Showing posts with label bear market. Show all posts
Showing posts with label bear market. Show all posts

Sunday, March 22, 2020

WEEKEND WRAP: Wall Street Suffers Worst Week Since 2008; Economy in Shambles and Worsening; COVID-19 Wrecking Central Banks, Sovereign Governments

My, oh, my, what a week this was!

The numbers are sufficiently horrifying to speak for themselves, and they're speaking loudly.

Stocks suffered their worst week since 2008. Yes. The week just past was worse than anything since the Great Financial Crisis, and beyond that, the dramatic drop that kicked off the Great Depression in 1929, is comparable.

The three top indices had their worst weekly performances since October of 2008. The Dow dropped 17% for the week, the S&P 500 tumbled 15% and the NASDAQ lost more than 12%. Friday's losses were widespread, the biggest losers were utilities (-8.2%) and consumer staples (-6.5%).

Since the beginning of the COVID-19 crisis, the main indices are down anywhere between 30% (NASDAQ) and 35% (Dow).

Here are the stark, raving-mad numbers from the peaks to Friday's close, with dates:

Dow Industrials: peak: 29,551.42 (2/12), close 3/20: 19,173.98, net: -35.12%
NASDAQ: peak: 9,817.18 (2/19), close 3/20: 6,879.52, net: -29.92%
S&P 500: peak: 3,386.15 (2/19), close 3/20: 2,304.92, net: -31.03%
NYSE Composite: peak: 14,136.98 (2/12), close 3/20: 9,133.16, net: -35.40%

Bear in mind, these numbers are all higher than they were prior to the collapse of 2008. For reference, here are figures from August 2008, followed by the bottoms, all recorded March 9, 2009.

Dow Industrials: 8/11/09: 11,782.35; 3/9/09: 6,926.49
NASDAQ: 8/14/09: 2,453.67; 3/9/09: 1,268.64
S&P 500: 8/11/08: 1,305.32; 3/9/09: 676.53
NYSE Composite 8/6/09: 8,501.44; 3/9/09: 4,226.31

What are the implications from these figures? Pretty simple, really. Since nothing was really fixed from 2008-09 (i.e., none of the major commercial banks - Lehman and Bear Stearns notwithstanding, as they were investment banks - failed), nobody went to jail, the GFC was mostly the deflation of a housing bubble, and all of the gains in stocks were the product of buybacks and/or massive infusions of cash by the Federal Reserve, it stands to reason that stocks will fall below their lowest levels of the GFC, or sub-prime crisis.

As almost all bear markets prove, there are steep losses in the initial phase, followed by a longer, slower, gradual decline, ending in complete capitulation wherein nobody wants to be holding equity shares at any price. Stocks go bidless. There are no buyers, and that is the condition to come.

The years 2009 through early 2020 can readily be construed as what's often referred to as the "everything bubble," in which all financial assets were inflated. In the simplest terms imaginable, gains in stocks during the past 11 years were a chimera, a figment of Wall Street's great imagination and greed.

An arguable point is that all of the major corporations who feasted on stock buybacks and easy money from the Fed are bankrupt. A corollary to that is the the commercial banks - Citi, Bank of America, JP Morgan Chase, Wells Fargo, Goldman Sachs, and Morgan Stanley - being either major shareholders of the Federal Reserve and/or many major corporations are also bankrupt, insolvent, as is the Fed, which, for all intents and purposes, just creates whatever money is needed out of thin air, with no backing other than the faith of the people and institutions using their fiat currency, and that faith is fading fast.

WTI crude oil concluded its worst week since the 1991 Gulf War, settling -11%, at $22.43/bbl as part of its 29% meltdown this week.

Precious metals continued to be under pressure, even though buyers of physical gold and silver are paying high premiums and silver buyers are waiting as long as a month for deliveries from major coin and bullion dealers. Many online outlets are out of stock on almost all silver items. Scottsdale Mint is advising buyers that silver purchases are 15-20 days behind. Spot silver was as low as $11.94 per ounce, ending the week at $12.59. Prices for coins and bars are ranging between $17.50 and $25.00.

