September 3, 2020
Worst Day for Stocks Since June 11
Nasdaq Nudged 5% Lower
It has been a while. This is the first Market Update since June 11. Here’s the last Market Update on that day. As I have noted, I will send out my Market Update on days that 2 or more of the 3 major U.S. stock indexes falls greater than 3%. It was bound to happen sooner or later; today was the day. The table below shows today’s changes for the major stock indexes. Notice the “CBOE” jump. It is better known as the “VIX”, which is aka the “Fear guage”. That tells us volatility is back!
So what has happened since the last Market Update on the June 11 down day? A lot. On that day, the S & P 500 fell 5.9% and the Nasdaq gave up 5.3%. As of yesterday’s market close, they have soared 19% and 27%, respectively. No wonder today was a profit taking day. Was that all it was? Just common-sense profit taking after a fast short-term run-up? Or, was today the beginning of a more significant downtrend and end of the recent rally?
My take on today’s decline is that it is too soon to call, but my signal is flashing yellow. I would be surprised if the market is as resilient from here as it was after the June 11 fall. We will know very soon. All three indexes closed just above there first line in the sand of market support at their 21-day moving averages. In June, they all bounced off that trend line to make big gains.
What is different today, in short on the positive side, is volume was light. It was massive on the big June 11 sell-off. A lot of investors were proven wrong with their selling. On a negative note, today’s downside action occurred at a near all-time high in investor sentiment. As I noted this morning in my ERPE Excerpts, bullish sentiment is now the highest since September of 2018. Like June 11, today’s sell-off was broad. However, the momentum growth stocks got hit the hardest. Many of these stocks fell nearly 10% (some more) but ONLY got back to where they were Monday (or last week). So, there is a lot more room below…
After a ‘V’ shaped pattern formed in the stock market’s chart, profit taking was to be expected. Beyond the big jump from June 11, the S&P 500 is up over 63% from its’ March 23 bottom! Every prudent, long-term investor must keep that in mind. Here’s the chart:
Yesterday the Dow reached 29,000 for the first time since February. Since July, the Nasdaq has made 20 new all-time high closes. As I wrote in my August 27 Excerpts, “Bubble Trouble”, this parallels the market behavior of late 1999.
Here’s some word of wisdom from a great investor, John Bogle (the founder of Vanguard).
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.”
Thank you for your continued trust and confidence. I remain vigilant as I manage and oversee your investment account. Call me if you have any questions. I am always happy to help!
John J. Gardner, CFP®, CPM®
Blackhawk Wealth Advisors, Inc.
4125 Blackhawk Plaza Circle, Ste. 260 Danville, CA. 94506
Phone: 800-925-6496 · Email: jg@blackhawkwealthadvisors.com