DJIA +230 points. SPX +1.34% to 2113. EEM (emerging markets) +2.42%. RSX (Russia) +3.9%. EW (Brazil) +3.94%. FXI (China 'H'Shares) +2.43%.
In my opinion, 'maximum pain' will be a further gap up on Friday. One which essentially forces bystanders to buy at any price (or be forced to continue standing by).
Back from several days in Vancouver.
ReplyDeleteI think we see a lot of Americans up here this summer with the US dollar at almost $1.30.
DeleteVancouver is a beautiful city.
Watching the Brexit vote a bit. First result was big for Remain and Pound and US futures jumped. Next results were ahead for Leave and Pound now down over 4% and futures down.
ReplyDeleteThis all on a.3% of votes.
Not sure why TWTR doesn't do more advertising at the side of the feeds. Refreshing the #brexit feed and maybe adds are intermixed with tweets, but I sure don't see them when there is hundreds of tweets every few minutes. Just put them to the right of the feed and would be an easy revenue drier.
ReplyDeleteWild
ReplyDeleteEs -55.5
Gold 23.10
Will be interesting to see where things are in the morning. UK futures down over 6% and Pound down 8%. Implies a 14% hit to UK holdings.
DeleteSure seems like some panic selling going on. Any buyers?
DeleteConsider some stink bids on some things you like just in case this carries over into our market.
ReplyDeleteMOS XOM SLB QCOM bids considering others
Deleteemini locks up/down on a 5% +/- move if memory serves
EVTC
DeleteFlight aborted appears likely. DJIA futures currently -650 points. Kudos to Carl Futia, who called for a -100 point drop in the SPX (and stuck with it) when it seemed as unlikely as snow in July.
ReplyDeleteIt's pretty clear complacency reigned i guess. Carl was right.
DeleteMy guess is the futures rebound fairly significantly to 2040ish. Not sure what happens after that. Im assuming a retest of overnight lows around 1990. I am not really familiar with the whole vote rules but I think this is by no means a done deal. Shocking nonetheless.
DeleteBlack Friday. Happy Birthday Mike!
DeleteNow it's -700 points. If in 'buy and hold' mode, it's part of the game. The only useful advice I can come up with for traders positioned 'long' is to remove sell stops before markets open. They will almost certainly be running stops at the open.
Delete107
DeleteSPX cash 2020 is 200 sma
Deletevery interesting day tomorrow going to bed and getting up early
I wonder if any broker sites will crash tomorrow?
DeletePanicking is almost never a great strategy. Unless you're levered long into the face of something like this. Lots of people are uncomfortable tonight. Will be interesting to see how it plays out. I'd like to pick up a few things on this drop.
DeleteBased on past experiences with market selloffs (and we've encountered several in just the last two years), the most likely scenario?
ReplyDelete(a) Gap down with stops run.
(b) Intraday bounce.
(c) A more prolonged slide, which may or may not breach today's lows.
(d) An unexpected bounce that takes the markets back to pre-Brexit highs.
Funny, the Italy and Spain ETF's are down more than the UK one.
ReplyDeleteEverything bouncing off the open so far. Brexit is probably not a big deal in corporate profitability or global economic growth in the long run. Individual companies will have good/bad effects and individual people get hurt and probably UK consumption drops a little bit, but other than that, the world economy will keep plugging along
ReplyDeleteWow, what a huge disappointment.
ReplyDeleteEven though I have a ton of cash, I'm afraid to look at my trading screen. Should I?
DeleteMark, you might want to first look at the charts, find those that are in a clear uptrend, and use today's pullback as an opportunity to add. I just did the same and saw that oil is in a clear slow uptrend since Feb, and so I just bought some more HLX.
DeleteI bit on QCOM 52.77 and NXPI 83.38, kind of feel early. My best guess is this rolls into Monday and we steady late Monday or on Tuesday.
ReplyDeleteBut anyone's guess. The yellow stuff helps me most but have held it since around 1992 or so.
We close near the lows of the day. But let's view the market 'carnage' in context.
ReplyDelete(a) To obtain a true 'read' on the Brexit effect, we should discount all points added during the spectacular 4-day rally leading up to the vote; ie, the +42-point rally in the S&P500, and the +336-point rally in the DJIA). That leaves us with about a -1.6% decline in the US indexes that we can attribute directly to the 'Leave' decision.
(b) Global markets ex-US did worse. However, they also performed better in the four days leading up to the vote. If we look at funds such as VT (Vanguard Total World Stock Market) and VWO (Vanguard Emerging Markets), prices were hammered all the way back to...June 14 levels! Somewhat lower perhaps, but only if one believes that dividends don't count! I can't speak for other funds, but I notice that VT, for instance, paid a +0.8% dividend last week.
So how bad was today's 'meltdown?' If we step away from media headlines, it was (realistically) almost a non-event.
