The first week of the final month of 2019 was a deviation from the general theme of 2019. Stocks were sold with reckless abandon, as were bonds, with the 10-year note bounding back to yield 1.83% - though higher during the day - a level not visited since mid-November.
The bond market felt more like churning than the start of actual long-term selling, but stocks had a different sense about them. Bad news on the US-China trade situation has the financial world in a near-panic as the deadline approaches for added tariffs to be applied on Chinese exports to the US. Additionally, President Trump reimposed tariffs on steel from Argentina and Brazil, citing the two South American countries' recent currency devaluations as reason for slapping on the tariffs "immediately."
While the steel tariffs boosted shares of US steel producers, it only exacerbated the unease surrounding the wider Chinese issue and sent stocks into a day-long tailspin. Selling was the order of the day globally, as bourses from Japan, China, Europe and the Americas all suffered declines with the sourness continuing into Tuesday as trade resumed Tuesday in international markets.
While the focus may currently be on trade and tariffs, there appears to be more to the sudden swing from buying to selling than just the movement of goods around the planet. Recall that Friday (ubiquitously know as Black Friday in the US) also witnessed declines, not the usual euphoria associated with the start of the holiday shopping season. Other concerns are various recent populist uprising in places as diverse as Hong Kong, Iran, Lebanon, India and elsewhere. Besides, it is December, so one can safely assume that any concerted selling is going to be enhanced by year-end profit-taking.
While the mainstream (now nearly completely fake) media will focus on the stock markets' generous advances during the year, they will also conveniently gloss over the dual declines from October and December of 2018, which, taken in such context, renders gains from September 2018 as practically nil.
The Dow Jones Industrial Average, for instance, is up only 1000 points since mid-September of 2018, accounting for a gain of less than a half percent. The NASDAQ has tacked on about 450 points since August of last year, while the S&P 500, at current levels, has added just 183 points over the past 15 months, the point being that stocks, though they've recently made new all-time highs, are really not much further ahead than they were more than a year ago, but the media will remind us only of what's happened in the current calendar year, which might be a tad misleading.
In any case, internationally, stocks are being whacked again Tuesday morning and US futures are looking pretty dismal, with Dow futures down nearly 300 points less than an hour prior to the opening bell.
Corporate profits have been underwhelming, to say the least, for the past few quarters, so some fundamental shift may be underway. If a flight into the safely of bonds develops, that will be a sign that the stock market is going to finish off the year on a negative note, though there's always the possibility of a Sant Calus rally the week between Christmas and New Year to save everybody's bacon.
At the Close, Monday, December 2, 2019:
Dow Jones Industrial Average: 27,783.04, -268.37 (-0.96%)
NASDAQ: 8,567.99, -97.48 (-1.12%)
S&P 500: 3,113.87, -27.11 (-0.86%)
NYSE Composite: 13,448.26, -96.95 (-0.72%)
Showing posts with label profit-taking. Show all posts
Showing posts with label profit-taking. Show all posts
Tuesday, December 3, 2019
Tuesday, September 25, 2018
Dow Losses Tied To Nothing Other Than Profit-Taking
There's almost no chance - as Yahoo! News blared in a headline late Monday afternoon - that Brett Kavenaugh's Supreme Court nomination had anything to do with the 181-point drop on the Dow.
The continuing false narrative foisted by the financial media is about as fake as fake news can get. Every day, there has to be a reason for stocks rising or falling, there just has to be. Otherwise, how would the 24-hour squawking about stocks, finance, and your money justify its existence.
Sure enough, there are days that movements in stocks is correlated to some economic event, data drop, or newsworthy story, but most of the time trading actions are the result of some analysis, some emotion, and largely, some advance planning. Big firms don't just jump in and out of positions on the news of the day, their positions, and the allocation of their capital, is guided by profit and loss, gauging risk and reward, greed and fear.
There are times in which herd mentality takes over and swings sectors or even entire markets one way or the other, but, by and large, such huge swings are already programmed by the big trading firms, which almost never leave their positions vulnerable to unforeseen events. They are protected by covered calls or puts or any of a variety of risk-reducing strategies. Nobody with any experience trading stocks is rushing to their terminals to buy or sell on whatever nonsense is being cooked up by the crooks running the federal government in Washington, DC, because what happens on Capitol Hill usually has little to nothing to do with real capital being flung far and wide from Wall Street.
Firm in the knowledge that big positions were not being liquidated by major traders, what did cause the dip on the Dow Monday?
