Stocks Continue Downward Spiral Second Straight Week

With stocks rallying on Friday, the disastrous second straight week of declines came to a relieving finish for equity longs, but not without significant teeth-gnashing through the tortuous five trading days.

The Dow and S&P 500 each entered correction territory on Thursday, as the blue chip index posted its second-largest single-day point decline. With the focus on the 10% down mark, Friday's gains may serve only as a temporary salve to many frayed nerves.

With the Dow Industrials still down nearly 2000 points in just the first seven trading days of February it's going to take quite an effort to regain all-time highs. The major indices peaked simultaneously in late January, but it's been all downhill since then, and the probable causes for such a shakeout are still in effect, if not even more exacerbated in the case of bond yields.

Globally, outflows from equity funds set a record, as investors pulled $30.6 billion out in the week through Wednesday, according to global fund tracker EPFR.

Breaking down those flows, the U.S. dominated with a record $33 billion in equity redemptions, while Europe saw $3.3 billion exit, the largest in 79 weeks. Japan saw the strongest equity inflows in 65 weeks at $2.4 billion, while $2.4 billion flowed into emerging markets, according to Bank of America Merrill Lynch.

Weekly declines in US markets were uniform, as the four major indices were all lower by at least five percent, led by the Dow, at 5.21%.

The 10-year-note closed out the week at 2.83%, a level seen promoting a massive shift from stocks to bonds and risk to relative safety. Crude oil slipped to its lowest level of the year, finishing off Friday at $59.05. Though not directly related to the equity selloff, crude prices have been elevated for the past two months until they were devastated by a massive increase in supply, reported this week.

Precious metals prices were muted, falling along with stocks, bonds and nearly every other asset class.

Trickling out from the corners of mouths were murmurings of getting long art, transportation, real estate and anything tangible.

Obviously, the correction is not over, having barely dipped a toe into the -10% water. It would not be unusual to see stocks bounce early next week and possibly beyond, though a retest of the prior lows is all but inevitable.

While caution had been thrown to the wind all of last year and through January of this year, consensus sentiment has changed dramatically and markets are likely to remain unstable until volatility subsides. That may not happen for some time, since the past nine years of bank-and-buyback-induced stock profits have been characterized by extremely low levels of volatility.

The past two weeks have been witness to a fundamental change in many regards. Extreme greed turned to a healthy level of fear in just a few days.

Rising rates and the prospect of profligate spending at the federal level point to further declines in the equity complex.

Dow Jones Industrial Average February Scorecard:

Date	Close	Gain/Loss	Cum. G/L
2/1/18	26,186.71	+37.32	+37.32
2/2/18	25,520.96	-665.75	-628.43
2/5/18	24,345.75	-1,175.21	-1,803.64
2/6/18	24,912.77	+567.02	-1,236.62
2/7/18	24,893.35	-19.42	-1,256.04
2/8/18	23,860.46	-1,032.89	-2288.93
2/9/18	24,190.90	+330.44	-1958.49

At the Close, Friday, February 9, 2018:
Dow Jones Industrial Average: 24,190.90, +330.44 (+1.38%)
NASDAQ: 6,874.49, +97.33 (+1.44%)
S&P 500: 2,619.55, +38.55 (+1.49%)
NYSE Composite: 12,405.82, +135.17 (+1.10%)

For the Week:
Dow: -1330.06 (-5.21%)
NASDAQ: -366.46 (-5.06%)
S&P 500: -142.58 (-5.16%)
NYSE Composite: -679.53 (-5.19%)

Dow Sheds Record 1,175 Points, Global Markets in Panic Mode

Anybody already not convinced that stocks have been relentlessly pumped by buybacks and central bank interventions over the past nine years may have had a rude awakening over the past few days and especially on Monday as the Dow Jones Industrial Average lost a record 1,175 points in the week-opening session.

While the percentage loss was nowhere near record-setting, it still managed to crack the top 20 of all-time percentage losses for a single trading day. Combined with Friday's collapse, the Dow is down over seven percent in just the past two sessions, wiping out all the gains from an over-exuberant January.

What happened?

Interest rates exploded. That was the first salvo from massively intertwined markets. The ten-year note, which has been comfortably below 2.5% for most of the last nine years of "recovery" following the Great Financial Crisis (GFC) from 2008-09, smashed through 2.80% on Friday and continued its ascent Monday before some odd force pushed US treasury rates lower across the curve. The 10-year note ended at 2.79, still higher than anybody expected, but not at a level that would cause a panic.

Other than the obvious villain in the bond pits, the other dynamic at play is the obvious overvaluation of stocks, and that is a global problem. By artificially keeping interest rates too low for too long (avoid the pain that should be measured across the board), boosting asset prices in stocks alone, the Fed, ECB, BOJ, PBOC and Swiss National Bank (SNB) created a market structure with one sure feature: failure.

Because borrowing money was such an easy proposition, many of the major corporations on the Dow, NASDAQ and S&P took to buying back their own shares, enriching only major shareholders and especially top executives with cushy compensation plans. That gambit appears to be over, and it's troubling, because when companies buy their own stock at inflated prices, they own it at those prices. Selling it back into the market at reduced prices causes a loss, which in turn causes earning to collapse. That is the expected conclusion, already evident in some recent quarterly filings. More carnage - much more - is to come.

It has been reported that 84% of all wealth created in 2017 went to the top one percent globally. That's an unsustainable level of wealth inequality largely gone unreported by the news-speakers, analysts and squawkers on Wall Street and the economists in the government. The one percent at the top of the wealth ladder will only be marginally affected by losses, largely because they have more money than they need and probably have been doing most of the trimming over recent days. Who will be harmed? Pension funds, which are already massively underfunded and cannot maintain any measure of credibility in a market crash currently gaining momentum.

