the sell-off, with the Nasdaq shedding 1.5%. The Philadelphia semiconductor index dived 3.4%. Everything from computer makers to software firms to data storage firms got hit.


Meanwhile, the NYSE composite lost 1.1% and S&P 500 1%. The Dow fell a milder 0.5% as gains in Home Depot (HD) and Wal-Mart (WMT) cushioned losses in Boeing (BA) and IBM (IBM).

For the week, the Nasdaq dropped 2.6%, NYSE composite 2.1%, S&P 500 1.7% and Dow 1%. For the month, the NYSE composite lost 4.2%, S&P 500 3.7% and Dow 3.5%. The Nasdaq crumbled 5.4%, its worst monthly loss since February 2009.

Computer Programs & Systems (CPSI) gapped below its 200-day moving average and swooned 15% in huge trade. Late Thursday, the health care software company reported a bigger-than-expected drop in Q4 earnings and gave a weak Q1 profit outlook. The stock had been down 23% at session's low.

NewMarket (NEU) gapped down and dived 15% on more than four times normal trade. [Read the full article]

Losses approaching 4% on the month for the S&P 500 are certainly no laughing matter, but defending the market on that basis alone is looking more and more like a losing proposition as key price level after key price level, fall to the wayside. Those traders following market fear levels via the CBOE Volatility Index are seeing what this option strategist considers as extra confirmation of the market’s corrective move not being over just yet either.

With prices in the cash VIX near 24.5%, investor sentiment is a far cry from lows near 17% less than two weeks ago. That might seen overdone, but recent short-term overbought extremes in the index have been removed through a period of consolidation. Bottom-line, that means there’s one very good reason to view the market as something other than being oversold.

Quite honestly, a rally in the broader market would have been nice this week. [Read the full article]

The rotation intensified with today's list. The new blood is primarily a mix of consumer and technology companies.

As they recover from the recession, many companies' earnings growth rates are becoming more impressive.

For example, Tempur-Pedic (TPX)came back from seven bad quarters of EPS results — as bad as a 67% decline in Q4 of 2008 — to post a 124% surge in Q4 of 2009.

Sales grew 29% for the maker of mattresses and pillows, ending a run of seven quarters of declines.

In announcing results last Tuesday, Tempur-Pedic CEO Mark Sarvary cited a "gradual improvement in the macro environment together with success from sales and marketing initiatives."

Other consumer stocks new to the IBD 100 include Netflix (NFLX), Deckers Outdoor (DECK), Ameri-Credit (ACF) and First Cash Financial Services (FCFS). Deckers has not reported Q4 results yet, but the others have posted sound numbers. [Read the full article]

What are the relevant buy rules now? Just one: don't. The major U.S. averages are in a correction, as are most foreign indexes. That makes for formidable head winds for almost any growth stock.

So whether you've been trading American depositary receipts or Hong Kong listings, new buys should be off the table.

Take AsiaInfo Holdings (ASIA), a provider of software and IT services to China's telecom industry. The IBD 100 member reported on Friday morning a profit of 38 cents a share for Q4, 7 cents above expectations.

The upside surprise didn't help the stock. It started out with a 6% gain, but closed basically flat.

AsiaInfo, like most Chinese leaders, already was damaged.The first clue trouble was at hand appeared the week of Dec. 18. The stock made a new high, but reversed. It moved sideways for a few weeks. Then a rise on Jan. 4 to a new high — by a scant nickel — appeared with below-average volume. [Read the full article]

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