Chalk it up to profit-taking on short-term positions. Of the 30 Dow stocks, only seven were winners on the day, leaving 23 in the loss column. Two of the winner - ExxonMobil and Chevron - were tied almost directly to oil prices, which were up not just on the day, but for the past few weeks, as WTI crude hit a four-year high above $72/barrel on Monday. Three were chip or computer-related, as Apple, Microsoft and Intel were up, and the other two, Disney and United Health, were based on some perceived valuation play.
The rest of the stocks were lower, and it's probably a good idea to discount it as nothing more than random noise. The Dow just reached all-time highs this past Thursday and was even higher on Friday, so traders had plenty of time over the weekend to figure their positions, their profits, and how to take them. Since the move was less than one percent there's reason to believe that many traders - who, via groupthink, share many of the same strategies, knowledge, and objectives - saw an opportunity to book profits and move on to the next big thing, whatever that might be.
And, when they discover the next profitable trade, it's a safe bet that you won't be privy to it, but that many of the bigger traders on the street will know. It will have nothing to do with the news, politics, the soybean crop report, or the color of Lady Gaga's hair. You can bet on that.
Dow Jones Industrial Average September Scorecard:
At the Close, Monday, September 24, 2018:
Dow Jones Industrial Average: 26,562.05, -181.45 (-0.68%)
NASDAQ: 7,993.25, +6.29 (+0.08%)
S&P 500: 2,919.37, -10.30 (-0.35%)
NYSE Composite: 13,162.05, -74.39 (-0.56%)
The continuing false narrative foisted by the financial media is about as fake as fake news can get. Every day, there has to be a reason for stocks rising or falling, there just has to be. Otherwise, how would the 24-hour squawking about stocks, finance, and your money justify its existence.
Sure enough, there are days that movements in stocks is correlated to some economic event, data drop, or newsworthy story, but most of the time trading actions are the result of some analysis, some emotion, and largely, some advance planning. Big firms don't just jump in and out of positions on the news of the day, their positions, and the allocation of their capital, is guided by profit and loss, gauging risk and reward, greed and fear.
There are times in which herd mentality takes over and swings sectors or even entire markets one way or the other, but, by and large, such huge swings are already programmed by the big trading firms, which almost never leave their positions vulnerable to unforeseen events. They are protected by covered calls or puts or any of a variety of risk-reducing strategies. Nobody with any experience trading stocks is rushing to their terminals to buy or sell on whatever nonsense is being cooked up by the crooks running the federal government in Washington, DC, because what happens on Capitol Hill usually has little to nothing to do with real capital being flung far and wide from Wall Street.
Firm in the knowledge that big positions were not being liquidated by major traders, what did cause the dip on the Dow Monday?
Chalk it up to profit-taking on short-term positions. Of the 30 Dow stocks, only seven were winners on the day, leaving 23 in the loss column. Two of the winner - ExxonMobil and Chevron - were tied almost directly to oil prices, which were up not just on the day, but for the past few weeks, as WTI crude hit a four-year high above $72/barrel on Monday. Three were chip or computer-related, as Apple, Microsoft and Intel were up, and the other two, Disney and United Health, were based on some perceived valuation play.
The rest of the stocks were lower, and it's probably a good idea to discount it as nothing more than random noise. The Dow just reached all-time highs this past Thursday and was even higher on Friday, so traders had plenty of time over the weekend to figure their positions, their profits, and how to take them. Since the move was less than one percent there's reason to believe that many traders - who, via groupthink, share many of the same strategies, knowledge, and objectives - saw an opportunity to book profits and move on to the next big thing, whatever that might be.
And, when they discover the next profitable trade, it's a safe bet that you won't be privy to it, but that many of the bigger traders on the street will know. It will have nothing to do with the news, politics, the soybean crop report, or the color of Lady Gaga's hair. You can bet on that.
