Every evening, I analyze every position I own based on technical analysis. That doesn’t mean I’ll trade on it but I like to check my predictive powers so to speak. I mark on a printout a plus sign, minus sign, or 0 based on what I think the stock will do the next day trading day. Last night I went to bed thinking just about every stock I owned could go up the next day. Out of the 40 positions I held I thought a staggering 31 of them could go up the next day. Boy was I wrong. Instead 4 went up and the remaining 36 went down. I didn’t see this one coming at all. Neither did many others as it was the biggest drop in the market in 10 months.
When I woke up and read the front page headline on the WSJ about the SEC investigation into SAC Capital, I had a sinking feeling in my stomach. I had just written about this a day ago and thought we were much behind it.
Instead I immediately realized it was just beginning in force. If any of SAC’s investors were calming others down about pulling their money out, they were certainly changing their mind when they read the latest news. Everyone will point out the weak ADP employment numbers, the dip in factory production as the villain for today’s sell off, the biggest drop in 10 months. But what about Tuesday, the last day of the month when the headline was Consumer Confidence, Case-Shiller Down and the Dow was up over 120 pts? That was a scarier headline than the one today. Perhaps back to back negative economic readings swayed some opinions but today’s selling was particularly vicious going into the close. Just one of the many headlines and quotes, this one from the Wall Street Journal:
“Every piece of economic data has been dreadfully weak, and it appears as though
the economy is facing the potential of a double dip,” said Tom di Galoma,
managing director at Oppenheimer & Co. “I would certainly bet that another
round of QE [quantitative easing] is more likely than a Fed rate hike.”
But as I previously alluded to there is a run on one of the largest hedge funds in the country. They are liquidating this fund and probably numerous other funds connected to SAC. That’s the sour smell in the room and there is a big seller waiting at the close to unload regardless of price.
As always this is a time to really understand what you own and why you own it.