Succinct Summation of Week’s Events 9.4.20 (plus "The AAII Way" of Buy and Sell Rules)

Below is the weekly summation and though this is a holiday weekend and I would ordinarily do this at the end of the holiday, I'm doing it tonight since my computer's been flaky. I may not be able to do it Monday night. The positives are continued modest economic recovery with jobless claims, unemployment and layoffs all down from July.  The big negative of course was Thursday, the worst trading day since the March crash.  The bonus this Sunday is yet another informative article from the AAII this time on the AAII strategy for making rules for buying and selling, regardless of whether you're a short-term trader or buy-and-hold.  Have a great Labor Day!  

AAII Screening on Faber’s Unique Approach to Yield Investing

Welcome to Labor Day weekend and just in case you have nothing better to do for the holiday, I bring back our old friend Mebane Faber who wrote several of the books our mentor Bert Ward recommended for us in the FastTrack course we took 10 years ago next month. (Did we imagine we'd still be a "group" ten years later?) For your reading I submit a September 1st article from the AAII on Faber's approach to yield investing. The link can be accessed by members only but I assume since we all met in AAII and found the class through AAII and continued to network via AAII, that most if not all are members.  Enjoy the weekend.  

Wall Street ends lower as Nasdaq rout persists

The selloff continues, though not nearly as severe, in a wild ride today up over 200 first thing and then down over 500 before noon before recovering to even just shortly before close, then diving 159 points again.  So though it was another big down day, it still ended way above the session low. Yesterday was triggered by fears that tech might be overvaluated. Today was triggered by a report from Japan’s Softbank that this was in fact the case. The good news is that, though the selling was fierce, the market did stabilize. The jobs report showed that unemployment had improved to 8.4% from 10.2 in July but was neither strong enough to provide reassurances of a reliable recovery nor weak enough to make a dent in the stimulus package standoff in Congress.  There are fears that today is but a preview of the next two months heading into the election.  Volume was again way above the 4-week average at 11.3 billion.

Tech tumble jams Wall Street into reverse; sharpest fall since June

With the indexes breaking records day after day, it was only a matter of time before there was a pullback. And wouldn’t you know that the day would come just two days after the Dow finally broke through its February records, weeks after the S&P, months after the Nasdaq.  So today the naysayers who have been lamenting all along through this bull market that everyone was being entirely too optimistic like there were blinders on that didn’t recognize the pandemic and faltering economy finally got their way.  Of course, if you say every day that the market is going to crash, eventually you’re going to be right.  So all three indexes had big retreats today, the S&P and Nasdaq their worst since June 11, the Dow its worst since June 26^th.  Was it triggered by the extraordinarily high unemployment, or a new report showing a slowing in the services sector, or the fading prospects of the new stimulus or businesses reopening?  Or was it as today’s expert suggests it’s just another “rotation out of technology stocks. I don’t think it’s anything ominous.”  Ominous or not, it spooked the market in that volume was considerably above average at nearly 12 billion. 

Wall Street closes higher with defensive bets out front

Bouncy bouncy! First,we’re moving out of tech and into value, then back into value. Today it was back into both tech and value, tech for the bargains and value because of the string of good reports on the modest growth of business activity and employment.  With the Dow up 454 points today, the blue chips are now just 1.6% below their February record and the Nasdaq almost 23% above its pre-crisis record. But the big rotation today was into defensive stocks (utilities, consumer staples, and real estate) which become the safest bet when the rest of market is mellowing. Private payrolls did increase in August but not as much as forecast which is why, as usual, the big eyes are on Friday’s government jobs report, which is expected to reflect the hiring slowdown in July and August.  For once, volume was a little above average at 9.8 billion. 

S&P, Nasdaq close at record highs in tech-fueled rally

Investors rushed back into value today shooting the Dow up 215 points as tech continued its charge boosting the S&P and Nasdaq to still new highs. There is renewed optimism over the stimulus talks and factory activity expanded for the third month. Apple remains a leader with a 4% spike a day after their stock split and Zoom surged almost 41% as they begin converting some free accounts to paid subscriptions. Of course, there remains caution about continued volatility coming. Volume was near the average at just over 8.9 billion. 

Nasdaq ends higher while S&P 500 posts biggest August gain since 1986

After last week’s rotation from growth (tech) to value (the Dow), investors decided today to return to the conventional bet of focusing again on the tech companies that will do well regardless of the pandemic. So there was a reverse rotation today out of the Dow and back to tech with the Dow slumping 223 points as a result. This was likely triggered by the weekend news that coronavirus cases have now topped 6 million.  Last week caution favored value, today tech, referred to as the “old pandemic playbook.”  The S&P is now almost 4% above its pre-crisis record, the Nasdaq almost 20% as last week’s sell off suddenly made all these momentum stocks look more attractive. The S&P has seen a 35% gain since April, its strongest run since 1938.  The biggest winner was Aimmune Therapeutics, a maker of a peanut allergy treatment, which soared 171% after news that Nestle offered to buy them for $2 billion.  For once volume was above the 4-week average at 9.4 billion.