Gold traded as low as $1471.40 on the paper markets. It finished up Friday at $14.98.80

Bonds were all over the map and ended with lower yields overall. Yield on the 30-year was as low as 1.34% and as high as 1.78%. It ended the week yielding 1.55%, crashing 23 basis points on Friday. The 10-year note yield ranged from 0.73% to 1.18%, closing at 0.92%. The curve steepened through the week to 151 basis points from the 1-month bill (0.04%) to the 30-year bond, though yields are lower than ever in history. Money has lost nearly all of its time-value, especially at the shorter end. The two-year is yielding a mere 0.37%.

The point is that the Federal Reserve, with ample assistance from other central banks around the world, particularly, the ECB, BOE, BOJ, and SNB (Swiss National Bank), blew an enormous stock bubble around the world, and, since it is deflating rapidly, are trying to blow an even bigger bubble. It will not work. Never has, never will. It might for a time, but in the end there will be massive defaults from individuals all the way to sovereign states and central banks themselves. There is a limit to how much fiat currency (not money, which would be currency backed by gold or silver or some other tangible, not-easily replenished asset) and how much complexity the world can handle. We are at those limits and hastily exceeding them.

What's worse is that the governments and central banks of planet Earth are doing this to themselves, or, rather, to their sovereign citizens, who will bear the brunt of rash decisions based on faulty economics and radical monetary and fiscal policies. The Fed will print trillions of dollars. The government will run debts to the tune of 20-25% of the gross national product, if there is any left after the shutdowns, slowdowns, quarantines, and eventual rationing.

Profligate spending and corruption at the highest levels of business, finance, and government has led to an inevitable dead end, ruining lives, destroying businesses, and deflating, then inflating bogus currencies.

This is the end of the fiat currency era, but it doesn't have to be the end of the world. Money Daily has been warning its readers for more than a decade that this kind of economic carnage would eventually come, urging people to invest in hard assets, real estate, precious metals, machinery, food supplies, arable land and produce, and more.

There will be winners and losers in all of this, and it is the intention of Money Daily to provide information and instruction on how to win.

Some random links:

Gregory Mannarino says, in a very emotional and exasperating video, that it's OVER, just as Money Daily has been suggesting for weeks.

Here's a beach-loving Seeking Alpha commentator who thinks we've seen the worst.

Marketwatch notes that the Dow is on track for its worst month since the Great Depression.

Sending checks to every eligible American is being debated in congress. Treasury Secretary quipped early in the week that President Trump and he would like to get money into the hands of Americans within two weeks. The current proposals being argued in congress are looking at early April as a timeline to get money to needy citizens. That's a lot longer than two weeks, but, when the banks and hedge funds need billions and trillions of dollars from the Fed, they get it the next day, if not sooner. It's about as unfair as banks getting money at near zero interest and charging 17-29% interest on credit cards.

The house of cards (no pun intended) is tumbling down.

At the Close, Friday, March 20, 2020:
Dow Jones Industrial Average: 19,173.98, -913.21 (-4.55%)
NASDAQ: 6,879.52, -271.06 (-3.79%)
S&P 500: 2,304.92, -104.47 (-4.34%)
NYSE: 9,133.16, -328.15 (-3.47%)

For the Week:
Dow: -4011.64 (-17.30%)
NASDAQ: -995.36 (-12.64%)
S&P 500: -406.10 (-14.98%)
NYSE: -1718.82 (-15.84%)

Thursday, March 12, 2020

Dow Reaches Bear Territory, Down 20% From Record Highs

Wednesday, at 2:18 pm Eastern Time, the Dow Jones Industrial Average sank into bear market territory on an intraday basis when it broke below 23,654.72, officially marking the end of the 11-year bull run since the Great Financial Crisis of 2008-09.

By the close of trading, the Dow also fell into bear market territory on a closing basis, finishing below 23,641.14.

Falling as low as 23,338.96 shortly after 3:00 pm, a brief attempt at a rally was undertaken, but eventually failed, leaving the market in tatters, and the future uncertain.

Wednesday night, President Trump made a brief televised appearance, outlining the government's steps to curb the global pandemic that is COVID-19, banning all travel from Europe to the United States for 30 days, beginning at midnight, Friday, the 13th of March. The president also instructed the Small Business Administration to extend loans to small businesses and to increase funding for the program by $50 billion.

