The market has enjoyed a nice run after hitting new lows in mid-October, but the action has turned sour over the last couple of days, and it is feeling like the bear is back -- still, I've found one stock interesting that I'll discuss below.
The S&P 500 is down about 3% over the last two days and has given back the entire gain that was created when Fed Chair Jerome Powell spoke last week and assured everyone that a half-percentage-point hike was likely at the next Federal Open Market Committee meeting on Dec. 14. Powell didn't say anything new or surprising, but the market liked his tone and the technical setup that was in place.
What has changed is that the market is no longer just focused on the next Fed rate hike. It is looking beyond that and is not likely what it sees for next year. As I discussed Tuesday morning, the main issue now is employment-related inflation and not just consumer-relative inflation. There is great fear that the Fed can not deal with the strong jobs market without having a substantial impact on growth.
The bulls have lost control of the narrative, and we are currently seeing some typical bear market action where stock picking doesn't matter much, and macro considerations are driving the indexes.
One of the worst things about bear markets is that stock picking and charts do not provide much protection. You can find a great stock, but the market will not reward your efforts if the indexes are the main driving force. Bear markets tend to be highly correlated, and the merits of individual stocks don't matter much.
Part of the problem is that we do not have any immediate catalyst to impact the negative momentum. There is the producer price index report on Friday and then the consumer price index report next week before the Fed announcement, but there isn't much in the headlines right now that can change market sentiment.
If you want to be active, then the best thing you can do is look for stocks that are selling off mainly due to illiquidity and market conditions rather than fundamentals. This mispricing will eventually be corrected, but it can take a long time.
One stock I am trading today is Orasure Technology (OSUR) , which develops medical test kits. It has strong third-quarter earnings, and the chart is holding in a trading range and above some key support. In this market environment, it may not move very fast, but the downside risk can be handled fairly easily.
(Please note that due to factors including low market capitalization and/or insufficient public float, we consider OSUR's stock to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.)
