The market is under pressure to start the week. The easy explanation for the selling is the increased intensity in the trade war with China. But, as I discussed in my opening post, this is historically the weakest time of the year on a seasonal basis and there are some convenient catalysts for selling. Not only is the trade war issue heating up, but there is some pressure on bonds in front of the Fed news later this week.
Last week, the market not only shrugged off the trade war headlines, but there were some bears throwing in the towel on the entire issue. They had given up hope that it would kill the market -- which of course is a typical contrary signal.
Another thing that helped last week was the wild speculative action in the cannabis stocks. That speculation spilled over to some other small-caps, and that helped to keep sentiment upbeat. When there are big moves in "junk" stocks, it makes everyone feel better -- especially if you hold stocks that you think are better quality.I have a few trades going, but I'm looking for some more downside in the indices at this point and may ramp up my index shorts. My Stock of the Week is Bank of America ( BAC) , as I'm looking for rates to spike a bit more and for a better yield curve to help.
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I also added to Intelsat (I) , which is a big 5G play. It is holding support very nicely and showing some signs of turning up. In addition, I started a small position in Amarin (AMRN) on big news for its fish oil drug. When a stock more than doubles on a gap-up open, I like to take a small starter position and then watch for the intraday pattern to develop. So far AMRN is holding support in the mid-$9s, but it isn't seeing any good bounces yet. I'll give it more time to attract interest, but it needs to bounce soon.
One big story this morning is the acquisition of Pandora (P) streaming music service by satellite radio operator Sirius XM Holdings (SIRI) . While this sounds like it is a good strategic fit, the market is not celebrating. This is a stock-for-stock deal, with shareholders of Pandora receiving 1.44 newly issued shares of SIRI. That was just a slight premium to Pandora at the opening print -- and the stock has now has fallen even more as SIRI's stock declines around 6%.
The biggest problem with the deal is that it does not appear to be immediately accretive. Both companies reiterated their current guidance, but hyped the deal primarily on the basis of cross-promotional opportunities. Shareholders would rather see improvement to the bottom line -- and that is why there is a negative reaction to the deal.