Love the country, but love the stock ?

The patriotism has always been associated with the great country; a country offers a lot of reasons for its citizen to be proud, either through its cultural heritage, or through its recent achievement.  It is the same in the equity market, you love a stock because it has a long history of steady performance, or the stock is the latest darling of the crowd.

 

The recent turmoil of the market will test investors’ royalty to their stocks. It obviously needs a lot of belief to stay put.  Good thing is that, other than self criminating, dumping a stock will draw neither social stigma nor political retribution.

 

It is the time of hardship.

 

The DJIA and SP500 are both deep in the oversold territory, only NASDAQ held its ground.  If you believe that SMH leads the way for NASDAQ, it will not take long for NASDAQ to suffer the same fate as other major indexes.

 

The market never misses a chance to make a record.  Even if the intention of the market is to rebound from here, it will not do so until all indexes entering into the “official” bear market.  It is the same as in the time of “tech bubble”, the NASDAQ had to entering into historical high before it retreated 50%.   

 

You would think people will rotate their money into consumer staple or utility for safety, however, those sectors are down as well.  This is typical in a bear market that there is no place to hide.

 

The interesting coincident is the lack of despair even though this is the worst market since almost 80 years ago.  A lot of peoples are still talking a better second half and a quick rebound as back in March.   There are also a lot of puzzlements over where VIX stands today.  The bottom line is the capitulation normally associated with the market’s nadir cannot be found anywhere.  And that alone does not bode well in the near term for the market.

 

It is hard to see the catalyst for the market to go higher, yet there is more negative news for the economy in the future.  The last Friday’s number offered a glimpse of worsening labor market, if you think the housing price has dropped so much, wait for the unemployment rate goes up to 6%,  by the time, more “for sale” sign will sprout up like the bamboo shoots.

 

Sector wise, the agribusiness, steel and coal get hammered last week. These are the leading sectors lately, when leaders are down, you begin to ask whether this is a temporary profit taking or the permanent damage are done.  In my mind, steel has more room to fail, so are the coal. The basis is that the economy will slow down globally, thus, curtain the demand of both sectors.  Agribusiness is probably a little different.  But I would not buy tomorrow. It is best to see how they behave next week. Collectively, agribusiness is in a critical support point.

 

Playing on the theme of job rate and the tightened consumer spending, will the MA and V go down with the rest of the economy, it is likely, the MA has already been weakening,  if the overall market condition does not improve soon, it will be a long time for investors holding the stock.

 

Have a good week.