Relentless Selling Wave Continues

It seems like every time I sit down to start a new post over the past few weeks, I am looking at the same data, indicators and price behavior. Stocks closed the day before lower and look like they have a chance to bounce but end up closing lower yet again. I thought when I started writing about relentless selling, it would end sooner than later. And here we are again; stocks fell hard on Thursday with the glimmer of hope for a rally on Friday.

Today is also the final option expiration day of 2018. Every quarter is considered a quadruple expiration where futures also expire. And December is often the biggest one of the year as the masses square up their books for tax and performance reasons. You are all but guaranteed to see potentially record volume in the first 30-60 minutes. Lots of activity early on.

Thursday saw another very heavy trading day with even more signs of panic, especially right after lunch. There was a very powerful micro wave into 2pm that I would have ordinarily said was an easy call to be THE bottom. I did text two of my industry buddies at the time that in most other declines, you could close your eyes and load up right then and there. However, the selling wave since December 3 has been more severe than we have seen in a long while. Stocks should bounce from it, but I would like to see even a single day where stocks close higher than they open. In other words, on my charts, that’s a green candle. The more green, the better for the bulls.

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Paul Schatz, President, Heritage Capital
Paul Schatz, President, Heritage Capital
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  1. Hi Paul,

    Thank you for all the updates. At this point it feels like we are just waiting for a dead cat bounce at which point this downtrend will resume. Is there any sort of glimmer of hope that the bull market is not dead? if its dead, how low do you think this “bear market” can go? Are we looking at another 10-20% lower or much worse?

    In any case, thank you for the updates. I appreciate your perspective.


    • Paul Schatz, President, Heritage Capital says

      Hi Aron,

      If this selling wave was not in December and took place in almost any other month, it would look like most other bull market declines. Remember, bear markets start with a bull market decline. I absolutely do not believe we just began a multi-year decline like 2007 or 2000. For whatever reason, the market is not getting that giant, 1000-2000 point, down day which cleans out all the sellers and creates the panic needed for at least a tradeable low. All of the ingredients for s sharp snapback are in place right now, but it seems like the bulls just either have no interest in sticking their necks out before year-end or are waiting until some of the dust settles.

  2. Thank you for the reply. Maybe we’re seeing the panic selling today..


    • Paul Schatz, President, Heritage Capital says

      It doesn’t feel like it Aron although volume will be close to record because of quadruple witching. Hard to believe there will be a panic selling day next week, but it was more hard to believe that stocks could collapse in December.

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