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There Have Not Been This Many “All or Nothing Days” Since the Financial Crisis of 2008.

Bespoke Investment Group has quantified recent market volatility.  According to Bespoke, the number of “all or nothing days,” or trading sessions when the number of advancing stock minus the number of declining stocks in the S & P 500 reaches more than 400 or less than negative 400, is huge.

Bespoke states since the intense volatility began on 8/20; the S & P 500’s daily advance/decline reading has been above +400 or below -400 on eight trading days through last Friday.  On a rolling 12 day basis Bespoke comments that there has not been this many “all or nothing days” since the financial crisis of 2008.

Bespoke further states, prior to 8/20 there had only been 13 trading days in all of 2015 where the S & P 500 had an “all or nothing day.”

The other day I wrote even the most seasoned participants are feeling the volatility.   The data now offers a reason why most are so uneasy.  It must be remembered that fear is more powerful than greed.   This intense volatility is a major reason why many are so fearful.

Commenting upon yesterday’s market action, stocks started the day strong only to erase almost a 200 point early morning advance ending about 235 points lower on data suggesting strong jobs growth.  Strong job creation increases the likelihood of Fed action thus the selloff.

And then there are concerns about China.  How will its slowing growth rate impact global economies?  All must remember the US is about 2x the size of China.  The economies of Western Europe and Japan are also about twice the size of China.  Data is suggesting these economies are accelerating, a block that is about four times the size of the Chinese economy.

Additionally the data states about two thirds of the second quarter global slowdown can be attributed to the economies of six commodity based countries, countries including Russia, Brazil, Australia and Canada.

I ask are Chinese growth fears overblown just as the fears of an imploding Japan were 25 years ago?  I think yes.

The narrative is beginning to rise about the outsized influence of algorithmic trading (HTFs).  Everything has become so cross correlated thus suggesting these correlations are now meaningless. 

Commenting further about yesterday’s market action, I think trading was greatly influenced by HTFs as I think the environment was no different at 10:30 than at 4:00.  The only difference was the JOLT jobs data suggesting the greatest job creation in 15 years, a fourth tier data point that maybe two people follow.

What will happen today?  Will the economic narrative change from one of weakness to one of strength?  Wow!  What a radical statement.  Treasuries are suggesting a transition may be at hand, a transition that perhaps the data is now suggesting is now at hand.

Last night the foreign markets were down.  London was down 1.07%, Paris down 0.79% and Frankfurt down 0.50%.  Japan was down 2.51% and Hang Sang down 2.57%.

The Dow should open quiet.  Will weekly jobless claims influence the direction of trading?  Maybe. The 10-year is off 3/32 to yield 2.21%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.