Stocks were battered again today as conflicting economic reports sparked volatile price action. The Dow, S&P, and Nasdaq Composite all closed significantly lower.
It seems now that a bear market continuation is underway.
Seasonally adjusted US first-time unemployment filings for the week prior totaled just 213,000, missing estimates and representing another initial filings drop. Unadjusted first-time filings fell to 156,000, notching a new low unseen since 1969.
This caused futures to fall prior to the open this morning.
Conversely, retail sales data provided bulls with a slight boost. August retail sales beat estimates (+0.3% month-over-month vs. +0.0% expected) but July retail sales were revised substantially lower, to -0.4% month-over-month from +0.0%, measuring a net decrease of 0.1% for US retail over the last two months. And, remember, bad news is still good news as long as it has nothing to do with inflation.
“The Fed needs to pick their poison. Do you continue strong ahead to tamp down inflation at the risk of recession, at the risk of increasing unemployment? It’s truly a dilemma, but I think that given what we have heard from the Fed the focus is squarely on inflation,” said Morgan Stanley’s Mike Loewengart.
Billionaire “Bond King” Jeff Gundlach commented on the market’s continued weakness as well. He told investors to buy Treasurys this morning, as he expects them to outperform the market over the next few years.
“Buy long-term Treasurys, because the deflation risk — in spite of the fact that the narrative today is exactly the opposite — the deflation risk is much higher today than it’s been for the past two years,” Gundlach said.
“I’m not talking about next month. I’m talking about sometime later next year, certainly in 2023.”
That doesn’t really mean much to short-term traders who are staring at another potential move lower, though.
Instead, focusing on top-flite stocks showing uncommon weakness might be a better idea. That’s what’s happening to Amazon (NASDAQ: AMZN) after closing near support at $125.00 today. The stock also closed below its 10 and 50-day moving averages two trading sessions ago.
With the stochastic indicator still above 20 as well, suggesting that the stock is not yet oversold, and the presence of a lower high relative to the mid-August high, there’s plenty for AMZN shareholders to be bearish about.
For those reasons, it may make sense to take the stock short with a trade trigger of $124.89, below support and today’s low, as the general market straddles support as well.