Those who have been derided for warning about just this kind of occurrence are now being proven to have seen the most obvious overvaluation and manipulation of markets early. Being early and being wrong are two different animals, but anybody who isn't invested at the moment is - at long last - looking fairly smart.

The global economy has been sputtering and stuttering ever since the crash of 2008. Nothing that caused the problems then has been fixed. In fact, credit has been extended even further than the levels seen prior to that singular solvency event.

Claims (especially those by President Trump, who has unfortunately embraced the massive gains and now will bear the brunt of blame for the losses) that the economy is strong and growing are largely a smoke screen hiding mountains of debt and poor financial management in government. The US Treasury is more than $20 trillion in the hole. Other major governments, especially Japan, are over-leveraged and broke.

The continuing narrative that the economy is strong - which will be heard repeatedly as the market correction (or slow motion crash) extends - is complete garbage, shoveled to an unsuspecting public that desperately wants to hear only good news. The federal government is broke. State governments are broke. Pension plans cannot deliver on the promises made to employees and retirees. Households are deeply in debt and businesses have enriched only their shareholders in recent years. The recipe for collapse has been ripe and the meal is now on the table.

As Wall Street prepares for another onslaught of selling, markets in the East have already taken the low road. In Japan, the NIKKEI was down over 1,000 points. The Hang Song dropped 1,600, or five percent.

This is not over by a long shot. Instead of an end of the bull market, this should be characterized as the beginning of the end for globally-induced monetary madness and an epochal message to believers in what were once known as "free" markets.

Nothing is safe.

At the Close, Monday, February 5, 2018:
Dow Jones Industrial Average: 24,345.75, -1,175.21 (-4.60%)
NASDAQ: 6,967.53, -273.42 (-3.78%)
S&P 500: 2,648.94, -113.19 (-4.10%)
NYSE Composite: 12,572.93, -512.42 (-3.92%)

Stocks Struggle Against Higher Bond Yields

Stocks may have had a wondrous January, but February is shaping up to be a story of a different kind.

Not only have yields on all manner of bonds risen with alacrity over the past three weeks, they show no signs of slowing, especially since the Federal Reserve has sent a signal to markets that the federal funds rate is going to be upped at last three times this year, the first hike scheduled at the next FOMC meeting in March.

Higher bond yields make stocks look less attractive by comparison, being that they are virtually without risk, as opposed to stocks, which can rise or fall on whims, trends, poor performance of the underlying companies, or without cause, simply because a company or a sector is "out of favor."

As the 10-year note created above 2.70% earlier in the week, stocks suddenly became not so much of a bargain, especially since valuations have been egregiously stretched as the nine-year-long rally in equities has exceeded all reasonable valuation metrics.

Countering the argument are the voices from the Trump train touting the meteoric rise in stock prices over the past year, and, certainly, the economy is in better condition than it was 12 months ago.

But, a strengthening economy has headwinds, such as higher wages and costs due to inflation, and that's being caused by the endless printing of fiat and buying of securities outright by central banks, which has distorted the landscape of global economics.

The rush to safety has begun, and, once started, such a trend is not easily pushed back. Investors should prepare for a sea change which will wipe out gains that have been largely the result of central bank intervention and stock buybacks by inefficient corporate managers.

At the Close, Thursday, February 1, 2018:
Dow: 26,186.71, +37.32 (+0.14%)
NASDAQ: 7,385.86, -25.62 (-0.35%)
S&P 500: 2,821.98, -1.83 (-0.06%)
NYSE Composite: 13,381.97, +14.01 (+0.10%)

Wall Street's Monday Blood-Letting Leads to Global Calamity in Equities

US equity markets were roiled Monday as the dollar jumped and bonds sold off, pushing yields higher, especially on the short end of the curve.

The two-year treasury finished the day at 2.09%, the five at 2.47%, and the benchmark ten-year note briefly touched 2.70% before dipping back to 2.68%. For perspective, consider that the five-year treasury was yielding 2.19% and the ten-year, 2.39, just a month ago. Those are significant moves and, apparently, the stock market has now taken notice as fixed investments begin offering yields competitive with stock dividends, at least.

For more perspective, the S&P and Dow averages suffered their worst one-day drops since early September. The percentage was just two-thirds of a percent on both indices. That shows just how decisive the rally since the election of Donald J. Trump as president has been. There has not been on single-day one percent decline on either in well over a year.

If a sea change in sentiment is occurring, Tuesday's trade could be a determinant day. Futures are pointing well lower and the VIX is cresting over 14 in the US, while global markets are a sea of red.

Japan's NIKKEI was down nearly 1.5%. The Hang Song was off over one percent. European bourses are uniformly lower at their midday.

As the nation prepares for President Trump's first State of the Union speech Tuesday night, more focus could be on internal DC politics, especially the readying for release of the troubling, explosive memo penned by the House Intelligence committee.

On Monday, the Intel committee voted along party lines to declassify the four-page missive. The president has five days to release the memo or keep it classified. Opinion and timing see Thursday as the likely eventual release.

With the FOMC set to keep rates unchanged on Wednesday (the meeting opens Tuesday), that may be the only thing that doesn't change this week.

