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Who buying?

edited February 2020 in Off-Topic
Investopia email read ... Gordon Scott, CMT

Who's Buying?

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Chart Advisor | Focus on the Price

By Gordon Scott, CMT

Monday, February 24, 2020

1. Stocks sell off hard, with subtle signs of opportunistic buying

2. The VIX says there is more selling to come

3. The only stock on the rise today

Market Moves

It isn't a surprise that the Nasdaq 100 index (NDX), S&P 500 index (SPX), Dow Jones Industrial Average (DJX), and Russell 2000 Small Cap index (RUT) opened with a calamitous gap lower. However, it is surprising that two of these benchmarks still maintained their upward trend of the last four months. Even more surprising is which two did so.



The chart below shows a four-panel comparison of the day's activity. This was a textbook exhaustion gap. The two indexes that maintained an upward trend (at least so far) are the Nasdaq 100, as depicted by Invesco's index tracking ETF (QQQ), and the Russell 2000, as depicted by iShares index tracking ETF (IWM). Though these two indexes dropped more than three percent lower on the open, they closed higher than the lowest close in January. The other two indexes closed flat or lower on the day. This is a curious outcome because it suggests that opportunistic buyers were prepared to buy up more risky stocks at a time when the market was exhibiting panic-selling conditions. This may be a hint that this particular sell off won't last very long. But would you be willing to take that bet today?


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The VIX Says There is More Selling to Come

On days like today, astute chart watchers know that it is important to review the price action on the Volatility Index (VIX). This index doesn't precisely predict what will happen next in the markets, but it does give those who review it an excellent indication of what the option market makers are thinking. Institutional option sellers set the prices for options by adjusting their implied volatility, and when they inflate the value of specific options, it rolls up into an aggregate and shows up in the VIX chart.



Today's VIX chart shows that even though the S&P 500 opened low, fluctuated and traded lower, the VIX gapped up and closed significantly higher. That means option sellers saw increasing demand for options throughout the day, and that demand held all the way through to the close. If this is any indication of the future, investors are still quite worried and it won't take much to get them to sell more stocks and send prices lower in the day or two to come.





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The Only Stock on the Rise Today

It's not too hard to figure out why Clorox (CLX) shares are on the rise today if it was news about a sickness that drove investors to sell. This company makes a lot of things that would be useful in the medical field, but nothing quite so valued as the best-known anti-bacterial liquid on the planet. It's not that it would cure the deadly strain of Coronavirus, but that it would be snapped up by everyone who wanted to clean, clean and clean again any surface of suspicion in a contagion-panicked world.



The chart below shows how this stock not only opened higher but traded higher on the day. Of all the stocks in the S&P 500, this was the only one to do so. The Average Directional Index (ADX) indicator, shown below the chart as a purple line, tracks the strength of the trend in a stock. CLX shares look like that strength is gaining.


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The Bottom Line

Stocks fell today amid rampant fears over the economic impact of the COVID-19, the current strain of the Coronavirus making headlines. But that didn't stop a few adventurous buyers from trying to play the contrarian. The VIX level remained elevated, which probably doesn't give those buyers a lot of hope. The one stock that did gap up and rise higher today was Clorox. Is anyone surprised by that?



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Comments

  • To early to buy the dip. The dip isn't a real dip, yet.
  • @ Crash Have we dipped enough yet?

    I decided today to nibble on some individual stocks I'd had my eye on.
    But tomorrow I might wish I'd waited.

    David
  • edited February 2020
    Buffett says wait for awhile...but how long is awhile..when is real bottom

    Maybe nibble tread very carefully w tight stop_loss
  • dstone42 said:

    @ Crash Have we dipped enough yet?

    I decided today to nibble on some individual stocks I'd had my eye on.
    But tomorrow I might wish I'd waited.

    David

    ......After today, yes. I'm doing nothing, though. Other preoccupations, today. I need to be where other people are not. People are the biggest pain in the ass in the universe.
  • bot qqq a few days ago, suffering a bit therefore
  • @johnN - you buy when the charts start to turn up again. Right now they're still running downhill. You may not catch the absolute bottom but you may still come out alright over the long term.
  • As long as we keep getting bad news about corona, I'm not buying anything.

    Travel restrictions and quarantines are still ramping up.

    We have yet to see what the mortality figures really look like in an open society.

    Nor do we really know the level of care that will be required for those that are seriously ill. But it's not hard to imagine that the virus could hit some countries a lot harder than others. And wait til this bug starts hitting refugee camps.
  • edited February 2020
    I opened a small position in MAIN earlier this morning. But mostly I am just watching. A new pot of cash will hit my brokerage account in a few days. I may do a little more nibbling then depending on how the markets behave.....currently I expect to invest most of that new cash in a fairly conservative manner.
  • Howdy folks,

    Buying in the metals with GDXJ, SILJ and CEF plus physical buying at these prices.

