Time To Go Shopping, The Tax Pay Sell-Off Is Over

seekingalpha04-15

Last week's stock market selling was likely due to participants cashing out to pay taxes, causing indiscriminate selling.The fear of geopolitical tensions with Iran contributed to a "buyer's strike" ...

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CNBC The peak was 19.27, and you see the close is nearly 2 points lower. So again, the fear of what could transpire was real, but the real culprits were motivated sellers who were price insensitive. There's more, if it truly was the drumbeat of war, why did we have such a sharp rally just the day before?According to ABC News and many other outlets with similar headlines on April 10th \"US believes Iran could attack Israel in coming days, with the potential to escalate war in the region\". Yet, as I said, the next day we had a monster rally!Now you'll say the PPI was really good, so the market rallied, right?Wrong, well, mostly wrong, it was a relief that the PPI was not as inflationary as the CPI. Truly, though, if the fear was so great, the PPI wouldn't matter. The stock market is supremely disinterested in foreign wars, though if things got out of ha","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4220":"综合零售","SOXL":"三倍做多半导体ETF-Direxion Daily","HXL":"赫氏","LU0511384066.AUD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (AUDHDG) ACC","DCO":"杜科蒙","HXL.AU":"HEXIMA LTD","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","TQQQ":"纳指三倍做多ETF","MAR":"万豪酒店","IE0034235188.USD":"PINEBRIDGE GLOBAL FOCUS EQUITY \"A\" (USD) ACC","NVDA":"英伟达","LU0211327993.USD":"TEMPLETON GLOBAL EQUITY INCOME \"A\" (USD) ACC","IE00B66KJ199.SGD":"LEGG MASON ROYCE US SMALL CAP OPPORTUNITY  \" A\" (SGD) ACC","FDN":"First Trust Dow Jones Internet I","VIXY":"波动率短期期货指数ETF","BKNG":"Booking Holdings","AMZN":"亚马逊","VXX":"短期VIX期货ETN","IE00BJTD4N35.SGD":"Neuberger Berman US Long Short Equity A1  Acc SGD-H","QQQ":"纳指100ETF","IE0009356076.USD":"JANUS HENDERSON GLOBAL TECHNOLOGY AND INNOVATION \"A2\" (USD) ACC","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","SLV":"白银ETF(iShares)","IE00B19Z4B17.USD":"LEGG MASON ROYCE US SMALL CAP OPPORTUNITY \"A\" (USD) ACC","UVXY":"1.5倍做多波动率指数短期期货ETF-ProShares","IE00B775SV38.USD":"NEUBERGER BERMAN US MULTICAP OPPORTUNITIES \"A\" (USD) ACC","LU0109391861.USD":"富兰克林美国机遇基金A Acc","IE00B3S45H60.SGD":"Neuberger Berman US Multicap Opportunities A Acc SGD-H","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","BA":"波音","MAR.AU":"MALACHITE RESOURCES LTD","SVXY":"0.5倍做空波动率指数短期期货ETF","LU0079474960.USD":"联博美国增长基金A","BK4564":"太空概念","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","BK4187":"航天航空与国防","EXPE":"Expedia","LU0061474960.USD":"天利环球焦点基金AU Acc","TVIX":"二倍做多VIX波动率指数短期期权ETN","LU0353189680.USD":"富国美国全盘成长基金Cl A Acc","DELL":"戴尔","IE00BKDWB100.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5H\" (SGDHDG) ACC","TECK":"泰克资源有限公司","BK7067":"生物科技","IE0004445015.USD":"JANUS HENDERSON BALANCED \"A2\" (USD) ACC","CENX":"世纪铝业"},"translate_title":"该去购物了，税收抛售结束了","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"DELL":1,"MAR":1,"MAR.AU":1,"NVDA":1,"QQQ":1,"HXL.AU":1,"HXL":1,"SLV":1,"SOXL":1,"EXPE":1,"DCO":1,"CENX":1,"BKNG":1,"TECK":1,"TQQQ":1,"AMZN":1,"BA":1,"VXX":0.9,"TVIX":0.9,"FDN":0.84,"VIXY":0.6,"UVXY":0.6,"SVXY":0.6,"VIXmain":0.6},"content_text":"Last week's stock market selling was likely due to participants cashing out to pay taxes, causing indiscriminate selling.The fear of geopolitical tensions with Iran contributed to a \"buyer's strike\" and halted buying activity.The market rallied on Thursday due to anticipation of a strong earnings quarter and a strengthening GDP, suggesting a positive outlook for the market.Larry_Reynolds Yes, I am specifically avoiding the geopolitical thing everyone else is focused on I believe that most of last week's selling, especially on Friday, was the cashing out of positions of stock market participants to pay their taxes. As such, some selling could continue tomorrow morning, I just saw the futures, and they are positive, still, I suspect that we could open in the red. As far as geopolitical influence, I do agree that the soaring VIX was due to hedging going into the weekend just in case the world would erupt in war. I think this was a contribution, but