October Brings Instability For Tech

First we had Apple sell off and now we have Google selling off. These two are the staples of most hedge funds. These funds will be under water for sure and what they will do to improve their monthly report is not yet clear. Some may now try to get out tech tocks and chase small-value beta. In short, there will be instability in the market for the whole of October.

Euro Summit decisions have now been pushed to November. Everyone is waiting for the U.S. Presidential election to get over to wash the dirty laundry. There is a fight between Germany and France about banking supervision. Spain's bailout issue is hanging and Greece's debt fiasco is nearing its end. I do not see it being resolved in favour of the Greeks.

The Power Of Liquidity
But the market seems to ignore all the above issues. In the USA, company after company (Chipotle, IBM, CAT, Nike, Intel, ……) report lower earnings and weak guidance. These are big names and yet the DOW/S&P 500 march on. This is the power of liquidity. I can only guess how long this will go on and I have given my best estimates of the timeline before. As of now we should be up till mid-next week.

Futures: DOW futures are down about 40 points but Nasdaq does not look that bad. Down only about five points. SPX is down about three points and is well above any danger mark. Today is OpEx day. Any move is to be discounted as a part of the shenanigan of the big boys who sell premium. As I wrote last night, the Dow has been down the last six straight and 7 of the last 8. That should tell us that we should expect the market to close in red. How deep the colour of the Red is to be seen. It would be foolish to venture an opinion on OpEx day.

Commodities: Overnight gold and silver sold off. Silver was worst hit, down 1.35% but gold is holding an important level. I expect a rebound here. Let us see how far the rebound goes till next week. Crude was higher with a gain of 0.25% and so did Nat. Gas. Therefore it would be wrong to say that the market is in “Risk-off” mode. It is just the manipulators switching money from one sector to another.

Earnings & Economic data: Today we have release of existing home sales. Additionally, General Electric (GE), McDonald's (MCD), Baker Hughes (BHI), Edwards Lifesciences (EW), Honeywell International (HON), Ingersoll-Rand (IR), McMoRan Exploration (MMR), and Schlumberger (SLB) are scheduled to release their quarterly reports.
In fact GE has already come out with the numbers and has reported an increased earnings of 8.3% while revenues are down. GE shares are down 2% in pre-market.

Conclusion: I am standing aside. Expect a roller coaster ride throughout the day. Trade safe. Invest not.

Note: Starting today, all intra-day updates will be released through the blog posting and link tweeted. No more direct twitter.