There's been an interesting dynamic to the market over not just the past few days, but for the past six months, though it has become somewhat pronounced recently, and that is the divergence between the staid, centered 30 stocks that comprise the Dow Jones Industrial Average and the thousands which populate the NASDAQ composite exchange.
Whenever the Dow is up, it's almost certain that the NASDAQ will produce gains as well, but, when the Dow is lower, the NASDAQ is often higher, which means there are not only some major differences of opinion on which stocks to own, but also on the general nature and direction of the economy.
It appears that those invested primarily in Dow stocks are probably more conservative in their investment approach, primarily due to the collective pre-eminence of the Dow components and the fact that all stocks in the Dow pay dividends.
The NASDAQ has always been more of a speculator's paradise, where some of the best new technology, finance, energy, and medical stocks reside. It's also home to many smaller firms with limited histories and even more limited earnings records. In fact, many stocks listed on the NASDAQ don't have any earnings at all. Those are fledgling enterprises operating at a loss, a not unusual circumstance, but one of which many funds and investment advisors steer clear.
To say that stocks traded on the NASDAQ are possibly of lower quality long term and risk-sensitive would be an understatement. Consider the leading percentage gainers in today's big move to yet another all-time high.
Destination Maternity (DEST), Etsy (ETSY), Nightstar Therapeutics ADR (NITE), iQIYI ADR (IQ), and Dropbox (DBX) were the five biggest gainers.
Of those, maybe you've heard of Etsy and Dropbox. The others? Probably not. That's where the speculators are playing.
Not only is the NASDAQ home to new ideas and new companies, many of the big tech names are listed there. The top 20 most actives today included the likes of Intel, Cisco, Comcast, 21st Century Fox, Apple, Netflix, Microsoft, Facebook, and Zynga, a pretty good sampling of large, established entertainment and media companies.
Apparently, the NASDAQ is where the action is, as it has outperformed the Dow quite handily this year.
The Dow still carries the weight of the world, though, and it's been sluggish.
Which one is on the correct path? Absolutely, time will tell.
Dow Jones Industrial Average June Scorecard:
Date
Close
Gain/Loss
Cum. G/L
6/1/18
24,635.21
+219.37
+219.37
6/4/18
24,813.69
+178.48
+397.85
6/5/18
24,799.98
-13.71
+384.14
6/6/18
25,146.39
+346.41
+730.55
6/7/18
25,241.41
+95.02
+825.57
6/8/18
25,316.53
+75.12
+900.69
6/11/18
25,322.31
+5.78
+906.47
6/12/18
25,320.73
-1.58
+904.89
6/13/18
25,201.20
-119.53
+785.36
6/14/18
25,175.31
-25.89
+759.47
At the Close, Thursday, June 14, 2018:
Dow Jones Industrial Average: 25,175.31, -25.89 (-0.10%)
NASDAQ: 7,761.04, +65.34 (+0.85%)
S&P 500: 2,782.49, +6.86 (+0.25%)
NYSE Composite: 12,773.15, -12.30 (-0.10%)
Getting the usual Monday morning boost, stocks experienced widespread gains throughout the day but faded badly into the close, with the Dow suffering the worst, dropping 80 points off its early afternoon high at 25,402.83.
The blue chips ended the day with a gain of just less than six points, the smallest percentage higher (0.02%) of the major indices.
Monday's subdued trading preceded the signing of an historic agreement to denuclearize North Korea, signed Tuesday morning, Singapore time, by President Trump and North Korean leader, Kim Jong-un. The late-day selloff might have been a precursor to more meaningful action to come Tuesday and Wednesday as the Federal Reserve plans a widely-anticipated increase to the federal funds rate, also known as the overnight or interbank rate, the price banks pay to loan funds to each other or to and from the Federal Reserve.
With the FOMC set to open the rate policy meeting on Tuesday and conclude Wednesday afternoon, treasury bonds displayed relative quiet, though yields rose moderately across the treasury spectrum.
Most worrying to bond traders and economists is the continuing flattening of the yield curve, as it approaches possible inversion, a condition that has presaged every recession since 1955.
The 2-10-year spread reached its lowest point in the current cycle, dropping to 43 basis points. The 5-30 spread stood at a mere 30 basis points (0.30%) at the close of trading Monday.
Further rate hikes by the Fed treated to choke off investment and send shorter maturities higher while longer ones stand firm. Both the 5-year note and 30-year bond have risen in yield by six basis points since June 1, though the stability is not expected to last long past this week's FOMC meeting.
As far as trading is concerned, there is likely to be a period of quietude Tuesday and Wednesday morning, leading up to the policy announcement at 2:00 pm EDT.
Dow Jones Industrial Average June Scorecard:
Date
Close
Gain/Loss
Cum. G/L
6/1/18
24,635.21
+219.37
+219.37
6/4/18
24,813.69
+178.48
+397.85
6/5/18
24,799.98
-13.71
+384.14
6/6/18
25,146.39
+346.41
+730.55
6/7/18
25,241.41
+95.02
+825.57
6/8/18
25,316.53
+75.12
+900.69
6/11/18
25,322.31
+5.78
+906.47
At the Close, Monday, June 11, 2018:
Dow Jones Industrial Average: 25,322.31, +5.78 (+0.02%)
NASDAQ: 7,659.93, +14.41 (+0.19%)
S&P 500: 2,782.00, +2.97 (+0.11%)
NYSE Composite: 12,856.96, +24.89 (+0.19%)
Ripping past rival indices, the Dow Jones Industrial Average scored its biggest point increase since January, adding 681 points while boosting its June increase to 900 points, also the best monthly gain since January.
Whether the bullish sentiment will prevail through the remaining 15 trading days of June may be addressed in the week ahead, one which will witness President Trump's negotiating skills at work when he meets with North Korea's Kim Jong-un in Singapore, an epic event that looks to end nearly seven decades of armed confrontation on the Korean peninsula.
Since taking the oath of office in January, 2016, Trump has made North Korea a significant priority, alternating between insulting tweets (calling Jong-un "Little Rocket Boy," for instance), displays of military force, and back-room preliminary negotiations through surrogates from China, Japan, South Korea and US diplomats.
Official negotiations begin Tuesday, 9:00 am Singapore time, which translates nicely to 9:00 pm Eastern Daylight Time, assuring that late-night political junkies will have their plates full for the better part of the week.
Also on the agenda for the upcoming week is the Tuesday-Wednesday FOMC policy rate meeting, in which the Federal Reserve will likely hike the federal funds rate another 25 basis points, an action which is likely to have great impact on stocks as well as bonds. After hiking rates earlier this year, Fed officials have gone to great lengths to keep their rate increase policy in front of investors and the general public, with various officials parroting the themes that the economy is strong and that now is the right time to increase lending rates.
As opposed to normal Fed operations being somewhat behind the curve, the current roster seeks to appear out in front of the economic realities, though critics maintain that all the Fed is doing is preparing for a looming recession, arming themselves with enough interest rate ammunition to staunch an eventual downturn.
