Hurricane Dorian is a perfectly apt analogy for the current stock market. We have meteorologists and technical analysts each culling data to build predictive models with a variety of scenarios.
Meanwhile, the actual underlying activity of each is one of ‘volatile stasis.’
For stocks, the S&P 500/ SPDR S&P 500 (SPY - Get Rating) is whapping back and forth with many moves in excess of 1% on a daily basis, as each new tariff tweet hits the tape. But it is essentially bound by the important 282 support and 296 resistance levels.
It seems whichever side of the box it ultimately breaks will determine the direction of not just stocks but the economy and possibly the politics of the country. Until that occurs, it seems bulls and bears risk getting chopped up as we go nowhere fast.
Just as meteorologists have never seen a hurricane of Dorian’s magnitude simply stall in place and gather in size have economists and investors never seen the phenomenon of negative-yielding interest rates whose amount also keeps growing.
Total global debt with negative yield have now hit $17 trillion which represents a whopping 30% of all outstanding fixed income securities.
This is simply not the way things are supposed to work. This has confused investors to no end causing the Bank America Economic Uncertainty Index to surge to record levels in recent weeks.
The confusion is leading to equally confounding, and often contradictory behavior. The people chasing both risk assets such as stocks and safety simultaneously.
The major stock indices remain just a few percent from all-time highs and the NYSE advance-decline line enters September at all-time highs. At the same time, a massive flight to safety is in the form of a rush into gold, bonds, the dollar and utilities is underway.
People simply don’t know where to turn. Can the U.S. continue to avoid what is apparently becoming a crumbling of the global trade and banking system?
Likewise, as Dorian remains nearly stationary, bound between two pressure systems causing massive structural damage and losses just offshore millions
of people along the U.S. coastline don’t know whether to evacuate or stay put.
I’m hunkered down in West Palm, FL, eye to eye, patiently waiting and trying to stay safe on both fronts.
SPDR S&P 500 (SPY - Get Rating) shares were trading at $290.26 per share on Tuesday afternoon, down $2.19 (-0.75%). Year-to-date, SPDR S&P 500 (SPY - Get Rating) has gained 17.22%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Smith
Steve has more than 30 years of investment experience with an expertise in options trading. He’s written for TheStreet.com, Minyanville and currently for Option Sensei. Learn more about Steve’s background, along with links to his most recent articles. More...
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