Investors who 'haven't got time for the pain' dump stocks
If Wall Street can’t notch a quiet, low-drama session today, it’ll prove the market remains slave to its own bad vibrations.
Global markets overnight were calm, with Mainland Chinese shares (000001.SS) clocking a minimal gain. The economic-news calendar is light on top-grade, market-moving data. And Fed officials are in their pre-meeting radio silence period, so any hints about next week’s rate call will be coming from those less informed.
So it should, by rights, be a pretty calm day, except for the market’s recent knack for making pinball-paddle moves in either direction for no obvious reason.
After the sudden, stunning 12% drop into late August, the S&P 500 (^GSPC) has been shuttling for two weeks within a new, lower range - above but uncomfortably close to the lows and at levels first reached in June 2014.
Investors have had ample chance to buy or sell the market at the current S&P level near 1950 in recent weeks. There’s no very obvious impetus to trade urgently today unless you follow the traditional “Sell on Rosh Hashanah, buy on Yom Kippur” rule, which is mostly cheeky even if it would have had you sidestep a few nasty drops over the decades. (Any pre-Rosh Hashanah unburdening of stocks will have to happen today in advance of the holiday’s onset Sunday night.)
That said, nine of the last 14 Fridays have been negative, a mark of the risk aversion has built and the idea of going into a weekend loaded with equities has lost some appeal.
One big question is whether folks have done most of the selling they’re likely to do for a while, having been in a slow-motion purge of stocks for weeks.
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Retail investors have been caught in a Carly Simon market – too much “Anticipation” of the Fed and other scary factors, leading them to decide they “Haven’t Got Time for the Pain.”
An estimated $16.2 billion was pulled from stock mutual funds and ETFs in the latest week, says Lipper. Merrill Lynch, using a separate data set, figures $46 billion has left equity funds over the past four weeks. Today’s consumer confidence data could be a clue as to whether the stressed stock market has soured the Main Street mood at all, too.
Meantime, speculators have built up a record position in CBOE Volatility Index (^VIX) futures, or bets that the market will become even more volatile in coming weeks. There is some noise in this data, but it’s clear that many pros have either chosen or been forced to bid for expensive stock insurance in the past month.
All these fit the narrative of a sold-out, heavily hedged market shrouded in skepticism. This is what you’d like to see, if seeking better odds for at least a near-term rally.
Maybe it sets us up for a relief pop regardless of the Fed’s decision Thursday. But six days is an eternity the way this market has been trading day to day.
Finally, it might be worth listening for dogs that don’t bark today. Goldman Sachs cut its crude oil price (CLV15.NYM) forecast for this year and next, saying that the downside in oil “could” stretch toward $20 a barrel.
See if the market takes this to heart, or perhaps shrugs it off as nothing new – perhaps preferring to focus on the largest oil supply cuts outside OPEC in 23 years, estimated by the International Energy Agency.
A refusal by crude to drop much today would be a hint that the commodity collapse and global slowdown story lines are sounding tired by now.
Or, with any luck, maybe it means the markets are seizing on some good excuses to do very little on a light-news Friday.
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