No, not the James "OU" Brown classic, but that uneasy moment when you have to rub your stomach in a circular motion to put it at ease due to the gyrations of the stock market.
One day recently, the market opened 1,000 points down and closed with a 500 point loss. Less than a week later, it was up 600 points only to turn down at the close and lost almost 200 points. A few days later, it had back-to-back up days of over 600 points and another 300 points. Almost a thousand point move in 48 hours. What's happening?
Market Signals
The market is telling you that more than distribution is taking place. Smart money is exiting. What I'd like you to do is think back to August 2011. It was the last time that the market had consistent volatility, which is a code word to mean, tanking. The market signaled that September and October would be rough waters and it was, but few took the clues. They just relaxed under the summer sun. The market had triple digit days just like today. Now, add these aspects...
Dear reader, back in 2011 every central banker was pushing stimulus. China made "work" projects and built "ghost cities." In the US we had QE and I predict it will return - see future piece, coming soon.
Today, excessive debt is curtailing stimulus. Governments are going back to the playbook and doing the old fashion, beggar-thy-neighbor approach with currency devaluations. In addition, the Middle East turmoil has caused a mass migration which will cause a severe backlash. I expect the EU to come forth with new regulations to address this problem when they should be doing things to help countries like Turkey and Jordan and in Europe for Italy, Greece and the Balkan nations. Bottom line: Europe with serious unemployment will also have unrest due to this immigration problem.
As the global nations look to the US to be the engine for their economies, it released a revised second quarter GDP results. It says the US economy grew at 3.7%. I'm thinking that the US hired Chinese nationals with their constant 7% growth rate which to me is all fluff with no substance. All one has to do is check out the yearly lows of our oil companies. Earnings are down 60% and stocks are in bear territory. In fact, all commodity companies are suffering and this effects the emerging markets too. This is why smart money is getting out of the market. The recent bounce only reflects the strength of five companies who are holding up the market.
*Apple up 5%
*Facebook up 21%
*Google up 29%
*Amazon up 71%
*Netflix up 152%
and the rest of the S & P 500= 0.5% This is the rest of the story. Don't buy the dips. The safe and smart thing to do is get your money out and preserve your capital. I see oil in the 30s and then, Chevron would be a nice opportunity for the long term. However, if you want one more sign and this one will mess with your head. The famous horror director, Wes Craven just passed. He used all types of visible messages with bad overtones like the ancient sign of the devil, 666. The Dow declined 6% for August. Nasdaq declined 6% for August and the S & P declined 6% for August. You play with the devil, you're playing with fire. Therefore, I began with the Godfather of Soul and so, I will end it with the Stones, "Please, allow me to introduce myself..."
