Daily Market Update – September 1, 2015 (Close)
There are some nights that I go to bed just knowing that the following day is not likely to be a very good one.
Last night was one of those nights as the S&P 500 futures were tumbling and the outlook for China and Japan weren’t looking very good as their opens were getting near.
I tend to wake up even earlier than usual the next morning to see whether overseas markets were able to turn around, but more importantly to see whether our futures were able to turn around in the early hours of the morning.
Not as if there was really anything that could be done about it, other than having an extra cup of coffee.
Many times those markets do turn around because the overnight futures trading is really very light and it doesn’t take that much to stop what may be looking like a hemorrhage, but isn’t really.
For anyone that actually looks at individual stock prices in the pre-open, you may recall how Holly Frontier had fallen $12 one morning last week on a volume of about 305 shares. Once the opening bell rang, Holly Frontier started trading at a loss of about $1, pretty much where it ended the day even as the market fell by more than 3%.
This morning it was United Continental that was down about 20% in the pre-open on also just a couple of hundred of shares.
This morning, though, it looked as if the selling in the S&P 500 futures had gotten worse from the previous evening.
Overnight China fell, but not as much as has become their norm lately, but Japan also fell and they fell with Chinese market-like quality and quantity, approaching a 5% decline for their session.
Hong Kong, too and Europe was now following.
The news from China wasn’t very good, especially as you start seeing some more desperate kind of moves, which includes some coerced buying by brokerage houses and increasing threats of arresting and punishing “malicious short sellers.”
Last week’s impressive recovery during the middle of the week took the S&P 500 out of correction territory, but this morning’s early losses would put it right back. That tends to be the pattern of markets that feature really large moves higher, as we’ve definitely been seeing over the past few months and especially pronounced over the last few weeks.
The net sum of all of the large moves higher and large moves lower tends to be a negative one and in a meaningful way.
So far, this recent series of very large moves higher has certainly been consistent with history.
With the morning looking as if it was about to get off to a very sour start, it probably wasn’t a great time to go hunting for anything that looked like a bargain, as that hasn’t necessarily been a good strategy of late, despite those occasional appearances to the contrary.
Still, it was hard to resist a small position in General Electric for the day and somehow a couple of rollover opportunities popped up, as well, despite what would be another 400+ down session.
At this point, probably the best thing the market could do would be to re-group at this lower level and build the kind of technical support necessary to launch a move higher than can be sustained. These quantum leaps higher are basically worthless, as they represent points that people who wished that they had gotten out earlier then simply take the new opportunity presented to them to cash out.
That sort of thing doesn’t happen when the recovery from a severe drop is slow and methodical.
Forget about technical analysis and support and resistance levels. It’s all about basic investor psychology that continually balances fear and greed.
With that drop the fear is definitely overtaking the greed, as there’s not too much evidence of bottom dipping going on.
Today was expected to be a likely day of observation, but maybe the rest of the week may turn out that way, as it culminates with the Employment Situation Report.
The August data is usually on the low side, but a larger than expected number might lead to selling, at least the way our mindset has been for the past year or more. However, we may now be finding ourselves at a cross road in the realization that our economy is a relative winner against the rest of the world and a rate increase would just be confirmation of that fact.
I hope that number is a good one on Friday, not just for what it means for individuals in the workforce, but for what it could mean as it may be the start of a market resurgence based on optimism for accelerating economic growth.