How many times have I posted that headline? Bad news is mounting as we saw an escalation in the Trade War Friday, days after stocks sold off on the impeachment inquiry into the Trump Presidency. We're seeing very wary signs for equities in beta-land as we've seen the high flying, high valuation market leaders get absolutely slaughtered over the past couple weeks. ROKU is down 78% since reaching its peak September 8th. TTD is down ~40% from highs, TWLO down ~30%, CYBR down ~30%, and SHOP down ~25% to name a few. All of this action is with the market a mere 2% off all time highs. There is either great rotation into value names, which is the case for now and why we're a couple percent from highs, or this is just the beginning of the market weakness. When we see the market leaders continuously get smoked, it usually means more downside is ahead. This has me very weary of buying breakouts right now as the path of least resistance has been down since market highs on September 19th.
The S&P is retesting a serious support level, so that is the area to first look for constructive market behavior (~$294-295 SPY), but have to keep all the underlying weakness in the back of your mind. We have seen consecutive weeks of news related market drops on Friday, which makes it a very difficult environment when swinging trades to the long side. We're seeing the XLU (Utilities ETF) trade at all time highs with weakness in the high beta names which shows us traders are flocking to safety right now with all the headline madness we've been experiencing.
The reality of the situation is that we're going to be dealing with this back and forth until the China Trade issue is resolved and all signs point to that lasting for an extended period of time. We may see some quarter end window dressing Monday, with the 4th fiscal quarter beginning Tuesday. Good news is that means we're just a couple weeks away from earnings season.
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