Housing Market Index – Oversold Stocks Fall Again
Many investors are no longer bullish on stocks even though they are oversold because the fundamentals look bad.
We got a reminder of those weak fundamentals on Monday. The new outlook has been working.
CNN fear and greed index showed “extreme fear” heading into the day and has been signaling stocks are oversold for weeks. Yet stocks still fell on Monday.
The CNN fear and greed index fell from 10 to 7 and the S&P 500 fell 1.66%. Based on the stock market simply pricing in the weakness expected by economists, the market should be down 10% to 15% from its September peak.
After that decline occurs, we’ll need to wait and see whether this slowdown will lead to a recession or a quick recovery.
Housing Market Index – Don’t Buy The Dip?
One of the most successful strategies in this bull market has been to buy the dip.
The biggest problem with that strategy last year was that there were no dips. This year’s market hasn’t been nearly as fruitful. S&P 500 is only up 0.64% year to date.
Even a Christmas rally won’t make this an average year for stock investors. Cash is outperforming stocks and bonds for the first time since 1992.
As you can see from the chart below, in 2018 the stock market is down on average after the previous week was negative. That’s the first negative performance since 2002.
To be fair, this isn’t the worst period in this bull market. S&P 500 fell 19.4% in its correction in 2011.
Housing Market Index – Tech Underperforms
Russell 2000 and the Nasdaq underperformed the S&P 500 as they declined 2.03% and 3.03%. VIX increased 10.8% to 20.10.
Tech stocks were destroyed. Nvidia fell 12% and Salesforce.com fell 8.7%. My timing on Facebook stock was wrong. It fell 5.72% to a new 52 week low.
The timing of Facebook’s bad year couldn’t have come at a worse time. Investors don’t like momentum growth names.
