Hopes for a year-end rally fizzled yesterday as selling in
big cap technology shares and an -11.41% drop in Tesla (TSLA) sent the NASDAQ
and S&P 500 lower. It looks like tax
selling may keep a lid on equities for at least another day as investors dump beaten
down tech holdings. With little economic data and earnings on the slate I'm not
sure the stock market will have a catalyst to bring buyers in off the
sidelines. The major averages are having their worst year since 2008 and I
don't see a reason to jump in now. That should lead to some back-and-forth
trading to close out the year.
Yesterday’s Breadth was negative with declining issues
beating advancing issues by 361 units on the NYSE and 2:1 on the NASDAQ. Volume
was holiday light with advancing volume holding a small edge on the NYSE, while
declining volume was 73% of the NASDAQ. The VIX jumped 0.78 (+3.74%) and closed
at 21.65. Crude oil prices increased 0.11 (+0.14%) and the February contract
closed at $79.67 a barrel. Gold prices rose 17.00 (+0.94%) and finished at
$1821.10 an ounce.
I have been a follower of Sam Stovall, Chief Investment
Strategist of CFRA for a long time now and he just keeps getting better with
time. Below is an excerpt from an article
which was published in yesterday’s edition of their Morning Briefing.
Anticipating
Indicators Sam Stovall, CFRA Chief Investment Strategist
“….While interesting and historically predictive, especially
for positive readings, investors should always remember that while history is a
great guide, it is never gospel. Even though Mark Twain once said “history
might not repeat, but it certainly rhymes,” one can add “like the singer of the
national anthem, it sometimes forgets the words.” Prices typically lead
fundamentals, so while these indicators frequently offer clues as to the
market’s likely direction, look upon them as guides to what may happen, but not
necessarily guarantees as to what will happen.”
Sam Stovall, CFRA Chief Investment Strategist
Market Recap: The stock market rally remains under heavy
pressure. Aside from the Dow Jones industrials, the major indexes are below key
moving averages. The S&P 500 needs to regain the 50- day line, but that
would be just a first step in the right direction.
Right now it’s unclear if the market will rebound, tumble
toward bear lows or move sideways in a choppy fashion for an extended period.
And investors probably won’t know until there is some clarity over when and
where the Fed will stop hiking rates, and whether the economy will slip into a
recession.
As released last evening my call for today’s market was
Neutral at best. Both the Overall Trade signal and the Trend Signal are Bearish
which are composite signals while the four individual indicators came in at
three Bullish and one Neutral marks. Not
convincing enough to warrant a Bullish trade so I have stayed with the two Bear Put Spreads which I put on Tuesday in the SPY and QQQ.
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