The S&P 500, which also made an all-time high on September 2, closing at 3,580.84 that day, is also nearing correction levels. Wednesday's close of 3,236.92 marked a 9.6% drop from the high.
The Dow Jones Industrials, which has yet to exceed its February 12 record close of 29,551.42, dropped another 525 points on Wednesday after losing 510 points on Monday. In between, Tuesday's 140-point gain amounted to nothing more than a dead cat bounce. On Wednesday the cat was formally pronounced dead, as 28 of the 30 listed blue chips posted losses. Only Johnson & Johnson (JNJ), on news that it's coronavirus vaccine was entering phase 3 trials, and Nike (NIKE), which smashed fiscal first quarter earnings, saved the industrials.
In what could be the worst trade ever, NIKE stock soared nearly nine percent, closing at an all-time high of 127.11. Nike's 0.95 cents per share earnings doubled expectations (0.47) as apparently more people working or lounging at home have been ordering sneakers off Nike's website. The reasons that the Nike trade might turn out horribly are multiple, especially the current P/E multiple of 74, a number usually reserved for IPOs and hot tech start-ups. Nike is neither of those and further, its third quarter gains can largely be attributed to an influx of orders from people getting an extra $600 a week on unemployment during the first month of the quarter. Nike's fiscal first quarter ended August 31, meaning the company benefitted from two months (June and July) in which millions of unemployed people were making bank staying at home.
What do people who were making $400 a week working who had a windfall of an extra $200 a week buy? Sneakers. And TVs. Best Buy's third quarter earnings should be reasonably good.
Nike's blowout quarter comes on the heels of two consecutive earnings misses and the company's quarterly sales of $10.6 billion were about 1/2 percent below year-ago figures. Worst trade ever? From the looks of it, RobinHood traders and momentum chasers just did it.
Getting back to the Dow, the world's most widely-watched index finished up Wednesday down 9.4% from it's closing high, so any further setback will send it (and the S&P) through into correction. Considering the multivariate issues facing investors - COVID, elections, violent protests, slumping economy, enormous government deficits - it would make perfect sense for this correction to morph back down to bear market levels, especially since the Dow never completed its comeback. The record-breaking performance by its neighbors in the S&P and NASDAQ were fueled by the Federal Reserve throwing in a kitchen sink's worth of programs and facilities to shore up the sinking stock markets off the March lows and were primarily vaporware.
Beyond the Dow not reaching its previous record high, it's counterpart in the Dow Theory calculus - the Dow Jones Transportation Average - did in fact surpass it's all time high, just a week ago, peaking out at 11,555.14 on September 16. Just as the Transports have to surpass prior highs or lows to confirm a primary trend change from bull to bear or vice versa, the Industrials have to do likewise.
While the Transports did make new highs, the Industrials DID NOT, thus, a bear market and its March lows remain in play as the primary trend and any bulls who profess that the bear market which bottomed out on March 23 actually ended on June 8 when the NASDAQ recovered beyond its all time high, is full of themselves and needs to go back to investing school.
Depending on who's citing statistics, bear markets typically last between 14 and 22 months, not 11 weeks, as per the NASDAQ's phoenix-like rise from late March into early June. If this bear is just average, an 18-month variety, we are only six months into it. Discounting the concept that this bear market could be one of the worst ever, on a level beyond the sub-prime crash of 2007-2009 or the Great Depression, which lasted for decades and culminated in World War II, stocks are very early in the game.
It can safely be assumed that what's occurring presently is just the start of the longer, slower, more painful second leg down of a protracted bear market, as markets are now following the historic script rather than the ill-advised and famously-promoted "V-shaped recovery" narrative pushed forward by the financial media and administration caterwaulers, Steven Mnuchin, Larry Kudlow, and even, sadly, the president himself.
What the world is experiencing is not a run-of-the-mill slump or recession that's isolated to one or a few countries. This is a global solvency event encompassing every nation on the planet. This is the end game for fiat currencies backed by full faith and credit of central, private banks, not sovereign treasuries. Nations, companies and individuals are on the hook for the debt-binging of the past 50 years to the tune of more than $258 trillion, a number which has ballooned beyond the reported 331% of global GDP.
Renowned financial scholars Max Keiser and Stacy Herbert explain how the overriding trend dates back to 1602, the end of feudalism and the beginning of public stock ownership. The second part of the report features the conclusion of a segment with esteemed Dr. Michael Hudson focusing on the ideas of the late anthropologist, David Graber.
The 400-year cycle now coming to an end is not cyclical nor secular, but rather epochal.
We may be living in interesting times, but few, if any, wanted them to be this interesting.
At the Close, Wednesday, September 23, 2020:
Dow: 26,763.13, -525.05 (-1.92%)
NASDAQ: 10,632.99, -330.65 (-3.02%)
S&P 500: 3,236.92, -78.65 (-2.37%)
NYSE: 12,359.16, -243.38 (-1.93%)
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