Not sure your point there. What I am saying is that some slow burn on two companies on the DOW over the course of a day won't tank the entire equity market. At least, that is my belief.
Trading the Indices on Fundamentals
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Not sure your point there. What I am saying is that some slow burn on two companies on the DOW over the course of a day won't tank the entire equity market. At least, that is my belief.
They can and did in this instance. 2 Co that represent 12% of the DOW losing over 6% of their value each equates to .75% drop in the DOW, the bots took that .75% and sold of all the S&P, the Russell & the NDAQ by an equivalent amount... so there you are, 2 companies falling 6% each brought down the whole market by .75%. Both companies did not recover and close at the -6% so the DOW closed at -.75% while the other indices recovered somewhat.
Now take a sell-off of say 20% in just one major name of the DOW, the bots will then bring down all the indices by 3% or so, cause panic and trigger stop losses that will cause the bots to feed on themselves... before you can come to your senses to absorb what just happened, the whole market is down 12% and will continue to fall until a circuit breaker stops it, if the humans don't come in fast enough to buy, the bots will resume and bring all markets down another 12%, and the process repeats until the humans start buying, by then you just experienced a 30% flash crash caused by one single name getting sold off. So is the nature of the modern market.
I look forward to flash crashes, because I hedge rather than stop and because the flash always recovers, I can make multiple $100k profits on a 30% flash crash... does not happen often but it's worth the cost of the insurance to stay hedged waiting for them... while I wait for a fat finger or whatever, I day-trade for the petty 200 or 300pts but the big money is made when a bot induced flash crash happens.
One needs to distinguish between flash crashes and corrections, fundamentals help in that.
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Unless there is a strong recovery in the underlying economy:
https://www.man.com/maninstitute/at-the-mini-cycle-low
Are We Missing Anything?
So, having dismissed the two current market concerns, we look again to our cycle indicators to see if we are missing anything.
Our Cycle Tracker is not pointing to imminent recession. Inflation remains quiescent, meaning the Fed can be loose, which has un-inverted the 10-2s yield curve, allowing credit spreads to remain tight and weekly initial unemployment claims are just very slightly off 50-year lows. Our leading indicator is also still pointing to a strong recovery in the US purchasing managers’ index over coming quarters, driven by lower input costs for business, the recent rise in government bond yields from low levels and the outperformance of early cycle versus late cycle stocks.
The US and global cycle has had three mini-cycle slowdowns since the 2008-09 recession: a peak in April 2010, trough in March 2013; peak in July 2014, trough in June 2016; and a peak in September 2018 (Figure 2). The magnitude of the slowdown is similar to the prior two slowdowns, even if the duration is just one year after two years and three years in the two prior episodes. On balance, we think we are most likely now approaching the third mini-cycle low in global activity. Usually, that’s when one should buy equity risk.
Are we due for a correction? Here are 2 experts that say yes, but one of them says "not yet"
TONY COUSINS of Pyrford International has analyzed the effect of low and negative interest rates and has determined that the world economy has backed itself into a corner characterized by having low to no growth coupled with masses of debt. The low and negative interest rates should have stimulated long-term capital investment but he sees no evidence of that, instead, he sees that negative rates have helped create bubbles in equities and various other asset classes.
JAMES BLAIR, Head of Fixed Income Asia Pacific, Capital Group agrees by saying that It’s not hard to build a compelling bear thesis when considering the trade war, the yield curve inversion, and the increasing risk of global recession, but he also warned against getting out too early, telling us that: “It's late-cycle, not end of cycle, and there are a lot of assets that can still perform quite well in an environment like this”.
Trump's and Powell's flip-flops have created uncertainty, no CEO is going to committ large capital investment in an environment that changes weekly and continuously moves the goalposts (tariffs on Mexico were Trump's biggest judgment error). The uncertainty of BREXIT and May's bungles for 2 years created a similar environment in Europe. China has its own problems that the tariffs have magnified. It's easy to see Cousin's thesis of no long-term capital investments.
So, what do we do? As traders, we probably should buy the dips, as investors we probably should take profits on the rallies and keep the cash on the sideline.
TONY COUSINS of Pyrford International has analyzed the effect of low and negative interest rates and has determined that the world economy has backed itself into a corner characterized by having low to no growth coupled with masses of debt. The low and negative interest rates should have stimulated long-term capital investment but he sees no evidence of that, instead, he sees that negative rates have helped create bubbles in equities and various other asset classes.