If the Fed does as expected it will hike rates from 0.00 to 0.25 to 1.75% to 2%. This will be the second rate hike this year and the seventh move since the start of the tightening cycle which began in December 2015.
While the small increases have been well-spaced, it's assumed that the Fed will continue to increase rates every three months, meaning that they will hike again in September and once more in December.
The trouble with such an optimistic outlook is that an increase in their base rate to 2.25-2.50 by year-end would put increased pressure on the stock market, as treasury yields would likely rise to levels above and beyond those of many dividend-paying stocks, without the associated risk.
Another anticipated action this coming week is the response from G7 members following their weekend meeting in which President Trump insulted the leaders of other nations in person and via Twitter. Trump's claim that G7 countries like France, Canada, Germany, and Italy have long been taking advantage of the US via unfair trade practices. The US president has been slapping tariffs on friends and foes alike and the backlash in tit-for-tat tariffs has already been forwarded by Canada, with the EU nations likely to impose their own retaliatory trade taxes on US goods.
While the trade wars have been building, the financial media has routinely blamed the tension for declines in the stock market. However, as trade talk went ballistic in the past week, stocks continued their ascent without interruption, proving once again that snap analysis of stock market moves are nothing other than pure fakery by an inept, disingenuous media elite. Trading decisions are largely not the result of current events, but rather, are outward-looking, with longer-term event horizons than a few days or weeks.
The effects of trade interruptions, tariffs and retaliation are unlikely to be felt in any meaningful way for many months, making the premature effusions of guilt by presidential association by the financial and mainstream press a rather large canard.
So, the first full week of trading in June went spectacularly for stocks, with the NASDAQ breaking to new all-time highs on Wednesday, before profit-taking took it back down on Thursday. Friday's 10-point gain on the NAZ left it roughly 50 points off the new closing high.
As for the benchmark Dow Industrials, they are cumulatively 1300 points behind the January record high of 26,616.71. There is a great deal of ground to be made up in any effort to convince investors that the bull market will continue, while those of the bearish camp point to the range-bound cycle of the past three months following the cascading February fall.
June may turn out to be a watershed month for stock pickers, as tech stocks have regained much of their luster while financials have languished. Due to the somewhat incestuous nature of Wall Street trading, all boats may rise or fall in coming days as the second quarter draws to a close and fed managers square their books in anticipation of second quarter reports.
While the prior week may have been a banner for bulls, the week ahead promises to be full of surprises, intrigue and potential pitfalls for investors.
Dow Jones Industrial Average June Scorecard:
Date
Close
Gain/Loss
Cum. G/L
6/1/18
24,635.21
+219.37
+219.37
6/4/18
24,813.69
+178.48
+397.85
6/5/18
24,799.98
-13.71
+384.14
6/6/18
25,146.39
+346.41
+730.55
6/7/18
25,241.41
+95.02
+825.57
6/8/18
25,316.53
+75.12
+900.69
At the Close, Friday, June 8, 2018:
Dow Jones Industrial Average: 25,316.53, +75.12 (+0.30%)
NASDAQ: 7,645.51, +10.44 (+0.14%)
S&P 500: 2,779.03, +8.66 (+0.31%)
NYSE Composite: 12,832.07, +43.56 (+0.34%)
For the Week:
Dow: +681.22 (+2.77%)
NASDAQ: +91.18 (+1.21%)
S&P 500: +44.41 (1.62%)
NYSE Composite: +211.24 (+1.67%)
The Dow Jones Industrial Average isn't really an average at all.
If it were, one would take the price of each of the 30 components and divide the sum by 30. That would yield the average price. Since that number would barely move the needle on a day-to-day or minute-by-minute basis, something more was needed to satisfy the voracious appetite of investors. Ergo, the Dow Divisor.
The Dow Divisor is 0.14523396877348. Since it's a fraction of a point, the divisor doesn't actually divide anything. Rather, it's a multiplier, which serves to enhance the gains of the higher-priced stocks and minimize the losses of lower-priced shares. That explains why declines on the Dow are serious events. It's rigged to go higher regardless of volume.
One can clearly see - using such a valuation (weighted) method - why tin-hat theories abound about market manipulation. The Dow leads the market, not only in the US, but around the world. A big move on the Dow triggers the herd instinct to buy other stocks.
Boeing (BA) was the biggest percentage gainer on the day, adding 11.46 points to 371.56. But, thanks to the divisor, Boeing contributed nearly 79 points to the overall Dow gain, despite less than 4.5 million shares changing hands.
By contrast, General Electric was the big loser, dropping 1.16%. But, since GE is the lowest-priced stock on the index, by far, at 13.64, the point loss was a mediocre 0.16. The magic of the divisor meant GE's loss to the overall index was a measly 1.10 points, despite the fact that more than 62 million shares were traded, more than the total number of shares in the three next most-widely traded stocks, Pfizer (PFE), Microsoft (MSFT), and Intel (INTC) combined.
Only four Dow stocks traded lower on the day. In addition to GE, Wal-Mart, Pfizer, and The Travelers finished down, though modestly. Also contributing to the day's massive spike were 3M (MMM), Goldman Sachs (GS), and United Health (UNH), each trading above 200 per share. Their combined advance of 10.77 points were good for another 74 Dow points, despite the fact that they were three of the four least-traded stocks on the exchange (Pfizer was the second least-traded).
So, four low volume stocks were good for 150 points on the Dow. The other 22 gainers were cannon fodder against the bear case as the Dow Industrials outpaced the other indices by a wide margin. The day's gain resulted in the highest closing price on the Dow since March 13.
Happy Dow divisor days!
A couple of good reads on the Dow divisor can be found here and here.
Dow Jones Industrial Average June Scorecard:
Date
Close
Gain/Loss
Cum. G/L
6/1/18
24,635.21
+219.37
+219.37
6/4/18
24,813.69
+178.48
+397.85
6/5/18
24,799.98
-13.71
+384.14
6/6/18
25,146.39
+346.41
+730.55
At the Close, Wednesday, June 6, 2018:
Dow Jones Industrial Average: 25,146.39, +346.41 (+1.40%)
NASDAQ: 7,689.24, +51.38 (+0.67%)
S&P 500: 2,772.35, +23.55 (+0.86%)
NYSE Composite: 12,778.23, +119.53 (+0.94%)
The see-sawing of the markets continued for another week ending in bifurcated manner, with the Dow and NYSE Composite suffering losses while the S&P and NASDAQ posted gains.
In particular, the Dow has seen 12 weeks with positive results, versus 10 weeks of losses, resulting in a relatively flat index, down a mere 84.01 points since the 2017 year-end close (December 29) of 24.719.22, the gains all made in January, when the Dow topped out at 26,616.71 on January 26. The losses were mostly confined to the correction in February and another poor showing in March. April and May both were positive for the Dow, though those small gains still leave the index nearly 2000 points below the all-time high.
Two stocks - Boeing (BA) and Apple (AAPL) have kept the Dow from sliding back into correction territory. Since April 30, Apple gained 15%, Boing added 23 points, or about seven percent, though both stocks have basically flatlined since mid-month.
