Well, ain’t that a kick in the pants? That was quite the drubbing yesterday in the market. Once those algos get started, there is no stopping them. They will sell until the cows come home, or, this case, until the market closes. Since the rout is on, I suspect we could see more carnage before the bulls step back in. Let’s just call this a correction, of a sort.
The economic news out today is a mixed bag, China’s Manufacturing PMI is up big, Europe’s Manufacturing PMI is flat, US manufacturing is expanding at the fastest pace in three years, and the US non-farm payrolls show another month over 200,000 (six in a row), but the unemployment rate rose to 6.2%. None of this really matters right now in the near term, as the market appears to be a traders market (think extreme volatility). So whatever happens in the immediate term is not a reflection of what the market expects longer term. Here is why.
US Incomes and Spending Up Again in June
All the economic indicators are important to varying degrees, but the three most important are employment, consumer incomes, and consumer spending. Although employment is off a bit in June, it is still up, as are incomes and spending.
In the near term, we do have a volatility issue. The VIX has jumped substantially. Although the gauge at 16-18 is within the historical norm of twenty, it still shows uncertainty in the near term. As well, gold is following suit with some up and some down.
Interestingly, though, Light Sweet Crude is down around $97 today, and it is in the red this morning. One could take this as a sign that it is in sell-off mode because of a lack of belief in global economic growth, certainly, but one could also see oil dropping as another sign that better economic times are ahead. Along with lower oil prices, gasoline prices are dropping as well. This bodes well for consumer income and consumer spending data down the line a bit.
All in all, the market lost some ground yesterday, but, hey, that happens. Just remember, if the issue was the market was a bit ahead of itself regarding earnings, that gap has closed considerably, given the solid earnings to date combined with the market freak out resulting in a down July.
Looking forward to August, I don’t expect much other than what we had in July, but I am still betting on a strong autumn, as long as we get the bad juju out now. As for the moment, well, the market is not tanking again, at least not at the moment. It sold off right out of the gate, but now all indices are in the green.
Oops! The Dow is back in the red and the other indices are trending down as well. Like I said, volatility is the in thing right now.
In the meantime, more cool technology is coming our way, technology that will reshape our world, but of more importance, it is the stuff that makes markets.
- A new breed of mobile wireless device lacks a battery or other energy storage, but it can still send data over Wi-Fi. These prototype gadgets, developed by researchers at the University of Washington, get all the power they need by making use of the Wi-Fi, TV, radio, and cellular signals that are already in the air.
Sit tight and hold on. If you are a day trader, enjoy the ride. If you are a swing trader, or an investor, close your eyes and trust that the rails are good. Just before the ride stops, though, open your eyes, look around, and buy what you see as good.
Trade in the day; invest in your life …
