September 20, 2020

The averages lost more ground late last week as the Nasdaq stood 11.9% off its Sept. 2 high by the weekend. There does not appear to be an obvious catalyst for the selling other than the market was due for some profit-taking following its unprecedented five-month advance.

The current Nasdaq correction took all of three days to reach 10%. This exceeds the six days it took during the Feb-Mar bear market, and is the fastest ever.

While the Nasdaq has been off in its own world led by the S&P 5 technology shares, other more-speculative growth issues have been assuming the mantle of leadership.

It is to be noted that a bull market does not need the liquid glamours to lead. As is sometimes the case, when technology corrects, the speculative money rotates into biotechnology. Such is the case currently, and in an obvious way as shown in this chart.

The current leadership consists largely of names that were extended coming into the September correction, but did not pull back much if at all. Otherwise, the titles discussed below represent some issues that offer attractive entry but without being extended.

It is unclear whether the current leadership will give up the ghost to join the Nasdaq to the downside or the leaders will end up pulling the Nasdaq out of its slump and move higher.

The game plan should be to err on the side of caution in terms of overall long exposure, but to have some exposure to this market via selective buying. The stocks below offer a start, as have some of the pilot buy ideas mentioned in recent reports and videos.

Beyond Meat (BYND)

Growgeneration (GRWG)

Kingsoft Cloud Holdings (KC)

Pinterest (PINS)

Seres Therapeutics (MCRB)

In sum, some exposure to this market is warranted, but without the participation of the Nasdaq, we would err on the side of caution and limit the extent.

Kevin Marder

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All stock charts created using MarketSmith unless otherwise noted. ©2020 MarketSmith, Incorporated. All other charts created using TradeStation. ©2001-2020 TradeStation Technologies. All rights reserved.

The views contained herein represent those of Marder Investment Advisors Corp. At the time of this writing, of the stocks mentioned in this report, Marder Investment Advisors Corp., Kevin Marder, or an affiliate thereof held a position in APPS, though positions are subject to change at any time and without notice. Estimate data provided by FactSet. Expected earnings release dates provided by EarningsWhispers.