WASHINGTON, Oct. 23, 2015 – As we’ve complained many times in this column before, as long as someone somewhere out there is doing the low interest rate centrally-planned stimulus dance, this is a pure traders’ market driven only by headlines and mass manipulations on those headlines as performed by high-frequency (HFT) trading firms.
There’s no better example of this than over the past two days’ trading. As portfolios stuffed with conservative investments just sit there staring, every high tech and speculative stock in the book (save for most oil companies) is getting its price goosed sky high. Earnings have been so-so this earnings season at best, but no matter. As long as the Fed, the European Central Bank (ECB) and those suddenly friendly-again Chicoms keep the “stimulus” pedal to the metal, stocks will get kicked back up into the stratosphere, à la 2014.
Too bad the party came so late this year, or we’d have stayed out of this messy market until now.
That said, given that the 2015 stock market has remained unmoored from all rational investment strategies, it’s entirely possible that some nasty headline item might leak this weekend and send next Monday’s traders into a selling panic. It’s just impossible to predict this stuff, and we find ourselves at times turning into day traders in spite of the fact that we hate and distrust this “method” of investing, which is really no method at all.
Tech stocks, including Apple (symbol: AAPL), which were all going to die a couple of weeks ago, are looking this week like they’ve just been to a revival meeting. Apple is finally getting up to where it should be, currently circa $117 per share at least, while Microsoft (MSFT) hit the rocket sled this morning, shooting up an astonishing 11.5 percent as we near the market close Friday (that’s +5.47 per share). At 53.51 as of 3:50 p.m., that shows the biggest up-gap on a chart that we’ve seen in quite some time.
Such a huge one-day leap in any stock would, in normal times, automatically signal a serious reversal on the next trading day. But in this market, who even knows? We’ll wait and see what Microsoft does on Monday, but at this point at least, we find ourselves wishing we’d bought some before its recent awakening from its Rip Van Winkle-style multiyear nap. Oh well…
No trading tips today. It’s just too nutty. We’re making money today for a change, but not the kind of money that Microsoft made for its fans in just one afternoon.
If we were back in a relatively normal interest rate environment, repricings this violent would rarely occur. But we’re by no means in a normal interest rate environment. As a result, companies are borrowing tons of free Fed-printed money at nearly zero interest rates to buy back their own shares to create the illusion that their earnings are increasing.
Since that’s what shows up on the books, as misleading as this is, it could very well be that at least for a time, we’ll return to the 2014 mantra of “Buy the Dip” (BTD) in the averages; or, as ZeroHedge likes to put it: “Buy the colorful adjective Dip” (BTFD). Take your pick.
Since the market’s about to close, the Maven is going to do the only rational thing he can do as the closing bell rings. It’s time to pour a small beaker of single-malt scotch, whilst sitting down and pondering where life has gone so horribly wrong.