PANIC? Really? Come On!!!

And the bleeding continued..... Asian and European stocks were all lower on Monday as they reacted to Friday’s tech beating and the Apple downgrade by Mizuho Securities only added fuel to the fire…..….Tech stocks (and the broader mkt) found themselves under pressure again yesterday as traders/investors prepare themselves for the coming FOMC (Federal Open Mkt Committee) meeting on Tues/Wed.  You can feel the cautiousness as investors/traders prepare for the expected rate hike – but also for what the FED will say tomorrow.  Are they still on track to raise rates in the fall without question or will she leave the door open as they consider what the lack of reforms means to the economy?
Remember – the mkt tends to rally ahead of the FED meetings because they tend to support it, encouraging the big banks to be ‘buyers’ as we go into the meetings – trying to create a sense of calm until the news is out.  This morning we are seeing futures HIGHER, S&P up 5, Dow Up 45 and the Nasdaq up 15 as the alarm clocks ring – sending traders & investors back to the bull pen.   
 
The VIX (fear index) spiked by 13% and is now up 27% since last week.....suggesting that maybe things are not so complacent and this took its toll on the S&P, the Dow and the Russell. 
 
And traders/investors are convinced that the pain gets worse.....hedging against further losses is spiking.....Total PUT volume on the QQQ* surged to almost 1 mil contracts - more than double the 20 dma - and that just means that the expectation is for lower prices ahead....Now - no one says that these guys are right - but it is clearly the way the boat is leaning.....
 
(The triple Q is an ETF that tracks the Nasdaq 100 index and tends to be a tech and consumer sector weighted ETF.)

Financials and Energy stocks were strong.  Talk of those highly anticipated plans for overhauling Dodd-Frank caused investors/traders to go on a shopping spree in the financials…….and after the mkt closed – BINGO!  The treasury released a report urging the gov’t to re-write hundreds of pages of regulations that were passed under the Obama administration that have served to choke the industry.   The changes, which would be dialed back, NOT eliminated, would hopefully spur lending which would lead to better job growth as the economy continues to struggle.  Treasury Secretary Steve Mnuchin had this to say:

“Properly structuring regulation of the US financial system is critical to achieve the administration’s goal of sustained growth and to create opportunities for all Americans.”

And oil – which has been bouncing around $46/ barrel as it looked for support, has been the beneficiary of the Tech wreck.  Energy, as you know has been the worst performer this year - down 17% as the price of oil has fallen by 14%, struggling to keep its head above $50/barrel, has rallied 3% in two days.  Certainly, some of this was a direct result of investors moving out of one sector – taking profits in tech – and moving into a sector that has been slaughtered but isn’t going anywhere anytime soon.  As I have been saying – unless you are completely asleep at the wheel – there is plenty of opportunity in the energy space yet there is no need to rush – it ain’t going anywhere – global supply and demand issues still need to play out – but as a long-term investor it makes sense to begin to add to or initiate long positions to take advantage of these bargain prices. 

Yes - ladies and gents - the mkt has been under pressure - but it is frustrating when we hear words like 'PANIC' to describe the action......

Yousef Abbasi – Global Mkt Strategist at Jones Trading described the 2-day action as ‘Panic” in a WSJ article....

“Is the panic over?  To some extent, it feels like it is because if you look at Nvidia, it’s bounced back off the low” 

Nvidia?  That is the mkt barometer now?   We are basing broad mkt commentary on Nvidia?

Dude?  Really?   Do you really know what panic is?  October 19th, 1987 was panic – when the mkt lost 22.5% in 6 hrs, March 16, 2008 when Jamie Dimon (JPM) came in and rescued Bear Sterns for what was initially $2/sh & September 15, 2008 when Lehman Brothers filed for bankruptcy were days of panic as the shockwaves ricocheted around the world and those ‘synthetic derivatives mkts’ froze.   2007 – 2009 was panic – when the mkt lost 60% over a year and a half, -  but last Friday and yesterday? Panic?   Because the Nasdaq lost 2.2% in 2 trading sessions?  - the Nasdaq is UP 14.7% ytd and up 23% since the election - so the 2.2% drop is PANIC???   Or are we pointing to the fact that NVDA lost 6.7% on Friday as the reason for ‘all the panic’? 

