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NCAA, Nor’easter Stella Translates to Thin Markets That Can Only Go Higher

I looked back on pricing and valuations - markets went higher into the end of Q1- 70% of the time. This makes perfect sense because "quiet markets always go up", and the B- Team on the trading desk.

The NCAA College Hoop Tourney sucks productivity out of our economy every year in March, but this year you have a Nor’easter that will send the “B” Team Traders and back ups to the portfolios across the globe. What this means to market liquidity is sneaky and you need to pay attention. First know, that Nor’easters occur every 2-3 years, and the NCAA happens every year in March and if you do a y-o-y check you will find that market always squeezes higher climbing a “wall of worry.”

But the real reason is the 2nd team of portfolio managers trade less, and this removes depth from US markets and creates higher volatility in single stocks -specifically the high priced mega caps (AMZN, GOOGL, NFLX, FB) – so prep for volatility.

Equities had staff on the ground at several conferences around the US, doing the rounds simultaneously at the Roth Conference in Dana Point, The Futures Industry Association (FIA) in Boca, and the PDAC in Toronto. One thing we saw was many portfolio managers in attendance after exiting NYC to warmer weather and taking the family before the 2017 Version (Stella) made its pass.

I looked back on what happens to pricing and valuations around large storms, and markets went higher into the end of the quarter 70% of the time. This makes perfect sense because quiet markets always go up,” and there are a bunch of fill-ins manning the desk planning on not doing a damned thing except watching the NCAA on the iPad.

A quant on a trading desk is running around trying to get someone to listen and buy some call volatility in FANG, but no one ever listens to him so he will compile the notes on the same iPad and go back to watching the games. But this year you have a huge storm so make sure you are also long DISH Calls. Never take too much risk, and buying calls that expire in 2 weeks is a perfect way to manage risk. Equities Research also believes trading smaller stocks as markets rotate is great way to manage portfolio risk.

Below is a list of Nor’easters shamelessly stolen (also photo attribute) from Wikipedia.

  • The North American blizzard of 1996 – Severe snowstorm which brought up to 4 feet of snow to areas of the mid-atlantic and northeastern U.S., and killed a total of 154 people.
  • The North American blizzard of 2003 – Dropped over 2 feet of snow in several major cities, including Boston, and New York City, affected large areas of the Northeastern and Mid-Atlantic U.S., and killed a total of 27 people.
  • White Juan of 2004 – A blizzard that affected Atlantic Canada, crippling transportation in Halifax, Nova Scotia, and dropping over 37 inches of snow in areas.
  • The North American blizzard of 2005 – Brought blizzard conditions to southern New England and dropped over 40 inches of snow in areas of Massachusetts.
  • The North American blizzard of 2006 – A powerful storm that developed a hurricane-like eye when off the coast of New Jersey. It brought over 30+ inches of snow in some areas and killed 3 people.
  • The April 2007 nor’easter – An unusually late storm that dumped heavy snow in parts of Northern New England and Canada and heavy rains elsewhere. The storm caused a total of 18 fatalities.
  • Nor’Ida (2009) – Formed from the remnants of Hurricane Ida, produced moderate storm surge, strong winds and very heavy rainfall throughout the mid-atlantic region. It caused US$300 million (2009) in damage, and killed six people.
  • The December 2010 North American blizzard – was a major blizzard which affected large metropolitan areas, including New York City, Philadelphia, Providence, and Boston. In some of these areas, the storm brought up to 2 feet of snow.
  • In January 2011, two nor’easters struck the East Coast of the United States just two weeks apart and severely crippled New England and the Mid-Atlantic. During the first of the two storms, a record of 40 inches was recorded in Savoy, Massachusetts. Two people were killed.

  • The March 2010 nor’easter- A slow-moving nor’easter that devastated the Northeastern United States. Winds of up to 70 miles per hour snapped trees and power lines, resulting in over 1 million homes and businesses left without electricity. The storm produced over 10 inches of rain in New England, causing widespread flooding of urban and low-lying areas. The storm also caused extensive coastal flooding and beach erosion.
  • The 2011 Halloween nor’easter – was a rare, historic nor’easter, which produced record breaking snowfall for October in many areas of the Northeastern U.S., especially New England. The storm produced a maximum of 32 inches of snow in Peru, Massachusetts, and killed 39 people. After the storm, the rest of the winter for New England remained very quiet, with much less than average snowfall and no other significant storms to strike the region for the rest of the season.
  • The November 2012 nor’easter – A moderately strong nor’easter that is notable for striking the same regions that were impacted by Hurricane Sandy a week earlier. The storm exacerbated the problems left behind by Sandy, knocking down trees that were weakened by Sandy. It also left several residents in the Northeast without power again after their power was restored following Hurricane Sandy. Highest snowfall total from the storm was 13 inches, recorded in Clintonville, Connecticut.
  • The December 25th-28th, 2012 nor’easter – A major nor’easter that was notable for its tornado outbreak across the Gulf Coast states on Christmas day as well as giving areas such as northeastern Texas a white Christmas.
  • The March 2013 nor’easter – A large and powerful nor’easter that ended up stalling along the eastern seaboard due to a blocking ridge of high pressure in Newfoundland and pivoted back heavy snow and strong winds into the Northeast United States for a period of 2 to 3 days. Many officials and residents were caught off guard as local weather stations predicted only a few inches of snow and a change over to mostly rain. That forecast failed miserably, as many areas received over a foot of snow, with the highest amount being 29 inches in Milton, Massachusetts. Several schools across the region, particularly in the Boston, Massachusetts, metropolitan area, remained in session during the height of the storm, not knowing the severity of the situation. Rough surf and rip currents were felt all the way southwards towards Florida’s east coast.
  • The January 2015 nor’easter (also known as “The Blizzard of 2015” by media outlets) – Unlike recent historical winter storms, there was no indication that a storm of this magnitude was coming until about 3 days in advance.

Cover photo attribute PixaBay via Literary Traveler Holden Caulfield in Manhattan piece.

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