Date: October 8, 2018

Bulls Fail Again

My continued theme of a stock market pullback continues. The weakness is unfolding as expected. Small and mid cap indices have been hit the worst, but now the NASDAQ 100 is joining in. The rotation into the Dow and S&P 500 remains, but they are also down as well. Semis, discretionary and transports have rolled over and now the banks are in jeopardy of following suit. Energy, industrials and healthcare are sectors where investors are trying to hide and that may last a little while longer until the final leg down in the pullback. During that stage, I expect the leaders to get hit hard over a short period of time.

After Thursday’s weakness, the bulls were supposed to step up on Friday or at least not allow much downside. That didn’t work out so well as early strength was rejected pretty quickly and the bears went back to work. With overseas markets sharply lower, I would expect a lower open today with the bull pushing back on this semi-holiday trading day. We are supposed to see a rally into lunch. Once again, it will be incumbent upon the bulls to thwart any selling waves this afternoon.

I noticed more than a few indicators over the weekend which said that the risk in stocks has increased dramatically. While I continue to see much higher prices ahead, I am starting to wonder if this is the first nail in the coffin of the bull market.


Paul Schatz, President, Heritage Capital