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Morning Commentary

Do You Hear Me Now?

By Charles Payne, CEO & Principal Analyst
10/9/2018 9:20 AM
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The big tech rally of the 1990's that ushered in what many called the Fourth Industrial Revolution ushered in the notion of a new paradigm for evaluating stocks and investing. 

It turns out all the rules eventually caught up with new technology, and even newer investors were drawn to the market with dreams of early retirement and private islands.

I don’t think we are on the cusp of a tech wreck like 2000-2001. There are numerous drivers just beginning to live up to the hype (Internet of Things, artificial intelligence, cloud, big data and 5G), but the recent weakness has been swift and biting.

Talk about “live by the sword, die by the sword.”  It’s wonderful when big tech is leaping several percentage points in any given session. However, what can rally like that can come down even faster, and that’s a lesson many have forgotten until this month.

The NASDAQ 100 hit 7,700 on October 1st and began free falling, hitting a low of 7267 yesterday, down 5.6% in one week. Usually, these kinds of moves are yellow, if not red flags, but a glance at the one-year chart suggest this is a normal move to the bottom of the current trading channel.

Nonetheless, big tech has to take a stand even if it means new leadership.

NASDAQ -100

The tech sell-off is a reminder that there are other parts of the economy and investing. It’s investments that harken back to those idyllic days of old when big tech was a couple of tin cans connected by a string.

It’s not as quaint as the notion that there are slow-moving, but steady names that are looking more attractive as tech takes its lumps.

Monday, the Dow Jones Industrial Average displayed true grit, rebounding from triple-digit declines twice. After opening down 150 points, the blue-chips chipped away to peak into positive territory. Once that rally effort ran out of gas, selling picked up steam and investors braced for massive losses.

Then, for the third session in a row, buyers bought the dip, panic selling became panic buying, and the Dow finished higher.

The S&P 500 was a curious mix as interest-rate-sensitive sectors rallied higher in the face of higher interest rates (don’t forget, the bond market was closed). This tells me investors were more concerned about seeking safety than interest rates. 

Adding to that thesis is the fact Financials (XLF) didn’t have a big day, and the big money center banks were essentially flat.

S&P 500 Index

-0.04%

Communication Services (XLC)

-0.33%

Consumer Discretionary (XLY)

+0.26%

Consumer Staples (XLP)

+1.38%

Energy (XLE)

-0.08%

Financials (XLF)

+0.68%

Health Care (XLV)

-0.06%

Industrials (XLI)

+0.25%

Materials (XLB)

-0.05%

Real Estate (XLRE)

+1.29%

Technology (XLK)

-1.13%

Utilities (XLU)

+0.84%

 

Internal Deterioration

Market breadth continues to erode, underscoring the idea investors might be selling losers regardless of fundamentals. This as we enter a difficult period where tax loss selling starts to come into play.

NYSE

NASDAQ

Value Emerging

The good news is buyers were aggressively buying NYSE names as the up volume was twice that of the down volume. As investors continue to bail out of Technology (XLK), most of those funds found stocks in other sectors, which were coming off lows.

In fact, many of yesterday’s biggest winners have very attractive charts on the cusp of big breakouts:

Industrials

Consumer Discretionary

Consumer Staples

Today's Session

Futures have been lower all morning on continued interest rate concerns, however, they are improving.  The Nasdaq now looks to open flat to slightly positive.  Let's see how trading goes this morning. 

 

 

  


Comments
Another fantastic overview piece filled with technical and historic perspective and wisdom. This is the kind of insight that our country needs to reignite capitalism as a force to be reckoned with.

The move appeared to be risk off from fear of the Fed moving to hard and crushing our economy. This DESPITE Powell specifically stating there was not a need to move to quickly and not seeing inflation growing to aggressively.

Nothing like a fantastic buying opportunity in time for the holidays. The profits made will make the upcoming holidays that much sweeter!

Thanks again Charles and your fantastic team.

Ray Weldon on 10/9/2018 10:47:11 AM
 

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