These measures are being implemented to help slow the spread of COVID-19, the coronavirus that has spread globally to 115 countries, sickening more than 127,000 people and killing 4,717. There have been 1323 cases of COVID-19 in the United States and 38 deaths. The numbers have jumped dramatically over the past week, both in the US and around the world, especially in Italy, Spain, France, and Germany.

With markets opening in minutes, and stock futures at distressed levels, this evolving story will be updated.

At the Close, Wednesday, March 11, 2020:
Dow Jones Industrial Average: 23,553.22, -1,464.94 (-5.86%)
NASDAQ: 7,952.05, -392.20 (-4.70%)
S&P 500: 2,741.38, -140.85 (-4.89%)
NYSE: 11,177.29 -615.99 (-5.22%)

Wednesday, March 11, 2020

Record Rise on NASDAQ; Big Gains on Dow, S&P Relieve Bear Market Fears... for Now

(Simultaneously published at Downtown Magazine)

In case anybody is growing weary of the recent volatility that has sent stocks soaring and diving over the past three to four weeks, prepare for more of the same. There will be no respite in daily swings of two percent, three percent or more, as yesterday proved, as stocks staged a monumental rally in the latter part of the the session, the Dow rising more than 1000 points in the final two hours.

At the end of the day, all major indices were approaching gains of five percent. Keeping with the trend of record-breaking sessions, the Dow's rise was the third largest point gain in market history. The other two occurred earlier this month. On March 2nd, the Industrials set the mark with a gain of 1,293.96 points. Tow days later, it came close to breaking that, up by 1,173.45 points.

With an eye toward the VIX - the market's preferred measure of volatility - this kind of roller coaster ride should continue until there's resolution to the downside. The VIX has recently hovered in the 40-50 range, ripping as high as 55. Normal volatility is usually measured in the teens.

The NASDAQ and S&P also experienced massive upside Tuesday afternoon, resulting in a record point gain on the NASDAQ, up 393.58 points, surpassing the record set just over a week ago, on March 2nd (+384.80). The S&P's gain of 135.67 points fell just shy of the record mark, also recorded on March 2nd, at +136.01.

In this regime of wild swings, it's probable that some traders are going to make massive profits while others fail miserably. It's all about timing and nerves. Anybody with poor timing and a thin appetite for risk is likely to be wiped out in short order. Those who relish the thrill of the hunt and have money to burn should come out ahead in the end, varying trades between long and short, at least until the market overseers ban short sales or profiting on put options.

It may not be obvious to the general public, but where this is head seems pretty clear. The coronavirus, COVID-19, has wreaked havoc on human society, thus disrupting the normal flow of business, a trend that's only just begun. Businesses are only beginning to feel the effects of breaks in the supply chain from China, and soon enough the entire planet's trade will be paralyzed by delays, outages, work stoppages, quarantines, deaths, and all the assorted maladies that accompany global pandemics, the likes of which have not presented themselves in the lifetimes of anybody alive today.

Estimates from medical experts are frightening, which is why the numbers being released by the CDC in the United States are nothing short of a bad joke. Over the past week, the CDC has "officially" recorded anywhere between 2 and 19 new cases of COVID-19 daily, this in a country with a projected population of 333,546,000.

Actual incidence of infection is orders of magnitude higher; that can be safely assumed. With the aid of the CDC, the US government has chosen to protect the economy rather than the people, a strategy doomed to fail. Without effective measures for controlling and containing the spread of the disease - as has been accomplished to a relatively high degree in places like Hong Kong, Singapore, and South Korea - via testing, contact tracking, and quarantine - it will spread virtually unchecked through a population. The evidence from the epicenter in Wuhan, China is compelling in this regard. Akin to what happened there, the US approach is dangerously close to causing a widespread outbreak in any number of cities by ignoring simple precautions and putting money ahead of human health.

What would an economy look like with 200 deaths per day, hospitals overwhelmed and people forced to stay indoors and away from others for weeks at a time? We, and some European nations are about to find out. With a population spoiled by the luxuries of freedom, it's not going to be much fun watching entitled populations melt down under the imposition of travel bans, quarantines, and other draconian measures.

