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We don’t need a bevy of analysts to explain to us that we are deep into another stock market bubble. The markets’ body language tells the whole story. Traders are exhibiting the emotional traits that typically precede the bubble bursting. It’s a blend of giddiness and fear and the anxiety that comes with knowing that one must act quickly before the inevitable happens. Despite all the warning signals, traders keep sharpening the point of the pin by latching on to whatever shred of hope they can find that might garner them the gain that the hope to achieve before everyone hears the impending “pop!”
Perhaps the biggest threat to the bubble – to any bubble – is not the bubble itself, but the effect of outside forces, like the finger of the young lad in the photo atop this story. It could be a single incident like a passenger plane being shot out of the sky, or it could be wars and rumors of wars as in Syria, the Ukraine, Iraq and Gaza. As these events escalate they will – and do – have a much greater impact on the markets that 50 major mergers and acquisitions.
What’s Happening to Markets Now?
The London Exchange is about to close for the week (it is now 4:06 pm), leaving the Western Hemisphere markets the only ones still open for the week. Look at what has happened around the world in a single day since the newest disaster for Malaysian Airlines.
| Market |
Gainers |
Losers |
| Japan |
786 |
2,510 |
| India |
1,452 |
1,570 |
| Hong Kong |
567 |
912 |
| London |
412 |
657 |
| Australia |
530 |
531 |
| Euronext |
312 |
517 |
| Germany |
232 |
478 |
| Singapore |
240 |
251 |
| Philippines |
85 |
119 |
| Russia |
63 |
102 |
| Greece |
32 |
96 |
|
4,711 |
7,743 |
That is an interesting picture, to say the least. Now we know that some reporters are saying that the FTSE would have had a flat day had it not been for Shire’s (LSE:SHP) acceptance of AbbVie’s (NASDAQ:ABBV) takeover proposal. That doesn’t say much for the rest of the market, although British Land (LSE:BLND), Severn Trent (LSE:SVT), Hammerson (LSE:HMSO) and BSkyB were up 1.93%, 2.33%, 1.00% and 2.20%, respectively on the day.
China is notably absent from the chart because, unlike the rest, it had more gainers than losers, with 487 on the plus side and 329 on the loss. The leading world indices are split eight to three toward the plus side. To add a bit more perspective, despite their exception to the gainers vs. losers, the Hang Seng closed down 0.34%
What Else Is Happening?
In a recent article about Federal Reserve Chairperson, Janet Yellen, we noted the immediate adverse impact her address before Congress made made on small cap, biotech and social media stocks. Witness the effect on the iShares Russell 2000 (AMEX:IWM), iShares NASDAQ Biotechnology (NASDAQ:IBB) and Global X Social Media (NASDAQ:SOCL) indices.
Meanwhile, so far today, the NYSE has 2,277 gainers versus 456 losers; the NASDAQ had 1,940 gainers with only 553 losers; and the gainers are ahead of losers on the AMEX by 204 to 146. In my personal opinion, this may have a great deal to do with the general American mental distance from the rest of the world in almost every area of life.
My concern with the markets at the moment is, again, that the general patterns of activity seem to parallel the aforementioned “body language” of investors.
What’s the Point?
The point is simply that this is not a time to throw caution to the winds. The winds of change are blowing and it would not take much more to whip them into hurricane or cyclonic force. None of us can afford to be giddy with our investments. It is time for us all to be wise, judicious, and to carefully assess every alleged opportunity. When the world is coming apart at the seams, we cannot individually afford to do the same.
