Wednesday, January 9, 2019

Stocks Keep Rising, But Major Speed Bumps Are Dead Ahead

Bored yet?

Since bottoming out the day before Christmas (December 24), the major US indices have gained in eight of the last ten sessions, including today's smallish gains.

While going eight for ten to the upside certainly sounds impressive, there is a small problem. The NASDAQ. S&P 500, Dow Industrials, and NYSE Composite are all trading below their 50-and-200-day moving averages. What's more troubling is that those averages are inverted, with the 50 below the 200, as all of the charts show the so-called "death cross" occurring variously between late November and mid-December.

This is troubling to chartists because the rallies have produced some ill-placed optimism in the minds of some investors, mostly affecting those passive types with 401k, retirement, IRA and other "hands off" accounts.

So, while everybody is cheering the fantastic performance of stocks in the new year, there are major speed bumps dead ahead. Turning around inverted moving averages is the kind of heavy lifting for which the PPT was created and how the Fed came up with various forms of money creation, such as QE, QE2, Operation Twist, and other variants of magical fiat money.

Earnings season is about to kick into high gear next week, and expectations are not all that rosy, though, if one tracks home builders, like Lennar (LEN), which missed expectations but still managed a gain today of nearly eight percent. Of course, the stock is just off its 52-week low, so there's an outside chance that everybody, all at once decided it was too cheap to pass up.

So, the question is whether the PPT or the Fed or the Bank of Japan or the ECB, or all of them are of like mind and will buy with open arms every stock that looks like a sure loser over the next four to five weeks.

There's an old adage in the investing world, that posits, "don't fight the Fed." This time it appears to be for real and the Fed, from the speeches and off-the-cuff quotes by some of the regional presidents, is in a fighting mood.

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

At the Close, Wednesday, January 9, 2018:
Dow Jones Industrial Average: 23,879.12, +91.67 (+0.39%)
NASDAQ: 6,957.08, +60.08 (+0.87%)
S&P 500: 2,584.96, +10.55 (+0.41%)
NYSE Composite: 11,778.42, +62.19 (+0.53%)
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