As for stocks, well, their pathway will be all but assured. The Dow Jones Industrials bounced off a mark of declination on Tuesday when it bottomed out at 23,690.34. It was down 19.88% from the intraday high of 29,568.57, recorded on February 12 of this year. It was about to fall into bear market territory. The day's gains may have staved off capitulation for now, but it's coming, and soon. The end of the 11-year bull market and the beginning of what could be a prolonged bear market is at hand.

At the Close, Tuesday, March 10, 2020:
Dow Jones Industrial Average: 25,018.16, +1,167.14 (+4.89%)
NASDAQ: 8,344.25, +393.58 (+4.95%)
S&P 500: 2,882.23, +135.67 (+4.94%)
NYSE: 11,793.27, +494.84 (+4.38%)

Wednesday, August 14, 2019

Stocks Rally On Trump Tariff Turnback; PMs Slammed, Bonds Not Buying It As Curve Inverts

Tuesday's miraculous stock market rally was fueled by the silliest of news.

The US Trade Representative (USTR), led by Robert E. Lighthizer, announced the delay of some of the proposed tariffs to be imposed upon China come September 1, rolling back the date on some consumer-sensitive items to December 15.

The government also mentioned that trade reps from both countries would speak by phone in the near future.

Thus, stocks were off to the races, having been given a big, fat one to knock out of the park.

Obviously, such news only makes for one-day wonders on Wall Street and an opportunity to smack down real money - gold and silver - in the process. Precious metals had extended their rallies and were soaring overnight. Traders in the futures complex felt best to sell, all at once, apparently.

Meanwhile, short-dated treasuries were being whipsawed, with the yield on the 2-year note rising from 1.58% to 1.66%, while the 10-year note gained a smaller amount, the yield rising from 1.65% to 1.68%.

Overnight, as Tuesday turned to Wednesday in the US, the two-year yield briefly surpassed that of the 10-year by one basis point. This marks the first time the 2s-10s have inverted since 2005. Because such an inversion almost always indicates imminent recession, this spurred headlines across the financial media, with Yahoo Finance screaming in all caps, YIELD CURVE INVERTS.

One shouldn't get too excited about this startling, yet widely-anticipated event. Each of the last seven recessions (dating back to 1969) were preceded by the 10-year falling below the 2-year, but in the most recent instance - December 27, 2005 - the recession didn't actually get underway until the third quarter of 2007, as precursor of the Great Financial Crisis (GFC). The last time there was an inverted 2s-10s yield curve was May 2007.

Naturally, haters of President Donald J. Trump are enthusiastically cheering for a recession prior to the 2020 elections, and they may get their wish. Stocks have been running on fumes for about 18 months, a bear market indicated by Dow Theory as far back as April 9, 2018.

The onset of recession, after the first instance of the 2s-10s inversion, normally occurs eight to 24 months hence.

With the hopes of Democrats taking back the White House riding on anything from Russian election interference to trade wars with China to recession, the leftists are pushing on various strings, hoping for something - anything - to trip up the celebrity president.

They have a 15-month lead time on recession, so their chances are about 50/50. If the recession occurs after the election, which Donald J. Trump will almost surely win, they may conclude that having a recession in ones' second term is an impeachable offense.

This story is developing, so watch something else.

[sarcasm noted]

Thursday, April 25, 2019

Dow Theory: Primary Bear Market with Reactionary Bull in Effect

Dow Theory has been around for more than 100 years and even in today's lightning-fast markets, Fed interventions, multiple tasing platforms and indices, it still serves investors well in determining primary and secondary trends over medium and longer-term horizons.

Even as the NASDAQ and S&P 500 made new highs on Tuesday, April 23 - and scampered back from them on Wednesday, the 24th - the Dow Jones Industrial Average remains technically in a bear market which began in October of 2018 and was confirmed by the Dow Jones Transports later in the month when the Trannys slipped below 10,000, bounced back from there but were clobbered all of December (as were the Industrials), putting in a low right around Christmas.

Since then, stocks have been on a tear, but the Transports and Industrials have stubbornly resisted making new all-time highs dating back to September of 2018 for the Trannys and the first week of October for the Industrials.

