WASHINGTON. The bungee jumping dude in the photo above is just about ready for a big, reactive bounce back up. That’s exactly the way US stocks were poised at Thursday morning’s 9:30 a.m. (ET) bell at the New York Stock Exchange (NYSE). Sure enough, as the bell rang, we were off to the races, to mix a metaphor.
Bungee jumping, Wall Street style
At the brink of disaster by Wednesday’s close, bungee jumping US stocks are at the high point of a Thursday bounce that at one point exceeded 500 points to the plus side in the Dow Jones Industrials.
An hour before Thursday’s closing bell, all three major US stock averages are up significantly. In the lead position at the moment, the tech-heavy NASDAQ composite (symbol: $COMPX) is rocketing toward the stratosphere, up a massive 241.12 points for a 3.4 percent gain on the day. (So far.)
The once beloved tech sector has been beaten badly over the last few weeks by sellers either sensing a sea change, investment-wise or just taking their 2018 profits and getting the hell out of dodge. Which, as it turns out, was a swell idea we should have embraced.
But today, holders of these surprisingly battered stocks at least have something to smile about. But with this touch of relief today, we may discover that remaining tech investors are using Thursday’s rally to bail out of tech yet again.
Meanwhile, the broader-based S&P 500 is up 60 points or thereabouts, logging a 3 p.m. gain of 2.3 percent.
In third place is the Dow, which one intrepid and seasonsed trader once called “the average for the tourists.” Meaning that 30 large cap stocks do not a market make.
At any rate, the dow is currently ahead by about 460 points from Wednesday’s close, for an approximately 1.9 percent gain. But again, I wouldn’t be surprised to see moderately relieved traders and investors bailing as we reach the closing bell.
Fighting a horrendous stock market
The market has been horrible recently. That’s why the general instinct right now is to take your losses, pile up the resulting cash, and wait for better investment weather. In this case, that will probably happen after we get the final tallies from Election 2018. The Tylers over at ZeroHedge tend to agree with this notion, albeit in a roundabout way.
“In fact, ‘if history is any guide, traders should proceed with caution,’ Will Geisdorf, technical strategist at Ned Davis Research, told clients in a note this morning.
“The S&P fell in 13 out of the past 15 sessions, which happened 21 other times since 1931. When such sell-off has occurred, the S&P fell on average 0.2% five days and 0.8% 10 days later, 1.7% 21 days later, before gaining 2.1% 63 days later.
“[Says Geisdorf,] ‘What do we need to feel confident that a bottom is in place? A breadth thrust, which we haven’t seen since just after the 2016 election’
“‘What makes this case unique is that it is occurring within a secular bull market. Typically, this type of negative price action is associated with a secular bear.'”
Fed interest rate risk, China trade risk, and this fall’s relentless headline risk, courtesy of an out-of-control Washington Congress and Federal bureaucracy will likely persist. As they do so, all the above will drive stocks nuts until the results of the November elections become finalized. A GOP sweep will likely lead to happiness. A split-party Congress will likely lead to wild, confused trading. And a total
Socialist Democrat takeover of Congress will lead to absolute market slaughter.
Investors tend to react in bizarre ways when they fear their stash is at stake
Oddly enough, my opinions here are not so much based on politics, but on the way traders and investors generally react to political events. Right now we have a president and a Congress that are, in most cases, very, very pro-business. That’s a good thing, even for wealthy traders and trading firms and rich New York fat cats.
All these fat cats are wealthy Democrats, of course, which should be an oxymoron, but isn’t. But they like money even better, and the current Washington arrangement is helping them make bales of Benjamins. They hate Trump, of course, but love what he’s doing for them.
Ironically, many of these overcompensated goofballs will vote against Trump and the GOP anyway, essentially voting against their own considerable self interest. Once committed to our weird, top-down Socialist Party, aka, the Democrats, it’s hard to give them up.
But a more rational cadre of impossibly rich guys and companies will hold their collective nose and vote GOP so they can keep making money and avoid paying too much in the way of taxes. We’ll have to wait and see who wins this contest when it’s actually held early next month.
More trading scenarios than there are in a business week
Meanwhile, dozens of imaginary scenarios play out each trading day, helping drive markets even wilder. Mainly because no one really knows how the hell this will turn out. Hating uncertainty, stocks will overact either up the upside or the downside. Yesterday we had the bungee jumping downside. Today, we appear to be having the first bungee jumping upside. We’ll have to wait and see at the closing bell.
As for us, we’re way distrustful of this latest bounce-back rally, and fear that, like the other ones we’ve had this fall, it, too, could vanish in a twinkle. So we’re using today’s upside party to trim small amounts of shares from various ETFs that have been suffering in this market. Just raising a bit of cash here and there, selling out small, anemic positions, and reducing the size of bigger, more horrendous positions.
Increasing cash positions
That’s because we’d like to have some cash to spend when this very nasty, YUGE downdraft exhausts itself, the better to offer bargain basement prices when sentiment turns.
Beyond that, no specifics. For me, at least, this is something of a touchy-feely market. (Can I use that expression these days without getting arrested or SWATted?) No rhyme or reason here. Trading in and out of positions is, for the moment, a crap shoot.
We’ll add a postscript to this article in case the rally develops beyond where it is right now. Otherwise, we’ll see you tomorrow as we try to figure out if US stocks actually know what they’re doing and pricing in. Or if we’re just in the midst of a Zombie Apocalypse, led by a bunch of wild, bungee jumping traders still hoping to game this increasingly irrational system.
(UPDATE: For the most part, stocks couldn’t quite sustain their early Thursday enthusiasm at the closing bell. The NASDAQ managed to retain a near 3 percent gain on the day, while the S&P 500 and the Dow rolled back a bit from today’s highs. The Dow did manage to close right at the +400 pt. mark on the day. But it’ll take more than one sunny trading day to reverse the current, glum mood that’s been driving stocks down. I’ll be back tomorrow to see if this market finds any firm direction.)
– Headline image: Jump in progress from Nevis Bungee Platform near Queenstown, NZ.
(Image via Wikipedia entry on bungee jumping, CC license 3.0)