WASHINGTON, January 26, 2016 – As the nation’s capital area continues digging out from this past weekend’s Snowmageddon 2016, Wall Street is attempting to dig the stock market out of the massive hole it’s excavated for itself since the beginning of the year. After Monday’s typically sickening close, Tuesday markets are rallying big time, at least as of the noon hour.
The Dow Jones Industrial Average (DJIA) is up 242.26 to stand at 16,127.48—a nifty 1.53 percent rise. The S&P 500 and the NASDAQ are also doing nicely, with the former up 23.10 to stand at 1900.39 (a 1.25 percent gain) and the latter up 41.90, putting that average at 4559.21, a nearly 1 percent gain.
Of course, there’s always that 2:15-2:30 p.m. “Sell Program Express” to fear—the selling freight train that frequently appears when traders are getting too happy. (Hat tip to ETF Digest’s Dave Fry for inventing that term.)
Yes, there’s a “Buy Program Express,” too, but we haven’t seen much of that one lately. Just the sellers—most likely those puckish scofflaws known as High-Frequency Traders (HFTs) who manipulate quotes with their supercomputers to sucker funds and retail traders into erroneous trades that lose the little guys a lot of money.
Wall Street’s “Wheel of Fortune”
Who knows? Wall Street today is a real Wheel of Fortune. Whether you’re talking about the syndicated TV show or the spinning wheels of Las Vegas, the game everywhere is the same. As the old carny barkers used to shout (and maybe still do), “Round and round and round she goes, and where she stops, nobody knows.” Except for the carny barker, that is. He always knew the wheel was rigged in favor of the house, with the result that you rarely if ever could win that big teddy bear to impress your current girlfriend.
The HFTs and other lawless frauds seem to be 2016’s answer to those carny barkers, shamelessly (and illegally) rigging markets in their favor while SEC officials generally turn the other way, lest they spoil their chances to be employed by those same HFTs once they retire with their fat government pensions, paid for, of course, by us. P.T. Barnum was right. There is a sucker born every minute. And collectively, those suckers are us.
Unless we keep our wits about us. Right now, rightly or wrongly, markets are mainly rigged to follow the price of oil in lockstep. Oil was off sharply Monday and so were the markets. Oil is up sharply today. Guess where the market is. Oh, right, we just told you. But let’s still keep our collective eye peeled for that Sell Program Express.
Apple and the Fed, incoming
Running in background is actual news. And after a lame Monday, news picks up starting this afternoon. There are plenty of major company earnings reports on tap this week, but the big one will be Apple (symbol: AAPL), which reports sometime after today’s close at 4 p.m. EST. Since stupid pundits and CNBC talking heads alike have been badmouthing this company for at least a year now (even as it has consistently beat earnings estimates big time), the company is likely to surprise on the upside today, although we won’t know the numbers until we know the numbers. That said, AAPL tends to run up (as it is doing today) into its earnings report before getting clobbered in after-hours trading and for the next day or two. Why? Just because.
The other eagerly awaited new is the Fed’s latest reading of the tea leaves, due out Wednesday afternoon. As usual, we’ll all be parsing what will mostly be the same pronouncements the nation’s central bank made last month, except for one or two magical words that might be changed and might put a mysteriously different spin on things. The markets will then react insanely to what they imagined it was that the Fed was actually saying. It’s another stupid game we’ve been watching for years.
The real answer to all this is simple: these doctrinaire Keynesians don’t really know what the hell they’re doing. Neither do we, but we don’t get paid the big bucks not to know what we’re doing. That said, whatever they say will move markets one way or the other. Whatever we say won’t amount to a hill of beans in this crazy world.
Keeping portfolios in position
We are currently about 50 percent cash—with some of it now parked into short term (1-3 month) CDs, which are now returning a very generous 0.5 percent. (Heavy irony embedded in that last sentence.) But you do what you can do, and after the almost nonstop shelling portfolios (even ours) have sustained throughout this miserable January, the prudent thing to do is to mostly step back, sit in cash after liquidating sure losers (mostly in the energy patch) and wait for things to settle down, which they eventually will.
Right now, best general bets are for more of the same wildness to continue in the oil patch, influencing (mostly to the negative) any and all associated stocks; for the Fed to issue more gobbledygook essentially indicating they’ll be holding off on that next interest rate increase at least for awhile (unless they want to tempt an instant replay of a similar grave goof their predecessors made in 1937); and for most of the world’s governments and central bankers to remain complete, self-centered idiots, ignoring the wishes, dreams and financial health of their constituents.
In other words, we’re on our own. “They” make the rules. So we have to pick our stock market battles carefully. We’re evolving a strategery for this as President Bush II was prone to say, and we’ll be laying it out for you very soon.
In the meantime, let’s keep our powder dry. If the current nonsense continues, a happy day today will be replace by tears of misfortune tomorrow as the Wheel of Fortune takes another turn.