Correct me if I’m wrong, but didn’t the market just do this only a month ago?
Yeah, it did.
Led by the FAANG stocks – Facebook Inc. (NasdaqGS:FB), Amazon.com Inc. (NasdaqGS:AMZN), Apple Inc. (NasdaqGS:AAPL), Netflix Inc. (NasdaqGS:NFLX), and Google’s parent company, Alphabet Inc. (NasdaqGS:GOOGL) – the market rolled over and played dead in October.
Only, it wasn’t dead. Stocks came roaring back, and by mid-November, it looked like the panic had subsided. It looked like stocks wanted to recover and like they were making a strong push back up north.
Then, just when things looked brighter, stocks tanked again, just like they did in October.
And the major benchmarks tested (and mostly broke) their October lows.
Now, we’ve rallied again. Just like we did after the swoon in October.
As Yogi Berra said, “It’s like déjà vu all over again.”
It’s easy to get discouraged now, believe me. Christmas is right around the corner, and it feels like all you’re going to be doing is losing money. Nobody wants that.
The Fatal Blow
This time, however, benchmarks didn’t get back up to where they peaked in October.
If this current rally peters out, we will have made a lower high. That’s a bearish sign.
If we break down from here, like we did a couple of weeks ago, and make new lows, that’s a very bearish signal.
On the upside, benchmarks have to get above the highs they made in early-mid November. If they can, maybe we’re out of the woods.
But I’m not betting that way.
The market looks like a wounded bull in a one-sided bullfight. Has the matador drawn his sword to render the fatal blow to this old bull?
On the downside, here are the levels that are critical to hold for the major benchmark and the FAANG stocks.
The Dow: If we get to 24,000, we’re going to 23,500 in a New York minute. Then, the bull market is probably done.
S&P 500: There’s important support at 2,600. If we break that, we’re going to test 2,550 in a heartbeat. Below that, the next support is all the way down at 2,400. OUCH!
NASDAQ: There’s support at 7,000, then 6,800, then 6,500. Below that, it’s a bear market that could last an unexpectedly long time.
Facebook: FB has support at $120-$115. Below that, it’s ugly. And it has already been UGLY.
Apple: AAPL has support at $160, then $140. Below that, something’s really wrong with investors’ hopes and dreams.
Amazon: AMZN has support at $1,400-$1,375. Below that, it’s $1200 and look out below.
Netflix: NFLX has support at $200. Besides that, it’s anyone’s guess.
Alphabet: GOOGL has support at $1,000-$980. Its next support is all the way down at $900. If it gets there, you’ll be thinking about bottom fishing.
You’ve Been Warned
So let me give it to you straight: That’s not where we are, but where we could get to.
Now, a bear market doesn’t always mean you’re going to lose money.
But the chance of making money by just latching onto stocks like these tech leaders is probably going to land you in a bad place. Your money could be looking down the barrel of a gun.
However, you can still make money in a (fast-approaching, but not quite there) bear market. Truthfully, it’s the most brutal and cutthroat way to make money in the markets.
The market is absolutely FULL of stocks that are hanging by a thread.
Just look at what happened last week – the Dow tanked by 600 points, and it plunged 500 points right before that.
Like I said earlier, it’s déjà vu all over again.
There’s a bunch of garbage out there that’s being flushed out. There are more and more dud stocks out there every single day – and they could make you tons of cash.
Investing in whatever the media is saying is the next Apple or next Amazon is, is total crap, if I’m being honest. Waiting for the next best thing to come and hit it big is just going to make you lose money, lose patience, lose your mind, or a combination of all three.
So, here’s what I’d say: It’s pretty clear that we’re on a path to a bear market. Yeah, we aren’t there yet, but we’ve got to prepare. Even betting on the success of good stocks might cost you dearly.
I’d say bet on the losers – you know what I’m talking about. Wall Street’s embarrassments, the struggling companies that are moments away from filing for bankruptcy, the ones that are knocking at death’s door.
There’s a lot of money to be made with betting against a company’s success, and with the holidays coming up, there’s a chance you’re worried about having enough cash to get your loved ones the gifts you want to get them.
And I believe I can help you out.
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And to the ones who’d rather keep their money in what Wall Street thinks is best… Beware, you’ve been warned.