Traders Shrug, Stocks Rip Higher

Bear market in Emerging Markets? No problem.

Upcoming Fed rate hike? Why worry?

Trade war with China? Nah.

The general attitude on Tuesday - following a somewhat dismal start to the week - seemed to be the old "buy the dip" mantra that boosted stocks high for most of the last ten years in the extended bull market.

As long as nothing major appears to disrupt the global money flow, traders in New York seem to be content buying stocks at just about any price, any multiple, any day, any time.

Tuesday's trading was a textbook example of momentum trading on the absence of news, good, bad, or otherwise. Stocks got off to a solid start and added to their gains throughout the session, with the markets in lockstep for a change.

The Dow was led higher by a wide swatch of companies, from Boeing (BA) to Nike (NKE), to Pfizer (PFE), Intel (INTC), and Home Depot (HD), all of which gained more than one percent on the day. 25 of 30 Dow components were winners, with just five losing ground.

Blue chips closed at their best level since the end of January, eclipsing the losses incurred in February and March, which are now fading into the deep recesses of trading memory. The Dow Jones Industrial Average is less than 400 points from making a new all-time high. Such a move would negate the Dow Theory bear market signal issued in April, as the Dow Transportation Index has already broken above its previous high.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34
9/5/18	25,974.99	+22.51	+10.17
9/6/18	25,995.87	+20.88	+31.05
9/7/18	25,916.54	-79.33	-48.28
9/10/18	25,857.07	-59.47	-107.75
9/11/18	25,971.06	+113.99	+6.24
9/12/18	25,998.92	+27.86	+34.10
9/13/18	26,145.99	+147.07	+181.17
9/14/18	26,154.67	+8.68	+189.85
9/17/18	26,062.12	-92.55	+97.30
9/18/18	26,246.96	+184.84	+282.14

At the Close, Tuesday, September 18, 2018:
Dow Jones Industrial Average: 26,246.96, +184.84 (+0.71%)
NASDAQ: 7,956.11, +60.32 (+0.76%)
S&P 500: 2,904.31, +15.51 (+0.54%)
NYSE Composite: 13,091.98, +60.07 (+0.46%)

Dow Takes A Header on Realignment

It was a little like old times today. Back before there were supercomputers running the show, there used to be a term called, "late at the close," which signified the level of volume in the final frantic minutes of trading. Financial news announcers would say things like, "the tape was 12 minutes late at the close," meaning that the ticker tape that recorded trades ran past 4:00 pm due to the heavy volume.

Today, the Dow didn't settle out until well after ten minutes beyond the official close, due to the realignment. Bank of America, Hewlett Packard and Alcoa went out; Nike, Goldman Sachs and Visa went in.

It wasn't a fair exchange, and that had something to do with stocks closing at the lows of the day and the Dow outpacing the other averages to the negative. Bank of America is basically an insolvent holding company of the Fed, Hewlett Packard is a dead stock with limited upside potential and Alcoa is more or less nothing other than a proxy for the commodity price of aluminum.

The new entrants seem to have futures, though the addition of Goldman Sachs seems more sinister than anything else. After all, the company has been termed a "giant squid," because its tentacles reach into the netherworld recesses of business and politics.

Still stocks took a pretty good header today and prospects for the remainder of the month - just six more trading days - are not bright, since a government shutdown looms, Obamacare continues to move toward implementation and the complete catastrophe of the US health and labor markets and the country continues to spiral deeper into debt with a rancorous debate soon to come on raising the debt ceiling.

Nonetheless, the Fed has everyone's back, until, of course, they don't, at which time they will have the front, all sides and the keys to all of your property, real, personal and possibly intellectual, if they can strike a deal with Google, Yahoo, Amazon and the NSA.

The future is (fill in the blank... we're too afraid to).

And, BTW, when Warren Buffett says stocks are "fairly valued," it's time to sell, because that's what he's doing.

For the week:
Dow: +75.03
NASDAQ: +52.55
S&P 500: +21.92

Dow 15,451.09, -185.46 (1.19%)
Nasdaq 3,774.73, -14.66 (0.39%)
S&P 500 1,709.91, -12.43 (0.72%)
10-Yr Bond 2.73%, -0.02
NYSE Volume 5,065,868,500
Nasdaq Volume 2,335,355,500
Combined NYSE & NASDAQ Advance - Decline: 2339-4314
Combined NYSE & NASDAQ New highs - New lows: 332-45
WTI crude oil: 104.67, -1.72
Gold: 1,332.50, -36.80
Silver: 21.93, -1.365

President Backs Cautiously Away from Syria; Markets Exultant

Tuesday night's address to the nation was - for lack of a better term - illusory.

While President Obummer tried his best to appear calm and in control, he was anything but. Russia's Vladimir Putin had outmaneuvered him on the Syria strike issue by proposing that Syria put its chemical weapons under supervision of international parties.

Meanwhile, the House of Representatives was backing far, far away from the unpopular choice to attack Syria, "in a measured way," as Secretary of State John Kerry might put it. A no vote on whether to give the president the authority to attack Syria was all but certain in the House and might have faltered in the Senate as well.

Thus, laughably, the president advised congress to delay its vote on authorization for use of military force for two weeks. Issue settled. Syria will not be assaulted by US arms, the president saves some face and congress gets off the hook as well. There probably will never be a vote on authorization. The Syria chemical attacks, which the administration so vociferously denounced as brutal, heinous, inhume and so outside the realm of civilized conduct that the Syrian government needed to be punished for them, will be back page news by the end of tomorrow so that congress and the president can move onto what they were trying to cover up with a war strike: the budget and debt ceiling twin fiascos.

