Stock Markets Bounce Back Intraday on Friday
Casual observers may see Friday’s stock market action as a continuation of Thursday’s big selloff. Not counting the first hour, Friday was actually a big up day.
It’s been quite a while, over 5 months actually, since we have been on high alert for a stock market reversal. Seeing the Volatility Index, or VIX, rise precipitously while stocks, especially the Nasdaq, dropped precipitously, at a time where there are some real reasons to be concerned, risks that the market has yet to price in, is well worthy of note.
This is also going on at a time where the Atlantic magazine ran a story where anonymous sources are claiming that President Trump declined to visit a soldiers’ graveyard in France in 2018 because he felt that soldiers are losers and suckers and that he did not want the rain to mess his hair.
The left wing media have not been interested in what the real story is, as they and the Biden camp are more than happy to take the ball with this smear campaign and run with it. According to sources that actually have been confirmed, people who have been confirmed to be there when these remarks were allegedly made, the President was instructed to not make the trip due to security concerns. A number of people present have denied that the President made these remarks, including now arch-enemy John Bolden, the former National Security Advisor who pulls no punches in his criticism of Trump, confirmed that the President did not make these comments.
Trump is being further ostracized in the majority of the U.S. media by way of this, who are on a sworn mission to discredit him whenever possible, whether he deserves it or not. If they are blaming him for all the COVID deaths, the millions of jobs lost, and even all the rioting, the fact that the people who were with Trump at the time are all denying the truth of these accusations won’t hold you back.
Biden is also now calling out his opponent for the deaths of police officers from COVID. He doesn’t need to explain the accusation, not that he could given how ridiculous this is, but the current fashion trend on that part of town is to just blame Trump for everything and have your comrades in the media just play the tape over and over again with on one even bothering to point out that Biden has lost his mind.
Biden does not need a cognitive test, he is participating in one in real life, and anyone who thinks that Donald Trump is to blame for police officers dying of COVID-19 has already answered sufficiently to be deemed to be suffering from serious dementia.
He still has a healthy lead in the polls, and therein lies the problem for the stock market. It takes so much for Trump to get the polls to reverse, where with Biden, all he has to do is retract some of the things that he has previously said like he now isn’t against fracking, or is against riots now, or doesn’t want to defund the police anymore, or has now come to understand he can’t mandate masks, and so on, and whether he has his fingers crossed behind his back or not, he can seemingly do no wrong in the eyes of these people.
This is exactly why we have been telling you all along that Trump getting re-elected was a lot bigger challenge than most people thought, because this time around, it’s not about the issues, it’s about who has a bigger propaganda machine. There’s only so much rebutting that Trump and Fox News can do, and while the attack by the fake news may be based completely upon absurdity, with no substance at all behind them, the fake news hasn’t even had the need to pretend here, they just say it and it stands.
During the Democratic convention, all they did is shake their fists against Trump, blaming all of our woes upon him, including the problem that America has with racism, where somehow Trump is to blame for all that as well. The message of the convention, like the message in the fake news, was no more substantive than rallying a protest against Trump for everything we don’t like.
While the Democratic convention was an appeal to anger, looking to incite voters to forego their ability to reason in favor of concentrating of all the anger that they may feel against anyone and anybody and unleash it against Donald Trump, whether it made sense to our not. It didn’t, but that part did not matter to them, and it hasn’t seemed to matter to a lot of American people either.
They Are Looking to Take Trump and the Stock Market Down at Any Cost
Amazingly, not a single one of their criticisms has any substance behind it at all, and the scariest part is that none has been required for this to all play very well. The major crime of Trump, the only one apart from their just blaming him for everything, is that Trump is “divisive,” which only cashes out to a claim that you don’t like him, since they have not produced any evidence of this divisiveness or even shared the secret of what this accusation even means.
No evidence has been needed, no sense is required, and that should scare us a lot more than it does, that they have created such a propaganda machine that you can peddle what cannot be understood as anything but pure idiocy so powerfully.
The Republican convention focused upon the achievements of the Trump administration, in contrast to these accusations, and attempted to reason with the American people so that they may set aside all the propaganda that they have been exposed to and think through the matter a little bit, enough to see how unfair Trump has been portrayed.
