Top Line: The late day selloff on Friday set up a negative emotional weekend for most. We think any further selloff is limited at best. Generally, the stock market should go up between now and Thanksgiving.
Friday's stock market took a major turn to the downside late in the day. That selloff continued in after hours with more early Sunday evening in the futures market. The sellers can't seem to get enough during regular hours.
We're still being bombarded by bearish chatter in the media. Most articles we read have negative undertones but very little bullish statements. Any bullish statements are generally accompanied by other comments such as we're oversold for the moment.
On Friday, the VXO climbed back to the 70 level indicating another buying opportunity. Let's do a quick reality check on the VXO. We think the market has entered into a period of higher volatility than has been the case since the 2002 market low. That's true, we do, but let's take a quick look at that 2002 low. Both then and at the 9-11 low in 2001, the VXO couldn't get over 60 and barely made it over 50. We have been over 50 consistently through October and November. VXO closed under 50 two times in these two months. That is solidly bullish.
Oh, and by the way, Japan announced that it's officially in a recession. Did you hear that, Officially? The worst possible news...oh wait, that would be the Most Obvious news has now been released about Japan. The Nikkei is up about 3% as we write this. Yes, the Japanese stock market is up on that news. Big surprise.
So, there are eight trading days until Thanksgiving so we need to get this rally on the road. With the market starting in the hole from Friday's after hours trading, there's some extra distance for it to go. As the Asian markets are recovering, the US futures are also digging their way out of the cellar. This could be a wild week. We say it's resolved to the upside after last Thursday's performance...