Those will come soon enough and command daily, screechy headlines from the breathless media whores, but before them, the Federal Reserve's FOMC meets next Tuesday and Wednesday, after which it will purportedly announce the great tapering, or, as it's being called on Wall Street, taper-lite, suggesting that the Fed will reduce its monthly bond purchases from $85 billion a month to somewhere in the neighborhood of $70 billion. Ho-hum. One supposes that the world can survive without an additional $10 billion of monthly liquidity. Somehow, we'll all find a way to survive.

With all these grand developments, Wall Street pros took the opportunity to ramp up stocks in advance of the next options expiry, in hopes that can can make another quick buck before the Fed pulls away the punch bowl.

The Dow was up another 135 points on the day, the third straight session in which the blue chip average was higher by more than 100 points, giving it a gain for the week, thus far, of 404 points. The NASDAQ and S&P were weighed down by Apple (AAPL), whose latest "earth-shaking" announcement was not any new products but merely enhancements and new pricing for existing ones. The stock was punished severely, down 26.93 points on the day.

Back at the Dow Industrials, the index will be reshuffled after the close of trade on September 20. Being kicked out are Bank of America (BAC), Hewlett-Packard (HPQ) and Alcoa (AA), replaced by Nike (NKE), Goldman Sachs (GS) and Visa (V). Because of the way the index weights stocks, giving more weight to high-priced ones than low-priced ones, Goldman Sachs will become the third most-important stock on the Dow, with Visa becoming the second most-important.

In other words, with five financial firms now represented in the 30-stock index, get ready for Dow 20,000. There's no stopping it now, especially when the index can arbitrarily kick out losers and replace them with their favorite pump primers.

There is no honor, nor shame, amongst thieves.

Dow 15,326.60, +135.54 (0.89%)
Nasdaq 3,725.01, -4.01 (0.11%)
S&P 500 1,689.13, +5.14 (0.31%)
10-Yr Bond 2.92%, -0.04
NYSE Volume 3,341,576,250
Nasdaq Volume 1,679,120,750
Combined NYSE & NASDAQ Advance - Decline: 3573-2957
Combined NYSE & NASDAQ New highs - New lows: 344-80
WTI crude oil: 107.56, +0.17
Gold: 1,363.80, -0.20
Silver: 23.17, +0.156

Should you be a fool?

The Motley Fool, in an article entitled Companies you should buy right now is recommending the following stocks as buy and hold candidates. I have some difference of opinion, but here's a key quote from the article:

What makes a great company? That's the rub. There can be a lot of ways to measure greatness. eBay (Nasdaq: EBAY) and Southwest Airlines (NYSE: LUV), for example, have high net promoter scores. Coca-Cola and Nike (NYSE: NKE) have nearly unmatched brand and marketing savvy. Boeing (NYSE: BA) and 3M have long histories of innovation. Starbucks (Nasdaq: SBUX) and Genentech (NYSE: DNA) have strong corporate cultures and are among Fortune's 100 Best Companies to Work For.

The article was originally published Dec. 8, 2006 and has been updated for publication on Jan. 9, 2007. (Makes one wonder which ones were switched out)

Right off the bat, I have some concerns over anyone calling eBay a great company. As I explained in my stock of the day feature, the company has been mismanaged and made poor business decisions for years.

Southwest Airlines? The stock has ranged between 12 and 22 for 5 years and is currently in a holding pattern over 15. Perhaps the "Fools" expect us to hold stocks that fly under the radar of the S&P 500. Maybe we'll just walk away.

Besides being suspected of operating in many countries as a CIA front, Coca-Cola still has that brand appeal, but the world of soft drinks is evolving quickly, toward more eco-friendly and trendy offerings. Coke has hung in gallantly and is a leader, but where is the growth and price appreciation going to come from? I don't see it.

Nike? See above, though the stock has been a stellar performer. Since late 2002, share price has appreciated from 40 to 100. Even I can't knock a 150% return over 4 years.

Another star performer is Boeing, which has run from the high 20s in early 2003 to near 90. Those monster returns are not likely to recur. recommending stocks near their highs may be foolhardy, but hardly prudent.

What can I say about 3M besides that it's so old school. The stock hasn't budged since late 2003, so maybe it's time for a move. Like others here, it does pay a dividend. Are the Motley Fools suggesting that 2-3% returns are de rigeur?

I like Starbucks coffee and the company has a great culture, but American's appetite for $4 lattes may wane and competition is sure to take a bite. Starbucks also sports a p/e over 40, so it's no bargain. Shares have ridden up from 10 to 40 over the past 5 years, and that kind of performance (400%) is going to be hard to top. If there's a winner on this list, this may be it.

Probably the most recognizable name in biotech, Genentech is a leader in profit as well. The company is expected to return 2.68 per share in 2007. However, the price of the stock doubled in mid-2003, split in 2004, ran up to nearly 100 in 2005 and was flat in 2006. This is a well-entrenched company, but maybe a touch pricey with a p/e close to 50. Value may still matter to some.

Overall, what impressed me about these picks was how many were close to their highs after impressive runs over a long bull markets. The Fools might have better served their readers - in an article professing that investors trade too often - by advising to time their buys on these stocks or wait for a general market correction before taking a plunge. They didn't.

I'll keep an eye on these stocks and check back in 6 months, a year, and beyond. Obviously, I don't care much for these picks and will stake my reputation against the Motley Fools, a bunch with whom I've frequently found fault.

Here are the closing prices from January 9 on the Fool's picks:
eBay: EBAY 29.75
Southwest Airlines: LUV 15.81
Coca-Cola: KO 48.61
Nike: NKE 99.76
Boeing: BA 88.00
3M: MMM 77.68
Starbucks: SBUX 34.86
Genentech: DNA 84.69