At the Close, Monday, January 29, 2018:
Dow: 26,439.48, -177.23 (-0.67%)
NASDAQ: 7,466.51, -39.27 (-0.52%)
S&P 500: 2,853.53, -19.34 (-0.67%)
NYSE Composite: 13,524.65, -112.37 (-0.82%)

Stocks a Little Shaky As Dollar Plummets, Silver, Gold Soar

Chalk this up to various theories of unintended consequences.

Even the brilliant thinkers at the Federal Reserve are unable to explain the strange divergence of bonds and the dollar over the past number of weeks because that's not the way it's supposed to go.

With the Fed becoming more hawkish as they attempt to unwind literally trillions of dollars worth of bonds on their vast balance sheet, interest rates have risen, but the value of the dollar in relation to other major currencies has taken a noticeable hit, not just in the past few weeks, but for the better part of the past year.

The mighty US dollar was beaten like a trailer park hooker, down nearly one percent on the day per the dollar index, which, in the forex universe, is a pretty severe move.

Other currencies were the beneficiaries of the dollar demise, with the British pound up 2.4%, Japan's yen up nearly one percent, and the Aussie dollar gaining 0.90%.

Fueled by Treasury Secretary Steven Mnuchin's comments at the World Economic Forum in Davos, Switzerland, that a weaker dollar was good for US trade, currency pairs were traded with one thing in mind: dollar dumping.

Bonds, however, failed to play along, with the 10-year benchmark unchanged at 2.65% and both long and short-dated maturities moving less than a basis point.

Besides the currencies of nations not the United States, commodities were bid large, with WTI oil futures making another in a series of three-year highs and precious metals continuing a rally that began in December but had recently stalled.

Not so today, as silver led the way with a gain of over three percent, topping out at 17.70, the highest since breaking briefly over $18 per ounce in early September of 2017. From a technical perspective, silver has ripped through a long, declining resistance line dating back to its peak in 2011. A clear breakout holding above $17.50 would be a significant development for the world's most unappreciated asset.

Gold was also well-taken, finishing in New York up $16.80 (1.50%), at $1358.70 the ounce.

Stocks meandered along the unchanged line, ending split, with the Dow higher while the NASDAQ and S&P fell.

With many pension funds chartered to rebalance by month's end, the rapid rise of equities in the early days of the new year may be coming to a quick conclusion. Estimates range from $12 to $120 billion of stocks which must be sold and converted to bonds in the next week. If that's the case, it will take a concerted effort from the central bank cartel (who also may be selling into the weakness) to keep the stock bubble adequately inflated.

If there's a downside other than stocks taking a much-needed shave, it's that any decline in the stock market will be blamed on President Trump and his administration's tough currency and trade policies.

The President is set to address the assemblage at Davos on Friday, concluding this year's fete of economic manipulators and would-be statist social constructionists.

The President is expected to deliver remarks touting America's re-emergence as the world's greatest economic force.

At the Close, Wednesday, January 24, 2018:
Dow: 26,252.12, +41.31 (0.16%)
S&P 500: 2,837.54, -1.59 (-0.06%)
NASDAQ: 7,415.06, -45.23 (-0.61%)

Tech Rout Spreads to Other Sectors; Bonds Signaling Slowdown

We have seen this show before.

Jittery markets, just off fresh all-time highs, make dramatic swings to the downside.

For the past nine years running, such activity has typically been followed by aggressive "dip-buying" and soon thereafter, new all-time highs on all the major indices.

Is this time different?

It's tempting to say that it is, especially for analysts who have been consistently wrong about market corrections during the grand recovery, but, it's probably nothing, unless...

... one considers the US treasury bond complex and its fast-collapsing curve, which currently has the spread between between a 2-year bill (1.80%) and the 10-year-note (2.34%) at a mere 54 basis points. The 2/30 spread is a minuscule 92 basis points (1.80%-2.72%), but perhaps most troubling is the tiny, 21 basis points between the 5-year and 10-year note.

The five-year note is yielding 2.13%.

Why does this matter? There are a number of good reasons, primarily, because in banking, one typically buys short-duration and lends long duration, making money on the spread. But, if there is no spread, there's scant money to be made and only a relative few defaults on long loans (such as occurred during the sub-prime crisis) can cause calamity for the lenders.

Also, the danger of inversion is weighty, occurring when a shorter-duration bond yields higher than a longer-duration. Such inversion might occur between the fives and tens, where the spread is - as mentioned above - only 21 basis points (0.21%).

Inversion matters because it signals that investors have no appetite for anything of long duration (loss of confidence) and are attempting to get all the yield on the short end, as quickly as possible. Every time bond yields have inverted in the past 90 years of market history, a significant inversion has been followed by a recession.

So, while Wall Street is enjoying salad days in stocks, the bond market is worrying, as Main Street finds difficulty in borrowing for the future.

The tide in stocks may also be turning, as evidenced yesterday as the Dow took over the lead in the relentless decline experienced in the NASDAQ. At this point, all stocks are at risk, probably due to the threat of yet another government shutdown, looming close at December 8. The November non-farm payroll report Friday could be the catalyst to send stocks even lower and bond spreads tighter. Extreme caution is advised the remainder of the week, noting that holiday season stock routs are extremely rare events. They usually happen in January.

In conclusion, this time is not different. It's the same as it always has been. Periods of stock euphoria are usually followed by recession. Boom-bust. Nothing lasts forever. To think so is pure tom-foolery.

