WASHINGTON, March 4, 2014 − It was gloom and doom on Wall Street yesterday with Russian President Vladimir Putin in full U.S.S.R/KGB mode. Led by headline-driven machine trading, markets plunged as HTFs, algos and permabears predicted the imminent demise of the U.S. and the Western world. But today, Putin seems to have climbed down from his aggressive stance on the Ukraine, so all is well on Wall Street, with stocks set to rally bigtime at this morning’s open.
What a difference a day makes.
It’s all nonsense, or mostly, anyway. But traders love this kind of action as they can short stocks and the market one day, then flip those positions and go long the next. Options can even be more fun because of the leverage involved.
Investors like the Maven, however, remain unhappy with the trivial way in which markets are driven to and fro these days, mainly because it causes almost all fact- and earnings-based systems either to produce less-than-impressive results or even break down entirely. Prudent investing is simply not a factor here, and patience and hard work involved in accurate stock picking doesn’t seem to matter.
That said, it is what it is, and so we play along. Expect most things to look positive today except for precious metals, particularly gold, which all caught a nice bid yesterday when Armageddon was at hand. Today, we can dump these metals, ETFs, and futures contracts, secure in the knowledge that Vladimir will place nice with us again. Until the next time.
Given Putin’s apparent desire to revive U.S.S.R.-style hegemony, or, at the very least, return Russia to something resembling the glory days of Stalinism and empire, we will assume, until proven otherwise, that the ex-KGB chief will employ the usual Marxist tactic of saying the right things to get Western pols off the hook for being lazy-ass about their own national security.
But behind the scenes, he’ll continue to do, albeit quietly, precisely what he always meant to do anyway.
Today’s trading tips:
If you have any decent profits, today might be a good day to sell into this market, assuming we have a big up-day that extends well past the first half-hour of trading. Beyond that, buying or selling is iffy in this kind of volatile environment, so it’s best not to be too jumpy.
Ultimately, markets will need to see if today’s relatively happy-face Putin will hang around for more than a few days before they breathe a real, sustainable sigh of relief.
After a mediocre earnings season, traders and investors alike will also need to see some signs that the current obvious slowdown in the economy really is only due to the weather. We assume that some of it is.
But remember: first quarter reporting, which will more or less coincide with sell-in-May time, will also contain within earnings figures the initial impact of the current rolling disaster otherwise known as Obamacare. Drug and pharma stocks and ETFs may be a good place to park some money in this environment. But other sectors may not be looking quite so happy.
So let’s come back tomorrow, if and when things settle down, and see what we might do to exploit at least this one fairly obvious green shoot.