WASHINGTON. For at least two weeks now, Mr. Market has morphed into a murderous, horrifying monster that devours anything you throw at it. Like your battered portfolios. If you buy, Mr. Market plunges. If you sell or short, he rallies. With Halloween 2018 dead ahead (forgive the weak pun), Mr. Market reminds us of movie monsters like Freddie or Jason. But lately, he’s more closely resembled the legendary Headless Horseman, that wildly galloping monster that terrified Washington Irving’s hapless Ichabod Crane.
Mr. Market plays Headless Horseman for Halloween
I’ve settled on the Headless Horseman as today’s stock market metaphor. That’s because Mr. Market has been behaving just like him this October. Every day, it comes out of nowhere, scares the bejeebers out of you and then vanishes into the night, making you fear the following day and night even more.
Monday’s averages showed tremendous promise they were putting in a bottom to US markets’ horrific and ongoing carnage. But, out of nowhere, WHAM!
In a free blog article at Stockcharts.com (a subscription service to which we subscribe), Tom Bowley gives us an accurate synopsis as to what happened next.
“Stocks closed lower on Monday, giving up sharp gains from earlier in the day in a wild session that saw the Dow Jones Industrial Average travel more than 900 points. The S&P 500 closed in correction territory, down 10 percent from its recent high.”
Even the Headless Horseman never experienced a ride like this one.
Rumor (perhaps truth) had spread across Investor Land that the administration was ready with another batch of tariffs if China doesn’t take Washington’s latest trade overtures (and / or threats) seriously this time.
The results of this latest tariff thread were predictable: Another violent market crash as duly noted above. But there was a surprise spate of buying near Monday’s closing bell, giving stocks a half decent bounce.
At any rate, the averages still closed down for the day. Again. No rest for the weary. Or the still invested. Like yours truly. And plenty of others.
Very nasty numbers for investors
CNBC provided numbers that detailed the carnage:
“The Dow fell 245.39 points to 24,442.92, erasing a 352-point gain, as Boeing dropped 6.6 percent. At the lows of the day, the Dow was down 566 points before coming back shortly before the close. The 30-stock index also briefly dipped into correction territory…
“The S&P 500 closed 0.7 percent lower at 2,641.25 after gaining more than 1 percent earlier in the day. The benchmark is now down 10.2 percent from its high reached at the end of September. The Nasdaq Composite fell 1.6 percent to 7,050.29 as shares of Amazon got pounded.”
More on this a bit further down.
So, is it “Rescue Tuesday” for Wall Street’s battered markets? Or politics as usual?
But today is another day. From Tuesday morning’s opening bell, stocks have been attempting to reconstruct Monday’s early rally. The Dow was up an impressive 200+ points for a while. But it felt tentative and feeble. And, as of 1:20 p.m. ET, it’s getting feebler, with all three major averages up only 0.3 to 0.5 percent. That’s pretty sad, given that we’ll need about 10 500+ Dow points rallies in a row just to get back to breakeven for 2018. Sad.
While TV pundits and blow-dries like to pin all the current negativity on the Trump administration’s ongoing tariff battles, that’s just simplistic. Worse, it’s deliberate pandering to the well-funded (by Soros) left-wing Democrats who need all the help they can get to take the House and thwart The Donald for the next two years.
Yes, the current tariff regime, particularly those YUGE tariffs directed at our friends, the Chi-coms, are a negative influence on stocks. But so is the blind “let’s start a recession” interest rate hiking crusade the Fed is imposing on the U.S. economy, lest the little guy get back some of his money after being trampled nearly to death by the Great Recession.
Ditto, too, in an odd way, the fear that the Democrats will at least take back the House. If that comes to pass, as banks, hedge funds and loads of individual investors all realize, the administration’s significant support for business, entrepreneurship, lower taxes and less regulation will come to a screeching halt.
What investors really fear, given this scenario, is that the Fed and vengeful Democrats will wreak havoc on an historically wondrous business environment, by shooting American business’ newly revived animal spirits squarely between the eyes.
Does that scare you? Obviously, it scares Mr. Market.
Another Recession dead ahead?
Another recession. Great! At least that’s a major item that Wall Street is seriously worried about. Paradoxically, only Trump stands between the markets, investors in the market, and the average, attempting-to-recover Joe Sixpacks of the world.
So what we’re left with are nameless, headless fears that are killing this market. It all kind of makes you identify with poor Ichabod Crane and his fear of the Headless Horseman. Assuming that any Americans over 40 have any familiarity at all with this classic literary tale.
The problem is, our current Headless Horseman – Mr. Market – is headless precisely because he’s lost his direction. So have stocks. There’s no leadership here. Investors on the whole have trashed the tech stocks and averages relentlessly skyward for who knows how long now.
Killing Amazon and the rest of the FANGs
Particularly battered are the so-called FANGs – Facebook, Amazon, Netflix, Google, etc. These are the tech companies and names that led this bull market and the Great Trump Rally relentlessly forward for what seems like forever.
Tom Bowley provides his readers with a vividly annotated chart of the very tech-heavy NASDAQ 100 sub-average. It illustrates what happened in beleaguered Tech Land during Monday’s teeth-chattering Wall Street blood-letting.
Markets can’t continue to climb without leadership. But thus far this month, the only leadership we’re getting is from the two most boring sectors in the S&P 500: Utilities and Consumer Staples. Everything else seems to have run out of options.
Plus, if you think about it, companies that provide us with electric power and send us must-pay bills each month, and companies that sell us stuff we absolutely must have to live, like groceries, are not very inspiring when it comes to getting the mass of stocks back up off the mat. We can almost hear our Headless Horseman saddling up for another ride.
How does Tuesday’s recovery and / or race back to the bottom end?
As we finish off today’s missive, circa 2 p.m. ET, stocks and averages are trying to rally once again. But as we’ve been saying for days, who knows where today’s trading action will finally end up?
We are also finishing a month where buying and selling usually peaks. That’s frequently due to the habit of mutual fund and hedge fund management annual habit of wildly buying and selling lots of positions to make their year-end statements look great to their investors. So some of this tech selling may simply have been part of this year’s game, allowing fund managers to capture tech gains they could brag about in an upcoming annual report. We should find out soon.
Meanwhile, let’s resolve to keep our powder dry, not fixate on our horrible losses, and pray that we get a half-decent dead-cat bounce soon from Mr. Market. We should.
But then again, until Mr. Market decides to put away his Headless Horseman costume, it’s best not to make any predictions. Or place too many bets that this current, violent, high-volume sell-off and crash will reverse any time soon.
Trick or Treat?
— Headline Image: The Headless Horseman Pursuing Ichabod Crane, painting by John Quidor (1858).
Public domain image via Wikipedia entry on the Headless Horseman, courtesy Google Arts Project.