Opportunity Always Abounds My Friends
Equities start the day lower as Hurricane Michael stalks the Florida panhandle. Wait…this thing is a category 4? Wow, that’s a monster. If you live anywhere near landfall please be safe because when Michael turns into a hurricane things get totally wrecked. I mean just ask my wife and kids, hurricane Michael hits Whitefish Bay WI a few times a year and the wreckage is everywhere. Speaking of wreckage, have you seen the market the past few days? We are working on the 5th down day in a row and people be wondering what’s up with all the red in my account? Well my friends you’ve come to the right place, not only can you learn how to make tasty football treats but you also get World Class free market commentary. Here’s what I think is happening: I think we are going thru one of these mini bear market/stealth corrections like we saw in late 2015, early 2016. Back then it was an energy implosion, right now it’s a housing/building materials/autos implosion driven by higher input costs, higher rates, tariffs, etc. I’ve seen people blame the move in yields but if this entire thing was just a “rates freakout” then why are Utilities massively outperforming? There is no planet where a rate sensitive sector outperforms AS RATES RISE. Tech being taken to the woodshed daily does makes sense: value has ticked up vs growth and in general people sell their big winners in a panic. You don’t get +60% a year in NFLX without a few -15% weeks here and there. How long could this little correction last? Well the one in late 2015 lasted about 7 months but that was a full on earnings recession, I don’t think we’re facing that right now. These kind of moves are also good for one thing: making a shopping list of all the names you wanted to own lower and saying “here’s my chance, lemme do some homework and see if I still like it”. Opportunity always abounds my friends, you just gotta find it.
After the open we saw more red than 60k Alabama fans watching the Shining while eating Twizzlers (that may have been a little forced, work with me here, it was ugly). It felt a bit like capitulation, at its peak 87% of NYSE volume was in declining shares, back in Feb that number hit 97%. However, it’s not like I spent my whole day selling stocks, I had plenty of buy orders too. If my thoughts in the first paragraph are correct then this is really just a scary rotation instead of a stock market peak but we’ll see, only history will tell that tale. Now look, I could list losers but it would take the rest of this blog so here’s a few for you to chew on: TIF, TWTR, RL, NFLX, FAST, and GOOS. Winners were nothing but quiet safe names. Inexpensive general merchandise (DLTR), Soup (CPB), Peanut Butter and Jelly (SJM), Cheerios (GIS), and Eggos (K). I freaking love Eggo waffles, if you don’t like Eggo waffles we legit cannot be friends. Back in the day I could eat 6 in one sitting, right now I think I could do 3 but I’d be on the struggle bus for the last one. By the way, if you’re bullish on the stock market, and you’re super smart/savvy, you do not wanna see Fastenal down this much, it’s a very important stock to keep your eyes on. By lunch we sat on 2,832, down a whopping 1.7%.
The afternoon got worse by the minute. Down, more down, sideways then even more down. It felt like we’d selloff every single second until the bell rang. We closed at 2,791 down over 3.3% and you can put a cap on that “the market has gone X days without a 1% selloff” stat because it’s OVER (ended at 74 days 10th longest streak ever h/t @ryandetrick). To be clear: I do not think the cycle peak for stocks is in, if this is the start of a correction then so be it but I think the bull market has gas left in its tank. Right now it’s dealing with a decline in certain sectors driven by late cycle factors and it’s coming to grips with it in an ugly way. But you know what? By one measure (7 day RSI) the S&P is the most oversold since 2012. I’m not saying it’s going to happen tomorrow but don’t be surprised by a vicious bounce. Whew….man…I gotta get out here…This is me, signing off
Final Score: Dow -2.8%, S&P500 -3.3%, Nasdaq -4.6%, Rus2k -2.8%.
- Succinct Summation of the Day’s events: Instead of “is this a pause in the rally” people are now asking “is this the start of a correction?” Ugly day, awful, nothing good to say about it.
- Great quote here from @michaelbatnick: Everybody wants to know when this movie ends, but as Matt Damon told Bill Simmons, “you don’t see the movie before you make it”. This is a great reminder that nobody can see the future. We know this bull market won’t go on forever, but we can’t know when it’s going to end.
We are going to skip to the end because I’m exhausted from watching stocks implode. I have two final links for you tonight
The first is a really boring elevator that OH MY GOD
The second….I don’t even understand what’s going on. Someone break this down for me
Have a good night