There Are No Free Lunches - Ever
Equities start the day slightly lower as our two day face ripper comes to a sputtering end. Trust me, that move you saw in stocks since the NFP report shouldn’t have surprised you one bit. You get those giant rips in downtrends because the market needs to punish everyone who is hedged to the teeth. There are no free lunches, ever, hedges don’t endlessly print money because you think the market is still overvalued. When everyone hedges up and drives sentiment indicators way too far in one direction the market takes it personally so be careful about pitching a tent in the bear camp. I took a quick trip across the pond to bang on a few doors and I’d be remiss if I didn’t relay a soccer story. I was generously given tickets to attend this “Arsenal vs something United” event last Sunday and I must admit, I was pretty excited. Took the tube, drank warm beer in amazing pubs, ate crisps, complained about the weather, you know, tried to blend in. In typical American fashion I decided to show up late because…come on…nothing happens in the first few minutes of a sporting event. Ok, well, they scored 2 goals right away and I missed them both. Fine, be that way. I’m gonna go in the concourse and enjoy a quick adult beverage quick because…come on…no one scores 3 goals at the start of the game. What’s that? I missed another one? That’s nice. At least I went back to my seat to hear some local yokel yell “you didn’t miss anything yet American….” Kill me. I flew 4000 miles and saw zero of three goals in some kind of big whoop ti do at Emirates stadium. Soccer stinks, I’m going back to hating on it. Plus, when all was said and done, I lost my co workers tickets, so now my year end review is going to include “totally irresponsible on trips abroad”. Ugh. Let’s move on to the market before I hate myself even more.
After the open it felt like the market was exhausted and traded like it too. A pathetic attempt at 1,990 fell apart and by lunch we had dropped to around 1,974. I said this a few weeks ago but the 1,995 – 2,000 range is a wall of selling, there is just so much supply there you can’t change your mind about the trend until you see that hurdle cleared. The IMF lowered its World Growth forecast for the 18th time in the past 2 months so if you’re still dialing up Lagarde’s number for your models feel free to move on. We get it…China, Commodities, Emerging Markets, changing Demographics, etc etc. Global Growth is slow after the biggest crisis of our lives? You don’t say? Healthcare got smacked today after ILMN pre announced dragging names like VRTX, ENDP, CELG, and BIIB with it. I guess the pain in healthcare won’t be cured overnight (yea I went there). You know I will say that Arsenal’s stadium is pretty cool, had a real Wrigley Field vibe to me. I get why people dig that place so much. Winners were ENS (talks with JCI), DD, HP, RIG, FSLR, and HES. Energy and Materials! Crude actually rose 5% today to near $49, I mean if Crude can go up maybe we got a shot here. DD’s CEO left, and they cut forecasts, yet the stock rallied 7%. So many people looking for bottoms in names like these it’s amazing. Almost any big news is readily embraced as a change in the winds. We’ll see.
The rest of the day was quiet and a small rally kept us from the lows. When all was said and done we closed at 1,980, down 0.3%. Look, here’s the thing, buying stocks at these levels is a bit like trying to navigate this. It might work but there’s downside to even trying. Wait for the break higher if you wanna play the Q4 seasonal (which I think is still a thing). Wait for earnings to see if companies say “it’s really not THAT bad.” If they do, and sentiment stays depressed, then I think we have a legit shot of going higher into year end. This week is a weird no man’s land before that happens and as the great Teddy KGB once said: “Go awayyy, Mike. This one's no good for you.” You know what is good for you? London. Awesome city.
Final Score: Dow +5bps, S&P500 -39bps, Nasdaq -72bps, Rus2k -72bps.
We’re gonna skip the news highlights because it’s late here and the hotel is SOOO FAR AWAY.
The final video reminds me of how awesome it is to come home after being gone for a while. The first 5 seconds destroys me in this one, gut punch right away. There’s even some DIS love in there too!
Have a good night.