DJIA + SPX futures were up as much as +1% in overnight trading. We're seeing a more muted open
in the cash market, but all indexes have gapped up. For sidelined investors, boarding will be difficult. The steepest parts of the climb are on the night train north.
A put is an option that gives its holder the right to sell an asset at an agreed 'strike price' (within a certain period of time), thus protecting the holder from further losses. The financial media has more recently coined the phrases 'Greenspan put' and 'Bernanke put' as clever word play when referring to Fed policies intended to stave off market declines.
I'm going to stretch the word play a bit and use the term 'BABA put' to indicate an inflection point in Emerging Markets. Purely arbitrary to be sure, but when Alibaba printed an intraday low of 58 on August 24 (the morning the DJIA dropped -1000 points at the open) I mentally 'shelved' it as the price at which it might be safe to open a longer-term position in Emerging Markets. Today's intraday low was 58.21, which is close enough. I added a position in VEIEX (Vanguard Emerging Markets) at the close, along with smaller positions in RYWVX and BABA itself.
Sure, the Shanghai Composite is off -40% from 2015 highs, and BABA is laboring under accusations of accounting fraud. A perfect buying opportunity. Investors couldn't wait to buy BABA @ 120 last summer, and now they're tripping over each other to sell it @ 60? We want to be the guys on the other side of these trades. No guarantees, of course.
"There is no training -- classroom or otherwise -- that can prepare for trading the last third of a move, whether it's the end of a bull market or the end of a bear market. There's typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it." -- Paul Tudor Jones
Seasonality will be a headwind next week, with the second half of September normally a good time to head for the sidelines.
However, Thursday's late reversal + Friday's unexpected selloff succeeded in forcing many weak hands to stop out. Put/Call ratios remain high, and my sense is that most investors are positioned for further downside.
The invisible hand that guides market forces may have transposed the seasonality template a few clicks, decreeing A-flat this year rather than C. Not many believers in a rally right now.