At the Close, Tuesday, December 5, 2017:
Dow: 24,180.64, -109.41 (-0.45%)
NASDAQ: 6,762.21, -13.15 (-0.19%)
S&P 500: 2,629.57, -9.87 (-0.37%)
NYSE Composite: 12,567.16, -67.73 (-0.54%)

Stocks Drubbed on Cool CPI

Stocks opened on the downside for the seventh consecutive session, only this time they did not manage a complete comeback by the close. What triggered the selloff was a tight CPI number, as the widely-watched index of US consumer prices inched up only 0.1% in October, the smallest gain in three months.

At another time in the pantheon of stock market momentum and movement, the soft inflation figure might have spurred a buying spree, as investors could gain confidence that the Fed would not raise rates in December, as is widely anticipated, but that was not the case today. The mood has changed significantly and there's a persistent pessimistic undertone that there soon could be blood in the streets.

Bonds may be calling the next move via the curve (or non-curve as the case may soon be). The spread between 5s and 30s plunged to 73 Basis Points today, the flattest since November of 2007, a key point in time, as it was then that the Great Financial Crisis (GFC) was about to unfold.

The 10-year note remains mired in the 2.30-2.38 range. A break in yield below 2.28 could be a triggering event prior to the December FOMC meeting at which the Fed is poised to raise the federal funds rate for the third time this year.

Credit is being squeezed as are margins in various industries, especially consumer retail. Amazon's foray into the grocery business via its Whole Foods acquisition may be the defining deflationary event of the decade.

As far as the indices are concerned, all eyes are on the Dow Industrials, which, after breaking to an all-time high last Tuesday, have done nothing but drift lower, though the flight path has been gradual... until today.

At the close today, the blue chips have shed 331 points, or about 1.4% since the high reached on November 7.

At the Close, Wednesday, November 15, 2017:
Dow: 23,271.28, -138.19 (-0.59%)
NASDAQ: 6,706.21, -31.66 (-0.47%)
S&P 500: 2,564.62, -14.25 (-0.55%)
NYSE Composite: 12,220.34, -59.77 (-0.49%)

Stocks slide as bond yields continue rising

Stocks took a rare turn to the downside after solid gains earlier in the week.

The selling was rather broad as interest rates worldwide began to reach levels that investors might be minimizing risk by tracking from stocks into bonds, particularly the 10-year note which has been rising steadily since mid-September when the Federal Reserve announced the beginning of their asset sales as they seek to trim their balance sheet.

The 10-year settled at 2.44%, a seven-month high. As recently as September 8, prior to the most recent FOMC policy meeting, the yield was 2.06%, representing a 10-month low, dating back to November 8, 2016, on the eve of the national election which put Donald J. Trump into the office of President of the United States.

Thus, yields are testing the buoyancy of the stock market, especially those stocks which produce dividends. While many blue chip-type companies yield similarly to the 10-year, they also carry risk that the US economy may stall and send stocks lower, which would reduce the effective yield and possibly decimate profits.

As the Federal Reserve intends to normalize rates - with another rate hike widely assumed to be coming in December - stocks will naturally come under pressure, though it is far too soon to tell exactly what the Fed will do should the long-winded bull market from 2009 stall.

There is considerable debate over the general health of the US and global economies, which have been aided to a great extent by easy monetary policy and massive stealth purchases by the central banks of Europe and Japan.

A single day of declines should not be taken too seriously, as stock indices have been recently making new highs almost on a daily basis, but, that said, this does not seem to be a time in which investors should throw caution to the wind. As always, the Fed stands ready with fresh injections of fiat or policy adjustments to ameliorate any kind of market detour.

Bull markets do not last forever, however, and there are significant headwinds to growth without the aid of fresh central bank intervention.

At the Close, Wednesday, October 25, 2017:
Dow: 23,329.46, -112.30 (-0.48%)
NASDAQ: 6,563.89, -34.54 (-0.52%)
S&P 500: 2,557.15, -11.98 (-0.47%)
NYSE Composite: 12,336.64, -68.35 (-0.55%)

Stocks Have Nowhere To Go, Set Up For Losing Week

As dull a session as there has been for many months, Thursday's action was muted and indecisive, with stocks trading in very tight ranges.

There's some concern over the coming effects of hurricane Irma, the disaster of the week that has captured the attention of people who are afraid of shadows and dark rooms.

With the media, with help from Florida's Governor, officials from FEMA and other officious morons panicking the entire population of the Sunshine State, the expected destruction had better be significant or stocks will spend Monday of next week making up for lost time and lost profits.

In the meantime, there's ample evidence exhaustion in the equity markets, while significant action in bonds and precious metals with gold and silver scoring large gains on the day and the 10-year note yield plummeting back to levels not seen in ten months, below 2.06%.

All of this points toward a potential bloodbath Friday and the first losing week in the past three for the main indices.

With minutes until the opening bell on Friday, futures are down significantly, with the Dow futures trending lower by some 60 points.

Keep you stops close, this could get ugly.

At The Close, 9/7/17
Dow: 21,784.78, -22.86 (-0.10%)
NASDAQ: 6,397.87, +4.55 (+0.07%)
S&P 500: 2,465.10, -0.44 (-0.02%)
NYSE Composite: 11,879.61, +6.69 (+0.06%)

Bonds Don't Lie As Risk Rears Ugly Head At Stocks

Sooner or later, all good things come to an end, and it appears that the 101 month bull run in US equities is just about over.

All things considered, from global uncertainty (think North Korea, and immigration, currently) to underfunded pensions (about half of the states' public retirement funds) to the upcoming debate over the debt ceiling and nothing looks really positive about the American economy, the same one that has limped along at less than three percent annual growth for almost nine years.

Last Friday's miss on the non-farm payroll data certainly didn't help matters on Monday as once-giddy speculators were morose and confused, many seeking the safety of bonds.

