WEEKEND WRAP: With Continued Volatility In Stocks, Is It Time To Consider Alternative Investment Asset Classes?

To say the least, this was one wild week.

Monday opened with word that Treasury Secretary Steven Mnuchin had phoned six major banks and the Plunge Protection Team to assure that the banks had adequate liquidity to survive a significant downturn. There were two problem with Mnuchin making these calls and then making them public. First, nobody was thinking about bank liquidity. Second, alerting the PPT suggests that there are significant economic issues facing the market.

Mnuchin initiated a panic, good for -653 points on the Dow, on a day in which markets closed at 1:00 pm. That was Christmas Eve.

The day after Christmas, Wednesday, the Dow set a record for points gained in one session. It was a spectacular day for anybody in the bullish camp. All the other indices were up more than four percent, another first.

On Thursday, stocks were slumping badly again, but then, the rally from nowhere produced a positive finish, boosting the Dow more than 600 points from 2:15 pm into the close, for a net gain on the day of 260 points.

On Friday, the opposite occurred. The Dow Industrials were up 240 points at three o'clock, but closed down 76.

Volatility. It's what's for Christmas, it appears.

When it was all over the week turned out to be a winner, the first in four weeks of December. Since the start of October, there have been nine weekly losses on the Dow, with just five weekly gains. The net result of this wicked roller-coaster of a market is a Dow Jones Industrial Average that's down nearly 2500 points in December and 3766 points from October 3.

While the week's heavy lifting (most likely done by our friends at the PPT) kept the Dow out of bear market territory, it - and the other major indices - are still deep in the correction zone, and all indices are down for the year. Since there's only one trading day left in 2018, this year is a good bet to end up a loser, despite the best efforts of the pumpers, panderers, shills, and jokers in the financial field to separate you from your money with promises of outstanding gains.

Every stock pumper in the world mouths the word "diversification" as a key element leading to positive investment results. The problem with their kind of diversification is that it normally references one, maybe two asset classes: stocks, and then, maybe, bonds.

Such short-sighted thinking obscures all the other asset classes, broadly, real estate, commodities, currencies, art, collectibles, precious metals and gemstones, vehicles, business equipment, private equity, cash, cash equivalents, and human capital.

There are plenty of opportunities in small business development, where ownership can be hands-on or hands-free, with the potential to grow a local business within a community. President Donald Trump (and many other private businessmen) is one good example of how much money can be made in real estate investment and privately-owned businesses.

People who held on to their Spiderman, X-Men, and Fantastic Four comic books are smiling broadly. So too, those who kept baseball and football cards for more than 50 years. The value of a Mickey Mantle rookie card today is astronomical compared to its original cost (less than a penny).

With the recent volatility in stocks, people may be considering diversifying out of stocks and into other asset classes. In the coming year and beyond, presentation of alternative money-making and investment opportunities will be a focus of Money Daily.

Here's to looking forward at a year of diversifying out of strictly stocks in a portfolio.

In advance: Happy New Year!

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95
12/17/18	23,592.98	-507.53	-1945.58
12/18/18	23,675.64	+82.66	-1862.92
12/19/18	23,323.66	-351.98	-2214.90
12/20/18	22,859.60	-464.06	-2678.96
12/21/18	22,445.37	-414.23	-3093.19
12/24/18	21,792.20	-653.17	-3746.36
12/26/18	22,878.45	+1086.25	-2660.11
12/27/18	23,138.82	+260.37	-2399.74
12/28/18	23,062.40	-76.42	-2476.16

At the Close, Friday, December 28, 2018:
Dow Jones Industrial Average: 23,062.40, -76.42 (-0.33%)
NASDAQ: 6,584.52, +5.03 (+0.08%)
S&P 500: 2,485.74, -3.09 (-0.12%)
NYSE Composite: 11,290.95, +5.64 (+0.05%)

For the Week:
Dow: +617.03 (+2.75%)
NASDAQ: +251.53 (+3.97%)
S&P 500: +69.12 (+2.86%)
NYSE Composite: +254.11 (+2.30%)

The Market Giveth, The Market Taketh Away, And Giveth Again

Stocks went on a wild ride Thursday, a phenomenon confounding to novice investors but completely understood by market observers who have been in the game for a few decades or more.

There's little doubt that the Dow's plunge of 600 points and last-hour rally were the work of the Plunge Protection Team, or PPT, or as they are formally known, the President's Working Group on Financial Markets.

Here are a few links for reference:

Mnuchin Calls Plunge Protection Team; Stocks Soar One Day Later

President's Working Group on Financial Markets

Happy Holidays!

You've been played.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95
12/17/18	23,592.98	-507.53	-1945.58
12/18/18	23,675.64	+82.66	-1862.92
12/19/18	23,323.66	-351.98	-2214.90
12/20/18	22,859.60	-464.06	-2678.96
12/21/18	22,445.37	-414.23	-3093.19
12/24/18	21,792.20	-653.17	-3746.36
12/26/18	22,878.45	+1086.25	-2660.11
12/27/18	23,138.82	+260.37	-2399.74

At the Close, Thursday, December 27, 2018:
Dow Jones Industrial Average: 23,138.82, +260.37 (+1.14%)
NASDAQ: 6,579.49, +25.14 (+0.38%)
S&P 500: 2,488.83, +21.13 (+0.86%)
NYSE Composite: 11,285.31, +81.22 (+0.72%)

Santa Claus Delivers A Relief Rally For The Ages; Largest Point Gain On Dow In Market History

The extended holiday season - thanks to an additional week for shopping between Thanksgiving and Christmas - was exceptionally kind to retailers, who reported the best holiday season in six years, so Wall Street finally got the news that the economy was apparently not on the verge of imminent collapse, sending stocks soaring throughout the session.

How much of the gains were attributable to short-covering buyers and strict momentum chasers is unknowable, though it was likely a large percentage. Risk appetites have been under assault for months, so this one-day wonder might not be as impressive as bullish traders would have one believe. It was more a technical advance after waves of selling created a severely short-term oversold condition.

To put it in perspective, the nearly five percent gain on the Dow, in point value, was equal to only about one-fifth of the most recent decline. The Dow had lost more than 5000 points since October, so Wednesday's buying spree pales in comparison and sets up the market for further speculation as far as directional trades are concerned.

If this nascent rally is to continue - which is also likely - there has to be some catalyst to carry it forward, though it might simply run until it is exhausted. Since the gains put only a minor dent in the recent losses, momentum should carry it forward, possibly another 1500-1800 points on the Dow.

While that might seem like a huge number, it wouldn't even wipe out the losses already sustained in December (as on Monday, that was -3746.36), so investors may get something of a stock sugar rush to close out the year and maybe some fun in the first days of the new year.

This pump was long overdue, and there's also the possibility that the call Treasury Secretary Mnuchin made to the Plunge Protection Team on Sunday had some impact.

Santa has come and gone, leaving plenty of presents behind.

Ho, ho, ho.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95
12/17/18	23,592.98	-507.53	-1945.58
12/18/18	23,675.64	+82.66	-1862.92
12/19/18	23,323.66	-351.98	-2214.90
12/20/18	22,859.60	-464.06	-2678.96
12/21/18	22,445.37	-414.23	-3093.19
12/24/18	21,792.20	-653.17	-3746.36
12/26/18	22,878.45	+1086.25	-2660.11

At the Close, Wednesday, December 26, 2018:
Dow Jones Industrial Average: 22,878.45, +1,086.25 (+4.98%)
NASDAQ: 6,554.35, +361.44 (+5.84%)
S&P 500: 2,467.70, +116.60 (+4.96%)
NYSE Composite: 11,204.09, +434.26 (+4.03%)

Reversion To The Mean... Can It Happen? Mnuchin Panics Markets With Calls To Banks, PPT

Stocks and math really should be on everybody's radar, if not today, then certainly every other day the markets are open. It's a major cause of angst and stupidity that people don't apply mathematic principles to investments. Math runs everything, it's immutable, and unmoved by emotion, which is what often moves stocks and other investments into absurd areas.

Speaking of absurd, how out of line were the valuations of stocks just a few months ago?

