Yesterday presented the kind of session that allowed for an assessment of investor sentiment, which would have been the kind of Black Swan capable of derailing the entire market. There is no doubt that Saudi Arabia losing half its oil production to drone attacks qualifies as a Black Swan event. While crude oil surged, there wasn’t a sense of panic.
S&P 500 Index | -0.31% | |
Communication Services (XLC) | -0.37% | |
Consumer Discretionary (XLY) | -1.28% | |
Consumer Staples (XLP) | -0.97% | |
Energy (XLE) | +3.36% | |
Financials (XLF) | -0.35% | |
Health Care (XLV) | -0.22% | |
Industrials (XLI) | -0.09% | |
Materials (XLB) | -1.64% | |
Real Estate (XLRE) | +1.04% | |
Technology (XLK) | -0.25% | |
Utilities (XLU) | +0.08% |
Not only was there ‘not’ panic, but the market breadth was bullish with lots of individual stocks staging strong intraday reversals, especially among newly traded Technology names.
Market Breadth | NYSE | NASDAQ |
Advancers | 1,573 | 1,617 |
Decliners | 1,380 | 1,503 |
New Highs | 56 | 57 |
New Lows | 6 | 22 |
Up Volume | 2.29 billion | 929 million |
Down Volume | 1.33 billion | 637 million |
Resolve…Where’s the Punch?
The market began exhibiting impressive resolve in late August after a couple of weeks with Dow losses of 500 and 600 points (that index and its other large equity rivals) held when they had to; when the spark came, the market was ready to bound higher.
That resolve remains. Once again, investors are wondering where the spark is.
What I’m watching today:
I want to see if crude continues to rally, and I wonder at what point it triggers the White House to dip into the Strategic Reserve. It’s just a hunch, but with most oil analysts suggesting crude oil increases at least another $0.20 to $0.25, it would take it toward that magic threshold of $3.00.
Three reasons the White House needs to curb the price of crude:
- Impact on economy and elections
- Oil stocks have a better track record of predicting recessions
- Higher crude could mitigate Fed concerns about deflation
Interestingly, it seems as if President Trump may be content not to rush into military retaliation on behalf of Saudi Arabia. The fact of the matter is Saudi Arabia must be embarrassed, and it’s time for them to step up to the plate and to do more for themselves.
By the way, one of the first cancellations of Boeing 737 orders came from a Saudi airline when Flyadeal changed its mind on an order of 30.
Buyers Looking for Action
Today, I’m watching the recent initial public offerings (IPOs) that reversed yesterday, such as CrowdStrike (CRWD), Pinterest (PINS), and others. Software stocks were solid as well. Just like that, many of these “hot” IPOs may have gone from overbought to oversold. For now, I would only be a trader of such names rather than an investor.
With the Federal Open Market Committee (FOMC) gathering and interest decision tomorrow, it would be impressive to see if buyers force the issue. On that note, the question-and-answer period is going to be a real nail-biter.
Approach
Communication Services | Consumer Discretionary | Consumer Staples |
1 | 2 | 1 |
Energy | Financials | Healthcare |
1 | 1 | 2 |
Industrial | Materials | Real Estate |
3 | 2 | 1 |
Technology | Utilities | Cash |
3 | 0 | 3 |
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