WASHINGTON – Today, Thursday, September 3, the roof finally fell in on our tremendous summer stock market rally. Particularly hard hit today is the tech sector. As we write this – 11:30 a.m. ET – the NASDAQ and tech stocks are tanking big time. The Nazz is currently off a whopping 584 points for a 4% loss. The Dow is being obliterated, off points for a 2.5% loss. And the broader-based S&P 500 is down 116 points for a 3.26% loss thus far.
As we had observed in our Wednesday column, US stocks – the NASDAQ and tech stocks in particular – have gone too high for too long. August’s fantastic but unsustainable rally continued into September. True, we tend to be bullish in this column and have enjoyed Mr Market’s irrational exuberance all summer. But a temporary curfew was probably in order. Clearly we’re seeing a nasty reversal today, particularly in the NASDAQ and tech stocks in all averages. Hopefully, it won’t last too terribly long. But a few stocks, particularly the big techs, need to come down a little closer to earth.
Apple & Co. take a header, leading the entire stock market off the cliff
At the moment, Apple shares (trading symbol: AAPL) are down more than 7.15%. Amazon (AMZN) is off 5.22%, Alphabet (Google: GOOGL) is down nearly 5%. Microsoft (MSFT) is slipping as well, down 5.5%. Other NASDAQ and tech stocks are in similar shape. It’s a real bloodbath out there.
But CNBC offers at least some reassurance that we’re not in for an instant replay of the market’s March 2020 Covid-19 swan dive.
“‘While we don’t expect a crash to happen again now, we don’t need new highs to grow every day to keep the uptrend alive either,’ said Frank Cappelleri, executive director at Instinet, in a note. ‘With the [S&P 500] up 9/10 days and having just logged its biggest advance in two months, it’s certainly earned a period of which to digest.’”
So there. But that said, Wall Street is certainly taking a beating today. While even the hated oil sector briefly rallied this morning, oil and gas stocks are now being taken out to the woodshed, just like the NASDAQ and tech stocks.
We shoulda sold some stocks Monday
We probably should have sold a few of our positions Monday, but we got a little greedy, and in this line of work, greed kills. For the last few trading days, we began to notice that even in many of those stocks continuing to rally, our trading software noted that there were almost universal trading imbalances on the sell side near each day’s market close. That was the sign to lighten up. Oh, well…
For those who’ve been resting on the sidelines, it’s probably time to keep your powder dry for at least a bit longer. Particularly when it comes stocks in the NASDAQ and tech stocks in general. Today’s nasty blow-off will create fear and loathing on Wall Street, which, coupled with our current Marxist revolution in the streets, hardly inspires confidence in either our government or our economy. Although the latter actually continues to improve.
That said, headline risk will become a more severe challenge as November 3 draws ever nearer. So caution is advised at this point.
Yet once today’s market smackdown tapers off, stock prices will become more reasonable. That’s the time investors should consider sneaking back in to stocks.
As for us, we’ll hold on to most positions, abandoning only those that were a bit on the weak side to begin with. As for the rest, panic sellers nearly always lose money, so we’ll let the bulk of our portfolios ride for now, collecting dividends along the way.
September is the cruelest month, particularly during a Marxist Revolution
As we’ve noted many times before, September tends to be a month of surprises for stocks. Usually nasty ones. Which is what we’re experiencing today and perhaps will continue to experience at least a bit longer. Once these selling waves get started, they don’t simply do a 180 the next day.
But interestingly enough, save for summers like the one we just experienced, it remains pretty good advice to “sell in May and go away.” For a while at least. That’s because market stats tell us that investment accounts often end up making most of their yearly gains in the final quarter of each calendar year.
This calendar year, however, we’ll probably have nonstop headline risk, so this “rule” might not apply. You don’t have to be a partisan to see that the Democrats clearly intend to use prolonged (and increasingly unnecessary) Coronavirus shutdowns and vote-by-mail disruptions that could throw any election results not in their favor into open chaos. We saw a preview of this in the 2018 “vote gathering” fraud that witnessed several Republican representatives losing their seats to Democrats after they’d won their elections. The vote gatherers kept circulating during and after Election Day and kept collecting real or imaginary votes until the “final count” went their way. Voting by mail in more states this fall will encourage equal chicanery, but on a more massive scale.
Watch out for headline risk this fall
And national instability is the real X-factor for stocks this fall. Watch what’s going on carefully. If our country gradually succumbs to an increasingly fierce Marxist revolutionary force, stocks and bonds will follow. So be careful out there.
– Headline image: Cliff jumping near the big cave at La Jolla Cove, with La Jolla Shores in the background. Photo and caption via Wikimedia commons. Original image by Jarek Tuszyński. Creative Commons Attribution 4.0 International license. Slightly cropped to fit CDN format.