Tags: stock market | weakness | bulls | investors

Is August Market Weakness Significant?

Is August Market Weakness Significant?
(Dollar Photo Club)

By    |   Friday, 21 August 2015 08:56 AM

As pundits debated whether the U.S. stock market can have a meaningful correction, defined as 10%, which it has not had for several years, it dropped 2% in one day Thursday.

Perhaps it should not be necessary to inquire as to why such a move would occur on any day, but the market has displayed some weakness lately amid chatter over the question of when the Fed will raise rates by even a symbolic amount.

Perhaps the reappearance of Greece in the news reminded traders that proposed solutions have a lot of moving parts, and something could go wrong.

Jason Ambrose, CEO of Vanda Research, says not to worry, and he sees the market driven by fear and lack of bullishness.

This writer wonders whether the lack of bullishness results from the fact that the bulls have done so well that they can take extensive vacations, and when they return after Labor Day, which is late this year, they will be ready to take advantage of the “buying opportunity” left over from a desultory August.

Ambrose envisions some selling in September in response to a Fed move, but this writer has suggested the market might take over and exact a rate hike in order to confound those who have assumed that the Fed can deliver a gradual move.

Jim Sarni, Managing Principal and Senior Portfolio Manager at Payden & Rygel, is in the camp that expects only one hike in the remainder of 2015, but he looks for more volatility anyway.

He presented statistics that show the S&P down 4.6% since its record high in May. (Those looking for a correction might say this is nearly halfway, but incipient corrections have fallen short before.) The S&P is down only 1.1% for 2015. He supports “normalization” policy, but this writer suspects it is too late for that, and the doves at the Fed will shy away in an election year.

Julian Chillingworth, Chief Investment Officer at Rathbone Brothers, takes comfort in the assumption that the Fed is supposed to raise rates in a gradual manner. At the same time, he notes that the VIX has delivered its strongest monthly move since September 2008.

This writer would note that if some commentators are right that that Fed will make only one or two symbolic moves, this could be so gradual that the market could reject it and take rates higher on its own.

Also, September 2008 coincides with the height of that year’s crisis episode, and perhaps the strong VIX indicates that another crisis episode is coming or that the 2008 episode isn’t over.

A more negative perspective comes from Robert Pavlik, Chief Market Strategist at Boston Private Wealth, who thinks the market is wary of Fed action and that it may decline a further 3.5% to 4%.

This writer would point out this would still not qualify as a correction, and the Fed’s action, if any, will be so mild as to amount to a non-event.

Maybe this time the market will sell the non-news, but another factor to be considered is that the Fed might act to support the market in the fall in order to support the market.

Yellen has indicated a willingness to do this, but this idea has never entered the discussion since Yellen spoke on it early in the year.

Finally, the CNBC Fast Money traders looked at potential opportunities in media stocks during this period of market weakness coinciding with restructuring of the industry.

Melissa Lee began by noting another downgrading of Disney (DIS). Other media stocks that have “taken a beating” include CBS (CBS), Viacom (VIA), and Twenty-First Century Fox (FOXA). A look at the charts suggests that one would want to see some basing before stepping in.

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Robert-Feinberg
Jason Ambrose, CEO of Vanda Research, says not to worry, and he sees the market driven by fear and lack of bullishness.
stock market, weakness, bulls, investors
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2015-56-21
Friday, 21 August 2015 08:56 AM
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