Dow Jones Industrial Average September Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 9/4/18 | 25,952.48 | -12.34 | -12.34 |
| 9/5/18 | 25,974.99 | +22.51 | +10.17 |
| 9/6/18 | 25,995.87 | +20.88 | +31.05 |
| 9/7/18 | 25,916.54 | -79.33 | -48.28 |
| 9/10/18 | 25,857.07 | -59.47 | -107.75 |
| 9/11/18 | 25,971.06 | +113.99 | +6.24 |
| 9/12/18 | 25,998.92 | +27.86 | +34.10 |
| 9/13/18 | 26,145.99 | +147.07 | +181.17 |
| 9/14/18 | 26,154.67 | +8.68 | +189.85 |
| 9/17/18 | 26,062.12 | -92.55 | +97.30 |
| 9/18/18 | 26,246.96 | +184.84 | +282.14 |
| 9/19/18 | 26,405.76 | +158.80 | +440.94 |
| 9/20/18 | 26,656.98 | +251.22 | +692.16 |
| 9/21/18 | 26,743.50 | +86.52 | +778.68 |
| 9/24/18 | 26,562.05 | -181.45 | +597.23 |
At the Close, Monday, September 24, 2018:
Dow Jones Industrial Average: 26,562.05, -181.45 (-0.68%)
NASDAQ: 7,993.25, +6.29 (+0.08%)
S&P 500: 2,919.37, -10.30 (-0.35%)
NYSE Composite: 13,162.05, -74.39 (-0.56%)
Tuesday, May 15, 2018
Dow's 8-Day Rally Ends Abruptly; Bonds,Technicals The Likely Causes
Naming retailers as culprits for ending the recent uptick in stocks on Tuesday probably doesn't quite hit the mark, even though stock futures continued to slide after April retail sales data was produced at 8:30 am EDT, prior to the market opening.
Overall, retail sales improved by 0.3% over the month, matching lowered expectations after a surprise gain of 0.8% in March. Whether traders were somewhat disappointed in the number is a matter of some speculation, better left with a question mark than a definitive answer.
What did likely spook the markets was the abrupt rise in bond yields, as the 10-year-note zapped higher to yield 3.07% during the day, a number not seen since 2011. The 2-year yield saw 2.60%, its highest level since 2008.
These are concerning numbers to stock hawkers because they are considered fairly risk free methods of making money, whereas stocks - even those offering dividends - imply risk, as stock prices rise and fall.
With the February's recent turn in markets still fresh in the mind, there are more than a few traders taking money off the equity table and moving it toward the relative safety of bonds. Besides, after eight days of gains, the market was pretty well priced out, so profit-taking commenced. The herd being what it is, the selling turned into a small stampede.
Another concern is the continued high price of crude oil. WTI crude held steady at 71.17 in New York, though pockets of $3.00+ per gallon regular gas began to appear across the filling stations of America. The national average stands at $2.87/gallon, which is beginning to squeeze middle class budgets, especially those with long commutes and larger, less-fuel-economiic vehicles.
Unless bond yields and the price of gas come down quickly, today's 197-point decline could turn worse in coming days and weeks.
Dow Jones Industrial Average May Scorecard:
At the Close, Tuesday, May 15, 2018:
Dow Jones Industrial Average: 24,706.41, -193.00 (-0.78%)
NASDAQ: 7,351.63, -59.69 (-0.81%)
S&P 500: 2,711.45, -18.68 (-0.68%)
NYSE Composite: 12,704.56, -67.47 (-0.53%)
Overall, retail sales improved by 0.3% over the month, matching lowered expectations after a surprise gain of 0.8% in March. Whether traders were somewhat disappointed in the number is a matter of some speculation, better left with a question mark than a definitive answer.
What did likely spook the markets was the abrupt rise in bond yields, as the 10-year-note zapped higher to yield 3.07% during the day, a number not seen since 2011. The 2-year yield saw 2.60%, its highest level since 2008.
These are concerning numbers to stock hawkers because they are considered fairly risk free methods of making money, whereas stocks - even those offering dividends - imply risk, as stock prices rise and fall.
With the February's recent turn in markets still fresh in the mind, there are more than a few traders taking money off the equity table and moving it toward the relative safety of bonds. Besides, after eight days of gains, the market was pretty well priced out, so profit-taking commenced. The herd being what it is, the selling turned into a small stampede.
Another concern is the continued high price of crude oil. WTI crude held steady at 71.17 in New York, though pockets of $3.00+ per gallon regular gas began to appear across the filling stations of America. The national average stands at $2.87/gallon, which is beginning to squeeze middle class budgets, especially those with long commutes and larger, less-fuel-economiic vehicles.
Unless bond yields and the price of gas come down quickly, today's 197-point decline could turn worse in coming days and weeks.