On the holiday-shortened week, the Dow recorded losses on Tuesday and Thursday (May 31), and gains on Wednesday and Friday (June 1), the latter upswing largely attributable to the better-than-expected June non-farm payroll release, getting the new month off to a flying start.
As has been evident since the February and March selloffs, this has become a trader's market, with individual stocks and sectors favored over pure index plays. All of the major averages have gravitated around their respective 50 and 200-day moving averages, the divergences seldom taking any of them far above or below those critical lines of support and/or resistance.
With summer coming on fast, volume continues to wither away, with select stocks getting the bulk of the trading action. Bullish deniers of the Dow Theory change from April will be hard-pressed to make much of a case for buying stocks during the hot weather, as the Dow's all-time high fades farther and farther away.
Dow Jones Industrial Average June Scorecard:
Date
Close
Gain/Loss
Cum. G/L
6/1/18
24,635.21
+219.37
+219.37
At the Close, Friday, June 1, 2018:
Dow Jones Industrial Average: 24,635.21, +219.37 (+0.90%)
NASDAQ: 7,554.33, +112.21 (+1.51%)
S&P 500: 2,734.62, +29.35 (+1.08%)
NYSE Composite: 12,620.83, +93.69 (+0.75%)
For the Week:
Dow: -117.48 (-0.48%)
NASDAQ: +120.48 (+1.62%)
S&P 500: +13.29 (+0.49%)
NYSE Composite: -14.12 (-0.11%)
Monday's rally had everybody singing the praises of Treasury Secretary Mnuchin and the "on hold" status of trade negotiations with China. Supposedly, this gave the markets an "all clear" signal to buy more risk assets at elevated price levels (remember, the Dow is only off 6-7% from the all-time high of 26,616.71, January 26).
On the surface, a 300-point gain on the Dow provides a reason to cheer the market and the economy. Underneath the hood, however, the gears are grinding, sparks are coming from various frayed electrical components and the engine is sputtering and coughing. Any description of the US economy as anything better than sputtering should be viewed with resolute skepticism.
The big move on the Dow was fueled mostly by a rise in Boeing (BA), which was up 3.61% and is trading at the nosebleed level of 363 per share. For perspective, two years ago Boeing was trading at 127 per share. So, that's a triple for a company that is one of the more mature companies in America. Absurdly, Boeing is carrying a simple PE ratio of 27, a number normally reserved for high-growth companies.
Meanwhile, the seeming were out in force, disregarding the reality of a slowing, or, at best, sputtering economy (despite what you're reading or hearing) and stocks still well below the previous highs earlier in the year.
Monday's rally was nothing more than a media-inspired bear market rally. It had all the elements: only a few stocks led the way, the media was cheerleading all along, it was on a Monday.
Whatever your perspective of the market, there is little evidence that it is not massively overbought at any level above Dow 20,000. Trade wisely.
Dow Jones Industrial Average May Scorecard:
Date
Close
Gain/Loss
Cum. G/L
5/1/18
24,099.05
-64.10
-64.10
5/2/18
23,924.98
-174.07
-238.17
5/3/18
23,930.15
+5.17
-233.00
5/4/18
24,262.51
+332.36
+99.36
5/7/18
24,357.32
+94.81
+194.17
5/8/18
24,360.21
+2.89
+197.06
5/9/18
24,542.54
+182.33
+379.39
5/10/18
24,739.53
+196.99
+576.38
5/11/18
24,831.17
+91.64
+668.02
5/14/18
24,899.41
+68.24
+736.26
5/15/18
24,706.41
-193.00
+543.26
5/16/18
24,768.93
+62.52
+605.78
5/17/18
24,713.98
-54.95
+550.73
5/18/18
24,715.09
+1.11
+551.84
5/21/18
25,013.29
+298.20
+850.04
At the Close, Monday, May 21, 2018:
Dow Jones Industrial Average: 25,013.29, +298.20 (+1.21%)
NASDAQ: 7,394.04, +39.70 (+0.54%)
S&P 500: 2,733.01, +20.04 (+0.74%)
NYSE Composite: 12,804.01, +86.59 (+0.68%)
With today's gains, the Dow Jones Industrial Average has nearly doubled - in one day - all of its monthly gains from the previous six trading days.
Hardly a notable event, it overshadowed two days (5/3 and 5/8) in which the general averages barely budged at all.
In a market that is supposed to be highly volatile, what are flat sessions doing in there? They are showing something which many may have missed: the volatility from February and March certainly waned in April and is is petering out in May, with the VIX standing at a 16-handle presently.
This being a highly fluid situation, and one in which there remains the narrative of "recovery" or "expansion" getting people to sell their stocks isn't going to be an easy deal, thus, the zig-zag patterning of the past six weeks may maintain for a few weeks or months more before there's a true selloff.
About two weeks ago, Money Daily was of the opinion that the next rally (the one we're currently experiencing) should be good for 1000 points on the Dow. We're not even half way there, so more upside, complete with unicorns and rainbows are to be expected in the near term.
Once the Dow gets beyond 25,000, gains may become more difficult to rationalize. The market will no longer be oversold and approaching the January 26 high (26,616.71) will have traders on their toes and the early departures feeling a little bit queasy, though, being early is not the same as being wrong.
Whether or not the machinations of the algorithms and AI computers will undo 100+ years of Dow theory remains to be seen.
BTW: Oil is going out of sight, again. That is not a good sign for a buoyant, expansive economy, but rather one that is tightening up and about to relapse into melancholy and the doldrums of stagflation.
For now, most of what's moving stocks is noise, and it is not very loud.
Dow Jones Industrial Average May Scorecard:
Date
Close
Gain/Loss
Cum. G/L
5/1/18
24,099.05
-64.10
-64.10
5/2/18
23,924.98
-174.07
-238.17
5/3/18
23,930.15
+5.17
-233.00
5/4/18
24,262.51
+332.36
+99.36
5/7/18
24,357.32
+94.81
+194.17
5/8/18
24,360.21
+2.89
+197.06
5/9/18
24,542.54
+182.33
+379.39
At the Close, Wednesday, May 9, 2018:
Dow Jones Industrial Average: 24,542.54, +182.33 (+0.75%)
NASDAQ: 7,339.91, +73.00 (+1.00%)
S&P 500: 2,697.79, +25.87 (+0.97%)
NYSE Composite: 12,632.53, +112.29 (+0.90%)
Another day, another volatile session with a 216-point trading range on the Dow has investors concerned, but traders - those commission-or-volume-based entities that make markets - ebullient.
The range of trade on the day was nothing of concern to anybody, since the levels are far from the extremes. Those extremes on the Dow, since February 8 include a February 26 high of 25,709 and a March 23 low of 23,533 and are dignified on charts as significant peaks and valleys. With the Dow closing somewhere betwixt and between is indicative of a market that simply cannot make up its own mind, since there are roughly equal parts sellers and buyers, but barely any conviction on either side.