While a somewhat ugly day for stocks, bonds were bid with gusto, the 10-year note getting so much action it hit its lowest yield since two days after Trump's election, crashing to 2.06%, on what turned out to be the best day for bond bulls since Brexit (June, 2016). It's fairly obvious by now that the benchmark 10-year will be yielding below two percent soon, the level it was occupying prior to the surprise presidential election of Donald J. Trump.

In an odd way, stock pickers may have an opening or two. Since bond yields are horrible, stocks, though vastly overvalued, may be worthwhile investments for those willing to take the risk. On the other hand, there may not be many stocks which are able to perform well through a prolonged recession, possible debt defaults around the world and a demographic nightmare that makes all other metrics pale by comparison.

Spoken of before in this space, the demographic dilemma cannot be understated. All of the developed nations are aging, starting with Japan and Germany, and older people simply do not spend as much or with as much frequency as younger folks. Aging populations are settled in their ways, move slowly (if at all) and are very conscious of their spending habits, many of them on fixed incomes.

That said, inflation is virtually impossible, pricing power for companies difficult if at all attainable. All that's left is financial engineering, cooking the books and keeping the creditors in the dark or off the doorstep.

Even the mighty Dow Industrials slipped again, for the ninth time in the last 20 sessions. The popular index is down more than 500 points over that span.

Precious metals also had a solid day, again, continuing the trend begun mid-August.

Stocks have crossed the rubicon.

At the Close, 9/5/17:
Dow: 21,753.31, -234.25 (-1.07%)
NASDAQ: 6,375.57, -59.76 (-0.93%)
S&P 500 2,457.85, -18.70 (-0.76%)
NYSE Composite: 11,827.15, -90.93 (-0.76%)

Was September 1st a Market Reality Check? Gold Hits One-Year High

On Friday, after it was announced that August non-farm payrolls had increased by a less-than-expected 156,000, stock futures ramped higher heading into the opening bell on Wall Street.

Stocks did indeed gain, on the twisted hope that a soft labor market would chill Fed ambitions to raise interest rates and/or begin to wind down their massive, $4 trillion balance sheet when the FOMC meets September 12 and 13.

Those were the thoughts of traders in the morning, but, when the NASDAQ fell briefly into the red mid-morning, sentiment seemed to take on a more sober tone, as the reality of a stuttering recovery over the past eight years - fueled primarily by massive infusions of freshly-created cash by central banks and historically-low interest rates - might actually be - rather than good news - bad news.

All of the major indices finished with gains, but they were hardly of the kind that one could take comfort in as the long Labor Day weekend commenced.

Rather, the afternoon session was mild, largely belonging to fixed assets, as precious metals traded briskly. Gold went into the weekend trading at a one-year high, $1320.40 the ounce, silver, while it didn't make any historic high marks, gains 16 cents, ending at $17.50, a mid-point range advantageous to speculation on both sides of the trade.

The 10-year note firmed up at a 2.15% yield and crude oil, in the aftermath of hurricane Harvey, regained its footing, trading higher in the afternoon to $47.35 per barrel.

Was this a wake-up call for equity traders and general market participants?

Doubtful. But, it is somewhat instructive to take into account that the second-longest bull market in history has been built on promises, fallacies, distortions, and the conjuring of more than $14 trillion worldwide.

Bull markets all end. And this one, 101 months old, is more likely to end sooner than later.

At the Close, 9/1/17:
Dow: 21,987.56, +39.46 (+0.18%)
NASDAQ: 6,435.33, +6.67 (+0.10%)
S&P 500: 2,476.55, +4.90 (+0.20%)
NYSE Composite: 11,918.08, +42.39 (+0.36%)

For the Week:
Dow: +173.89 (+0.80%)
NASDAQ: +169.69 (+2.71%)
S&P 500: +35.50 (+1.37%)
NYSE Composite: +106.05 (+0.90%)

Stocks, Gold, Silver, Bonds Ominously Reverse Course

As noted in the previous post, stocks were poised - via lower futures pricing - for a major downdraft on Tuesday, but, oddly enough, or, thanks to the good folks at the PPT, that never actually occurred to any great extent.

Instead, stocks did indeed start the session lower, but quickly reversed course and ended mostly on the upside. Additionally, the dollar dropped then popped on the widely-watched dollar index, crushing the gains in gold, silver and bonds, with the 10-year note ending at 2.14% yield.

It's amusing to see such theatrics carried out by those mostly "in charge" of global finance, i.e., the central bankers and government operatives in the Treasury Department, SEC and State. It's going to get more amusing, if that's what one wants to call outright market manipulation via direct, clandestine equity purchases, once congress comes back from vacation following the long Labor Day holiday.

One obvious feature of late has been the decline of the dollar over the past six months. It's been steady and in a bear market since July, but yesterday's rapid descent was apparently too much, too soon.

At the Close, Tuesday, August 28, 2017:
Dow: 21,865.37, +56.97 (+0.26%)
NASDAQ: 6,301.89, +18.87 (+0.30%)
S&P 500: 2,446.30, +2.06 (+0.08%)
NYSE Composite: 11,791.88, -8.34 (-0.07%)

Stocks Flat, Gold, Silver, Bonds Explode Higher

Editor's Note: Money Daily is eventually going to move to its own server at dtmagazine.com, but issues implementing the blogging platform while integrating ad serving has kept the blog from being fully integrated. Thus, for the time being, until these issues resolved, the blog will appear here.

Stocks were relatively unmoved as the world's central bankers wrapped up their annual economic symposium at Jackson Hole, Wyoming over the weekend.

