Stocks Plunge With A Possibility That The Worst Is Yet To Come
Stocks were crushed yesterday, with the S&P 500 falling by 7.7% to 2,736. At this point, the S&P 500 is running out of lifelines on the technical side. Once this level around 2,730 goes, it gets even worse, with the next significant level down around the 2,634.
The relative strength index failed to make a new low and could be the first signal of a reversal of the trend. But that might not be for a while.
SPX Daily Chart 
SPX Daily Chart
The VIX rose to a crazy level yesterday at 62.1 and closed below 54.5. But again, these are very high levels of fear in the market.VIX Daily Chart 
VIX Daily Chart
The put to call ratio rose to 2018 low levels
Put Call Chart 
Put Call Chart
The Advance/Decline ratio was, well, you can see how low it was.NYSE Advance Decline Ratio Daily 
NYSE Advance Decline Ratio Daily
On a fundamental basis, if we assume no earnings, but a 5% contraction in earnings. The S&P 500 would have earnings per share of about $149 in 2020, and assuming a rebound of earnings in 2021 by 10% to around $164, at 16 times earnings, the S&P 500 is worth about 2,650.
Do I think we are going to have an earnings contraction? At this point, the evidence would not support that. GDPNow is forecasting growth of 3.1% for the first quarter, and it is already March 9. Could it fall considerably, sure. But other than hearing about work trips being canceled from friends and family, the stores are still packed, and schools are open. Could it get worse, I guess so. I don’t know.
If you want to get all doomsday, the S&P 500 could even be heading back to the December 2018 low around 2,330. It could certainly make for a big-time double bottom. But still, I’d rather not go through that experience. It would amount to a 31% decline for index from the top.
SPX Monthly 
SPX Monthly
If we fell to that level of 2,330, at a PE of 16, the S&P 500 would be pricing in earnings for 2021 of $145. Currently, my model is estimating earnings for 2021 of $190. That is a drop of 23%.BOEING (BA)
Boeing (NYSE:BA) fell sharply, and $213 is the next level, where it fills a gap. After that, maybe it finds some support at around $197.
Boeing Chart 
Boeing Chart
CISCO (CSCO)
Cisco (NASDAQ:CSCO) is another stock looking lower to around $35.
Cisco Chart 
Cisco Chart
MICROSOFT (MSFT)
Microsoft (NASDAQ:MSFT) could fall to around $142.
Microsoft Chart 
Microsoft Chart
BANK OF AMERICA (BAC)
Bank of America (NYSE:BAC) needs to stop falling here around $22, or it could fall back to $18.25
Bank Of America Chart 
Bank Of America Chart
MICRON (MU)
So much for Micron (NASDAQ:MU), not even it could survive the day, and now finds itself on support at $45.50, with the potential to go to $42.
Micron Chart 
Micron Chart