Looks like there may be a break up of the U.K.
ReplyDeletePlenty of 'never happen' scenarios in play.
Delete(a) Parliament vetoes the idea of leaving (as the referendum is legally non-binding).
(b) Imminent naming of Boris Johnson as Prime Minister prompts many Brexiteers to more carefully ponder the consequences of their vote, setting up a second referendum.
(c) It takes ten years to fully implement withdrawal from the EU, by which time the DJIA 24k->14k->30k scenario has already unfolded and Brexit appears as a footnote in 2026 textbooks.
The DJIA is likely to retest the lower 17xxx range next week. It was a buy on Friday, and an even stronger buy on further declines.
DeleteBrexit may in retrospect be seen as the catalyst for further stimulus by global central banks, and in my opinion speeds the arrival of DJIA 24,000.
Here is another perspective from a ML Wealth Management Advisor in San Fran.
DeleteI stole some of the thunder from this special 15-page economic briefing of David's by sending you his 105-page slide show titled "What Went Wrong." I hope you had a chance to review it.
This report, which might be sub-titled: The Economy in 3-D: Debt, Deflation and Demographics, is also well worth reading. It provides the thought process behind the wonderful slides from David's other presentation.
The fact that, eight years after the "Great Recession," cash as a percentage of bank assets is sitting near the recent all-time 20% peak (page 7), and the Velocity (turnover) of both the M1 and M2 money supply continue to plumb new depths (page 8), is testament to how anemic the domestic economy remains, and we are outperforming the rest of the developed economies (For example, 20% of bank loans in Italy are non-performing).
The domestic savings rate is north of 10%, something we haven't seen in years. Consumers saved the entire "tax cut" from cheap gasoline prices over the past year, so it does not look like the 70% of the economy that relies on consumers continuing to spend is going to be the factor that keeps the economy moving ahead. And there is no pickup in capital spending in the corporate sector either. Frugality is making a dramatic comeback on the part of consumers and corporations.
Alan Greenspan was on CNBC this morning, as it seems they thought he might have something cogent to say regarding the Brexit vote. However, all he wanted to discuss is our Federal (and state and local) entitlement problem. Greenspan pointed out that our entire national savings is being eaten up by the growth of entitlements, and if we don't do something rather quickly to slow the growth (forget reversing) of entitlements, we will soon confront a real fiscal emergency. Good to know now that we have tripled the national debt since 2008. So don't look for Washington to go on a spending spree to boost the economy either.
Rosenberg points out that with the Federal Deficit having been more than cut in half to 2.8% of GDP, we are actually running a tight fiscal policy; certainly tighter than perennial sub-2% GDP growth would dictate. David believes our fiscal restraint is equivalent to several points of interest rate hikes by the Fed. He also believes the rise in the Dollar over the past year is equivalent to nearly two percentage points of Fed rate hikes. Maybe we need Negative Interest Rates domestically, too? Ben Hunt (Epsilon Theory) said two days ago in "Cat's Cradle" we will see negative interest rates domestically by Q1, 2017.
I recently re-read George Soros' 1987 book, "The Alchemy of Finance," and it is interesting to look back in history to see how, during the Reagan administration, lose fiscal (large tax cuts) and monetary policy, and rapid deregulation, along with rapid growth in international bank lending, all conspired to produce a red hot economy (I am grossly simplifying the dynamics involved). Nobody realized what was happening at the time. Thirty years from now, I wonder what assessment financial historians will make regarding our current economic policies?
It is becoming increasingly obvious the central problem we face, as per Stanley Druckenmiller's speech I recently forwarded to you, is that the still-increasing global debt load is weighing on the recovery of economies everywhere. As Rosenberg points out in the attached report, "The global non-financial debt-to-GDP ratio has actually risen to new record highs this cycle (Japan and China being the poster children for this phenomenon), and no major country has really managed to contain, let alone reverse, this upward trend (with burgeoning entitlements being a major cause). This debt overhang remains a ball-and-chain on the economy."
Continued:
DeleteHis conclusion is even more sobering: "The fact that the deleveraging cycle has been so slow to materialize means even more time is needed before the next cycle of sustainable above-trend growth can take place."
As Michael Milken is fond of saying, when a nation "mis-allocates" $14 trillion in a decade by fighting two wars and allowing a housing bubble to grow and burst (spending about $7 trillion on each), it's not an easy thing from which to recover.
I am positioning my portfolio, and client portfolios (insofar as they will let me), for the day when the global deleveraging process begins in earnest, which I do not believe is far off, inasmuch as any number of economists, including David Rosenberg, have proclaimed we are at "peak debt" now, with the ability to continue servicing existing debt having past the point of no return, with new debt being required just to service existing debts (see China). Such a process cannot last long before things begin to unwind. Corporate bankruptcies in China have doubled over the past year (off a very low base), and my sense is that the down cycle in global credit is already underway, with the commodity (energy) sector being just the leading edge.