Stocks will continue to trade in this 2100-point range until there is some decisive catalyst to lead them either higher or lower. Presently, there is nothing to encourage the bulls nor the bears that a breakout or breakdown is about to occur. What happens during these volatile but rangebound periods are fairly discernable patterns of behavior, most notably stocks bouncing higher off the 200-day moving averages of the various major indices, or correcting lower off the 50-day moving averages.
Stocks being tied to computers and the computers run by algorithms, programmatic trading is ensured.
There isn't much to be said or inferred from this sideways pattern, except that the range continues to be on the low side, with all-time highs from January 26 (26,616.71) becoming a smaller and smaller object in the rear view mirror of the stock market race car.
Nothing is likely to change this pattern until either the peak or valley is breached, though the odds are good that the valley breach will be the eventual winner, leading to a more vicious, faster-paced downturn.
That's not to say that the Dow could not add significantly from its current level. It's a distinct possibility, but one that would probably fail as the index approaches that February 26 peak.
Throw away all the fundamentals, dismiss all the geopolitical news, ignore all data and just focus on the chart. Sometimes - and now is one of those times - it is really that simple.
Dow Jones Industrial Average May Scorecard:
Date
Close
Gain/Loss
Cum. G/L
5/1/18
24,099.05
-64.10
-64.10
5/2/18
23,924.98
-174.07
-238.17
5/3/18
23,930.15
+5.17
-233.00
5/4/18
24,262.51
+332.36
+99.36
5/7/18
24,357.32
+94.81
+194.17
At the Close, Monday, May 7, 2018:
Dow Jones Industrial Average: 24,357.32, +94.81 (+0.39%)
NASDAQ: 7,265.21, +55.60 (+0.77%)
S&P 500: 2,672.63, +9.21 (+0.35%)
NYSE Composite: 12,519.75, +26.40 (+0.21%)
After closing out April with the first positive result in three months - a paltry gain of 50.81 points - the Dow Jones Industrial Average began the month of May with a bad stumble, falling by as many as 350 points before rallying miraculously in the afternoon to end the session with a minor loss of just 64 points.
While the first day of May could have been - and probably should have been - a worse result than what the nightly news reports, signs for a continued decline in stocks overall are ominous.
The Dow remains far from all-time highs set in January, and, with earnings season winding down, traders will have a difficult time conjuring up reasons to have faith in equities over the near term.
With many stocks wickedly overvalued, the short-covering rally of Tuesday is likely to be short-lived, though the market still appears to be slightly oversold in the very short term.
April showed the market trading in a sideways direction, though the tilt to the downside is evident and wearing on Wall Street's general optimism. Any little thing could set off a panic, exacerbated by programmed trading and those silly algorithms and ETFs that bounce stocks around like rubber balls on concrete.
After the bell on Tuesday, Apple (AAPL) reported earnings for the most recent quarter that beat analyst estimates.
The company posted earnings of $2.73 per share on $61.1 billion of revenue. Analysts were looking for $2.64 per share on $60.9 billion of revenue, so, it wasn't exactly a blowout quarter, something that will surely be a cause for concern going forward. Apple is supposed to beat every quarter, and usually by leaps and bounds, but the company - which hasn't produced a new product in years - seems to be living more on reputation, and record stock buybacks, than innovation.
Dow Jones Industrial Average May Scorecard:
Date
Close
Gain/Loss
Cum. G/L
5/1/18
24,099.05
-64.10
-64.10
At the Close, Tuesday, May 1, 2018:
Dow Jones Industrial Average: 24,099.05, -64.10 (-0.27%)
NASDAQ: 7,130.70, +64.44 (+0.91%)
S&P 500: 2,654.80, +6.75 (+0.25%)
NYSE Composite: 12,493.02, -22.34 (-0.18%)
There are very few people who ascribe to the discipline of Dow Theory.
I, Fearless Rick, am one of them. I am also the only person I know who has read Adam Smith's "The Wealth of Nations," and I am currently re-reading sections of that lengthy tome because it's important to understand.
I'm making these statements not to blow my own horn, but to point something out that readers of this blog and the millions of non-readers should acknowledge.
When I wrote this post on April 9, I had complete confidence in what I was delivering. There were no caveats, what-ifs, or other murky scenarios by which I could hedge my declaration that the bull market in stocks was over and that the next 18 months to three or four years would be losers for stock holders.
It's nearly a month later - and three months since the Dow Jones Industrial Average topped out at 26,616.71 (sorry, that number has been hard-wired into my brain) on January 26 - and nothing has changed. Stocks are still hovering between their 50 and 200-day moving averages. In fact, since the Dow Transports confirmed the bear market, the Dow Industrials are up - as of today's close - a whopping 184 points, a gain of less than one percent over the past 15 trading days.
Thus, I am here to say that it sure looks like I nailed it, called it, that I'm absolutely right. This is a bear market, and it will be a bear market until the Dow Industrials find some bottom and the Dow Transports confirm the primary trend change back to the bullish side.
And I will tell you when that happens and not a moment sooner.
I'm pointing this out because I've grown a little bit weary of toiling in obscurity while outright frauds like Dennis Gartman get to bloviate on CNBC in stultified language how "we" erred on the bullish side, or how he's "long gold in yen terms," or other such nonsense. He is getting paid to tout garbage. I get nothing, not even faint praise, when I'm absolutely right, 100%.
OK, so maybe I'm having a little hissy fit here, but I'm not going to lower my voice, nor am I going to stop speaking my mind, making my calls and writing this daily blog. My reward is out there somewhere, I just hope I get some of it before I get to heaven.
As for today's action in the markets, it was the same old saw that I've been commenting upon in previous blogs: up at the open, then a long, slow decline into the red, a typical and obvious chart pattern that the mainstream media will not ever acknowledge because they and their Wall Street banker masters want you to continue contributing to their ponzi schemes, at your own peril.
Fund holders will be the eventual bag-holders of this bear market. They'll lose anywhere from 30 to 60% of their portfolio if they don't reallocate their investments out of growth stocks and ETFs and into something more sustainable, whatever that may be. Bonds are probably a good spot as yields are rising. Commodities may not be bad, depending on the asset mix. Cash is more than likely to be king. You can send me some by clicking here.
We are entering a period in which it is more important to preserve capital than risk it and hope for gains. Hope is not an investment strategy. Watching your magic fund sink month after month is not pleasant, and being a bag-holder while the smart money runs for the exits is not what any rational person would do.
As anyone can clearly see, after taking losses in February and March, the Dow Jones Industrial Average finished with a gain of 50.81 points. That's not a gain, that is a rounding error, a pimple, a dot. It didn't even beat inflation. You lost money over time.
Get out, reallocate, or die.