This did not work anywhere near as well as it should, because they are not just taking on Biden in a fair fight, they are taking on a gang far more powerful, all those media sources that have aligned against Trump and have no interest in any truth that does not fit their political agenda.
In the aftermath, while Trump has made up a little ground, the gap remains very wide, and both his opponent and his powerful friends in the media are still peddling their absurdities without shame. The fact that this has worked so well so far should tell us that this is not something that will be put down so easily as pointing out how fraudulent these claims are, and when they started to show a few cracks, they just hit him with these unsubstantiated claims of his belittling veterans.
The left-wing media will milk this for all it’s worth, but it’s not this that we need to be so concerned about, it is just how they control the narrative in the minds of so many to such an effective degree. Trump wants to fight Biden, but Biden has a gang of bullies on his side who will seemingly stop at nothing to beat on him, and when they have thrown all their punches and feel the need to throw more, they can just make up whatever they like and who cares whether it can be substantiated or not, because that’s never a concern with propaganda, and is what distinguishes it.
The very real prospect that this propaganda will end up being decisive is a specter that has been hanging over the stock market for quite a while now, even well before Biden was the presumptive choice of the party for president. The war isn’t over yet, but as the fateful day approaches, at some point the market is going to have to either see this take a dramatic turn or start pricing in the risk.
Biden is now talking reparations for slavery, where he is planning on making this right, and this and all his other grandiose plans, some of which he has recanted at least until the election is over, hangs over our heads ominously, including over the heads of those who own stocks, which is a lot of people.
We’re glad that someone finally told Biden that presidents do not have the constitutional power to order national mask mandates, although they presumably waited to see if this issue was hurting him, and presumably that was found to be the case.
We find it hard to believe that even a now demented Joe Biden, someone who has been serving in Washington for so many decades now, could make such a foolish mistake, but he’s plenty scary enough either way, whether this was disingenuous or actually did involve such a fundamental misunderstanding of presidential power.
Either explanation should leave us alarmed, but this is just a petty matter compared to some of the other things that he has committed to, all the things that is going to harm our economy and the stock market in particular. We can hope that these side shows such as his anger against Trump for these unsubstantiated accusations portray him in the dim light that they should, but that’s hard to do with so much canned applause dubbed in there and having so many applauding along at home.
This shows just how desperate Biden is, to use something like this which should have no bearing on the race even if true, trying to reduce our choice of president to who has the better manners, while ignoring everything else. They don’t even have anything meaningful to criticize him for, but that hasn’t stopped them from trying, and the utter success of this so far is the most disturbing event in the country’s history, by far.
The Risks That the Stock Market Is Facing Cannot Continue to be Ignored
We’re not even sure how bad a Biden presidency would be for the country and the stock market, but this is no normal Democratic presidency. These are not normal times either, and there are two big issues going on, the fragility of our current economy and the contrast between the two candidates on it.
In spite of the current economic challenges, we are on the right track, and the market has remained confident that we will continue to give it the support it needs to recover. In spite of some of the back-peddling that Biden has done on a few issues, even his now watered-down agenda has the economy and the stock market in its sights, and the market has not appeared to understand what the risks really are with a Biden win and especially seeing a radical socialist government be given complete legislative power should the Dems run the table.
We’ve been waiting for the risk of all this to finally be priced into stocks, and Thursday’s trading was the first real sign that this might be underway. Unless we see a substantial change in the polls, this has to happen sooner or later, even though if the worst does happen, we’ll see plenty more as the risk comes home to roost and the bombs start going off on Wall Street, a street this party reviles.
The first thing that will happen in this scenario is restrictive taxes and regulations, things that Trump rolled back, being put back into place, and that is more than enough to cause the bear market that so many have been expected for a while to come to pass, a real bear and not just one that got sick from COVID and has since recovered and ran away.
This is just the start of the worry, and you can bet that while Trump has disavowed being against fracking, he’s still fully on board with the socialist Green New Deal and the economy and stocks get thrown under the bus and run over with this one as well. There’s no way that oil production doesn’t get targeted under this regime, regardless of what song and dance Biden wishes to engage in now.
There’s also the threat of the unprecedented fiscal destruction that Biden is promising, anywhere from slavery reparations, to Medicare for All, to higher taxes including wealth taxes that will drive a lot of money out of the country, to his $100 trillion Green deal, to free college, to free housing, and all the other things that Santa Biden is planning. Santa presumably uses magic to fund the Christmases of all the kiddies around the world, but Biden’s playing Santa does have a real bill attached, one that will be paid by all future generations of Americans.