The answer is, historically speaking, VERY. Stocks were valued as if nothing negative would ever happen ever again in the world. US unemployment would forever be under four percent. GDP would always be above three percent. Politicians would never, ever lie again. Democrats and Republicans would make peace and compromise in support of the American people, and ordinary citizens in France would just accept the uber-liberal policies that are taxing them out of existence and stop their silly protesting.

Yeah, sure. Throw in some unicorns that barf up rainbows and poop gold and you'd be close to the kind of valuations the stock market was assigning to banks (bailed out in 2008), tech companies (many which have never experienced a severe recession) and plenty of other stocks. The distorted valuations of the past ten years exist because of easy money policies and corrupt corporate executives who used stock buybacks to reduce the number of shares outstanding, thus boosting the value of their stocks via higher earnings per share.

Let's put the past behind us, where it belongs. The Fed is trying, despite serious criticism from the president (he's wrong about the Fed being the real problem... the Fed can be a solution, and should be, since they created the problem originally) to right the global financial ship. The Fed and other central banks extended too much credit prior to the sub-prime debacle, and did it again in its aftermath, bailing out the banks who loaned money to people who could not make the payments.

Now, the Fed is drawing back on the easy money. Nobody likes it, but it must be done. Interest rates of two to three percent are an anomaly, unlike any time in history. The 10-year treasury note should ideally be in a range of 4-6 percent, which would make borrowers think twice about borrowing, and lenders would scrutinize their potential loans with much more dedication and diligence than to standards with which they've become comfortable.

Bad debts, many of them left over from the GFC, need to clear.

Policies are changing, and, with that, valuations will adjust, so here comes the math part of today's monologue.

Using the CAPE ratio for the S&P, stocks closed out today - another disaster, by the way - at 26.02. The mean CAPE ratio for the S&P is 15.69. If reversion to the mean occurs, at some point in the near future (3-12 months), the S&P will decline from it's current value of 2,357.54, to 1,552.20, because it is 65.84% above the mean. That would wipe out the gains of the past six years, sending the S&P back to where it peaked in 2007.

That actually would be a good outcome, since the 2007 levels were later found out to be a bubble, and they went south from there. So, it's very likely that the S&P will overshoot the mean, sending the index down to maybe 1400 or even 1300. Some people with good memories will recall that the S&P bottomed out BELOW 800 at the depths of the Great Financial Crisis of 2008-09, so 1300 or 1400 would be a pretty good outcome.

The same can be applied to the Dow, NASDAQ, NYSE Composite, Dow Transports, the Russell, or whatever US index one chooses. Take the current level, multiply by 65, divide by 100, and you'll have a good estimate of the mean valuation, and maybe even the actual bottom, but, chances are good that the bottom will be quite a bit lower than the mean, that is, if fundamentals matter once again, and we are done with the Fed backstopping every decline via asset purchases, the PPT, QE, ZIRP, NIRP, bailouts, fancy derivatives and generally speaking, voodoo economics (a favorite term of George HW Bush, BTW, in reference to Reaganomics or trickle-down theory).

Just because Money Daily likes to focus on the Dow, the mean is probably somewhere around 14,164.93. You may notice that is a further decline of more than 7000 points, but that should not be out of the equation since the Dow has already lost more than 5000 points just since October 3 (26,828.39, the all-time high) and it's down more than 3700 points just this month.

As has been the theme here for some time now, this is only the beginning of a long decline in stocks.

Treasury Secretary Steven Mnuchin made calls to six major banks and the Plunge Protection Team, and announced that he did so to the press and the general public. Talk about transparency! These kinds of inside baseball moves were, in former times, kept very, very quiet. Mnuchin's up-front attitude about this was meant to panic markets, not calm them. In that regard, he did the bidding of the Fed and his Wall Street friends. Remember, Mnuchin is a Goldman Sachs alum. Surely, his buddies at GS and JP Morgan Chase, Bank of America, Morgan Stanley, Citi, and Wells Fargo aren't losing money nor sleep over these most recent declines in the stock market. Their clients may be losing massive amounts, but, hey, they're just the little people, muppets, right?

Unless you've got a million or more for these guys to manage, you're not worth their precious time.

Merry Christmas. Ho, Ho, Ho.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95
12/17/18	23,592.98	-507.53	-1945.58
12/18/18	23,675.64	+82.66	-1862.92
12/19/18	23,323.66	-351.98	-2214.90
12/20/18	22,859.60	-464.06	-2678.96
12/21/18	22,445.37	-414.23	-3093.19
12/24/18	21,792.20	-653.17	-3746.36

At the Close, Monday, December 24, 2018:
Dow Jones Industrial Average: 21,792.20, -653.17 (-2.91%)
NASDAQ: 6,192.92, -140.08 (-2.21%)
S&P 500: 2,351.10, -65.52 (-2.71%)
NYSE Composite: 10,769.83, -267.01 (-2.42%)

WEEKEND WRAP: Stocks Wrecked, Bull Market Finished; Bears' Claws Are Out

If the week prior to last was characterized as one in which "the wheels fell off" (Money Daily, 12/16/18), the most recent week was nothing short of a full-blown train wreck.

Everything was on sale, but especially stocks, as the Fed raised rates, the US federal government ground to a halt over a $5 billion border wall, and investors were spooked by collapsing long-term interest rates and the specter of a recession in coming months.

More than anything else, however, stocks were on sale mostly because they were being perceived as overpriced, and by most accounts they were and still are. According to Robert Shiller's CAPE index, the week ended with the Shiller PE ratio for the S&P 500 at 26.75, down from the peak of 30 two weeks ago, but still well above the mean (16.59) and the median (15.69) levels.

Shiller PE ratio is based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio), Shiller PE Ratio, or PE 10

This is how bubbles are pricked, and, as Doug Noland candidly attests, "There is never a good time to pierce a Bubble." More from Noland:

"Expiration for the aged “Fed put” was long past due. For too long it has been integral to precarious Bubble Dynamics. It has promoted speculation and speculative leverage. It is indispensable to a derivatives complex that too often distorts, exacerbates and redirects risk. The “Fed put” has been integral to momentous market misperceptions, distortions and structural maladjustment. It has been fundamental to the precarious “moneyness of risk assets,” the momentous misconception key to Trillions flowing freely into ETFs and other passive “investment” products and strategies. It was central to a prolonged financial Bubble that over time imparted major structural impairment upon the U.S. Bubble Economy."

Noland's entire Credit Bubble Bulletin commentary can be seen here.

If Noland's perception is accurate (and there's little reason to doubt it), this week's cascading declines are merely the end of the first act in what is likely a three-act drama to be played out over the next 12-18 months. Surely, the tremors from February and March were early warnings that the persistent bull market was coming to a conclusion.

October's declines were blamed by some analysts - incorrectly - on the lack of stock buybacks during the "quiet period," and were nothing about which to be worried. Obviously, that analysis was short-sigthed and based upon the bubble hypocrisy that has guided markets since the Great Financial Crisis of 2008-09.

December's nosedive was pretty predictable. Stocks hadn't shown any inclination toward the upside for months and there wasn't a good catalyst for investors, nothing even remotely resemblant of a buying opportunity. Of course, some too the "buy the dip" bait a few times this year and have been destroyed. That concept is a dead doornail for the time being. Selling into any strength is likely to be the prevailing rear-guard action.

Once 2018 comes to an end - in just five more trading days - there will be some regrouping, repositioning, but until there's resolution of some basic issues (the Wall, Brexit, China, tariffs), there isn't going to be any kind of rally. Gains will be hard-fought, and sellers will be eager on short-term wins. The second phase of the selloff will last well past January, into the summer and possibly the fall before the endgame commences, with sellers capitulating en masse. By this time next year it may be nearing a bottom some 40-60 percent below the all-time highs. Investor confidence will have been at first shaken, then eroded, and finally, shattered. Wall Street will have a crisis of its own making, and the economy will be embarking into recession.

Markets have come full circle. Central banks have decided that the experiments of QE, ZIRP, and NIRP which propelled stocks to dizzying heights, are over, their purpose achieved, and now comes the hard work of withdrawing some level of liquidity from markets in an attempt to normalize markets.

