I’m going to weigh in on this national anthem debate if that’s what we call it. This couldn’t possibly be good for business. We are coming to the point where this group is going to boycott those products and that group is going to boycott these products. I heard Maria Bartiromo say with the decrease in ratings, the advertisers will be paying out less. That’s just the start of it because the horses really got out of the barn yesterday.
I don’t know how they will be able to put it back in. I’m a stock market guy and keen social observer. Folks see a riot in St. Louis, they shut the pocketbook. Now many have one day to relax and get pissed off one way or the other by the politics. If everyone were to boycott the sponsors of whatever they don’t like, there would be no products to buy. For those of you who do not think there will be a payoff to the economy by all of this, it’s likely you are a reflection of the VIX being below 10 again. We know recessions are based on a contractionary environment. What would you call this?
Yellen didn’t raise rates but said we are entering a tightening environment where they may raise 3 times next year but also has not ruled out one in December. They also stated they’ll starting winding down their $4.5 trillion portfolio. Some called it historic but I think it was more historic how we got into this mess in the first place. Recall we went through one complete presidential cycle where there was no fiscal policy at all. Now, this Congress is said to be the biggest do-nothing group since 1860. That’s historic. But there is a shift to a less accommodative environment which ultimately can’t be good for housing stocks. Right now the housing sector is hanging on.
But the Greenback went through the roof on the news and precious metals collapsed. But by the end of the week, a lot of those gains were retraced as traders attempt to digest what it all means. I don’t think they have figured it out yet and they could end up in a trading range. One of the areas that have been on fire is biotech. It pulled back off the high in what looks like a bull flag. On Tuesday and Wednesday, it hit an interesting low on a .233 (Fibonacci) retracement at 144 hours down. In a good market that should go. At first, it did but you see over the past two sessions the action is very questionable. This questionable behavior is not good for the market but it started decent Monday morning on a weak morning.
In other areas, the SOX is off the high in the 55-day window up. Oil is still moving, Transports is back at the high so the divergence/rotation has healed. Housing is holding on while the banks are also back near the highs. Believe it or not, two of the biggest names are now in trouble, AAPL and AMZN. FB is hanging on but CNBC announced on Friday Zuckerberg is selling 75 million shares of his Facebook stock which he claims is for philanthropic purposes. I’ve heard whispers which can’t be verified that Congress is finally considering regulating the oligarchs in Silicon Valley. What does he know that we do not?
The market has technically improved somewhat through September as we’ve managed to dodge numerous bullets. But the rhetoric from North Korea is now off the charts. The only thing comparable to it was the insults hurled at FDR by the enemy prior to WWII. But you already knew that as Lord Rothschild recently declared this market and mindset is very similar to that of 1937. I think Kim Jong Un wants to negotiate something that will allow him to do whatever he wants with his nukes just like other superpowers but when diplomacy collapses one can’t rule anything out.
Markets opened weak and the business channels blamed Merkel’s margin of victory, where her party secured only 33% of the vote while the far right AfD took 12.6% which is the first nationalist right-wing party to be in German parliament since WWII. The DAX remained flat on Monday as she was expected to win. I also heard mention of fallout from Puerto Rico and since the Dominican Republic was hit there is concern cash-strapped governments might not be able to handle all the weather bailouts. But overall, if you want to understand why the market is dropping, you need to look no further than Sunday afternoon. If I’ve told you once, I said a thousand times. People don’t buy stocks when they are in a bad mood. We’ve heard many pundits say this through the years. Americans are unusually blessed and everything will be fine until the day comes that Joe Six-pack can’t crack open a cold one and relax on the couch on Sunday afternoon.
Obviously, we are not to that point here, but there are more than whispers that many are disgusted that politics now invades the world of sports and people are tuning out. Here we are, the end of September and the market survived any number of catalysts. But at the end of the day, it wasn’t anyone catalyst, it’s likely all the issues are starting to add up. Let’s not forget, seasonally speaking, the last two weeks of September is the weakest time of the year. If the calendar has anything to do with it, today could be the start of some turbulence into the end of the month.