WASHINGTON, Nov. 9, 2015 – Markets this fall have felt like playing a roulette wheel or spinning a wheel of fortune at a cheap carny sideshow. “Round and round and round she goes, and where she stops, nobody knows!”
After a mostly nice first week of November trading, the market tone began to deteriorate on Thursday and Friday with volume way down and sentiment notably weakening. What had changed the bull equation? Simple. All of a sudden, we heard, the Fed was putting that long-gone December interest rate increase back on the table.
The biggest and most exuberant reaction to this rumor was a big jump in long-moribund bank and financial stocks. Off to the races? You bet. Even beleaguered Bank of America (symbol: BAC) caught a healthy bid, looking as if it were at last ready to break out of its trading range.
But what a difference a (trading) day makes. This morning, banks and financials are getting whacked once again, and nearly everything seems to be down. The Dow was off well over 200 points by early afternoon, although as we near Monday’s close, that average has recovered somewhat and is currently down “only” 148 points. Small comfort for last week’s bulls.
What happened? Seems that all of a sudden, maybe the Fed won’t raise interest rates in December after all. Or not. Who knows? It’s getting stupid out there. The market tanks when interest rates are rumored to be going up. The market tanks when the Fed seems to be backing off on the issue. It’s all absolutely ridiculous and is dumping most long-term, effective buying and selling techniques right into the crapper, if you’ll excuse our French.
The reality is this. Corporate earnings in general—largely inflated not by real profitability but by corporate stock buybacks with free QE money—are flat to down as the long-term shell game being played by wealthy corporations, officers, and boards of directors becomes clear. There is no growth, and sooner or later, PE ratios (and stock prices) are going to have to reflect this lack of progress.
So what’s really going on is a lot of rumormongering, resulting in headline-driven buying and selling by HFTs, most of whose officers and bigwigs would be in jail if we actually had an SEC that worked for the American people. But we don’t and there it is. In the absence of real, encouraging news, the computer clowns have turned the stock market into a rumor-driven video game.
Making this pathetic reality worse is the equally bi-polar news coming out of China, which once again turned negative Monday as both imports and exports to that worker’s paradise were reported to be sharply down. So much for international growth hopes.
So what we have here is another Blue Monday, something that’s been standard issue throughout most of 2015. It’s not going to change anytime soon, either, until the Fed actually takes a stand one way or the other and until China finally gets off its five-year plan high horse and starts doing something concrete about its mess of an economy besides threatening to execute a few corporate CEOs for selling stock.
“Round and round and round she goes.” Monday’s likely close is better than where things started out today. But in the end, everyone is still confused.
Which means no trading tips for today or Tuesday.
UPDATING: The Dow ($DJI) has just closed down 178.58 points at 17,731.62. The S&P 500 ($SPX) closed off 20.53 points at 2,078.65, and the NASDAQ was down sharply, off 51.82 at 5,095.30. All three averages were off about 1 percent on the day.