US stocks sharply higher Friday, boosted by Suez Canal traffic jam
WASHINGTON – Mr Market surprised us a bit Friday morning. US stocks opened sharply higher in all three widely followed averages, including the Dow Jones Industrials (DJI), the S&P 500 and the tech-heavy NASDAQ. The serious traffic jam in the Suez Canal injected some new life into the wavering energy sector, while good news on employment and inflation added to the market’s optimistic tone, pushing US stocks sharply higher. Particularly in the badly lagging tech sector — a real surprise.
A musical interlude for Mr Market
After Thursday’s clearly iffy trading action, Friday morning’s bullish tone looked as if we could all break out into a chorus of this writer’s favorite stock trading tune.
Opening lyrics (in English):
What a difference a day makes
Twenty-four little hours
Brought the sun and the flowers
Where there used to be rain
US stocks sharply higher Friday? A change in the McClellan Oscillator predicted this
Wednesday’s closing McClellan Oscillator, which we discussed yesterday, definitely gave us a near-term buy signal. We just didn’t expect things would start to rebound late Thursday, which they did as you can see from last night’s closing McClellan Oscillator chart. A clear bottom in this chart, which we saw after Wednesday’s close, often gives traders and investors a clear signal that drives US stocks sharply higher within days of the signal. In the chart below, posted after Thursday’s close, we can see a sharp liftoff in this measure. Nothing is infallible. But in our experience at least, the McClellan Oscillator has proved better than your average indicator.
So what gives with today’s bullish stock market? The Suez Canal traffic jam proves a friend to big oil stocks
As we write this article, circa 2:30 p.m. ET, however, we find the NASDAQ sinking back into its recent, customary red zone. The broad-based S&P 500 is up roughly 0.28% at the moment, struggling to hold onto its gains. But the DJI, once up over 200 points, finds itself up just 96 points now (+0.28%) and slowly sinking.
What gives? In addition to that ongoing Suez Canal traffic jam, at this point in the merry month of March, we’re probably seeing the last stages of mutual fund and hedge fund “window dressing. That’s the sneaky but legal tradition of dumping a portfolio’s losers and picking up some shares of hotter stocks. Or at least stocks that show some promise of hotness.
The object of the game: Make your bad performers disappear from your portfolio before you have to list them in your quarterly report for investors. Makes fund managers look better to investors, particularly if their returns turned out iffy when compared to the genius of others.
Window Dressing; or, Avoiding April Showers
Such window dressing can occur at other times during a calendar quarter. But the SEC requires those reports only every quarter. So the end of March, June, September and December are what count when fund managers have to come up with performance and investment info. And that’s why ends of quarters can prove so frustrating.
Q1 2021 seems particularly troublesome. In addition to the usual 4x per annum trading nonsense, businesses, particularly in Blue States, continue to battle ruinous and obviously unnecessary lockdown situations that damage both quarterly profits (if any) and employment numbers.
Meanwhile, the (finally) dawning knowledge that Americans, by and large, listened to the corrupt media and social network mavens and “elected” a doddering, senile and corrupt has-been politician to serve as a figurehead US president. This puts us all on the path to the kind of socialism that’s ruined at least half the known world at this point.
The political kabuki continues in the nation’s occupied capital city
Thursday’s joke of a presidential “press conference” essentially proved the point. The inevitability of how this performance would turn out was likely the reason behind this week’s mandatory terminology change from the “Biden Presidency” to the “Biden-Harris Presidency.” That’s really something to look forward to, isn’t it?
In background, at least, Mr Market has finally begun to regret the exile from Washington of Donald J. Trump. But, fickle as always, he’ll put that away for a bit and enjoy today’s otherwise decent financial news, as it puts the bulls back in charge of stocks. At least for the moment.
Adding to this optimism: The fact that we have only 3 more trading days for funds, traders and investors to finish fussing with their portfolios before the new quarter begins. So things should settle down late next week. Then again, with Wall Street’s seemingly archaic Good Friday trading holiday falling next week, the “short trading week” dynamic might cause things to get weird again.
But at this point, I’m probably speculating right now. At the moment, nobody – including me – knows what they’re doing. But they do know enough to make them nervous.
Which brings us to Friday’s (apparent) rally
As for today, Friday, energy (Thanks, Suez Canal!) finally began to rally, with that Middle East oil tanker traffic jam creating the excuse for a rebound. For now. Tech stocks continue to stubbornly try to reclaim this morning’s rally. Some have begun to lag now while others continue to climb. Notable gainers: Cisco (NYSE:CSCO), Intel (NYSE:INTC), and Oracle (NYSE:ORCL). Ditto Netherland-based NXP Semiconductors (NYSE:NXPI), a stock that hit new highs a week ago only to nose dive for a week thereafter.
All these shares have a small representation in our portfolios at the moment. But we won’t chase them. Anyone who’s invested in tech stocks knows that their frequently wild daily ups and downs can give you a coronary at a moment’s notice, and NXPI shares caused notable heart palpitations over this past week.
Nonetheless, if you have an adequate supply of blood pressure meds, you can – most times – still hold these bipolar investments long enough to make some money. So that’s what our portfolios are trying to do right now.
We did shed minimal positions in the international oils earlier this week. That’s because the Eurozone is once again reverting to basket-case mode. But we’re holding onto our domestics through thick and thin. Biden’s fracking idiocy guarantees higher oil prices, at least for now, which could make this investment sector quite popular for at least the next quarter or two.
… And in conclusion…
So, at least for now, investors can breathe easier this weekend. And they can unwind a bit prior to next week’s Easter-Spring break.
Meanwhile, the Suez Canal traffic jam may continue to boost energy stocks. That transport mess might even get minimal inflation targets back in sync. Because supply line shortages.
But we should all remain a bit cautious. Volume tends to dwindle, pre-Easter, as the bigwigs start heading off to the Hamptons. Or, under Governor Cuomo, more likely south to Florida to price some real estate. Any remaining bigwigs looking to buy or sell big blocks of stock can move markets out of proportion.
So relax this weekend and next week. But stay watchful.
UPDATE: All three major averages closed sharply up at Friday’s 4 p.m. ET market close.
— Headline image: Cartoon by Branco. Reproduced with permission and by arrangement with Comically Incorrect.