Date: December 18, 2018

Ugliness for the Bulls Rolls On. May Need More Panic

Most of the past few weeks when I sat down to start a new post I thought, “well, yesterday wasn’t very nice for the bulls”. Today, as I sit on the train to New York, I am thinking that Friday and Monday were downright ugly for the bulls. The bad Friday, bad Monday combination, regardless of whether this remains a bull market or not is something typically seen near lows which is where I think the market is. Similar to hat I mentioned yesterday, the S&P 500 is now approaching its lows for 2018 while the S&P 400 and Russell 2000 have already breached those levels. The Dow and NASDAQ 100 remain above them, but with this nasty a selling wave, those two indices shouldn’t get comfortable.

I was disappointed to listen to the financial networks on the way to the train this morning with so much of the chatter focused around a stock market bounce, even from the bears. More than a few commented that Monday was the bottom. If in fact stocks do rally from here, I would feel very, very strongly that Monday’s low will be breached sooner than later. I had the same feelings after the first leg lower in October when stocks started to bounce.

There is definitely fear in the streets, but I don’t have the sense of true panic right here. I did see some panic readings on the way down, but they were not able to stabilize the market. Perhaps the most important takeaway from yesterday was that the previous leaders were taken out and shot. Those of us who have been hiding in the defensive sectors like utilities, staples, healthcare and REITs were finally punished. And although bonds have been rallying, they haven’t provided the same “safe haven” as they have in the past.

The Fed begins their final meeting of the year today with an announcement out on Wednesday at 2pm. Volatility isn’t going anywhere so soon.


Paul Schatz, President, Heritage Capital