NEWS: Triple-digit loss today for the Dow after trading flat for the
first few hours. The final numbers showed the industrials down 100
points or 0.8% at the worst close since Tax Day. The S&P 500 also
sold off in the late hours of trading, losing 8 points or 0.6% on the
session. The next level of support for the index is a mere 2 points
below today's closing price. The NASDAQ faired the best today with a
loss of 0.4% or 11 points. Of the three indices, the NASDAQ, due to its
tech-heavy weighting looks the best.
THE BOTTOMLINE: Today nearly every sector was lower, including gold and
oil. As I mentioned above, the technology names have been doing very
well recently and could have a direct relationship to the price of oil.
In a research note put out by Jefferies, they compare the movement in
technology stocks to the action in oil. It is interesting to note that
as money leaves the energy trade it has found its way into the
technology stocks. If you are in agreement with me that oil is due for
at least a short-term pullback, technology stocks/ETFs could be the
place to be.
Below is a chart taken from the Jefferies research report.
McCALL'S CALL - OH NO BAMA!
NEWS: The market was holding steady all day just above the breakeven
level until1pm ET when the bottom fell out. Right around that time
there was a rumor that hit the trading floors that Hillary will finally
bail out of the race. So what does this tell you about Wall Street and
their favorite candidate?
THE BOTTOMLINE: Nearly every American realizes that Obama will receive
the Democratic nomination; however there are a few Hillary supporters
out there that will not concede defeat. Now that Clinton's days are
numbered, the rumor of her defeat speech will hit the wires each day.
But today was the first time substantiated stories on the wire began
pointing to the official stepping down of Hillary. The market may have
known it was going to be Obama that wins the nomination, but when it
actually happens do not expect Wall Street to cheer.
Typically the Republicans are looked upon as more investor friendly due
to their "big business" policies among other reasons. This year is no
different with Obama likely to hike taxes substantially, which is never
good for business, most of Wall Street prefers McCain (even though they
will not tell you that). An example is today's market sell-off, which
can be attributed to Obama all but locking up the nomination. There is
also the unscientific poll done by CNBC today that asked which
candidate they think is best for the economy. McCain was the clear
winner with over 50% of the vote, followed by Clinton, and Obama was
I do not want to get into my political beliefs, but simply sharing with
you thoughts from my trading desk as I watch the market move and try to
make money on the news. I know some people will take offense to the
Obama bashing, but I am just telling you how the market is reacting.
THE DAILY ETF UPDATE - SMALLER THE BETTER
NEWS: The trade in 2008 has been to move out of the "aggressive"
small-cap stocks and into the large and mega-cap asset class. That may
sound good on paper, but is it the best strategy for ETF investors?
THE BOTTOMLINE: As of today's close the S&P 500 was down over 6% on
the year. This is compared to a loss of only 1% for the S&P
Small-Cap 600 and a gain of 2% for the S&P Mid-Cap 400. I have
mentioned the mid-cap class a few times this year due to its great
relative strength versus its peers. The top ETF in the area is the
iShares S&P Mid-Cap 400 Growth ETF (symbol: IJK), up 4% this year.
If you want to play the entire index there is the iShares S&P
Mid-Cap 400 ETF (symbol: IJH) that is up 2.9% in 2008.
An example of stocks that can be found in IJK include Southwestern
Energy (symbol: SWN), a top-rated natural gas stock. There is also
Cleveland-Cliffs (symbol: CLF), a steel & iron company. Also in the
top five was Joy Global (symbol: JOYG), a maker of construction and
mining equipment. I love the diversity of an asset class ETF and the
potential upside if you pick the right one!