Analysts fear stock volatility is "quant quake" revival | Technical analyst encouraged by increasing market breadth | CMT picks Disney as a growth stock to withstand downturn
Market analysts are concerned that volatility in growth stocks might indicate a repeat of the 2007 "quant quake," which ran up big losses for computer-driven traders.
With the Dow Jones Industrial Average and S&P 500 within touching distance of new highs, it has been noted that much of the gains come from a wide range of stocks rather than the tech names that had previously dominated, which suggests developing market breadth. Technical analyst Scott Redler is among those who take this is a positive step toward further growth, commenting "when you have a lot of groups and they're taking turns, it's harder to break the back of the bull."
With growth stocks suffering in this month's market rotation, technical analyst Mark Newton, CMT, says investors need to be selective in their choice of entities in this sector. He singles out Disney as a stock that can thrive despite the rotation, contending that its recent consolidation helped alleviate overbought conditions and predicting a possible 14% gain to reach a new high of $155.
When JPMorgan Asset Management took a 51% stake in China International Fund Management and became the first foreign firm to take a majority stake in a Chinese asset manager, it paid 33.9% over CIFM's stated value. The premium is raising industry concerns over the price of future deals in China.
The recent market rotation has come at a cost to the previously buoyant tech giants. Technical analyst Bruce Kamich, CMT, notes there are mixed signals on Amazon's charts, including a weakening on-balance-volume line and an overall decline in trading volume since June. He says a tradeable rally is conceivable but new highs should not be expected and a marginal downturn is more likely.
Secured Overnight Financing Rate options that CME Group plans to launch Jan. 6 will replicate "the entire breadth of the eurodollar futures and options space," says Agha Mirza, global head of interest-rate products. "Instead of taking a more incremental approach, we are moving forward by listing three-month SOFR options," Mirza says.
The recent market rotation from growth stocks to those with lower valuations has been particularly painful for hedge funds. Long-short hedge fund exposure to growth stocks has reached a three-year high at a time when company valuations have declined, according to Goldman Sachs data.
Goldman Sachs has hired Amazon Web Services executive Marco Argenti as co-chief information officer and former Verizon executive Atte Lahtiranta as chief technology officer as the bank works to migrate its services to the cloud.
The CMT is pleased to announce that a thorough review into the evolution, criticism, historical practice and modern applications of technical analysis was recently published by the CFA Institute Research Foundation in partnership with the CMT. The review discusses the evolution of technical analysis and how that evolution, in the tradition of other social science disciplines, has served to address many of the criticisms of the field.
In the last 10 years, a branch of technical analysis has arisen -- quantitative technical analysis -- which holds broadly that the proper, most useful purpose of technical analysis is not the predicting of future price outcomes. Rather, it is the adding of net financial value to investment decisions. Net financial value is total additional value reduced by the extra risk necessary to capture that value.