Dow Jones Industrial Average May Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 5/1/18 | 24,099.05 | -64.10 | -64.10 |
| 5/2/18 | 23,924.98 | -174.07 | -238.17 |
| 5/3/18 | 23,930.15 | +5.17 | -233.00 |
| 5/4/18 | 24,262.51 | +332.36 | +99.36 |
| 5/7/18 | 24,357.32 | +94.81 | +194.17 |
| 5/8/18 | 24,360.21 | +2.89 | +197.06 |
| 5/9/18 | 24,542.54 | +182.33 | +379.39 |
| 5/10/18 | 24,739.53 | +196.99 | +576.38 |
| 5/11/18 | 24,831.17 | +91.64 | +668.02 |
| 5/14/18 | 24,899.41 | +68.24 | +736.26 |
| 5/15/18 | 24,706.41 | -193.00 | +543.26 |
At the Close, Tuesday, May 15, 2018:
Dow Jones Industrial Average: 24,706.41, -193.00 (-0.78%)
NASDAQ: 7,351.63, -59.69 (-0.81%)
S&P 500: 2,711.45, -18.68 (-0.68%)
NYSE Composite: 12,704.56, -67.47 (-0.53%)
Tuesday, September 1, 2009
Traders Book Profits; Markets Take a Dip
Contrary to what I posted yesterday about inevitability and the lack thereof in the stock market, investors (many of whom read my blog and no doubt wish to prove me wrong) did what prudence would dictate and booked some profits.
So many profits were booked, in fact, that the selling sparked a mini-panic, sending the major indices down by roughly 2% at the worst of the trading. There's no indication as to what exactly caused all the selling, but it began to occur right after 10:00 am and the worst of it was over by noon, so it looked to be pretty organized, likely by the usual culprits in all this, the Goldman Sachs and Citigroups and JP Morgans.
The brokerages and banks have to book profits, and sending the markets down 2% on volume is nothing to really get excited about. It happens all the time, in bull markets as well as in bears, and there was nothing unusual about this except the overall timing. Market pundits have been calling for this kind of pullback for weeks, so today being the first day of September, it was ripe for the self-fulfilling prophecy trade.
And, while volume was significantly higher, it was still not so extreme as to cause alarm. In fact, large-scale selling of positions that, prior to today, were considered solid, is nothing more than an invitation to buy more because the bull market is really just kicking into a secondary phase in which wild gyrations in both directions will be evident, with the overall result being a slight increase on the indices at the end of each month or quarter.
This one-day event should not cause anyone to second-guess themselves or their positions, except to maybe take a little off the table. Stocks are for the long run, and this is a short-term move. While there's some concern that we may be headed for a "double-dip, " the data doesn't suggest it and the markets won't tolerate any unjustified corrections. September is an odd month, coming at the end of summer and just prior to third quarter earnings. It's essential to stay very focused and not be swayed by short-term thinking as it may all prove to be wrongly-directed.
Dow 9,310.60, -185.68 (1.96%)
NASDAQ 1,968.89, -40.17 (2.00%)
S&P 500 998.04, -22.58 (2.21%)
NYSE Composite 6,487.81, -155.43 (2.34%)
The internals confirmed what was already obvious. Decliners led advancers by a wide margin, 5218-1283, but it is interesting to note that there are still a good number more new highs being posted - even today - than new lows. New highs took the edge once again, 123-48. There were more new highs and fewer new lows than yesterday, which may supply some insight into this little bout of selling, notably, that there were still buyers bidding up the high fliers while not unloading the bottom-feeders. Looks and smells like garden variety profit taking according to those figures. Volume, as noted, was among the top ten highest of the year, but hardly unusual.
NYSE Volume 7,914,128,500
NASDAQ Volume 2,727,714,500
Commodities took the brunt of the selling, mostly those in the energy-related sector. Crude oil for October delivery was thumped again, down $1.91, to $68.05. Natural gas, for which there is an abundance of supply, was smashed lower again, down 16 cents to $2.82. The combination of lower oil, gasoline, heating oil and natural gas has to be seen as a positive for the consumer. Even though Wall Street may not initially appreciate the ramifications of lower energy prices, the gain in purchasing power is to everyone's advantage. Instead of plowing more and more money into non-renewable expenses, consumers, if energy prices continue lower into the winter, will have more discretionary income and spending power. Leading into the final months of 2009, the benefits of a stronger consumer are obvious.
The metals were the only sector showing any gains on the day. Gold added $3.00, gaining to $956.50. Silver was up 14 cents, to $15.06. The silver closing price was the highest since June 11 and continues to indicate higher prices for silver in coming months. Aside from its collectible and intrinsic value, silver enjoys more industrial use than gold, and supply is being strained. If economies worldwide advance, silver could top the $20 it saw in 2008.
