Wednesday, February 21, 2018

The Market is a Yo-Yo; Don't Get Strung Out

There are only two directions in which the prices of assets can move: up or down. In it's current state, US stock indices are doing both, a condition which cannot persist for long before the establishment of a definite direction becomes apparent and dominant.

Thus far in the month of February - which has a mere six trading days remaining - there have been eight days of gains and five sessions ending with losses, each swing in either direction being rather magnanimous compared to the prior regime of low volatility and complacency.

On Tuesday, the Dow Jones Industrial Average arrived at the midpoint between the highs and lows for the month. On the 8th, the low reading was a cumulative loss of 2288 points. On Tuesday, the 20th, it closed with a loss of 1184 for the month, roughly a 50% retracing off the lows, ending a string of six straight winning session.

Tumultuous times cry out for straightforward thinking and diligent observation. Direction will soon be determined, and such direction can be employed as a springboard for trading over the upcoming six to 18 months.

At the present, nothing has been determined, but it is clear that stocks are finding a rough road back to all-time highs acquired late in January. Not that all gains are without drawbacks and whipsaws, but the measure will likely be in the breadth of gains and losses in individual stocks.

Tuesday's losses on the Dow were led by Wal-Mart (WMT) which fell by more than 10%, but it was by no means alone. Of the 30 blue chip components, only five gained on the day, and only one - Intel (INTC) - gained more than one percent.

One by one, as fourth quarter 2018 and full year earnings are announced, the Dow stocks are being sold off. Whether this emerges as a buying opportunity or a precursor to more asset shredding is a function of both market sentiment and the continuing narration of the Trump economy.

If the general economy is on the mend, then this episode of doom and gloom will be brushed off as a mere anomaly. On the flip side, should the darlings of Wall Street continue to underperform, more losses lay dead ahead.

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

At the Close, Tuesday, February 20, 2018:
Dow Jones Industrial Average: 24,964.75, -254.63 (-1.01%)
NASDAQ: 7,234.31, -5.16 (-0.07%)
S&P 500: 2,716.26, -15.96 (-0.58%)
NYSE Composite: 12,763.34, -111.02 (-0.86%)

Note: Just heard that Reverend Billy Graham has passed away at the age of 99. A good man has gone to meet his maker.
Post a Comment