As the momentum of the new year and the "Trump economy," with an able assist from the Federal Reserve - which stopped its insistence on hiking the federal funds rate 25 basis points every quarter and also suspended its balance sheet roll-off - both indices are within hailing distance of all-time highs once again. They are tantalizingly close to extending what many consider to be the longest bull market in US history, despite Dow Theory standing in the way, saying, "no, the primary trend has changed."

The issue for investors and chart-watchers is whether the Bear that emerged late last year will persist in the face of solid economic data and healthy performances by individual stocks or fall victim to excessive speculation and high valuations. The Shiller CAPE ratio remains elevated, above levels seen in 1929 and 2008, though below the spasmodic bubble highs of 2000.

Neither proposition - new all-time highs or another retreat - offers particular pleasure. New highs would confirm that the bubble economics put in place following the 08-09 financial crisis are still in play, and there's ample evidence to support that view. A systemic breakdown - first a correction (10%), followed by a massive sell-off similar to what was witnessed in December of last year - would please nobody other than the most ardent short-sellers (and maybe the Democrat party, Trump haters and the mainstream media).

Of course, the Industrial and Transportation indices are exceedingly narrow, though they are far from being outdated. The 30 stocks on the Industrial Average and the 20 on the Transportation Index still manage to provide a compelling snapshot of the US big business economy. Understanding their primary and secondary trends goes a long way towards gauging the overall health of the US economy.

This is a time to pay them extra attention, as the next major move should provide timely insight to the years ahead. Friday's first estimate of first quarter GDP may spur a move in one direction or another as estimates have ranged as low as +0.9 to +2.8.

Anything over +2.2 is likely to be viewed positively in the current risk-happy environment. a reading under +1.6 would fan the flames of the bear campfire. The estimate is due out on Friday, April 26, at 8:30 am ET.

Thursday, December 20, 2018

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

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

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

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

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

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

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

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

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

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

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

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

Dow Jones Industrial Average December Scorecard:

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

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

Sunday, December 16, 2018

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

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

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

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

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

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

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

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

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

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

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

Dow Jones Industrial Average December Scorecard:

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

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

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

Monday, December 10, 2018

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dow Jones Industrial Average December Scorecard:

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

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

Sunday, December 9, 2018

WEEKEND WRAP: The Week The Wheels Fell Off

Was this the week that everything fell completely apart?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Happy Holidays!

Dow Jones Industrial Average December Scorecard:

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

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

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

Saturday, November 24, 2018

WEEKEND WRAP: Black Friday or Blue Friday? Oil Down 34%, S&P, NASDAQ, NYSE In Correction

The beatings will continue until morale improves.

While the exact origin of the above phrase is clouded, it certainly applies to the current stock trading regimen that has sent world markets spinning downward and US stocks to levels comparable to nearly a year ago.

The sad situation for stocks continued even into the holiday season, when the traditionally upbeat and optimistic Black Friday half-day session turned into a savage selloff that lasted right through to the 1:00 pm ET close.

Following a brief respite on Wednesday that saw the Dow end down less than one point, and the Thanksgiving Day holiday, investors took their cues from overseas markets, which were sold off on Thursday, extending the dour moods in Europe and the Pacific Rim. Friday's trading in foreign markets was mixed, though the outlier was Brazil, where the Bovespa lost 1,247.21 points (-1.43%), confirming the theme of a global, rolling, slow-motion crash in equity values.

According to respected sources (ZeroHedge and ETF Daily News), the Dow suffered its worst Black Friday loss since 2010 and the S&P saw its worst performance for the day after Thanksgiving since the mid-1930s.

While the Dow has not yet caught down to its deepest depths of 2018, it is approaching the 2018 bottom from March 23 (23,533.20), promoting the idea that the worst of this round o selling is not quite over.

Friday's session concluded another in a series of poor performances for stocks, nearly equalling the declines seen in the week of October 8-12, sending all of the major indices below their respective 50, 200, and 40-week moving averages.

While shoppers in the US were out buying electronics, toys, appliances, clothes, and assorted trinkets, Wall Street traders were selling off assets, not an encouraging start to the holiday season. All of the major averages ended the week below where they started 2018. Without a significant Santa Claus rally, 2018 looks to be one of the worst for traders since 2008, when the S&P 500 lost 38.49%. Since then, only twice - in 2011 and 2015 - has the S&P closed lower than the close from the previous year. Currently, the S&P is down less than two percent on the year.

