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Morning Commentary

IF YOU THOUGHT YESTERDAY WAS BAD

By Charles Payne, CEO & Principal Analyst
10/20/2020 9:28 AM

On the 33rd anniversary of “Black Monday,” the market opened higher, then struggled not to slip into a complete rout. However, it was a good session for an important reminder in history.

On October 19, 1987, the U.S. stock market suffered its largest single-day loss in history.

The Dow tumbled 22.6%, and the S&P 500 lost 20.5% in a day that will forever be known as “Black Monday.”  I was a young stockbroker working on 100% commission. And I saw my childhood dreams go up in smoke - or so I thought, as the selling mounted.

I came to work the next day, spoke to all my clients, and even prospected for more. I was surprised. Not only were people eager to buy stocks, but it also didn’t take long for the market to rebound.

Since that day, I’ve learned a lot more about the stock market. But having to live through that day, I wondered if my chance to escape poverty and to provide a good life for my family was the ultimate baptism by fire. I’ve learned to focus on building a great portfolio of stocks I wanted to own and never panic. That doesn’t mean I don’t get anxious, concerned, or occasionally overreact, but I do not panic.

It served me, my subscribers, and folks who watched me on TV this past spring when I implored folks not to take losses, and if they had the wherewithal, to become buyers. Investing should be a lifelong endeavor, which means from time to time, you are going to be tested. Those tests also create buying opportunities when everyone seems to be selling everything.

Excesses are the main reason for market conditions that ultimately lead to crashes. Excesses induce unbridled euphoria. And we are nowhere near that mindset. Even if you believe the market has too much liquidity, too many zombie companies, and valuations that are too high, it is still hated as much as it is loved.

Be that as it may, if you are lucky, you will live through a few market crashes (I hope to last another 33 years after the next one). Until that fateful day comes, there will also be corrections, sloppy sessions, and depressing weeks. In the grand scheme of things, it is not a big deal unless you make it work to your advantage.

Meanwhile, remember how markets recover from crashes, as it is different each time, but they always recover.

Message of Market

Market breadth was really ugly, as decliners overwhelmed advancers on the NYSE and the NASDAQ.  The overall volume was light but decidedly bearish.

I was never sure why the market was higher out of the gate. I doubted it was about the stimulus, but I couldn’t find any reason. Soon after the opening bell, it became a moot point. 

Market Breadth

NYSE

NASDAQ

Advancing

827

1,060

Declining

2,215

2,398

52 Week High

86

121

52 Week Low

21

32

Up Volume

1.01B

1.59B

Down Volume

2.94B

1.82B

Technical View

The chart of the S&P 500 shows the index pulling back from a double top (it’s simply amazing how often this negative formation works) and could be on its way to testing the bottom of the trading channel. Further weakness from here leaves the index vulnerable to 3,300.

This is just a stock market that’s grappling with too many unknowns, but we will begin to get answers as the week goes on.

Hotline Model Portfolio Approach

Today’s Session

The US anti-trust lawsuit against Google slows pre-open momentum.

Consumer Buy Signal

Earnings Scoreboard

Proctor & Gamble (PG)

-Beat revenue

-Beat eps $0.21

-Guidance higher

-Organic Sales +9%, 7 pts of volume growth, 1 point of positive mix, 1 point of price

-US organic sales +16%, Greater China +12%

Built momentum heading into Covid and has been able to maintain this through the most recent quarter. 

Lockheed Martin (LMT)

-Beat revenue

-Beat eps $0.15

-Guidance higher


Comments
Good thoughts!!!

George Gottuso on 10/20/2020 10:04:12 AM
I have your book and enjoy your perspective and comments


Ed Jeffers on 10/20/2020 11:07:43 AM
I graphed my portfolio value from September 2019 through August 2020. I drew a line from Sept 2019 to early March 2020, and extended it to the end of the time period. My portfolio value intersected that thine in late August. It is as though the value drop in March and April of this year never happened!
I tried to paste the graph, but your software would not let me. If you tell me how to get it to you, I will

Earl

Earl Sutta on 10/20/2020 3:42:31 PM
Yes charles I remember that day also in my late 20s also I lost 2k of my hard earned money, my lesson was if you dont have a clue what your doing and only listen to one broker ,myrll lynch in my case ,without doing a little homework yourself ,dont play the markets thinking your going to get rich in a few years ,so I decided that day if I cant hold it in my own hands or live or walk on it stay away ,I do enjoy your show on fox and you give me info that is valuable in my buisness as a gauge of what the overall economy is doing ,thanks and good luck to you Charles and stay safe we will some how make it thru this together ,chet ft.pierce fl

Chester c. Chambers on 10/22/2020 6:01:01 AM
 

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