The bottom line is that a broad swath of leading stocks have gone entropic as their technical integrity begins to unravel. In some cases, this has happened suddenly and has been characterized by intense selling that hit many stocks on Monday.
Facebook (FB), arguably the biggest of the formerly stable big-stock leaders in this market, illustrates what is going on under the surface of this market. Market indexes have an admittedly sanguine look to them which belies the turmoil going on under the surface with respect to what is going on with certain leading stocks.
We can see that FB was acting just fine heading into the weekend last Friday, with the stock showing some supporting action at the 50-dma as volume declined. For the most part, the stock appeared to be going about its business of building what was an eight-week base as of Friday, in an orderly and relatively quiet manner.
That all changed on Monday as the stock literally fell out of bed, slicing through its 50-dma on huge selling volume. That was the second-highest daily selling volume for the stock this year, and sent it well below the 50-dma as it also undercut the lows of its current base. From here, weak rallies up into the 50-dma would be something I might look to short, but FB mostly serves to illustrate the sudden entropy that abruptly overtook its orderly chart pattern on Monday.
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