2018 has witnessed a market which was not predicted by anyone, now everyone is an expert and predicting more bad news in 2019......
Carter Worth predicting another 10% slump in 2019
In order to come to an educated conclusion, here are following facts :
S&P 500 Down 17.79%
SOX Down 22.09%
Nasdaq Down 22.14%
DOW Down 24.23%
RUT Down 25.83%
The above is a clear picture of a very weak stock market, what caused this slump is based on few reality :
-Stock market has been UP in a straight line since Trump election, so a major pullback was not only a reality but was needed.
-FED has been very aggressive in raising interest rates even causing a temporary inverted yield, that took away allocation into Money market & T bills.
-Worldwide economy has been slowing, market knew BUT FED was behind the curve...
-Trade war has been intensified causing major disruption in world economic order, thus lack of confidence in world stock market.
-There has been serious outflow from equities into treasury bills or money market
-Earnings are slowing down which has shrunk PE
-Shutdown of government was the last straw that caused intense selling.
-Monday is the last day of trading for 2018 to book loss or gains....
Now looking @ 2019...we have to look @ RSI for guidance, and they are :
RUT 20.17
S&P 500 22.44
DOW 24.63
Nasdaq 26.23
SOX 34.16
SOX is the only sector which has a pulse, rest are on respirator.....
To say the least we are deeply oversold, thus a bounce is imminent.
FED has changed its tune and may not increase any rates anytime soon.
Yield are not inverted anymore, 2 year @ 2.635%, 10 year @ 2.788% and 30 year @ 3.03%
Many participant may start to nibble @ current valuations which is 50% lower than @ peak, when was the last time, every stock has been cut into half.
Earnings will be lower by max 10%, but stocks are deeply discounted by 50%.
Trump may have to soften his tone on Shutdown and on trade with China.
SO...all in all stocks has been discounted much more than fundamental picture, which has resulted in deep bargain in stock prices.
Finally, SOX may lead us higher based on relative strength.
Good luck with your own analysis and comfort level with this TAPE.
BLOG does NOT give buy or sell.
Saleem
4 comments:
Hi Saleem,
Last week: -7.97% (YTD: +17.85%)
Notable Winners: none
Notable Losers: all
It was depressing to work the numbers this week with all stocks in the red, some significantly so. Sometimes only when you look back at a longer term frame do you really see how bad things have gotten. We haven't seen weekly or monthly numbers like this in a very long time. I am not sure when this ends, but I think valuation and extremely oversold conditions support a rise here--we just need a catalyst, even a small one.
Holdings: SAIL TENB VICR VCEL CSOD HUBS APPN ORTX LQDA AVLR NIU TRIL HEAR, cash 0.0%
Stocktrader
Hi Saleem,
Sold HUBS @ 115.61 to raise cash
Stocktrader
Hi Saleem,
Bought SPLK @ 91.04
Stocktrader
Hi Stocktrader,
Your YTD number beats all averages by few 100%...good job.
Good luck with SPLK.
Saleem
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