Friday's losses sent there S&P 500 into correction territory, ending down 10.17% from the September 20 all-time high (2930.75). The NASDAQ sank further into correction, and is approaching an outright bear market. The NASDAQ is down 14,44% from its August 29 high (8109.69).

On October 3rd, the Dow Industrials closed at an all-time high of 26,828.39. On Friday, it closed down 9.48% from that level.

The NYSE Composite, which peaked on January 25 at 13,637.02, is down 11.74%, and the Dow Jones Transportation Index is down 10.39 since closing at 11,570.84 on September 14.

Finally, the big loser for the week - which will eventually be a boon to consumers - was oil, which was once again crushed, as WTI crude lost more than seven percent, to $50.42/barrel. On October 3rd, coincidentally the game day the Dow peaked, WTI crude sold for $76.41 per barrel. That's a decline of 34.02% in just over seven weeks. Now, that's a crash.

Dow Jones Industrial Average November Scorecard:

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

At the Close, Friday, November 23, 2018:
Dow Jones Industrial Average: 24,285.95, -178.74 (-0.73%)
NASDAQ: 6,938.98, -33.27 (-0.48%)
S&P 500: 2,632.56, -17.37 (-0.66%)
NYSE Composite: 12,036.24, -87.10 (-0.72%)

For the Week:
Dow: -1,127.27 (-4.44%)
NASDAQ: -308.89 (-4.26%)
S&P 500: -103.71 (-3.79%)
NYSE Composite: -364.04 (-2.94%)

Wednesday, November 14, 2018

Stocks Stumble Again, Dow Loses All November Gains; Germany's DAX Tumbling

After a while, one gets the impression that the bottom is going to fall out at some point, the only matter being one of when, and, maybe, by how much.

Stocks trended lower for a fourth straight day, with the Dow plunging by more than 350 points midway through the session, giving up all of its gains for November (some 1075 points). The NASDAQ led in percentage terms, down nine-tenths of a percent, with the S&P giving up early gains as well.

As usual, it could have been worse. The Dow slumped below 25,000 for the first time in two weeks, and while big, round numbers are flashy, the 25,000 level has no particular importance other than acting as a psychological figure.

Consumer prices rose by the most in nine months, as the October CPI came in with a "hot" 0.3% increase, fueling more concern that the Fed will continue raising interest rates at its December meeting, as planned. By now, the December federal funds increase should have been priced in, so, accusing inflation as the culprit de jour is probably a bit off the mark. What's really causing the continuation of the selling is more than likely a move by smart money out of stocks and into bonds or cash equivalents. With a 10-year treasury note offering well beyond three percent interest with no risk, some of the money leaving the market is surely headed that way, though corporate bonds are similarly attractive, albeit with a little more risk premia.

The major indices are still less than 10 percent off their all-time highs, making valuation a true issue. Post midterm elections, it appears that the federal government will be largely dysfunctional for the next two years, blunting any of President Trump's economic initiatives, and Maxine Waters proclamation that banking regulations will be tightened isn't winning any popularity contests on Wall Street. Waters is the chair-in-waiting of the House Financial Services Committee, which oversees banks and other financial institutions.

There's considerable concern over the smooth continuation of government, more even than there has been since the Gore-Bush election selection fiasco of 2000. Taken by any measure, Trump's policies in the first two years of his administration have been business-friendly, and the newly-elected Democrat majority in the House not only threatens to stop any progress that's been made, but actually reverse it by plunging Washington into chaos with investigations and special committees designed to strip the president of his power and possibly lead to impeachment.

Such an unstable environment gives pause to business expansion decisions while also worrying large investors. Thus, stocks are acting as a proxy for politics, which is not their best function, and the results could be devastating if the Democrats don't back down from their overly strident positions.

Given such a climate, is there any wonder stocks cannot gain traction, even with unemployment at historic lows?

Another concern is the state of foreign markets, which remain moribund at best, the DAX, Germany's main stock index has been falling in conjunction with US stocks, and it recently broke a key "neckline" in an obvious head-and-shoulders pattern according to analysts at The German market could enter bear market territory in a matter of weeks, if not days, an important element in gauging world stock performance and a general indicator of economic health in the Eurozone.

