The markets broke out of the starting gate for 2018 with the Standard & Poor’s 500 (SPX) vaulting past 2,700 to 2,800 before hitting a wave of selling in the middle of Tuesday’s session. Similarly, the Dow Jones Industrials (INDU) vaulted past 25,000 to 26,000 before running into yesterday’s midday bout of selling. Tuesday’s post three-day weekend began on a strong footing as a result of upbeat earnings before reversing to the downside as profit taking kicked in. The markets are just keeping us honest, because as we know, trees don’t grow to the sky.
Intra-day turn-arounds, especially of the magnitude which we experienced on Tuesday usually come out of left field. Sometimes it occurs because of some unexpected news. That was not the case yesterday. Sometimes traders place limit orders at round index levels to take profits. That might have occurred to some extent yesterday. The most likely cause of the stock market reversal was the bond market which sold off in fear of a government shutdown.
Certainly the markets are due for a pullback, however we have seen this “fear of government shutdown” knee jerk reaction in the markets, about as many times as we have seen Lucy Ricardo pitching Vitameartavegamin.
So, for whatever reason; the markets got to a point of being overbought. We just have to accept that fact as being true and will let profit taking run its course.
On a micro level, I have cut positions in tech leaders Facebook (FB) by just about a half and Alphabet (GOOGL) by about a quarter. Also I have scaled back exposure in aerospace companies. In turn, I have allocated capital to materials and energy stocks as well as added to positions in JP Morgan Chase (JPM), and started a position in CSX (CSX).
We will likely have to endure this government shutdown fear for a few more days, until the government does not shut down; or, it reopens after a brief shutdown. The balance of this quarter will likely have some back and forth action but close above current levels as earnings reports will remain positive. My crystal ball right now sees the likelihood of a 5 – 10% correction taking place in the second quarter. We will deal with that when the time comes.
Finally, I was interviewed by Channel 7 Eyewitness News on the subject of recent announcements by WalMart (WMT)
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long FB. GOOGL. CSX, WMT, DIA, DDM, UDON, SPY, SSO & SPXL — although positions can change at any time.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, a registered investment advisor specializing in high net worth private wealth management. For more information on investing with LakeView Asset Management, LLC call us at 888-9LAKEVIEW or request more information by clicking on the contact button on the top right hand corner of the website. LakeView Management, LLC is a Nevada LLC, with its principal office located in Henderson, NV and branch office located in Millburn, NJ
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– Read Scott’s intra-day thoughts and comments on Scutify for which he is a co-founder of its parent company Wall Street All-Stars, LLC
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