Stocks Exit Extremely Oversold Territory

Stocks Exit - Biggest Post Election Rally Since 1982

The stock market rallied sharply after the midterm elections. Dems won the House and the GOP held the Senate. S&P 500 usually rallies 0.7% after the midterms. Instead, it rallied 2.12%.

This is the biggest increase since 1982 when it increased 3.9%. It’s good to get past an uncertain event without anything negative happening.

Usually, a divided government is better for stocks than one completely controlled by the GOP. However, I think the main stocks rallied was because they were oversold.

Finally, after this strong rally, the CNN Fear and Greed index has exited the extreme fear category.

Now it is at 29 out of 100 which indicates fear. I’m no longer extremely bullish on stocks in the short term. The S&P 500 is only down 3.37% from its record high in September. And it’s up 5.25% year to date.

Personally, I think a trade deal with China needs to be made before stocks can reach a record high. Therefore, I don’t see much more upside.

If you believe there will be a trade deal soon, you should still be extremely long.

Stocks Exit - Amazon Soars & Zillow Craters

Nasdaq increased 2.64% and Russell 2000 was up 1.67%. VIX fell 17.83% to 16.36.

Zillow stock ended up doing way worse than the 18% decline after hours as it fell to 26.92%.

Investors hate the idea that it’s going to start flipping houses when home flipping fell 18% year over year in August. Normally, this would be a risky business venture.

It’s even worse because this is a terrible time to start flipping houses. The CEO stated he’s betting the entire company on this venture. He should reconsider that after this massive crash. The stock is at its lowest point since June 2016 and it’s down 54% from its peak on June 15th.

Every single sector was up. Best sectors were consumer discretionary, technology, and healthcare. They increased 3.12%, 2.88%, and 2.94%. Amazon drove up the consumer discretionary sector as it increased by 6.86%.

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