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It is a Black Friday on Wall Street

 

Black Friday sales are in full swing. Normally, today is all about the retail trade. Consumers spend the day waiting in line, picking up heavily discounted ‘door buster’ deals, and generally starting their holiday gift shopping. This year, it appears traders are also holding their own Black Friday sales. read more…

Markets need to hold here

This week saw a re-test of the October lows. That is to be expected in most stock market corrections. What is important to the future well-being of equities globally is that the averages do not decline much further from here. read more…

Stocks take a breather

Stocks are in the process of consolidating after the big gains over the last week or so. So far, the October sell-off has led to a recovery of about half of what was lost. In the two months ahead, we should see even further gains. read more…

October lives up to its name

It happened like clockwork. Earlier in the week, all three main U.S. averages re-tested their lows and then proceeded to bounce back, only to give it all back. That’s what happens during corrections, but it is not over yet. Afterall, it is October.

Readers will recall that last week I wrote that nine out of ten times markets will re-test their recent lows. Naturally, this is more of an art than a science, so prices can bottom somewhat above or below those lows. In this case, the Dow hit its lowest level in four months. The S&P 500 Index slipped below its recent lows while NASDAQ got hit the worst, wracking up a total 10% decline from its highs.

This is how it should be, since all year long the markets have been led by the advances in the tech-heavy NASDAQ. And by the way, there was no new news on Tuesday. There was no event that anyone can point to for the decline. That also makes total sense when you understand that this entire pullback has been technically-driven.

And it isn’t over yet. We still have five days left in October and another six until the mid-term elections. The way the market has been acting this week, we could continue to see 1-2 percentage point-sized swings daily.

The fuel for these pyrotechnics is earnings results. Remember my warnings that earnings this quarter, although good, would not be ‘as good’ as the past few quarterly results? As an example, Thursday evening, two of the big FANG stocks, Amazon and Google, reported after the close. Their top line revenue growth was less than expected, which came as a bit of a surprise to investors. No never mind that profits beat expectations, since these days profits can be manipulated easily by simply buying back additional shares.

Index futures Thursday night dropped like a rock as a result, and Friday morning the Dow dropped 300 points on the opening. Earlier in the week, companies like Caterpillar and Boeing reported. Their announcements were enough to move the markets (up in the case of Boeing, and down on Caterpillar’s results). Why, you might ask, do individual company results suddenly have the power to move markets like this?

It’s all about expectations. Investors have been fretting about Trump’s trade war all year. So far, the fallout has only impacted a few areas. Farming, for one, and maybe some companies in the steel business. The fear is that over time more and more companies will pull back investments, lose sales, or be damaged by these tariffs. And what may happen to one, may happen to all.

If you believed, as I do, that this is an inaccurate and rather simplistic view of the world, than the fact that one company might see some fallout if tariffs are imposed does not warrant taking an entire sector, or in this case, an entire market down with it. However, markets are not rational at times. This is one of those times.

Friday, it was announced that the country’s economy grew by 3.5% in the third quarter, which was faster than expected. Fearful investors barely paid attention to the news. That should come as no surprise. You can search to doomsday for a solid fundamental reason why we are experiencing this sell-off. You won’t find one. Bottom line: the markets were overbought and in need of a healthy pullback. Don’t over think this one and stay invested.

Pessimism reigns over the financial markets

It never fails. A couple weeks of declining markets and everybody becomes bearish. “New bear market unfolding,” “An end has a start,” or “More evidence of a global bear market” are just some of the headlines I’ve read in the past week. How did we go from bullish to bearish in such a short time period? read more…

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About Bill

Bill Schmick was born in a blue-collar neighborhood of Philadelphia, just a few blocks north of “Rocky Balboa” territory where most of his Catholic schoolmates grew up to be either cops or criminals. He narrowly escaped both professions by volunteering to fight in Vietnam as a U.S. Marine... Read More

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