When I flipped on my TV at 5 AM this morning, CNBC had a "Breaking News" icon flashing on the screen. Stock futures were trading limit down, a sign of the selloff turning to panic. As I stated in the blog this morning before the market opened, it was expected to be a wild ride.
Shortly before the market opened, S&P 500 Depositary Receipts (Spiders) were down about 9% in premarket trading. The guest analysts were calling for a huge blowout when trading opened at 8:30 our time (9:30 Eastern). We all sat watching our trade screens as the markets opened...slowly. Of the 40 or so stocks on my screen, only about 10 to 15 started trading at the open. Over the next 10 minutes or so, the rest started trading. The reason that they weren't trading was because of an imbalance of orders at the open - sellers wanted to sell, but buyers weren't saying what prices they'd be willing to but at. Then all of a sudden, it was all open, and trading. Down 200, 300, 400, 430, 440, 450. The slide was slowing down...where was the 1000 point crash they were calling for?
We spent most of the remainder of the day down about 350. Shortly after 1:00 Chicago time the market started climbing out of the hole, and by 2:00 we were down about 150 points. It held that range until the last 5 minutes or so, then slid back to end the day down 312 points. To some, the lack of a major selloff was a disappointment, as they are looking for a final flush out of sellers. This would (to them) signal a bottom.
But the story really isn't about today. It's the whole week. A number of people got excited on Monday as the market rallied 413 points. But the excitement was too early, as the market gave up about 745 points over the next two days. Thursday was somewhat uneventful as recent history goes, with a mere 172 point upswing. By the close of trading today, we had given up about 475 points for the week.
The losses have not been limited to stocks. Gold was trading below $700 today. Oil is below $70 per barrel (a blessing at the gas pump!). OPEC attempted to put a floor under oil prices today by cutting production by 1.5 million barrels per day, but the price of oil fell again anyway. Other commodities are also weak. Right now, nearly everyone is looking for a safe haven. The upside to this is that the US has been seen as the domicile of choice. This has resulted in the dollar strengthening versus the Euro.
We believe that we're going to continue seeing volatility for a while. We do not expect broad stock market stability in the foreseeable future. However, we do see opportunities in specific names, and we are cautiously entering into positions when appropriate. The opportunity is not as broad-based as some might think. This morning we ran a series of screens looking for stocks that met our criteria. Initial filtering produced a couple thousand names, but by the time we analyzed valuation, the list was cut to 20 names. Some of these may be purchased in the coming days, but it will depend largely upon what news is coming out, and how the market is reacting.
As always, if you have any questions, please e-mail me at nsnodgrass@evanstonadvisors.com
