September Rears its Ugly Face
The seasoned financial media will certainly have good, cerebral explanations to explain yesterday’s sell-off. Seemingly it was “monstrous” Hurricane Irma and North Korea, the latter apparently going nowhere anytime soon. Throw in September’s negative seasonality and the story of why the market fell yesterday couldn’t be clearer!
The American stock market fell on Tuesday, the first trading day this week, as North Korea and the West sent tremors rippling through Wall Street. The S&P 500 fell 0.8%, recording its worst trading day since August 17th, financial stocks leading the way lower with their biggest losing day since May 17th. Insurance stocks saw downward pressure after yet another rise in the risk threshold that a new hurricane, named Irma, could hit Florida.
North Korea successfully tested a hydrogen bomb over the weekend which triggered an earthquake with a 6.3 reading on the Richter scale. The ETF tracking South Korea, the EWY, fell 2.8%. Investors, alternatively, increased their exposure to safe-haven assets like gold, which soared 1.1%.
The last time the market fell against the backdrop of concerns regarding North Korea proved itself to be a beautiful buying opportunity. Just a week ago, the indexes opened at a gap down after a ballistic missile cruised over Japan’s skies; stocks, in the 4 ensuing days, rallied day in and day out.
Market players were well aware of the tendency to “buy the bad news” and that’s the reason it didn’t work yesterday. Earlier in the trading day, right after the negative opening, the market attempted to rebound, but when the market fell to the daily opening level, algorithms went into sell-mode.
It’s not the news that’s pushing the selling. It’s the way in which the programs are now responding to the news. “Buying the correction” was too clear and predictable to be able to function in the same way. Nobody has an edge when everybody has the same information.
Despite yesterday’s losses, the technical damage is yet to show up on the charts. The S&P 500 succeeded in producing a daily bottom precisely on the 50-period EM, and from there, bounced back, closing far from the bottom. The NASDAQ also closed above its 50-period EMA.
Is this the beginning of the downtrend the bears had been anticipating for ever so long?! It’s still too early to say! At minimum, some support levels will need to be neutralized for a downtrend to develop. Yesterday, that didn’t happen. In the event the market continues falling and the market test August’s low at the SPY’s 241.83 point level, then, there will be room for worry.
Daily Summary: The S&P 500 fell 0.75%. The Dow Jones ended off 1.07%, the NASDAQ falling 0.93%.
Wednesday: A packed Economic Diary will greet investors today. Investors will continue to eye any and every development in so far as tension between North Korea and the West goes – first and foremost, the U.S.
At 9:45, the service sector PMI index will be released, immediately followed by another indicator, the Supply Managers’ non-manufacturing index coming out at 10:00. The Fed’s Beige Book on the economy will then be released in the afternoon, at 14:00 N.Y. time. The list of companies reporting today before opening includes NAV.
Wednesday’s Hot Stocks: PLAY, COUP, DLTH, HPE, NAV, VRNT
Have a great trading day!
|Wednesday||8:30||International Trade||$-44.6 B||Medium|
|Wednesday||9:45||PMI Services Index||54.6 to 56.9||Medium|
|Wednesday||10:00||ISM Non-Mfg Index||55.4||Medium|
|Thursday||8:30||Jobless Claims||239 K||Medium|
|Friday||10:00||Wholesale Trade||0.4 %||Medium|
|HPE||Hewlett Packard Enterprise Company||PM||Tuesday|
|PLAY||Dave & Buster’s Entertainment, Inc.||PM||Tuesday|
|CASY||Casey’s General Stores, Inc.||PM||Tuesday|
|NAV||Navistar International Corporation||AM||Wednesday|
|VRNT||Verint Systems Inc.||PM||Wednesday|
|DCI||Donaldson Company, Inc.||AM||Thursday|
|DVMT||Dell Technologies Inc.||AM||Thursday|
|SAIC||Science Applications International Corporation||PM||Thursday|
|PAY||VeriFone Systems, Inc.||PM||Thursday|
|KR||The Kroger Co.||AM||Friday|
Today’s Picks – Day Trading!
New York Strategy Swing
Today’s Picks – Swing “New-York Strategy”
Risk Rates: Normal – Regular size, High –Consider reducing size, Low – Consider increasing size