Have We Forgotten That Stocks Go Down Too? Here's What's Next

seekingalpha11-18

Last week saw the worst stock performance since September, driven by rising interest rates and a lack of new buyers post-election.Despite recent market volatility, I remain bullish, focusing on stocks...

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Here's What's Next\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-18 10:21 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4738260-have-we-forgotten-that-stocks-go-down-too-here-what-next><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Last week saw the worst stock performance since September, driven by rising interest rates and a lack of new buyers post-election.Despite recent market volatility, I remain bullish, focusing on stocks...</p>\n\n<a href=\"https://seekingalpha.com/article/4738260-have-we-forgotten-that-stocks-go-down-too-here-what-next\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"NDX","symbol_name":"纳斯达克100指数","start_time":0,"source_url":"https://seekingalpha.com/article/4738260-have-we-forgotten-that-stocks-go-down-too-here-what-next","article_id":"2484509899","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/121268369/image_121268369.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484509899","pubTimestamp":1731896491,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"There were many market participants, including me, who expected a contest presidential election that would go on for weeks. Due to that concern, many market participants stayed on the sidelines. So the surprise, quick decision brought investors in from the sidelines. Personally, when I saw that stocks were already going up before election day was over, I reduced my hedges. I wish I closed them all out at that moment, but at least I received the message of the market somewhat and acte","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"NDX":"纳斯达克100指数"},"translate_title":"我们是否忘记了股票也会下跌？接下来是什么","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"NDX":0.9},"content_text":"Last week saw the worst stock performance since September, driven by rising interest rates and a lack of new buyers post-election.Despite recent market volatility, I remain bullish, focusing on stocks that are still rising during sharp selling and avoiding the \"falling knives.\"Key trades include Long Call Options on Disney and SoFi Technologies, and a cautious approach to T.J. Maxx ahead of earnings.I anticipate a market recovery post-Nvidia's earnings report, with opportunities to buy the dip in strong consumer discretionary names.   alexsl Last week was the worst week for stocks since September. The media is looking for the easiest and most apparent explanation: rising interest rates. Yes, interest rates helped retreat along, and perhaps it was that several companies merely met earnings expectations and didn’t raise expectations for Q4, or forward guidance enough. All these things had a hand in it, the easiest and least satisfying answer was that stocks ran out of buyers. Now we did have a rush into equities right after election day, caution was thrown to the winds and indexes soared. The VIX dropped from the 20s to 15 and then as low as 13.71 (as I recollect) this week.  A Wall Street Journal article had two interesting facts: “U.S. equity exchange-traded and mutual funds drew nearly $56 billion in the week ended Wednesday, the second-largest weekly haul in records going back to 2008, according to EPFR data.” and “The share of investors surveyed by the American Association of Individual Investors who said they were bullish jumped to 49.8% this past week, while the share of those reporting a neutral sentiment dropped to the lowest level since 2022.” What does this mean to me? So many market participants turned bull and rushed in, that by the end of election week, the bulls were sated. When the market runs out of buyers, then even the normal load of sellers can move the market so that it rolls over. Once traders see that the rally has faltered, they take profits and turn around and get on the short side. The result was a retreat from the all-time highs for the S&P 500 and Nasdaq indexes, this week. The rally of the week before last was very logical Many were shocked, including me, regarding the decisive win in the presidential election. Nearly every poll had the contest as super close. So when it was known who the president was, and in less than 24 hours, there was massive short covering. As the Wall Street Journal article noted the jump in bullishness, and why not? There were many market participants, including me, who expected a contest presidential election that would go on for weeks. Due to that concern, many market participants stayed on the sidelines. So the surprise, quick decision brought investors in from the sidelines. Personally, when I saw that stocks were already going up before election day was over, I reduced my hedges. I wish I closed them all out at that moment, but at least I received the message of the market somewhat and acted on it. By the time I closed it out some the following day and the last tranche when the FOMC statement was issued, and it was as dovish as could be, my “insurance” through hedging was costly. I have been hedging on and off all year, and this was the first time I paid a higher price than I expected. This was mostly because not only was I hedged, but I had much of my trading account in cash. Meaning I had too much hedge if I didn't have as many trades on at that moment. The thesis that the election will take time to collect all the votes had much precedent. House elections are still being counted, so had the polls been accurate then chances are the results might have been decided late last week. Instead, a ton of buyers rushed in and bid up a wide swath of sectors, except for recession favorites like consumer staples. The irony was that last week was the week to have the hedges Last week we lost much of the gains of last week. So this week, when I was deploying my cash, I looked for stocks that were rising and not falling. I will go into the how and why later when I discuss my trades. I want to stress that even though we hit a rough patch, I am still very bullish. Even as Powell decided to finally pull back from the notion that he was going to cut at every live meeting. What I heard in his latest appearance was that while he is likely to have another cut next month, he also said that they will return to being