One thing’s for sure; the signature of this market over the past year has been “program trading”. With trillions in hedge funds and well-funded Wall Street trading desks, it’s a reality hard to ignore.
Today’s market action is a good example. Sell programs hit markets early and, typically, when selling pressure eases, buy programs take markets quickly the other way. Who can blame the players involved? They have the computers and the cash to play the game. For everyone else, it’s a spectator sport.
Of course the big news today came from the continuing slide in commodity markets, led by energy, with precious metals bringing up the rear. Now that Wall Street pundits and advisors have everyone overweight those sectors, it’s time for the old “switcheroo.”
Even the homebuilder’s continue to hang tough against the onslaught of terrible news -— permits down over twice what was expected.
Bulls believe everything is going to be just fine. Falling energy and commodity prices are good, as are lower interest rates. Further they’re unfazed by troubles in housing markets -- they’re big buyers! To them the economy is slowing to a “Goldilocks” environment where interest rates and inflation are low, the economy grows at a modest pace, corporate earnings will be fine, and (ahem) stocks are cheap.
Bears believe rapidly falling energy, precious metals, coupled with a more serious than admitted housing price decline is a harbinger of deflation and recession. Negatively, they believe corporate earnings are inflated by the one-time effect of stock buy-backs. Bulls tend to dismiss and isolate problems with Intel Corp. (INTC), Dell Inc. (DELL), Yahoo! Inc. (YHOO), and automakers, for example, while bears obsess about them.
Tomorrow the optimists at the data-dependent Fed will toss their two cents into the mix by probably saying little new -— make that one cent.
From my perspective, the bull’s still have the ball.
More tomorrow folks -— have a pleasant evening!