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Afternoon Note

Wild Gyrations Setting & Investor Behavior

By Charles Payne, CEO & Principal Analyst
2/9/2018 1:30 PM

A lot has been said about the current market correction from the litany of reasons why it’s down to guesses on when it all ends.  I think the market is oversold, but the thing about that is there are no rules to how much markets can over-correct.  Nonetheless, we must start considering the signals for buying this dip, because there are a lot of amazing bargains developing.

I want to focus on investor behavior going into the close today.   If somehow the market reverses, and closes higher into the close, that would be huge in part because of all the anxiety that’s sure to build over the weekend.  On that note, a rally today and Monday would be a buy signal, not an all-clear perhaps, but certainly a critical sign for those looking to take positions.    

Dow Jones Industrial Average

The Dow was able to rally to its pre-open implied open early in the session, +349 points, but the move didn’t attract enough buyers. So, it’s been a steady pullback, and each tick lower triggers additional moves lower from fear, margin calls and massive redemption of funds.

There is more than enough dry powder to get the market higher, and in fact, there is a point on the upside that will trigger panic buying.  That point is obviously above 24,209.  When we get to that point, the Dow will experience its first +1,000-point session in history.   And this is going to happen on a session when we are bracing for a thousand-point decline.

Look at sectors rotation into the safety of utilities and real estate. 

Oil getting crushed is beyond the supply/demand dynamic, but it is a function of a broken chart.  

Consumer discretion, my favorite sector, is getting hammered as Expedia and Chipotle continue to pay for coming up short on earnings.

  

S&P 500 Index

-1.09%

 

Consumer Discretionary (XLY)

-2.40%

 

Consumer Staples (XLP)

-0.97%

 

Energy (XLE)

-2.31%

 

Financials (XLF)

-0.94%

 

Health Care (XLV)

-1.06%

 

Industrials (XLI)

-1.49%

 

Materials (XLB)

-0.94%

 

Real Estate (XLRE)

 

+0.07%

Technology (XLK)

-0.50%

 

Utilities (XLU)

 

+0.80%

 

Have a good weekend. 


 

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