Stock Market Commentary:
Stocks traded all over the map on Monday. Overnight, Chinese stocks plunged another 5% which was not idea. US stocks opened higher but quickly turned negative after new sellers showed up and distributed stock. Towards the close, a big rip enabled the Dow to finish positive but the Nasdaq still finished down. Crude oil plunged over 6% and hit the lowest level since 2003! Copper prices plunged to a fresh 6 year low which illustrates the market’s concern about weaker global demand. Biotech stocks ($IBB) fell over 4% and took out September’s 2015’s low which is not ideal for the bulls. In M&A news, Shire ($SHPG) said it will acquire drug maker Baxalta ($BXLT) for $32 billion in cash and stock.
Gary’s Thoughts:
Put a crayon in your 3 year old’s hand. Let him scribble on a piece of paper. That’s what today’s intraday action looks like…but:
Since we received dozens of emails and phone calls, we wanted to give you some short term thoughts after Monday’s wild action. In fact at 3:18pm the NASDAQ was down at whopping 57 points by the close it was barely down!
In our long missive to you last night, we told you we would not be surprised by a vicious rally/bounce and that it would be normal to have one to wring out such an oversold condition. The hardest thing to do is to gauge and game the short-term movements but here we go.
We think a decent near-term low could be forming in and around the lows of Monday. This simply means after about 1600 DOW points in eight days, after the NASDAQ dropped from 5116 to 4573 in that same amount of time, sellers are washed out and buyers get a little bit of the upper hand. We suspect this is akin to what happened on August 24 of 2015 when the markets experienced the fake open and the big washout. Keep in mind, this in no way changes the overall big picture and you know what that is. Markets do not go straight down though after the past 8 days, one wonders if that is true. We will be smart and leave it at that.
We were asked if this has anything to do with Fed’s Lockhart’s flip-flop as he was quoted as saying there may not be enough fresh data on inflation to support an interest rate hike by March! We don’t know but just realize IT NEVER ENDS! THEY REF– USE TO LEAVE MARKETS ALONE!
Like you read from a tea leaf-this is just a one day wonder. Last week action in the market is tell tell story for things to come. You have said it so well all along.