Are We Out Of The Woods Yet?
Equities start the day lower and all anyone wants to know is….Are we out of the woods yet, are we out of the woods yet, are we out of the woods yet, are we out of the woods. We got a LOT of Bad Blood going on right now because everyone and their mother is worried about China. Speaking of worries, you can put the month of September next to Chinese manufacturing numbers because it is one dire month for stocks. Ok, let’s fill this Blank space with some fresh thoughts shall we? Ever heard of the 10 month MAVG? Probably not, but I wish you would because it’s followed by the Pro’s to sense big trend changes. Take a look at this fantastic chart from dshort.com and you’ll see that buying and selling a 10 month simple moving average has been fairly effective since the early 90s. Now a lot of people will say “but Mike, All you had to was stay in the market over the long run and you generally avoid all these whipsaws”. That’s a decent argument, but with respect to this bull market it’s starting to feel like Everything has Changed. Volatility is back with a vengeance, dip buyers are Never ever getting back together, and all sorts of investment Style’s aren’t working. Look, in my Wildest Dreams I never thought we’d see the kind of moves we saw in August. The 10 month MAVG filters out daily noise and shows you long term trend changes. When the trend changes its important to decide: do I want to still be here or do I want to get Clean. This is a pivotal moment folks, either the bull market ended in August or this is just another whipsaw. I don’t know the answer to that question but it feels crazier now than it has in a long time. Welcome to trading in New York. (that wasn’t bad right? I think Wildest Dreams is my favorite of her new songs).
After the open it was another one of those “everything is down” type days. 500 stocks in the S&P and you were hard pressed to find 4 or 5 that weren’t hideous. Just an across the board 2.5% puke fest led by financials, energy, and materials. It really is ALL about cyclicals right now. On miserable days they get crushed, on rebounds they soar. Bi polar? That’s an understatement. Couple economic data points today: ISM Manufacturing continues to lumber around the 51-52 area and August Flash PMI was inline at 53. Quieter selloff than the one’s we saw last week, in fact if I didn’t have this $20k a year Bloomberg terminal I would’ve thought it was another slow summer day. Who really got pounded? NFLX, DLTR, FCX, and JOY. FCX was up big the other day because Uncle Carl took a stake, today no one seemed to care. Things are just that schizo. Any winners at all? CVC and AAL. An Airline and a cable company…good luck finding the pattern there. One weak sauce rally got smacked and by lunch we were on the lows, 1,922, down 2.5%. Duran Duran last week, Glen Miller today. We’re really swinging thru the centuries of music here (see what I did there? That one just came to me. BAM)
The final hour it went down, they were yelling timber. Look, we can try to dress this up anyway we want but we hit resistance, period. There was overhead selling, a lot of it, and once that geared up there was nothing anyone could do about it. That’s the problem with trend changes, when you try to go back to the old ways it doesn’t work. Now we have to retest the lows and like any retest it’s going to suck. I wish I felt like I was 22 because my youthful optimism is running on E right now. 3% rallies and selloffs are becoming the norm….what is this 2008? 2011? Can China really do this to global markets? I guess the answer is yes. One lesson that comes back time and again is that the globe is tiny, no market is insulated from a slowdown. Even if it’s across the Pacific Ocean.
Final Score: Dow -284bps, S&P500 -296bps, Nasdaq -294bps, Rus2k -271bps.
- Succinct Summation of the Day’s Events: All of last week’s worries cropped up again. Oil rose 8% yesterday, fell 8% today. Good luck in this kind of market.
- I like to call this “The Dream”
- And you thought managing money was hard where you work, try doing it in China: One manager at a major fund - part of the "national team" of investors and brokerages charged with buying stocks to revive prices – said a friend, also an executive at a large fund, was recently summoned for a meeting with regulators, along with all other mutual funds that had engaged in short-selling activity. "If I don't come back, look after my wife," his friend told him, handing the manager his home telephone number.
- I honestly wouldn’t mind if this was one of the reasons the Fed raised rates: “Last, and perhaps most intriguing, is that Fed Chair Janet Yellen might want to end the so-called Greenspan put, or the tendency of the Fed to give into every tantrum the market throws by easing monetary policy. After seven years of inaction, perhaps this might be Yellen’s way to let the market know there’s a new sheriff in town.”
- Quote of the day (which I like a lot): “The dot-com bubble of the late 1990s was a misestimate of the timing, not the magnitude, of the digital revolution." - Michael Spence
- Speaking of dot coms, here is an awesome Vanity Fair article on Silicon Valley. In it I regret my choice of college studies….”During 2013, high-tech workers up and down the peninsula were reportedly paid nearly $196,000 a year, on average, and some made several million dollars in stock. Other programmers have their own agents, much like Hollywood stars. Some interns have been paid more than $7,000 a month, which adds up to about $84,000 a year. (The median household income in the United States is around $53,000.) Snapchat has offered Stanford undergrads as much as $500,000 a year to work for the company.”
- We watched this movie with our kids last night, it holds up remarkably well. I highly recommend it for ages 7-10 (if you don’t get the movie from the picture we can’t be friends)
- The best thing about this Nikkei chart….well you’ll know it when you see it (a movie that DOESN’T hold up well. What is with the “im gonna go take a shower” scene? Is that the craziest thing you’ve ever heard on a first date? “Yea thanks for inviting me over, I’m just gonna go shower, you got any Dial soap up in there? Maybe a loofah for my back?”
- One of the coolest links I’ve had in a long time. You have to be on a modern browser…oh and be a tennis fan.
- If you believe in yourself, anything is possible kids.
We’re gonna end with some Crossfit fails because if there’s anything that sells well its Crossfit fails. You know what the first rule of Crossfit is right? You ALWAYS…
Have a good night.