Another rough day. Any more and you will see many pundits that have been bullish and fighting the ugly all the way down…all of a sudden, be bearish. Coming to a theater near you soon.
“GLOBAL ECONOMIC SLOWDOWN DEEPENS!”
That’s the headline on the front page of the WSJ this morning. But not sure we have read articles telling us that the global economy had even topped…but all of a sudden, it has deepened. We have been bearish on world markets since February. Some areas we have been bearish for years. NOW…we are getting the news that Japan and Germany contracted in the 3rd quarter. In case you don’t know, Germany has been the engine of Europe. As it goes, the rest usually go. The important point we want to make is that those markets forecasted the slowdowns way in advance. We are of the belief that the action we are seeing here is doing the same. We believe in the months ahead that even our GDP is going to slow. You just do not get new yearly lows in CHEMICALS, INDUSTRIAL, AUTOS, HOUSING, HOUSING-RELATED and so many other areas AND EVERYTHING IS GOING TO BE JUST FINE. Slowdowns do happen. Bearish phases do happen. We continue to believe we are in one and continue to believe it is folly to think this is just garden variety. Our rusty abacus says more than 50% of the stocks in our universe are already in “bear market” territory.
Time and price. It is going to take time and price to wade through the market we are in now. How much time? How much price? We do not have a clue. Maybe the worst is over soon but so far we have seen nothing to change our stance. But we do know what the big picture looks like and right now the big picture is:
Just about everything is trading below longer term support and the all-important 200 day average.
FINANCIALS and SEMIS continue to be bearish. People who have followed us for years know how important these two areas are to our work and the markets.
Leadership remains defensive. As we look at the names with the strongest relative strength, we find UTILITIES, CONSUMER STAPLES, a few REITS, DISCOUNT RETAIL and not much more…all areas that usually show leadership during an economic slowdown.
FAANG continues to be DE-FAANGed. It is not good news when the leaders of the bull are being smoked. It is not just these names. Most TECH/BETA and all that crap remain under serious pressure. We have never seen a bull market without TECH and leading growth names.
GE…We have not mentioned GE much but in case you did not know, we are finding out just how much leverage this company has. If their bonds gets downgraded…let’s just say that will not help.
After a 1200 point drop since last Thursday, markets are again very oversold but have you noticed we are now getting strong opens, strong intraday bounces…only to finish poorly. That’s just another symptom of a rough market. A strong bounce could come at any time.
The good news is that eventually this will end…but when and from where is anyone’s guess. We would rather be a little late than too early. Why? Just buy something. You will be down almost immediately. We suggest you let that dynamic change first. And if the A LOW we called three weeks ago gets taken out, we will then be talking about not just the average stock but the major indices are also in a bear market. The hope is the A LOW turns into THE LOW…not out of the question but every ugly day that goes by adds to the worry it gets taken out.
Again, the good news is that all bearish markets in history have always ended. When they do, markets soar. Names you have never heard of will double, triple, go up 5-fold, 10-fold. We just think continued patience is a must.
And lastly, we first started talking “the coins” on tv last December in the midst of the “melt up.” We urged everyone to realize it was just another mania and told everyone that eventually (and we used this word) all the coins would turn to “DUST!” Many coins are already dust as the crooks came out with over 2,500 coins, trying to foist them upon an unwary and greedy public. Fortunately, last December was the end even though we continue to be touted on the coins by the crooked tout artists that still own a ton of them and are now praying the public takes them out. We are still seeing calls for $25,000 bitcoin BY THE END OF THIS YEAR. We would like to smack those people in the jowls. Remember, all one had to ask…”what economic value did any of these coins have?” We suggest even the almighty bitcoin is even at these prices because it is now down to a few hands. If they sell, they kill each other…thus the slow bleed.