Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

More RED this morning #2

Is it possible the market makers are trying to slow the rate increases & the number of forth coming increase ? or is the market not at their fair value as per the makers ? Or are they on the other side , SHORT ?
Probably all three !
Enjoying the ride, Derf

Comments

  • edited January 25
    I hated these True & False tests in school. But here are my answers. For clarification, I’m assuming “market makers” pertains mostly to hedge funds.

    - Is it possible the market makers are trying to slow the rate increases & the number of forth coming increase ? FALSE

    - or is the market not at their fair value as per the makers ? TRUE

    - Or are they on the other side , SHORT ? TRUE
  • I would wager: market over-valued; political & geopolitical concerns; lingering supply chain woes w/ Omnicron, rotation out of growth, Bitcoin nervousness. Quant trading alogorithms.

    Maybe, just maybe, folks are also worried about having COVID in rear-view mirror (as odd as that sounds). But that's a maybe.

  • Biden is under political pressure to do something about inflation so the rate increases will be jammed through no matter that the market is trying to scare off the Feds. Inflation affects a lot more people that matter to the Dems vs. a correction to SP500.
  • I would wager: market over-valued; political & geopolitical concerns; lingering supply chain woes w/ Omnicron, rotation out of growth, Bitcoin nervousness. Quant trading alogorithms.

    Maybe, just maybe, folks are also worried about having COVID in rear-view mirror (as odd as that sounds). But that's a maybe.

    +1 To which I would add typically-jittery index-based retail investors of ETFs and/or OEFs that can amplify market moves in individual stocks both on the up or downside. Especially those who "got into" investing (er, "trading") during the pandemic and probably don't know what they're doing.

  • This excerpt from a Barrons article today suggests the upcoming FED meeting where the path of interest rate increases may be discussed is the main driver of very recent volatility. Not sure if that is today(?)
    Wall Street Is in a Volatile Mood, With Uncertainty Over Fed Direction
    Wall Street’s mad Monday really was quite something. After a bloodbath early in the day (Monday), U.S. stocks staged a remarkable comeback as investors flocked to buy the dip.

    The S&P 500 was down close to 4% at one point but closed 0.3% up, while the Nasdaq Composite and the Dow Jones Industrial Average also pulled a rabbit out of the hat. All that happened off the back of very little news...

    ...It was a perfect illustration of the heightened anxiety being felt ahead of the Federal Reserve’s first policy meeting of 2022, which begins today. The path ahead for interest-rate increases is uncertain and it’s rattling the markets. The Fed can relieve some of that tension with its decision Wednesday, although a more hawkish update could see the selloff resume.
  • edited January 25
    500 points here … and 500 points there … and pretty soon you’re talking about a real bear market..

    - FOMC meetings usually cover 2 days. This month’s begins today, Tuesday. Tomorrow afternoon (Wednesday) they will issue their “statement” which will be followed by a press conference by Jerome Powell. Often, it’s the press conference that moves markets.

    - Roughly quoting Randall Forsyth this week: “Watch what the Fed says, not what it does.” Meaning: They probably won’t raise rates at this meeting, but what they say about future QE or rate hikes will be the real news.

    - Just browsing today’s WSJ, the economy has slowed significantly this year - largely attributed to covid.

    - The wild market swings are not a positive sign. I wouldn’t be surprised to see a 1,000 - 2,000 point one-day selloff in the Dow some day this week or next. ((I’m not psychic - just looking at patterns and, like everyone else, trying to draw some inferences.)
  • For the 2nd day, someone is doing heavy duty selling (institutional rebalancing?) in the morning until about 11:00 AM Eastern, and then dippers come in around the lunchtime and onwards to reverse much of the morning action. VIX remains elevated at 30, meaning daily SP500 volatility of +/- 1.6%. VERY UNUSUAL.
  • Thanks @davidrmoran. Both loaded well. The second one is succinct and highlights 3 causes of the market turbulence. It’s hard to call this a “selloff” from the heights the markets reached.
    “Fall”? I guess. It’s all relative. I tend to have very little that’s exposed to tech - which I think is where most of the carnage has occurred.
  • edited January 25
    “and then dippers come in around the lunchtime and onwards to reverse much of the morning action.”

    Them’s some pretty big “dippers”. I doubt it’s you and me and that other fella. I’d bet mostly short covering, hedge funds, preprogrammed computers.

    I don’t understand option trading very well. But the press has been full of reports that it’s at a very high level - particularly high for the retail class. I follow Ameritrade’s web based TV network (entertaining) and there’s a near constant stream of discussion which I’ll label: “Even you can make easy & nearly risk-free money trading options.”

    To the extent options includes puts & calls I understand the concepts well enough to get by in fund selection. Obviously there’s more sophisticated types.
  • One options indicator I follow is $SKEW (Stockcharts, etc) or ^SKEW (Yahoo, etc). When puts are more expensive than calls (due to high demand from the hedgers), then SKEW is high (140+); otherwise, SKEW is low/moderate (120s-130s). This is a refinement over the put-call ratio that simply uses put and call volumes. It doesn't work well by itself, but provides useful info with $VIX (^VIX). https://stockcharts.com/h-sc/ui?s=$VIX&p=D&yr=1&mn=0&dy=0&id=p80512392701

    When options volumes are high, they distort the market for the underlying stocks. For example, when the retail crowd piles into the calls of meme stocks, options dealers have to buy the underlying stock to maintain their hedges. Likewise, if there is huge amount of put buying, options dealers have to short the underlying stock to maintain their hedged positions.
  • Futures GREEN. 7:00 AM CST A step in the right direction
  • edited January 26
    Derf said:

    Futures GREEN. 7:00 AM CST A step in the right direction

    The former trader in me sees big green before the open and thinks "dead cat" and "sell anything you wanted to yesterday while you can" ... old habits die hard. :)

  • edited January 26
    The actions on Mon, Tue & overnight Wed as captured in the futures markets at 30 min is simply impressive.
    https://www.cmegroup.com/market-data/delayed-quotes/equities.html

    image
  • DKNG (which I bought a week ago) +17% this morning. Who said stocks are volatile?

