Financial Commentaries

MARKET COMMENTARY

December 11, 2018
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Market Commentary – Week of 12.11.2018

RETEST

We view last week’s market decline as a retest of the October–November lows. The S&P 500 Index fell 4.6% last week, leaving the index in line with the low of the autumn correction and 10% off the September highs [Figure 1]. Losses were driven primarily by three issues: the risk that U.S.-China trade talks fall apart, concerns about a Federal Reserve (Fed) policy mistake, and sharply lower oil prices, all of which contributed to increasing concerns about slowing global growth or potential recession. This week, we summarize our views on these issues and discuss prospects for a potential stock market rebound based on technical analysis… (cont’)

KEY TAKEAWAYS IN THIS WEEKS ISSUE

  1. Last week’s losses were driven primarily by increased recession fears related to U.S.-China trade tensions, a possible Fed policy mistake, and sharply lower oil prices.
  2. Recent volatility may have provided one of the most important ingredients of a stock market bottom: fear.
  3. We see elevated put/call ratios, increased trading volume, and extremely negative breadth as signs of fear, a potentially bullish development with the S&P 500 at/above  recent lows.

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