WASHINGTON, February 2, 2018: As we noted in an article posted earlier today, Wall Street launched its final trading day of this week with heavy selling. Today’s negativity was based on a number of factors, including (ironically) excellent news on the wage and employment front. As we round the 3 o’clock hour Friday afternoon en route to a 4 p.m. ET market close, however, an enormous tsunami of selling has hit the investment shore, engulfing and annihilating any remaining bulls.
Tsunami effects? The Dow Jones Industrials (DJIA) are off a disastrous 633 points and sinking, a negative 2.4 percent decline on the day. The broader-based S&P 500 is off 59, down 2.08 percent on the day, while the tech-heavy NASDAQ, led by a horrific and amazingly undeserved decline by Apple (symbol: AAPL) is off a whopping 140 points, a negative 1.9 percent decline.
As ZeroHedge notes,
“Despite a roller-coaster dump-and-pump overnight, Apple stock is falling hard again today – along with many of the tech giants – and is now down over 10% from recent highs, entering a correction.”
We were frankly expecting something like this to happen after the market’s near-parabolic January rise, which was largely due – and correctly so – to the liberating effects of the GOP’s hard-won tax reform package, in conjunction with the Trump administration’s relentless slashing of thousands of business- and profit-killing Obama era red tape and regulations. But in all honesty, we didn’t expect a decline this rapid or this violent.
Yet here it is.
All markets had been pretty much sitting in a sharply overbought situation last week, which virtually guaranteed at least some kind of correction. Conditions weren’t helped this week by constant interest rate spikes, dollar weakness and a concurrent weakening of prices in the oil patch.
Late this week, relatively good earnings stories in the tech sector were declared bad news, and big kahuna stocks like Google (GOOGL, due to disappointing earnings); and AAPL, due to great earnings and profits that were outweighed by analysts’ knee jerk response to lower iPhone numbers that seem to this writer to have been largely due to the very late arrival of the product in Q4.
But when the gang decides to get negative, that’s all she wrote. The political uncertainty raised Friday afternoon by the White House approval and subsequent release by the House of the long-awaited and damning 4-page memo outlining the political weaponization of the FBI and Justice Department by the Obama administration only made things worse.
After a one-day break mid-week, this Wall Street’s long-threatened selling tsunami burst ashore Friday, surprising and engulfing most investors and funds with unexpected violence. It’s not certain how many new bulls will survive until trading resumes on Monday.
Anyone who didn’t sell a couple of days ago, like us, is probably best advised to sit tight or even nibble at badly-damaged, waterlogged stocks, at least a bit. As we write this, stocks are in the midst of yet another feeble attempt to close the day with some respect. The ongoing selling tsunami, however, is likely to drown any remaining optimism today. Such a tsunami only ends with seller exhaustion. That’s likely what’s going to happen by the end of the trading day. But there’s never a guarantee that the selling panic won’t continue for at least another trading day.
Anyway, we’re not likely to see any clarity on the situation until Monday at the earliest. We can already predict that the main indicator we follow in overbought and oversold situations, the McClellan Oscillator, is now violently and outrageously oversold, thought we won’t see Friday’s closing charts until later this evening.
A number like the one we’ll probably see will almost certainly trigger a massive snapback rally on Monday or Tuesday. But given life in the U.S.A. since Election 2016, I wouldn’t bet on a damned thing right now. So for us, it’s plenty of Maalox and sleeping in a fetal position this weekend. This ain’t exactly 2008. But today’s action still feels pretty nasty just the same.