After last week, I am running out of adjectives to describe the stock market decline since December 3. Relentless seemed like the best word a week ago, but now it’s almost an understatement. Although I thought I had written my last long update before the Fed meeting, I had also thought that stocks would at least see a temporary low. I was wrong on both counts and am working on another update now.
Almost every day last week looked similar. Carnage across the board with almost no place to hide. I have said this before, but I think it still has merit to mention again. The decline has the “feel” (which I often say is not real) of needing a “clean up” day to force more selling and cleanse the market of any remaining sellers. Given the size of the decline so far, that could end up being a 1000+ point down day. Talk about unsettling investors over the holidays.
I would be really surprised if stocks just jump up at the open and rally sharply into the New Year. That would end up being a much worse scenario and need more downside before the initial low was in place. This would be the same sentiment I shared for weeks after the October 11 low when I said that if stocks just rallied right back to new highs (they didn’t), I thought the bull market would end in Q1 2019. Significant, major or meaningful bottoms have very similar characteristics year in and year out, decade in and decade out.
A bottom is coming, but I believe it has to come from lower levels.
For those celebrating Christmas, I wish you and your families the happiest one of all, surrounded by loved ones. Some good food and cheer won’t hurt either!
