With stocks surging and the US dollar rebounding, one of the legends in the business said, “The shorts began to panic.”
A Short Panic
July 26 (King World News) – Here is a portion of today’s note from legend Art Cashin: The stock market painted a beautiful picture yesterday but that wasn’t truly evident until the final thirty minutes in trading.
Apparent Tariff Truce Spooks The Shorts – Stocks began the Wednesday session in a rather shaky fashion.
The Dow weighed heaviest in the early trading and that was due to two specific components.
General Motors announced results that were in line with expectations; however it said costs were rising and looked to continue to do so. The implications were that the newly added tariffs on steel and aluminum were beginning to pinch and would likely continue to do so.
Boeing also undercut the Dow; at one point taking over 70 points from the index. Boeing’s earnings were okay but it lowered its outlook somewhat.
Stock indices continued to struggle throughout the morning, ultimately bottoming out around the time that European markets were closing.
The mood then shifted slightly as the Trump/Juncker meeting approached. Some very mild short covering seemed to begin as the bears reduced their risk exposure on the chance that the talks might bring some mild progress.
That process continued through much of the afternoon’s trading.
Messrs. Trump and Juncker made a pre-opening statement. It helped the market very slightly.
Then around 3:30, the Dow headlined that the two parties had agreed to put the tariff talk on hold.
The shorts began to panic. A stampede to cover burst out, shooting the Dow smartly higher.
Net/net the rally was brief but relatively broad. Ten of the 11 S&P sectors moved smartly higher led by a sharp upward reversal in the chip stocks.
Also, helping the late rally were the energy stocks as crude moved higher on falling inventories.
More Political Speculation From The FoF – Lots of chatter while the ice cubes were being marinated last evening.
The theory grows that the Russians (and others) will try to influence the election in November. This time they will likely try to help the Democrats to take control of the Congress.
The thinking here is that a Democratic edge in Congress would lead to a quick move to impeach President Trump.
The impeachment process would take months during which the U.S. government would be virtually paralyzed, allowing Russia, China and others opportunities for adventures on a broad scale.
Another topic was possible opponents for Mr. Trump. While he seems to be trying to bait Mr. Biden into a run, Mr. Biden could present a real challenge to Mr. Trump since the state of Pennsylvania is thought to be critical to Mr. Trump’s count.
The FoF thinks the outlook for the 2018 and 2020 elections may be critically important to markets, so expect politics to be a more and more frequent topic.
Overnight And Overseas – Stocks in Asia generally closed lower as traders thought the proposed tariff truce was limited to relations between Europe and the U.S. In fact, if there really is a truce between the U.S. and Europe, it may give Mr. Trump more latitude to press harder on its Asia trading partners.
European markets are mildly celebratory in light of the Trump/Juncker “truce” announcement. Britain is odd man out, trading flat to fractionally lower.
Have technical problems gathering data on other assets and markets.
Consensus – Facebook fallout may have dented what was shaping up to be a breakout rally. Draghi’s press conference will be carefully watched.
Some of today’s data could have a disproportionate influence on tomorrow’s key GDP number. Stay very, very nimble and have a wonderful weekend!
***KWN has released the powerful audio interview with Andrew Maguire and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
ALSO JUST RELEASED: Gold Now Poised For A Major Rebound CLICK HERE TO READ.
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