The problems lie in execution. It's not going to be easy to take corporations off the baby bottle of leveraged stock buybacks which blew up expectations and prices but caused serious long-term harm to capital structures. This current crisis may turn out to be worse than the sub-price fiasco or the dotcom malaise simply because it involves so many companies that have gutted their balance sheets and will have no other recourse than to slash production, wages, jobs, capital expenditures or all of the above.

This week was a full stop.

There aren't going to be any more bailouts, white knights, back-room deals or "Fed Put." The coming regime is going to be one of hard and cold capitalism, where the strong get stronger and the weak are slaughtered. Wall Street brokerages are sure to be among the most celebrated casualties when everybody realizes these heroes of the past ten years aren't all that bright and that there aren't that many good stock pickers in down markets. The financial industry, already under siege, is about to be breached and downsized to more human and humane proportions.

There's only so much one can say about stock routs. The numbers are there for perusal and they are horrifying enough all by themselves. Hashing over the events of the week, as stocks slid, then rallied and slid more, and finally crashed on a Friday afternoon would be little more than overkill.

It was a very, very bad week, the worst since 2008, and some say, since the Great Depression. It may not have been the worst we will witness however, as this is only the beginning of the bear market.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95
12/17/18	23,592.98	-507.53	-1945.58
12/18/18	23,675.64	+82.66	-1862.92
12/19/18	23,323.66	-351.98	-2214.90
12/20/18	22,859.60	-464.06	-2678.96
12/21/18	22,445.37	-414.23	-3093.19

At the Close, Friday, December 21, 2018:
Dow Jones Industrial Average: 22,445.37, -414.23 (-1.81%)
NASDAQ: 6,332.99, -195.42 (-2.99%)
S&P 500: 2,416.62, -50.80 (-2.06%)
NYSE Composite: 11,036.84, -185.96 (-1.66%)

For the Week:
Dow: -1655.14 (-6.87%)
NASDAQ: -577.67 (-8.36%)
S&P 500: -183.33 (-7.05%)
NYSE Composite: -718.54 (-6.11%)

Everything was not gloom and doom, however. Here's Darlene Love, in one of her many appearances on the Late Show with David Letterman, performing "Chirstmas (Baby Please Come Home)." This is one of her best.

Stock Carnage Continues; NASDAQ Down 20%; Why It Is Happening

Stocks continued to sell off on Thursday, extending the December decline to dangerous levels.

The Dow has registered what is easily the worst month of 2018, while the NASDAQ joined the Dow Jones Transportation Index in bear market territory, down 20% from its August 29 high.

Pundits in the financial media are trying to assign blame wherever they can, on the Fed's recent rate hike, fear of a coming recession, the possible federal government partial shutdown, China's slump, a looming trade war. While those are contributing factors, the real culprits are the Federal Reserve and their cohorts in central banking in Japan, China, the ECB, the Bank of England and the Swiss National Bank.

These are the architects of the past decade's debacle of debt, beginning in the depths of 2008-09 and continuing through until today. Their schemes of zero interest rate policy (ZIRP), negative interest rate policy (NIRP) and quantitative easing (QE), which made money all-too-easily available to their willing friends in the C-suites of major corporations.

The corporations took the easy money, at rates of one to two percent or less, and repurchased their own corporate stock at inflated prices. Now that the executives have cashed out, milked dry their own businesses, they are upside-down, owning shares of stock purchased at 20, 30, 40 percent or more than they will sell for today.

2018 was the culmination of this global corporate theft, inspired by the gracious money printers at the Federal Reserve and other central banks. Over the past ten years, trillions of dollars, yen, yuan, euros, pounds and other currencies were brought into existence, lent to various large corporate interests in a variety of complex and/or simple transactions and now the gig is up, though one will never hear talk of this in the mainstream media.

What happens to a corporation that is holding shares it bought at $90, when the stock is selling for $60 and may be worth less than that? Nothing good, including cutbacks, rollbacks, layoffs, and the general demise of once-strong companies.

When these companies offer shares for sale - and they eventually will - they will realize losses and they will still have the loans from the central banking system to repay. Some will file for bankruptcy. Others will cut payrolls and expenses to the bone. The past ten years have been nothing short of complete and total corruption of the financial system, from top to bottom. This is why the selling has been intense and relentless and likely will not cease until stocks are 40 to 60 percent off the artificial highs created by reducing the number of shares available through stock buybacks.

It was a swell scheme that paid off handsomely for some of the top executives at many of the largest corporations, and the general public, the people with 401k or retirement or college funds tied to the stock market, are going to end up bag-holders, broke and dismayed, as well they should be.

If there is any justice in this world, the bankers will be fingered, the corporate executives tried and jailed, and money clawed back from their ill-gotten gains. But we all know from the 2008-09 experience that that will not happen. Nobody will be tried. Nobody will serve a single day in jail, and the Federal Reserve will continue on its merry way, inflating and deflating to their heart's content, stealing from the public as they have been since 1913.

That's all there is to it. Hopefully, you are not a victim, though in many ways, we all are.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95
12/17/18	23,592.98	-507.53	-1945.58
12/18/18	23,675.64	+82.66	-1862.92
12/19/18	23,323.66	-351.98	-2214.90
12/20/18	22,859.60	-464.06	-2678.96

At the Close, Thursday, the solstice, December 20, 2018:
Dow Jones Industrial Average: 22,859.60, -464.06 (-1.99%)
NASDAQ: 6,528.41, -108.42 (-1.63%)
S&P 500: 2,467.42, -39.54 (-1.58%)
NYSE Composite: 11,222.79, -149.05 (-1.31%)

Stocks Tank On Fed Rate Hike (Thank You, Captain Obvious); Transportation Index In Bear Market

What a racket!

As if there was ever any doubt that the Fed would hike the federal funds rate another 25 basis points, stocks shot up at the open and maintained a very positive stance right up until 2:00 pm ET, when the Fed did what everybody knew they would do all along.

Seriously, who in their right mind was buying prior to the rate hike? People with money to burn?

To get an idea of the kind of lunatics trading stocks on Wall Street, the Dow was up just about 300 points at 1:57 pm. By 2:08 pm - following the policy announcement - it was essentially flat... and it went down from there, eventually losing 351 points, closing at a new low for 2018.

Over the same time span, the NASDAQ was up 65 points, but 11 minutes later was down 38. The same fate that befell the Dow was true for NASDAQ, S&P, and NYSE Composite: fresh 2018 lows.

The Transportation Index was absolutely devastated, closing at 9,147.66, down 297.81 points (-3.15%), pushing the transports into bear market territory, down 21% from its September high.

OK, so it was one of those "heads, Fed wins, tails, you lose," kind of deal. There was no way the Fed was going to surprise anybody. It's simply not their style. They telegraph everything they do, because they're so, so important to the proper functioning of the economy, and they never balk at even the most obvious data or implication. Balderdash.

The Fed should be run out of town just like all other central banks have been, but the US sheeple population has put up with this particular band of thieves for the past 105 years. The Fed is why we have booms and busts, never-ending inflation, recessions, absurdly high interest rates on credit cards, and incomes that just don't quite match up with expenses for much of the former middle class.

The good news about the Fed's rate increase is that it may be the last one for a while. They may hike a few times in 2019, or, depending on how the stock market and/or ec responds, they may not hike at all. Meanwhile, they'll keep losing money by unwinding their massive, overvalued bond portfolio of US treasuries and toxic mortgage-backed securities dating from the sub-prime glory days.

Elsewhere, crude oil rallied a little bit, gaining to $47 and change per barrel. Gold and silver were punished, though each was down less than one percent. The real lashing will come tomorrow or at the latest, by the end of the year.

Thus, the Fed, in its infinite wisdom (greed), decided that it would be in its own best interests to destroy the global economy by hiking the overnight and prime rate for the ninth time since 2015.

Happy days for some. tears and more pain to come for many more.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95
12/17/18	23,592.98	-507.53	-1945.58
12/18/18	23,675.64	+82.66	-1862.92
12/19/18	23,323.66	-351.98	-2214.90

At the Close, Wednesday, December 19, 2018:
Dow Jones Industrial Average: 23,323.66, -351.98 (-1.49%)
NASDAQ: 6,636.83, -147.08 (-2.17%)
S&P 500: 2,506.96, -39.20 (-1.54%)
NYSE Composite: 11,371.84, -130.32 (-1.13%)

Oil Crashes, Takes Stocks Down With It

Quite literally, oil is the grease of the global economy. Nothing moves unless oil is pumped, shipped, distilled and employed in the manufacture of just about everything. It is instrumental not only in manufacturing, but in food production and distribution.

