The Nasdaq and S&P 500 entered bear market territory today, with each off 20.2% from its intraday high to today's low. According to Zerohedge, this is the fastest it has taken the market to reach a bear market from its bull peak.
Volume remains extreme, as does volatility, as market participants discount a substantial slowdown in economic growth, if not a short-lived recession. The flight to safety was unlike anything seen since the '08 financial crisis. As one example, on Monday the 10-year Treasury yield plummeted to an intraday low of 0.316%, per Reuters. Just three days' prior, the yield was 1.0%. In the normally staid world of bonds, this was historic.
The market is not without its positives, though one must look for them. The most notable: Every 25%+ bear market for the past 40 years has seen the Nasdaq lag the S&P -- except this one. There are enough names on our Watch List that are hovering relatively near their highs to expect some quick moves before or in conjunction with an O'Neil follow-through day, and preferably a cross of the 20-day line.
Besides large-cap growth vis-à-vis the Nasdaq 100, relative strength resides in the defensive sectors: consumer staples, REITs, utilities, healthcare. There is historical precedent for both growth and defensive sectors to lead: to wit, the '89-'91 period. During that post-'87 crash aftermath, staples like Coca-Cola, Merck, Gillette, and Johnson & Johnson sported RS ranks of 89-93, along with the likes of dynamic growers like Cisco and Costco.
The game plan will be to allow the volatility to settle down before selected short and inverse ETF positions make sense -- assuming this downtrend continues. Until this occurs, holding anything overnight carries excessive risk. At least with index futures like the NQ (i.e. QQQ) and ES (SPY), one has a 23-hour-a-day market which virtually eliminates the opening-gap problem at the start of each cash session.
The following is a discussion of some of the better actors (please click on the chart to zoom in):
GSX Techedu (GSX)
TAL Education Group (TAL)
Zoom Video Communications (ZM)
In sum, cash is king. And patience takes patience.
Hey Kevin, just want to say thanks for doing your awesome work on your videos. Seems Twitter and news have so much negative information that it feels like nothing but doomsday and worries of recessions and depressions etc. Market seems to tell us the story without the insane emotion in a written piece. Hope you are well. Looking forward to this market bottoming. I don't even bother with overnight holds. The swings are insane!
For intraday ideas and analysis: https://twitter.com/mardermarket
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The views contained herein represent those of Marder Investment Advisors Corp. At the time of this writing, of the stocks mentioned in this report, Marder Investment Advisors Corp., Kevin Marder, or an affiliate thereof held no positions, though positions are subject to change at any time and without notice. Estimate data provided by FactSet. Expected earnings release dates provided by EarningsWhispers.