MARKET ALERT – Wall Street Rumblings – Issue #455, November 19, 2017 by Ray Dirks

MARKET-ALERT “ Rumblings Up, Down, and Around Wall Street “ Issue #455 dated November 19, 2017, with Ray Dirks of RAYDIRKS Research and his team of Securities Analysts and Money Managers.

‘Twas another interesting week on Wall Street in the United States, although common stocks were down slightly. Rumblings readers/investors did well as the common stocks we’ve been recommending closed up on the week generally, led by the insurance stocks Aflac (AFL) and Hartford Financial Services (HIG). And or favorite technology stocks also performed well last week, led by Fusion (FSNN), up by about 10% following a very strong and powerful presentation in New York City on Thursday.

Let’s take a look at The Trader column in Barron’s, The Dow Jones Business and Financial Weekly, where the headline reads: The Market’s Journey: Don’t Stop Believing. The column starts off: If the market were a watch, we would say it could take a licking and keep on ticking. If it were a prizefighter, we’d say it knew how to take a punch. But it’s a market, and that simply means investors are willing to take chances again and again and buy the dips.

You wouldn’t know it by looking at the major indexes, which finished mixed on the week. The Dow Jones Industrial Average dropped 64 points, or 0.3%, to 23,358 last week, while the Standard & Poor’s 500 index dipped 0.1% to 2,579. The Nasdaq Composite rose 0.5% to 6,783.

The final tally, however, doesn’t do justice to the beatings the market took at the open early in the week. The Dow traded down nearly 80 points on Monday, 170 points on Tuesday, and 170 points on Wednesday, but each time the blue-chip benchmark finished off its lows. That was followed by the Dow’s 180-point rally on Thursday as everyone but bought the dips. We saw a bit of a shakeout, says Todd Lowenstein, director of research at HighMark Capital Management. But the market has been resilient.

Has it ever. The S&P 500 has now gone 62 weeks without a drop of 2% or more, the longest such streak since 1965. And it isn’t as if there haven’t been reasons to sell, from the narrowing difference between short-term and longer-term Treasuries “ known as a flattening yield curve “ to tax-reform hiccups in Washington and a sell-off in high-yield bonds that briefly caused investors to wonder if the credit market was acting  as an early warning signal.

They needn’t have worried. See, it isn’t just equity investors who are looking to turn selloffs into buying opportunities. The iShares iBoxx $ High Yield Corporate Bond exchange-traded fund (HYG) “ a reasonable facsimile of the overall junk-bond market rose 0.4% last week after dropping 1% the week before. Despite the fact that equity investors were watching junk bonds, junk-bond investors were” you guessed it – buying the credit dip. That will have to change before the HYG leading stocks story becomes a truly lethal one, says Nomura Instinet technical analyst Frank Cappelleri.

The truly scary thought is that even volatility can’t seem to kill the speculative bug. No asset class had a bigger dip and a bigger bounce than Bitcoin. The cryptocurrency tumbled nearly 20% from its November 8 high to its November 12 low, according to Bloomberg data. Then it was off to the races, as Bitcoin rallied 30% to close near an all-time high. For traders looking to make a quick buck, there might be nothing better, says Datatrek Research co-founder Nicholas Colas. In a world of low volatility, Bitcoin is one of the few markets that offers traders volatility and moves with a discernible trend, he notes.

What if higher volatility, instead of scaring investors away from the stock market, brings them in? In that case, this bull market could still have a long way to go.

Well, Rumblings thinks that this stock market still has a long way to go though for other reasons even more clearly than those cited in the previous seven paragraphs. As we’ve been saying for a year or more, this market still has a very long way to go up, that is probably somewhere between 50% and 100% at least in the next couple of years.

And the upside is virtually assured because interest rates on fixed -income investments (government bonds, municipal bonds, corporate bonds, and short-term bonds and notes) will likely provide little or no returns (negative in many cases) as the United States financial authorities strive to increase interest rates which, of course brings down the market values of fixed-income securities.

Accordingly, Rumblings suggests that readers/investors check with their investment advisers and then sell as much of their fixed-income securities as possible and place the cash proceeds in common stocks with outstanding management teams – such as the companies on the list of Rumblings’ Favorite Stocks for 2017.

Rumblings also suggests that readers/investors place no more than 1% of their investable funds in the securities of any one company. It pays to diversify!

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