Thus, when the price of oil crumbles, as it did on Tuesday, it worth taking notice. WTI crude futures were down sharply on Monday and again on Tuesday, dipping below $46 per barrel before recovering slightly to around $46.50. Tuesday's slide marked a $30 decline in the price of crude in just the past three months. On a percentage basis, oil is off 40% from its high of $76 per barrel in early October, coinciding with an all-time high recorded on the Dow Jones Industrial Average (October 3).

While the price drop may superficially be assigned to oversupply, there's also the condition of slack demand amid what is largely being hailed as a global slowdown set to commence early in 2019, if not already well underway. If companies aren't growing, they're not using more oil. With too much supply already weighing down prices, a perceived lack of demand is causing futures traders to panic.

The price of oil is going to be a boon to consumers as gas prices have been dropping, with some states now seeing gas at the pump for under $2.00 per gallon. Cheaper gas helps people with moderate income, freeing up capital for other expenses. The last time oil was down in this range (2015-16) the price dropped as low as $30 per barrel but at the time, people expressed a desire to either save the extra money they weren't spending on gas or pay down debt. If that's the generally-accepted policy for consumers at this juncture, it's going to play right into the global slowdown meme and send not just oil and gas prices tumbling, but stocks as well, as has already been the case.

As far as stocks were concerned, traders tried to shrug off Monday's crushing losses by bidding the Dow up by more than 300 points on Tuesday. As has been the case for weeks, the rally fizzled midday, and the Dow - along with the other US indices - fell into negative territory early in the afternoon. In what's become something of a motif for this current regime of volatility, short-covering perked up the indices into the close, but the entire session wasn't much of a response to Monday's mess. In fact, there was more weakness on display as stocks failed to hold ground, finishing with minor success.

With oil in the dumps and stocks hitting the skids, now might be the right time to cash out and walk away from the betting tables. After all, it is December. Any losing wagers can help with the inevitable tax bill come April.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95
12/17/18	23,592.98	-507.53	-1945.58
12/18/18	23,675.64	+82.66	-1862.92

At the Close, Tuesday, December 18, 2018:
Dow Jones Industrial Average: 23,675.64, +82.66 (+0.35%)
NASDAQ: 6,783.91, +30.18 (+0.45%)
S&P 500: 2,546.16, +0.22 (+0.01%)
NYSE Composite: 11,502.16, -29.96 (-0.26%)

Global Stock Rout Deepens; Dow Loses Another 500 Points; NASDAQ Down 16.7% Since August

The pain is spreading, and it doesn't seem to be about to abate any time soon.

According to Dow Jones Market Data, the S&P 500 closed at its lowest level since October of 2017, the NASDAQ finished at its lowest since November of 2017, while the Dow closed at lowest level since March 23. Only a rally in the final 15 minutes of trading kept the Dow from closing at its lowest level of the year.

The Dow had plunged as low as 23,456.8 with just minutes to the closing bell, but short-covering boosted the industrials more than 100 points in the final minutes of trading. Not that it matters very much, but the closing low for the year was 23,533.20. Prior to that, the Dow closed at a low of 23,271.28 on November 15, 2017.

Both of those levels are likely to be subsumed, as the stock rout about to be hit with another dose of reality. Trumping anticipation, the Fed meeting which ends Wednesday afternoon at 2:00 pm ET, is almost certain to include a 25 basis point raise to the federal funds rate. On Friday, the federal government, unable to reach a suitable compromise on President Trump's border wall, will go into a partial shutdown.

Neither event - especially the federal shutdown - is of the earth-shattering variety, but they come at a very inopportune time for the market, which is struggling to find any good news upon which to hang a rally.

Europe is either in flames (France), in a bear market (Germany), or about to enter a recession thanks to the end of the ECB's brand of QE. Beyond that, there's the uncertainty of an orderly departure from the EU by Great Britain. The official date for Britain to separate itself from the EU is March, but there have been rumblings of an extension and more than just a little unrest from the island nation to the continent concerning what effect a member country departing will have on the solidarity of remaining members.

In China and Japan, an economic slowdown is already well underway, so it appears that the sellers have reason enough to move away from stocks, and rapidly. There are just too many negatives floating around geopolitical and financial circles for all of them to be resolved in the near term. Rather, these worries turn into realities which the market doesn't appreciate, such as the actual imposition of tariffs rather than mere rumors and threats of them. The same goes for the Fed's upcoming rate hike and the government shutdown. It's become a market that's twisted the old saw into "sell the rumor, sell the news." Everything is on sale and buyers have been heading to the sidelines beginning in February. Since October, the pace has picked up noticeably, but December threatens to be the worst month of the year for the Dow, at least.

For perspective, February's loss on the Dow was 1120.19 points.

March saw a decline of 926.09.

In October the Dow lost 1341.55 points.

So far this month, the Dow is lower by 1945.58 points, making the October through December (November's gain was 426.12 points) period worse than the February-March spasm.

The NASDAQ is down 16.7% since August 29. WTI Crude was seen at $49.45 per barrel, the lowest price since September, 2017.

Throughout the years of experimental financial chicanery of QE and ZIRP, and NIRP (negative interest rate policy) by the Federal Reserve and fellow central bankers following the Great Financial Crisis (GFC) of 2007-09, the question was always, "how is this all going to end?"

Now, we have the answer, firsthand, and, as many predicted, it's not pretty and likely to get worse.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95
12/17/18	23,592.98	-507.53	-1945.58

At the Close, Monday, December 17, 2018:
Dow Jones Industrial Average: 23,592.98, -507.53 (-2.11%)
NASDAQ: 6,753.73, -156.93 (-2.27%)
S&P 500: 2,545.94, -54.01 (-2.08%)
NYSE Composite: 11,532.12, -223.27 (-1.90%)

Friday Meltdown Leaves Stocks Near Lowest Levels of Year; All Major Indices In Correction

After the first week of December ended in tears, there were glimmers of hope for a rebound in stocks as the clock ticked closer to Christmas and the end of the consumer shopping/spending season.

While retail sales - as especially so, online sales - continued strong, stocks suffered through another week of volatility, though it didn't actually present itself until the very end.

The Dow was up a bit over 200 points as of Thursday's close, but at the opening bell on Friday it was apparent those gains would not hold. In the end, the Dow lost nearly 500 points on the day, sent that index into correction, along with the S&P, joining the NASDAQ, NYSE Composite, and the Dow Jones Transportation Average.

The tailwinds of the recent selloff have its roots in October, when the Dow most a cumulative 1,345 points. November's gains were only 426, but the Dow is down another 1438 points in December, challenging the closing low of the year, 23,533.20 on March 23.

Besides the usual concern over profits and/or losses, financial markets have plenty of issues to keep investors up at night. There's the continuing Brexit issues, which nearly cost Prime Minister Teresa May her government, and coming up this week is the Fed's FOMC meeting in which the federal funds rate is supposed to be hiked another 25 basis points, along with the real possibility of a particle government shutdown over budget issues, primarily concerning President Trump's promised border wall, and the funding of such.

So, instead of being perplexed over dollars and cents, Wall Street seems more focused on politics and nonsense, as the relentless - mostly baseless - attacks on Mr. Trump continue to overhang every discussion policy and threaten to throw the entire country into chaos.

Form a technical point of view, stocks are in very dangerous territory. The dreaded "death cross," in which the 50-day moving average falls below the 200-day moving average, occurred last week on the S&P, had already happened in mid-November on the NYSE Composite Index, made its appearance the last day of November on the NASDAQ and is maybe two more days away from happening on the Dow.

It's a fairly obvious phenomenon, which points up near-term weakness. When both the 50 and 200-day moving averages point lower in such a condition, it doesn't take a genius to figure out that a hungry bear is roaming free in the forest.

