On the heels of a wild start to 2019, here is Art Cashin’s take on the flash crash and panic.
Kicking Off 2019
January 3 (King World News) – From legend, Art Cashin, Head of Floor Operations at UBS: The bears thought they would not have to wait for another day as trouble in China, and elsewhere, promised a nasty gap down on the opening to kick off trading for 2019.
The bears had more than China in their bag full of negatives. Let’s recap some of the list:
- China’s manufacturing PMI feel below 50. That was the first sign of economic contraction since May of 2017.
- There were signs of slowing in European manufacturing as the IHS Markit hit its lowest level since February 2016.
- There were also reports that Trade Rep. Lighthizer had told President Trump that we might need higher tariffs to get concessions from China.
That rather ugly cocktail had the Dow futures down well over 400 points in overnight trading. The Dow opened down 300 or so and immediately went to work to trim its losses.
The rebound continued throughout the morning and, around noon, I sent the following note to some friends:
Today’s rebound rallies in the Dow and S&P seemed to stall in the same general band that has restrained them over the last three days. (Dow circa 23350-23385 and S&P 2505-2520)
I got the concept spot on but I probably should have used a sharper pencil, at least where the Dow was concerned. The S&P did top out around 2519. The Dow, however, got as high as 23413, which was clearly beyond my estimate of the band. Nonetheless, if you look at a multi-day chart of the Dow, the highs of the last three days look horizontally similar.
After reaching the day’s high around 2:00, stocks undulated within a rather narrow range over the final two hours.
Certainly a rebound day but a good deal less than celebratory.
Overnight And Overseas – The key surprise in overnight markets was a bit of a flash crash in currency markets. At about 9:30 a.m. in Sydney, Australia a sudden large burst of buying hit the Japanese yen. In a matter of minutes, the yen shot over 8% higher against the Australian dollar and nearly 10% higher against the Turkish Lira.
Within about 30 minutes, the yen gave back half of those moves, suggesting the sudden, sharp move may have had a bit of a “fat finger” aspect to it. Nonetheless, it was historically a massive, massive move.
Equity markets in Asia were far more muted. Tokyo and Hong Kong dipped modestly. Shanghai was down fractionally. India had a moderate loss.
In Europe, equity moves were a bit more significant. Paris and Frankfurt showed losses on the order of 225 Dow points. London saw modest losses as Brexit speculation continues to bubble.
Among other assets, Bitcoin pulled back … Gold is basically flat. Crude is rallying, with Brent trading just below $70. The euro is a bit firmer against the dollar and yields are a tick or two higher.
Consensus – The Apple negative surprise sent the overnight equity futures into the pits. As dawn hit New York, it looked like the Dow might open down 300 points or so.
Let’s see if there is any fallout to this morning’s “flash crash” in currencies.
Also, keep an eye on the crude pits. If oil begins to weaken again, it could put pressure on equities in general. Stick with the drill – stay wary, alert and very, very nimble.
Have a wonderful first weekend of 2019!
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