Fear Invades the Market Like a Plague

Like storm clouds moving in Fear has gripped Wall Street. Two fear indicators: (VIX) and (VXN) have both risen 37% since the start of the month. It is unreal the amount of fear that has gripped many traders on Wall Street. Most likely candidate, not a big surprise crude oil prices causing major demand curve shifts. All the attention zeros in on the American consumer and can it survive when the price of crude is at historical highs. Monday’s market reflected the fear as the leading index, the NASDAQ tumbled more than 1.5% intraday. Albeit volume was lighter throughout much of the day the price action certainly reflected the element of fear.

There is always a silver lining in the storm clouds and that being we pushed off the lows (bounce of the 50dma) and closed above the mid range of the trading range. In addition, the level of fear that has flooded this market is unreal. Too many participants are bearish on this market in the short term. Do we start a new bull market, I do not think so. However, it does appear we can rally back to the major indexes’ 200dma where we ran into trouble last time. Watch for volume and how it unfolds in the coming days.

Scanning for charts, as I do every night I cam across (JAS) last Friday night. I wanted to highlight the chart pattern here. Quickly, here are the fundamental growth numbers: Sales YoY MRQ +5.16% (not terribly good), EPS YoY MRQ 269.39% (tremendous growth!), ROE 4.68 (not too effective), and P/S is .32 (very low). This is typically not a stock I would jump up and down for but I do believe its one worth watching. If I were managing $100mm I would certainly begin accumulating shares. Lets take a look at the chart:

I am looking for this market to move forward higher from here. However, it isn’t time to get fully loaded on the long side either. We aren’t entering a new bull market and we won’t for a few years. When crude oil peaked in 1979 it took the market almost 2 years to recover and begin a new bull market. We have the same situation now, patience must be exercised.

Disclosure: Author does not currently own JAS

Posted in Categories: Contributor, Economy, External Research, USA.

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