Oil catches a bid as the inevitable Saudi-Iranian faceoff begins. Meanwhile, China’s markets tank. All this equals a nasty start to 2016 trading on Wall Street. UPDATED.
WASHINGTON, Jan. 4, 2015 – As newshounds already know, long-simmering tensions between Saudi Arabia and Iran came to a boil over the weekend. The Saudis had a head-chopping party late last week, sending some 47 souls to Allah and/or the hereafter for various crimes, including some serious ones.
But the main event was the removal of the head of a radical Shiite cleric who, major media excuses aside, had clearly been working for the Iranians plotting the downfall of the Saudi royals. Predictably, there was a “spontaneous” demonstration in the far northeastern Iranian city of Mashhad that destroyed the Saudi consulate there. In fairly short order, the Saudis terminated diplomatic relations with Iran.
With so much of the world’s oil at stake in this inevitable brouhaha, not to mention the prospect that our long-simmering World War III may begin to boil over into something far more serious, oil caught a bid on world markets and gold caught an even bigger one.
Feeble manufacturing surveys in China revived concerns over the slowdown in the world’s second largest economy. Fresh manufacturing PMIs on Monday showed a fall to 48.2 in December, from 48.6 in November, contracting for a 10th month and coming in below a Reuters poll forecast for 49.0.
The distinctly risk-off mood was highlighted as the Shenzhen Composite had its worst day since early 2007, closing down 8.2 percent. The Shanghai Composite ended down 6.86 percent and trading on both exchanges was temporarily halted as the authorities implemented a “circuit breaker” for the first time.
All this, of course, hit European markets earlier this morning, driving them down. And, as the earth turns, Wall Street will be taking the next hit, and it is likely to be a hard one. Dow futures are currently off a colossal 323 points. Gold, finally getting back to its traditional role as a safe haven in chaotic times, is up over $17 an ounce. Oil is up half a buck—not great, but better than late last week. And everything else looks like it will be headed down—way down—when U.S. markets open at 9:30 a.m. EST.
It’s not the way bulls wanted 2016 to begin. But the opening day of 2016 trading looks to get off to a very bad start. Where it ends, of course, is anybody’s guess. Likely results, though: 2016 could be another year like 2015, where stocks churn violently up and down and kill portfolios yet again as traders and investors alike get whipsawed to and fro, mis-timing purchases and sales again and again. It’s a depressing thought, relieved only by the knowledge that Jan. 20, 2017, we’ll have a new president, whoever he, she or it may be.
We’ll update this column a bit later in the day once some kind of trading range is established.
UPDATE: As expected, markets tanked, big time, with nearly everything down and with some stocks and ETFs, notably biotech ETF IBB, down dramatically. After the Dow plunged over 400 points with the other averages following some bargain hunters materialized late afternoon, regaining a couple hundred Dow points. But Monday marked one of the more truly awful trading days to start out any New Year in recent memory.
Today’s trading tips
We have only one: stand back. This will be an ugly opening trade to start the New Year, but after about 11 a.m. EST, things could go either way, although we’ll still likely close down to way down.
In such situations, best thing is to get out of the way until the nonsense ceases. If one is in a bolder mood, a quick spec on gold via one of several ETFs (we usually use SGOL), a few shares of Apple (symbol: AAPL) as it crashes again may eventually work, and maybe even the natural gas ETF, UNG, might be worth a look, given the nation’s suddenly increasing deep-freeze temperatures and oil’s likely pop here, which makes natgas seem more of a bargain.
UNG looks to open down this morning, for whatever reason, but perhaps likely due to its surprisingly robust recent run up. Maybe it’s already made its move.
But as we’re saying, anything anyone chooses to do this morning is pure spec. The bears look to take control of things early, and it seems like they’re in a very nasty mood.Click here for reuse options!
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