WASHINGTON, April 4, 2014 – Our desiccated, flattened, very much former squirrel pictured above is about what the stock market felt like Monday evening. With few exceptions, pretty much the entire market of stocks—particularly the techs—felt like a veritable stampede of now-pancaked fauna whose carcasses were scattered about Wall Street as if they’d suddenly encountered a fifty mile caravan of fully loaded Mack trucks.
Making yesterday’s action all the more hideous was the fact that it followed hard on the heels of last Friday’s equally appalling market bloodbath. Stocks have been trading on QE and talking-head froth for over a month now, making the Maven nervous, though not nervous enough to pull out of the action completely. Alas, he and many other investors are paying a price now for not following their instincts.
As of lunchtime today, markets are trying to make nice with the bulls, apparently. But even this somewhat feeble rally seems to be fizzling as of 1 p.m. EDT in both the Dow and the S&P 500. Only the NASDAQ looks robust. But then, it was lying in the gutter without a pulse after yesterday’s horrendous close, so perhaps today’s 30-something point move up—normally an impressive figure—is more of a dead-squirrel bounce than anything else.
Those prepared to be more realistic than CNBC’s perpetually optimistic talking heads—excepting gold’s Johnny One-Note, the perpetually wrong Peter Schiff—were pointing to any number of reasons for the market’s apparently one-way trip down the River Styx.
Chief suspect, as of yesterday at least, was the somewhat abnormally high number of shares being carried on margin, usually a bearish sign. When heavy selling gets underway, it’s margin call and forced sale time, which tends to accentuate the downtrend. Investors apparently have been so bullish lately that relatively few short-sellers remain to pocket profits by buying in to the selloff. Without that kind of support, down she goes with all hands.
Plus, who knows? Maybe the now-perceived-as-evil HFTs have been slamming markets down to capitalize on this themselves, making things even worse.
Added to the pressure are the creeping but inevitably enfeebling effects of Obamacare as it slowly crushes individual spending with its high middle-class premiums and even higher deductibles; plus the obviously pre-planned protests in Eastern Ukraine, the prelude to what was always intended to be a second and much bigger land-grab as engineered by the
Soviet Union’s Russia’s President “I’ll Be Happy With Just Crimea” Vladimir Putin.
Actually, you gotta hand it to Pooty-Poots (as our belatedly beloved W once called him). Looking out at the West, and particularly at the Great Satan across the Atlantic, the current Rushkie Thug-in-Chief and his oligarch cronies sure as heck know a bunch of Western wimps when they seem them.
Once Putin accomplishes his current land-grab goals, even Neville Chamberlin will start looking manly in retrospect when compared to the U.S. and NATO’s limp-wristed response to this the first step in the re-establishment of the Iron Curtain.
It’s a shame to see the rewards of roughly 75 of bipartisan opposition to radical socialism go down the crapper in one President’s two-term flush. But then, the Maven guesses, you gotta hand it to Obama, too. He promised fundamental change and that’s exactly what we’ve got: a weak, bankrupt country run by its own parallel set of left-wing oligarchs who probably have more in common with the current Rushkie elite than anyone could have predicted.
In any event, none of this can please the markets very much, given the huge, looming uncertainty staring everyone in the face. Investors hate this kind of stuff and with good reason. Combined with the chaos of Obamacare, this makes business investments and outcomes even dicier to predict which then has a negative ripple effect on stocks. So a lot of professional investors are withdrawing from stocks, at least for now, until the outlines of a new Soviet and Chinese Communist-dominated world future become more clear.
Adding to all this negativity and angst, we have the looming “Sell in May” syndrome sitting there in the near-horizon. Perhaps all this nasty economic and political stuff has made investors more interested in bailing before they’re supposed to sell in May.
And, oh yeah, the latest quarterly “earnings season” results are about to start hitting the fan. Look out if the numbers are anemic, which they very well might be.
It all makes for a very ugly picture and any positions an investor takes should be regarded at this point as fairly speculative.
Today’s trading, more or less:
We’re sneaking in and building a position in the straight S&P 500 short ETF, symbol SH. We don’t much like this thing because it seems oddly sluggish to go up when the S&P takes a cliff dive. But the leveraged version of SH, ominously designated by that old New Lefty symbol SDS, tends to be treacherous as well, a little slow off the chocks to protect you in a brutal down-market, but more than happy to reverse course quickly if even a whiff of optimism enters the virtual trading floor.
To use SDS, you have to sit at the computer all day lest it get away from you in the wrong direction. Since we prefer to have a life, this generally makes us stick with the somewhat flaccid but modestly effective SH.
Unless techs decide to mount a dramatic recovery, we’re also partial to the leveraged negative Proshares Ultrashort QQQ (QID) an ETF that follows a collapsing S&P 100 (quite tech heavy) at double time on the way down. Like SDS, however, this puppy is a stay-at-home ETF. If you look away from your screen for even a moment, it can sometimes turn on you, so careful here. We bought a bit yesterday and are being punished by the tech snapback today, but we may take some advantage of this by picking up a bit more around the close.
But everything is iffy today. We were due to get some kind of bounce in the averages, given the brutal efficiency of the recent selling. But an oversold rally and a resumption of the bull market in stocks are two different things that can look alike in the early innings.
We are actually looking at potential buy opportunities, but not until things either stabilize or head into a solid 10-20 percent correction, which could happen and soon.
We’re also considering picking up some shares of the ALLY IPO when it’s priced, presumably tomorrow night. The Feds at long last are looking to exit this company, formerly known as GMAC. But it’s a crapshoot to evaluate what it’s actually worth vs. whatever the final pricing may imply. If the tea leaves align properly, maybe it will be okay for a long-term hold. Then again, anything this government has had its mitts in is always suspect, so we’ll have to examine this one very closely before getting in.
If you don’t like this market at all—and we don’t like it much ourselves—best thing is to get your hands on some Treasury-oriented ETF, like Schwab’s short-term SCHO, and bench yourself for a few innings. We shoulda done that ourselves, and now we have to hedge.
Have a good one.