The market has experienced many pullbacks in the past few years that have had many pundits questioning whether we are in the long awaited stock market correction, only to see the market bounce and make new highs. As we are experiencing another pullback: off the highs of the year with the Dow : -5%, SP500 : -3%, NDX: -4% is this finally the time we see a further decline?
The preconditions of this move are more ominous than the past. Transports, Dow Theory has all triggered classic warning signal. But there are other macro signs that say the probability is high that we are in the midst of a move toward correction territory:
1) Commodity price declines, 2) China’s struggles to manipulate support for its stock markets and its implications for growth 3) the aftermath of the Greek bailout – kicking the can down the road. 4) US monetary policy 5) dollar strength. 6) global liquidity asset bubbles
Finally, certain widely held stocks such as Apple are on critical support levels (120) which if broken would lead the market lower. From our vantage point the catalysts for higher prices are few and far between and we put the highest probability so far we are in store for the long awaited correction, as such we have the largest cash position in years, and converted our two favorite positions $DIS and $FB into options strategies. This is the first time we have not bought the dip and may as many in the past been wrong about this bull, but we are not willing to bet on it for now.
Since its 10% drop in late January of 2015, Alibaba Stock $BABA has traded approximately 7 points either side of 85. With periodic declines and pops, such as on Amazon earnings, the stock typically retraces back to the 85 price level, which has served as support and resistance throughout the past 6 months. Most of the moves in the stock occur on earnings. Given the reaction markets have had to earnings of companies this season, it looks like earnings day will be critical to whether the stock breaks out of the range.
David Klein discusses how technology is causing finance to take a more human approach. Read more below:
“A recent article from TechCrunch’s David Klein focused in on how technology is forcing finance to humanize its approach. This may not be a sector-wide conclusion, but Klein makes some intriguing points. The finance sector faces difficult decisions to keep pace with the evolving landscape where technology, competition and a new generation of potential business all can break or build many financial institutions. As Klein opens with a quote from Bill Gates, ‘Banking is necessary – banks are not,’ he notes that this is now viewed by many as the unofficial beginning to the shift in financial technology. Just over 20 years from his proclamation in 1994 and Gates’ words are finally showing its validity. Since fintech began gaining mass exposure in the market a few years, the shift in finance has come in several key facets: regulation, technology and consumers…”
Read the full post here.