End of year selling done?
We were asked a couple of very good question by Neil Cavuto on Monday. We were simply asked whether it is possible that the 70% of the market that’s been bearish can turn back up and get the markets going again.
We are all for it. Anything is possible especially when you’re dealing with maniacal central banks. Again, we are all for it. It is so much easier to make money when markets are working to the upside and not the downside. But so far, there has not been one shred of evidence that this is ready to occur. All bounces in these areas have been anemic and short-lived. The fact is that in our study of every bull and bear market throughout history, we do not think we have found a time with these kinds of negative divergences resolved to the upside…but there is always a first time. The other question was whether this narrow market can continue for much longer. Our answer is absolutely. There is no reason why we cannot get further romping and stomping in names like Google, Amazon, Facebook and others. But again, the norm would be the eventuality that the market comes and kicks them in the teeth also.
As of today, nothing has changed. The same stuff is holding up and working while a long list if areas just ain’t happening. Monday was another case in point as Amazon and Google were the stars while everything else was blah. The good news is those names are holding nice and tight and can definitively move out of range if they wanted to.
Just to put things into perspective, the Russell is down 14% and is sitting where it was 26 months ago. The Transports are down almost 20% and have had no game for two years while oil prices have sank. The NYSE is down about 10% and has not moved in two years. We need not go into the misery of all the commodity areas as well as the recent retail carnage.
That all said, we are all about the ability for the market to provide evidence on a daily basis. We have no interest in telling you where things will be in a year because we don’t know. Nobody knows. But we can continue to get all the clues we need by the continued action in the market. If anything changes for the better, you will know it because we will see it and and we will tell you.
We suspect with yesterday’s defense, any selling may just be over for the week as the boys paint the tape as best as possible for the next 3 days.
Something I think is a clue of where we are headed is the flash crash we had in August. Most things I read as I was away and not monitoring anything at the time, said it was a technical sell off. I monitor markets globally and have noticed…..somethings recovered and others just sat and what is sitting and not going anywhere seems to be China. So the trigger for the August sell off appears to be China and that market is now just sitting. I’m not sure how much more they can stimulate their economy. Their short selling ban I understand ends on the 8th of Jan, lets see what happens after then.