What did move were precious metals and bonds, both boosted by ambiguous speeches by Fed Chair, Janet Yellen, and ECB president, Mario Draghi.

Both speakers failed to address the bubbling equity markets, and instead opted for a can-kicking, all is well, "stay the course" approach. Markets were effectively unimpressed, though fixed investments saw massive gains.

The benchmark 10-year note was bid, knocking the yield down to 2.16, and to levels not seen since before last year's November elections, at 2.09% just prior to the Tuesday open.

Gold has blown through resistance at the psychologically-important $1300 level, kicking up to $1325 in early Tuesday futures trading. Silver also advanced, blasting through $17, hovering in the $17.60 range at this time.

Stock futures are down massively, setting Tuesday up for a massive downdraft.

With congress coming back to debate the debt ceiling and federal budget and the FOMC meeting in September, the final days of August appear to be presaging the volatile days and weeks ahead.

Hang on to your hats. This looks to be a wild ride.

At the Close, August 28, 2017:
Dow: 21,808.40, -5.27 (-0.02%)
NASDAQ: 6,283.02, +17.37 (+0.28%)
S&P 500: 2,444.24, +1.19 (+0.05%)
NYSE Composite: 11,800.22, -11.81 (-0.10%)

Stocks Wracked On Poor Industrial Production Data, Led by Lower Auto Sales

When the opening bell rang today on Wall Street, there wasn't realistically any cause for alarm, except the data on Industrial Production, which rose 0.2% on expectations of 0.3%, driven lower on a 3.6% drop in the automotive sector.

Car sales have slowed sharply from the record pace in 2016. Production of motor vehicles and parts has fallen in five months this year, and have dropped five percent in the latest 12 months.

That may have been cause for alarm, though not to the extent to which the major indices took it. Stocks had their worst session overall since mid-March, with the S&P 500 and NASDAQ falling below support at their respective 50-day moving averages.

Bond yields were slashed as investors rushed out of equities to the safety of credit. The 10-year note closed the day with a 2.18 handle and the 30-year bond the lowest in a week, at 2.78%.

Oil caught a weak-hand bid, pushing above $47/barrel, but not holding that level. Gold and silver, which had been bid up in prior sessions, held onto gains.

This is the second major loss in the last six session, which, if one is inclined to be seeking trends, could be one to watch. On the other hand, with the Fed having the market's back, continued weakness is considered unlikely.

It has been said that Wall Street is more of a casino than ever before. The past six or seven sessions are proving that the house doesn't always win.

At the Close, Thursday, August 17, 2017
Dow: 21,750.73, -274.14 (-1.24%)
NASDAQ 6,221.91, -123.19 (-1.94%)
S&P 500 2,430.01, -38.10 (-1.54%)
NYSE Composite: 11,712.72, -156.13 (-1.32%)

NASDAQ Continues Short-Term Slide; Bond Yields Soar

Happy Independence Day!

While plenty of Americans were celebrating the founding of their nation, drinking cold ones and grilling hot ones, the elitist scum that wants to control everybody's lives couldn't take the hint - and a four-day weekend - returning to the trading desks Monday for another round of Sell That Tech Stock.

The major indices were all rising, with the notable exception of the NASDAQ, upon which the most speculative stocks are traded, closing down just shy of 1/2 percent on the day.

Closing below its 50-day moving average for the third straight session, the NASDAQ is exhibiting a unitary weakness, unshared by its cohorts. The last time the NASDAQ made such a breach was at the very end of December, 2016. Six months have passed since the end-of-year scare, so it is notable, but the index is only down 3.66% since the 6341.70 top on June 9.

The selling seems to not be abating any time soon. The NASDAQ has closed lower 11 of the last 17 sessions, inclusive of the June 9 FAANG debacle.

Obviously, a multi-day decline of less than four percent is alarming to almost nobody, though closer analysis does give one reason to pause and possibly for many to liquidate out of high-multiple, overpriced equities into the safety of dividend-paying plays such as those readily found on the Dow or within the higher echelons of the S&P.

Divergence of the NASDAQ from its close peers bears notice, as has been mentioned here at Money Daily on a number of occasions over the past few weeks. Since it is easily the most bloated of the indices, it is most vulnerable to sprees of selling, or, as may be the case, cyclical rotation.

With that in mind, it may be amusing to some that the Dow posted an all-time intra-day high on Monday, but closed below the record closing high, though that mark may be surpassed on Wednesday, with traders flush with renewed animal spirits.

Otherwise, the eight-year-old bull market seems to be running on fumes, badly in need of something other than fresh fiat from central banks, which has been the primary fuel for the record rise over the long span.

Also worthy of notice is the continued sell-off in the 10-year note, sending yields as high as 2.35. The condition has prevailed since just after the latest interest rate hike on June 14, putting the federal funds rate at a multi-year high of 1.00-1.25%. It's also a marvel that the FOMC of the Fed has changed the game somewhat, targeting the rate in a range rather than offering a solid number. It gives the fakery some wiggle room, though bond brokers seem to be reacting as the Fed would wish, even though rising rates in a declining economy - of which the signs of are lurking everywhere - is a classic misalignment.

Hang on, diversify, or get off. Those are the current choices, though for specs, the last of those choices seems to currently be the most favored plan.

At the Close, 7/3/17:
Dow: 21,479.27, +129.64 (0.61%)
NASDAQ: 6,110.06, -30.36 (-0.49%)
S&P 500: 2,429.01, +5.60 (0.23%)
NYSE Composite: 11,835.72, +74.02 (0.63%)

Which Way is Up? Stocks Battered Again; VIX, Bond Yields Exploding

Volatility is back, to the chagrin of equity investors who have enjoyed the easiest ride to Easy Street possibly in the history of the US stock market.

