Institutional selling was detected on the TICK for the first time in a long, long time. It’s been so long, I stopped even talking about the TICK indicator on the weekly Saturday night Stock Market Prediction show.
If you are signed up for the Premium service, then you know I sent this text on Sunday night:
What I think happened is that when traders woke up on the east-coast and read stories in the mainstream financial media about the “Plunge Protection Team” being called into action for the first time since 2009, it freaked them out. This is a crisis group and while the intention of calling them into action may have been a good one, it sent the message that maybe this sell-off is a bigger problem than most traders and investors realize.
On the S&P 500, there were 10 stocks that closed up today, and 469 that closed down. Advancing volume on the S&P 500 was 26 million while declining volume was 1.6 billion. The S&P 500 is 0.20% away from going into a Bear market thus joining the Nasdaq and Russell 2000 in Bear market status.
If all that wasn’t bearish enough, did you notice the candlestick that formed on the S&P 500 today?
The Equity Put Call Ratio continues to surge higher as increasingly PUT insurance is being purchased to hedge long positions.
How does this play out in the real world?
In my own personal experience, you guys know I sold one of my cars back to the Toyota dealership I bought it from in September 2018. My wife and I carpool now as we are a one-car family. It’s not easy but with rising interest rates and healthcare costs, I couldn’t afford to make both car payments with my modest income (I have Muscular Dystrophy and think it a blessing that I have a job at all). The stock market had supplemented my income for the last year or so since my wife’s terrible 6-month battle with Pancreatic necrosis from which she almost died. Right now, after the carnage on Wall Street, I’m feeling good about getting out from underneath that loan and sticking the dealership with an overpriced asset that they have to find a buyer for now in this higher interest rate environment. I don’t think of myself as unique at all. If I’m struggling more in this rising rates environment, so are a lot of other Americans.
I heard a homeowner today who just closed escrow tell her real estate agent that her entire focus was to keep up her bank account balance because the stock market wasn’t helping her do that now. Think about that for a second. Millions of Americans use the stock market to supplement their income. Take away that supplemental income and consumer spending behavior changes rapidly.
The longer the stock market continues in a downtrend, the more consumers will make calculated moves to lower their liabilities. Remember when President Trump in a CNBC interview said that the market was up about 40% since he was elected and so this is the time to have a trade war with China because “it’s just the bank’s money we’re talking about”?
The stock market is not just “on paper” or “the bank’s money” as Trump called it. It’s real money that Americans use to live off of and when you take that money away it has a very real and bad impact on consumer spending and thus the economy.