WASHINGTON, August 10, 2017 – Thursday’s miserable trading action was the same only different from Wednesday’s broad-based stock market decline. Different? Heck, it was a whole lot worse as nearly every stock in the major averages, percentage-wise, got hit at some point, with damage ranging from a nick in price to wholesale declines.
The Dow Jones Industrials were off 204.60 at the closing bell, a loss of nearly 1 percent on the day. But that was the good news. The broader based S&P 500 average was down 35.81 points, an awful loss of nearly 1.5 percent on the day. But the worst beating was administered to the tech-heavy NASDAQ, which was down a heart-stopping 135.46 points on the day, a horrific 2.13 percent loss in just a single day.
The carnage was wide and deep, mercilessly pounding nearly everything on the boards. Sure, we’ve had worse percentage and point losses, particularly in the financial horror show that took center stage from roughly December of 2007 to the early summer of 2009. But today’s SuperSlam was harsh enough to shock the bulls and rouse the bears from their troubled slumber, and they piled on hard as the closing bell loomed dead ahead.
Tech stocks in particular – as we can see from today’s NASDAQ carnage – were mercilessly kicked into the gutter and left for dead. The reason behind today’s bearish glee and bullish misery in the tech sector isn’t hard to see.
With the North Korean threats against Japan and South Korea, (not to mention the U.S.) getting kicked up a notch every day by North Korea’s Dear Kleptomaniac, any level of destructive warfare that hits these two American allies would obliterate tech supply lines for the indefinite future.
That, in turn, would lead to catastrophic earnings disasters as companies ranging from Apple (symbol: AAPL) to Google (GOOG, GOOGL), Microsoft (MSFT), Intel (INTC) and beyond find their intricate, just-in-time supply lines obliterated in a literal flash. Small wonder that any stock in, around, or connected with TechWorld got put into Wall Street’s giant trash compactor today.
Who wants to be around tech in the middle of THAT kind of catastrophe? Sure, today might have been a good chance to Buy The Dip. But if the Norkies keep up with their asinine and dangerous military plumage displays, Buying The Dip could be a ruinous strategy that’s just run its course.
To buttress the short-term bearish sentiment, the McClellan Oscillator – our favorite, highly effective indicator of extreme bullish or bearish movements – tanked badly Wednesday. Just looking at the chart for the McClellan Oscillator as of Wednesday’s close is sickening, as you’ll see in the illustration below. Once charted, today’s decline will likely look much worse.
We’ll have the latest McClellan Oscillator results sometime this evening from Thursday’s miserable action. When we get them, we’ll post a brief update to this article. But we don’t expect the picture to look very good.
The only things that remained afloat today in our own portfolios were a few preferred stocks and a last-minute buy of the Double-Short S&P 500 ETF, SDS, that we executed this morning. Frankly, if we get any kind of market respite Friday or Monday, we’ll consider doubling or tripling our modest position in these shares, as the North Korean nonsense won’t be over ‘til it’s over. It’s one way to hedge a portfolio that’s getting badly hit.
Ultimately, the political (and military, God forbid) conclusion to this tedious and seemingly immortal Korean conflict could be catastrophic unless President Trump’s generals have a virtually airtight plan to close this latest Korean chapter out on better terms than they got in the last one in the early 1950s.
Generals McMaster and Mattis (heading up the National Security Council and the DoD respectively) and even White House Chief of Staff (General) Kelly are likely as fed up as our volatile Commander-in-Chief (who is clearly and authentically pissed), and all of them, without any doubt, have formulated several attack plans and contingencies – a prudent course in a situation like this one, even if they only want to execute those plans as a last resort.
Whatever the military case, however, the current international turmoil is going to scuttle any near-term enthusiasm for resuming Wall Street’s surprise summer rally. Mr. Market, alas, cares about manufacturing, productivity and profitability and not so much about a loss of lives.
Like Star Trek’s devious, ultra-capitalist Ferengi, it’s a potential loss of future profitability that has most traders and investors nervous these days, whether they’re in the market or out. It’s brutal, but true. And North Korea’s latest power-mad, Stalinist Dr. Evil-Kim is giving the willies to investors of all stripes.
On glimmer of hope: For most stocks, the trading volume today was significantly below average, indicating that the Big Boyz had either already done their selling earlier this year and/or that little guys and recent newbie investors are dumping their shares out of fear. While some fear is clearly justified in times like these, we hope our small investor friends don’t let their feelings of panic turn into an impulse to take catastrophic losses just to sleep better in the evening. That’s the tried and true way to lose money in almost any stock market situation.
Here’s hoping for at least a Flat Friday. Another massacre like today’s blow-off sell-fest would be an awful way to launch another sunny summer weekend.