Dow Fades Into Close for 5th Straight Losing Session

Issues persist in global financial markets and investors are beginning to shift assets back into fixed income, since yields are rising and should continue to do so, though chances that the Fed will begin tapering in September appear to be diminishing as economic data and corporate reports are not suggestive of a strengthening economy.

The Dow, which, along with the other major indices, was positive all session long, finally succumbed to selling pressure in the final minutes of trading, ending the day with a minor loss, though still the fifth straight session in the red.

What's not being talked about much is where the Dow Industrials currently are settled, well below the 50-day moving average (roughly 15,275) and in danger of sparking another rout in stocks. Additionally, Dow stocks are largely among the best dividend-payers, just the kind of risk asset that investors are shunning, with interest rates on the rise and fixed income carrying much less perceived risk than even blue chip stocks.

The Dow components aren't exactly going to be sold off in wholesale fashion - there's too many diversified investors in them - but they have obviously been under pressure since the start of August, despite Fed incantations and deliberations over QE tapering beginning sometime in the near future.

For gambling types, the biggest question is whether the Fed will actually begin tapering its bond-buying in September, or, at some later date. Some suggest that the economy is so weak, and the Fed terrified of causing a market panic, that tapering will not and cannot occur in the current environment. The secondary issue of by how much the Fed will taper is also in play. Being that the Fed is now so trapped and dovish, the tapering might be an inconsequential number, like $10 billion, reducing their total bond purchases to $75 billion a month, still an enormous liquidity lift.

In such a case, wherein the Fed reduces QE by a mere $10 billion a month, in either September or October, and then continues to cut down on bond purchases at a rate of around $10 billion a month every two to three months, would probably be enough to rattle markets a bit without causing a correction or crash. Of course, the US and global economies are currently in such a weakened state that markets may crash and burn on their own, despite what the Fed and other central banks conspire in their rigging.

The outlook remains the same, with the bias toward the downside. September, with the Federal government politicians back from their extended, annual August recess, is shaping up to be momentous, what with budget negotiations and an expected fight over raising the debt ceiling again, with the outlier that the Republican Tea Partiers may be so inclined as to stall negotiations on both issues to a point at which the government is shut down. On top of the already-expanding sequester, these kind of childish hissy fits from our political elite might be enough to topple the markets into bear territory.

It's an eventuality, as the bull market is approaching the 54-month mark, which it will reach on September 9. The week of September 8-15 figures to be dramatic, with the anniversary of 9/11 and expected hijinks in the corridors of power.

One thing is for sure: the housing market is already under stress and, unless interest rates suddenly reverse course (unlikely), the so-called recovery in housing is over, dead and done. Real estate prices nationwide should experience a fairly sharp pullback over the next three to 12 months, because there are not enough qualified purchasers out there, interest rates are driving up the cost of buying and carrying a mortgage, and, the number of homes still held off the market by the banks continues to be an enormous, unseen force driving down real estate. Bargains are out there, but one has to look hard and long for the right ones at the right entry price. This is not a market for bold speculation, but rather for considered, strategic purchasing of the right property, be it for housing, farming or simply to escape the madness which is headed toward everyone within 10 miles of a major population center.

Major shifts in the economies of billions of people are underway and will play out over the next five to seven years, transforming the economic landscape beyond what most people can imagine.

Dow 15,002.99, -7.75 (0.05%)
NASDAQ 3,613.59, +24.50 (0.68%)
S&P 500 1,652.35, +6.29 (0.38%)
NYSE Composite 9,421.56, +35.67 (0.38%)
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Combined NYSE & NASDAQ Advance - Decline: 4827-1777
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WTI crude oil: 104.96, -2.14
Gold: 1,372.60, +6.90
Silver: 23.07, -0.095