The stock market has been merry making unabated in the face of these threats, but as the election approaches and Biden still remains a strong favorite, there will be a reckoning eventually, even if this doesn’t kick in until the election is over.
It is only sensible to want to keep parting with the market as the party continues, perhaps to take whatever else we can from the long side of our stock positions, but we need to have a plan B, to escape once the racket gets too loud, before the police come and arrest us as well, and be on our guard to implement it when required.
Thursday’s trading was very alarming, seeing the level of fear as viewed through the VIX, otherwise known as the fear index, start to spike, and see this increased fear materialize in the stock markets as well.
Friday’s trading was set to shed more light on whether this sell-off was a sign of things to come or the market just staggering a little but regaining its footing, and while Friday did produce another down day, there’s often more to the story than where indexes are when the closing bell rings.
It wasn’t enough to just watch the indexes on Friday, as we told you to keep a close eye on the VIX as well to get some additional insight on what may be going on. The VIX peaked an hour and 15 minutes into the session, while stocks plummeted further, and the Nasdaq was down an additional 5% for the day at this point, to go along with the 5% that this index lost Thursday.
Both the VIX and the major stock indexes took a sharp turn at that point in the trading day, and the fact that these things happened at the very same moment shows us just how powerful program trading is these days, as these programs are programmed to take the VIX very much into account during times like this. Some of the extra hedging that drove the VIX up became pulled, and program trading instantly started going on the buy side in concert with this move.
The 5% that the Nasdaq was down in the early part of the trading day became just 1%, although we did see a late day sell-off that suggested that the market isn’t all that comfortable yet with a propensity to close out positions rather than to expose them to whatever new things emerge in over the 3 day long weekend that we are now in.
The VIX only went up a tad during this late-day selloff, and this move therefore isn’t one to worry about much. The VIX ended up running up from 33 to 38 at its peak, and back down to 30 to end the day, still higher than the 26 that it started Thursday’s session at, and well above the 21 that it was at in mid-August, but this is at least headed the right way now if you are on the long side.
The higher the VIX, the more money you can make trading, and intraday traders that were trading stock indexes with an eye on the VIX did very well on both Thursday and Friday, well profiting from both the tumble on Thursday and early Friday and the rise back up for most of the day Friday.
Investors, on the other hand, tend to be chained to the long side, and as the ground starts to shake under them a bit like what just happened, their lack of a good plan starts to bubble to the surface as well. A great many were caught like deer in headlights during the last crash, but were given a reprieve of sorts as we’ve come back from that raid, although those who actually did have a good plan came out so much better.
What’s on the horizon for us is actually more ominous, and those who didn’t learn from their mistakes the last time around will really be in a bad spot if we end up getting a more enduring bear market as the outcome of this coming election proceeds the way the polls suggest.
If we are up for it, we may continue to want to hang out at the party that Donald Trump is still throwing for the stock market, although those who do not wish to hang around at this point in time can certainly be forgiven for wanting to sit this dance out. The script hasn’t been finalized yet, and those attentive enough may be able to milk a little more money out of this bull market before the bears probably take over, and there’s still the chance that the Republicans will hold both the Presidency and the Senate and the party may continue on.
Succeeding in investing is always about managing both risk and reward, and the risks have gone up a lot now. They can still be managed, but it’s now gotten tougher to do that. September is generally not a good month for stocks anyway, and with all the trouble that is going on now with the economy and the election, if you don’t trust yourself to run when you need to, which could be any time now, you might want to head for the door now.
This means that you are not prepared to manage the additional risks now and it would therefore be wise to cash in your chips now instead of giving up way too much back to the house if you do not know when to fold your hand. As the cards continue to be dealt in the middle of the table, keep an eye on the changing value of your hand and the betting action if you are not ready to fold yet.
Chief Editor, MarketReview.com
Ken has a way of making even the most complex of ideas in finance simple enough to understand by all and looks to take every topic to a higher level.
Contact Ken: ken@marketreview.com
Areas of interest: News & updates from the Federal Reserve System, Investing, Commodities, Exchange Traded Funds & more.