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
4/3/18
24,033.36
+389.17
-69.75
4/4/18
24,264.30
+230.94
+161.19
4/5/18
24,505.22
+240.92
+402.11
4/6/18
23,932.76
-572.46
-170.35
4/9/18
23,979.10
+46.34
-134.01
4/10/18
24,407.86
+428.76
+294.66
4/11/18
24,189.45
-218.55
+76.11
4/12/18
24,483.05
+293.60
+369.71
4/13/18
24,360.14
-122.91
+247.80
4/16/18
24,573.04
+212.90
+460.70
4/17/18
24,786.63
+213.59
+674.29
4/18/18
24,748.07
-38.56
+635.73
4/19/18
24,664.89
-83.18
+552.55
4/20/18
24,462.94
-201.95
+350.60
4/23/18
24,448.69
-14.25
+336.35
4/24/18
24,024.13
-424.56
-88.21
4/25/18
24,083.83
+59.70
-28.51
4/26/18
24,322.34
+238.51
+210.00
4/27/18
24,311.19
-11.15
+198.85
4/30/18
24,163.15
-148.04
+50.81
At the Close, Monday, April 30, 2018:
Dow Jones Industrial Average: 24,163.15, -148.04 (-0.61%)
NASDAQ: 7,066.27, -53.53 (-0.75%)
S&P 500: 2,648.05, -21.86 (-0.82%)
NYSE Composite: 12,515.39, -78.64 (-0.62%)
The Industrials ended a five-session losing streak on Wednesday, but, as dead cat bounces go, it didn't even register on the Boo-Boo Kitty scale, leaving the Dow Jones Industrial Average in the red for the month of April and still within whistling distance of correction territory (23,954).
If it hasn't become obvious to just about everyone on Wall Street that stocks are in some serious trouble after nine years of relentless stock buybacks and jerking up by Fed policies of ZIRP and QE, it should be quite clear now. With earnings season winding down, there's going to be nothing with which to prop up stocks - other than the usual central bank manipulation and other wily shenanigans - from the first week off May until the next FOMC meeting in June.
Stocks and the Fed are playing a dangerous game of chicken. If the Federal Reserve insists upon its path of raising interest rates every three or four meetings, stocks are going to tank. From the Fed's point of view, it probably doesn't matter what they do in the interest rate scheme, since they consider the business cycle to be at an end. That kind of thinking gives them full reign to raise rates, crash the markets, send the economy into recession (late 2018 or early 2019), so that they have sufficient ammunition to battle the downturn they created. It's a sickening policy from the prior century that badly needs replacing in the 21st.
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
4/3/18
24,033.36
+389.17
-69.75
4/4/18
24,264.30
+230.94
+161.19
4/5/18
24,505.22
+240.92
+402.11
4/6/18
23,932.76
-572.46
-170.35
4/9/18
23,979.10
+46.34
-134.01
4/10/18
24,407.86
+428.76
+294.66
4/11/18
24,189.45
-218.55
+76.11
4/12/18
24,483.05
+293.60
+369.71
4/13/18
24,360.14
-122.91
+247.80
4/16/18
24,573.04
+212.90
+460.70
4/17/18
24,786.63
+213.59
+674.29
4/18/18
24,748.07
-38.56
+635.73
4/19/18
24,664.89
-83.18
+552.55
4/20/18
24,462.94
-201.95
+350.60
4/23/18
24,448.69
-14.25
+336.35
4/24/18
24,024.13
-424.56
-88.21
4/25/18
24,083.83
+59.70
-28.51
At the Close, Wednesday, April 25, 2018:
Dow Jones Industrial Average: 24,083.83, +59.70 (+0.25%)
NASDAQ: 7,003.74, -3.62 (-0.05%)
S&P 500: 2,639.40, +4.84 (+0.18%)
NYSE Composite: 12,517.86, +3.87 (+0.03%)
Today was yet another example of the kind of days which are typical in a bear market, and make no mistake, this is the early phase of what could become a raging bear which will strip stocks of 40-60% of their valuations. Stocks were higher in the early trading and slumped in the afternoon, with the Dow Industrials closing at its lowest level in three weeks.
With today's losses, the Dow has plunged into negative territory for the month, following back-to-back declines for February and March. Even earning reports are not enough to keep stocks elevated, especially after Alphabet (parent of Google, GOOG) posted what appeared to be strong numbers only to reveal increasing expenses, crushing profit margins.
Dow component 3M (MMM) led the decline after posting earnings per share of $2.50, which missed analyst estimates of $2.52, and were 16% higher than the $2.16 posted in the year-ago period. The stock was blasted, losing 14.77 points (-6.84%) to end the day at 201.11.
Caterpillar was close behind in the loss column, down -9.80 points (-6.36%).
Alphabet dropped a stunning -47.47 (-4.45%) to close out the session at 1,019.98.
Only six of 30 Dow stocks managed gains on the day. The NASDAQ and other major indices were also badly damaged.
The prevailing trend this earnings season has been that whatever a company posts, it's probably not good enough for anybody seeking to get out of a position, as risk aversion has suddenly become popular once again, especially with yields on the ten-year-note approaching three percent and precious metals (gold, silver) at bargain basement prices.
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
4/3/18
24,033.36
+389.17
-69.75
4/4/18
24,264.30
+230.94
+161.19
4/5/18
24,505.22
+240.92
+402.11
4/6/18
23,932.76
-572.46
-170.35
4/9/18
23,979.10
+46.34
-134.01
4/10/18
24,407.86
+428.76
+294.66
4/11/18
24,189.45
-218.55
+76.11
4/12/18
24,483.05
+293.60
+369.71
4/13/18
24,360.14
-122.91
+247.80
4/16/18
24,573.04
+212.90
+460.70
4/17/18
24,786.63
+213.59
+674.29
4/18/18
24,748.07
-38.56
+635.73
4/19/18
24,664.89
-83.18
+552.55
4/20/18
24,462.94
-201.95
+350.60
4/23/18
24,448.69
-14.25
+336.35
4/24/18
24,024.13
-424.56
-88.21
At the Close, Tuesday, April 24, 2018:
Dow Jones Industrial Average: 24,024.13, -424.56 (-1.74%)
NASDAQ: 7,007.35, -121.25 (-1.70%)
S&P 500: 2,634.56, -35.73 (-1.34%)
NYSE Composite: 12,513.91, -96.87 (-0.77%)
Hammered lower on Friday, stocks across the spectrum finished out the week holding relatively minor gains with the Dow Scoreboard showing a 350-point advance for the month.
On a percentage basis, the Dow Jones Industrial Average (^DJIA) was the weakest performer of the major indices with a gain of just 0.42%. After winning moves on Monday and Tuesday, stocks traded to the downside the final three days of the week as solid earnings failed to allay fears that the nine-year-old bull market had topped out in January and that any gains at this juncture might be wiped away in another cascade to the negative.
Ever-hopeful investors were still buyers, though volumes have diminished over the past few weeks as some seek the safety of bonds or more defensive positions in stocks.
A three-day losing streak to close out the week does not auger well heading into the final full week of trading on US markets. With February and March both ending in tears for the bulls, Monday's trading will likely set the tone for the remainder of the week and the month. If April's early strength continues to fade, the sight of three consecutive losing months for equity investors could turn the mostly orderly selling into more panicked disposal of assets.
While it would be folly to predict even one days' movement, the general direction may have already been established. With a downward tilt and the majors clinging to the 50-day moving average across the spectrum, it may be easier to call the market direction for the next three to six months. In conditions such as those present and the markets entering what are traditionally slow months, betting on sideways to lower could prove to be the prescient strategy.
