Wednesday, October 10, 2018

Market Alert - The Close

Stocks continued lower to start the session, but that was jus ta warmup. A pair of selloffs in the morning session had DJ30 down 400 and at the 50 day MA. That bounced stocks modestly and they moved laterally for almost 3 hours into the afternoon session.

Then things got 'interesting,' as stocks really started to sell. DJ30 doubled its largest loss from the morning session, closing off 830+ points (-3.15%). DJ30 smashed the 50 day MA, closing at the halfway mark to the 200 day SMA.

SP500 -94.66, -3.29%
NASDAQ -315.97, -4.08%
DJ30 -831.83, -3.15%
SP400 -2.63%
RUTX -2.86%
SOX -4.46%
NASDAQ 100 -4.44%

ADVANCE/DECLINE: NYSE -7.9:1, NASDAQ -7:1, both on the close. That is getting close to extreme.

NEW LOWS: NYSE 502, NASDAQ 330. NYSE is close to extreme. Would have liked to see 600+ on NYSE.

DOWNSIDE VOLUME: NYSE 90.2%, NASDAQ 87.5%. Plenty of downside trade, getting extreme.

These internals are getting toward extreme points. Another downside open and selloff in the morning leaves a pretty good setup from the standpoint of internals as well as the SP500 holding at some support at 2,800.

Historically, down 800+ and 3.15% on the Dow is not the worst session any of us have seen in our careers, not by a long shot. 1,000 Dow points would have been interesting to see, but that would still not be the worst session seen. Not making light of the impressive selloff, but it is all a matter of where they are in their patterns.

SP500 is 2/3 of the way to the 200 day SMA. NASDAQ is there, NASDAQ 100 almost there. SOX, SP400, RUTX have to look in the rearview mirror to see the 200 day, and even with images appearing closer than they are in that mirror, the 200 day still looks a long way away. Gee, DJ30 is still the relative leader. Much rejoicing. Yeah . . .

Not many areas were refuges as many of the upside holdouts were lower, e.g. big drugs, energy, WMT. DLTR, KSS, BIG, DG -- discount retailers -- were higher; WMT did not really hurt itself at all. A very narrow list of positive stocks.

Now it is a point of the market feeling the Fed mindset it too aggressive given the trade issues that are not going to resolve with China for a long while as well as other issues. Hence the selloff.

Futures are lower afterhours as well and Europe will dive bomb on the open. Not terrible, however. Indeed, a dive lower Thursday another 200 or 300 Dow points could very well get VIX up to the February/March levels (26+), hopefully higher, and clean out the sellers in what could be a serious rebound. With SP500 at an important level, most stocks getting taken out and shot, extreme leaning internals, and an impressive selloff straight down, the market would be primed to put in an impressive rebound in what is in our view a bull market correction: fast down, fast back up. We will see.
Jon Johnson, Chief Market Strategist

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