August Markets: Stocks Often Declines as Traders Vacation

August Markets: Stocks Often Declines as Traders Vacation

August Markets: Stocks Often Declines as Traders Vacation

$DIA, $SPY, $QQQ, $VXX

It is August and markets are taking time to consolidate the recent big gainers.

And this August US President Donald Trump threatens to leash Fire & Fury on NKorea.

So, we are seeing the VIX wake up, as swings in stocks and junk bonds gain and participants say goodbye to $500-B from global equities.

Nevertheless, nobody that is anybody on Wall Street has cancelled their Pause to Refresh. Though you can be sure they are asking this Big Q: What the market will be looking at next week?

Vacationers will be taking their cues from the geopolitical drama, which is almost impossible to trade from a practical point. But it is a driver in here.

This week has been the 2nd worst on The Street YTD.

On the week, the S&P 500, the NAS Comp, and the DJIA currently mark WTD losses of 1.4%, 1.6%, and 1.0%, respectively.

European stocks fell the most since President Trump’s election and US junk bonds had the biggest drop since March.

Turbulence surged, pushing the CBOE Volatility Index up 50% and above 16 for only the 2nd time in Y 2017.

The savvy participants are not to do any fear-trading, thinking people are taking the NKorean’s threats seriously but know that NKorea has been making them for years and likely has no really strong weapons technology to speak of.

We have now have a take no prisoners President who is meeting the challenge head on with the US Marines at his side.

And our President knows the the underlying fundamentals and technical’s to this market are very strong.

The Big Q2: So, why then is August historically so rough?

Here are a few recent reasons: for stocks, it is  the worst month for volatility, with the VIX rising an average 12% over its 31 days. In Y 2011, the S&P 500 alternated between gains and losses of at least 4% for 4 days in August, something never seen in 88 years of data, and 2 years ago the S&P 500 posted its worst 6-day fall since Y 2011.

Note: Friday,  the CBOE Volatility Index (VIX) 15.52, -0.52) declined 3.2%, retreating from the 4-month high it marked Thursday

Some experts says valuation in the stock market is on the minds of clients as much as war. It’s a dicey time now that earnings season is over, not much fundamental news breaks and the Fed is says it wants to unwind some beginning in September.

I know full well that this is a 24-7 business, we are all dialed in and connected. As there is always the risk of headlines coming into the weekend that will not be well received by the market and the risk of that is growing. That said, I have not spoken to anyone who is nervous.

So tune out the Noise

Friday, the US major stock market indexes finished at: DJIA +14.31 at 21858.32, NAS Comp +39.68 at 6256.53, S&P 500 +3.11 at 2441.28

Volume: Trade on the NYSE came in at: 792.2-M/shares exchanged

  • NAS Comp +16.2% YTD
  • DJIA +10.6% YTD
  • S&P 500 +9.0% YTD
  • Russell 2000 +1.3% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.39) Bullish (0.40) Neutral (0.23) Very Bullish (0.54)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.01) Neutral (-0.05) Neutral (0.08) Neutral (0.00)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Neutral (0.11) Neutral (-0.01) Neutral (0.02) Bullish (0.33)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Neutral (-0.15) Neutral (-0.15) Neutral (0.09) Bearish (-0.38)

Have a terrific weekend,

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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