After a nifty morning rally, the bears, the HFTs and the algos are wrecking the party again, with oils, biotechs and techs all get brutally hammered and with all three major averages sinking fast.
WASHINGTON, Jan. 13, 2016 – It might as well be Friday the 13th, not Wednesday, given the latest of this month’s serial disasters for traders and investors alike. After a bright, happy opening surge by hopeful bulls, the early buying surge, building on Tuesday’s positive action, soon proved to be a wasted effort. The Dow, the S&P 500 and the NASDAQ are down horribly once again.
The moment the latest news confirming even larger oil inventories than all Wall Street’s Wise Guys could ever have imagined hit the wires, the Great Bear materialized and proceeded to smash both stocks and widely followed averages down savagely. To switch metaphors, the Good Ship Wall Street started taking on serious water on Jan. 4 and has been slowly sinking pretty much ever since.
The Dow (-270) and the S&P 500 (-35.70) are currently down roughly 1.5 percent each as of 2 p.m. EST, while the NASDAQ (-126.32) is being hammered even worse, down nearly 3 percent as we write this brief article—brief because there’s not much more to say than we’ve already been saying.
If things proceed as they are currently, we’ll be even more oversold than we were after Monday’s vicious close, which was only patched a bit by Tuesday’s brief and surprising bout of optimism, which, for a few minutes at least, looked like the feeblest of dead cat bounces.
Of course, given the way things have been going since roughly springtime, 2015, we could get the Mother of All Snapback Rallies this afternoon or tomorrow morning, even. But right now, the Wall Street bloodbath continues with pretty much everything down hard, particularly in the tech and biotech sectors.
More and more stocks are starting to look attractive. But then again, trying to buy what looks like a bargain in this market is like trying to catch a falling machete with your bare hands. (Or is that “bear” hands?) Stay away. Stocks are getting as irrational as we’ve seen them since… well, since 2008-2009. But, aside from going short, which is treacherous in its own way, it’s going to be hard to find any winners here until this Niagara-like waterfall decline begins to dry up.
According to Wall Street’s current so-called wisdom, this January smackdown won’t be over until we get a firm reversal in oil price declines (down yet again after a very healthy opening trade), some sense that the Chi-coms and their economy finally understand the pitfalls of money and stock manipulation by Central Committee, and TV’s clueless pundits cease terrifying traders and investors with warnings that Armageddon is imminent.
Today’s trading tips
As we advised Tuesday, best thing to do is stay out of the market until the current asininity starts tapering off. Every move is a wrong move, no matter which side you take. Volatility is high, and whatever side of the trade we take, we are almost immediately whipsawed in the opposite direction.
We retain our high-dividend-paying preferreds and get out of the rest of our portfolio, more or less, as the opportunity arises. We should have dumped the lot of our holdings, preferreds and bonds excepted, in December. But we tend to tilt a bit bullish here, which has really betrayed us over the last six months or so.
For defense, we’re looking for good opportunities to go short in order to protect our remaining positions. We’ve already established a tiny position in the somewhat unreliable S&P 500 short ETF, symbol SH. But that’s because it provides a kind of slow motion protection. What we really want to do is get into the double short S&P 500 ETF, SDS. But market moves are so abrupt currently, that we would need to have a pretty dramatic rally to inspire us to make this move. We’ve tried a couple of small moves, but they’ve failed. So we need something more decisive to make a good-sized position in SDS, and perhaps one or two other shorts, work for us.
Stay tuned, and we’ll update if there’s anything to update. And do remember: Monday is not a trading day in honor of the Martin Luther King Jr. holiday. We’ll post news and trading rules for the holiday tomorrow. A long weekend away from this market will feel like an exotic vacation.Click here for reuse options!
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