A Volatile And Mixed Day

Markets were again mixed yesterday in a very volatile session. Megacap tech shares slumped again falling about 0.85%. The biggest losers were Amazon and Netflix with the former shedding $53 billion in value. The Dow was essentially unchanged.

The Trump administration is considering leveling antitrust or anticompetition sanctions on Amazon. Some have opined the President is playing politics.

My comment is cynical… what administration has not played politics? President Obama was the master especially as it relates to the financials. President Clinton almost ruined the tobacco industry.

Amazon has bragged about being a “disrupter,” doing everything under the guise of benefiting the consumer. Wall Street and government have followed along. The former under the simple premise for fees and performance, living in a Janusian world that profits and valuations do not matter.

The latter because it is all about politics and to heck with the small businessman. It is easier to control one large organization versus hundreds of smaller companies.

The Trump administration was elected on a populist basis, espousing economic nationalism and the common person. The President is doing what he stated he would do.

Last week, I referenced Commerce Department statistics that only 10% of retail sales are conducted on an on-ine platform, platforms that include Walmart and Target. The Commerce Department also stated that online sales grew by 9% in 2017, double the 4% rate of overall retail sales.

In my view, the cards are stacked in favor of Amazon for a myriad of reasons and the populist President is attempting to level the playing field.

I have written a gazillion times about the “crowdedness” of several popular trades opining who will buy when selling commences? Some are “shocked” about the damage in a sector that was viewed as impervious to all laws of gravity, government and fairness. In my view, the damage is just beginning.

Algorithmic traders trade on momentum and may exacerbate selling pressure given their penchant for speed over capitalization. Indexers and ETFs may accentuate the selling, the inverse of the past three years.

Typically, great volatility — defined as big losses followed by big gains — are a sign of a major top. The “buy on dip” mentality becomes exhausted. Recent trading patterns of the mega-sized technology shares are similar to those of eighteen years ago. In that era, buyers gave in and the NASDAQ imploded about 80% in about two years while the typical stock greatly outperformed.

Will history repeat itself?

What happens today? Most markets are closed tomorrow for Good Friday.

Last night the foreign markets were up. London was up 0.39%, Paris was up 0.56% and Frankfurt was up 0.79%. China was up 1.22%, Japan was up 0.61%and Hang Sang was up 0.24%.