WASHINGTON, March 4, 2016 – It’s getting really hard to know what’s driving this market. Headed for apocalyptic disaster not ten trading days ago, the major averages suddenly did a 180 just a few trading days ago. Now it seems there’s no stopping them as they assume their formerly accustomed trip back up into the stratosphere.
It didn’t hurt, of course, that oil continues to catch a major bid. West Texas Intermediate (WTI) closed trading this afternoon at $35.97 bbl. on U.S. markets. That’s up a buck forty from yesterday’s close, roughly a 4 percentage-point rise.
But the Saudis, Russians, Venezuelans and everybody else are still pumping away, so the oversupply situation hasn’t changed. Nobody seems to care, though, save for the HFTs—the probable culprits behind oil’s upward spike this week, given that they’ve been smashing it down hard since at least late 2015.
Except for a brief respite, it seems that in 2016, where oil goes is where stocks go whether they have anything to do with black gold or not. Since oil has been getting a colossal bid this week despite the facts on the ground (or under the ground), stocks have been partying hard.
The alarming thing is, markets have been drastically “oversold” most of this week, at least in terms of the hallowed technical indicator known as the “McClellan Oscillator,” which is showing major averages as massively oversold. Which means they should be correcting rather severely at this point. Which they’re not as we near Friday’s closing bell.
Perhaps, too, markets are taking a perverse interest in the Texas Cage Match that the Republican presidential primaries have been offering, big time. Up to now, Ted Cruz, an actual Texas dude, doesn’t seem to be getting any big advantage out of this metaphor. As Jeb Bush has already discovered, and as everyone else is belatedly figuring out, anyone who trashes The Donald only makes The Donald stronger.
This whole Trump phenomenon is gaining a momentum of its own, trending along the lines of that wondrous 1976 satirical film, “Network,” as in Howard Beale’s famous line: “We’re as mad as hell, and we’re not going to take it anymore.” The people in flyover country are currently beyond as mad as hell, and they aren’t going to take it anymore.
There’s a whiff of revolution against the elites in the air these days, and The Donald is, for better or worse, the standard around which the disgruntled natives are gathering.
The more you trash Trump, the stronger is his support, as in Mitt Romney’s asinine and self-defeating attach on the New York building mogul yesterday. Who put Romney up to such clownish defeatism—he who weakly allowed Candy Crowley to snatch his final debate victory over Obama away by throwing a lifeline to the badly-prepared amateur White House incumbent? Trump would have stalked off the set after giving Crowley a richly-deserved middle digit. THAT is what the Great Unwashed want to see in a candidate.
So what do the Republican elites do—send Mitt Romney, Mr. Lack of Credibility, out to trash Trump.
The whole situation reminds us of a classic late 1950s sci-fi film, “Kronos.” Another of the many post-A-bomb films that dotted the cinematic landscape back in the Atomic Era, the eponymous villain of this film was an energy-sucking robot who grew bigger and more powerful every time it sucked energy out of the power grid. When the U.S. military tried to put Kronos out of business by hitting it with a nuke, the robot simply sucked in the atomic energy and grew bigger and more powerful.
Trump is like Kronos—every hit just makes him bigger and stronger out in the hinterlands. Hence our modestly doctored up header graphic—our take on an old “Kronos” promo poster put out by 20th Century Fox (ironic after last night’s debate).
But back to investing—what does this have to do with anything? Perhaps a great deal. Even a fair number of investors would like to see the U.S. economy—and U.S. corporations—start to grow again like great capitalist companies always used to do. Is the market somehow telling us that after November, Washington will not be continuing with its kleptocratic business as usual?
It’s often said that markets are about 6 months ahead of the history curve, in terms of predicting what is to come. If so, are markets predicting a sea change here? Who knows? We’ll have to wait to find out.
We’re still standing pat on this market. Given the overbought situation, Monday might be the best time for Mr. Market to launch a nasty, though perhaps short-lived correction.
But you never know. This market is as overbought as you can get at this point. And it’s clearly not just about the price of oil getting a bit.
The Force seems to be moving. Let’s watch. And keep some cash at the ready.