not the direct cause, it contributed by causing a \"buyer's strike\". Many market participants, myself included, monitor the VIX continually, and as it started to soar I stopped buying. I did sell out of my Silver ETF (SLV), but I was looking to sell out anyway. I think most market participants' first instinct was to stop getting long, so if the buyers slow down, the sellers must bring prices down to entice the buyers. Most of the sellers were (again, in my opinion) US market participants who were sending out their IRS filings and wanted to generate funds to pay their taxes. Therefore, the selling was indiscriminate and that is why the market moved down so sharply. If you wait until almost the last minute and your tax preparer tells you to mail out your form on Friday so it gets postmarked for Monday (April 15) you do it - That motivation in turn makes one price insensitive. I believe a bunch of electronic filers sell tomorrow too, though with the VIX being well lower tomorrow (again my opinion), buyers will eventually return to the market. If it were totally about Iran, wouldn't the VIX stay completely elevated into the close? Look at this chart of the VIX. CNBC The peak was 19.27, and you see the close is nearly 2 points lower. So again, the fear of what could transpire was real, but the real culprits were motivated sellers who were price insensitive. There's more, if it truly was the drumbeat of war, why did we have such a sharp rally just the day before? According to ABC News and many other outlets with similar headlines on April 10th \"US believes Iran could attack Israel in coming days, with the potential to escalate war in the region\". Yet, as I said, the next day we had a monster rally! Now you'll say the PPI was really good, so the market rallied, right? Wrong, well, mostly wrong, it was a relief that the PPI was not as inflationary as the CPI. Truly, though, if the fear was so great, the PPI wouldn't matter. The stock market is supremely disinterested in foreign wars, though if things got out of hand, Iran could close the Strait of Hormuz. I admit that that would cause Brent to soar to $200 per barrel, and the market would not like that one bit, except for oil stocks. I think the opposite happens in the next two weeks, and WTI tests 80 per barrel. This is because I think speculators have taken advantage of oil disruption fears, and it has gone too far. Let's leave this aside for now, if I am correct, then we have a very nice opportunity before us. My assumption is, that neither Iran nor Israel wants to attack each other directly. I hate going off on a tangent about geopolitics, but it has been widely reported that Iran gave 72 hours' notice to their neighbors and that the drones had lights on them. Even though there were nearly 300 drones, ballistic and cruise missiles, Iran has thousands and Hezbollah has thousands too. They could have coordinated an attack that really could have done damage. They didn't, they made a big show of this and also said they were done. Now, I think Israel has to do something that doesn't involve mainland Iran or some act of sabotage in Iran that they will have plausible deniability. The only point I want to make is that this chapter will likely be over shortly. The real reason the market rallied on Thursday is because the rally is intact If you wish to put a rationale behind this motive force behind the rally, I would say that it is the anticipation of a very good earnings quarter. I also think that enthusiasm will return to the tech stocks and the Nasdaq, but not to the exclusion of other sectors, I think we will have a very nice \"everything\" rally. I think consumer discretionary names like travel and entertainment will do rather well. Also, since we did recently have happy news from the manufacturing sector, perhaps materials and machinery do well as well. I believe Oil consolidates a bit before the summer driving season takes off. This has to happen quickly because the changeover to summer formulations for gasoline has to happen soon. That tends to make gasoline pricier. With all those preconditions, I want to show you a 3-month chart of Nasdaq-100 ETF (QQQ). It shows a fairly lengthy consolidation of nearly all of 2024 after a big leap in late January/early February. TradingView