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Bungee jumping US stocks now totally under the spell of Covid-19 

Written By | Jul 14, 2020

WASHINGTON – I’ve been taking a weeklong class this week, so can’t quite keep up my usual pace of stock market articles. That’s why I missed yesterday’s crushing disappointment of a day during which bungee jumping US stocks soared toward new intraday records before completely reversing. They closed down rather badly. The averages were initially led ever upwards, led by the big tech stocks. They hit new record highs, then lost them in the twinkling of an eye to close badly down on the day.

Chief villains in this not so surprising surprise massacre were Amazon (trading symbol: AMZN), Google-Alphabet (GOOGL and / or GOOG) and Facebook (FB).

Not so surprising?

As bullish as I tend to be, you could plainly see Monday that the bullishness had gotten wildly out of hand on those big, popular tech stocks that “always go up.” (So does Tesla [TSLA], whose shareholders also got gobsmacked Monday.) Which is why, on a day like Monday, they had to go down. There are no certain certainties on Wall Street these days. Or ever, for that matter. And bungee jumping US stocks will continue to bungee jump.

Also Read: The Lord giveth, the Lord taketh away: Thursday’s iffy stock market action

Wait a minute. I take that back. One certain certainty is that whenever the media want to pull the market down in record time, they trumpet another negative but poorly sourced and analyzed article proving we’re all going to die from Covid-19. Maybe this very afternoon. They pulled that trick again yesterday, shouting from the metaphorical rooftops the capricious lockdown order issued by Governor Gavin Newsom, Fearless Leader of the People’s Republic of California.

Sure, Covid cases are on the move. But that’s inevitable due to ever-increasing testing across the US. So, even though deaths are down, we get Act II of “let’s wreck the California economy.” At least for small businesses. The Silicon Valley flock of Golden (State) Geese will keep coining money and paying taxes. But Wall Street picked this nasty economic tidbit up and once again assumed we’re all gonna die. So down we went. (Increased US-China saber rattling hasn’t helped, either.)

Tuesday’s trading action

Tuesday morning, stocks were set to open up nicely. Particularly JP Morgan Chase (JPM). And that’s certainly what happened, with JPM getting a particularly nice pop, back to nearly $100 per share. But then the bears came back to town, brandishing the California and US-China news like Antifa brandishes baseball bats, and with equal effect. Down we went, particularly the big techs, which are getting whacked for the second day in a row. JPM pulled back a couple points in sympathy, which is a shame for faithful bank investors. The broader-based S&P 500 prefers to vacillate right now between slightly above and slightly below the current flatline. Bungee jumping US stocks. What can I say?

Play-by-play account

Fox Business sums up the Tuesday action thus far, echoing my earlier remarks. (Or am I echoing theirs?)

“U.S. equity markets see-sawed Tuesday as banks prepared for the harshest economic downturn since the Great Depression to worsen, undercutting optimism that a tentative recovery will overcome a spike in new COVID-19 cases.

“The Dow Jones Industrial Average gained 240 points, or 0.92 percent, while the S&P 500 rose 0.25 percent by mid-morning, wiping out earlier losses. The tech-heavy Nasdaq Composite fell 0.35 percent.

“The major averages were hammered by a sharp selloff on Monday afternoon following California’s decision to shut bars and indoor dining back down amid a surge in new COVID-19 infections….

“Looking at stocks, JPMorgan Chase & Co.’s second-quarter profit was cut in half from a year ago, but the lender reported better-than-expected earnings amid double-digit growth in stock and bond trading as COVID-19 whipped up market volatility.”

So it looks like another sideways day for Mr Market. On the other hand, we thought it looked like a big rally day Monday. But note what actually happened.

Rallies since early June have generally gotten slapped back

If you look back to early June on the charts of major market averages, you’ll see that aside from the occasional bungee-jump rally or crash here and there, those averages have remained remarkably flat. That means we’re in what chart fans call a “basing pattern.” Or, perhaps, a “consolidation pattern.”

After the big spring Covid-19 market bust, market averages have nearly recovered. That means that if you’re a bull, either the Fed’s money-pumping machines are continuing to work their magic, or the economy is all set to resume the Great Trump Rally. Or both.

Or, if you’re a bear, that means the rally is running out of steam. And when poor earnings start rolling in during the current, about-to-unfold earnings season, we’re getting set up for the greatest market crash of all time as the Great American Experiment finally reaches its sorry end.

Both views are probably a bit too extreme. Or more than that. But right now, that’s why markets are indulging in their current bungee-jumping act. The media continues to push emotional buttons, and is anxious to keep most Americans on edge and nervous, the better to influence electoral politics this November. Life has become a scam. And Mr Market always reflects current events rather accurately.

Guessing today’s market close is like trying to catch a greased pig

Your guess is as good as mine when it comes to predicting how stocks will close today. My current guess is that the Dow closes up 100-200 points, the S&P closes fairly close to flatline on the day, and the tech-heavy NASDAQ fails to impress for a second consecutive day as sellers continue to let the air out of the Big Tech balloon.

(UPDATE: Big Tech got a late boost, allowing all three major average to close nicely up. You never know.)

Looking further out, that might mean we get a definitively down day tomorrow. But it all depends on the headlines, fake or not. This isn’t the way to invest. But at the moment, it’s what we have.

– Headline image: xxx


Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17