D&D Note (6.19.2018) ~ Trade War Triggers Algorithms To Sell ~
Last night and through todays session the high frequency trading algorithms got triggered to sell on the news of $200 Billion to $400 Billion in additional tariffs on China on top of the current $50 Billion. Economic data shows that China can only retaliate on $250 Billion in trade with the US.
The dangerous option is America goes too far and China is forced to liquidate US Treasury holdings. Another possible direct action of the total Trade War is it effects global markets creating systemic risk to the American Economy.
Humans were not selling these stocks today in large moving trades to move the market as it did in seconds at a time. These are times when an investor has to step back, and absorb the price action in equities to better understand algorithmic trading, after all 85% of all trading these days is done on a daily basis by algorithms.
The pattern developing on each of the down drafts caused by Trade War headlines is algo’s bring the market down fast in the overnight futures trading and at the market open. Then we see the market fight back into the close from human professional investment traders.
The Industrials Sector got hit the hardest in correlation to trade war with Boeing and Caterpillar causing a good portion of the DOW’s drop.
The question today was whether or not to buy the dip. D&D views the current market as still too high in valuation except for certain stocks and more sector wide in the Financials. We continue to eye Netflix and the two Jack Dorsey companies of Square and Twitter. All three of those stocks along with the overall market are at the top of their current trading ranges. A pullback or reversion to the mean has been expected.
Apple is a stock that is at a reasonable valuation but could like the market see further down side in the coming days.
Today D&D took further gains on CGC (position up 212%) and gains in APHQF (position up 51%). This was a planned sale we signaled last week in our market note of the day. Cash raised by these we will then look to redeploy into existing or new holdings on further price weakness and better repriced valuations.
D&D movers:
– CGC up 3.96%
– MEDFF up 3.91%
– CNTTF up 1.39%
– AMZN up 0.64%
– TSLA down -4.93%
– BA down -3.84%
– IMLFF down -3.23%
– BABA down -1.98%
Indexes
– DOW down -1.15%
– NASDAQ down -0.28%
– S&P down -0.40%
Sector Movers:
– Telecom up 1.42%
– Utilities up 1.06%
– Consumer Staples up 0.52%
– Industrials down -2.14%
– Materials down -1.81%
– Technology down -0.72%
Notes
– US 2-YR 2.545% (down -0.013)
– US 10-YR 2.889% (down -0.037)
– US 30-YR 3.024% (down -0.031)
Volatility
– VIX 13.54 (up 9.99%)
Crypto (1:00 PST)
– BTC $6,744.21
– ETH $537.76
– BCH $899.00
– LTC $98.69
Metals
– Gold $1,278.10 down -0.16%
– Silver $16.31 down -0.79%
– Copper $3.0385 down -2.19%
Energy
– Oil $65.09 down -1.15%
– Brent $75.12 down -0.29%
– Nat Gas $2.914 up -0.76%
D&D Investments 
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