Normally I would tell you that it is time to do some picking up of stocks. This time I want to wait. That's because there aren't enough safety zone areas to start buying.
Let me explain how I feel.
Typically after a fall like this I like to start buying the stocks that I think fit the picture of the market. Perhaps people are worried about a slowdown. That means we can buy PepsiCo (PEP) , Procter (PG) and Estee Lauder (EL) , all of which had terrific quarters and all of which had even better outlooks. I would look for some down and out health care stocks, perhaps Bristol-Myers (BMY) now that it merging with Celgene (CELG) . Maybe HCA (HCA) after a spectacular quarter.
But I can't do that this time. Because it isn't a slowdown that I fear. It's a tweet. A tweet that says we are strong, the economy is excellent but we need a rate cut anyway. That's just the kind of thing that would drive the traditionalists crazy.
Plus the consumer packaged goods stocks have been bid up to crazy levels that make it so it might be quicksand underneath them. They have run so much that they have lost their dividend protection so they don' have the safety that I would love them to have.
The discount domestic retailers I mentioned? They are precisely the stocks most in the crosshairs of the tariffs. You want to buy a Dollar and a half Tree? A Dollar Tree and a Dollar Fifty General (Dollar General (DG) ). I don't think so.
How about a more offensive posture. Maybe you buy the cloud kings? They are all getting killed. It is a strategy that makes sense but has never worked after day one of a selloff. That's day two late at best and only after they are shelled again?
How about FANG? Facebook (FB) , Amazon (AMZN) , Netflix (NFLX) and Alphabet (GOOGL) ? Let's see, Facebook has no China but what a run it has just had based on the fact that the government can't stop it. Amazon? Just rallied big on Uncle Warren but Uncle Warren won't be there to help you come Friday. Netflix? Every time I hear Netflix now I hear Disney (DIS) . So that's a no go. Alphabet? Again, no China. However, how are we supposed to buy the stock of a company that missed the quarter?
Now I know there's a way out of this. All that has to happen is for Uber to be placed perfectly, just right, where it opens up 10% to 15% in an orderly way and nobody gets picked off with a too high opening, but the people who run Uber are happy with the amount of money they raised. And, if the president says "we are now starting to get serious with these talks, the Chinese have walked back what they reneged on and we are going to keep those tariffs from happening until we are absolutely sure that there is no deal to be had which is not the case right now."
This is the first time I can ever recall when a president is so attuned to the market that he will bend to its wishes. We go down again like this tomorrow he may tweet that he sees progress. That would cause a total reversal which is why it is so hard to sell here even as I want you to take something off the table in case there is intransigence on both sides.
But remember the silver lining: the same thing that allows the president to play hardball with the Chinese - 3.6% unemployment and 3.2% GDP - is what makes this market buyable after the tariffs are worked into the equation. If it's a man-made selloff it can be a man-made buying opportunity.
We just have to go a little lower before that happens.