Loss of 'Momentum' as Market Sells Off Nasdaq Growth Stocks

     Maybe this sell-off has legs? We've looked at Cramer's prognistications in the past. 

     http://diaryofarepublicanhater.blogspot.com/2014/04/todays-jobs-report-in-retrospect-bears.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DiaryOfARepublicanHater+%28Diary+of+a+Republican+Hater%29

     http://diaryofarepublicanhater.blogspot.com/2014/03/jim-cramer-buy-bank-of-america-if-we.html

     However, even he's sounding a somber not right now:

     "Jim Cramer is worried by the sell off in the Nasdaq. Really worried."

     "Whenever you have a sell-off as dramatic as what we've been seeing in manyNasdaq stocks, there are often deeper forces at work," Cramer said.

     "At issue is the amount of money that went into growth stocks trading on the Nasdaq between 2011 and 2013. Because growth was hard to find during that period, "growth managers were very willing to buy companies with terrific revenue growth even if the company was not profitable," Cramer said.

     http://www.cnbc.com/id/101561933

     What's going on, according to him, is market managers are rotating out of the momentum and growth stocks. 

     That concept of growth without profits "is an integral piece of the puzzle. It's behind what's gone wrong here," Cramer said.

    "That's because, in early 2014, the economy showed early signs of significant improvement."

     "As a result, money managers rotated out of so-called momentum growth stocks (that had no profits) and put money to work in cyclical stocks that stood to advance on solid fundamentals; things such as higher profits."

     "Then to aggravate an already serious problem, "lock-ups started to expire," Cramer said.

     "That is, more shares of companies with growth but no profits came onto the market at a time when the appetite had started to diminish substantially."

     "What we ended up with was a nasty situation," Cramer said. Selling prevailed with the Nasdaq making its largest decline in two years in early April.

     "Although Cramer is typically a buyer of weakness, he doesn't think this is a typical sell off."

"The Nasdaq decline is not about the fundamentals, it's about the mechanics of the market," Cramer said.

     If he's right this is a good thing ultimately-the sell-off is not about fundamentals which I think is true. So if it's just a change from growth into cylicals that's a good thing in the long run-as the fundamentals aren't bad. However, in the short run where might the market be going? 

    I got out of KING today-the Candy Crush IPO-with a small loss-I had bought 100 shares. I got out of my $18 BAC calls for early May and got into some $17 which expire in two weeks and were pretty cheap. BAC closed at about $16.40 today. I had written on Friday that this stock tends to move pretty methodically-it had a $15 handle in the last 2 months last year, a $16 handle the first 2 months of this year, and a $17 handle since-until the last two days. It's now finished two days in a row under $17. 

   Yet I still like the $17 calls-I've got to think that there has to be at least a dead cat bounce coming and when it does the bulls will at least try to get it over $17. From my point of view it doesn't matter whether they succeed or not-just get it in the neighborhood of $17 and I would have significant gains-I bought 50 of these calls. I mean it opened up at $16.74 today and that's the lowest if had opened that low since March 5 about once, so I got to think it can at least get back to where it was this morning, even briefly. Everything I know about this stock suggests that it has a long gestation period before making any move-it rarely makes a huge move without even retracing a few times-usually much more than a few. 

   Meanwhile, I was up in my Citi May 2 puts-have 40 there .I could have gotten out today with about $1,700-I got in around $900 so this would have been nice gains. Of course, I'm too greedy. I want more. I think after Citi dropped beneath $47 and closed there it can next go beneath $46. So I'm going to be a little greedy-I probably should have taken at least 10 off. 

   Cramer's advice of 10 days ago still looks pretty good. He said if the job number on Friday was a strong number buy BAC but if it's week go with CBSO. I didn't listen but bought both of them. At least CBSO has held up better than most stocks over the last few days. 

   P.S. I see that my options at $44,50 May 2 didn't get any traffic today-no one bought and sold any but there was tons of open interest in it-much more than at other strike prices close to it. Could that be a good sign?