Week Ahead: Stocks Trim Monthly Losses As 2018 Comes To An End


Stocks Trim Monthly Losses As 2018 Comes To An End:

The market is deeply oversold and trying to bounce as 2018 comes to an end. 2018 will go down in history as a crummy year for Wall Street. The year began with a strong rally as 2017’s record run continued into January 2018. Then, out of nowhere, sellers showed up in February and the market quickly fell into a correction. That was short-lived as the bulls showed up and spent the next 6-8 months sending stocks to fresh record highs. Then, in August-September, the major indices topped out and stocks plunged into a new bear market in the fourth quarter of 2018. In fact, December was on track to be one of the worst December’s since the Great Depression (until the plunge protection team was called in to help on Christmas Eve). Remember, the last week of the year has a very strong upward bias. The big question is what will happen in January. Unless, we see a massive change in either monetary or fiscal policy, odds favor lower prices will follow. Conversely, if we get clarity on any of the big issues that has been weighing on the market this could be a very shallow and short-lived bear market. Until then, this appears to be another violent bounce in a bear market. 

Monday-Wednesday Action:
On Monday, stocks plunged again as investors continued to aggressively dump stocks. Treasury Secretary Mnuchin called the CEOs of major banks to shore up confidence as sellers continued to pound stocks. The last full trading week of 2018 was the largest weekly decline for Wall Street since 2008! The Russell 2000 and the Nasdaq Composite both fell into bear market territory and that clearly is spooking major investors. Stocks were closed on Tuesday for Christmas. Not surprisingly, one day after Mnuchin called the Plunge Protection Team, the Dow soared 1,000 points! That is not an insignificant sum and it was the largest single day advance since the financial crisis. Remember, the biggest up moves occur during bear markets so it is not surprising to see the market rip higher as we enter the early stages of this bear market.

Thursday & Friday Action:
On Thursday, stocks opened sharply lower and fell over 600 points before another late day reversal appeared out of nowhere and sent the market closing up over 200 points. That ladies and gentlemen is the definition of the plunge protection team. In the short term, clearly the call Mnuchin made on Monday is working. The only question now is how long will this little rally attempt last? Remember, stocks are extremely oversold and way over due to bounce. Next week is another shortened holiday week and the real test will be to see how stocks act in January, because historically, December has an upward bias, but January can go either way. 

Market Outlook: Flirting With A New Bear Market
Stocks are forming a big top and are beginning to roll over and officially hit bear market territory. Resistance is the 200 and 50 DMA lines & then 2018’s high. As always, keep your losses small and never argue with the tape.


Here are more articles you may like

Claim Your Free Guide Today

Give us your email and we will give you the tools to change your life. 


Learn about Early Entry Points & much more...

© ChartYourTrade | Contact us: website@chartyourtrade.com

Disclaimer: All communication from ChartYourTrade is general in nature and for educational and general informational purposes only. Under no circumstance should it be considered personalized investment advice. All our work is general in nature and not specific to any one person. All the information on this site and/or that originates from us, or any of our partners or affiliates, is for educational and informational purposes only and is NOT a recommendation to buy or sell anything. To avoid any conflicts of interest, we do not have a working relationship with any of the companies mentioned in our work. Furthermore, we may have a long, short, or no position in any, or all, of the names that appear in our work and they may change at any time without notice. Investing and trading in capital markets or using margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you as well as for you. Before you decide to invest or trade in capital markets you should carefully consider your investment objectives, level of experience, and risk appetite, among other factors. The possibility exists that you could sustain a loss of some, all, or more of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with capital markets, investing/trading, and seek specific investment advice from an independent financial advisor and other professionals. Remember all the information we provide is for educational and general informational purposes only and is subject to change without notice.

Charts and Data are courtesy of MarketSmith Incorporated. Join MarketSmith here.

Terms of Service