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article imageOp-Ed: Investors buying bargains on US stock markets on Boxing Day

By Ken Hanly     Dec 26, 2018 in Business
New York - With the low prices set before Xmas, US stock markets found lots of bargain buyers no doubt with others covering shorts as many stocks looked to be Boxing Day specials.
Dollar gains along with stocks
The dollar rose against a basked of other currencies as US stocks bounded off 20-month lows. However, uncertainty about the US government shutdown, remains a headwind both for the US dollar and perhaps a further rise in the stock market. On Tuesday, US president, Donald Trump, said that the shutdown would last until his demand for funds for his border wall are met. That may be some time especially with the Democrats having control of the House in the new year.
Stocks in the US gained more that 2 percent with a substantial rebound in technology stocks and in retailers with Amazon leading the way. Xmas retail sales are up. The market snapped a four-session losing streak before Xmas.
In a report, Nick Brennenbroek, a currency strategist at Wells Fargo said: “There is a modest sense of temporary stability returning to equity markets. That said, trading conditions remain light and investors remain somewhat cautious, watching closely for more U.S. political headlines.”
Stephen Innes, of Oanda in Singapore said in a note: “There’s an endless laundry list of concerns: Trump berating the Fed, Trade Wars, China slowing growth, Brexit casualties, EU slowdown. But when you factor in a downturn in the U.S. economy, this is when things get ugly.”
Stocks with big shorts made record gains
The Thompson Reuters US Most Shorted Index rose a full 6 percent. This was the largest rise in the six-year history of the Index. Short players obviously moved to cover their bearish bets on the 51 stocks in the index while prices were at their lowest price in years.
Dow Jones Index rises over a 1,000 points
The Index surged more than a 1000 points in a single session for the first time. The surge also pulled the S&P index back from the brink of a bear market.
Michael Antonelli, managing director of institutional sales at R.W. Baird said: “This is a short-covering rally. The move you see is just everybody trying to get out of these super, super bearish positions that they have been in, that have been easy to make money in. From the day the market opened in December, if you just went short the market every morning, you were making money at the close." Short sellers make money by selling borrowed shares and then buying them back later at a lower price. If short sellers get timing wrong they can lose large sums.
Brett Ewing, chief market strategist at First Franklin Financial Services noted that short sellers realized that they should not be too greedy and hope that stocks would go lower still. Instead they bought the shares to replace those they had sold at a higher price. It remains to be seen if the recovery rally will continue to the end of they year or if there is a further downturn during the few remaining sessions.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com
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