Market Commentary by Art Cashin August 8, 2018 - compliments of www.gdnnyc.com
Cashin’s Comments
An Encore Presentation
On this day in 1588, history again took one of those turns that don't show up in the form charts. The greatest naval force in the history of the earth (to that date) was decimated by a smaller, swifter navy.
Spain, which had become top dog, through Columbus's accidental discovery of America (about a century's worth of gold came into Europe in the next decade to dominate the currency markets of the world), decided to eliminate all challengers.
The key challenger was a place called England which had folks who were busy sailing about and assisting the Spaniards by relieving them of any excess gold in order to let their ships move faster. Mistaking this helpful gesture for piracy the government of Spain called together its military/industrial complex.
Naturally, the complex built the largest, most cumbersome ships the world had ever seen. But while they were in the process of being deployed in the English Channel (to dominate the seawaves) they were hampered by smaller, faster English ships which sailed around them and shot holes in their sails. So the Spanish Admiral decided to regroup and pulled his fleet into Calais.
The English, thinking it may have been a game of early cricket, didn't recognize a rest period. They sent flaming boats into the crowded harbor. The Spanish panicked and sailed out and headed north to avoid the bulk of the English micro-fleet. And then the great storm hit. On this day, Spain's grand navy and Spain's great plans were destroyed trying to sail north. And the stragglers reportedly were wrecked off the coast of Ireland. (The survivors swam ashore and are assumed to be the sires of the "Black Haired Irish.")
The stock market was not beset by storms Tuesday. Rather, they sailed smartly forward in the early going and then became becalmed for the balance of the day.
Up! Up! And Await – In Tuesday morning's Comments, we said the bulls had the ball and the momentum and were ready to push for a chart breakout rally.
The markets followed that pattern to a tee, at least for the first 90 minutes of trading. Then, they seemed to put the tools back in the toolbox and spent most of the balance of the day watching the Tesla tweet circus.
Cashin’s Comments August 8, 2018 Page 2 of 3
The early push took some of the subset indices, particularly the small caps to new record highs. The S&P 500 got to within 10 points of a new record but, as previously noted, just seemed to lose interest.
The loss of interest in the general market rally was aided and abetted by the fact that the financial media became consumed by the Tesla story. It was as if the rest of the world had ground to a halt.
All you could hear, or see, were debates about where would the funding come from. Musk claimed the funding had been secured but Musk would not name the potential source.
There was also debate about whether any securities laws had been broken by the series of tweets on the topic.
Consumed by the various Tesla related speculations, the possible run for a record in the S&P became less than an afterthought.
While the Tesla domination continued into the bell, the indices drifted to mostly plus-tick closes in light to moderate volume. The bulls put their dreams away for another day.
Looking At The Low VIX – The summer doldrums have seen the volatility index the VIX, drift below the 11 level. To see what has tended to happen when this occurred in the past, we turned to the dependable, Jason Goepfert over at SentimenTrader.
Here's a bit of what he wrote:
Seven-month low in fear. The VIX “fear gauge” closed below 11, its lowest close since early January. There have been 9 other times it closed below 11 for the first time in at least three months. Over the next month, the S&P 500 rallied 8 of the 9 times, with risk of only -0.4% compared to reward of +1.8%. Six months later, the S&P was higher every time.
Eight out of nine times. That could give the bulls another shot.
Overnight And Overseas – Equity markets in Asia are all over the lot. Japan is fractionally lower. Hong Kong and India saw moderate rallies. Shanghai, which had a massive rebound on Tuesday gave back half of those gains overnight.
In Europe, London is seeing a solid rally but markets on the continent are fractionally lower.
Among other assets, Bitcoin is weak again and is now trading below $6500. Gold is a shade lower and crude is softer on inventory data. The euro is flat against the dollar and yields show little change.
Consensus – Tesla may remain at center stage since most questions remain unanswered. New tariff talk may postpone a full bull rush. So close we can almost taste it.
Stay very, very nimble.
Trivia Corner
Answer - To wrap it up - "cranky; "windiest; "bleary"; lattice".
Today's Question - Positive ions in the air. Can you fill in the blanks to make a word __ i o n __ __ __? You could be a hero if you get it.
Opinions expressed herein are subject to change without notice and may differ or be contrary to the opinions or recommendations of UBS Wealth Management Research, UBS Investment