It was almost as if the market hadn’t opened for trading on Monday. It was lackluster out of the gate. The only major equity index that showed life was the NASDAQ, as momentum stocks have gotten to the point where they’re attracting an odd mix of value investors and fast traders.
- Google (GOOG)
- Facebook (FB)
- Amazon (AMZN)
S&P 500 Index | +0.09% | |
Communication Services (XLC) | +1.14% | |
Consumer Discretionary (XLY) | +0.04% | |
Consumer Staples (XLP) | -0.29% | |
Energy (XLE) | +0.84% | |
Financials (XLF) | -0.92% | |
Health Care (XLV) | +0.45% | |
Industrials (XLI) | -0.34% | |
Materials (XLB) | -0.92% | |
Real Estate (XLRE) | +1.09% | |
Technology (XLK) | +0.08% | |
Utilities (XLU) | -0.28% |
Still, there were more 52-week lows than highs on the NASDAQ, although the up volume was 50% higher than the down volume. The point is that companies that have fallen out of bed on bad news will continue to get punished, even when they’re obviously oversold.
Pairs Trade
Lots of professional investors use a technique of pairing longs with shorts (in the same space), and yesterday looked like a classic part-trading. The meatless wonder Beyond Meat (BYND) rocketed to a fresh all-time high, while meat producers got hit hard, in part to concerns over supply and higher prices for crops.
Meat Stocks:
- Sanderson Farms (SAFM): -7.45%
- Pilgrim’s Pride (PPC): -3.84%
- Tyson Foods (TSN): -4.13%
Meatless Stock:
- Beyond Meat (BYND): +12.20%
Of course, BYND is also the best performing initial public offering (IPO) of 2019. However, it’s not the only winner. Recent offerings continued to move higher, including:
- CrowdStrike Holdings (CRWD): +9.12%
- Fiverr Int’l (FVRR): +9.18%
- Luckin Coffee (LK): +10.09%
The Squeeze
Another Beyond Meat connection is its a heavily shorted stock. Shorts have attacked the stock, and their losses are quickly mounting toward $1.0 billion dollars. Tesla (TSLA) shorts are feeling the pain as well.
And of course, biotech names popped after another deal involving a cash-rich pipeline-thin pharmaceutical takeover.
Portfolio Approach
Communication Services | Consumer Discretionary | Consumer Staples |
1 | 3 | 1 |
Energy | Financials | Healthcare |
1 | 2 | 1 |
Industrial | Materials | Real Estate |
2 | 3 | 1 |
Technology | Utilities | Cash |
3 | 0 | 2 |
Today’s Session
The head of the European Central Bank has indicated there could be swift rate cuts and other actions if necessary, sending the Euro lower and equities higher on both sides of the Atlantic. The news was met with frustration at the White House, where President Trump quickly pushed out a couple of tweets.
Donald J. Trump
?European Markets rose on comments (unfair to U.S.) made today by Mario D!
Donald J. Trump
?Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.
This all adds even more intrigue to the FOMC gathering that begins today, with a decision on rates coming tomorrow. I still don’t think the Fed will cut tomorrow, but it’s clear they would be the only central bank in the world not actively protecting the interest of its own nation if they stick to the old game plan and rules book.