After April, earnings flow will diminish from a steady stream to a trickle, with most of the important companies (banks, techs) having already reported, leaving a void and a downside bottom that will almost surely be tested within the next 30-60 days. June's FOMC meeting also looms largely, like a debt shadow overhanging already overpriced stocks. With the Fed determined to raise interest rates again, the threat of higher borrowing costs choking off the nascent growth theme is becoming more and more real.
Elsewhere, treasury bonds were on the move again, with yields on the 10-year-note approaching three percent by week's end. Also getting considerable notice is the commodity complex, led by oil, as prices for WTI crude reaching three-year highs, taking precious and base metals along for the ride to the upside. So important is the price of oil and gas that the president tweeted about it on Friday morning, putting a temporary cap on gains with his fiery comments.
As President Trump and others in the financial community know all too well, higher gas prices act as a tax on the American consumer and could do significant harm to the economy since nearly 70% of GDP is based on consumer spending. If the bulk of the money from the tax cuts recently passed go directly into gas tanks due to higher prices, there's little left to spend on other things, and that's also a real concern.
The week ahead should focus on oil and commodities. Any further upside to the price of crude oil could be seen as very damaging, though bulls in the precious metals arena are champing at the bit for an overdue breakout from the recent dismal price range.
All things considered, stocks seem somewhat imperiled by potentially better opportunities elsewhere and the continuing debate over whether the bull market has topped. The longer the Dow shies from the January 26 highs (26,616.17) the more compelling the case becomes for those calling this the beginning of a painfully episodic bear market.
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
4/3/18
24,033.36
+389.17
-69.75
4/4/18
24,264.30
+230.94
+161.19
4/5/18
24,505.22
+240.92
+402.11
4/6/18
23,932.76
-572.46
-170.35
4/9/18
23,979.10
+46.34
-134.01
4/10/18
24,407.86
+428.76
+294.66
4/11/18
24,189.45
-218.55
+76.11
4/12/18
24,483.05
+293.60
+369.71
4/13/18
24,360.14
-122.91
+247.80
4/16/18
24,573.04
+212.90
+460.70
4/17/18
24,786.63
+213.59
+674.29
4/18/18
24,748.07
-38.56
+635.73
4/19/18
24,664.89
-83.18
+552.55
4/20/18
24,462.94
-201.95
+350.60
At the Close, Friday, April 20, 2018:
Dow Jones Industrial Average, 24,462.94, -201.95 (-0.82%)
NASDAQ: 7,146.13, -91.93 (-1.27%)
S&P 500: 2,670.14, -22.99 (-0.85%)
NYSE Composite: 12,607.16, -64.32 (-0.51%)
For the Week:
Dow: +102.80 (+0.42%)
NASDAQ: +39.48 (+0.56%)
S&P 500: +13.84 (0.52%)
NYSE Composite: +61.11 (+0.49%)
The Dow Scorecard shows strong gains for April, yet a long way from returning to all-time highs set on January 26 of 26,616.71. Etch that number into your brain. In the near term, for all intents and purposes, as long as the Dow remains below that level, you should consider this a bear market.
Longer term, the market will resolve the issue. If the Dow makes another fresh low below the one put in on February 8 (23,860.46) or March 23 (23,533.20), it's near 100% certainty that this is a bear market. It's important to be positioned correctly, but at the present time, many traders are confused. Even some followers of Dow Theory, which confirmed a primary trend change to bear market conditions on April 9, are not convinced. All manner of arguments have been made, calling the confirmation false, due to extraordinary conditions, such as President Trump wanting to bomb Syria.
Such talk is pure hubris and rubbish, not worth the breath to speak of in real analytical terms. Geo-political risks are always paramount in markets; the current condition is nothing out of the ordinary.
For the present, this is a bear market and the recent gains, even if they run for days and weeks, are to be considered exit points for those who are still engaged in the equity game. Bonds, cash, tangible goods are preferred at this time.
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
4/3/18
24,033.36
+389.17
-69.75
4/4/18
24,264.30
+230.94
+161.19
4/5/18
24,505.22
+240.92
+402.11
4/6/18
23,932.76
-572.46
-170.35
4/9/18
23,979.10
+46.34
-134.01
4/10/18
24,407.86
+428.76
+294.66
4/11/18
24,189.45
-218.55
+76.11
4/12/18
24,483.05
+293.60
+369.71
4/13/18
24,360.14
-122.91
+247.80
4/16/18
24,573.04
+212.90
+460.70
4/17/18
24,786.63
+213.59
+674.29
At the Close, Tuesday, April 17, 2018:
Dow Jones Industrial Average: 24,786.63, +213.59 (+0.87%)
NASDAQ: 7,281.10, +124.81 (+1.74%)
S&P 500: 2,706.39, +28.55 (+1.07%)
NYSE Composite: 12,705.76, +77.55 (+0.61%)
That's the only number any macro investor needs to know. That was the January 26 all-time high on the Dow.
Since that time, the world's most widely-followed stock index has fallen on some lean times, and getting back to its level days of glory isn't going to be easy, if at all possible over the near term.
Today was an effort to allay the fears of those looking at their 401k statements from the first quarter, which showed losses, possibly, for many, for the first time in years, perhaps as long as nine years.
Stocks continued to ramp higher throughout the day without any discernible news other than the usual flow of corporate earnings reports, most of which were positive, and the thought that President Trump won't actually send missiles into Syria. The tail is truly wagging the dog on this one.
The gain today on the Dow was close to 300 points. Putting that in perspective, if the Dow was to go straight up at the rate of 300 points per day, it would only take seven trading days to get back to the all-tme high.
But, how likely is that?
Not very.
What is likely is that the Dow will continue to gain through the month, as corporate earnings continue to fuel a rally, as visceral and fleeting as that may be. Something negative will come along to upset the status quo, as it usually doesn't, but investors are keen to ignore the negative and trade on the positive. That's because everybody likes to be positive, whether the reality supports it or not.
Examining a couple of representative corporate earnings reports, Delta (DAL) and Blackrock (BLK) stood out, both reporting before the bell.
Delta gained 74 cents per share, down from 77 cents a year ago. The stock gained 1.51 points (+2.93%). That's some wishful thinking there. The company is in the midst of a $5 billion stock repurchase, begun just over a year ago and scheduled to be completed by 2020. Putting this most-recent quarter in perspective, the company's EPS would be declining if the number of shares outstanding had held steady.
Blackrock was expected to hit 6.39 per share. The New York-based company's net income rose to $1.09 billion, or $6.68 per share, in the first quarter, up 28 percent from the year-ago period.
Adjusted for special items, BlackRock earned $6.70 per share. They have money (yours) and know how to put it to good use. The stock was up 7.70 (+1.47%) on the day. Blackrock executives - including CEO Larry Fink - are Washington and Fed insiders, expert at employing the most extreme accounting tactics, thus making up extraordinary investment opportunities. They are hardly saints, but they are well-protected.
