Thursday, January 10, 2019

Retail Woes Subdued By Dip Buyers; Stocks Continue New Year Rally

Stocks have been on quite a tear since Christmas, a move that is strangely similar to hmmmm... last January.

How did that turn out?

Since the big downdraft of December, which culminated in a major splashdown on Christmas Eve, the Dow, NASDAQ and S&P 500 have staged a rally that is remarkable if only for its vacuousness. The only reasonable rationale for the recovery rally is that stocks were down so much, they looked like bargains. Oddly enough, many of these same stocks - names like Amazon (AMZN), Apple (AAPL) and Facebook (FB) - were being unloaded like cabbage off a produce truck just weeks ago.

These companies aren't doing any better than they were in November or December, nor is the economy. Even worse, the government shutdown, which began just before the markets bottomed, has continued, its effects so far minimized. The shutdown only affects about a quarter of "non-essential" federal operations, so it has not been a major headache for many. In a month or two, however, even if the shutdown ends soon, there will be some material and psychological damage to the economy, that's without a doubt. Plans were changed, the federal employees who were either furloughed or working without pay had problems making ends meet, and the general populace grimaced, frowned, and variously expressed disgust at the government's dysfunction.

So, the choice is whether to engage in the buying or await a better entry point, or, since stocks are up broadly in the nearly three weeks since Christmas, go short.

For now, the waiting game may be the most prudent, unless one has an economic itch that is in need of a scratch, especially since today's action saw a heavy downdraft at the open due to failures in the retail space, particularly Macy's (M) and Kohl's (KSS), both of which reported disappointing same store sales over the holidays.

Macy's was sacrificed to the tune of a 17% decline on the day, while Kohl's, down nearly 10% early, finished with a loss that was half that, thanks to the dip buyers de jour.

If this continues, all stocks will eventually be bought, at some price, regardless of fundamentals. Certainly, Macy's is now going to be seen as ripe for the plucking by somebody.

Dow Jones Industrial Average January Scorecard:

Date Close Gain/Loss Cum. G/L
1/2/19 23,346.24 +18.78 +18.78
1/3/19 22,686.22 -660.02 -641.24
1/4/19 23,433.16 +746.94 +105.70
1/7/19 23,531.35 +98.19 +203.89
1/8/19 23,787.45 +256.10 +459.99
1/9/19 23,879.12 +91.67 +551.66
1/10/19 24,001.92 +122.80 +674.46

At the Close, Thursday, January 10, 2019:
Dow Jones Industrial Average: 24,001.92, +122.80 (+0.51%)
NASDAQ: 6,986.07, +28.99 (+0.42%)
S&P 500: 2,596.64, +11.68 (+0.45%)
NYSE Composite: 11,839.31, +60.89 (+0.52%)

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