Showing posts with label Santa Claus. Show all posts
Showing posts with label Santa Claus. Show all posts

Wednesday, December 26, 2018

Santa Claus Delivers A Relief Rally For The Ages; Largest Point Gain On Dow In Market History

The extended holiday season - thanks to an additional week for shopping between Thanksgiving and Christmas - was exceptionally kind to retailers, who reported the best holiday season in six years, so Wall Street finally got the news that the economy was apparently not on the verge of imminent collapse, sending stocks soaring throughout the session.

How much of the gains were attributable to short-covering buyers and strict momentum chasers is unknowable, though it was likely a large percentage. Risk appetites have been under assault for months, so this one-day wonder might not be as impressive as bullish traders would have one believe. It was more a technical advance after waves of selling created a severely short-term oversold condition.

To put it in perspective, the nearly five percent gain on the Dow, in point value, was equal to only about one-fifth of the most recent decline. The Dow had lost more than 5000 points since October, so Wednesday's buying spree pales in comparison and sets up the market for further speculation as far as directional trades are concerned.

If this nascent rally is to continue - which is also likely - there has to be some catalyst to carry it forward, though it might simply run until it is exhausted. Since the gains put only a minor dent in the recent losses, momentum should carry it forward, possibly another 1500-1800 points on the Dow.

While that might seem like a huge number, it wouldn't even wipe out the losses already sustained in December (as on Monday, that was -3746.36), so investors may get something of a stock sugar rush to close out the year and maybe some fun in the first days of the new year.

This pump was long overdue, and there's also the possibility that the call Treasury Secretary Mnuchin made to the Plunge Protection Team on Sunday had some impact.

Santa has come and gone, leaving plenty of presents behind.

Ho, ho, ho.

Dow Jones Industrial Average December Scorecard:

Date Close Gain/Loss Cum. G/L
12/3/18 25,826.43 +287.97 +287.97
12/4/18 25,027.07 -799.36 -511.39
12/6/18 24,947.67 -79.40 -590.79
12/7/18 24,388.95 -558.72 -1149.51
12/10/18 24,423.26 +34.31 -1115.20
12/11/18 24,370.24 -53.02 -1168.22
12/12/18 24,527.27 +157.03 -1011.19
12/13/18 24,597.38 +70.11 -941.08
12/14/18 24,100.51 -496.87 -1437.95
12/17/18 23,592.98 -507.53 -1945.58
12/18/18 23,675.64 +82.66 -1862.92
12/19/18 23,323.66 -351.98 -2214.90
12/20/18 22,859.60 -464.06 -2678.96
12/21/18 22,445.37 -414.23 -3093.19
12/24/18 21,792.20 -653.17 -3746.36
12/26/18 22,878.45 +1086.25 -2660.11

At the Close, Wednesday, December 26, 2018:
Dow Jones Industrial Average: 22,878.45, +1,086.25 (+4.98%)
NASDAQ: 6,554.35, +361.44 (+5.84%)
S&P 500: 2,467.70, +116.60 (+4.96%)
NYSE Composite: 11,204.09, +434.26 (+4.03%)

Tuesday, December 29, 2015

End-of-Year Santa Rally: Is It Real or the Ultimate Head-Fake?

Stocks took off like proverbial holiday bottle rockets on Tuesday, as 2015 winds down and investors (or HFT algos) scramble for the last bits of profit for the year.

All three of the major US indices were up handsomely with just two more trading days left in the year. Equity and bond markets will be open for business as usual on Thursday, the 31st, and closed for New Year's Day on Friday, January 1.

The boost today came right at the open, with all the indices shooting up roughly one percent promptly at 9:30 am ET. The remainder of the session was somewhat on the dull side with low volume, but the speculators didn't seem to mind booking one-day gains.

What little economic data there was turned out to be positive, the Case-Shiller 20-city Index showing a 5.5% gain for October and the Conference Board's measure of consumer confidence came in at 96.5, well above consensus estimates of 92.9. It seems that consumers were sharing in the holiday spirit. MasterCard yesterday reported robust holiday spending, at a pace 7.9% better than last year. the gains were attributed in part to lower gasoline prices making more income disposable for holiday spending sprees.

With data darting in and out from positive to negative over the past few weeks, the question arises whether the end-of-year rally on Wall Street is the real thing or whether it's a Grinch-y fake-out which will all be taken away come the new year.

That's a tough call, though most analysts will gladly opine that the bull market is here to stay, since the Fed's rate increase has gone off without a hitch, consumer spending (which accounts for as much as 70% of the economy, so it is said) is awesome and roaring, and funds are all in on equities.

The other side of the coin, from Main Street, is seeing heavier use of credit for everyday purchases, a job market that on the surface says full employment but at the core is made up of statistics, lies and low-paying jobs, and a middle class that continues to be eviscerated by taxes and inflation.

The glue to either side of the story is oil, the one commodity upon which the global economy spins, which is as cheap as it has been since the crisis of 08-09, and doesn't seem to be going anywhere, despite the outsize gains today (WTI closed up, at 37.35/barrel). Low oil and gas prices are boons to consumers and to business, driving input costs lower and profits higher. The only people not happy with the price of oil are the producers, especially the frackers, who have had to lay off thousands as the price of crude has declined.

What the low price of oil does beyond the gas pumps is provide margins for business production, and there's little downside to that. So, other than stocks approaching nosebleed levels, the US economy is in a strange spot. GDP may actually begin to ramp up to levels the Fed can feel more comfortable about raising rates though stocks will be hard-pressed to continue much higher. The rally is going on seven years, already the second-longest in market history since WWII and earnings have slowed for many companies, though the price of their stock remains high.

That's an unsustainable condition, one which will be worked out by the markets over time, and the general rule at these levels would be to fade any rallies, even ones which come in holiday wrappings with candy canes and sugar plums.

It's what's inside that counts, and market internals like breath and volume are pointing in the wrong direction.

Stocks are likely to rally for the remainder of the week and the year, but all-time highs are looming, and on the Dow and S&P haven't been overcome since May. It's tough to see how these indices can go much higher without significant improvement in the bottom lines of many companies.

Besides, it's never smart to buy high, and these markets have been at extremes for more than six months. There's been plenty of time to switch out of equities, but seriously, where else can money go?