Stocks Drop On September 30 – The Fun Has Merely Begun

S&P 500 (SPX)

It’s a pretty bad day for stocks, with the S&P 500 falling by about 1.2% to finish the month down 4.7%. The market doesn’t look all that healthy, but then again, it hasn’t looked healthy for weeks, maybe months. It seems like at this point; we are in the middle of wave three down. We will need to confirm this by falling below 4,300 tomorrow. If so, I see a move to 4,240 at a minimum and could be as steep as 4,115.

But here’s the problem, at 4,115, if that does come into play, the S&P 500 would be trading for a stunning 19.3 times its next-twelve-months earnings estimates. A still very pricey multiple. If I had my way, I would like to see the index settle at and trade for something like 17 times NTM estimates, or 3,600. I think 17 is a good PE for the market, given where growth rates are going and the low rate world. We have to hope that earnings estimates hold up and don’t start coming down.

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VIX (VIX)

Despite today’s drop, the VIX hardly increased, rising just 2.5% to 23.1. Indeed, not a sign of any fear being built into the market yet. It could be an indication that serious selling hasn’t even begun. If you start to get a VIX that can go up in an orderly manner instead of those significant 20% one-day jumps, you could see a market that moves much lower over time.

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Nasdaq (QQQ)

Meanwhile, the Qs have been consolidating and forming a bear flag, which was present in the S&P 500 futures this morning before it broke. The pattern would suggest the Qs fall back to $346.

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Apple (AAPL)

The chart for Apple looks pretty weak, and it should break support at $141 and start its drop to the low $130s.

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Amazon (AMZN)

Amazon looks pretty bad too, with a break of support at $3,300 and a negative sloping RSI, the stock’s next stop will probably be $3200.

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Disney (DIS) is very close to falling below support at $168, and with a giant gap to fill at $154, it is not looking good.

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The disaster, also known as FedEx (FDX), keeps on dropping with no end in sight. It could still have a considerable distance to fall, too, with $180 the most suitable spot.

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