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.

Don’t kid yourself—we haven’t seen anything close to capitulation this week.

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.

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.

Regards,

Greg Guenthner
for The Daily Reckoning

Ed. Note: When the momentum picks back up, Greg will be right there in front of it. He studies the market movements closely every day and sends his Rude Awakening readers a short, to the point email with everything they need to know about the day ahead. It’s a free service that offers actionable advice and no less than 3 specific opportunities to find hidden profits in the markets. You owe it to yourself to check it out. Sign up for free, right here.

You May Also Like:


No Time to Buy Cheap Stocks

Dave Gonigam

On this day, in 2009, President Barack Obama said that buying stocks was a "potentially good deal." Six days later the S&P 500 eerily bottomed out at 666. Today, Dave Gonigam looks to see if the "good deal" touted by the president has as much potential as it did 5 years ago. Read on...

Greg Guenthner

Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

Recent Articles

Extra!
Where You Can Make $56,000 a Year Delivering Pizzas

Jim Mosquera

US unemployment rates are some of the most dubious and debatable numbers in economics. And when you look at how the government fudges them it's easy to see why. Today Jim Mosquera attempts to make sense of them, and includes an insightful commentary on another controversial topic: minimum wage. Read on...


Addison Wiggin
The Quickest, Easiest Way to Store Your Wealth Overseas

Addison Wiggin

Over the years, the feds have made it increasingly difficult for you to maintain any semblance of financial freedom. So today, Addison Wiggin details one strategy that will go a long way to keeping them at bay, and allow you to keep more of your hard-earned money in the process. Read on...


The Next Phase of Gold Profits is About to Begin

Frank Holmes

Today Frank Holmes shows how tracking the past history of the Federal Reserve's Funds Rate Cycle can be a powerful prediction tool for gold investors. Specifically, he points out why this is the beginning of a period in the cycle that's historically favorable for the price of gold, and how you can take advantage of it. Read on...


Laissez Faire
A Graceful Way Around Obamacare Mandates

Jud Anglin

Real health care reform isn't going to come in the form of laws, rules, and regulations. It's going to come from people looking to do things differently and find savings where none previously existed. And that means developing new technology that expands medical coverage. Now if only government got out of the way...


188 Stocks that Could Benefit from a Short Squeeze

Greg Guenthner

With the market hitting new highs all the time, many investors are beginning to think that a dramatic drop in stock prices is right around the corner. But while they continue to add short positions to their portfolios, you can take the opposite side of the trade and laugh all the way to the bank. Greg Guenthner explains...