Squirrels And Cockroaches? | Seeking Alpha

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Luis Alvarez

Those following the market may feel like they have squirrels in their attic. Chairman Powell’s speech last Wednesday was the same hard line he had taken weeks ago when he sent the market lower. In this instance, the market rallied over 700 points! Also, on Friday, the market bulls were spooked in the early morning hours as futures went 400 points in the red, only to rebound by the day’s close. What is going on? Positioning. It was all about how the market was positioned. Everyone knew that Powell was going to take the hard line, and they were positioned for it. When he didn’t say anything, new markets rallied as shorts covered. As for Friday, the upcoming options expiration on the 16th is the largest of the year. The 4000 (S&P 500) level is immense. The FOMC has a meeting scheduled for the 13th. We are in positive gamma and options players will be selling implied volatility until the 13th, so we probably grind higher for the next several days. I am still looking at the 4150 level on the S&P. Remember, Santa usually comes to Broad and Wall – it’s when he does not that there is a problem. The Santa Rally is the last three days of the year and the first two trading days of the next. We need to consider that Santa might run out of gas after the 16th.

There are some worrisome happenings in the market, and the one that stood out for me this week was the stock of Blackstone (BX). Four weeks ago, the well-known investment firm’s stock spiked higher and out of a downward trend that it had been in since December of last year. A week later, it had given up all its gains. Something was afoot. We found out this week as it announced that it was putting the brakes on withdrawals from one of their large real estate funds. They are only redeeming half the withdrawal requests in order to protect the fund investors. Interestingly, most of the requests came from Asia. This is a $125 billion real estate fund. At one point, Blackstone stock was down 26% from its recent highs. Not a recommendation. Blackstone is a bellwether. If things are not going well for the bright folks at Blackstone, there are other problems we haven’t found out about yet. There is never just one cockroach. Heavy redemptions in real estate and private equity funds could begin to put a strain on asset prices.

Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.

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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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