Way back…..three days ago, we suggested the selling would continue before a “crescendo” low was reached in the market. Well, if Thursday’s action did not represent such a crescendo then we are likely just a day or two away. Unfortunately, Friday’s (tomorrow) are rarely when stocks find a low. This is because many investors feel uncomfortable buying ahead of a weekend when unsettling news can be printed. So, next week is more likely to be when we see stocks find their footing.
The selling that has occurred in the last few days is pretty breathtaking. While there have been selloffs that have lasted longer or been greater in magnitude, what makes this one unique is the violence of the whiplash.
In the chart below, we see that over the last 6 days, we have experienced the fastest correction (10% decline) of the S&P 500 from its recent peak…..ever!
So, what now? Well, while we expect a bit more selling to occur on Friday, we feel we are within 3% of a low. This suggests the market is poised to rally next week. Once the rally occurs, we would not be surprised to see the market return to current levels and “re-test” support. Once this re-test occurs we believe it will be the moment when we believe it makes sense to go on the offense and move our managed accounts to fully invested.
The indiscriminate selling has revealed some compelling values in the market. There are some energy, technology, financial and transportation companies whose stocks look very attractive. We have thankfully had some cash in reserve in our managed accounts. Unfortunately, we also bought a technology and media stock a bit too early. Regardless, we are working hard to use this selloff to improve our holdings for client accounts.
Kessler Investment Group, LLC