Thursday, February 22, 2018

Did The Fed Spook Markets Or Was the Short Squeeze Over?

Analysts must employ incredible amounts of self-control to keep from hysterical laughter or uncontrollable slobbering sobbing when trying to explain the ups-and-downs of the stock, bond, commodity and FX markets.

Simplistic explanations are usually best employed as rationales for the awkward and apparent non-coincidental wild intra-day swings and unexplained episodes of random volatility.

It was the Fed minutes. China. Draghi's comments. The dog ate my homework.

None of this really works or is remotely believable, but the talking heads on TV or in alternate media try to get a grip on what's moving the market, regardless.

Thus, it is better to not get into the practice of reading tea leaves or practicing voodoo economics in search of trading directions, market timing or some other resource which will make us all rich, or happy, or just not so confused. Markets move on emotions, herd behavior, greed and fear. There is also an oversupply of computers and algorithms which direct trading in one way or another. Once things start moving one way, they seem to accelerate in that direction, until something or somebody comes along to stop it.

Rinse, repeat.

The Dow accomplished what could be referred to the rise and fall of the Roman empire in just one session on Wednesday, rising as much as 300 points before giving it all up in the final hour-and-a-half plus another 167 points for good measure. It all added up to more losses for the Industrial Average with just four of the thirty component stocks finishing positive on the day.

In other words, it was a very bloody afternoon. Interest rates went soaring, precious metals were hammered (as usual), and the dollar index shot up in meteoric fashion.

TV commentators attributed the drop to the release of last month's FOMC minutes. Yeah, sure. That's why stocks went up immediately after the release, before the collapse, and why equity markets are poised for a positive open Thursday morning. Rinse, repeat. Gibberish.

The cause, as always, is the love of money, the root of all evil. Keep rooting; see what sprouts.

Here's the score:

Dow Jones Industrial Average February Scorecard:

Date Close Gain/Loss Cum. G/L
2/1/18 26,186.71 +37.32 +37.32
2/2/18 25,520.96 -665.75 -628.43
2/5/18 24,345.75 -1,175.21 -1,803.64
2/6/18 24,912.77 +567.02 -1,236.62
2/7/18 24,893.35 -19.42 -1,256.04
2/8/18 23,860.46 -1,032.89 -2288.93
2/9/18 24,190.90 +330.44 -1958.49
2/12/18 24,601.27 +410.37 -1548.12
2/13/18 24,640.45 +39.18 -1508.94
2/14/18 24,893.49 +253.04 -1255.90
2/15/18 25,200.37 +306.88 -949.02
2/16/18 25,219.38 +19.01 -930.01
2/20/18 24,964.75 -254.63 -1184.64
2/21/18 24,797.78 -166.97 -1351.61

At the Close, Wednesday, February 21, 2018:
Dow Jones Industrial Average: 24,797.78, -166.97 (-0.67%)
NASDAQ: 7,218.23, -16.08 (-0.22%)
S&P 500: 2,701.33, -14.93 (-0.55%)
NYSE Composite: 12,695.53, -67.81 (-0.53%)
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