• Stocks fell most of the day, snapping back only in the last half-hour.
• Worries about Glencore, Volkswagen, commodities and China remain in place.
• The bear needs to be fed more bad news if it’s going to keep feeding on investors.

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Walk in the woods almost anywhere in America and before long you are going to start talking about bears. And the old joke. If a bear comes after you, you don’t have to out-run the bear. Just the others with you.

Yesterday was like that. The stock market kept waiting for Mr. Bear to show up. When he did, around 2 PM, he had his way, until a cavalry of buyers showed up at 3:30 and saved most of the averages. For the day the Dow Jones Industrial Average (INDEX:DJI) rose .30%, or 47.24, to finish at 16,049. The S&P 500 (INDEX:SPX) eked out a gain of .12%, or 2.32, to finish at 1,884. The Nasdaq Composite (INDEX:COMP) was not so lucky, losing 26.69 or .59% on the day to finish at 4,517.

BioTech Eaten by Bear

It was the biotech sector that got eaten by the bear. They went up furthest and fastest, so they are coming down fastest and hardest. Valeant Pharmaceuticals (NYSE:VRX) was down another 4.96%, or $8.25, to $158.08. This is a stock that was trading over $200/share as recently as Friday. The iShares NASDAQ Biotech Index (NASDAQ:IBB) finished down again, but only by .39%.

There was no news to account for this. Supposedly Hillary Clinton was supposed to apologize for mentioning the sector, although if a politician’s tweet can send your stock down maybe it was overpriced in the first place. Valeant’s market cap has now gone down 21% this week, on average that is five times normal. There was similar carnage at smaller companies like Avalance Biotech (NASDAQ:AAVL), down 7.47% or 64 cents to $8.04, Spark Therapeutics Inc (NASDAQ:ONCE), down 8.38% or 3.63 to $38.91, and uniQure (NASDAQ:QURE), down 13.52% or $2.52 to $18.99.

There wasn’t anything like company-specific news to cause any of this. The risk-reward calculation for the whole sector has changed. Risk on has become risk off, and companies that are still in the research stage, or who might not get paid as well as buyers previously thought, were all vulnerable.

Better News From the Oilpatch

Oil was actually up on the day, up 1.8% to $45.23/barrel on expectations that prices will keep firming as U.S. shale supplies start dropping into next year. Brent was up 1.9%, to $48.23.

Big oil stocks rose in sympathy. Exxon Mobil (NYSE:XOM) was up .50% to $72.96, Norway’s Statoil (NYSE:STO) was up 2.31% to $14.17, and even Brazil’s Petrobras (NYSE:PBR) was up, 4.57%, but only to $3.89/share.

Investor Carl Icahn, who has lost money on energy shares like Cheniere Energy (NYSEMKT:LNG) lately, helped the panic by posting a video on his personal web site extolling the virtues of Donald Trump and warning that the Fed’s balance sheet is too high, interest rates are too low, and that we’re heading for a crash.

It Could Have Been Worse

Given the set-up for yesterday’s trading, it is surprising the bear didn’t growl louder. Shanghai dropped 2.06%, Australia was down 3.77%, and all the major European exchanges showed losses -- .83% in England, .35% in Germany, .31% in France. Most of the talk remained centered around two companies – Glencore International (OTC:GLNCY) and Volkswagen (OTC:VLKAY). Glencore actually rose yesterday, by nearly 17%, but it’s said even a dead cat will bounce if dropped from high enough, and Glencore is down almost 75% from early May on fears low commodity prices will cause it to default on its debts. Some are calling it “the mining sector’s Lehman,” after the New York brokerage whose 2008 failure triggered the financial crisis. The Volkswagen scandal was also being called a “Lehman moment,” threatening the auto industry.

Raising Cash from Techs

Some of those who have had margin loans called or have lost their shirts in commodities were having to raise money from somewhere, so they sold tech shares. Apple (NASDAQ:AAPL) lost 3.01%, or $3.38, to $109.06. Amazon (NASDAQ:AMZN)  lost another 1.59%, or $7.99, to finish at $496.07, its first close under $500 since the August downturn. Facebook (NASDAQ:FB) lost 3.85%, or $2.54, to finish at $86.67.

Again, all this is a case of “risk on, risk off.” In a bull market people buy riskier issues in search of bigger gains. In a bear market they tend to sell more speculative issues or seek to raise cash by getting out of stocks that have been winners.

So What Happens Now?

The factors that set this bear market in motion – cuts in margin debt, low commodity prices, Chinese uncertainty – remain in place.

At some point people are going to start seeing screaming bargains and buying again. There was a little of that late in the day yesterday. Don’t expect immediate follow through, but if there isn’t some really bad economic news to go along with these falling prices then at some point the bulls are going to run. And the snapback could be intense.

I am not an investment advisor, and my opinion should not be treated as investment advice. I am not being compensated for this post (except possibly by Amigobulls). I do not have any business relationship with the companies mentioned in this post.