Worsening US-China trade war crashes Dow over 850 points in Monday action
WASHINGTON. Updating. Following up on our initial assessment of stock market carnage this morning, we regret to report that the Dow Jones Industrial Average (DJIA), the S&P 500 and the tech-heavy NASDAQ continue to sustain a pounding. Wall Street’s bears are getting their revenge today for enduring months of market bullishness. Which is why they’ve got the bulls on the run today. Investors are dumping stocks, any stocks, with abandon, increasingly worried about the worsening US-China trade war. Few vehicles have escaped damage in the ongoing Monday carnage.
At the moment, the DJIA is off a phenomenal 870 points or thereabouts. Market action is so volatile Monday afternoon that the Dow is gaining – or losing – 10 to 20 points every 2 seconds or so.
The Dow’s loss is currently running at a -3.14 percent clip, a colossal hit for a single day of trading. The S&P 500 average is in slightly worse shape, losing 93+ points thus far on the day for a snapshot loss of 3.17 percent. And the NASDAQ and its collection of heavily-owned microchip names is getting hammered for what must be the 5th trading day in a row if we recall. The Nazz is currently off a hideous 301.68 points and sinking, currently kicking its loss dangerously close to a negative 4 percent on the day.
Worsening US-China trade war means selective buys, cautious sells as stocks thrash violently about
We’ve actually done some very selective buying here, although that could prove to be a very bad move. The frantic, desperate, fear-driven selling, almost all of it based on China’s virtually warlike revenge against President Trump’s merely announced (but not yet implemented) tariff hikes, is obliterating 20-, 50- and 200-day stock trendlines by the hundreds. This latest development in the worsening US-China trade war means that technicians may have to begin their calculations all over again after Monday’s closing bell. It’s a bad place to be when the technical damage is this extensive.
Our portfolios have suffered a palpable hit today. Not fun when you consider the insidious portfolio erosion suffered by most shareholders last week as stocks began signaling a potential correction. But it would have been a lot worse if we hadn’t sunk a chunk of change into a broad collection of high-yielding preferred stocks and conservative ETFs over the last year or so.
Ponick’s general rule of stock market investing
For me, the general rule in investing, as I shared with investment classes I taught in the 1980s, is this:
“Position your portfolio to make as much money as you can in a bull market. And, when the market starts to turn on you, reposition your holdings to lose as little money as you can during a nasty, bearish downturn.”
Following this rule, we’re halfway there readjusting our portfolios. Plus, we pared a few positions this morning before things got really bad.
Crashing the McClellan Oscillator: Not good, but a potential silver lining inside
But today’s selling is so dramatically overdone that it’s already likely to have crashed the McClellan Oscillator toward a new intermediate term low (see today’s previous piece).
That’s almost always a sign that at least a snappy short turn reaction rally could be right around the corner. This could give a lot of investors, including us, a brief window we could use to escape additional greatly-loathed positions. We hope. Because a crushing downturn like we’re seeing today won’t be leaving town tomorrow. Neither will the ever-worsening US-China trade war, or so it seems. Such rottenness tends to linger.
Looking for a few good bargains, perhaps prematurely
Shares we’re nibbling at right now include tiny slices of high-priced Amazon.com (trading symbol: AMZN); and stable genius software, cloud and tech giant Microsoft (MSFT). We regretfully dumped small positions in Intel (INTC) and Micron (MU). It was a good move. They continue in their headlong decent into hell in today’s horrendous trading action, which has clobbered chip and tech stocks like there’s no tomorrow coming.
Social networks, moronic, sophomoric network “news” anchors and “reporters” encourage violence, not Trump
US political atmospherics, social media censorship and (likely) associated illegal election manipulation, and this past weekend’s dueling mass murderers – at least one of whom was clearly an anti-Trumper – have not helped today’s trading atmosphere.
Nor has the deteriorating social situation been helped on whit by so-called network and cable news shows that seem less interested in restoring comity to this country than they are whipping their poorly-informed acolytes into increasingly intolerant and violent frenzies. Which, in turn, along with social media agitation is precisely what’s inspiring any number of already certifiable nutcases to play violent video games against innocent fellow citizens. Taken as a whole, it’s a hideous situation. The media needs to get its act in gear to work against it. Except that they won’t. They prefer to act like the overgrown juvenile deliquents they’ve become. Worse, they’ll get pay raises for the amount of hackles they raise (and advertisers they can recruit.)
In short, these ignorant clowns and shills will do as they’ve been doing. They’ll encourage the exact opposite of peaceful behavior. Then blame the results – like the horrific outcomes we witnessed this weekend past in El Paso and Dayton – on, you guessed it, Orange Man Bad.
Wall Street’s Bears: Welcome to Chaos Manor. Or is that Crackerbox Palace?
All this chaos, in turn is not helping a market that’s already seriously worried about the clearly worsening US-China trade war and the implications it has for the US economy moving forward. Like George Harrison’s antic song, the world – and Mr Market – seem to be welcoming us all to Crackerbox Palace.
Meanwhile, as we wrap this follow up article, the Dow is now attempting to make this a an over 944 Dow point loss on the day, a 3.54 percent drop. And the NASDAQ is about ready to take out that 4 percent loss ceiling it seemed to be avoiding earlier. (Oops, it just did at 3:04 p.m. ET by crossing the minus 4.1 percent loss point and sinking further, down about 328 points at the moment.
I can see it’s time to pull out a couple of limes, screw open a bottle of tonic water, and start pouring the gin. On days like this, that’s the only rational thing to do. Averages could pull back a bit from the brink today before the close. On the other hand, the slash-and-burn bears could very well try to run the table and close the Dow with more than a 1,000-point headline-grabbing loss.
We’ll come back with the results in tomorrow’s report.
–Headline image: Taking a header off a deck and into the Great South Bay of Long Island. Just like the stock market’s trying to do in trading action today. (Image via Wikimedia Commons, GNU Free documentation license 1.2.