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“The Worst is Yet to Come”

The post-election rally is cooked.

Another day of ugly action has eviscerated last week’s gains. The Dow lost more than 600 points to begin the new trading week. The S&P 500 cratered almost 2%.

Meanwhile, tech stocks continue to lead the market lower. The Nasdaq Composite dropped almost 2.8% on the day, sliding to month-to-date lows.

Now that the bears have shut last week’s election gap, we’ll have to see if stocks can consolidate these losses. If not, we could quickly revisit the October lows.

Once again, some big names were caught up in the selloff.

Let’s dive right in…

General Electric continues its breathtaking tumble into obscurity.

The bad news just gets worse for poor ol’ General Electric. Sellers continued to batter the stock last week following a brutal earnings miss and additional downgrades.

One JP Morgan analyst warned the worst is yet to come for GE shares, slashing his price target to a measly $6.

So far, this assessment has been dead right.

GE crashed another 6% Friday afternoon to finish last week’s session at 9-year lows. Just a half hour into Monday’s session, the stock puked up another 10% following CEO Larry Culp’s comments that the company would miss full-year sales targets as management makes cutting the company’s debt load its highest priority.

When the dust cleared, the stock finished the Monday session down almost 7%.

GE

Bloomberg piles on:

The stock decline underscored collapsing confidence in GE as the company grapples with one of the deepest slumps in its 126-year history amid weak demand for gas turbines, heavy debt and federal probes into its accounting.

We’ve tracked the GE debacle since the stock unceremoniously decoupled from the bull market at the start of 2017 as conglomerates fell out of favor while elite Silicon Valley tech stocks soared. Just one year later, GE had dropped more than 50%. Even as the tech sector absorbs hit after hit this quarter, GE stock is working on revisiting its financial crisis lows.

But hey, at least isn’t not dragging down the Dow anymore…

Speaking of the Dow, investors are draining more blood from the Vampire Squid…

Goldman Sachs (NYSE:GS) helped drag the Dow deep into the red as shares tumbled nearly 8% yesterday.

The too-big-to-fail bank’s worst one-day drop in seven years comes as investigators turn up the heat on the 1MBD scandal.

Here’s the quick-and-dirty on 1MBD: Goldman was heavily involved in raising more than $6.5 billion for 1Malaysia Development Bhd., a Malaysian government investment fund. Netting $600 million in fees, according to Bloomberg.

But since this is Goldman Sachs we’re talking about, key players involved with the fund allegedly bribed officials, jacked up fees, and skimmed millions.

This behavior might earn you a trip to the Banker Hall of Fame here in the U.S. But Malaysia’s not messing around. The finance minister is now demanding a full refund from the Vampire Squid.

Here’s the reaction:

GS

Meanwhile, the U.S. Dollar just notched 16-month highs.

The so-called experts who have been eager to bet against the strong dollar all year are throwing in the towel as King Dollar streaks to 16-month highs this week

“Although many currency strategists see the greenback resuming its downtrend in 2019, some are advising investors to keep their powder dry for now,” Bloomberg notes.

USD

The dollar’s strength has also put a lid on the gold rally. After settling at a three-month high just below $1,240 to kick off November trade, gold futures have fallen off a cliff. They’ve now given back all their market correction gains as gold falls below $1,200 this morning.

The bottoming action we’ve witnessed in the mining space is also breaking down. The Van Eck Vectors Gold Miners ETF dropped more than 2.25% yesterday in a move that looks like the beginning of the next leg lower for these stocks…

GDX

Finally, futures are sneaking higher this morning.

The major averages are looking to post a modest bounce at the opening bell following yesterday’s bloodbath. We’ll see if stocks can attract some buyers today for some Turnaround Tuesday fun. Stay tuned…

Sincerely,

Greg Guenthner

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Greg Guenthner, CMT, is the editor of Rude Awakening PRO and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing for 13 years. In 2018, Greg’s Rude Awakening PRO portfolio beat the S&P 500 by 14%.

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