Oh Oh Oh Where’s Santa? Markets Tumble Thanks to News ALGOs
Yesterday we outlined what we would do if Santa didn’t show up and the markets moved lower. Doom and Gloom Persists. It looks like News ALGOs had a field day.
We added to hedges as the plan dictated. SQQQ, SPXU, and SDOW are inverse index funds that will allow you to sleep at night, or so the thinking goes.
Stocks sold off sharply on Wednesday, supposedly in reaction to comments from Fed Chair Jerome Powell. New ALGOs most likely had a huge impact, as the FED chair was seen as less dovish than hoped. The hope was for one rate hike and more dovish commentary. Instead of four rate hikes, he said inflation data suggested only two (2) hikes in 2019.
The S&P 500 closed lower (-1.54%), reversing solid gains (+1.00%) in the morning session prior to the Fed event.
Momentum and breadth indicators, MACD, NYMO, NAMO, are back in oversold territory, suggesting the Major Indices are stretched to extreme lows going into the holiday weekend. This is the worst December in recent memory, and a low not seen during the month in over 50 years. The 6.0% decline in December of 2002 was scary enough for this trader.
That said, sentiment indicators suggest that this is a good buying opportunity, however, we need a catalyst. Until then we’ll stick with our hedges and trade smaller positions.
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