You can see it. Stocks are at resistance. Resistance is still holding. Will it hold ’til the advance breaks… or, will it break on thru resistance, and lift-off to higher levels? That’s the question everyone wants to know. Wonder if this might help?
According to a new report from Bloomberg Business just this morning, demand for U.S. stocks from companies and individuals is “diverging at a rate that may be without precedent.” From the article… “Standard & Poor’s 500 Index constituents are poised to repurchase as much as $165 billion of stock this quarter, approaching a record reached in 2007. The buying contrasts with rampant selling by clients of mutual and exchange-traded funds, who after pulling $40 billion since January are on pace for one of the biggest quarterly withdrawals ever.” Translation: Individual investors are selling out of mutual funds and exchange-traded funds at one of the fastest rates in history, companies have been buying their own shares like there’s no tomorrow.
Further, David Kostin – chief U.S. equity strategist at Goldman Sachs – thinks share repurchases could be the only thing keeping the market afloat today. He said, “Corporate buybacks are the sole demand for corporate equities in this market.” Hmmmmm, that might account for the truly abysmal volume we’ve been seeing… especially today. It was the lowest since this rally started.
Companies have been borrowing massive amounts of money to buy back shares. This can’t go on forever. As Andrew Hopkins, director of equity research at Wilmington Trust, put it… “Anytime when you’re relying solely on one thing to happen to keep the market going is a dangerous situation… Over time, you come to the realization; Look, these companies can’t grow. Borrowing money to buy back stocks is going to come to an end.” Gee, what’s gonna happen then?
Oil has fallen back to $37.32. I put on my first small short position today, just some shares of SH at $20.87. It may be a bit premature… we’ll see. As things might truly head south, I’ll step up to some double-short shares of SDS, and maybe even a put option or 2 on the SPY.
Market moving news and data comes out tomorrow, Wednesday and Thursday. It’s going to get more interesting by the day. When it gives way, it might be sharp. But, break out to the upside? I’m not confident of that move at all… although, the Fed might make a surprise announcement about rates Wednesday that could cause some excitement. More later….
5:00 am EST and Asia closed down. Europe is off. Our index futures are down by .4 to .5%, and OIL… oil is down almost 2.5% to $36.27 a barrel! There will be retail sales news at 8:30, that should be of interest, but all eyes are commencing to focus on the Fed and their statement to be released Wed. afternoon. AND, until oil is no longer the issue, I cannot emphasize this enough… read this column DAILY. It is always brief, but concise! http://www.theweek.co.uk/oil-price/60838/why-the-oil-price-rally-could-be-self-defeating Know what is the real news about oil, while it is driving the markets, and you’ll be your own investment expert!
Here’s to your successful investing!
Harold F Crowell