The VIX, a broad measure of market volatility, spiked today as high as 15.16, a huge move, considering the close on Wednesday was 10.03. That's better than a 50% move to the top, though the slaughter was interrupted and canceled midday, when it appeared the world was ending. No doubt, the PPT another central bank cohorts rushed to the aid of everybody in quelling the panic, sending the VIX back to 11.44 at the end of the session.

The Vix halting helped the major indices to some degree, though it could not stem the selling. The Dow melted down as low as 21,203, a full 250 points from the close on Wednesday. The NASDAQ was again hit full force, bottoming out at 6090, before receiving somewhat to close with a mere 90-point loss.

With the Federal Reserve's loose policy unchecked for eight years running, stock picking has been easier than throwing darts at a barn door. Despite the easy money, most hedge fund and money managers have failed to keep pace with simple indices, a shameful state of affairs for the people who are supposed to know what they're doing when it comes to investing. Now, as everything from the presidency to health care to the media and the future of the global economy is being questioned, the bifurcated reasoning of ultra-low interest rates and gambling recklessly in equities is beginning to lose some favor.

All of this came as the government reported, prior to the opening bell, first quarter GDP at a surprising 1.4% growth rate. This was the third estimate, after the first - back in April - came in at 0.7, and the second, in May, was better, at 1.2, were still below an acceptable range. Apparently, nobody is particularly interested in an economy that is growing at less than two percent, and maybe even less interested in the government's goal-seeking statistical chicanery.

It seems, from all appearances, that the Federal Reserve is being taken seriously about rising rates, if one agrees that bonds tell the real story. The rally in the 10-year note has been shunted, with yields spiking the past few days, opening at nearly 2.30%. The note closed at 2.267, a gain of better than two percent, a large move in treasuries.

Tech stocks were the usual suspects, as the FAANGs took the heat. Facebook, Apple, Amazon, Netflix, and Google all suffered losses on heavy volume.

So, is this the beginning of the end of the bull market?

Maybe. Maybe not. Nobody really would know, though there are those of the opinion that the market is vastly overextended and the core economy is under-performing and facing severe deflationary pressure.

What to watch now are the movie averages. The Dow is still gleefully above its 50-day moving average, but the NASDAQ closed precisely on its 50-day, as is the S&P. Further weakness could send sell signals and a plummet through the 50-day toward the 200-day.

Also to keep in mind is the rough guideline for correction territory, which is casually assumed to be a 10% decline.

The NASDAQ topped out at 6341.70, nearly three weeks ago. A quick look at a NASDAQ chart reveals the collapse on Friday, June 9, exactly three weeks ago as of tomorrow, as if somebody rang a bell, denoting the tippy-top of the market. A level of 5707 would have to be met for the NAZ to fall 10% and it is the most vulnerable index, having had the best run-up over the past three months.

Not that it would be a huge move, though significant in percentage terms, but it would erase gains all the way back to February 9, so just five months of lost appreciation.

Friday closes out not only the week, but the month and the quarter, so it should be instructive from a technical standpoint, if that actually matters any more.

Bull markets do not last forever, no matter how low interest rates are nor how easy money is to lend.

At the Close, 6/29/17:
Dow: 21,287.03, -167.58 (-0.78%)
NASDAQ Composite: 6,144.35, -90.06 (-1.44%)
S&P 500: 2,419.70, -20.99 (-0.86%)
NYSE Composite: 11,739.98, -72.82 (-0.62%)

A Disturbance in the Farce? Stocks End Lower Second Straight Session

Stocks turn red for the second straight session, this being the first full week of June, suggesting that there may be a revised adage for the new Wall Street, "Sell in June and avoid the swoon?"

Obviously, two days of smallish losses does not constitute a trend. Three days might. A close on the Dow below 20,600 would. Not only would that be a nearly three percent decline (OMG!), but it would be below the previous low close, a line of demarcation that could signal the oncoming of a bear market.

Those who deny the possibility of a bear market are either under the age of eight and have never seen what one looks like, or has forgotten prior bear markets, which generally occur when stocks are overstretched, overvalued and/or overbought.

To imagine that after eight years of somewhat spectacular gains that investors might disinvest and actually pull some of their support from the lofty prices of stocks on the Dow, NASDAQ, S&P, et. al., is not so far-fetched. It's happened before. It will, in all likelihood, happen again.

Trying to time such an event is the task of fools. With the FOMC ready to raise interest rates again, despite the incongruous activity in the bond markets (10-year-note yield at seven month lows, 2.15%), continued declines may become not a nuisance, but a feature this summer, one of the big hits that Hollywood will miss completely.

At The Close, 6/6/17:
Dow: 21,136.23, -47.81 (-0.23%)
NASDAQ 6,275.06, -20.63 (-0.33%)
S&P 500 2,429.33, -6.77 (-0.28%)
NYSE Composite: 11,671.46, -22.22 (-0.19%)

Stocks Gain Again With No End in Sight

The rally continued this past week, despite a weak outlook for employment with the May NFP data coming in well short of estimates and the prior two months (March and April) revised lower.

As has been the case for the better part of the last eight years, stocks charted their own course, without regard to underlying fundamental data. As the market entered the first full week of June, the ancient adage of "sell in May and go away" did not apply. Stocks were higher (the DOW, NASDAQ and S&P all making new all-time highs) the past two weeks and up in eight of the last 11 overall.

