Yesterday and Today
Yesterday
People are disappointed that the bottom we hit was not the classic “V” bottom where we hit hard on massive fear/capitulation, and then bounce just as hard. This is a reason many analysts are coming out and saying we are now in a bear market. Maybe they are right, but I doubt it. I don’t remember reading in any text book where the markets have to be easy to predict.
Yesterday we opened up 200 points and sat for hours. In all honesty I was not sure if it was just the market separating from one rocket stage to the next, or if the thing ran out of energy. It was the later. Futures were up 26 and closed exactly unchanged. The Dow closed up marginally (+23) while the Nasdaq closed down.
What was strange about this falter was the markets had what they wanted for a rally. Oil prices were stable but slightly higher. Bonds were stable and slightly lower. Speculative stocks like AAPL and TSLA were higher. China was not even open, giving the market a reprieve from having to watch every spin of their roulette wheel market. Yet the rally got stuffed. This does not bode well for a strong open today.
TODAY
I stated above that the weakness at the end of the day, especially in the absence of any news, does not bode well for a strong open tomorrow. We are hovering right on the cusp of being in or out of the official “correction level”.
Anyone that is long this market can not be faulted for still being long. The correction happened in 2-3 days, and came out of seemingly nowhere. The only way to protect oneself on the downturn would have been being out before it started (and risking missing out on upside), or having option hedges. The market here is the dilemma. Every day we don’t see the V-bottom or SPX 1867 tested and a bounce come people lose resolve.
Instead of focusing on the fact that corrections are natural and healthy and that we are in the biggest bull market in history, not to mention historically low interest rates, people focus on the latest headline. We start to run up but China fell. Who really cares?
China devaluing their Yuan makes it cheaper for us to buy their air pollution tainted, lead-based paint laden novelty products. It took people 5 months and the Fed Chairwoman stating that lower gas prices are good for the country to forget about crude futures in February, but now we are worrying again. This selling off on headlines happens in a country where the attention span is limited to the 28 seconds television commercials have programmed us to.
So there may not be a V bottom. This may be a 2 step forward, one step back rally until we get above 17,000 in the Dow and can sell 18,000 at the end of the tunnel. Remember the V bottom in 1987’s crash? I don’t, but anyone who thought the world was coming to an end missed the rally from Dow 1,738. O am not totally on board with the bull until we see yesterdya’s highest taken out.
And fans of bear markets………don’t be alarmed. There is an even bigger party waiting for the blood-hungry beasts waiting to release the dogs of war (Julius Caesar).
OPTION TRADERS
Say good bye to high volatility levels and expect 15% – 18% in a week (if not sooner). Of course this is a guesstimate.
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Too True To Be Funny
Attorney Stuff
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