Here's What's Wrong with Gold

What the heck happened to the bounce?

The stock market has leaked like a broken faucet for more than a week now. In fact, the S&P 500 just logged its first seven-day losing streak in five years, LPL Financial’s Ryan Detrick reminds us.

“Over the last 20 years the S&P 500 index has only recorded a seven-day losing streak on three separate occasions,” Bloomberg reports. “The first was in 2008 after Lehman Brothers collapsed, while the other two were during Europe’s 2011 debt crisis.”

But here’s the thing…

This week’s “Lehman moment” is missing its punch.

During our current seven-day slouch, the S&P hasn’t lost more than 1% on any given day. That’s a far cry from the nasty, gut-wrenching crashes of 2008 and 2011.

Overall, the S&P has coughed up less than 2.5% during the current losing streak. Sure, it’s been a shallow drop. But one more day in the dumps will match a gloomy record we’d sooner forget…

“The index’s longest-ever run of losses was eight days, matched at the height of the financial crisis in October 2008,” Bloomberg reports. “The S&P 500 started falling on Monday September 29 and saw lower closes at the end of every trading day until October 10, in what was its worst week in history.”

Yikes…

Judging by how investors have reacted to news events over the past couple of weeks, it won’t take much to drag the major averages lower today. Even relatively mundane news items like obscure, localized election polls are receiving a ton of attention.

The presidential election has officially put everyone in the country on edge. No one knows how to position their investments ahead of the big event.

We briefly discussed the market’s waning breadth earlier this week. Fewer and fewer stocks are propping up the averages. We’ve already seen small-caps, biotechs, and other speculative names hit the skids. Now the big household names are starting to slip…

Look no further than FANG for proof.

The famous FANG foursome – Facebook, Amazon, Netflix, Google—has found itself at the forefront of most major market moves over the past 24 months. And unless you’re allergic to banking gains, you’ve probably owned each of these stocks at some point over the past few years.

But the market’s poor performance is finally beginning to catch up with the leaders.

Amazon shares dropped more than 2.5% yesterday to close near their September lows. Google stock lost more than 2%, posting its worst day since June. Even Facebook shares slid almost 2% on Wednesday. After an earnings report after the bell failed to impress investors, we can expect to see some more downside action in this stock today.

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Keep in mind that these are the big, popular stocks that have stayed strong since the winter market swoon. If these names can’t find a floor soon, we could be in for a rough month.

As it stands this morning, the S&P 500 is just a breath from its 200-day moving average. If you’re keeping score at home, you know that the S&P has only spent about 24 hours below this level since crossing above the long-term trend indicator in March. That move turned out to be the Brexit Bottom that helped shoot stocks off their lows back in late June.

While we can’t guarantee a big oversold bounce will spark a similar market rally here, we need to closely monitor how stocks and the major averages act as we charge toward Election Day.

Buckle up. It’s gonna be a wild ride…

Sincerely,

Greg Guenthner
for The Daily Reckoning

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