WASHINGTON. We weren’t in our investing chair Thursday, busy instead tending to various real estate investments, which required being on the road. A good thing, as it turns out, since the market decided to give up Wednesday’s nice gains for the most part. But we didn’t have to watch. Unfortunately, Friday trading action seems even more problematic. News and financial sites provide a daily deluge of negative-to-rotten, thinly veiled anti-Trump and anti-GOP stories geared toward tanking stocks across the boards into the run-up to Election 2018. Gosh, who knew they would do that?
Anti-Trump, anti-GOP fever in the media
The media has been characteristically bold in their collective anti-Trump, anti-GOP hyper-partisanship. The latest tone-deaf salvo against both was fired by California’s aggressive but dimwitted and overrated Senator Harris. Her latest, unsupported, stupid, vote-buying promises involve telling pro-Democrat voters everywhere that if they put the Dems back into the House majority they will do wonderful things. They will promptly kill off the GOP tax cuts, for example. These are the tax cuts that put American business back in charge of the world. Instead, the government will start paying “the people” lots of money. She promises.
Great logic here. Kill off the Golden Goose of Trump-Recovery U.S. business, and use deficit spending, apparently, to give money away that the Federal government does not have. Since, of course, it killed American businesses once again.
Democrats: Full Stalinist mode
Then again, the Democrats are in full Stalinist mode these days. No longer content to lie about their intentions to get elected before going back on every “moderate” promise they’ve made, the Donkey Party now just boldly tells voters precisely the way in which they intend to ruin American democracy, destroy American business, and make all Americans’ incomes “equal.” Just like Maduro has done in Venezuela. In that country, Maduro supporters, though relatively few in number, get all the bolivars. On the other hand, the rest of the unwashed get to share in the few non-black market bolivars that remain, making the rest of that country “equally” poor.
This dreary truth-telling by those Democrats who don’t worry at all that their ignorant constituents will forget to re-elect them have been making Wall Street nervous. Should even a few of these clowns succeed in taking over one House of Congress—likely the House of Representatives, at this point, if they can do it – businesses know they’ll do exactly the ruinous things their promising to do. So they’re suspending share buybacks just as traders and investors are pulling money out of the market in fear of a DNC House takeover.
Irrational or not, that’s the way the political cookie crumbles. But then, on top of this, we have the Saudi-Khashoggi mess; the media’s ass-kissing “BetoMania” in Texas, the Federal Reserve’s intemperate vow to keep killing the economy whether it needs to or not, the nasty turn the U.S.-China tariff game has taken, and, of course, the Soros-paid-for “caravan” of 4,000+ (and counting) potential illegal aliens from Honduras and elsewhere that’s headed our way. Taken all together, add in the anti-Trump, anti-GOP mania and we get a typical but understandable Wall Street response:
Uncertainty + Chaos = SellSellSell
That’s what too much headline risk will do for ya.
McClellan Oscillator: Wildly gyrating classic market indicator goes nuts
You can see this headline-risk overload play out in the wildly gyrating McClellan Oscillator chart we’ve placed at the top of today’s article. The chart drops way down beneath the zero (placid market) line. It takes a quick bolt upward. Then it gets whacked again. The Oscillator, for those who’ve just joined us, is a chart measure of overbought and oversold markets.
Extremes on either end indicated at least an impressive snapback rally. But such rallies generally last a few days or even longer. This week’s snapback rally lasted just one day, indicating that chaos continues to reign.
The VIX turns highly volatile: Crazy markets ahead
That, in turn, is illustrated by the volatility index, or VIX. The VIX has been on a tear this month, as you can see in the chart below. Wednesday, it looked like things might be settling down. But, if you look at the chart here, you can see that volatility kicked right back up yesterday. That indicates that it’s going to take a longer time for markets to settle down. Like maybe after Election Day 2016, after one final big spike up or down. Depending which party takes over or retains the Senate and/or the House.
Back to present tense, earlier today, CNBC weighed in with Friday’s morning scoreboard.
“The corporate earnings season is off to a strong start. With more than 15 percent of S&P 500 companies having reported, 83 percent have topped analyst expectations, according to FactSet.
“These moves follow a sell-off on in the previous session as investors worried about rising rates, geopolitical tensions and a potential slowdown in the global economy. On Thursday, the Dow dropped more than 300 points, following a plunge in Chinese equities. History shows that, when stocks plunge in China, the U.S. market is rarely immune as large exporters suffer.”
Looked pretty good until that China thing.
Friday’s current market action
As for today’s averages, the Dow and the S&P 500 have been trying to keep their turf in the green today. But at times, both averages have failed, tanking in the process before bouncing up slightly.
Meanwhile, the tech-heavy NASDAQ has been doing what tech has been doing lately. Selling off. Oh, sure, at 1:38 p.m. ET, the Nazz is currently positive by the whopping percentage of 0.01 percent. But at the rate it’s going, it’ll sink beneath the waves again momentarily.
Many of these stocks, overpriced at the outset of this nasty bear-pocket, are now more attractively priced and will start getting a bid again. But maybe not yet.
Another confusing element: The re-ordering of investment categories that has sent several big and important stocks away from the Consumer Discretionary and IT sectors, and into the new Communications Services sector that has recently revised and replaced the old Telecommunications sector.
As these averages – and the ETFs that follow them – balance and rebalance, that’s thrown a considerable amount of portfolio-revision tension into the managed portfolio world. And, along with it, considerable buying and selling of big issues involves as fund-runners rebalance their portfolios, often swapping the same stocks, which now have to go in different sectors. What a mess, as all of this is occurring right around Election 2018.
Love Trump’s policies, hate Trump. Wall Street simply can’t choose
But what the heck, the better to derail House Republicans and “impeach Trump.” Traders and investors—the rich ones at least—deplore Trump because he’s unfashionable. Yet they love, love, love Trump’s and the GOP’s current, very pro-business policies. So against their best interests, they send money to Trump’s and the GOP’s Democrat opponents. Perhaps they understand that the latter continue to run the Federal government’s money machine and they don’t want to get stiffed if there’s Federal money and contracts being handed out.
Stated in another way, they love Trump and the GOP. But they’re monetarily supporting pols that vow to vote down the policies that are making businesses rich. This is the kind of stupid world we live in today.
In any event, we’re trying to stay fully invested in the midst of this anti-Trump, anti-GOP Election 2018 propaganda mess. But it’s not a happy time for us. Ultimately, staying successfully invested during October 2018 depends on just how much pain you can take. And that’s a real problem. Too much pain makes you bail. But when you bail, that’s probably the time NOT to bail.
On the other hand, if you want to retain at least some of your precious personal capital, you have to triage the losses some time and some hollow. That’s what people have been doing for the last couple of weeks.
Welcome to CrackerBox Palace
Add one final wicked ingredient – the fact that many funds must snug up their portfolios by the last business day of October in order to come up with annual figures by December – and this market resembles the Beatles “Crackerbox Palace.”
— Headline image: McLcllan Oscillator ($NYMO), 08/18/12018, chart courtesy StockCharts.com,
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