Wednesday Weakness – Struggling to Hold Last Week’s Lows

This is not a good chart:  

Clearly we're in decline but more worrying are all those big red spikes (high volume selling) with very few green anything in the last 7 sessions.  It's been a low-volume market for a couple of years now and that means it's very unlikely there are enough buyers out there to cash out the people who want to exit – especially if panic ensues and people feel forced to sell.  That makes for a very dangerous situation and is a big part of why we cashed in about half our positions last month, moving our Member Portfolios to 80% CASH!!!

A stock market sell-off is simply an auction in reverse.  Instead of a room full of traders bidding up the price of one stock, you have a room full of sellers and just the one (few) buyer and the sellers panic and offer lower and lower prices to attract their attention.  As the prices begin 1to fall, the panic builds and things can drop very, very quickly in those situations.  Getting back to CASH!!! is how we avoid getting stuck with shares we can't sell and it also puts us in the position of being that buyer when everyone else is panicking.  All you need is a little patience.

Stocks have slipped in September amid worries that markets are ripe for a pullback after marching higher for much of the year. Just as concerns about high valuations are on the rise, investors say the economic rebound likely won’t be as fast as they previously expected. The spread of the Delta variant of the coronavirus, an economic slowdown in China and supply-chain difficulties have all damped sentiment – things we've been pointing out for quite some time.

Stock indexes in mainland China and Hong Kong fell after data showed growth across a range of Chinese economic indicators pulling back in August.  An outbreak of Covid-19 and tighter property regulations hit consumer spending and the housing sector.  The CSI 300 index, which includes large stocks listed in either Shanghai or Shenzhen, fell 1%. In Hong Kong, the Hang Seng Index shed 1.8%, with gambling and property companies among the biggest fallers in the market. Casino companies Sands China and Galaxy Entertainment dropped 33% and 20%, respectively, following steep falls in some U.S.-listed peers.

Oil prices are extending their recent rally, driven in part by disruption to output caused by Hurricane Ida. Brent-crude futures, the international energy benchmark, gained 1.3% to $74.53 a barrel at $75, we will look to short it (/BZ), which should be $72.50 on WTI (/CL).  More than 39% of oil output in the Gulf of Mexico and 48% of gas output was offline Tuesday, the Bureau of Safety and Environmental Enforcement said.  Yesterday's API report showed a 5.4Mb draw in Crude along with a 2.8Mb draw in Gasoline and a 2.9Mb draw in Distillates.

We have already picked up a few bargain stocks (that's what the cash is for!) but, for the most part, we're waiting for Q3 earnings to see how much the Delta virus has affected business in the last few months (along with the lack of new stimulus).  If Q3 looks good – we'll be happy to get more bullish into Q4.

In a shocker for Republicans, who live in an alternate reality, California Governor Gavin Newsom won a recall vote by a landslide (or, as they claim on Fox, via voter fraud) and this does not bode well for Republican candidates in 2022 as the GOP was pulling out all the stops to get rid of the Nation's most powerful Democratic Governor, who only had 60% of the vote when he was first elected (now 67.5%).  Newsom said last night:

“We said yes to science. We said yes to vaccines. We said yes to ending this pandemic. We said yes to people’s right to vote without fear of fake fraud and voter suppression. We said yes to women’s fundamental constitutional right to decide for herself what she does with her body, her fate, her future. We said yes to diversity.”

The governor charged that far-right extremists and supporters of former President Trump were attempting a hostile takeover in a state where they could never hope to attain majority support in a regular election. He also contrasted California’s low rates of coronavirus infection with the large numbers of deaths and hospitalizations in Republican-run states like Florida and Texas.

Tuesday’s defeat — in a special election that cost the state an estimated $276 million — marked “another nail in the coffin,” said Mike Madrid, a California Republican strategist who has been deeply critical of the party under Trump, charging in particular that the G.O.P. has driven away Latino voters.  He said Trump’s party had become part of “an increasingly radical, exercised and shrinking Republican base, lashing out in different ways in different parts of the country.”

For example:  Despite the yawning gap in support, Newsom's opponent, Mr. Elder, demanded this week, BEFORE the voting was finished, that a special legislative session be called “to investigate and ameliorate the twisted results.” He said there had been “instances of undocumented ballots” but provided no examples and now the California GOP is petitioning for a recount of a landslide election – more costs, more time but it gives the GOP an excuse to squeeze more money out of their base to "stop the steal" and gives Fox something to rant about – so that's a win for them.

This is how we do things now in America – your vote doesn't count until the last court battle is decided and the winner of the last election gets to pick the judges….