When will the selling stop??!! At one time the S & P 500 was at February 2014 levels. The number of annual new lows for both the S & P 500 and NASDAQ is at the greatest number since November 21, 2008 according to Bloomberg.
The NASDAQ was down almost 14% YTD and 17.3% from its summer apex. The Dow is off 11.3% YTD and over 15.5% from its peak. Every Dow and NASDAQ 100 stock is now down for the year as many household names have been crushed over 40%-50%.
The catalyst for yesterday’s selloff—oil. Crude is off almost 75% since July 2014 and a whopping $10.50 or 29% since the start of the year. Wow! I am not aware of another time when crude has experienced such a dramatic decline.
In my view what today is different than past selloffs because of the massive influence of high frequency trading and exchange traded funds. Because of this massive influence, I think many issues have been excessively sold off thus suggesting great value.
Unfortunately stocks/indices can get oversold and remain oversold for a long period time but ultimately monies do gravitate to shares that represent greater potential return and less amount of perceived risk.
As inferred above, there was a late day rally that reduced the decline in the S & P 500 and Dow by half and briefly erased the losses in the NASDAQ. The advance was focused in small caps and health care issues.
Is money beginning to move to these issues that have been decimated, shares that may represent greater potential return and less amount of perceived risk? For 15 minutes it appeared that a transition was at hand.
What will happen today?
Last night the foreign markets were mixed. London was up 0.46%, Paris up 0.44% and Frankfurt up 0.44%. China was down 4.1%, Japan was down 2.43% and Hang Sang down 1.82%.
The Dow should open nominally lower. The averages are vastly oversold. Earning season continues and analysts expect a 7% decline in profits and a 3.1% drop in sales. The 10-year is up 7/32 to yield 1.96%.
IT IS REALLY UGLY!!
Ken Engelke
Chief Economic Strategist Managing Director
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.