The deleveraging process may very well unfold like an avalanche, or perhaps a volcano. The point being, in either case, when it happens, we won't have time to do anything except run for our lives. Portfolio rebalancing will not be an option.
Rudi Dornbusch is famous for having said, "In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could." Given the liquidity problems that currently exist across markets (as witnessed by the wild price swings in global financial markets today), I think Dornbusch might amend his statement to, "...then they happen much faster than you thought they could."
I sent Mark some PDF's and a link of supporting materials. Let him know if interested, or maybe Mark could just forward.
DeleteIs Rosenberg back to being bearish again? I had a feeling that guy wouldn't last long on the bull side as he seems to be a negative nelly
DeleteRosenberg's Investment Strategy Stance: SIRP, Safety and Income at a Reasonable Price.
DeleteHere is Cat's Cradle if interested.
http://www.salientpartners.com/epsilon-theory/cats-cradle/
Thanks for forwarding Rosenberg's take. ATACX (Michael Gayed) is positioned for the 'Summer Crash of 2016' as well.
DeleteAll I can say is that everyone has a take. I'm open to changing my view(s), but right now I'm still expecting new highs within the next few weeks.
If you ever wondered about the different sizes of the markets, check out this video.
ReplyDeletehttps://vimeo.com/172160052
Crazy stat:
ReplyDelete"Since 1990 when the SPX has lost more than 1.5% on a Friday, Monday saw a lower low 86 out of 90 times."
Japan bouncing tonight - up 1.6% after a big loss Friday. US Futures down .7%
ReplyDeleteGoing to be an interesting couple of months while this gets the initial sort out done. I think we see pretty volatile markets, but probably continue in the current trading range until we know what this all really means to the economies and companies involved.
The extrication of Britain from Europe will likely be more in the character of the Greek financial collapse, a seemingly endless process where each event and each piece of news has the power to set off a new round of financial fears.
ReplyDeleteAnd like the Greek crisis, each piece of bad news will compound fears in markets that were nervous for other reasons.
I agree with this 100%.
DeleteLong TNA at $54.8
ReplyDeleteEnded up taking the hit at the close. No rally yet
DeleteAnd to think we were saying new highs by this week. The market is predictably unpredictable
ReplyDeleteTiming the bottoms on events like this is so hard. And the bounce could be so quick on the other side that it could easily be perceived as fake and missed. I'd think the first bounce we see will be fast, but then fail to lower lows, which will provide a more sustainable bottom, but so many factors and who knows what the politicians are going to say.
DeleteHere's my question - what do you think would be a better buy to go up going forward?
ReplyDeleteRolls Royce, based in the UK, flat through the Brexit selloff
ING Bank - mainly a European bank outside the UK, down 24% in 2 days
Do you think it's better to buy the beaten down one for a rebound, or is the stable one showing strength and more likely to move up as the market recovers?
I was just looking at all of the Euro banks. ING, HSBC, and SAN are by far the best. I didn't realize how low asset coverage those banks had though. The average of the equity to asset ratio of the above three is about 6%. By comparison, a bank like BAC has 12.03% equity to asset ratio.
DeleteHere's what I'm seeing:
SAN - 11.18 P/E and 9.00 x avg earnings of past 5 years
HSBC - 9.21 P/E and 7.79 x avg past 5
ING - 7.51 P/E and 7.91 x avg past 5
I wonder if that may be due to IFRS vs. GAAP reporting. ING is very well capitalised and not considered to be risky.
DeleteNo clue. Charts are horrendous
DeleteI ended up selling Twtr and cake today and move almost all back to cash save my AMZN position which I will hold. Since the s&p dropped back below the 200dma I'm going to keep risk minimized yet again.
ReplyDeleteMaybe the airlines and hotel stocks are telling us something. Airlines in particular should be killing it
Still have NXPI and QCOM, minor pain but kinda hoping for a strong bounce tomorrow to sell and access situation later.
DeleteI'm also surprised at how weak UAL and many airlines are.
No one said it would be easy.
There was a warning from Easyjet that Brexit would affect their profits and most airlines make a lot of money off trans-Atlantic flights, so I think a lot were down in sympathy:
Deletehttps://next.ft.com/content/09338fc6-3c30-11e6-9f2c-36b487ebd80a
Nadurra anyone?
ReplyDeleteThis is the time for orders for the ROTTEN HEART OF EUROPE from Amazon and Yra Harris as book seller. No one has had Brexit and the EU correct as my friend and mentor Bernard Connolly. Get a good bottle of Kentucky whiskey; sit back and absorb the wisdom of Bernard. If you want to excel in a mad world you need to arm yourself with the relevant information. “The Rotten Heart of Europe” is a must have for knowing all the relevant characters in this “sea of madness.”
