It's A Bear Market
Equities start the day higher on one of the lamest oil headlines I’ve ever seen. After we spent yesterday basking in the warm glow of a day off I was hoping we’d start the week with some kind of good news. Instead we got this “4 oil producers agree to output freeze at current record levels”. Oh is that right? You guys are going to just keep producing huh? Isn’t this like saying “I’m gonna go ahead and freeze my current cupcake intakes at these levels in an effort to stop this downward spiral my weight is in”. You know how long Crude remained green today? About a nano second. Guys, I know you don’t wanna take advice from a gray Midwest equity trader but if you plan on addressing this sea of oil we are swimming in, locking your production right here is about as useful as a Kanye West tweet (he’s $58mm in debt? Doesn’t his wife make like $5mm a day on her stupid app?). So the macro slog remains the same: worries about growth and European banks which slams credit which slams equities which slams high PE stocks which slams sentiment which slams everyone’s P/L. Rinse and Repeat. We aren’t getting out of this until the world reprices itself for a new level of economic activity. You may want the pain to stop and I may want the pain to stop but it won’t until the towel is sailing across the mat with Burgess Meredith in the corner yelling “NOOOOOOO”. Did you enjoy your day off? I sure did, is there a better holiday than Presidents Day? Our kids have school while we lounge around! God Bless you Washington and Lincoln, you guys rock.
After the open the day turned into a real slog. Honestly it felt like a quasi-holiday as volumes ran 10% below 2016’s average and interest in trading seemed scarce. Empire Manufacturing turned in its 6th straight negative reading so that didn’t help matters at all. The NAHB Housing index also missed but this one is still near its highs so meh. Two big movers of note! ADT rose 47% after agreeing to be acquired by Apollo and CYH fell 22% after announcing a surprise quarterly loss. CYH…ugh…how are we supposed to think about something like this? They basically said “there were less sick people” which, you know, is usually a good thing. I mean this is like same store sales falling yet in this instance it was less people who were hurt / sick / injured / potentially dying. Yea…hard to root against that my friends. What else…CHK FCX and WMB all rose big because when these dog house stocks rally they rally HARD. Aint no one messing around in CHK for a 1% gain…no no…they in there for the 17% random rips. GOGO fell 27% after American Airlines said “it’s not me, it’s definitely you”. Airplane Wifi, this is one of my ALL TIME favorite 1st world problems. When someone says “my internet stinks at 35k feet” I can’t help but get irrationally mad. Are you freaking kidding me? You are in metal tube hurtling the air at 450mph and you are bummed that Youtube stutters? Come on MAN. Banks did ok today so that was one less worry for us. Two things I check when I walk in the door: the price of oil and where DB is trading in Germany, you can pretty much call the day with those two pieces of information. We rose throughout the morning because sentiment is awful right now and “less bad news” is basically all we need to see a big gain. We’ll see what happens above 1,900 though because I can’t imagine there’s legs above there.
The afternoon brought nothing new as we went sideways for the last 3 hours of the session. We closed at 1,894, up 1.6% but there really wasn’t any meaningful change to the narrative. We are going to continue to see days like today because equity bounces will be both swift and meaty. Earnings are over (check my link in the news highlights) and the main takeaway will be “blah, those didn’t do anything to help the macro picture”. The market will continue to be dominated by swings in sentiment so don’t walk away from big rallies thinking all is clear. The upside is absolutely capped, there is no path back to 2,000 that I can see. And again, feel free to quote me on that, I HOPE I’m wrong.
Final Score: Dow +139bps, S&P500 +165bps, Nasdaq +227bps, Rus2k +245bps.
- Succinct Summation of the Day’s Events: Slow grindy rally as a two day bounce continues. This is what often happens when sentiment reaches peak negativity, you see this type of action. Likely fails after we breach 1,900.
- Make sure you read one of my favorite bloggers Weekly Summary. Always informative.
- Get your earnings geek on here with @factset. “The blended earnings decline for Q4 2015 is -3.7%. If this is the final earnings decline for the quarter, it will mark the first time the index has seen three consecutive quarters of year-over-year declines in earnings since Q1 2009 through Q3 2009. It will also mark the largest year-over-year decline in earnings since Q3 2009 (-15.5%).”
- I wonder…will this chart keep going up and to the right? I’ll say yes and that scares me
- Well, it’s a Global Bear Market
- Stuff Michael Should’ve invented: cheesy style
- Take a look at the first chart in this link, its eye opening. Goes to show how miserable stocks can be over long time frames.
- Josh wonders….is there ever a reason to be 100% long stocks? I do like the 5 reasons he came up with
- Look what this kid has to go thru to get to school. I can’t even get mine to walk 2 blocks without moaning.
- This is my favorite Aussie link EVER. I don’t know what he says but it makes me laugh every time I hear it
- How to Buy Low and Sell High by James Altucher. “Don’t let a day happen without turning it into an experience you can squeeze the magic out of. Stretch the day out to find what was hidden in the secret folds that we often ignore. An experience is often free. And what you get out of it can stretch a lifetime.”
- Listen boys, now may not be the time to play your lvl 85 Orc.
- It’s time to measure your risk tolerance. To combat those feelings, you can conduct a self-evaluation of your risk tolerance. Two companies, FinaMetrica and Riskalyze, have built businesses around these sorts of assessments.
- New Game of Thrones Season 6 trailer! Amped. Did you notice where Jon Snow is positioned?
We’re going to end tonight with a London Tube fail. It’s an oldie but goodie and I’ve always wondered what it would be like to attempt this because it looks like fun. Actually maybe not…
Have a good night.