Tuesday Talk: Like A Carousel
The stock market has been going up and down much like carousel ride, of late. One day up, one day down, not too fast, not too slow, on a ride that seems to take you nowhere.
One should perhaps expect as much what with a dearth of good news on the geopolitical front and continued mixed to poor economic news in Europe and China. Still, on Monday the market ended on the upside. The S&P 500 closed at 4,433, up 28 points, the Dow closed at 34,560, up 213 points, and the Nasdaq Composite closed at 13,705, up 114 points.
Chart: The New York Times
Most actives on the day were Tesla (TSLA), up 0.1%, followed by Nvidia (NVDA), up 1.8%, and Advanced Micro Devices (AMD), up 0.4%.
Chart: The New York Times
In morning futures trading, S&P 500 market futures are down 8 points, Dow Market futures are down 69 points, and Nasdaq 100 market futures are down 41 points.
Starting off in the Education Department this morning, contributor Lance Roberts discusses timing the market in an article entitled 10 Best Days – A Meme For Every Bull Market.
It's a good evergreen piece with lots of history and charts, and worth a look. However, I think he does a good job of boiling down the essence of his message in his concluding remarks which I have pasted below.
"What should be obvious is that using a basic form of price movement analysis can provide a practical identification of periods when portfolio risk should be reduced. Importantly, I did not say risk should be eliminated, just reduced...
Again, I do not suggest that such signals mean going 100% to cash.
What I am suggesting is that when “sell signals” are given, that is the time when individuals should perform some essential portfolio risk management such as:
- Trim back winning positions to original portfolio weights: Investment Rule: Let Winners Run
- Sell positions that are not working (if the position was not working in a rising market, it likely won’t be in a declining market.) Investment Rule: Cut Losers Short
- Hold the cash raised from these activities until the next buying opportunity occurs. Investment Rule: Buy Low
Using some measures, fundamental or technical, to reduce portfolio risk by taking profits as prices/valuations rise, or vice versa, the long-term results of avoiding periods of severe capital loss will outweigh missed short-term gains.
Minor adjustments can have a significant impact over the long run.
There is little point in trying to catch each twist and turn of the market. But that also doesn’t mean you must be passive and let it wash all over you. It may not be possible to “time” the market, but it is possible to reach intelligent conclusions about whether the market offers good value for investors."
FWIW.
Crypto beat contributor Simon Peters writes Bitcoin’s Summer Struggles Persist.
"Bitcoin (BITCOMP) struggled again last week despite a brief rally early in the week and has traded mostly flat over seven days. The cryptoasset began last week above $25,700, rallying over $26,200 but has fallen back to around where it started as softness in trading volumes and confidence pervades the market...
Data from CryptoQuant shows bitcoin trading volumes are down significantly at the moment, their lowest level in more than four years. Trading volume is a highly variable measurement in the Bitcoin market but does show us the tricky dynamic for investors right now.
There is a combination of factors driving volumes lower at the moment. Summer is partly to blame - this isn’t uncommon in equity markets either with many away from their desks. But many owners are sitting back and waiting to see where developments will shift for the world’s largest cryptoasset.
The data would suggest long-term investors are lying in wait despite the softness of the market. The price of bitcoin while well away from all-time highs is still much more resilient now than it was a year ago. With some significant market developments likely to materialize before the end of the year, the cryptoasset shouldn’t perhaps be discounted as heavily as it is right now."
TalkMarkets contributor Daniel John Grady brings readers up to date regarding Eurozone August Inflation And ECB Hike.
"The ECB is facing a complicated scenario that makes it harder to figure out what they will do with policy. In turn, that makes the future of the Euro somewhat uncertain. Short-term volatility might remain the theme for the currency unless there is a surprise in the data coming out later this week. That also might be pivotal for whether the Euro can regain some momentum or will keep sliding against the dollar.
According to the latest poll of economists conducted by Reuters, a very slim majority of 53% expect the ECB to keep rates unchanged at the next meeting. That would be the first “pause” since the start of the hiking cycle last year. That view is seen as weakening the Euro, but it is such a shaky consensus that a small deviation from the forecasts in the data could easily change the forecast for ECB action...
German inflation is expected to barely change, slipping to 6.1% from 6.2% prior...
French inflation is also expected to barely change, ticking down to 4.2% from 4.3% prior...
Eurozone Flash PMI for August is expected to come down to 5.0% from 5.3% prior. This, of course, more than doubles the target rate. The core inflation rate is expected to remain higher at 5.3%, but down from 5.5% prior. The slowing in the pace of the descent in inflation could make ECB policymakers worried that not enough has been done to bring down inflation. A core rate of above 5.5% would likely set off alarm bells, as it would mean that prices have continued an increasing trend for four months...
With unemployment high and the economy sputtering, the market might be reinforced in thinking that the shared central bank will only raise rates if forced to by inflation."
Looking toward China, TM contributor and chartist Chris Kimble observes China’s Shanghai Composite Stock Index Nearing “Decision Time”.
"China has the world’s largest population and second largest economy, so it’s always wise to keep an eye on the Chinese economy and stock market.
Today we look at the latter, eyeing up a 10-year indecision pennant pattern on the Shanghai Composite Index.
As you can see, the lower highs (red arrows) and higher lows (green arrows) have guided this pennant pattern into an ever-narrowing squeeze. There is not much room left here, so we should expect a decision soon.
Will it be in the form of a breakout (higher) or breakdown (lower)?...
Stay tuned!"
Closing out today's column with a missive from the "Pie In The Sky" Investing Department, contributor Zachary Scheidt gives advice on How To Play The Instacart IPO.
Zachary Scheidt on LinkedIn
"The grocery delivery business is slated to start trading on Friday, in one of the few high-profile Initial Public Offerings (or IPOs) this year...
Popular IPO transactions like Instacart can be extremely lucrative for certain investors (Hedge funds, asset management companies)...But individual investors like you and I are unlikely to receive shares at the true IPO price. And by the time shares start trading in the open market, prices are often much higher and carry more risk of a pullback. So I won’t be buying shares of Instacart immediately after the stock goes public.
But there are still some important winners from this deal. And also, from future deals that will likely be priced if the Instacart IPO is a success.
Private equity firms like The Blackstone Group (BX), Carlyle Group (CG) and KKR & Co. (KKR) often own shares of private companies like Instacart. And they benefit when the IPO market picks up...
Investment banks like Goldman Sachs (GS), Morgan Stanley (MS) and JPMorgan Chase (JPM) charge lucrative fees for setting up new IPOs...
While many of these investment bank stocks have pulled back over the last few months, a revival in the IPO market could trigger a new rally. So be sure to watch the Instacart deal later this week.
A successful launch and rising stock price following the deal would be great news for these investment banks.
In short, you’re unlikely to make a killing trading Instacart this week.
But you do have plenty of investment opportunities to profit from a newly rejuvenated IPO market."
Well, Zach is certainly keen on the selling (to) part.
As always, caveat emptor!
Have a good one.
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