The markets continue to trade like someone trying to swim in a pool on the deck of a cruise ship that’s in the middle of a storm. BTS is now pending a move out of high yield although they indicated that the drop in high yield pricing is not indicative of a recession. The good folks at BTS see this pullback as technical in nature with trader’s at large firms striking gold with all this volatility as they place bets on long and short positions. IBD is in “rally under pressure” mode and could go to correction mode if the volatility continues. At the close the Dow was off 1,032 at 23,860. Trading volume was higher on the day.
Jim Cramer today vented about the volatility in markets being tied to “group of morons” invested in an ETF called the “daily Inverse VIX Short-Term exchange traded note” aka “The new wombatnian surprise fund.” This fund makes leveraged bets on declining volatility and Credit Suisse announced it will shut the fund down because it is getting pounded. While market fundamentals are in good shape with earnings up over 16% the volatility shows that algorithmic computer traders on Wall Street are pinging off each other with high speed trades that have nothing to do with investing.
I recently read an article in the Christian Science Monitor about how every reporter on the planet gets up in the morning and immediately checks Twitter to see what the news of the day is or will be. This comment is proving true since Twitter reported a surprise profit today sending shares higher than a Tesla Roadster in orbit. Twitter had been struggling the past couple years but lately has become the “go to” news feed driving both traffic and profitability. Twitter is also making moves into artificial intelligence and some big investors like Mark Cuban have been pecking away at the stock like hungry chickens on a compost pile. Revenue came in 2% higher and profits were up 73%.
Tesla also reported a 44% increase in revenue and a net loss that was smaller than expected. Tesla produced 1,542 model 3’s in the quarter and expect to be at 2,500 per week by the end of Q1 and 5,000 per week by the end of Q2. Sales of the model S and X were up 28%. Investors are focused on production rates for the model 3 and if the company can hit their targets or not. Place your bets!
Call us with any questions. We were out of the office yesterday at a conference.