No matter how one views it, the current market picture is not pretty. Okay, it ain’t pretty, but at least it is consistent. If nothing else, count on the market to succumb to the pressure of the daily onslaught of news and, lacking any large, positive catalyst, it will sell off. This is good news for the folks who like to short the market and it is bad news for those who fear the worst when the market behaves this way.
- If this wasn’t made clear by Tuesday’s sucker punch, the stock market certainly seems to be entering a harsher, more volatile trading climate. It’s been a couple months since investors have been stung this hard, but don’t let your guard down thinking another two will go by without another blow like this.
True, harsh drops and volatility are fast becoming hallmarks of the 2014 market, but that does not mean the bulls are out of the game. I keep looking at oil and I keep looking at gold and neither one of those is showing any sign of taking off.
Oil is understandable, but weakness in gold when the market is freaking out tells us something – deep fear is lacking. And if this is the case (lack of deep fear), then one should wonder where the big money that tracks both of these commodities will go when the selling stops.
- Regardless of whether or not stocks face an imminent retreat, investors, as evidenced by the steady climb up the market-cap ladder, have been circling the wagons. But they’re not doing it with gold, obviously. There doing it by getting in bed with big names and trusty track records.
Riding out the current volatility with stocks that pay you to wait (dividends) is not a bad strategy, as they will all return to their former glory, and more. Putting the strategy aside, this movement of money also tells us that uber fear of a market crash is not in the cards. Yes, the market is tanking, but, as I write, gold is dropping and light-sweet crude is looking to crack $87 to the downside.
If you recall, way back in 2008, in the run up to the Great recession, oil shot up to $147 and gold climbed toward $2000 with many predicting it would reach $5000. My point is neither of these indicators is showing any sign of busting out in this, the latest flurry of fear in the market.
Add to this the VIX is not even close to the 34-plus it reached late in 2012, much less the 60-plus it reached in the Great Recession . Even with the current market freak out, the VIX is ranging between 15 and 17, a range that reflects reality, but certainly not any uber fear.
So, where is the market going? Who the heck knows. Maybe the S&P will retreat to its three-month low of 1909 and maybe the Dow will fall to 16368, its three-month low, and if they did, that would be a healthy correction in anyone’s book. Maybe then, the perma bears will be satisfied that the market has met the requisite need for a correction and we can move on with life.
In the meantime, the market still has to face earnings, and one of the first bellwether stocks to announce those came out this morning.
- Costco Wholesale Corp. COST, +1.80% said Wednesday fiscal fourth-quarter net earnings were $697 million, or $1.58 a share, up 13% from $617 million, or $1.40 a share, in the same period a year ago. Total revenue was $35.52 billion, up from $32.49 billion in the year-earlier period.
As consumer spending signs go, Costco is, well, one of the biggies and these numbers from the giant retailer are impressive, indeed, relative to the idea that the market cares more about earnings than anything else, ultimately. Now, if the rest of the earnings story is like Costco, we might not see those three-month lows I mentioned earlier.
Trade in the day; invest in your life …
