Signs of a Bottom?
Courtesy of The Contrarian Investor
News headlines point to capitulation as the S&P 500 continues to flirt with a bear market…
Transcript:
Good morning contrarians!
State of Play
Stock futures are up as of 0615. Small caps are leading things, with the Russell 2000 up 1.2%. S&P 500 futures are up about 0.8%, roughly the same as Nasdaq and Dow Industrials. All indexes were up more earlier in the overnight session.
Bonds are selling off a bit with the yield on the 10-year moving up 4 basis points to 2.82% whilst the 2-year is up 3bps to 2.61% (yields move inversely to prices).
Commodities look to be gaining ground with WTI crude oil up 1% to trade around $111/barrel. Soft commodities and industrial metals are all up. So are gold and silver, with the latter rallying about 2%.
Cryptos are bouncing as well with bitcoin up 1% to trade around $30,500.
Economy
No economic data releases of note, really. Atlanta Fed President Raphael Bostic is due to speak at noon. The World Economic Forum takes place this week in Davos, Switzerland. That’s always good for a few headlines (as well as the occasional conspiracy theory, of course).
Corporate News
JPMorgan’s 50th Annual Global Technology, Media & Communications Conference starts today and goes until Wednesday. This has been a pretty big catalyst for individual stocks movement in the past. The precise agenda is only made available to attendees, but it was made available to media and the website has a listing of some of the keynote speakers.
Based on a compilation of various sources, companies presenting include Visa (V), Intel (INTC), eBay (EBAY), Lyft (LYFT), Google (GOOG), Verizon (VZ), Comcast (CMCSA), Cisco (CSCO), Roblox (RBLX), Snap (SNAP), AT&T (T), and Paramount (PARA). JPMorgan’s Jamie Dimon is also scheduled to speak. It’s always interesting what he has to say about the broader economy.
Couple of earnings worth mentioning today: Zoom Video (ZM) and Advance Auto Parts (AAP).
The Bottom Line©
The bottom is exactly what we’re looking for. Bear markets seem to unfold as their very own stages of grief: denial, acceptance, belief the worst is over (aka a relapse of denial), and finally capitulation. The fact that the Wall Street Journal has claimed the “stock market bottom remains elusive” and quotes that “things are just going to keep getting worse.” Barron’s on Saturday crowed that “the sell-off isn’t over.”
The venerable WSJ also doubled down with another piece this weekend about how “conditions are ripe for a deep bear market.” Not to be outdone, the title of this morning’s Yahoo Finance Brief is “simple tips for surviving the bear market in stocks.”From a contrarian perspective, these are exactly the signs you’re looking for in terms of capitulation.
This doesn’t mean the bottom is in, of course. You can’t time markets. In retrospect, it will all be obvious one day. Until then we just have to sit back and observe the behavior. Not everybody I speak to is convinced we’re even in a bear market. They may still be in denial, or maybe they’re right?
Whatever your thoughts on this, and please do supply them, through the comments on this page.
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