Market Briefing For Friday, Oct. 19
Panicky peddling pummeling prices resumed for FANG stocks mostly; while the behavior of the S&P and Dow Industrials was relatively sanguine; even as it elicited 'end-of-world' coming-off-the-rails comments periodically. Between those views, and 'you gotta buy 'em' (no you don't) exhortations, it is the kind of jitters and scrambling that we expected, and that we really do not need to be very active in; since the next thing to is pick up the pieces in the wake of what has unfolded, and is still a 'rolling bear market'
Some pundits even suggested 'buying' tech stocks after the huge rally of a Tuesday; and now talk about protection. This is typical. None of us nail all moves of the market; while everyone now realizes the appropriateness of what I termed 'smart money selling' during numerous 'Rinse & Repeat' lifts that we had earlier in the year.
Generally analysts viewed that as affirming strength; I viewed it more like a cowardice by managers; fearful of joining the 'smart money' by selling into strength; and realizing that rallies generally were light volume with narrow breadth; which means the moves had no 'oompth' behind them. They were for purposes of selling, not buying; generally speaking.
Fine. Now here we are with a market on the precipice of another break; that traditionally gets deferred for one reason or another. This time it's harder to pull the wool over investors' eyes, by using buybacks, short-covering, or an assortment of rationales about earnings not topping until later next year (it's important to recognize markets often top before economic trends or profits by the way). Or they'll blame the Fed.
Perhaps they should look askance and recognize that 'sluggishness' during this year prevailed increasingly in Housing, Autos and even loan-demand. A true acceleration of the growth rate would have benefited the bankers. Of course analysts pushed banking stocks; while we actually made a point of loan demand being constrained; corporate CapEx plans deferred; and felt there was no justification for loading up on Bank shares.
Why did they do it then? Because (like Housing, Autos and Tech); they do need 3 or 4 legs of the stool to hold up or the market simply cannot. I made that point again recently. This has been a tough year for investors; I sure get that. All I can do is assess it as I see it; and generally we've had this on track for what it was: a 'rolling Bear Market' with Small and Mid-Cap stocks correcting under-cover of a strong Dow Industrial and S&P umbrella.
Now you have the S&P catching-down with where the 'real market' already was treading. Hence, my 'Crash Alert' conditions warning two weeks ago.
Bottom line: we've reasonably targeted this progression of distribution; it's not been a 'new Bull or extended cycle' since the parabolic thrust blow-off, in late January. That led to the February break; our nailing the 'trading low', and rightly call the rebounds to be for trades not longer-term investing.
More recently we've looked for a crack (from the 'crash alert' high right on the day of closing Dow and S&P highs as it turned-out); focusing this week on the trading 'Hail Mary' desperate Tuesday thrust, which I thought (turns out it was) just huge 'short-covering' and an invitation to sell that rally not to buy into. Thankfully that assessment was valid; and we're crumbling now; I think to new lows and I suspect there's not much that can restrain this.
In-sum: there's no reason to 'start' lightening-up as some say; all that really should be way behind. This is what I meant by when others are frantic and in panic (wait until the gavel rings down and makes a base technically), we will be looking to pick up the pieces. They are not negative enough yet; for the most part they haven't recognized that buybacks can't rescue the S&P or FANG stocks this time; and that there's little fresh money coming in.
From the technical viewpoint side, it's just been a bounce off the 200-Day Moving Average which got nowhere after one day up; and now threatens to move to lower lows (likely). Of course 'they may' try (they know danger at this point); but barring rabbits out of the hat; this dives down deeper.