After Friday’s carnage, the bulls fought off early weakness and pushed stocks to close at their highs around the flat level. Is the decline over? Anything is possible, but I continue to see more downside ahead with all major indices breaking their recent lows. A pre-election low remains in the cards and that would really catch folks off guard!
I remember calling my parents from college when I heard the stock market had crashed 22.6% in a single day. My father had literally just opened another brokerage firm and even I knew this wouldn’t be good. I remember him telling me that it was the BEST time to open a new firm since they hadn’t brought clients over and built their book up yet. So not many folks were unhappy!
I remember a buddy of mine who traded for a living teaching me about how the whole financial system was broken. The stock market was not trading at the levels that the underlying derivatives suggested and the key providers of liquidity and stability were rendered impotent by this disconnect. The morning after the crash, my buddy showed me how the Dow should have been another few hundred points lower. It was at that moment, he dove in and bought with both hands, selling out by the next day for a year’s worth of gains.
Stocks fell hard on October 19, 2012, but nothing compared to 25 years ago. An equivalent decline would have been almost 3000 points today! Today’s carnage was interesting and I think there is more to come, even if we see a bounce first. A good buying opportunity is coming for those who are patient…
Here is the latest Street$marts:
In the last Street$marts, I opined that the stock market should see at least another new 2012 high this year, but that we were long overdue for a pullback and a 2-8% decline should begin shortly.
So far, all we have seen has been a 3% decline and many folks wonder if new highs are next. I think the healthiest thing would be for stocks to decline below the levels we saw last week and then mount an assault higher. That would set up a much better foundation for a rally and perhaps begin to fix the canary problem with the semiconductors and transports.
We will have an extended article out this week on the Fed’s QE Unlimited and what it all means and if you should even care.
Here is the piece I did last Friday after the putrid jobs report. While the headline number may have indicated an increase of almost 100,000 net new jobs, the underlying data was awful. Additionally, while the unemployment rate may have fallen to 8.1% from 8.3%, it was primarily due to people leaving the workforce than people being hired.
The latest Street$marts is here…
I am scheduled to be on FOX Business’ Markets Now at 1:30pm today discussing the historically low volatility in the markets as well as the roadmap to the election. If you looked for me on CNBC last Friday, Labor Day traffic was off the charts, deeming it impossible to get to the station on time.
This week, I will be posting the two Yahoo Finance segments I did last week along with a new Street$marts issue. Several cracks in the pavement are popping up for the stock market over the intermediate-term…
Hope you had a great (and safe) Labor Day weekend!
It’s been a while since I mentioned Apple, but the action of late deserves comment. After peaking in April with the broad market, the stock declined into May with the broad market. But when stocks declined further into early June, Apple did not follow suit by making a new low. Rather, it formed a higher low than it saw in May and that was the first clue that it was ready to rally again.
This week, Apple made an all time high at almost $675 before reversing on Tuesday. In the short-term, the odds favor some downside, possibly into the $630s, but over the intermediate-term, there should be some upside left before the final peak is seen later this year or early next.
As I have written about before, each and every bull market has at least a single story stock or more. 2007′s top was Google. 2000 was Yahoo and a host of other Dotcoms. We researched back to the 1929 peak and found similar mesmerizing stocks in every bull market. Of note, each and every story stock declined by at least 40% when all was said and done. I believe the same lies ahead for Apple, everyone’s favorite company.
Just like with Google and Yahoo and IBM and RCA and GM and Zenith, the masses always think that this time is different. The story stock has no competition and rules the world. There are always reasons why the stock won’t be like its predecessors. I get that every time I speak publicly about Apple. Sadly, investors will be left holding the bag without a plan.
Don’t expose yourself to that kind of risk. Put a plan together on when and why you should sell or hedge the position, possibly with options. Profits are a great thing! Keep what you have earned!!
It seems like the markets, investors and media have been waiting forever for Ben Bernanke to give his annual speech from the Fed’s retreat in Jackson Hole WY. Lots of initial expectations have faded into much ado about nothing. I like that the stock market is showing weakness into the speech. That leaves ammunition for a potential move higher next week. Today’s decline was very orderly and began to restore a little worry in the markets. We don’t need all that complacency!
I don’t want to put too much emphasis on one trading day, the last day of the slowest month of the year, but Friday should be interesting and telling about the short-term.