The Bear Case For Stocks in Q4

JC Parets
September 20, 2019

I've been in the camp that this 20-month consolidation in the U.S. Stock Market is just that, a consolidation within an ongoing uptrend that started in early 2016, or 2013, or even further back depending on who you ask. I already made my case.

When you factor in the global market conditions, which I've done here, this is an environment where I believe it's easier to get paid buying stocks, not selling them. That could certainly change. Energy could roll over again, Small-caps and Transports could lose their former lows and new downside leadership can emerge. While I think that is the lower probability outcome, it's always an important exercise to consider the other side.

Today we're making the bear case and presenting the evidence that most points to a bearish environment in Q4 and one where we're better off selling stocks, not buying them.

I posted this on Twitter and I encourage you to join the conversation and make it a better thread! It will be valuable to come back to this in a few months:

Alright everyone. Let’s make the bear case for equities. Tweet me your best charts that would argue selling stocks is the best thing to do for next quarter instead of buying them

— J.C. Parets (@allstarcharts) September 20, 2019

As I was going through my weekly charts, these failed breakouts in Industrials stood out as charts that argue selling vs buying. I think it's just a matter of time before these break out for real, but if you're bearish equities and think we need to be selling, you'll want to see downside follow through in the coming weeks to confirm you're correct in your bearish thesis. Here's the Daily Line Chart:

And a Weekly Candlestick Chart:

 

Make sure to share your chart!

JC

 

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