“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” – Seth Klarman

「株式市場というのは何度も繰り返すもので、人はいつもどちら側にも過剰反応をする。」ーーSeth Klarman

Weekend Reading: Charged With Obstruction

Tyler Durden's picture

Authored by Lance Roberts via RealInvestmentAdvice.com,

No! I am not talking about President Trump but rather the crash in both Technology stocks, and Oil prices, which are obstructing the continuation of the “bull market.”


As I discussed this past Tuesday, the mini “flash crash” in Technology certainly woke investors up.


While there is certainly damage being wrought in the Technology and Discretionary sectors, the rotation to Financials, Energy, Small and Mid-Capitalization areas are offsetting the correctionary process. As shown below, the markets remain confined to the bullish trend currently while the overbought condition is being reduced.”


As shown in the updated chart below, despite all of the “angst” there has been relatively little price deterioration to date.


While the Nasdaq has primarily been under pressure from the unwinding of the excess in the main #FANMAG ($FB, $AAPL, $NFLX, $MSFT, $AMZN & $GOOG) stocks, as shown below, some performance pickup by small and mid-capitalization stocks, as well as emerging markets, limited portfolio damage over the last few days.

Nasdaqは買われ過ぎの株式#FANMAG ($FB, $AAPL, $NFLX, $MSFT, $AMZN & $GOOG) の巻き戻し圧力を受けているが、下に見るように、小型中型銘柄、新興市場、をみるとこの数日ダメッジは限られている。

As money rotates wildly between sectors and markets, in a clear attempt to stay invested, the risk of a decoupling has risen in recent weeks. This is particularly the case if it either becomes clear Trump’s legislative agenda is not going to progress OR earnings begin to disappoint.


I believe BOTH of those outcomes are highly likely.


First, with Trump embroiled in investigations, allegations, and general revolt, the ability to progress on legislative agendas has become markedly more difficult. However, the bigger issue is the potential disappointment in earnings expectations as sliding oil prices feed through in the next quarter. With the recent break below $45/bbl, there is a real possibility that a test of $40 is coming.


With revenues and CapEx already suppressed, the negative feedback into earnings, expectations, and outlooks is increasing. I would expect to start seeing earnings expectations through the end of the year get trimmed back in the next couple of months. The problem, of course, is that makes the current valuation arguments that much more difficult to justify.


That could weigh on investor’s portfolios sooner rather than later.


In the meantime, here is what I am reading this weekend.




Research / Interesting Reads

“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” – Seth Klarman