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
4/3/18
24,033.36
+389.17
-69.75
4/4/18
24,264.30
+230.94
+161.19
4/5/18
24,505.22
+240.92
+402.11
4/6/18
23,932.76
-572.46
-170.35
4/9/18
23,979.10
+46.34
-134.01
4/10/18
24,407.86
+428.76
+294.66
4/11/18
24,189.45
-218.55
+76.11
4/12/18
24,483.05
+293.60
+369.71
At the Close, Thursday, April 12, 2018:
Dow Jones Industrial Average: 24,483.05, +293.60 (+1.21%)
NASDAQ: 7,140.25, +71.22 (+1.01%)
S&P 500: 2,663.99, +21.80 (+0.83%)
NYSE Composite: 12,580.22, +65.63 (+0.52%)
Less than 24 hours after making the bold proclamation that the bull market was over, Wall Street traders seem to disagree, sending the Dow Industrials up nearly 400 points at the open, with the Transportation Index cruising 130 points to the upside when the bell rang to start trading.
Days like this are precisely why investing is a longer-term proposition. Markets can turn on a dime, on a word from some prominent investor (see: Warren Buffett), a Fed President, a presidential tweet or even something more innocuous, like the trade balance (a new record, ignored), or jobs data (a bad miss on Friday, not ignored).
It's imperative to maintain perspective and not question what your own eyes told you a day ago, a week ago a month ago. In fact, for the Dow Theory components to finally trigger a sell signal took nearly three months from start to finish, all that time merely suggesting something ominous, before finally saying, "yes, here it is."
Tuesday's massive bounce contained no earth-shattering qualities in and of itself. The way the markets have been performing of late, one could hypothesize an equally violent downturn on Wednesday, Thursday, or Friday, though it appears the bulls are discounting the Dow Theory as a false flag for now. One wonders what the perma-bulls will be eating come June - steak tartar or boiled crow?
Instead of taking a short-term approach and admitting one was/is wrong, it's likely a better plan to look back at the charts and see exactly where the Dow Jones Industrial Average has to go before making a judgement on the efficaciousness of Dow Theory. I's a simple number: 26,616.71, the high from January 26, and the Transportation Index would have to close above 11,373.38, the all-time high from January 12.
Those numbers are far away, so the test will come over the coming weeks of earnings releases, when Wall Street and the financial news-speakers on CNBC, Bloomberg, and Fox Financial Network will be falling over each other to proclaim the greatness of the latest "beat." Bear in mind that all of these funny numbers coming out over the next three weeks, especially the EPS (earnings per share) figures, have all been manipulated by stock buybacks, diluting the number of shares outstanding, and in many cases, by lowered expectations by analysts. The true comparisons can be found from year-ago EPS (i.e., growth) and gross revenue numbers.
So, despite the snorting of the bull for a day, reserving judgement on a dead-cat, one-day wonder of a rally may be not only prudent, but prescient.
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
4/3/18
24,033.36
+389.17
-69.75
4/4/18
24,264.30
+230.94
+161.19
4/5/18
24,505.22
+240.92
+402.11
4/6/18
23,932.76
-572.46
-170.35
4/9/18
23,979.10
+46.34
-134.01
4/10/18
24,407.86
+428.76
+294.66
At the Close, Tuesday, April 10, 2018:
Dow Jones Industrial Average: 24,407.86, +428.76 (+1.79%)
NASDAQ: 7,094.30, +143.96 (+2.07%)
S&P 500: 2,656.85, +43.69 (+1.67%)
NYSE Composite: 12,575.63, +195.08 (+1.58%)
Right off the bat, here's the theme for today's trading: Frankie Valli and the Four Seasons 1964 hit, "Dawn."
For the uninformed, today's epic pump-and-dump collapse on all the major indices was more than just "the usual." It was, simply put, a day to be marked in financial history, the day the most phony, contrived and manipulated bull market that ever existed, died an overdue death and gave birth to a bona fide bear market, something most of today's millennial day-trading demons have never experienced.
Why would the death of a bull market and the beginning of a bear market be something suitable for celebration?
Good question.
Here's an even better answer: because the bull market, which started March 9, 2009 - nine years and one month, to the day - was one built on fumes and Fed happy talk, endless fiat money printing, rounds and rounds of Quantitative Easing (QE), artificially low interest rates approaching zero (ZIRP) and corporate stock buybacks of unprecedented quantity. Almost nowhere was there a single sign of real growth; much of the gains in stocks were due to buyback manipulation as gross revenue stagnated for nearly a decade.
It was a decade of fakery, of spoofing and high frequency trading as GDP never reached three percent until nearing the end, and never actually did for a full year, including 2017, the last. Almost all of the supposed growth in the "recovery" was due to inflation, nothing else. A false sense of security was promoted by the governors and presidents of the Federal Reserve System and their regional banks and the public gobbled it up.
Meanwhile, in the real world, mark to market had been replaced by mark to fantasy, and price discovery was banished from the equity world.
According to Dow Theory - a nearly infallible projecting tool - as the Dow Transportation Index closed today below the February 9 low of 10,136.61, at 10,119.36, confirming the primary trend change, the bull market can be properly buried and a bear market born.
For anyone unfamiliar with Dow Theory, the primary trend change goes like this:
New Closing Low
Interim High, Below Previous High
New Low Below Previous Low.
This simple pattern must occur on both the Dow Jones Industrial Average and the Dow Jones Transportation Index (confirmation), and here's how it happened.
The Dow Jones Industrial Average made a new all-time high on January 26, 2018 (26,616.71).
On February 8, it closed at 23,860.46 (new low).
On February 26, it closed at 25,709.27 (interim high, lower than previous high).
On March 23, the Industrials closed at 23,533.20 (new low, lower than previous low).
For confirmation, the Dow Jones Transportation Index had made it's new high on January 12, 2018 (11,373.38).
On February 8, it closed at 10,136.61 (new low)
On February 26, it closed at 10,769.84 (interim high, lower than previous high)
On April 9, the Transportation Index closed at 10,119.36 (new low, lower than previous low = primary trend change, bull becomes bear).
Why is this good?
This is good because markets in a stable, trustworthy financial system must have a mechanism to clear mal-investment. Otherwise, stupid money must be purged from the system in order to create real value.
For instance, Facebook, Google, and many other stocks should not be trading as high as they currently are. They are overvalued, promoted by shysters and traded up by fools, one fool greater than the previous one. In other words, this is money chasing an unrealistic return. In order to get back to a realistic, fair, honest market, these stocks must lose value. Some companies will achieve their true value, which is zero. Others will lose 20, 30, maybe even more than 50%. The market will sort out the winners (there will be a few) from the losers (there will be many).
In the end, stocks will be properly valued, but when that time is to come, nobody knows. The perma-bulls out there can take heart that bear markets generally last 14-18 months, some like the one during the Great Depression which began with the stock market collapse in 1929, last much longer. How deep this one will be depends on how quickly stocks revert to an undervalued position, because the market always overshoots on the upside and the downside. There will be a bottom, when it will be wise to buy stocks. The only winning position presently is to sell stocks at a profit, park the money in bonds or money markets and wait for the bottom, which, just like the primary change from bull to bear, will be repeated - in reverse - according to Dow Theory.
