The last six weeks have been rough for investors who jumped into 2013's big stock market winners like Netflix and Facebook, only to see their share prices crater.
For now, they have shifted money to other parts of the equities market, instead of retreating to safe-havens like cash, and concerns that there will be a full-scale retreat are muted. Despite the ugliness in sectors like biotech, down 20 percent from its high, the broad S&P 500 has lost just 3.2 percent.
And the flashing lights that often exist around the time of a deeper reversal just aren't there.
"This sell-off is giving me the chance to buy at lower prices," said Josh Spencer, portfolio manager of the T.Rowe Price Global Technology Fund (PRGTX.O). "If you pick your spots well, you can play defense and offense at the same time, if you buy good companies that have corrected in price."
His confidence may be justified.
Reuters examined 10 different market metrics, and found that eight are supportive or at least benign when it comes to buying equities.
For starters, the initial public offering market looks remarkably healthy, which rarely happens when stocks are going out of favor. This week alone there are plans for 15 market debuts, according to Briefing.com.
Last week wasn't too bad either - in a week in which some major Internet stocks were taking a battering, online restaurant ordering service GrubHub (GRUB.N) was a big hit and its shares are now up 36 percent from its $26 IPO price.
IPO proceeds so far this year come to $14.1 billion, not far from the $15.4 billion in proceeds at this time for 2012 and 2013 combined, according to Thomson Reuters data.
Deal making is also buoyant. This year, U.S. mergers and acquisitions have totaled $390 billion, the most since the same period in 2007.
"You're not seeing deals pulled because of 'market conditions'," said Art Hogan, chief market strategist at Wunderlich Securities in New York.
HEDGE FUNDS FAR FROM FLEEING
Hedge funds are often a big part of market swings. So far, long/short equity hedge funds are not moving to cash, instead maintaining their gross exposure to equities.
"Gross exposure hasn't shifted very much," said Jon Kinderlerer, head of risk advisory for prime services at Credit Suisse. "There hasn't been signs of a big liquidation," though he did note a big pullback from technology stocks based on cloud computing.
To be sure, there has been an increase in hedge funds taking on protection against a big drop. Headed into April, between 16 and 17 percent of funds had some kind of "deep downside protection," according to Credit Suisse, about average for the last couple of years.
As of Tuesday, that figure was around 18 to 19 percent of hedge funds. That's a modest shift, but higher than most readings in those years, suggesting increased concern among hedge fund managers.
Among individuals, the weekly survey of the American Association of Individual Investors showed that last week, 35.4 percent of those surveyed were positive, an increase from the previous week, but still less than the historic average of 39 percent, according to AAII. Individual investor sentiment is sometimes seen as a contrarian indicator, with high levels of bullishness seen as a signal that a correction could be imminent. But in this case the survey appears to be largely in neutral.
The CBOE Volatility index .VIX, an indication of how much investors are willing to pay up for protection against a slide in the S&P 500, remains subdued. At around 15, it is below the 20 historical median. It has closed above 20 just once this year and only a handful times more in the past two years.
Market technicals are still supportive, if not for gains, at least in limiting any losses. The 1,840 level on the S&P 500 looms large (the S&P ended Tuesday at 1851.96), because it represents the 50-day moving average, a measure of the intermediate-term trend in the market. It also stands as what's known as a retracement level between the early February low and last week's high.
When different technical indicators converge, it makes that level more important, where clusters of buyers would be expected to show up. Should the S&P fall through 1,840, it could presage a more significant selloff.
Exchange data show short interest has increased since the start of the year on an aggregate basis, but short bets in high-flying shares have receded.
TripAdvisor (TRIP.O), down 21 percent since early March, has seen the number of its shares borrowed for short bets decline 18 percent since the year started, according to SunGard's Astec Analytics data. Borrowing in Alexion Pharmaceuticals (ALXN.O) stock, also down 21 percent from its peak, has fallen by almost half. Bets against Facebook and Netflix have also declined in recent weeks.
"This would suggest short sellers are both getting out of those stocks, closing their positions, and also refraining from opening up new positions. They would seem not to expect profit opportunity on the downside," said Karl Loomes, market analyst at Astec Analytics in London.
Corporate results in the next few weeks will be crucial. Profit projections have continued to drop for first quarter results, and are now at a lowly 1.1 percent. That is largely as a result of the long, hard winter's damage to consumer and corporate demand.
Earnings forecasts for the second quarter, though, have been relatively stable. Expectations are for growth of 8.3 percent in the second quarter, down from 9.7 percent forecast for the period at the beginning of the year, according to Thomson Reuters. The market's direction may be determined by whether the winter weakness gives way to a spring takeoff in demand.
"If you start to see some shortfall on earnings and guidance to the downside then this (selloff) could actually continue," said Gordon Charlop, managing director at Rosenblatt Securities in New York.
Still, economists at Bank of America/Merrill Lynch forecast the U.S. economy will grow at a healthy 3 and 3.5 percent in the next three quarters. And recent data, including car sales and housing market activity paint a better outlook for the U.S. economy.
(Reporting by Rodrigo Campos, David Gaffen, Ryan Vlastelica, Ross Kerber, Timothy McLaughlin; Editing by Martin Howell)