JAMES BLAIR, Head of Fixed Income Asia Pacific, Capital Group agrees by saying that It’s not hard to build a compelling bear thesis when considering the trade war, the yield curve inversion, and the increasing risk of global recession, but he also warned against getting out too early, telling us that: “It's late-cycle, not end of cycle, and there are a lot of assets that can still perform quite well in an environment like this”.
Trump's and Powell's flip-flops have created uncertainty, no CEO is going to committ large capital investment in an environment that changes weekly and continuously moves the goalposts (tariffs on Mexico were Trump's biggest judgment error). The uncertainty of BREXIT and May's bungles for 2 years created a similar environment in Europe. China has its own problems that the tariffs have magnified. It's easy to see Cousin's thesis of no long-term capital investments.
So, what do we do? As traders, we probably should buy the dips, as investors we probably should take profits on the rallies and keep the cash on the sideline.
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A bit of upside on the US markets on news that phase one trade deal might go through if Trump flips on the Dec 15th tariffs, however, China also wants a roll-back of other tariffs, something that was not discussed previously, a step too far that might derail the deal in my opinion. Small caps & NDAQ gained 1%, DOW was flat kept down by Boeing. Europe once again surged ahead leaving the US behind.
I remain net short US, long EU
I remain net short US, long EU
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https://blairbellecurve.com/sitting-on-the-sidelines/
"Waiting for a market correction creates a false sense of security. If the market continues to go up, there will be regret and further hesitation to invest. If the market goes down, there will be paralyzing fear and hesitation to invest. Lose-lose."
"Waiting for a market correction creates a false sense of security. If the market continues to go up, there will be regret and further hesitation to invest. If the market goes down, there will be paralyzing fear and hesitation to invest. Lose-lose."
Boeing has dropped more than 11% in the past three sessions, representing about 280 DOW points. Today the following DOW components report:
McDonald's
United Technologies
Travelers
Procter & Gamble
Also reporting are S&P components:
Biogen
Harley-Davidson
Hasbro
Kimberly-Clark
Lockheed Martin
PulteGroup
Quest Diagnostics
Regions Financial
Sherwin-Williams
UPS
and Fifth Third
With such activity, I think trade news will be on the backburner.
McDonald's
United Technologies
Travelers
Procter & Gamble
Also reporting are S&P components:
Biogen
Harley-Davidson
Hasbro
Kimberly-Clark
Lockheed Martin
PulteGroup
Quest Diagnostics
Regions Financial
Sherwin-Williams
UPS
and Fifth Third
With such activity, I think trade news will be on the backburner.
Tue reporting was a mixed bag, not enough in them to move markets. What did move markets at the close was the BREXIT vote, in true market irrationality, the FTSE100 was up while US & DAX fell on the news. NDAQ lost almost 1%, possibly on the belief that the cloud business is slowing bringing the 2 biggest players in the space, Amazon & Microsoft, down. Wed is another busy reporting day that includes Boeing and Caterpillar, which have both been under pressure.
Boeing was up 2% today, perhaps insiders know something we don't and are anticipating "not as bad as feared" results or maybe just more irrationality, however, what outsiders know is that the MAX's troubles are mounting rather than reducing and the redirection of resources and the FDA's oversight of the whole of Boing procedures have affected all areas of Boeing, its reported figures & forward guidance are not expected to be good. I akin Boeing to Wells Fargo... a perfect enterprise until the surface got scratched (Even Warren Buffet was conned by Wells Fargo appearance).
I bought some NDAQ contracts at session lows as a hedge on the shorts I have in that index. I also have some S&P limit buy orders at 2,871 and below
Boeing was up 2% today, perhaps insiders know something we don't and are anticipating "not as bad as feared" results or maybe just more irrationality, however, what outsiders know is that the MAX's troubles are mounting rather than reducing and the redirection of resources and the FDA's oversight of the whole of Boing procedures have affected all areas of Boeing, its reported figures & forward guidance are not expected to be good. I akin Boeing to Wells Fargo... a perfect enterprise until the surface got scratched (Even Warren Buffet was conned by Wells Fargo appearance).
I bought some NDAQ contracts at session lows as a hedge on the shorts I have in that index. I also have some S&P limit buy orders at 2,871 and below
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Looks like a few issues that have been around a long time are simultaneously comming to a head... is this the catalyst that triggers the correction? 2018 over again?