Traders Scared - It’s Time To Buy Stocks

Traders Scared - Stocks Crater Friday

Stocks were hit on Friday because of worries about poor Chinese retail sales and industrial production growth. This caused the S&P 500 to fall 1.91%. That's a big deal because it fell below the November low. It is now at its lowest point since May. S&P 500 closed at 2,599.95. The lowest close in February was 2,581.

Some traders believe the 2,600 level is important, but I don’t. I don’t think round numbers mean anything.

Clearly, the February low matters because the market has bounced off it several times this year. My expectation that the S&P 500 will stay above that floor until the Fed’s meeting is still in play.

There is only 2 days left for stocks to stay above it as the meeting is Wednesday. I don’t see why anyone would make a big bet in either direction before the meeting.

Nasdaq fell 2.26% and the Russell 2000 was down 1.53%. VIX rose 4.75% to 21.63 as it stayed elevated. Russell 2000 outperformed the market finally, but it still added to its losses. It is down 18.73% since its peak in August.

This is lowest it has been since September 2017. It has no technical support, unlike the S&P 500.

Traders Scared - JNJ Falls 10%

Besides the Chinese data, the averages were brought down by Johnson & Johnson. It fell 10% because there were reports the firm knew about the asbestos that was found in its baby powder. This will likely lead to fines. The firm’s market cap fell $39.8 billion.

This really hurts investors because JNJ is a defensive stock that does well in this environment. There are even land mines in safety sectors.

Traders Scared - Sentiment Is Disastrous: Investors go Bullish

Many investors, including me, are bearish on the economy. Personally, I think growth will slow in 2019 and there will be a recession in 2020. It takes a lot of selling for me to turn bullish.

That selling has occurred as stocks have fallen to the point where many are comfortable buying them. The CNN fear and greed index fell from 11 to 7. It is in the single digits again which is the sweet spot to buy stocks for the short term.

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