Let's take a look at the unexpected surge of Nov/Dec in the face of projected lower earning for the Dec quarter... The star was Microsoft, equally stellar were APPLE, LAM, AMD and KLA, not far behind was VISA, JP Morgan and GOLDMAN. These few names and a handfull on others are what brought the DOW, NDAQ and the S&P to the stars, the rally was not broad and volumes also were low. With the strong year-end performance, not many are making a correction call, equally not many are predicting new highs for 2020. My own view is that Jan to March will see high volatility, particularly Jan could see a correction exceeding 10%. I pay attention to the Russell 2000 as I consider this index representing the broader US economy, the Russell did not make new highs confirming what was said above i.e. the 2019 rally was driven by handfull of high-flyers, not by the broader market which is what reflects the health of the economy. Just for reference, this is what Bezos invested in 2019, his choice made him the ex-richest man. In contrast, Bill Gates invested in the following which increased his wealth by $22.5b retaking the top title. Berkshire Hathaway (NYSE:BRK.B) Waste Management Inc (NYSE:WM) Canadian National Railway (NYSE:CNI/TSE:CNR) Caterpillar (NYSE:CAT) Wal-Mart (NYSE:WMT) Ecolab (NYSE:ECL) Crown Castle International (NYSE:CCI) UPS (NYSE:UPS) FedEx (NYSE:FDX) Coca-Cola Femsa (NYSE:KOF) Happy New Year and wishing all a prosperous 2020.
I take it this is the NDAQ100 eMini? If so, it hit 8,821 so you did Ok exiting at 8,802. You got balls man to go long at 8,796+, I normally don't play it that finely tuned, had 4 X 8,223 longs of 3rd Dec, exited these at about your buying price, now got buy orders below 8,658.
Dip or start of a correction? For those that believe history repeats, today's strong & fast surge to new high without a catalyst, followed by a reversal to below the previous closing, signals the start of a correction. I'm adopting wait & see although I do believe there will be a correction within the 1st 3 months of the year.... perhaps this is it, perhaps not... I'm ready for it. .
Still waiting to see if Fri dip is the start of some sell-off. Today's dip in the futures caused by news of Iran's attack on 2 US army bases was a one-off knee-jerk reaction not related to Fri dip, I did, however, took the opportunity to short some VIX Feb futures at above 18. We might see another dip if the US takes retaliative action, so far, no word from Trump despite his though talk before the attack. Trump's tough talk was laughable.... He eliminates the #2 man in Iran then he publically threatens Iran to do nothing about it or they'll get more punishment.... spoken like a true bully with no understanding of diplomacy and the M.E. eye for an eye culture. Doesn't Trump have diplomats that work behind the scenes to de-escalate things? Now, let's look at what Trump started: Iran was looking for an excuse to restart its nuclear ambition. Good intelligence should have told Trump that an attack on Iran will be that excuse. Iran restarting its uranium enrichment will draw Israel into a direct conflict with Iran which in turn will unite all Arabs against Israel and the US will then be forced to take sides... who knows where this will end.
The shooting down of the Iranian passenger plane was a rather baffling event. Firstly I must condemn the US business community and traders celebrating the news, the downing of the jet was a cruel and despicable act, celebrating it for profit is so insensitive that it puts the morals of American business community at par with the people that pulled the trigger. Secondly, it shows the Iranian Ayatollah Khomeini has a level of cunningness & cruelty beyond belief. Considering the timing and place of the event, it is likely that the Ayatollah formulated the plan so that he could then blame the USA for the atrocity. The plan has backfired because the US took no retaliative action and therefore it is now plain & clear that the Iranians themselves took the plane down. The only "mistake" here is that Khomeini got confused that Canada and America are one of the same. The other mistake was that the Iranian airport did not shutdown while missiles were flying, perhaps not a mistake at all since the airport is under government control. 176 people died in the Ukrainian plane downing, all innocent pawns in a game Khomeini was playing.
First time this month we see markets reacting sensibly to news, the tepid jobs figures have taken some of the hot air from under the market to ease them down a little. Perhaps the euphoria is dented and we'll see some sensible movements from here on factoring the fact that the US has a slowing economy. Still early days but Friday was a good day with a movement that made sense and reflected reality. Next week we see some of the major banks reporting on the last quarter of 2019, more denting of the euphoria may continue to see some dips.
I really don't like this exuberant market. Dumb money driving things up? Didn't think there was so much dumb money around, so what is it that makes everybody indifferent to bad news and celebrate stupid things like a trade deal that wasn't a deal? Celebrate an unemployment figure that didn't get better? Celebrate the bank's reporting for not going backwards? Celebrate a +1% expected GDP growth when a year ago 3% was expected? There is no logic! I'm raising my t/p level on existing longs every day but other than that, I'm on the sideline until there is a dip to a fair price, I'd say 28k for the DOW is a fair price.
A follow-through to y'day's post: Bank of America equity and quant strategist Savita Subramanian said: “The S&P 500 is running on fumes."