Despite trading having been buoyant during most recent holiday seasons, this one appears to be rather different. There's a distinct possibility of a global slowdown, especially since retail sales and industrial production in China both slowed in November. While politically-oriented pundits will point to Trump's trade war with the Chinese as the culprit, the issue seems to be more complex and deep-seated than such a superficial analysis suggests. China's economy, built on massive credit expansion, ghost cities, and often spurious economic data, has been booming for 20 years and has been due for a slowdown, correction, or even recession. As is the case with the longest bull market in US history, nothing lasts forever.

Any gains in the coming weeks are likely to be eaten away rather quickly as profit-taking is followed by loss prevention. Even as the Fed raises rates, bond yields should continue trending lower as investors seek safety and shun profligate speculation.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08
12/14/18	24,100.51	-496.87	-1437.95

At the Close, Friday, December 14, 2018:
Dow Jones Industrial Average: 24,100.51, -496.87 (-2.02%)
NASDAQ: 6,910.67, -159.67 (-2.26%)
S&P 500: 2,599.95, -50.59 (-1.91%)
NYSE Composite: 11,755.38, -180.82 (-1.51%)

For the Week:
Dow: -288.44 (-1.18%)
NASDAQ: -58.59 (-0.84%)
S&P 500: -33.13 (-1.26%
NYSE Composite: -186.55 (-1.56%)

Sluggish Trading, Late-Day Rally Lifts Dow

A late-session rally moved the Dow into positive territory into the close, and pared losses on the other major averages. The entire trading day was spent with the Dow criss-crossing the unchanged line. Trading was spotty, sporadic and inconsistent.

This was a bit of a change from the volatility seen recently, though there are still enough jittery global events and data points to make traders nervous heading down the home stretch of the holiday season.

Using Fibonacci numbers to exploit the current rally - using intra-day numbers on the Dow - maths out like this:

December 3 high: 25,980.21
December 10 low: 23,881.37

Difference: -2,098.84

First resistance (23.6%): 495.33 points = 24,376.70 (Dow closed at 24,370.24 on Tuesday, December 11; Close enough!)
Second resistance (38.2%): 801.76 points = 24,683.13 (the Dow exceeded this level on Wednesday, but pulled back below it at the close. On Thursday, the Dow approached this level but could not exceed it, signaling a possible breakdown to end the week.)
Third resistance (50%): 1,049.42 = 24,930.79
Fourth resistance (61.8%): 1,297.08 = 25,178.45 (this is usually the key, where resistance is very high and a pullback can be expected. If the Dow powers through this level, expect it to go all the way back to where it started, i.e., 25,980.21 (100% retracement).

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19
12/13/18	24,597.38	+70.11	-941.08

At the Close, Thursday, December 13, 2018:
Dow Jones Industrial Average: 24,597.38, +70.11 (+0.29%)
NASDAQ: 7,070.33, -27.98 (-0.39%)
S&P 500: 2,650.54, -0.53 (-0.02%)
NYSE Composite: 11,936.16, -7.13 (-0.06%)

Federal Reserve Loses $66 Billion; Volatility Meets Fibonacci Sequence As Sucker Rally Extends

Here's a fun headline:

Fed piles up $66 billion in debt.

Now, since the Federal Reserve System has been known to conjure up money out of thin air, how can they incur losses, and, if they somehow manage that feat of economic alchemy, do they even matter. The author of the article says no, but the reality is that our fiat money system - and, with it hose of the rest of the world - are fantasies. The money created is all debt. Nothing but debt. Most of it is incurred when the US treasury - or the treasury of some other nation - issues a bond. It's debt, and it's bought by the Fed or one of their agents, and, viola! instant money is created.

Most of government-issued debt is never paid off, which is why the United States has a $21 trillion - and growing - debt. Some of it is owed to other countries, some to private investors (like the Fed), and some of it is owed elsewhere.

Getting back to the Fed and their debt, how they managed to get into debt themselves is pretty simple. They bought a ton of near-worthless paper called Mortgage Backed Securities (MBS) back in the halcyon days of sub-prime lending (2006-2011), and that paper is worth today, as some of it is maturing, worth less than what they paid. They did so to bail out their friends, the big banks, and now the piper is being paid. This will continue for some time, as theses MBS mature at different times. Like most mortgages, some won't mature for 30 years, so think 2036-2041 before they're all exhausted, though some will mature well before those dates.

The Fed wants to shrink its balance sheet, so this is how they're doing it, retiring debt. Do they care? Not particularly. To them, gains and losses are ledger entires and nothing more. They exist in a parallel universe from the rest of us who can't just roll over our debts indefinitely. The Fed will outlast all of us, and they know it.

As far as the impact this will have on the economy and markets and currencies, it's likely not good, but it isn't something to lose sleep over either. The Fed's money machine is massive and they'll just print more if they run into problems. However, for the rest of us, that may be inflationary, though that wasn't a huge issue all the time they were engaged in QE, printing to their heart's content to save the world from economic ruin.

As long as everyone keeps using their money, it's fine. If other countries shy away from the glorious dollar - something that some countries already are doing - it could get a bit rough in the international trade venues. Until very many people, businesses, and nations lose faith in the almighty greenback, we're all good, however. But the Fed will still be losing money for the foreseeable future. Nothing to worry about. They can - and will - make more.

As far as the stock markets are concerned, today was day two of the Mother of all Sucker Rallies which was presented yesterday. Stocks were once again bid higher, with the Dow up more than 450 points. Once again, the afternoon was telling, as sellers took control, leaving the Dow and other indices with reasonable gains.

With the rally ongoing, it might be instructive to concern ourselves with Fibonacci levels, as detailed below.

Fibonacci numbers are often used in technical analysis to determine support and resistance levels for stock price movement. Analysts find the two most extreme points (peak and trough) on a stock chart and divide by the Fibonacci ratios of 23.6 percent, 38.2 percent, 50 percent, 61.8 percent and 100 percent.

Using Fibonacci numbers to exploit the current rally - using intra-day numbers on the Dow - maths out like this:

December 3 high: 25,980.21
December 10 low: 23,881.37

Difference: -2,098.84

First resistance (23.6%): 495.33 points = 24,376.70 (Dow closed at 24,370.24 on Tuesday, December 11; Close enough!)
Second resistance (38.2%): 801.76 points = 24,683.13 (the Dow exceeded this level today, but pulled back below it at the close. Watch for direction on Thursday.
Third resistance (50%): 1,049.42 = 24,930.79
Fourth resistance (61.8%): 1,297.08 = 25,178.45 (this is usually the key, where resistance is very high and a pullback can be expected. If the Dow powers through this level, expect it to go all the way back to where it started, i.e., 25,980.21 (100% retracement).

This should give a signal of when the current sucker rally is about to expire. After that, the resistance points will become support, and if the Dow plummets through them, get ready for another round of massive losing days.

Happy Holidays.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22
12/12/18	24,527.27	+157.03	-1011.19

At the Close, Wednesday, December 12, 2018:
Dow Jones Industrial Average: 24,527.27, +157.03 (+0.64%)
NASDAQ: 7,098.31, +66.48 (+0.95%)
S&P 500: 2,651.07, +14.29 (+0.54%)
NYSE Composite: 11,943.29, +82.64 (+0.70%)

The Mother Of All Sucker Rallies

The Miracle Monday Rally has been encored by a follow-up, Terrific Tuesday, which pushed stocks further into a positive realm, though despite Herculean efforts, it didn't end that way.

Making the high of the day just minutes into the session, the Dow was up more than 350 points. Apparently thinking their work was done for the day, whoever was hitting the BUY button went out for coffee, a stroll, and lunch, because the Dow spent the next four-and-a-half hours leaking lower, to a point at which it was 200 points down by 2:00 pm ET.

Back at the controls, the clandestine clerk for the Federal Reserve got back to bidding up stocks, sending the Dow - and with it the rest of the indices - back into the green zone over the next hour.

The entire convulsion involved some seriously heavy lifting and an equally resolute effort by the sellers. From the low point on Monday to the early Tuesday high, the Dow rocketed 910 points, but then came back down another 570 before rocketing higher by 300 points. In the end it was all for naught, with the Dow losing 53 points by the closing bell.

Boo-hoo-hoo. It may be Christmas, but January's 401k statements are likely to be carrying a load of coal.

