| October 04, 2013 | | | | | |
 | | | | Don't Call it Capitulation | | | - Picking apart the market's losing streak
- Have we found a bottom yet?
- Plus: No jobs report? No problem!
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| | | Greg Guenthner coming to you from Baltimore, MD...
 | | Greg Guenthner | Is there a doctor in the house? The S&P 500 and the Dow are bleeding out...
The broad market recorded its biggest post-Fed meeting drop yesterday, with the S&P and Dow each shedding about 1% to close out the day.
I told you yesterday that I found it difficult to get aggressively bearish when small-cap and momentum names were working so well. Unfortunately, just writing that thought down cursed the market for the day. I saw plenty of momentum stocks that had ignored every bump in the market over the past month puke up their gains. Small-caps also underperformed, with the Russell giving back about 1.1%.
So now we have a serious losing streak on our hands. The S&P has finished lower 9 of the last 11 trading sessions. Ditto the Dow. We've got a nasty two-weeks in the rearview mirror. But that's not what really worries me…
Despite yesterday's selloff, we didn't see much capitulation from investors. Approximately 70% of stocks ended the day lower. Sure, that's a good chunk of the market. But it's not enough to call the day a complete washout.
On top of that, more than 250 stocks posted new highs at some point during the day. If we really want to begin looking for a broad market bottom here that could lead to a bounce, I'd like to see a much bigger group of stocks roll over. [Ed. Note: Yeah, there are still favorable trading setup on the long side out there right now. Don't believe me? I have a fresh idea for PRO readers today right here…]
To put this current losing streak in perspective, let's turn to 2011. Similar government-related shenanigans pushed stocks to the brink in July-August 2011. In fact, a losing streak that included 10 of 11 down days in a row produced double-digit losses in the S&P.
Today, we're still down a measly 3% or so since mid-September. Sure, stocks are leaking lower. But it's nothing compared to the damage we could see if the market were truly spooked…
Don't kid yourself—we haven't seen anything close to capitulation this week. It's not time to step up and recklessly buy with both hands. Unfortunately, the market is at the mercy of our wonderfully incompetent elected officials right now. They could very well have some more tricks for us that might drum up additional fears and selling pressure. The fourth quarter momentum rally is on pause… for now.
| | |  | | | | Rude Numbers | Targets, Predictions and Wild Guesses
| | | | 21 | days of government shutdown were experienced the last time around, back in 1995. The average duration of all 17 shutdowns since 1976 is 6 days. | | $173 | buys one share of Tesla. A viral video of a burning Model S sedan has sparked some selling pressure yesterday. Shares have dropped by more than 12% this week. | | $133 | buys a Bitcoin this morning. The crypto currency has stabilized since Wednesday night's selloff triggered by the Silk Road raid… | | $103 | will get you a barrel of crude today. Oil has also found temporary support late this week after tumbling from its early September highs… | | 1,674 | is where you'll find S&P futures this morning. After yesterday's drop, the broad market is looking to get back on track to finish the week… | | | | | | | | Rude Trends | When to Buy... When to Sell
| | | No government means no jobs report today.
Don't worry… you'll survive. In fact, I doubt anyone really cares.
Allow me to turn it over to Barry Ritholtz for a stellar piece of analysis for this no-jobs Friday:
"The net impact of this? Nothing. Total loss to the investment community? Nada. Actual impact to the economy? Zilch."
There you have it. Barry's much more interested in the long-term employment trend—as opposed to a single monthly report. You should be, too…
Plus, with all of the distractions out there right now, I somehow doubt that a jobs report would significantly move the market today. Even if the government managed to cobble together a skeleton staff to assemble a report for Wall Street's sake, traders would shrug off the results—good or bad—in a matter of minutes. After all, we have a debt ceiling approaching, right? Feels like a week where jobs would take a back seat.
Jobs report or no jobs report, the numbers should always be the second thing you watch for anyway. Your first priority is to gauge the market's reaction. Price always tells the most important story…
[Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner]
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