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MoMo Pain Is Contained, For Now

08-17-2018

The Dow and S&P were unchanged through midday, while the Nasdaq was off about 0.5%, as the chip sector continues to trade lower. Last night Nvidia was unsuccessful at beat-the-number, as was Applied Materials.

When Will the Present No Longer Get a Pass? It is now pretty clear that the problems that have been ignored, which are largely related to saturated end markets, are starting to matter (of course, in the past these issues would have had the entire sector much lower already). Thus, it will be interesting to see how this all plays out. While a lot of companies in the chip sector are liable to be good candidates for puts or shorting, trying to make money (more precisely, risk management) is complicated by the chaotic nature of how the market trades and its ability to lurch quite a ways as folks chase any number of concepts and rumors.

In terms of the market response to the earnings, however, I would have guessed Nvidia would be much weaker than it was, although Applied Materials' decline of about 10% seemed appropriate. At any rate, in the afternoon, the market marched higher led by the Dow, which gained 0.5%, with the Nasdaq lagging, though the latter fought its way back into positive territory, as bad news in the chip sector was "contained."

Away from stocks, fixed income was slightly higher, oil rose 0.5%, while green paper was weaker. Given the near hysteria in so many emails I've received in Ask Fleck recently concerning the dollar, I think a lot of people would be surprised to learn that it actually declined this week. As for the metals, they finally popped a little, with gold gaining 0.5% to silver's 1%, while the miners saw a decent bounce, regaining a pretty good chunk of what they lost yesterday.

If You Can't Stand the Hateā€¦ On the subject of the metals, a friend sent some data from Jason Goepfert's website in which Goepfert noted that a sentiment measure he has developed, which tracks the collective optimism in gold, silver, and platinum, now ranks at its lowest level in 27 years. So for those of you, like me, who feel like the recent bashing of the metals was seemingly out of proportion and extremely lopsided, you weren't wrong. That appears to be the case.

Lastly, late in the day the CFTC data showed commercials were net long 11,000 contracts (combining futures and options). The last time they were long was in mid-2001 on the bear-market lows. This is a very positive development, so I wanted to be sure readers saw it.

Positions in stocks mentioned: none.