Jejune:
https://yragharris.com/2016/06/27/jejune/
It's an even toss as to whether we're seeing a resumption of the long-term rally, or simply a 'throwback' rally in a new downtrend. You all know my bias, of course.
ReplyDeleteDJIA +232 points. SPX (S&P500) lifts +1.53% (31 points) to 2031. EEM (emerging markets) +2.7%. VGK (Europe) +3.07%. EWZ (Brazil) +4.4%. FXI (China 'H' Shares) +2.07%. RSX (Russia) +2.9%. In most cases, funds are back to levels seen early last week (ie, week of June 20). In a few cases (Brazil, for instance), they're approaching the highs seen last week.
Did some small adds to current positions today. I don't think the final bottom is in, but it very well could be and prices on a lot of stocks are good, so my plan is to just keep doing small buys over the next while as things shake out and get an overall low cost basis on these additional purchases.
ReplyDeletePicked up some BCS at $7.28, ING at $9.87, SAN at $3.84 and CHK at $4.28 today. Been a tough week for me as I got shaken out nice and good yesterday and am buying up a bit.
ReplyDeleteThe comforting thing about this crash in the euro banks is their credit has actually IMPROVED since the Grexit vote if you can believe it.
DeleteThey've been focused on it. Would have been better if they were forced back in 2009 like the US banks were, but they have been making progress and their stress tests have been getting more realistic.
DeleteAt some point this move up in Nat Gas is going to help CHK. I think this thing is a pressure cooker.
ReplyDeleteMy last bunch UGAZ hit its sell limit today at $44. I am all out of UGAZ now. It's been a sweet rendezvous. :)
ReplyDeleteBeautiful, beautiful trade David. Enjoy your vacation.
DeleteThank you, 2nd!
DeleteGoing on vacation now till mid-July, with no internet access. Hopefully, when I get back, new highs will be in for commodities.
ReplyDeleteI could go George Zimmer on you and say, 'I guarantee it!' but I learned my lesson the last time I typed those words.
DeletePrior to Brexit, the charts of MOS, SLX, etc. were finally looking like they are taking off for good, but then the flight was aborted and they were pushed back to the horizontal support line. That line did not break down, so maybe the 4th time (for MOS) will be the charm?
DeleteIt's too early to tell, but we're off to a decent start.
ReplyDelete(a) EEM (emerging markets) up another +2% (on top of Tuesday's +3%) and back to last Wednesday's levels.
(b) EWZ (Brazil) up +2.56% (on top of Tuesday's +4.4%) to 29.26. This exceeds last Thursday's high (the day before Black Friday), and may challenge the 2016 year-to-date high of 29.96 set April 29.
(c) DJIA up another +138 points (on top of Tuesday's +269 points) in early trading.
Picked up some CAKE today
ReplyDeleteTraders navigating the 2016 market might as well be driving solo across the country. I'd rather shell out for a plane ticket in order to 'buy and snooze!'
ReplyDeleteBears who celebrated the 'Brexit Crash' on Friday and Monday are now wondering whether they're back in the Twilight Zone of 'V' reversals.
(a) The SPX (S&P500) closed Friday @ 2037, and Monday @ 2001. It's currently trading @ 2071.
(b) The DJIA, which dipped as low as 17063 on Monday, is now changing hands @ 17696 (+286 points).
(c) EEM (emerging markets) +2.47% and back near last Wednesday's highs (two days prior to the Brexit Crash).
(d) EWZ (Brazil) has now tacked on another +4.1% (that's +8.5% in two days) to 29.70, just twenty cents shy of its year-to-date high. RSX (Russia) +2.43% and also challenging its YTD highs.
(e) VGK (Europe) is the slacker (no surprise), up +2.13% today to just June 15 levels.
(f) VT (total world stock market) +1.9%, held back by Europe also to mid-June levels.
Interesting chart of how flat the market really has been:
ReplyDeleteEddy Elfenbein @EddyElfenbein 3h3 hours ago
Here's the S&P 500 with some data points excluded, but not that many.
https://pbs.twimg.com/media/CmJoOpFUYAAgc9q.png
Just a matter of time before CHK gets going with nat gas near $3. This is undoubtedly positive for them.
ReplyDeleteCheck this comparison out:
ReplyDeletehttp://charts.stocktwits.com/production/original_57683380.?1467312300
A move below $3.50 for CHK would be the ultimate shakeout. Shake everyone out of this thing and then it goes on an epic run. I am going to keep a piece on in case this doesn't happen...but I'm leaving some $$ aside in case it does as I'd like to watch for a break down and then a move back up above the 12 DMA. This might not pan out but it is the best chart pattern I see in the market right now.
new post
ReplyDelete