Remember when the bull market had an air of invincibility about it? Almost as if investors were getting tired from all that winning.
Yeah, well, that was way back in October 2018, when the blue chips DJIA, -1.19% were on the verge of breaking through another big round number on their way to more big round numbers. Alas, Dow 27,000 wasn’t meant to be.
What’s more, at Friday’s closing levels, we’re now down for the year and even 25,000 is starting to drift out of sight. It could get worse before it gets better as a crowded slate of economic data, looming midterms and earnings — Apple AAPL, -1.59% and Facebook FB, -3.70% , for starters — promises to keep the temperature running hot this week.
The fear gauge VIX, -2.44% , which has been historically subdued during much of this bull run, is already elevated. It closed at 24.16 on Friday and has climbed 100% this month alone. That means investors have been paying up for protection from a downturn.
The Fly, the iBankCoin blog’s popular smack-talking investor who says he left his 18-year Wall Street job because it’s “all horseshit,” warns recent action has created a critical juncture for those clinging to hopes that all the red ink is merely temporary.
“A house of pain has been built upon a very weak foundation,” he wrote in our call of the day. “If we continue to travel lower at this rate of speed, I’m afraid it could portend a truly brutal dislocation in markets that would make you regret the day you opened up a brokerage account.”
He used this chart to illustrate his point.
“I do not want you to look at it with trend lines or support/resistance levels in mind,” the Fly instructed. “Look at it and think of ownership and how people obsess over their cost basis and how it might effect overall investor psychology.”
In other words, investors far and wide are under water, and if buyers don’t reassert themselves and hold close to that key 166ish level on the QQQ QQQ, -2.57% — a widely held ETF that tracks the Nasdaq 100 — then the selling stands to intensify.
“Bottom line,” he said, “we must bounce next week.”
A bounce could be in the works.
Dow Jones Industrial Average YMZ8, +0.21% , S&P 500 ESZ8, +0.39% and Nasdaq Composite NQZ8, +0.91% are all perking up. Gold GCZ8, -0.45% and crude oil CLZ8, -0.74% are also sagging.
Gains for most of Asia stocks ADOW, +0.46% eroded, led by a drop for the Shanghai Composite COMP, -2.06% . Europe markets SXXP, +0.98% are seeing some nibbling, as well, with upbeat HSBC HSBC, -1.23% results sending London stocks UKX, +1.31% higher.
International Business Machines Corp. IBM, -1.31% closed a deal — it’s biggest ever — to acquire software company Red Hat RHT, -3.19% for about $33 billion, a massive premium over its closing price on Friday. With the move, IBM is making a bid to become the world’s biggest hybrid cloud provider as it battles rivals Amazon AMZN, -7.82% and Microsoft MSFT, -1.24% . Red Hat is already climbing in thin premarket trading, while IBM is headed the other way.
So, does Apple’s AAPL, -1.59% new iPhone live up to all the hype? Well, the reviews are in and, in a word: Yes! “Most people… are going to be very happy with this phone.” Read more takes from Barron’s roundup. Plus, new iPads and more coming from Apple’s October hardware event Tuesday.
Another populist just made his mark. Jair Bolsonaro, a champion of Brazil’s 1964-1985 right-wing dictatorship that he once served, was just elected the country’s president. MarketWatch readers approve, judging from the comments section.
Gab.com, the social-media site where the Pittsburgh synagogue shooter spread his anti-Semitic hate, is down, after it seems domain host GoDaddy gave it the boot. A message on the site says the company has been “smeared by the mainstream media for defending free expression and individual liberty for all people and for working with law enforcement to ensure that justice is served for the horrible atrocity committed in Pittsburgh,” but said it will be back. On Saturday, founder Andrew Torba, said his site was “not going anywhere,” and was probably enjoying the most traffic it’s ever had.
A Lion Air Group passenger jet carrying 188 passengers and crew reportedly crashed into the sea, according to multiple media reports. The plane was flying from Jakarta to Pangkal Pinang, a city on an island off Sumatra. Search and recovery efforts were underway on Monday morning.
When it comes to planning for the upcoming midterms, Morgan Stanley’s MS, -1.30% Michael Zezas tells clients, “we want you to embrace the uncertainty rather than plan for the expected.” And what exactly is expected? Look at this chart (h/t Zero Hedge):
As you can see, the anticipated outcome is Democrats take the House and Republicans keep the Senate. It’s a virtual certainty. Just like Hillary in 2016.
Zezas offered some tips on navigating the variables, including the use of alternative hedges, specifically getting long volatility. Not a bad idea, either way, considering how the VIX VIX, -2.44% has been performing lately.
He also advised clients to stay cautious in corporate credit. “Even if election night drives a constructive near-term narrative for credit, perhaps on tax policy,” he said, “we would use any rally to continue moving up in quality.”
Read: What key midterm candidates are saying about the economy
“Worth it” — Tesla’s TSLA, +5.09% Elon Musk, responding with his trademark snark to one Twitter TWTR, +1.76% user who asked him about the infamous “funding secured” tweet that ultimately cost him some $20 million. Read more from Bloomberg.
47,220 — That’s how many gun-related incidents have taken place in the United States so far this year. Of those, 11,984 resulted in deaths, according to data compiled by Gun Violence Archive.
The big number to watch for this week is the October employment report, but we won’t see that until Friday. Also of note in the coming days are the ISM manufacturing index, October auto sales and the September trade deficit. As for Monday, we get Personal Income and Outlays for September at 8:30 a.m. Eastern, followed by the Dallas Fed manufacturing activity survey two hours later.
Read: We’re about to discover what a post-sugar-high economy looks like
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