data-dependent. He said that about the December FOMC meeting, so we will have to pay attention to Fedspeak once again. I think he should hold off cutting in December and reserve that cut for January, or the next meeting. At his last appearance on Friday, Powell said, “There was no hurry to cut now,” so let’s take him at his word. I think this added to the selling climax on Friday. Thankfully, we don’t have to rely just on the rate cuts Interest rates have been rising ever since we had that .50% cut in September. It seems almost fanciful now, but interest rates had a 3%-handle on them before that cut. Now we are a full 70 basis points higher, most of the time the stock market ignored the rise, but eventually the level will matter. I have said this too many times, but it’s not a particular level, it is how fast we get there. The 10-Y hit 4.50%, let me remind you all that the recent peak in interest rates for the 10-Y was just about 5%. So at the speed the rates have been accelerating, 5% is not that far away. Even so, eventually, the lower the Fed Funds Rate goes, the lower overall rates should fall as well. Putting aside rates and what that means for growth stocks with little profit, let’s look at the big picture. Overall profits have been quite strong in the current earnings reports, revenues were strong too. However, I believe that once again, growing profits have come into fashion. We see the likes of Amazon (AMZN) that for decades eschewed showing profit because there was so much opportunity for growth, that they wanted to invest. Now they are growing, but also reporting profits, I am not surfacing AMZN to say that I want to add to my AMZN investment at the moment. However, the share price has held up pretty well amid all this selling. I am just illustrating that profits have been growing nicely and that supports the share prices. In the early part of this rally, stock valuations rose by higher P/E ratios instead. I think with the strong dollar, domestic companies, mostly small and midcap stocks, will have lower input costs. On the other hand, the Mag 7 names might continue to be under pressure. If that happens, I would add to my investment in those names. If I could figure out Meta Platforms (META) bottom, I might trade that name. As it stands right now, the stock has been steadily rolling over, even with the surprise election results. Yes, the trial for META's purchase of Instagram is set to go to trial, and that might pressure META further. I can’t see how it could ultimately be successful, but stranger things have happened. Meanwhile, META is now about 9% from its peak of $602. You know what I think? I think when the irrationality wears off, and maybe the dollar takes a rest, META moves back to $600. A little more patience and there will be a lot of great stocks for sale this week. Chances are, it picks up where it left off for a bit longer. I think market participants will be nervous about NVIDIA's (NVDA) earnings results on the 20th this Wednesday. NVDA has exceeded expectations numerous times before, can they do it again? Meeting expectations won’t be enough. Already there are “Doubting Thomases” about AI and most other chip stocks and chip equipment makers are down hard. I don’t want to write a long essay about why AI is real, but there is room for some skepticism. The lower a Micron (MU) falls, the more I want to add some to my investment pile, though my cost basis is above the current level, I am patient. NVDA has been holding up very well, but I have to think it will lose some fizz in the next few days. Whether it recovers and even makes new highs remains to be seen. I started this paragraph talking about what prices I would be buying these names because ultimately, I am still bullish, and I want to buy this dip. This might be the last dip of this year. Would it surprise you that I am still mostly out of trading tech stocks? I am still mostly in consumer discretionary names. The consumer is quite strong, and while there is some interest in enterprise software development names, I made some interesting trades. So let’s get to that. As I said earlier, when you have this kind of selling, it’s best to look at stocks that are still catching a bid in the face of the selling pressure. Don’t try to catch the proverbial falling knife right now. So this week, after Disney (DIS) had profitable results in their streaming business, the stock jumped despite the negative environment. One thing about large-cap stocks when they catch a bid like this, they tend to go up for several days. So putting money that was on the sidelines, I got a bunch of Long Call Options that were in the money, with an expiration out to February. I trimmed ⅔ on Thursday and Friday and let the rest run into this week. Another stock that I actively traded was a financial, but they focus on the consumer, so that is fair game. The stock was SoFi Technologies (SOFI) which had exemplary results. I have several Call Options that are \"at the money\" out to March. I have been patient with Uber Technologies (UBER), I had to roll down the strike this week but finally, it broke the inverse correlation with Tesla (TSLA). TSLA robotaxi narrative was causing pressure for UBER. When UBER fell, TESLA would be up. I think there must have been a “pairs trade” going on. Finally, they are both up at the same time and UBER is starting to cook. My latest foray into consumer discretionary is TJX Companies (TJX), I think it would be a good trade for the holiday season. However, I found out that they report this Wednesday, so I tend not to hold trades on a binary event like an earnings report. So I will look to close it out earlier in the week. If they do well, I might pick it up again. Last but not least, I have been a long-term investor in Rocket Lab (RKLB). When they had a good earnings report and announced that they already had a customer for their bigger Neutron rocket, I added a bunch of \"in-the-money\" Call Options that expire in April. I intend to hold on to some calls for an extended period, as progress on the new Neutron will garner more attention. Everyone wants a piece of SpaceX, RKLB isn't a SpaceX... not yet. Meanwhile, you can get shares in RKLB now on the public exchange, while SpaceX is still private. Once the NVDA earnings report is behind us, I think this rally picks up where it left off. So friends, I am buying the dip!  Good luck everyone","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484509899"}