WASHINGTON, September 3, 2012 – Given the thinness of the trading and the futility of trying to game international politics, we took last week off from this column, and it proved an excellent choice. Action was negative to weird, particularly in the precious metals, which actually went down as the potential for Middle East violence increased. This counterintuitive move was predictable, however, as key precious metals contracts/futures expired last week, inciting the usual and expected fun and games generated by professional gamblers traders.
Worse, bonds continued to sell off in a slower but still steady drumbeat, as “Fear the Taper” has apparently become the watchword of a newly revived cadre of bond vigilantes. Treasurys still remain under pressure today in a bond market that is now beginning to appear to be ridiculously ahead of itself on the downside.
Given all this nonsense, we waited until about noon today to check the market’s pulse. We’re glad we did.
Making matters worse for the Dow were two additional factors. Microsoft (MSFT) took a -7 percent swan dive after announcing it would acquire the data and serviced businesses of Finnish telco manufacturer Nokia (NOK), whose stock promptly rocketed upward by roughly a third of its value.
Adding to the Dow’s nervous indigestion was the weekend’s news about the decision by Verizon (VZ) to acquire from British-based Vodadphone (VOD) that portion of Verizon Wireless that the American telco giant doesn’t already own, for the usual huge premium, of course. VZ promptly tanked nearly 3 percent.
With big Dow components MSFT and VZ doing a Wile E. Coyote, the Dow, at least for now, is busily tanking along with them, given the substantial weighting these stocks have in the overall DJI. MSFT’s poor action is also affecting the S&P 500 and the tech-ier S&P 100 for the same reason.
In general business news, the ISM Manufacturing index notched up to 55.7 last month from July’s 55.4. While a bit better than “expected” (Wall Street’s most over-used and nonsensical descriptor) the number was still pretty anemic for a so-called recovery.
After last week’s light trading, precious metals nonsense, and Syria scare (soon to be revived in a Congress near you), those precious metals, along with oil, are trying to get back to the upside today, although the move doesn’t look very convincing.
In short, it looks like we’re headed for the usual September-October market action, which generally requires traders to down equal measures of Prozac and Maalox in order to survive for the usual Santa Claus Rally in December.
Vix (volatility) remains too high this week for the average investor. So unless you really like to roll the dice, it’s probably best to stand back from this market. Any morning gains tend to get erased in the afternoon, courtesy of high-frequency traders (HFTs) and their soul-crushing volleys of selling. In other words, “buying on the dips,” which worked so well through roughly the first day of summer, could be really counterproductive here.
We established a small position in oversold Apple (APPL) late last week, and have been riding that Ferris Wheel up and down, hoping to catch a brief run just prior to that company’s new product announcements scheduled for mid-September.
It’s usually a good idea to sell such a trading position in this stock right before its actual announcement presser, which is what we plan to do. Whether the announcement(s) is/are truly exciting or already over-reported by speculators, AAPL tends to get decked right around its product announcements, so it’s usually advisable to leave the party early, even if you get back in later.
For the record, informed rumors have it that Apple will announce a new 5-something version of its iPhone, a bump in iOS plus an already-expected Mac OSX update called “Maverick,” and maybe even new iMacs running on Intel’s latest power-saving processors.
Also eagerly rumored is Apple’s new iWatch (or whatever they decide to name it). But Apple’s BFF, Samsung, has already pre-empted that particular subset of buzz by announcing its own answer to Dick Tracy’s 1950 comic strip innovation. Who knows whether these things will take off anyway.
Aside from Apple, Syria, the upcoming Federal Reserve pronouncements (slated to happen right around the time of Apple’s announcements) and the usual autumn Congressional Follies will likely to continue body-slamming stocks for roughly the next 60 days and perhaps longer.
So, like Smokey the Bear used to say, “Stay Alert. Stay alive.” And stay out, save for a little fun with AAPL, gold, and silver if you have a little stash of cash you could afford to lose without shedding a tear.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He currently holds small positions in AAPL, SGOL, and SILV plus select bonds primarily purchased at the height of the 2008-2009 debacle.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.
Follow Terry on Twitter @terryp17
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