So the thin blue line shows the sideways consolidation, while the red lines show a pennant with higher lows from the bottom line and lower highs punctuated by several leaps to old highs. I believe this flag formation will resolve to the upside, anticipating a fine earnings season powered by a strengthening GDP, according to the Atlanta Fed GDPNow as of April 10 was at 2.4%. That is enough power to energize revenue growth for our public companies. It also explains (in my opinion) higher prices, which come from true business demand and not inflation expectations. According to a recent piece on March 22, 2024, by Vanguard's chief economist for the Americas, Roger Aliaga-Díaz \"Better-than-expected workforce and productivity gains are behind the U.S. economy's continued vigor. A combination of productivity growth of 2.7% and the addition of 3.5 million people to the workforce more than offset the effects of Fed monetary policy tightening in 2023\". I conclude by reverting to the title of this piece, \"Let's go shopping!\" So what am I thinking about, as far as what I would focus on? Well, with 3.5 Million people new to the workforce, I am thinking more consumption. I started with consumer discretionary, so perhaps experiences; so hotels, casinos, and cruise lines. I am looking at Booking Holdings (BKNG), Expedia (EXPE), or maybe a Marriott (MAR), I don't like to talk about stocks that I haven't already invested in so do your own research, this is just how I am characterizing my thought process. As far as industrial names, I do have investments in quite several industrial stocks, though for me, investing is not something you do because we are going to have a good earnings season. I did recently embark upon investing in material stocks like Teck Resources (TECK) for copper, zinc, and gold, and Century Aluminum (CENX). I also added to Hexcel (HXL) because it sold so hard on news of a new and unpopular CEO that was very unexpected. HXL is a name on our investment group's Aviation List and because of the low production output of Boeing (BA), more parts are going to be ordered to keep the older planes flying. Ducommun (DCO), another name on that list which I also added to this past week, got a takeover offer from a private equity firm. I believe the stocks in this sector are undervalued and will likely attract strategic buyers going forward. Now for technology, I am still long both the Nasdaq-100 3X ETF (TQQQ) and the Chips Index 3X ETF (SOXL). I am back in Dell Technologies (DELL) Calls at the 120-strike June Exp. However, if it falls lower, I would roll down the strike to 115. I was very successful riding it up to 130 last time, and I am thinking that this time I will hold out for a higher price, as they report in about 6 weeks. I think that NVIDIA (NVDA) could be a nice trade on its own, since I think it should trade up over $900, to the low $930s, so if we do get a little selling tomorrow I might look at some calls at that 900 strike of select from any number of single stock ETFs for NVDA that have a lower share price. Another interesting idea might just be Amazon (AMZN) has been so strong lately that I think it could break out to all-time highs going into earnings. I have two more trades to share, I closed out my Silver ETF (SLV) as Silver closed in on 29.30, truth be told my charting said 29.40 to 29.50 would be the top, but in light of the Iran narrative I started selling out once I saw the 29-handle and my last tranche went through close to the high. Also when the VIX hit 19.17 I got Long Puts on the VIX futures 15 strike and May 15 Expiration.  Please remember when I talk about this stock or that one and not say that I made a transaction, this is me ruminating, I am not giving recommendations. If I am in a trade, I will tell you, and you can make up your own mind. Either way, please do your research, it will be readily apparent if my thesis here is correct, that we could start the day in the red, as the last-minute procrastinators pay their fair share to Uncle Sam to sell stock at the market. Then we should get this consolidation resolved to further gains in the coming weeks. Have a great trading week, everyone! Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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