WASHINGTON, February 5, 2018: At 3:05 p.m. ET Monday, Friday’s vicious stock selloff is continuing with a vengeance. Stocks are getting ruthlessly pounded across the board in bearish trading action not seen for well over a year.
Monday afternoon, the Dow Jones Industrial average seems hell-bent on reaching the minus 1500 mark on the downside. It’s already off 1000+ points, an over 4.4 percent loss on the day thus far. And it’s headed lower.
The other major averages are doing their best to keep up with the Dow’s sickening downside pace during today’s selloff. The broad based S&P 500 is off 105 and counting for a nearly 4 percent loss on the day. The tech-heavy NASDAQ is also doing its part, off a staggering 240+ points for a 3.4 percent shellacking.
As Yogi Berra famously said, “It ain’t over ‘til it’s over,” and that stands doubly true for what is amounting to the first genuine stock market crash during the business friendly Trump administration’s term in office.
As I mentioned in an earlier article today, the barometer I frequently use to discover crucial market turns, the McClellan Oscillator, was already showing heavily oversold market conditions on Friday. Today’s reading will likely prove astoundingly worse unless we see some kind of dramatic turnaround in the final hour of Monday trading.
After an initial downdraft, stocks tried to make up lost ground from Selloff, Phase I on Monday morning. The Dow actually getting close to breakeven on the day after an initial -350 point downdraft. But fluctuation continued on increasing volume, leading to this afternoon’s disastrous readings as the ruthless, relentless and remorseless selloff resumed.
What we’re now witnessing is a full-fledged selling panic, with today’s extended selloff likely due to some well-earned investor profit-taking, but also likely due to hedging and short selling by long-suffering bears. These bears are bound and determined to short stocks, averages and indexes to make the kind of epic profits that have eluded them since Donald Trump’s surprising victory in Election 2016.
An equally violent upside reversal would be an enjoyable way to end Monday’s investor chamber of horrors. But we’re not counting on it, at least yet. The selling has become so ridiculous that at least some kind of positive bounce is in the offing, though maybe not today.
Despite everything, the market is having to face some major concerns here. The economy seems to be humming around. Aside from a few big P&L misses by big firms during the current earnings season, there’s not much else to worry about at least on the surface.
However, another ridiculous government shutdown threat looms at the end of this week. The Democrats remain bound and determined to hold the Federal budget hostage to unlimited immigration, while forcing the U.S. onto the same path of destruction as hapless Sweden, all the better to guarantee permanent one-party rule – something they’ve already accomplished in California.
These budgetary battles don’t help an otherwise positive atmosphere in stocks, which have been rejoicing over the major positive effects businesses will experience this year and beyond, due to the GOP tax cut legislation.
Balancing that out, however, is another issue. The Fed is slowly withdrawing a great deal of liquidity from the market by gradually dumping the massive bond portfolio it accumulated in the most extreme years of the Great Recession. That’s partly why interest rates have been increasing beyond those much-ballyhooed ¼ percent Fed rate hikes.
There’s currently an overweening fear of inflation, apparently due to the fact that worker salaries appear to be on the increase for the first time in what must be at least two decades. Whatever the case, the market’s legion of Nervous Nellies are already imagining Carter-era inflation numbers and the subsequent, massive Federal Reserve credit crunch that solved the issue, but at great cost to the economy.
I think that’s overblown, but once a prairie fire starts and the wind picks up, no one knows how much territory it will burn before it’s over.
Suffice it to say that current market conditions are a mess. They can’t go on much longer, and so we’ll see a conclusion fairly soon. We just can’t guess at this point what that conclusion will be.
FINAL UPDATES: After fluctuating wildly all Monday afternoon, the Dow Jones Industrial Average (DJIA) closed down 1,177.72 points for nearly a 5 percent loss on the day, as the bears tackled all market sectors, leaving very few survivors. Today’s decline is continuing in after-hours trading, and CNBC offers this jolly headline story, headlined:
Sell-off continues after hours — S&P 500 futures now down 6% on the day
Tomorrow is another day. Let’s see what happens.