SPX 3455.06. After 4 days above 3500, we fell hard.
The market opened lower and kept falling until we settled down 3.5% in the SPX and -5.07% in the Nasdaq. OUCH!
The cold bucket of water in the face was inevitable given we just came off of 9 straight days of record breaking new highs. The P/E of the S&P 500 reached 27%, an all-time record last seen at the height of the the DOT COM bubble. We also saw three market leaders (AAPL, TSLA and ZM) reach stratospheric levels with charts that are parabolic – mostly because 2 of them had stock splits. Somehow the media and/or lack of math skills has each new generation produce people that think when a stock splits, free money is made and this time, the free money must have been huge.
Take AAPL as an example. Weeks earlier, the stock was sluggish on news of 5G problems. On July 30th, the company announced earnings, and the stock was at $360. No one cared about the earnings, rather the thing that got people elated was news that the stock was going to split 4:1. That was enough to take the stock to a height of 551.92 ($191 higher) by September2. What did people think was going to happen?
Wednesday, the leaders were being sold by people who can spot a “pig in a poke”. Yesterday, the weak longs had enough pain to also capitulate and sell the stock down $10.52 (-8.0%). Telsa lost 9.02% and Zoom was the big winner/loser at -10%.
This sent the Dow -807.7 points (-2.78%) and the SPX down 3.51% (125.78 points). The Nasdaq? Fo-get-bout-it. It lost 5.07%. Please do not cry. The SPX is still higher by 7% for the year when just a few months ago the world that the world was ending with bodies piled in the streets like cord wood.