DPC S i n k i n g l a s t t u b u l a r s e c t i o n , M i c h i g a n C e n t r a l R . R . t u n n e l , D e t r o i t R i v e r 1910
Some still see a very long bull market dead.
• More S&P 500 Pain Seen as 10% Losses Spread (Bloomberg)
For most American stocks, the correction has arrived. While gauges such as the Standard & Poor’s 500 cling to gains for the year, declines that exceed the 10% are spreading in the broader market. In the Russell 3000 Index (RAY), for example, 79% of companies are down that much from their highs, according to data compiled by Bloomberg. That’s a bad sign to Doug Ramsey, the chief investment officer of Leuthold Group who correctly predicted in July 2013 that the U.S. bull market had months more to go. He said that when losses multiply in stocks away from benchmark indexes, it usually means the bigger companies are next. “We’re not expecting a bear market, but we are expecting a significant additional correction,” Ramsey, who helps oversee $1.7 billion at Minneapolis-based Leuthold, said by phone. “We’re seeing very classic late-cycle action where the Dow and S&P 500 are painting a very false picture of what’s going on underneath.”
Concern the rate of global growth is slowing and the Federal Reserve is preparing to raise interest rates has pushed the S&P 500 down 5.2% from its September record. The 1,700-stock Value Line Arithmetic index, which strips out weightings related to market value to show how the average U.S. stock has fared, is down 10% since July. An average of 7.9 billion shares a day changed hands on U.S. exchanges this week, the most since November 2011, as the Dow Jones Industrial Average erased its 2014 gain. The Chicago Board Options Exchange Volatility Index jumped 46% to 21.24, the highest since February. Three weeks of declines have broken the almost unprecedented calm that had enveloped markets for most of 2014. Eight trading days into October, the S&P 500 has posted six single-day moves exceeding 1%. The market went without any swings of that size for 62 days in May, June and July, the longest stretch since 1995.
Markets need volatility simply to make money.
• V o l a t i l i t y K e e p s R i s i n g ; V I X H i t s N e w 5 2 - W e e k H i g h (Barron’s)
F e a r i s r i s i n g . T h e C B O E V o l a t i l i t y I n d e x ( V I X ) c o n t i n u e d i t s u p w a r d c l i m b t o d a y , r i s i n g 9 % t o 2 0 . 4 5 a f t e r e a r l i e r r i s i n g a b o v e 2 2 o n t h e h e e l s o f e y e - p o p p i n g g a i n s y e s t e r d a y . U B S S t r a t e g i s t J u l i a n E m a n u e l a r g u e s t h a t v o l a t i l i t y c o u l d k e e p r i s i n g . I n a n o t e p u b l i s h e d t o d a y , h e w r o t e :