Down $78- UP $14

By Gary Kaltbaum October 31, 2018
Before we do markets, we must mention that the president, who picked supreme court justices based on interpreting the constitution and “settled law” now lets us know “just kidding!” Yummy! 
With another wild action day yesterday, culminating with finally, a decent close…combined with this morning’s  gap to the upside, for the first time since the high, we are thinking (hoping) that maybe, possibly, could be A low for now. This simply means the lows of the past couple of days will not be taken out in the near term. Of course, don’t blink! We say this for a few reasons:
As we stated over the weekend, pessimism has finally pervaded the air wiping the smiles off the bull’s faces while thrilling the bears. We would like to see some more puking  but we get what we can get.
Markets, sectors, stocks are about as stretched, extended and and oversold as we have seen  in ages. There is a lot of territory between price and just the 200 day average, let alone short-term moving averages. Bounces eventually do happen to relieve these conditions.
The down $78, up $14 syndrome. We are using Facebook as an example on this. Down from $218 to $140…and as we write this pre-market, it is trading at $154 off of their earnings. While the stock now rallies, down $78 and up $14 does not make a great uptrend. (And yes, Facebook sand bagged their numbers! Guidance was for earnings to BE DOWN! ) Just about everything else has this syndrome to a certain extent, some even worse. Again, bounces eventually do happen. Want another example? AMAZON is up $30 as we write this. Down $550…up…you get the hint. Of course, these stocks can rally further to fill some of the drop.
If we are indeed in a bear market and we are in the first innings, remember one of our main mantras of the bear…”in bear markets, rallies are strong, make you feel better, get everyone calling a bottom, suck you in and bury you soon after.” We have to mention this because we haven’t had a real bear since the maniacs at the Fed decided it was their job to move markets with their asinine bubble making policies. We do not know yet if this is a full blown bear but we do know many names and areas have defined one.
Can this be THE low? Anything is possible with these wild markets. Anything is possible with a president who jawbones the Fed even though they are sitting at an easy money 2%. Anything is possible with such fast trading. But there has been a ton of technical damage and we mean a ton. We suspect if this is THE low, there is going to be a decent amount of backing and filling and working  through all the resistance. On top of that, we are going to have to see some leadership. Leadership is so far negligible. Just remember, in February’s steep drop, it took months before markets found their footing. This drop has been much worse internally.
As we stated over the weekend, seeing good patterns in DISCOUNT RETAIL, UTILITIES and CONSUMER STAPLES, the most defensive areas. There are also a few regular RETAIL names showing up on our screens …like a NORDSTROMS (JWN) but not much else.
Let’s call it a start but THE low? Not so sure. Need a few more cards coming out of the deck…and thinking the type of drop we have just seen does not lend itself to such a quick THE low…but am open to anything. Just don’t blink!