I got 6 separate calls today asking various versions of that very question. My short answer was (is) “the same thing that’s been happening for days now. Oil drops… stocks follow.” WTI managed to close positive today (relative to yesterday anyway), but the damage was already done. In my opinion, the biggest problem the equity markets face at the moment is the longest running and most ardent bulls seem to be losing faith… and are joining the bears who have been trying to short this market for 15 months.
A few stats:
- Dow Jones: -2.2%
- S&P 500: -2.5%
- Nasdaq Composite: -3.4%
- WTI +1% (but broke through $30 at 1 point — lowest level since 2004)
The monthly chart above probably scares you if you’re positioned as a bull. It clearly shows that price rode the uptrend line straight up since 2012 and even survived a couple of real tests. At the upper right, price broke down through the rising trendline setting the stage for a reversal. Over the last few months it retested the trendline from below… and has clearly failed. Classic pattern… Not good from a chartist’s perspective.
- Oil… Banks lowering their price targets… finally… Crude inventories near 80 year highs… with an already oversupplied market… and talk of millions of additional “shut in” barrels that could come to market…
- Soc Gen bear Albert Edwards suggested the S&P could fall 75%… expect more of these predictions unless we make new highs… They cost the analyst nothing… and make their name when they are eventually right… at least temporarily anyway.
- Cramer says market oversold and suggests stocks to start buying…
- Maybe he thinks you should buy GPRO… it was down 24% in the after market because they admitted their last product flopped and sales were a lot softer than they expected
So what to do?
Stick to your process.
If you own stocks (for trades) tighten your stops.
If you own them as “investments” make sure you know what you own… and stay the course.