Whatever unnatural force is preventing a complete crash, it has friends in far-away places. All other indices around the world were sucked into the mother of all sucker rallies on Tuesday, saving the world from a long-overdue asset re-pricing that will, as sure as the sun rises in the East, continue to wreak havoc on the investing universe for the foreseeable - and equally, the unforeseen - future.

Bah, humbug.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20
12/11/18	24,370.24	-53.02	-1168.22

At the Close, Tuesday, December 11, 2018:
Dow Jones Industrial Average: 24,370.24, -53.02 (-0.22%)
NASDAQ: 7,031.83, +11.31 (+0.16%)
S&P 500: 2,636.78, -0.94 (-0.04%)
NYSE Composite: 11,860.65, -28.64 (-0.24%)

Seas of Red Ink; Global Collapse In Asset Pricing Underway; US Markets In Denial

Was Apple (AAPL), Amazon (AMZN), or Microsoft (MSFT) ever worth a trillion dollars?

All were, for a while, supposedly worth that high until the market considered the madness of such lofty valuations. Then, they were probably not.

A little quickie math is appropriate. For a company to be worth a trillion dollars, in rough terms, it would have to make a profit of $143 off every person on the planet (we're using 7 billion as an estimate) in a calendar year. Figuring a 15-year capitalization period, it's possible.

However, with the global median individual annual income at about $3000, it's unlikely. And for three companies to be worth that would mean every person on the planet, including babies and the elderly in nursing homes or hospices, would have to spend enough so that combined, Apple, Amazon, and Microsoft would net a profit of $429. So, for three companies to have that kind of valuation simultaneously is something right out of science fiction, because these people would have to spend about $2000 (figuring a rough profit margin of 20%) on products from just those three companies. Were this to happen, a third of the planet would die off because they spent most of their money on smartphones, software and trinkets from Amazon (with much lower profit margins, BYW), instead of food.

And what about all the other companies on the planet? From the corner store to multi-national corporations like General Motors, Nestle, Samsung, etc.? How much money do they extract from every person in the world with these three biggies crowding out everybody else? It simply doesn't add up.

That's why asset prices are collapsing. Companies, or rather, the stock prices representing shares of these companies are not worth what they're selling for, the big money knows it, and they're selling their shares to people less informed or desperate to make their investments pay off in the global rat race.

Let's face facts. US Stocks have more than tripled in value over the past 10 years. That doesn't make any sense. Were Americans suddenly three times as wealthy as they were 10 years ago? No. No. And Hell No.

Today, as stock prices tumbled around the world, US markets barely suffered a scraped knee and a paper cut. The NIKKEI was down 459 points, or, 2.12%. Japan's economy shrank by 2.5% in the third quarter.

Stock markets in Australia, New Zealand, Hong Kong, India, China, Indonesia, South Korea, Germany, France, England, Belgium, Italy, Greece, Spain, Brazil, Argentina, Mexico, and Canada were all down between one and two-and-a-half percent, again, after weeks of declines. Many of these indices are in correction. Germany, South Korea, China, Japan, and others are in bear markets, down more than 20%. That's just a sampling. But the US carries on, though the Dow is less than 325 points away from correction territory. All the other US indices are in correction, down more than 10%.

Dow Industrials were down more than 500 points in the morning, but finished, magically (same as last Thursday) well off the lows, in fact, with a small gain. Magic! Denial! HFT Algorithms! Programmed Trading! Central Bank Intervention! It's only temporary.

US stocks have performed better than the rest of the world, so far, but they are trending in the same direction - lower. Brokers and dealers on Wall Street are living in a La-la Land that would put Hollywood to shame. Many in the financial sphere are in deep denial. They don't believe the US economy can contract, that stocks can be re-priced lower, down 20, 30 or 40 percent or more. It has happened in the past, many times, and it will happen again. It is happening right now.

But, but, but, we can't have a stock market crash during the Christmas season, can we? Maybe stocks will not exactly crash this month, but the performance has been - on a day-to-day basis - underwhelming. Winter is coming (Dec. 20).

According to Dow Theory, the Dow Jones Transportation Index confirmed the primary trend change - from bullish to bearish - that the Dow Jones Industrial Average signaled on November 23. That's the second time this year Dow Theory confirmed a primary trend change. The last was through March (Industrials signaled) and April (Transports confirmed), but stocks bounced back quickly through the spring and summer. By autumn, the bloom was off the rose, however, and the false rally began to unwind, and it continues to unwind.

And, with that, today's musical selection, "Turn, Turn, Turn," released October 1, 1965, written by Pete Seeger, performed by the Byrds.



Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20

At the Close, Monday, December 10, 2018:
Dow Jones Industrial Average: 24,423.26, +34.31 (+0.14%)
NASDAQ: 7,020.52, +51.27 (+0.74%)
S&P 500: 2,637.72, +4.64 (+0.18%)
NYSE Composite: 11,889.29, -52.64 (-0.44%)

WEEKEND WRAP: The Week The Wheels Fell Off

Was this the week that everything fell completely apart?

The answer is a matter of perspective and speculation, but it sure looked pretty bad. Stocks, with no significant deviation between the Dow, NASDAQ, NYSE Composite, and S&P 500 companies took a major hit, or, rather, a series of heavy blows. Stocks were bludgeoned with regularity, flogged within an inch of their lives, only to be flayed again the following day without respect to any particular sector or class.

Monday was the only positive day of the week, with all the major indices closing nicely in the green. Tuesday was a nightmare, with the Dow dropping nearly 800 points and the other indices dragged down the same abyss. By virtue of the death of former president George H.W. Bush, current president, Donald J. Trump issued an executive order, closing all federal offices for a day of mourning, thus shutting down not just mail service and other government functions, but the financial markets as well.

After the surprise day off, traders got right back to selling again, whacking away with the same ferocity as on Tuesday, but, by mid-afternoon, a suspicious rally emerged, sending the S&P and NASDAQ into positive territory by the close, leaving the Dow with a minor loss of 79 points after it had been down more than 700 during the session. As many expected, the lift late Thursday was either short-term short covering or some button-pushing by the PPT (President's Working Group on Financial Markets... remember them?), setting up Friday for a major collapse of another 558 points on the Dow with the other indices following the lead lower.

What actually was behind the carnage was difficult to discern, as a convergence of events helped shape the worrying. Wrapping up the G20 meeting in Buenos Aires on Sunday, President Trump and China's president, Xi Jinping, announced a 90-day calling off period on new tariffs that were supposed to go into effect and increasing the percentages on others already in force on January 1. Those changes were postponed until March 31, with the intent of the two leaders to work out a framework for trade policy going forward. Markets were obviously pleased on Monday, but by Tuesday felt that a mere 90 days would not be enough to develop long-term policy for either nation.

Politics also is playing a role in the background, as Special Counsel Mueller's bogus "Russia collusion" investigation drags onward with the expectation that a final report will is forthcoming in the very near term. The corrosive political climate in Washington is not only a worry for those involved or tangentially aligned, but it's also having a somewhat chilling effect on investments. Nobody likes uncertainty, but especially so, Wall Street, and when it involves the highest levels of the federal government, the fear gauge goes bonkers and skepticism reigns.

On top of that, there's still a general perception that stocks are not just fully valued, but some are significantly overvalued. More than a few analysts have maintained that the effects of the Trump tax cuts are wearing thin, the federal government is running enormous deficits and a profits squeeze will be apparent by the end of the first or second quarter of 2019.

A minor inversion of the treasury yield curve occurred - almost without notice - on Monday, when the yield on the three-year bill rose above that of the 5-year note. On Tuesday, the 2-year joined in, and both the 2-and-3-year yields ended the week above that of the five. The 2-year closed out Friday at 2.72%, the 3-year the same, and the five-year at 2.70%. The 10-year note was last seen with a yield of 2.85%, and the 30-year down to 3.14%. Bond vigilantes were out in force, and the flight from stocks sent both short and longer-dated bonds soaring. While not quite the textbook inversion of the 2s-10s that have preceded every recession since 1955, the indications are not at all rosy.

Finally, on Friday, November's non-farm payroll data came in woefully short, with expectations of 198,000 jobs met with the reality of just 155,000 new jobs for the month.