    And so it goes,

    peace,

    rono
  • I had a limit order on IAU (gold ETF) kick in today when gold dropped dramatically at the start. Not sure why but gold dropped ~3.5% today.
  • I did the same here only with GDX (large gold miners) in contrast to the smalls/juniors (GDXJ). I haven't held a stake in PM's since like forever and I'm tired of listening to rono yell at me all the time.
  • Oh-oh. Now you've done it.
  • So here's my question...what does a corona virus have to do with REITs and utilities, which have gotten crushed along with everything else? I'm beginning to question whether the boom of ETFs may have caused this babies/bathwater punishment of the innocent trend we're seeing.
  • edited February 2020
    @PRESSmUP Here are my hunches. As far as REITS go, I can think of a couple of possible connections. First, the mall, hotel, and shopping center REITS will be significantly impacted if people meaningfully reduce their use of public spaces over an extended period of time. Second, the statistics I've seen indicate day to day REIT trading is much more heavily influenced by retail investors (many of them income seeking seniors) than the market as a whole. And, mom and pop investors may well be spooked by what is going on and dumping their REITS. I wonder if the same thing might be influencing the utility sector although I haven't noticed any data on that sector.....
  • Sticking to my knitting here. No changes. Perhaps the Fund Managers will find a good excuse to deploy the cash they've been holding, if Mr. Market falls hard enough. First day of the month is always a very small automatic purchase of more shares in PTIAX. Remarkable finish on Friday, 28th Feb, up +.11 cents. Never seen the like! That fund now comprises 8.42% of the whole portfolio.
  • @davfor ...I was going to say that over the past few years I've avoided mall and shopping center REITs like the plague, but...well, you know.
  • Looking next week to PRNEX and PRFDX. Both getting hammered but p/e looking good mid teens with low expense ratios. Both oversold.
    PRULX finally jumped today. Up almost a dollar since I got it early February. Looking to use some of that. Thoughts?

  • Why now when thing just getting interesting? Earning season is coming in March. If the pandemic persists the recovery will last well into Q2.
  • Maybe a bit of averaging over the next few weeks I was thinking. Couple times a week on the way down.
  • Added to PRWCX & AKREX on Wednesday. May add some more beginning of next week.
  • Roy said:

    Added to PRWCX & AKREX on Wednesday. May add some more beginning of next week.

    PRWCX has been holding up better than VWELX, and several others, in my gaggle.

  • Howdy folks,

    I don't think we're anywhere near the bottom. Sorry, but we're in the middle of a trade war, facing a pandemic, and we've got an idiot in the White House. We all hoped and prayed there wouldn't be some sort of international crisis . . . but hope don't pay the rent. He's calling the coronavirus a democratic hoax, but at least he put the chief religinazi in charge , who's asking the faithful to pray for a cure.

    I urge you to fasten your seatbelts,

    And so it goes,

    Peace,

    Rono
  • It will be interesting to see how Mr. Market plays out in the days ahead.
    Enjoy your weekend, Derf
  • Can't we keep petty partisan politics out of it Rono? For goodness sake. The thread is entitled "Who Buying?"
  • I'll add to my growth fund, GFAFX, next month. I typically buy at the beginning of the month, rain or shine. I'm young enough to shake through this. I did consult my doctor about the virus who stated it's not really different than the flu, more of a novelty now because it's new, but like the flu it's mostly a concern to elderly people and young children. He also figures like the flu, it should start to dissipate with the coming warmer weather. Happy investing people:-)
  • rono said:

    Howdy folks,

    I don't think we're anywhere near the bottom. Sorry, but we're in the middle of a trade war, facing a pandemic, and we've got an idiot in the White House. We all hoped and prayed there wouldn't be some sort of international crisis . . . but hope don't pay the rent. He's calling the coronavirus a democratic hoax, but at least he put the chief religinazi in charge , who's asking the faithful to pray for a cure.

    I urge you to fasten your seatbelts,

    And so it goes,

    Peace,

    Rono

    Will there be fire and brimstone? Locusts??
  • edited March 2020
    Sorry, but rono is absolutely right: "Petty partisan politics" has nothing to do with that situation- It's not petty, it's not partisan, and it's not politics. Having an idiot in the White House is, unfortunately, a demonstrable fact, and It makes no difference what political party he pretends to represent.

    To ignore the financial implications of this would be foolish in the extreme.
  • I agree with @rono and @old_Joe. Center for Disease Contol already sent out plenty of warning and ways to protect individuals, i.e. good personal hygiene practices. Yet the WH is treating this as low risk. By the way, where is Ben Carson? He is a surgeon and can better lead this effort to deal with coronavirus.

    Wasn't too long ago someone on this board called that we are in a secular bull market. In light of the last 10 trading days, we could be in something far worse if we don't take this virus seriously.
  • Unfortunately Trump's chickens may all come home to roost. Cutting the NIH and CDC budgets, calling scientific analysis "fake news", saying the press is the enemy of the American people, claiming that the "deep state" experts should all be fired.

    Epidemics run on panic and fear. The treatment is aggressive epidemiology by deep state experts funded by the CDC and scientifically based journalism to counteract wild rumors.

    All things this administration, unlike any others has tried to destroy.

    That is why I think it is impossible to use previous epidemics as models of the governmental and markets response.

    This will probably get a lot lot worse. I would not be buying this dip
  • @sm3
    I am curious. Do you know anything about the epidemiology of the cases in the Washington State (Kirkland) LTC facility? Also, do you know if the current test methods in the US have any or many false positives? I tried to Google both questions because I scratch my head about some of the cases and found - not much.
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