Today was an exercise in complete futility and boredom. Volume is non-existent and there isn’t much movement at all. Just mind numbing chop. This is a strange market right about noe and its nor like anything we’ve seen in a while. The longer it goes sideways, the bulls will argue that its consolidating for a big move higher. The bears will argue that its lost its mojo and ready to dive lower.
Both are possible, but either scenario will require a negative or positive catalyst, or else we will continue to just drift. So bring on the black swan or the white swan.
Investors poured a record sum over the past month into exchange-traded funds whose value increases along with Wall Street’s so-called fear gauge. I speak of the VIX. The money is pouring into VXX, UVXY & TVIX. These are all etf’s that will rise in value if we hit market turbulence and the VIX rises. If the markets rally, these players will be wiped out pretty quickly. All in over the last month,investors have committed about 3.5B to these instruments.
At the end of the month, institutions often sell stock to free up cash for distributions. Money managers also tend to sell and buy shares in large quantities at the end of the month to compensate for big moves in their sector allocations. For instance, if energy stocks rose sharply in a month, a fund manager may sell some energy shares in order to maintain a certain percentage allocation to the sector. Its also the end of the first quarter, so we could see things move around a bit.
Later this week, we will receive readings on manufacturing production and consumer sentiment, as well as the highly anticipated March jobs report. The data will be closely monitored following a week of renewed talk about the timing of the next Federal Reserve interest-rate increase.
It feels like the market has gone back to being desperately afraid of higher rates again, so any kind of “hot” numbers that come in could upset the apple cart. Something to be aware of.
For the market to remain firm here, I think its important that energy stocks hold firm. Other than energy and basic materials, there really isn’t a whole lot of leadership.
Its been a wild quarter for the market and if you slept through it, you would think nothing at all happened. We dropped about 11% and rallied back about the same. If you are like us, folks that watch it closely, then it was a wild ride and it faked out many, including me. I loved the action in January and February and traded it better than most, but March hit me with a waffle iron. The market dishes out humility probably better than anything else.
For the record, I don’t trust this market at all.