The short explanation is that the bull market is getting awfully long in the tooth, the economy is set to slow down a bit in 2019, and the big money on Wall Street is heading for the hills, i.e., bonds and cash or cash equivalents. Dow Theory is about to signal a bear market. The Dow has already sent the signal with its close at 24,285.95 on November 23. Confirmation will come if the Dow Transports close below 9,896.11. It closed Friday at 9,951.16.

With the Fed's FOMC meeting scheduled for December 18-19, and the widely-accepted view is that the Fed will raise the federal funds rate another 25 basis points, there's more than one good reason to be getting out of stocks and those in the know - or at least those who think they know - have been scurrying like rats off a sinking ship.

With the S&P now in correction and the NASDAQ, NYSE composite and Dow Transports already having been there, only the Dow remains above the magic mark of -10 percent. All the major indices show losses for the year and the Dow is just a few hundred points from correction.

Elsewhere on the planet, the number of countries in which their stock markets are already down more than 10 percent continued to grow, with Germany's DAX just a shade above bear market status. That's a huge issue, since Germany is Europe's strongest economy. Given the angst over Brexit, the unwinding of the ECBs massive balance sheet, and Japan's upcoming announcement about the end of QE measures, the focus could easily be on Europe, as it will almost certainly be headed for a recession in 2019. Since Japan's been in something of a recessionary decline for the past 25 years, any slowing of growth on the island nation will barely elicit more than a yawn.

If Europe is about to fall over, the US will almost certainly follow. So much for Making America Great Again (MAGA). The disassembly of the globalist power structure, the rise of populism (marches and violent riots in France) and a global economy on its knees after 10 years of fake stimulus may all be leading to a recession that will have long-lasting and severe consequences.

So, yes, this was the week the wheels fell off.

Here's how the Traveling Wilbury's see it, with the cheery "End of the Line."



Happy Holidays!

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51

At the Close, Friday, December 7, 2018:
Dow Jones Industrial Average: 24,388.95, -558.72 (-2.24%)
NASDAQ: 6,969.25, -219.01 (-3.05%)
S&P 500: 2,633.08, -62.87 (-2.33%)
NYSE Composite: 11,941.93, -202.48 (-1.67%)

For the Week:
Dow: -1149.51 (-4.50%)
NASDAQ: -361.28 (-4.93%)
S&P 500: -127.09 (-4.60%)
NYSE Composite: -515.62 (-4.14%)

PPT To The Rescue, But For What Purpose?

Prepare for lower lows and lower highs.

It's long been maintained that central banks and/or governments should intervene in capital markets to keep people from panicking. That can also be read as "whenever stocks go down too much, too fast, we're here to protect our friends' investments."

For context, the Dow Jones Industrial Average was down more than 700 points today. It rallied to close with a minor loss. One problem. All other major stock indices around the world closed down between two and three-and-a-half percent. America is great, but not so great that it can avoid a global slowdown. Nefarious forces behind the scenes - much like the man behind the curtain in the Wizard of Oz - averted a major selloff. Globalism is ending, and with it, many multi-national stocks are going to be badly damaged.

That's what today's miracle late-day rally was all about, because if stocks lose value, the system falls apart. It's really that simple. For context, figure this: corporate buybacks have been at record levels the past three years. Corporations have been buying their own stock at a frenetic pace, at the highest prices. If stocks fall, these companies will be sitting on mountains of their own stock which they bought at ridiculously-high prices. When they are forced to sell to raise capital, they will be losing money on investments in their own companies.

It's not just stupid, it's corrupt to the core, and that, friends, is why stocks can't go down.

But they will.

For a little more context, consider that according to Dow Theory, the primary trend has changed again from bull to bear. More on this in a later post.

Caveat Emptor.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79

At the Close, Thursday, December 6, 2018:
Dow Jones Industrial Average: 24,947.67, -79.40 (-0.32%)
NASDAQ: 7,188.26, +29.83 (+0.42%)
S&P 500: 2,695.95, -4.11 (-0.15%)
NYSE Composite: 12,144.41, -77.57 (-0.63%)

MidDay Digest: Global Rout Underway; Asia, Europe Down Big, US Stocks Plunge

This is a Money Daily update on the churning volatility in stocks, which has taken on prodigious proportions as of Tuesday and extended - after an unusual break due to President Trump ordering all federal offices (and with it the stock market) closed in mourning for the late George H.W. Bush, 41st president - into Thursday's trading.

Asian stocks were wracked as the sun rose from the Pacific. Japan's NIKKEI was down nearly two percent, and Hong Kong's Hang Seng fell 2.47%. European markets opened lower and the selling accelerated throughout the day. Of particular note was Germany's Dax, which stood at 10,810.98 by the close, down 389.26 points (-3.48%). The DAX is now down 19% from its October 30, 2017 high. Another 100-point decline will put it officially into a bear market.

Other European bourses were hit hard, with losses of three to three-and-a-half percent on all major exchanges.

When stocks opened in New York, the rout had reached critical velocity. The ow opened down more than 400 points and continued selling off. At one point, the Dow was down more than 700 points, but has recovered somewhat as of this writing. With the NASDAQ already in correction territory, the Dow and S&P are close, both down roughly nine percent from recent highs.

There will be another post here after the market closes. Look for a full recap about 7:00 pm ET.

Heads Up! Stocks Selling Off Worldwide; US Open Looking Ugly; Germany's DAX Nearing Bear Market

After an unscheduled day off for the Kumbayah TV presentation of George HW Bush's funeral Wednesday, the rest of the world's equity bourses took the day to vacillate, but Thursday looks to be a bloodbath of magnificent proportions.

Asian stocks were down broadly in Japan, Hong Won, China, and elsewhere, and European stocks opened lower and continued to descend. The DAX, Germany's main stock exchange, is approaching bear market status, down 19% from an all-time high of 13,478.86, reached on October 30, 2017. The DAX is currently trading around 10,940.

At this writing, Dow futures are off more than 450 points, S&P futures have fallen nearly 50, and NASDAQ futures are 115 points lower.

Money Daily will be monitoring events throughout the US session, as this current downdraft appears to be one without a bottom.

Stocks Rocked As Europe Burns, Political Skepticism Soars; Globalism Grips As Populism Rises

With all the good news that's been spreading of late, the magnitude of this most recent setback was, for some, a little overdone. Others, who see the planet for what it is, see populism on the rise and globalism fading into history.

Prepare for some over-the-top hyperbole in 3...2...1...

Besides wealth inequality reaching heights heretofore unseen, taxation of the general populace in developed nations has reached catastrophic proportions. As seen in the European protests, the civility of the average man and woman, having been grossly abused, has been stretched beyond the limits of many whose toils seem to barely keep pace with the endless panoply of regulations, fees, fines, taxes and penalties. This is how epochs end.

In France, Germany, Sweden, Belgium, Italy and elsewhere, the citizenry has had enough of misrepresentation by so-called officials, elected, selected, or otherwise, and they are seeking economic and social freedom. The forces of globalism have been resolute in obfuscating reality and distorting the obvious all the while raking in the spoils of their pernicious policies and decietful politics.

In the United States, the working class has seen through the flash narrative surrounding the demonization of the popularly-elected President Trump. Americans no longer want illegal migration across their borders, handouts to the poor or the rich, nor policies that do them no good. The entire planet is on the verge of an emotional and psychological breaking point. It has been many years in the making, but, every day that goes by is rife with lies, innuendo, untruths, double-talk. Within the next year or two, everything is going to go sideways. The politics have simply outpaced the usefulness of the ruling class. It's apparent to just about anybody who give a damn and the wisest of the monied class on Wall Street are running for the proverbial hills.

Who knows what causes stocks to zig-zag on a day-to-day basis, for the Dow to pick up 600 points one day and drop nearly 800 the next?

In any case, the point drop on the Dow was the fourth-largest in market history. The other three larger also occurred this year. For the NASDAQ, it was the sixth largest. All of the 11 largest point declines on the NASDAQ occurred in either 2000 or 2018.

The Dow transports (DJT, -4.39%) tumbled 476.37 points, or 4.4%, with all 20 components closing lower. The previous biggest-ever point decline was 445.16 points on Oct. 10. At its intraday worst, the index was down as much as 565.23 points, or 5.2%.

