How to Lose $8 Trillion

Here’s something new:

The stock market didn’t fade into oblivion yesterday.

In fact, the major averages rallied into the closing bell. The Dow led the way higher with a 430-point gain. Meanwhile, the Nasdaq Composite jumped nearly 1.6%.

Yesterday’s action was a welcome change from the doom and gloom we’ve experienced this October. After all, we’ve seen our fair share of down days this month. If the S&P 500 ends today’s session in the red, it will mark the highest number of down days in a month since April 1970, according to MarketWatch.

If the averages finish the month where they stand now, we’re looking at an 8% drawdown in the S&P 500 — and a 11% decline for the tech-heavy Nasdaq Composite and the small-cap Russell 2000.

That’s a far cry from the all-time highs posted just a handful of weeks ago. Smooth sailing for stocks feels like a distant memory after the jarring market action we’ve experienced this month…

Any way you slice it, stocks have had one helluva month.

October’s abrupt reversal has now officially erased $8 trillion from global markets, earning this month’s drop the dubious distinction of becoming the worst selloff since 2008, according to Bloomberg.

SynchronizedSellOff

Futures are pointing to a higher open this morning. Does this mean a second-straight day of gains is in the works?

If so, it would finally snap another brutal trend. I just read yesterday that the S&P 500 has gone 27 days without posting back-to-back daily gains. A green close today would help improve conditions for the potential relief rally we’re beginning to see shaping up under the surface of the major averages.

Even beaten-down Facebook stock is catching a bid right now.

Facebook Inc. (NASDAQ:FB) shares are glowing bright green this morning following the company’s third-quarter earnings report.

The stock is up about 4% early this morning after Zuckerberg & Co. beat on the bottom line — yet missed revenue estimates and reported slowing user growth.

But investors don’t give a damn about the numbers right now. Facebook just needs to keep its nose clean and avoid any earnings-related disasters like we witnessed back in July when management’s lame excuses for soft guidance crashed the stock.

FB

No, a small rally today won’t fix all of Facebook’s problems. But if we want to see a tradable bounce emerge among the tech wasteland, it couldn’t hurt to have one of the sector’s most visible companies catch a bid.

If freefalling Facebook can rise from the ashes, what about other beaten-down tech stocks?

Semiconductors are also showing signs of life.

I’ve kept a close eye on the semiconductor sector ever since it started breaking down earlier this month.

For more than four weeks, the chip stocks have posted some of the ugliest charts on the market. Relentless selling dragged the these names down to new 52-week lows as recently as Monday morning.

But the VanEck Vectors Semiconductor ETF (NYSE:SMH) finally caught a bid yesterday. It finished the day higher by more than 4%. Industry leader and former highflyer NVIDIA Corp. (NASDAQ:NVDA) almost completely erased its Monday losses, gaining an impressive 9%.

SMH

It’s difficult to overstate just how ugly this semi slide has become. I noted last week that The Philadelphia Semiconductor Index is now on pace to post its biggest monthly decline since November 2008. After this month’s big breakdown, it would bode well for the rest of the market if these stocks could continue to retake their leadership role.

As futures flash green early this morning, the market looks ready to extend its oversold bounce.

Of course, we’re still treading carefully. We’ll need to see buyers continue to step up to the plate throughout the afternoon to prevent another late-day fade. Fingers crossed!

Sincerely,

Greg Guenthner

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Stocks ended the day lower!! The Dow lost 90 pts, the S&P gave back 25 pts, the Nasdaq lost 166 pts and the Russell lost 0.65 pts. as investors/traders and algo’s focused on ‘some’ of the negatives yesterday vs. looking through the noise and only seeing roses… In fact though, the market remains resilient… what looked like a broader selloff in the pre-market yesterday morning never really materialized… and while all of the indexes were lower – they didn’t collapse…

Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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