Stop the histrionics….. panic is not a word that anyone should use to describe the last 2 days….  Down 2.2% for the Nasdaq while the Dow made a new high..... That is far from panic…. You use panic to describe the action when the broader indexes get smashed and are off by 8% - 10% or more in ONE session…Look – until the indexes or a stock is off by 10% - it is not even considered a correction – now that doesn’t mean it's not uncomfortable or even painful for some people – but a move of less than 10% is well within the normal trading range – and a move of 2.2% is nothing but a pimple on your a**.  

On the other side of the coin though we are hearing all these guys talk UP their own book -

about how this is a BUYING opportunity - Louis Navellier's Ultimate Growth Newsletter begins with this:
 
"Tech Selloff Equals Buying Opportunity"
 
"The technology selloff at the end of last week took a little wind out of our Ultimate Growth Buy List's sails. Our Buy List is down about 3.8% in the past week, as many of our technology stocks hit the brakes on Friday. Overall, though, I'm not concerned about the profit taking on Friday, given that this selloff was very technical in nature. Plus, there was a reversal in the final hour of trading on Friday.  Clearly, bargain hunters were ready to snap up great technology stocks on the pullback. I expect that we'll see more bargain hunting in leading technology stocks this week, too. That's because, in the end, good stocks "bounce" like fresh tennis balls and bad stocks fall like "rocks." So I look for our Ultimate Growth technology stocks to rebound strongly this week".

(Lou is Chairman and Founder of Navellier & Associates and has some $2.5 bil of assets under management - AUM). 

It goes onto to say that the guys at Bespoke Investment Group think that the Nasdaq will be 2.6% HIGHER by month end...saying:

"On Friday, we saw the Nasdaq decline nearly 2%, which dragged its weekly loss down to more than 1%.  Interestingly, this isn't that rare of an occurrence. Since 1988, there have been 23 days when the Nasdaq dropped more than 1%. And 61% of the time, the Nasdaq was higher by an average 2.6% one month later."
 
So then 39% of the time it wasn't higher......just sayin.....
 
That being said US futures are up 5 pts in early trade as technology stocks are getting a bit of a bounce overseas..........European mkts are all higher after their recent weakness....not huge - but they are trading higher for now.  The FED starts their 2 day meeting an there is one FED speaker today...NY's Billy Dudley at 1:45 pm......Other than that - I would expect that the mkt will bounce and test a bit higher - but run into resistance at the 2445 level as we await the FED results. 

Take Good Care
KP

Linguine Puttanesca

The word - Puttanesca literally translates into  “in the style of the prostitute” (where the Italian word puttana means "lady of the evening" ) .

As many of you may know this dish originated in Naples and is today a staple of the Neapolitan household.  It is made from tomatoes, black olives (or Kalamata Olives), capers, anchovies, onions, garlic, oregano and parsley.  It is easy to make and has an interesting history. 
 
So how  did it become so popular?   As you might imagine - legend has a number of explanations.....

1. The intense aroma would lure men from the street into the local brothel where the prostitutes would be cooking the sauce to lure the patrons. 
2. The prostitutes made it for themselves to keep the interruption of their business to a minimum.
3. And in a twist -  it was a favorite of married women who wished to limit their time in the kitchen so that they may visit their lovers.   
Whatever its origin - it is a great dish - that is easy to prepare -  is spicy, tangy and vibrant – an appropriate description of the mkt today…..

Start with 3 crushed garlic cloves sautéed in olive oil about 3 / 4 mins...do not let it burn....next add a diced white onion and diced/minced anchovy filets and sauté for another 5 / 8 mins.  - as they cook they melt away.  Add one can - 28 oz - of kitchen ready crushed tomatoes....not puree - Crushed.   Add about 1/4 of a can of water -  Let simmer for 10 mins or so. 

Next add capers, oregano, pepper, chopped Italian parsley, and rough chopped pitted Kalamata olives or pitted black olives - whichever you prefer - but do not mix...It is one or the other.    No need to add salt as the anchovies are salty enough.  If you like more bite -  you can add red pepper flakes at this point.....cover and let simmer. 

 In the meantime - bring a pot of salted water to a rolling boil and add the Linguine or spaghetti.  Do not use Cappellini as it is to thin and it clumps up etc.....Let boil for 8 mins or until aldente.  Remove and drain - keeping a mugful of the pasta water.  Add the pasta to the sauté pan with the Puttanesca sauce and heat and stir until well coated and fragrant.  Serve immediately onto warmed plates offering up grated Parmegiana cheese on the side. 

 
Buon Appetito.