For those wishing for the good old days of January 26, a return to those levels may take four to seven years, possibly longer, and, judging by the general insanity plaguing the human race presently, one should prepare for the much longer period. There are mountains of bad investments and onerous debts to be flushed from the system, since they were not flushed out in 2008-09, only papered over by TARP, QE, and ZIRP.
If you must, cry in your beer over the death of the bull. The rest of us will be having a cold one with the new-born bear.
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
4/3/18
24,033.36
+389.17
-69.75
4/4/18
24,264.30
+230.94
+161.19
4/5/18
24,505.22
+240.92
+402.11
4/6/18
23,932.76
-572.46
-170.35
4/9/18
23,979.10
+46.34
-134.01
At the Close, Monday, April 9, 2018:
Dow Jones Industrial Average: 23,979.10, +46.34 (+0.19%)
NASDAQ: 6,950.34, +35.23 (+0.51%)
S&P 500: 2,613.16, +8.69 (+0.33%)
NYSE Composite: 12,380.55, +31.44 (+0.25%)
This edition of the weekend wrap begins with a comment to an article on ZeroHedge
One need not read the article in question, only question the conclusion.
markets have started pricing in a Fed policy mistake, or
markets have started pricing in end-of-cycle dynamics.
BOTH, FTW, or, I'll take policy mistake and end-of-cycle dynamics for $1000, Alex.
This article ignores the obvious.
The policy mistake was the March rate hike. It was either too soon, or completely mis-timed. One can assert, dependent upon where one is positioned, that any and all of the Fed's policies are mistakes, but that may be significantly overstating the case.
End-of-cycle dynamics? Give us all a break. The bull market began on March 9, 2009. It's now been nine years and one month, or 119 months, whichever you prefer. Nothing lasts forever, especially bull and/or bear markets.
The Dow Transportation Index (^DJT) is all one has to watch, since the Industrials have already broken below the Feb. 8 closing low.
According to Dow Theory - which, in matters of primary trends, has a track record approaching 100% - the transports need to confirm, and that number is 10,136.61 (yes, you should have that number memorized).
Where did the transportation Index close on Friday? 10,146.37. 10 points is all there is separating this market from turning bull to bear.
After Friday's mini-crash, stocks ended the week with a significant loss from where it started the week, the month, and the quarter, predictably, the NASDAQ being the worst performer.
Forget articles, commentary, and mainstream analysis. It's all noise. The Fed has made one policy error after another (keeping rates too low, too long, and, trying to raise rates in a weakened economy) and the bull market is ending. The close on the transports below 10,136.61 will tell you exactly when the market has turned, but it's not quite there yet. It could make the move on Monday, the 9th of April, but keen minds are looking at late may or June for the turn. Either way, the bull will be dead.
While there may be a bounce in the aftermath, it will not last and there is a good likelihood of a corollary recession 6-12 months beyond the turn.
That's all one needs to know.
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
4/3/18
24,033.36
+389.17
-69.75
4/4/18
24,264.30
+230.94
+161.19
4/5/18
24,505.22
+240.92
+402.11
4/6/18
23,932.76
-572.46
-170.35
At the Close, Friday, April 6, 2018:
Dow Jones Industrial Average: 23,932.76, -572.46 (-2.34%)
NASDAQ: 6,915.11, -161.44 (-2.28%)
S&P 500: 2,604.47, -58.37 (-2.19%)
NYSE Composite: 12,349.11, -222.83 (-1.77%)
For the Week:
Dow: -170.35 (-0.71%)
NASDAQ: -148.33 (-2.10%)
S&P 500: -36.40 (-1.38%)
NYSE Composite: -102.95 (-0.83%)
Spooked at the open that China would impose a 25% tariff on soybeans (you can't make this stuff up), the Dow Jones Industrial Average slumped 510 points at the open, but immediately began to gain ground.
By noon, the index had nearly clawed itself all the way back to breakeven, and finally, after 2:00 pm EDT, began an ascent that would leave the blue chips up 230 points on the day.
What spurred the gigantic gain of nearly 800 points off the opening low was word from White House financial advisor, Larry Kudlow, that the tariffs were only outlines and that they may never even be put into effect.
It may be cynical to say, but when the greatest stock market in the world can be auto-tuned to move in massive fashion on the words of one man - and that man happens to be Larry Kudlow - anybody with a functioning brain would want to be far removed from it.
In a word, it's Bullshoot. Rubbish. Trash.
Another cynical outlook would suggest that anybody being short heading into first quarter earrings season is in dire need of a frontal lobotomy. Being anything but long at this juncture - particularly after the whacko Wednesday just witnessed - is tantamount to financial suicide, and suicide is still outlawed in most states.
April now looks to be a perfectly glorious month for pensioners trapped in an alternate reality of hopefulness and trust, and for stock manipulators who make money on both ends of the trade, the brokers, schemers, bankers...
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
4/3/18
24,033.36
+389.17
-69.75
4/4/18
24,264.30
+230.94
+161.19
At the Close, Wednesday, April 4, 2018:
Dow Jones Industrial Average: 24,264.30, +230.94 (+0.96%)
NASDAQ: 7,042.11, +100.83 (+1.45%)
S&P 500: 2,644.69, +30.24 (+1.16%)
NYSE Composite: 12,466.45, +99.38 (+0.80%)
Following a brutal February and March, equity investors could hardly be pleased with the first day of trading in April and the start of the second quarter.
A weak opening was followed shortly by indecision and then a descent back into the abyss, with all the major averages into the red for the year. Of particular interest was the Dow Jones Transportation Index, which spent much of the afternoon testing new lows below the February 9 bottom of 10,136.61. Only a late-day push kept the transports from finishing under the level that would signal a primary trend change.
The Dow Industrial Average was likewise saved from further embarrassment as it gained into the close after being down more than 750 points earlier. The push higher nearing the end of the session should be largely attributed to nothing other than day-trading short-covering by quants and large hands taking massive profits at the expense of the bulls still looking for some upside.
With stocks under serious pressure for nearly two months, some relief is almost guaranteed, though the duration of any improvement is a question for market-timers, chartists and wide-eyed speculators. Recent activity appears to be more reminiscent of the end of a bull market and the beginning of something worse than what should accompany a surging economy. The narrative of US strength is failing on many fronts and likely will not last more than a few more months, or possibly, even a few days.
This is a market made for traders using other people's money, not their own.
Dow Jones Industrial Average April Scorecard:
Date
Close
Gain/Loss
Cum. G/L
4/2/18
23,644.19
-458.92
-458.92
At the Close, April 2, 2018:
Dow Jones Industrial Average: 23,644.19, -458.92 (-1.90%)
NASDAQ: 6,870.12, -193.33 (-2.74%)
S&P 500: 2,581.88, -58.99 (-2.23%)
NYSE Composite: 12,216.71, -235.35 (-1.89%)
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