    Will probably close down by end of day.
  • hank said:

    DKNG (which I bought a week ago) +17% this morning. Who said stocks are volatile?

    Will probably close down by end of day.

    The only financial advice you can bank on 100% of the time to be totally accurate is: "markets will fluctuate, sometimes wildly, but most times rather tamely." :)
  • edited January 26
    It’s Nuts. The short sellers have been blasting it for months. As I think I mentioned recently “a little bit of this one goes a long way.” (And “ouch” on the down days.:))

    ARKK only up 3-4% today.
  • hank said:

    It’s Nuts. The short sellers have been blasting it for months. As I think I mentioned recently “a little bit of this one goes a long way.” (And “ouch” on the down days.:))

    ARKK only up 3-4% today.

    At the risk of going too far off-topic, speaking of ARKK, per SA...:

    Popular exchange traded funds ARK Innovation ETF (NYSEARCA:ARKK) and KraneShares CSI China Internet ETF (NYSEARCA:KWEB) have imposter leveraged funds filed for by AXS Investments.
    The two ETFs filed for with the U.S. Securities and Exchange Commission are the AXS 2X Innovation ETF (TARK) and AXS Short China Internet ETF (SWEB).
    TARK is a leveraged exchange traded fund that aims to provide investors two times the performance of the ARK Innovation ETF.


    ... somehow I don't think this will end well.

    Back to on-topic market discussions....
  • edited January 26
    “... somehow I don't think this will end well.”

    Yep. Nuts

    Just another bizarre day. Haven’t liked the market action for a while. Missed most of the Fed news today. Need to catch up. Powell’s mumbling something on Bloomberg … DKNG pulled back from +17% to only +9%. The DOW which has been up 300 points or more today is negative 50 as I write. Hmm …

    Gold’s getting mildly slammed today (off $33.00). But it’s still $1818 - far ahead of the $1700 it flirted with last year. I’m hanging on to DKNG this time around because I have some good hedges in place if all H breaks loose. As @Derf says “Enjoy the ride.” YOLO

    WTF?. The Dow fell another 300 while I was writing. Will need to write faster!;)

    Pundits welcome!
  • I was in agreement with @rforno's earlier comment re: dead cat bounce. I sold out of the last remaining so-so positions I had and will now wait for Ms. Market to chart a course.
  • edited January 26
    Notes from FOMC releases & Powell's press conference:

    Rate hikes will start soon (March). The fed fund rate will become the primary tool of Fed monetary policy. Expected will be gradual +0.25% rate hikes, but +0.50% hikes were not ruled out.

    The QEs will be reduced in February & should end in early-March.

    The Fed balance sheet reductions will start (around mid-year) after the rate hikes begin (in March) & will run in the background. The MBS will be gone faster & entirely at some point. The balance sheet will shrink substantially to a level needed for Fed operations.

    The labor market is very strong. The current inflation is also very high but is expected to decline. People on fixed-income are affected more by high inflation. Less fiscal stimulus is expected. The Fed will remain flexible in its policies & actions. The yield-curve is normal now & will be watched. It will be a year of tightening. Risks include high inflation, various threats to economic expansion, Covid-19 factors, supply-chain disruptions (that should gradually clear), Europe, etc.

    The stock market has been very volatile this week. It was up strong on Wednesday morning but turned down after the press conference.

    Additional statements were issues on 1) long-term monetary policy & strategies, 2) principles for Fed balance sheet reduction.

    LINK
  • @yogibearbull- Thanks for the summary.
  • edited January 26
    One of my trackers covers daily performance of 18 different funds & ETFs - none of which I own. Only 3 were green today. 15 were in the red. This covers a wide spectrum of asset classes and styles.

    The 3 green:
    BRCAX +.83% (commodities)
    HEGD +.11% (equity L / S)
    JHQAX +.12% (hedged equity)

    Biggest losers:
    SLV: -1.36% (silver bullion)
    TRREX: -1.30% (real estate)
    SWAN -.76% (hedged equity)
    TEMWX -.77% (global equity)

    What’s interesting is that most of the losses were slight. But the damage was widespread across asset classes. The 2 Hussman funds I track, HSGFX and HSTRX were both red as well.

    One fund (not on that list) that I own took the “prize” today. OPGSX (gold miners) lost 3.45%. The good news is the metals (of late) tend to be “Lucy Goosey” and follow no set pattern. Tomorrow’s another roll of the dice!


  • The battle after the initial drop today was over the 200d ma, whether it's a springboard or a ceiling. Today the verdict was ceiling. Tomorrow? We'll see.
  • edited January 26
    Thanks. Nice summary @yogibearbull. Will take time to digest.

    Haven’t read Fleckenstein yet. (Likely LOL)
Sign In or Register to comment.