WASHINGTON – Investors today encounter increasingly weird trading patterns when trying to buy US stocks. Thursday’s market action is a case in point. Major averages closed virtually flat with techs logging modest gains, as usual, the S&P 500 closed barely in the green, and the Dow Jones Industrials closed down 0.15% on the day. (Yawn.) Erratic US stocks and bonds continue to wobble in uncertain trading action. In anticipation of Friday’s incoming options expiration pandemic, perhaps? Will stocks tank? Will last week’s brief, fearsome rally re-ignite?
Answer: Nobody knows. Except maybe for the mega-rich and their high-speed trading algorithms.
And save, perhaps, for the short-sellers trying to panic retail investors out of stocks so they can close out those shorts, buy low, and then induce those same retail investors to buy in again at higher prices so the moneybags can sell high. What a racket.
One reason behind today’s wobbly trading action
Jim Cramer waxed cynical about Wall Street’s motivations around the end of last week’s mystical market machinations.
“CNBC’s Jim Cramer said Friday that professionals on Wall Street are taking advantage of amateur investors by bidding up beat-up but popular stocks like airlines in premarket trading.
“‘It’s a game. If it weren’t securities, let’s say it was monopoly, let’s say it’s Draft Kings … it would be so much fun,’ Cramer said…. ‘Pick a couple of stocks, you gun them in the morning, and then you hope people are stupid enough and they buy them.’”
Referring to the recent certifiably insane bullish action in currently eviscerated airline stocks, Cramer stated the obvious. Which, these days, seems entirely un-obvious.
“[Cramer] said people who really wanted to invest in a company like American Airlines, betting that coronavirus-related impacts of air travel would not be a long-term drag, would wait until the market opens.
“‘If people wanted these stocks, there would be plenty of supply if they would just wait until 9:30 a.m.,’ Cramer said…. ‘But no, they’re fomenting action. Once you foment action, it brings in suckers and then maybe they’ll buy the stock thinking that there’s something going on.’”
Remembering Dave Fry’s advice on trading action at the opening bell
Refining on this observation bit, Dave Fry, formerly head guru at his now-discontinued site ETF Digest, opined that trading action at the NYSE’s 9:30 a.m. opening bell was nearly always misleadingly insane.
This was why he always chose to wait out the first 15 minutes of trading action. That prudent interval generally allows most of the opening bell market nuttiness to play out. This then permits more serious investors to gain a clearer vision of the direction a given ETF (or stock) might take. At least for the rest of the morning. It also helps avoid getting whipsawed by erratic US stocks and ETFs, as in the current trading environment.
I still follow this informal rule. It’s usually the right thing to do in most circumstances.
More from Cramer on the recent confusion caused by erratic US stocks and market averages
Meanwhile, Cramer remained on a roll Thursday morning, lashing out again, and more specifically, at all the rich clowns trying to game regular, hard-working investors by scaring them out of stocks. Likely either to buy in at lower prices to close out short positions, or pick up great stocks at bargain basement prices once the little guys dump their shares in a panic.
“[Cramer] on Thursday blasted wealthy money managers for making dire predictions and scaring individual investors out of the stock market.
“… Cramer called out Jeremy Grantham one day after the GMO co-founder, who called the 2008 financial crisis, [said] that the market’s rebound from the March coronavirus lows is emerging as ‘the fourth “Real McCoys’ bubble”’ of his career. Grantham, 81, also advised investors to take their U.S. exposure to zero.
Rich guys need to stop talking their book…
“‘Our viewers don’t want to be talked out of’ investing in stocks and potentially making money, Cramer said. ‘Jeremy Grantham, he may not want it. He may be so rich he doesn’t need it.’
“‘Our viewers have every right to capture that money despite many people coming on and saying, “No, that’s a bubble,”’ Cramer said. ‘Yes, you can lose money,’ he added, but also asked, ‘Why can’t our viewers make money?’
“[He] added: ‘You can buy and you can sell. And the insult that I hear rich people [who] come on is to think that once you bought you’re going to buy and hold to the poorhouse because everyone says buy and hold. I say buy and make money.’”
Why this column’s recent absence? Could it be we had little to say?
Stepping back a bit, I haven’t filed a column for a few days simply because Mr Market has been so confusing that I’ve had nothing useful or even intelligent to say. For me, this means that – unlike most high-paid, self-important columnists and political and money gurus – I see no reason to blather on just to fill column inches.
After all, why opine on things I don’t know or can’t figure out before reversing such opinions and flushing them down the memory hole the very next day? Which is just what these fake-news gurus do. It’s a waste of the reader’s time. And an insult to the reader’s intelligence. And mine, really.
Re-centering on the highly uncertain market action we continue to experience, I have to say at this point that stocks are backing and filling after their first major run back toward January’s bullishness ended up running out of steam. That’s usually what happens after a major crash or a major run of irrational exuberance. If the initial crash – or bull run – ultimately proves to have legs, it normally picks up again after a decent interval. Traders call this “digesting” a major move.
Due to the constant whipsawing, however, our portfolios are fairly heavy in cash right now. No point in paying too much for stocks if the rich guys are trying to talk them down by pushing coronavirus casualty figures. Even as they champion the fascist, Stalinist thugs trashing American cities. Hypocrisy like this, they assume, helps score political points and make President Trump look even worse than the fake-news media has already portrayed him. But maybe not.
Will political backlash release the dormant Kraken… er, the Great Trump Rally, Part II?
Backlash is coming. So is the resumption of the Great Trump Rally, Part II, currently erratic US stocks and markets notwithstanding.
But that didn’t happen today. And maybe it won’t happen tomorrow. So, for now, we’ll keep our financial powder dry, awaiting the right patterns in our stock market tea leaves. Stay tuned.
– Headline image: The bull looks set to go after the bear at the stock exchange in Frankfurt, Germany.
Is something similar going on with today’s erratic US stocks and markets?
(Image via Wikipedia entry on market trends, GNU 1.2 license)