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December 5, 2018 | What on Earth Was THAT Selloff About?

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

We’ll treat Santa rallies with caution, if not to say skepticism, as a result of Tuesday’s take-no-prisoners onslaught. Mainly, it’ll be a matter of keeping the word “DISTRIBUTION!!!” in mind whenever bulls seem emboldened. That goes for AAPL as well, my one-size-fits-all bellwether. The stock had switched on the charm Monday, all but shouting “Buy me!” from the rooftop as the session ended. This was before AAPL tripped an outright ‘mechanical’ buy signal midway into Tuesday’s session — one that met our criteria for jumping on that type of trade. Lo, the stock thwacked our bid, then continued relentlessly lower for the remainder of the day. This eventually stopped out the trade, but the thing to notice was that AAPL barely bounced after the last bull had been cast off. It does not bode well for the short-term.

Nomura bank’s man-in-the-trenches attributed the selloff to more or less technical factors while noting that his employer’s ‘CTA Trend Model’ — here’s a mouthful of jargon — “is again deleveraging massive notional in long US Equities expressions across SPX, RTY and NDX live.” Phew! For a moment there, we’d though it was just run-of-the-mill fear that brought sellers out in droves. He also noted that the selling occurred in the context of a well entrenched global shift by investors out of stocks and credit and into government bonds — all due, apparently, to a sharp turn in the economic cycle. Now they tell us! Think what it could have meant to us pishers if we’d known a day earlier what was on the tiny, fevered brains of algo traders and their Olympian Masters as the week began. The Masters’ unaccustomed lust for Treasury paper has reversed the upward spiral in rates, a development that some will see as beneficial. But a fat lot of good it will do us if the U.S. economy is already headed into a recession that dulls housing appetites, even with mortgages 75 to 100 basis points lower.

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December 5th, 2018

Posted In: Rick's Picks

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