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Stocks End Sharply Lower, Next Support Levels Eyed

Stocks closed sharply lower on Friday and for the week. That's two down weeks in a row, and four down weeks out of the last five.

Earlier in the week, it looked like the S&P had found support. But that was short lived. Friday saw near-term support give way and more selling ensued.

So the correction continues.

The next layers of support for the S&P come in at 2,532 (February's reactionary lows, and just -2.61% away); and then 2,417 (the gap left on the chart from September 8th, 2017, and only -7.04% away).

Currently the market is down -11.60% from the highs. That's similar to the correction we saw earlier in the year before powering up to new highs.

At 2,532 support, we'd be down -13.90%. And at 2,417 support, we'd be down -17.81%, which is not much different than the correction we saw back in 2016.

The point is, prior to this year, we went almost two years without a correction. But this year we've had two corrections within the last 12 months. Unfortunately, that's just part of investing. In fact, there's been numerous corrections over the last 9 ½ years of this bull market. But the market always came back because the underlying fundamentals of the economy were strong.

And right now, I'd say the fundamentals of the economy are stronger than at any other time during this bull market.

The correction is real. We're going through it, just like we have before.

But now is not the time to give up.

There are definitely challenges the market needs to overcome, not the least of which is the ongoing trade dispute with China. And the impending budget battle and potential government shutdown on December 21st.

But even during corrections, there are plenty of standout stocks. For the record, there are thousands of stocks beating the market. Over 1,080 stocks up 20% or more. And over 240 stocks up 100% or more YTD.

You just have to know where to look.

So make sure you're taking full advantage of this correction. There are great bargains out there. And stock prices you only wished you could've gotten in at just a few short months ago.

Be cautious. And be picky. But stay vigilant.

There are plenty of people beating the market right now. And that should include you too.

See you tomorrow,

Kevin Matras

Executive Vice President, Zacks Investment Research


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