WASHINGTON, November 2, 2016 – Today, Wednesday, feels like the Day of the Dead on Wall Street for traders, investors and institutions alike. Election jitters and another big drop in the price of crude oil are contributing to yet another stiff decline market wide in Wednesday trading action.
The major averages are all off today, with the broad based S&P 500 and the tech heavy NASDAQ getting hit for yet another half-percent decline as broad based selling continues. The Federal Reserve’s just-released rate hike indecision—no hike but contemplating one—isn’t exactly helping the mood on Wall Street either.
Even as we write this, all three major averages we follow continue to plummet, with the Dow Jones Industrials collapsing from a negative 50 point to a negative 100 point decline just minutes after the Fed’s announcement. The much-anticipated wording of the Fed’s November tea leaf reading is simply adding to the day’s uncertainty, and the averages will continue to gyrate, mostly to the negative.
CNBC excerpts the key paragraph from the just-released Federal Reserve Open Market Committee report:
“‘The committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives,’ the FOMC said in a statement released Wednesday at the conclusion of its two-day meeting.”
The cumulative selling pressure in all stock sectors is getting the universe of stocks within striking range of an “extreme oversold” condition according to the latest annotated chart from ETF Digest’s Dave Fry, who, BTW, has happily re-surfaced after discontinuing his subscription service to offer occasional insights on his site, like this annotated posting of the hugely reliable McClellan Oscillator as of November 1:
While the market mood is extraordinarily sour for this normally positive part of the trading year, It is Election 2016 politics that seems to have U.S. markets in its strongly negative thrall, as behind the scenes polling—not available to the public—seems to be telling Wall Street insiders who have strongly backed Hillary Clinton that they might have wasted all the millions of dollars they spent to elect her as President.
Worse, this inexorably leads to the impossible-to-believe conclusion that The Donald might actually win next Tuesday’s finale. Like the election of that yahoo Andrew Jackson nearly 200 years ago, this possible conclusion is leading to severe attacks of rage and fear among all the smart people. They now cower in fear of Trump and his Deplorables coming into power right at the moment they were about to institute mandatory globalism, aka Feudalism 2.0.
We will wait and see. Popular votes are not electoral votes, and everyone needs to remember that going into next Tuesday’s final voting action. Problem is that the Democrat left has so infuriated at least half of the national electorate so much that anything less than a Trump landslide will cause never-ending trouble for businesses and individuals alike.
Alternately, should Clinton win by any margin, we can look forward to an administration very like Nixon 2, and we know how that one ended.
It’s ugly, but there it is, and it’s not going to help stocks out at all, even after all the shouting, recounts and court cases are over. The McClellan Oscillator tells us we’re very, very close to a sharp, “oversold bounce.” But once the oscillator drops breaks below the ETF Digest’s bottom line—the line of support— the selling can go on longer than any of us think before we get that bullish bounce.
Our very large position in Allergan Preferred shares (symbol: AGN/PRA, your brokerage’s symbol may vary) is getting absolutely hammered into oblivion today, courtesy of its linkage with Allergan common stock (AGN).
In a nutshell, Allergan reported missing its quarterly numbers by a considerable margin. Its common shares were pancaked this morning in furious trading action, and AGN was off as much as 10 percent at one point. It’s now down about 8½ percent, cold comfort to current shareholders.
Since AGN/PRA is linked to the common stock by a convertibility feature, traders have trashed it as well, absurd to us given the preferred’s now over 7.15 percent yield. On top of this, another ex-dividend day is coming up soon for AGN/PRA. With these shares set to be retired at par ($1,000) on March 1, 2018, what’s not to love about a stock now priced at $738 and change? Apparently a lot, according to today’s mindless sellers.
We bought a bit more AGN/PRA Tuesday and are flirting with picking up a few more shares today. In one way, it’s utter foolishness to get so overweighted in one stock. But given the likely uncertain political future, one that will roil markets for longer than anyone can imagine, we’re willing to take some temporary damage to our portfolios as we await six more fat quarterly dividends ($13.75 per share) and a now even bigger capital gain on every share we’ve purchased.
AGN/PRA goes ex-dividend on November 10, so any shares purchased prior to that date will get the dividend. Hmmm. Tempting, though at least for us, a bit risky, given how many of these shares we already hold.
Then again, the old rules for sensible trading seem to have vanished this year, so maybe it’s best to raise the Jolly Roger and trade against the grain. Who knows?
As we noted yesterday, we’ve also put in an order for another IPO, set to be priced Thursday evening. Smart Sand, Inc. (proposed symbol: SND) is what it says it is, a miner and producer of high-grade fracking sand, with competitors like its Wisconsin neighbor, High-Crush LP (HCLP) and a company based close to us in Frederick, Maryland, U.S. Silica (SLCA).
What the anti-frackers never tell you is that “fracking fluid” is about 97 percent fresh water. The final 3 percent is where the “additives” come in. But, depending on a given fracker’s formulation, most of the 3 percent is actually fracking sand—a finer variety of the beach sand most of us love, and just as neutral chemically as anything can be. For that reason, the actual chemicals used in fracking are an almost infinitesimal part of the mix, something the eco-freaks never bother mentioning.
With regard to these fracking sands stocks, however, the near term continues to look weak as oil prices have yet to stabilize at a level where more wells begin to come online. Which means that we’ll actually need to see a major cut in this IPO’s current $15-18 price range before we make our final decision in this already relentlessly negative market.
It’s all beginning to look like the horror show traders and investors experienced at the beginning of this year. What a mess. Stay tuned. We’ll keep you posted on the action, even if we have to do it from a bed in the local hospital’s ICU.Click here for reuse options!
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