Okay, so now we are getting somewhere. The market seems to be acting normal. Two down days in a row seems normal, given the recent crossover to the Land of Lofty Heights. The catalyst for today’s move, according to the news anyway, is the earnings guidance from Samsung, the giant doing battle with Apple over the cell phone market.
- Asian stocks were subdued on Tuesday as Wall Street turned cautious ahead of the corporate reporting season and earnings guidance from regional tech heavyweight Samsung came in well short of forecasts.
Okay, so cheap Galaxy phones are out and expensive iPhones are in, which says something for the global economy I might add. Nevertheless, the market action is about earnings, which brings us back to normal. When acting rational, the market is about earnings, so, for now, until it gets a read on earnings, expect this summer market to be volatile for a bit.
- The moves on Monday were modest and highlighted a lack of conviction in a market still in the grips of a summer lull.
Today is not a modest move, at least as this morning begins. The move out of the gate is a strong one to downside. The good news as I see it, though, is the VIX is moving into that range I mentioned a week or so ago as a healthy range – 12-13. I feel good about that. It shows the market is paying attention. Speaking of paying attention …
- Fed officials including Jeffrey Lacker and Narayana Kocherlakota are scheduled to speak later on Tuesday, with Lacker addressing the “Economic Outlook, July 2014”, and Kocherlakota “Monetary Policy and the Economy.”
Maybe the above is contributing to the powerful move in the market today. The Fed is a certain catalyst and when the “Fed speaks,” investors listen. After all, the lead into the news regarding the speaking engagements is that the Fed might be loosening the reins on the discount rate (overnight loans to banks) sooner rather than later. Of course, this is a good thing, as it gets things moving back toward normal, but the market tends to freak out about the unknown. “Will the world fall apart if interest rates rise?” the market wonders.
Okay, so now for the really big news, speaking of normal again. We are loading up the car to drive for 10 hours to get on a boat to sail around the San Juan Islands for five days. Now, that is not really normal, but it might just make me feel more normal, after the months of work now behind me. Yes, I need a vacation, even if I feel anxious about taking one.
So, hang in there, the market will be just fine, especially if earnings fall into line, as they have for some five years now. Oh! One more thing … In between now and then, the market just might decide to rebalance. Yup, that is normal.
Trade in the day; invest in your life …
