A Textbook Oversold Bounce
Equities start the day higher on a textbook oversold bounce. So last week I was reading this relatively humorous market recap by a potato shaped guy in the Midwest where he said “no way the market has a big move with 2 weeks left in the year”. Man, what an idiot that guy is. Wait. Actually, to be fair to myself, we’re only 3% off the all-time high so it might be a bit early to flog the back. Nevertheless, the market is really struggling to cope with this dramatic drop in Crude. It really, REALLY has no idea how to react. Frankly it’s not the drop in Crude that worries me, it’s the drop in credit. Credit is always the canary in the coal mine. If you were watching the credit markets in 2007-2008 you would’ve known something bad was about to happen. Now I know it’s not the same situation here, I’m not trying to say we are due for an implosion, what I’m trying to say is that the credit markets lead and they are leading lower. Can’t we just hit fast forward on 2014 and call it a day? Who wants to have a serious market discussion on Dec 15? I want to write about how bad peppermint chocolate is and show you funny pictures of Elf on a Shelf. Now I gotta be all serious about $40 crude oil and the fact that market can’t find a bid. Sigh.
After the open it was nothing but down and to the right. Santa Claus rally? Nope, more like this. There were literally no bids in the market, all we got was cascade selling which extended our streak of horrible price action. You know what, at this point I can’t blame crude oil anymore. For days now the media and twitter have settled on “weak crude” as the impetus for all this market misery. Which is fine, a drop like we’ve seen over the past few weeks smothers us in uncertainty. But you can’t go day after day blaming one event, one single solitary thing. Eventually the market becomes numb to it (remember Ebola or Cyprus banks?) and moves on. This late year selling is a combination of a lot of things so let’s not be complacent about that. Crude, protecting profits, downward momentum, pricing in slower growth, it’s a bit of everything. Two M&A events to talk about, RVBD and PETM, both of which were acquired by PE. Speaking of M&A, the Burger King / Tim Hortons deal was finalized. You know what ticker symbol they settled on for the new company? WHPR? DNTS? Nope, QSR. Freaking QSR!! What marketing genius came up with that one? Sigh. By lunch we sat on 1,995, down 0.3%. Winners: DO, ADS, NBR, ORCL, SPLS. Losers: F, SBUX, REGN, VRTX, QEP, and ADBE.
The afternoon saw fresh lows as Crude nearly touched $54. We closed just off the lows, 1,989, down 0.6%, on another miserable day. So that puts us back under the 50day MAVG and a full 4% off the yearly highs. There are just 11 days left, one of which is a half day, so the old Mike would’ve said “come on, what could possibly happen near Christmas”. The new Mike is going to say “I have no idea, I never would’ve expected action like this at year end so I’m going to stop saying dumb stuff”. Seriously, how out of left field is this whole thing? Couldn’t we have at least waited for the figgy pudding before rioting over falling energy?
Final Score: Dow -58bps, S&P500 -64bps, Nasdaq -100bps, Rus2k -105bps.
- Succinct Summation of the Day’s Events: still an endless grind lower because no one knows what to do with oil/year end/momentum.
- When a bull market gets long in the tooth, you see stories like these: High School kid makes millions trading stock. Ugh.
- Oh and Barron’s couldn’t find any stock markets bears in its 2015 outlook. Ugh x 2
- Ever wonder who sells those toys on AMZN waaaaay above mkt prices? Guys like this: “Jim Sheppard combed store shelves last week to find the hottest toy of the season: the Disney Frozen Castle & Ice Palace Playset. But it wasn't for a Christmas gift for the children in his life. Instead, Sheppard, who lives in Hebron, Ky., bought the $119 playset to list in his online store at Amazon.com, where the plastic, 2-in-1 palace replica was going for more than $250, at least double the original price. The toy sold in less than a day. Hitting brick-and-mortar stores for deals and then selling the items online -- a practice called retail arbitrage -- is one way Sheppard regularly runs his online store.”
- This is easily the hardest puzzle to solve
- My favorite econ-blogger made some comments on crude oil. “So it was no surprise that OPEC didn't cut production. And the speculation that oil producers are trying to hurt Iran, Russia, or terrorists ... that is also incorrect. The reason prices have fallen sharply is supply and demand. It is important to remember that the short term supply and demand curves for oil are very steep.”
- How would you even use that stupid sink?
- Yes, that is someone skiing that.
- Heck, I’d watch it.
- Everyone who worries about “repaying the National Debt” should read this plain, clearly written article. Forward it to your uncle….you know which one I’m talking about. “Actually, the debt will NEVER get paid down. Saying that the govt has to “pay back its debt” is like saying that the private sector must pay back its debt. This is true at the micro level, but false in the aggregate. Debt is someone else’s asset. So, to “pay back” the national debt is to reduce non-government’s assets by that much. In a credit based monetary system there is no such thing as aggregate debt repayment. In the long-term, debt is pretty much always expanding. And as our population grows we have, at least to some degree, growing needs for government (more policeman, firefighters, etc). So it’s not surprising that our debt has grown over long periods of time”
Tonight we’ll end with the best tennis rally I’ve ever seen. Some sick, sick shots in here!
Have a good night.