Bungee jumping US stocks take cliff dive Tuesday, rally Wednesday
WASHINGTON – After last Friday’s big crash and Monday’s exciting rally, Tuesday turned out to be another nasty cliff dive for our portfolios’ bungee jumping US stocks. All three major averages – the Dow, the S&P 500 and the tech-heavy NASDAQ headed right off the cliff again this morning. As markets opened Wednesday, things looked a bit better again. But after that first or second bungee jumping bounce, one worries about how far the next ride down will take us. And the bears are already chomping at the bit. Because Covid. More on this a bit further down.
More about those bungee jumping US stocks
Speaking of bungee jumping US stocks, check out Tuesday’s McClellan Oscillator chart. Note the horrendous Tuesday dive, charted at the lower right on this leading indicator. This seems to be approaching this past spring’s yearly low, indicating a big, bullish bounce up may occur at any moment. This started to happen Wednesday morning. But keep reading.
Looking back, none of Wile E. Coyote’s famous Acme devices could have saved stocks from another severe beating Tuesday. True, the techs gave it a good run. But in the end, they, like other sectors, mostly succumbed to another wild chapter of Covid-Omicron gloom and doom. Only some interest-rate sensitive shares were spared from the Tuesday bloodbath. At least to some extent.
And Apple (NYSE: AAPL), for some reason. Maybe fears of another long stretch of virtual home schooling.
Some words from a noted fixed income guru
Innovative Income Investor’s preferred stock and baby bond guru Tim McPherson penned an evenhanded executive summary of the unfolding gloom and doom early Tuesday, as the extent of the carnage grew more obvious. And ominous.
“It looks like stocks and bonds are taking another wild Covid ride today–stocks way down with yields tumbling by 5-6 basis points.
“So we go from Friday being wild down, Monday a ride up and now Tuesday back down.
“It is all kind of silly–but markets have been kind of silly and artificial for a few years and there is no reason for anything to change now.
“Add the Powell and Yellen show before congress today to the Covid variant and you have the ingredients to send markets into a panic. Oh well–these moves have really been just noise–we remain just a few percent off of record highs in the various indexes.
“It really continues to be a ‘wait and watch’ situation–we need to have the Covid situation shake out a bit since this is the market mover right now–could be a couple weeks.”
The Bad News Covid Bears return, just in time to chill the Wednesday snapback rally
Right now, as we put the finishing touches on today’s market article, Mr Market seems intent on playing games in Wednesday afternoon trading thus far. After a tremendous 500 point opening rally in the Dow, the bears gradually returned to roll that rally back.
They’ve just been aided and abetted in that quest by the inevitable Covid terror report. It arrived Wednesday afternoon, just in the nick of time. Before the bulls could prevail. We’ve seen this coming, as we’ve experienced the gradual rollout of each successive, business repressing Covid media terror sequence. Perhaps the Davos bunch and the current White House Resident worry that capitalism might triumph once again just after they had it on the ropes.
This afternoon’s Fear Factor report claims that the first (alleged) Covid Omicron variant case has just appeared in California. (Send by Chairman Xi?) And of course, this report came from Dr Fauci’s always-reliable CDC. And, as we know, Dr Fauci IS Science.
Anyhow, settled Market Science right now is this. The Dow promptly gave back nearly all its initial gains. Ditto the other major averages, the S&P 500 and the tech-heavy NASDAQ. However, as of 2 p.m. ET, the bulls appear newly determined to win the day. Right now, it’s a tossup. Most notably damaged right now? Oil, gas and travel-related stocks, as usual. The usual permabear and day trader combo is killing these stocks again, because, Covid.
Predicting today’s market close = another gesture of futility. This is no way to run a country.
Now where do we go?
I often wonder if US markets will ever return to rational investing strategies again, as opposed to reading the online headlines of the moment. Most of these tend to be political, not financial, in origin. And playing them is a lousy way to make money in the long term for the average investor.
We’ve added a bit to positions that survived Tuesday’s onslaught with little damage. It may take more than a few days to see if that’s the right strategy for us. But, as of right now, the Covid Krusaders seem intend on stopping any incipient Santa Claus Rally in its tracks.
Covid is fast evolving into a disease that’s now more of a political than a medical problem. But the current excuse for an Administration and its media sycophants don’t want you to know. They’re also strangely quiet about the previously postponed and now incoming government funding crisis, fiscal 2022 edition. That legislation is back up for a vote again soon. A government shutdown, which the Democrats seem eager to court, could slap Mr Market around rather badly. And, once again, this could happen right on top of the latest Covid terror narrative. This week’s bungee jumping US stocks might continue indulging with their dangerous and irrational non-direction. Where’s Santa Claus when you need him?