S&P 500 Overview: Further Downside Risk
- 2620 level broken, little clear support above 2500 area from August, September 2017.
- Sector performance shows risk-off: Transports, small caps, materials weak.
- Potential for bearish “window dressing” into year-end.
- March 1 China tariff deadline is now reason for waiting to buy stocks.
- Rotating selling (REITs today) suggests broader liquidations under way.
- Lipper shows record $46 billion of outflows.
- S&P 500 on pace for worst quarter since Q3 of 2011.
Economic data shows some risk…
- NAHB housing index craters to 3+ year low as everything slows.
- Empire index slows sharply, missing estimates. New orders weak.
- Still, employment strong. Italy budget crisis averted.
- At other times like this hopes of a dovish Fed would lift spirits more.
…but Sentiment Toward Stocks a Bigger Issue
- Slew of bad news on big companies like JNJ, GS.
- Healthcare hit by Obamacare risk.
- Margin pressures (wages, tariffs etc.) may threaten earnings: COST, DG, TGT, AMZN.
- China worries, growth stalling.
- Rotating selling (REITs today) suggests broader liquidations under way.
Educational Idea of the Week: Credit
- Leveraged stocks can really struggle at times of economic concern, like now.
- “Cement shoes”
- Transocean (RIG): 14K Jan20 5 puts → 50K Jan20 3 puts
- Attend MasterClass for full lesson.
Workspace of the Week: Active Underlier Scanner
- Look for stocks near key moving averages, or with MACD signals.
Russell’s Watch List
- Facebook (FB) at risk near 50DMA.
- Advanced Micro Devices (AMD), Boeing (BA): potential bearish triangles
- Visa (V), MasterCard (MA), Square (SQ): Growth stories more dubious.
- UnitedHealth (UNH) distribution risk after false breakout.
- Emerging market risk: EEM, EWZ, FXI
- Yen (@JY) has breakout potential.
- Watch Aussie dollar (@AD) copper (@HG) for potential breakdowns.
- Careful of gold miners, other safety plays because of rotating liquidations.
- Bear markets “don’t make sense.”
Don’s Earnings Watch List:
- Tonight: Oracle (ORCL) reports
- Tuesday night: Micron Technology (MU), FedEx (FDX)
- Wednesday morning: General Mills (GIS)
- Thursday night: Nike (NKE)
