The unwavering uptrend in stocks in the last few years may be seeing disruption with the return of volatility in 2018. Institutional and retail investors are looking for various gauges to measure the effect of volatility and how that’s trending in the coming quarters. Most analysts think there may be more upside and opportunities to come this year even with (or perhaps because of) the emergence of geopolitical issues.
We are coming to the next phase of the divergence. I woke up this morning, turned on the box and first commentator I saw said we’ve started the next leg up in the bull market. Some of these people take it for granted the market is going up again. Has anyone noticed the Dow and SPX peaked in January?
With mega-cap FANG Tech names like Facebook (FB) blowing up, it might be time to look at smaller cap tech names; in industry niches less known. One niche fits that bill well. The Computer Networking industry space is populated with 10 companies, many of which are small-cap names.
What a very strange week. Last Wednesday the Transports led to the upside while the Dow lagged. You’ll recall the Dow lagged because IBM got clobbered on their earnings report. Also, the BKX along with Goldman Sachs flattened out. Goldman is still moving to the downside. Why is this important? IBM is the 9th weighted stock in the Dow while Goldman Sachs is number two.
Crude oil ran into tech trouble as the U.S. tech sector is under fire leading to a sell-off in stocks against a backdrop of rising oil inventory. The data breach scandal at Facebook is only one of many quick rising problems for the many tech firms and I am sure somewhere the Winklevoss twins are smiling.
The Nasdaq 100 has been lurking within 2% of its all-time high since late February and Friday’s monster gain of 1.8% finally achieved the inevitable.February’s Consumer Price Index data is due out Tuesday at 7:30 a.m. Central. The Core read that excludes food and energy is the most closely watched data point. Industrial Production, Fixed Asset investment and Retail Sales are due out of China on TuesdayEvening.
One way to prevent losses in a deteriorating position is the use of stop-loss orders. A stop-loss order is activated when a stock, ETF or futures contract reaches a certain price point. Let’s use the example of Facebook. On the afternoon of Jan. 4, 2018, a purchase of FB is made at $185. After rising above $188 a stop is placed to sell FB at $184 (just below the previous high close) on Jan. 11. This means that at $184 the stop becomes a market sell order and the long position is liquidated.
Whether or not the corporate tax rate drops to 20% won’t matter much to U.S. companies, which have put up a stellar performance this year and are expected to continue their run into 2018. The S&P 500 saw earnings grow nearly 10% in 2017 (through Dec. 4), an annual rate not seen since 2011.
With volatility over the last two years at record lows traders have been itching to trade something that really moves. Bitcoin definitely fits that description. On the first day of 2017 bitcoin traded above $1,000 for the first time since January of 2014. The highest price for bitcoin at the time was 1,216.70 in 2013. By June 5, 2017, the price more than doubled to 2,874.00. On Nov. 12 it was trading at $5,426.