Craig Johnson’s

Stock Market Summary

Monday, February 12, 2018

  • The stock market fell sharply last week. Monday started the week with a large decline that impacted all areas of the stock market. A short term low Tuesday morning followed by a rally left the impression the first wave of selling was over, but Wednesday and especially Thursday left no doubt the selling wave was still in effect. Friday’s trading proved to be even more volatile than the other days with a rally followed by a huge selloff recording a low for this decline. In the afternoon, a rally took the market back into positive territory. This was followed by even further volatility before a significant rally sent the market higher finishing the day with large gains.
  • The week closed with the major market indices finishing down for the week 4.5 – 6%.
  • Earnings season has been quite positive with an abundance of companies exceeding estimates for revenue, earnings or both. The large number of earnings reports being released will continue in the coming weeks.
  • All sectors of the stock market suffered last week with all declining more than 2.5% for the week. The Utilities and Basic Materials sectors showed large declines, but were not damaged as badly as the others.
  • The worst sector by far was the Energy sector declining over 8%. Financial, Health Care and the Industrial Sectors showed declines of more than 5% for the week.
  • Historically, one of the seasonally weakest periods on a calendar basis is the last week of January and the first two full weeks of February. Once again, this has been the case.
  • If Friday’s low is the end of the first wave of selling, then typically a significant bounce higher retracing about two-thirds of the decline takes place followed by the last wave down which tends to undercut the low in the first wave of selling. No one knows yet if this will occur or not this time.
  • The extreme volatility throughout this process makes it prudent not to get too attached to the declines or any advance taking place until the selling is complete. This typically means to wait until higher lows on declines and higher highs on rallies occur along with a significant reduction in volatility.
  • The short term trend is down. Intermediate and long term trends are higher for the stock market. 
 

Sources: bankrate.com, bloomberg.com, Dow Jones News, finviz.com, Investor's Business Daily, marketwatch.com, seekingalpha.com, Thomson Reuters/First Call, U.S. Dept of Treasury, individual company web sites and press releases.

Leonetti & Associates, LLC views or opinions are as of a certain date and subject to change without notice.  The material contained herein is for informational purposes only and obtained from sources we consider reliable. We make no guarantee as to its accuracy or completeness.  References to specific securities and industries/sectors should not be considered recommendations to buy or sell any security or advisory service.  Past performance is not a guarantee of future results.

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