Bonds are telling an odd story as well, with the 10-year note falling below 2.20% yield on Friday, the lowest level since the election. The action in bonds is unusual, considering that the Fed is prepared to and has hinted at raising the federal funds rate another 25 basis points at their June FOMC meeting, which will be held next week, on the 13th and 14th.

Entering Monday's trading, futures are pointing lower, though that means little, except that the expected levitation will be delayed a few minutes or maybe even a few hours.

At The Close, 6/2/17:
Dow: 21,206.29, +62.11 (0.29%)
NASDAQ: 6,305.80, +58.97 (0.94%)
S&P 500: 2,439.07, +9.01 (0.37%)
NYSE Composite: 11,718.70, +18.91 (0.16%)


For the week:
Dow: +126.01 (0.60%)
NASDAQ: +95.60 (1.54%)
S&P 500: +23.25 (0.96%)
NYSE Composite: +86.83 (0.75%)

Stocks Gain, Bond Yields Continue Lower in Fed-inspired Environment

Opening the week with across-the-board losses, the major indices took a little off the top Tuesday, the penultimate trading day for the month of May.

The losses were limited in scope, however, as speculators seem reluctant to forego gains in a bull market that has shown few signs of slowing.

With optimism on Wall Street approaching a state irrational exuberance, the issue becomes one of not when the market will reverse course, but at what speed. A sharp downturn could expose many hedgers and options players, though the Fed and their cohorts at the ECB, BOJ, and the PPT would likely quash any rampant selling by putting an artificial floor on the market, a tactic they've employed over the last eight years of fake recovery.

Unlimited upside is the overarching theme of the decade, despite the Fed's promise to raise interest rates four times in 2017. Despite the threat of tighter money, the 10-year treasury note closed out the day at 2.22% and shows no sign of reacting negatively to any Fed jawboning nor actual policy directives.

While the bull market remains intact at eight years and running, the bond rally is at 30 years. Liquidity and solvency have been the main catalysts since 2009, with central banks coordinating bond (and equity) purchases in order to prevent a complete collapse of the global financial system, which almost fell apart in 2008-09.

Complete control of all markets being the ultimate goal of central banks, the money-printers are close to achieving just that. Even if economic data remains sluggish, weak, or troubling, the Fed and friends will be at the rescue. Stocks have been unable to extend any losing streak to frightful lengths, thanks to central bank intervention, fearing losing control.

Whatever the outcome of the June FOMC meeting, it's almost a slam-dunk that stocks will gain. It's simply the way the market is currently composed.

At the Close, 5/30/17:
Dow: 21,029.47, -50.81 (-0.24%)
NASDAQ: 6,203.19, -7.00 (-0.11%)
S&P 500: 2,412.91, -2.91 (-0.12%)
NYSE Composite: 11,601.31, -30.56 (-0.26%)

Wall Street Tumbles Most This Year; Treasuries, Gold Rally

Sure enough, being the contrary indicator for which Money Daily has become legendary, as soon as this blog issued the "all clear," circa the past two days - citing that the Fed has Wall Street's back - then the bottom falls completely out of the market.

While today's massive declines could be nothing more than a case of jitters over the Washington establishment's fixation on making President Trump's life a living hell, or, a simple matter of profit taking, there's some indication that both may be partially true.

As usual, with everything related to stocks and finance since roughly the year 2000, there's insufficient information upon which to make a decisive call. One day's worth of declines by no means indicates anything fundamentally wrong, and it's likely that this current bout of market indigestion will blow over with the next data release.

Moreover, given that the mainstream media is chock full of creeps, fabricators and liars, it wouldn't be beyond the pale for financial media to be right in the middle of the "fake news" mix. To the point, the headline on Yahoo Finance at today's market close screams, "Stocks tumble as Trump worries Wall Street," as if it's the President himself causing consternation among international financiers, when in fact, it is the news media itself promulgating questionable narratives surrounding the President and his administration.

Thus, there may be something more compelling afoot. Perhaps some of the more recent data releases haven't been particularly rosy, or maybe somebody deep inside the global financial establishment knows something of which the general public isn't keenly aware. That insiders would know more than the public is undeniably true; whether or not there's something big about to occur - and this was just cover for a deeper dive - is a matter of great conjecture.

On the surface, that doesn't seem to be the case. Tuesday's releases showed that capacity utilization and industrial production both beat expectations, but housing starts and building permits missed the mark. Wednesday's release of crude inventories (a drawdown) and mortgage applications (off by 4.1%) shouldn't have catalyzed the market into this kind of paroxysm.

What we do know is that the dollar index (97.456) fell again today (fifth straight decline) and has been below 100 for a full month. That's sent gold soaring (up nearly two percent today), with silver tagging along, though without as much gusto (+0.73%, 16.87/oz.). A falling dollar should be good for US companies, though that correlation hasn't always held true, because US imports in other countries' currencies would cost less.

We also know that today's losses were the worst of the year for the major indices and Treasuries were rallying, with the 10-year yield falling to 2.22% and the two-year moving down to 1.24%.

Thus, the crystal ball remains cloudy. Thursday's market action may be more telling. It's never too late to take a profit, nor is it ever too early to cut losses. Maybe Wall Street has come to its senses.

At the Close, 5/17/17:
Dow: 20,606.93, -372.82 (-1.78%)
NASDAQ: 6,011.24, -158.63 (-2.57%)
S&P 500: 2,357.03, -43.64 (-1.82%)
NYSE Composite: 11,423.54, -182.95 (-1.58%)