There was some confusion for those trading yesterday’s first session of the year, which started off in euphoric fashion with the Dow Jones printing once again just shy of 20,000, then slumped after crude inexplicably tumbled, prompting even JPMorgan to chime in with the following snyde commentary: “the question isn’t why stocks have come in from their highs but instead why they were so strong to begin with.”
An even better question then, is not why stocks were strong to begin with, but why did they surge in the last hour of trading, closing near session highs as they tend to “mysteriously” do so very often in past few years.
While few know the specific reasons behind yesterday’s odd market moves, here is everyone’s favorite market commentator, UBS’ Art Cashin, sharing his take on the “multiple personalities” of stocks in the first session of 2017.
From today’s Cashin’s Comments:
Stocks Show Multiple Personalities In First Session Of 2017 – As anticipated, stocks spiked sharply on the opening and held those gains for nearly an hour. Then crude suddenly began to reverse and reverse sharply. Bids in stocks began to disappear as I noted in an email to some friends:
“The equity rally seems to fade in reaction to a similar fade in the crude rally. Volume shrinks on the equity fade.”
Then, shortly after 11:00, the other shoe fell. Ford announced that they were canceling a planned factory in Mexico. This appeared to be a response to a critical tweet from Mr. Trump, issued a few days ago.
The Transports suddenly turned negative, led by Norfolk-Southern on the assumption of less cargo to and from Mexico. A protectionist chill swept through other stocks.
Equities managed to stabilize near the day’s lows just as the European markets were closing. It was a bit of a shaky stabilization; however, as further weakening in the transports looked like they might pull the Dow Industrials into negative territory.
That tenuous trading continued into the final two hours of trading when the market on close indications became a factor.
The early indications were not a factor but around 2:45, the early mild sell indications began to pair off. In reaction, the stock averages began to inch higher.
By 3:40, it was clear that the market on close had shifted to the buy side and markedly so.
With 15 minutes to go, there were 1.4 billion dollars to buy with some estimates as high as 2 billion. That seemed to spark a quick round of short covering, which helped to spike the Dow up to the +119 level by the closing bell.
The buying was reasonably broad with advances beating declines by 3 to 1. The multiple shifts also served to lift the volume to just under a billion shares. A rather nifty final hour rescue.
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Consensus – Keep your eye on oil. Yesterday’s sharp reversal may signal that the OPEC rally is over. Next two weeks could be key.
FOMC Minutes will be interesting but most traders think the Fed is sidetracked for the next several months as they monitor the progress of the Trump initiatives.
Stick with the drill – stay wary, alert and very, very nimble
Source: zero hedge