Date: October 29, 2018

Squawk Box, Yahoo Finance & Correction Update

I started out my day with a visit to CNBC’s Squawk Box at 6:15am. I should have the link to post later today. I will be with the good folks at Yahoo Finance on Midday Movers either right at 11:30am or noon, live from Heritage Capital’s global headquarters via Skype. There’s an inside joke in there which I am always willing to share in person.

As you know from all of my posts, markets have been very volatile and even unnerving for some. I am going to discuss when I think stocks may find a bottom, how and at what price zone.

I had hoped to have an update done on Friday with some indicators to watch for a low in stocks but the depth of the decline forced me to wait until after the close and the weekend has been kind of insane with two bar mitzvahs in Saturday and the final weekend of baseball with party to follow at our house. To make matters worse, both my wife and I have been a little under the weather. On a happier note, however, Mount Snow opened on Saturday so ski season is here with one of the earliest openings ever. If you’ve never skied during fall foliage in Vermont, it’s definitely a bucket lister!

Back to the stock market, I said on Wednesday and Thursday that the ultimate low from this pullback, now correction, was still in front of us and lower prices were still ahead. Friday’s action was interesting as it had something positive for both the bulls and bear during the day.

The bulls, once again, staved off the mini crash scenario while the bears were able to push off the final low. The bulls really need a stand on Monday, ESPECIALLY if stocks open higher. I don’t think the bulls can afford an up opening and then downside rout. That would open up lower targets that I had not considered this year. Alternatively, a weak opening followed by some firming would also be okay for the bulls.

The bears, on the other hand, want to aggressively sell any morning strength and press it after lunch. They could also win by seeing a lower open and then a heavy trading day where stocks stair step down right into the close. Those are your four scenarios for Monday. It should not be a quiet day!

Looking at my four key sectors, banks transports, consumer discretionary and semis, they all basically look like death. After this correction bottoms, it’s going to be really interesting to see if they regain bull form. If not, that will be a telling sign that this old and wrinkly bull market will likely die during the first half of 2019.

Remember, I still have a projection of Dow 27,000 after the Dow closed above 25,000 for five straight days. I am not abandoning that down here.


Paul Schatz, President, Heritage Capital