Analysis of the recent volatility is sure to take on obscene forms from a parade of wizened economists, generalists, and hobbyists. None of them will have it exactly right. One day, all the world's full of unicorns and honey. The next, it's going to hell in a hand basket.

Whatever your particular niche or trading style, the current offers a uniquely volatile and confounding proposition for traders, speculators, or even the casual investor.

For the coming months, expect more of the same.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39

At the Close, Tuesday, December 4, 2018:
Dow Jones Industrial Average: 25,027.07, -799.36 (-3.10%)
NASDAQ: 7,158.43, -283.09 (-3.80%)
S&P 500: 2,700.06, -90.31 (-3.24%)
NYSE Composite: 12,221.98, -355.56 (-2.83%)

Stocks Spurt On Tariff Truce; 3-5 Yield Curve Inverts

There was good news on the trade front, but bad news concerning a possible recession.

At the conclusion of the G20 meeting in Buenos Aires, President Trump and his Chinese counterpart, Xi Jinping, announced a 90-day moratorium on tariffs set to take effect on January 1, 2019. Some of the tariffs already in place were set to increase while new tariffs on a variety of goods were to take effect on the new year, but the leaders of the world's two largest economies decided on a cooling-off period and further talks before proceeding.

That good news sent futures soaring in pre-market trading, the euphoria spilling over into the regular session. Barely noticed - and un-noted by the financial press - was a minor inversion in interest rates, with the yield on the 5-year note (2.83%) falling below that of the 3-year treasury note (2.84%).

Though it's not the inversion that most economists are looking for in terms of portending a recession, the minor inversion is a warning shot. The 2-year and 10-year notes are the fear standard, with an inverted curve of those rates consistently preceding every recession since 1955. Currently the 2-year note stands at a yield of 2.83%, while the 10-year holds at 2.98%, notably below 3.00%, after Fed Chairman Jerome Powell softened his stance on rate hikes last week.

Thus, there's a split narrative that threatens to put a lid on gains in the near term. Trade wars have been postponed, for now, but 90 days isn't long enough to establish new guidelines between China and the USA. With the Fed set to raise and check, interest rates are going to give them some maneuverability, though not much, with the federal funds rate settling in somewhere between 2.25 and 2.50%.

Bond vigilantes brought the 10-year note down below the Maginot Line of 3.0% on the first trading day of December. That's more than enough speculation as to where interest rates are headed. In a word, nowhere. The ancillary note is on growth - both domestic and global - which has had a bit of a bump thanks to US strength, but pockets of malaise are popping up everywhere. There seems to be no smooth path heading into 2019, so, after a boost from the Fed and another from the international trading community, this early December rally may not have enough gusto to carry it past the FOMC meeting and through the holidays.

Much emphasis will be put on consumer spending, though with an early Thanksgiving, holiday spending might just peter out a week before Christmas.

It's not all doom and gloom. It's more like murky, with a light at the end of some tunnel.

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97

At the Close, Monday, December 3, 2018:
Dow Jones Industrial Average: 25,826.43, +287.97 (+1.13%)
NASDAQ: 7,441.51, +110.98 (+1.51%)
S&P 500: 2,790.37, +30.20 (+1.09%)
NYSE Composite: 12,577.54, +120.00 (+0.96%)

WEEKEND WRAP: Powell Puts Positive Spin On Rates, Economy; Stocks Respond With Banner Gains

As much as stocks were flattened last week, they gained back this week, and then some, rebounding mainly off the lips of Fed Chairman Jerome Powell, who uttered two words which are sure to become ensconced within the annuls of great Fed Chairman one liners, such as Alan Greenspan's notorious "irrational exuberance."

Having a way with words, especially concise two-word constructs, Powell uttered, in a speech at the Economic Club of New York, that interest rates were "just below" neutral, sending stocks spiraling upwards on Wednesday.

Those gains followed two prior sessions with more pedestrian advances, the Wednesday push a 617-point blast on the Dow which sent the industrials into positive territory not only for the month, but for the year as well. The week's gains were capped off by a window-dressing close on Friday, with the Dow posting a nearly 200-point gain, all of which came after 1:30 pm ET.

Events of the week - from Powell's speech to Trump's dealings at the G20 in Buenos Aires - managed to put a positive spin on the outlook for stocks going into the final month of the year and the holiday shopping season.

Effectively, what Powell's statement on interest rates did was virtually assure a 25 basis point hike in the federal funds rate and then a pause at what would have been the next logical rate increase, at the March FOMC meeting, and beyond. Whether the Fed's members actually believes that an overnight rate of 2.25-2.50% neither hinders nor aids the US economy is a question open for debate, as most believed that more rate hikes were necessary per the minutes of the last FOMC meeting earlier in November.

That sentiment put a bit of a damper on the market when released on Thursday, but, as Wall Street memories seem exceedingly short these days, the flattish close didn't have any lasting effect.

Once into 2019, the Fed is likely to continue to spin positively, as Janet Yellen's honorable mention entry in the two-word scrabble that is Fedspeak, "data dependent" should be rolling off the lips of more than a few Fed officials in the cold months of winter.

Undeniably, a dovish Federal Reserve can be nothing but good for stocks, which are the de facto underpinning of the US economy. The Fed - and Powell in particular - may have been taking a sideways glance at the housing market as well, another pillar in the economic construct. Rising mortgage rates have shut down advances in new and existing home sales, punishing home builder stocks like Lennar (LEN), D.R. Horton (DHI), and KB Home (KBH). A stagnant housing market may have been instrumental in the formation of Powell's suddenly-accomodative stance.

Even with the rebound this week, stocks still have a pretty large slope to scale to get back to September or October's all-time highs. The NASDAQ still has issues with falling tech stocks and GM's announcement that it was shuttering five factories and laying off 14,000 workers had a chilling effect on what was an overwhelmingly positive week.

Elsewhere, oil continued to hover at the $50 level for WTI crude, precious metals remained flat to negative, but other global markets perked up a bit.

When the FOMC meets on December 18-19, there will be little doubt about their direction. A rate hike of 0.25% is practically baked into the cake. After that, however, it certainly appears the Fed will consider its work done, for now, at least. The next rate hike - and there is almost certainly to be one or two in the next 12-18 months - will probably come after some gaudy economic data or fresh highs in the stock market.

Until then, the skies are blue and smooth sailing is ahead.

Dow Jones Industrial Average November Scorecard:

Date	Close	Gain/Loss	Cum. G/L
11/1/18	25,380.74	+264.98	+264.98
11/2/18	25,270.83	-109.91	+155.07
11/5/18	25,461.70	+190.87	+345.94
11/6/18	25,635.01	+173.31	+519.25
11/7/18	26,180.30	+545.29	+1064.54
11/8/18	26,191.22	+10.92	+1075.46
11/9/18	25,989.30	-201.92	+873.54
11/12/18	25,387.18	-602.12	+271.42
11/13/18	25,286.49	-100.69	+170.27
11/14/18	25,080.50	-205.99	-35.72
11/15/18	25,289.27	+208.77	+173.05
11/16/18	25,413.22	+123.95	+297.00
11/19/18	25,017.44	-395.78	-98.78
11/20/18	24,465.64	-551.80	-650.58
11/21/18	24,464.69	-0.95	-651.53
11/23/18	24,285.95	-178.74	-830.27
11/26/18	24,640.24	+354.29	-475.98
11/27/18	24,748.73	+108.49	-367.49
11/28/18	25,366.43	+617.70	+250.21
11/29/18	25,342.72	-23.71	+226.50
11/30/18	25,538.46, +199.62	-23.71	+426.12

At the Close, Friday, November 30, 2018:
Dow Jones Industrial Average: 25,538.46, +199.62 (+0.79%)
NASDAQ: 7,330.54, +57.45 (+0.79%)
S&P 500: 2,760.17, +22.41 (+0.82%)
NYSE Composite: 12,457.55, +68.18 (+0.55%)

FOR THE WEEK:
Dow: +1,252.51 (+5.16%)
NASDAQ: +391.55 (+5.64%)
S&P 500: +127.61 (+4.85%)
NYSE Composite: +421.31 (+3.%0%)