Today's trading was expected and hardly a blip on the worldwide equity radar screen. Unless there is significant follow-through Wednesday through Friday, it will be seen as profit-taking and nothing more. If Wednesday's private employment figures from ADP and other data are positive, as today's ISM report was, then the market is taking off on its own tangent and presaging a potential pitfall in months ahead for the US and world economies.
Nothing will be set into stone until the government's non-farm payroll report for August hits the wires on Friday. This is a data-heavy week which bears close scrutiny and an iron will.
So many profits were booked, in fact, that the selling sparked a mini-panic, sending the major indices down by roughly 2% at the worst of the trading. There's no indication as to what exactly caused all the selling, but it began to occur right after 10:00 am and the worst of it was over by noon, so it looked to be pretty organized, likely by the usual culprits in all this, the Goldman Sachs and Citigroups and JP Morgans.
The brokerages and banks have to book profits, and sending the markets down 2% on volume is nothing to really get excited about. It happens all the time, in bull markets as well as in bears, and there was nothing unusual about this except the overall timing. Market pundits have been calling for this kind of pullback for weeks, so today being the first day of September, it was ripe for the self-fulfilling prophecy trade.
And, while volume was significantly higher, it was still not so extreme as to cause alarm. In fact, large-scale selling of positions that, prior to today, were considered solid, is nothing more than an invitation to buy more because the bull market is really just kicking into a secondary phase in which wild gyrations in both directions will be evident, with the overall result being a slight increase on the indices at the end of each month or quarter.
This one-day event should not cause anyone to second-guess themselves or their positions, except to maybe take a little off the table. Stocks are for the long run, and this is a short-term move. While there's some concern that we may be headed for a "double-dip, " the data doesn't suggest it and the markets won't tolerate any unjustified corrections. September is an odd month, coming at the end of summer and just prior to third quarter earnings. It's essential to stay very focused and not be swayed by short-term thinking as it may all prove to be wrongly-directed.
Dow 9,310.60, -185.68 (1.96%)
NASDAQ 1,968.89, -40.17 (2.00%)
S&P 500 998.04, -22.58 (2.21%)
NYSE Composite 6,487.81, -155.43 (2.34%)
The internals confirmed what was already obvious. Decliners led advancers by a wide margin, 5218-1283, but it is interesting to note that there are still a good number more new highs being posted - even today - than new lows. New highs took the edge once again, 123-48. There were more new highs and fewer new lows than yesterday, which may supply some insight into this little bout of selling, notably, that there were still buyers bidding up the high fliers while not unloading the bottom-feeders. Looks and smells like garden variety profit taking according to those figures. Volume, as noted, was among the top ten highest of the year, but hardly unusual.
NYSE Volume 7,914,128,500
NASDAQ Volume 2,727,714,500
Commodities took the brunt of the selling, mostly those in the energy-related sector. Crude oil for October delivery was thumped again, down $1.91, to $68.05. Natural gas, for which there is an abundance of supply, was smashed lower again, down 16 cents to $2.82. The combination of lower oil, gasoline, heating oil and natural gas has to be seen as a positive for the consumer. Even though Wall Street may not initially appreciate the ramifications of lower energy prices, the gain in purchasing power is to everyone's advantage. Instead of plowing more and more money into non-renewable expenses, consumers, if energy prices continue lower into the winter, will have more discretionary income and spending power. Leading into the final months of 2009, the benefits of a stronger consumer are obvious.
The metals were the only sector showing any gains on the day. Gold added $3.00, gaining to $956.50. Silver was up 14 cents, to $15.06. The silver closing price was the highest since June 11 and continues to indicate higher prices for silver in coming months. Aside from its collectible and intrinsic value, silver enjoys more industrial use than gold, and supply is being strained. If economies worldwide advance, silver could top the $20 it saw in 2008.
Today's trading was expected and hardly a blip on the worldwide equity radar screen. Unless there is significant follow-through Wednesday through Friday, it will be seen as profit-taking and nothing more. If Wednesday's private employment figures from ADP and other data are positive, as today's ISM report was, then the market is taking off on its own tangent and presaging a potential pitfall in months ahead for the US and world economies.
Nothing will be set into stone until the government's non-farm payroll report for August hits the wires on Friday. This is a data-heavy week which bears close scrutiny and an iron will.
Subscribe to:
Posts (Atom)
Posts
