This remains a global bear market, way overdue because of maniacal central banks that refused to and continue to not let markets be. Asset bubbles always lead to big cracks and to be clear, you are seeing big cracks. Asset prices should have never gone so far.
Over the weekend, we penned these words:
“Before the recent drop in the indices and on the last rally, we wrote to you that a select group of what we called “nifty fifty” type names continued to get huge money flows as fund managers had to find a place to park their money. We are talking about names like Amazon, Google, Facebook, Priceline,Expedia and a few others. These names have done a good job of holding up the Nasdaq and Nasdaq 100 better than the other major indices. After last week’s action, we now believe they are about ready to have their day in the nausea court. We think you will be hearing about this soon. Google and Priceline have already broken the 50 day average. The others look ready. And we couldn’t stop there as we have to mention Apple who is going to sell a lot of phones in the next few weeks. We are so far noticing Apple having trouble as it rallies into the 50 day. If it gets hit along with the others, say so long to the Nasdaq and Nasdaq 100. It is important to know that in bear markets, they get them all.”
All these names were destroyed on Monday. Apple has gone down even though they sold several bazillion phones. There are many other names we did not mention. Unfortunately, we do not believe this is the end of the move but the beginning as these names are over-owned, over-loved and on a lot of margin. How did we know they would kill them yesterday? We didn’t. We just saw the major distribution last week on these names and knew it was just a matter of time. It just happened to be yesterday. Indeed, this bear market is now getting them all. Remember our recent call that Biotechs were next. Biotechs are crashing and taking the whole healthcare complex with them.
We have been asked whether the recent action looks like 1998 when the market tested lows, undercut the lows and then turned back up resuming the bull market at that time. We agree. Technically, it does look the same. We are now testlng the lows. The Russell has already broke the lows. But instead of predicting, we will just say to let more cards come out of the deck. With government-run markets, anything is possible. We have just seen nothing yet to indicate anything good happening at this point and to us, odds favor, there is more time and more price this bear market has to deal with.
Investor’s Edge: 09/28/2015