These are just a few of the elements pushing hard against investors.

While the Dow is still 1000 points from an official correction, the NASDAQ re-entered the correction zone on Monday and the tech sector - which had been the driver of rallies - threatens to pull the entire stock complex down with it.

Amazon may be celebrating a coup in gaining sweet deals for its new HQ2 in Virginia and New York, but the rest of the tech world is not such a happy place.

Dow Jones Industrial Average November Scorecard:

Date Close Gain/Loss Cum. G/L
11/1/18 25,380.74 +264.98 +264.98
11/2/18 25,270.83 -109.91 +155.07
11/5/18 25,461.70 +190.87 +345.94
11/6/18 25,635.01 +173.31 +519.25
11/7/18 26,180.30 +545.29 +1064.54
11/8/18 26,191.22 +10.92 +1075.46
11/9/18 25,989.30 -201.92 +873.54
11/12/18 25,387.18 -602.12 +271.42
11/13/18 25,286.49 -100.69 +170.27
11/14/18 25,080.50 -205.99 -35.72

At the Close, Wednesday, November 14, 2018
Dow Jones Industrial Average: 25,080.50, -205.99 (-0.81%)
NASDAQ: 7,136.39, -64.48 (-0.90%)
S&P 500: 2,701.58, -20.60 (-0.76%)
NYSE Composite: 12,280.73, -47.57 (-0.39%)

Monday, October 29, 2018

Massive Market Crash Sends Dow Into Correction Before Last-Minute Save

Monday's rapid rise at the opening bell turned to a massive selloff as the session progressed, prompted by a self-fulfilling note from Morgan Stanley chief strategist, Michael Wilson, that emerged around 1:00 pm ET, calling the current market turmoil more secular in nature rather than the "cyclical" call that most Wall Street analysts have been making.

The Dow and other major averages were sent off like fireworks at the open, but stalled in early trading, beginning their descent just after 10:00 am ET. The Dow topped off at 25,040.58 and continued lower, finally bottoming out at 24,122.23, an intra-day loss of more than 900 points, top to bottom. With just 15 minutes left in the trading session, short-covering took the Dow up more than 300 points, eviscerating more than half of the day's losses.

As for percentages, the Dow today actually was sent down just over 10% on both a closing and intra-day basis form the October 3rd all-time high. Intra-day, the Dow topped out at 26,951.81 before closing at 26,828.39. That puts the 10% correction mark at 24,256.63, intra-day, and 24,145.55 on a closing basis, both of which were exceeded today, though the closing number avoided a clear-cut entry into correction.

As for the benchmark S&P 500, today's close was 9.8% lower than the September 20 closing high of 2930.75. For those who like round numbers, that would qualify as being close enough, especially since the S&P bottomed out at 2,603.54, well below the number necessary to call it a correction. That index was down more than 55 points prior to the late-day rescue, finishing with a modest 17-point decline.

The NASDAQ and Dow Jones Transportation Index, both already well into correction territory, suffered even more losses on the day.

In agreement with Morgan Stanley's Wilson, there's growing evidence that what stocks are undergoing is anything but cyclical in nature, despite Friday's advance reading of third quarter GDP coming in at a rosy 3.5%. It's worth noting that the most recent quarter's growth was less than the second quarter's 4.2%, and that the first estimate is often revised lower in subsequent months, as data becomes more well-defined. Additionally, the third quarter figures were goosed higher primarily by consumer spending rather than business capital expenditures (CapEx), which were moribund.

For those of bullish sentiment, one has to consider just where markets are supposed to go when unemployment is at historic lows and the stock market is at historic highs, more than nine years into the longest bull market expansion in stock market history.

Proponents of Dow Theory (and the Elliott Wave) need only to look at a one or three-month chart to surmise that the Dow and the Transports have signaled a primary trend change - bullish to bearish. The Dow fell sharply from October 3rd to the 11th, rallied meekly through the 16th and puked it all up (or down, as the case may be) to current levels. The transports had already completed the four-step top-bottom-recovery-lower bottom prior to today's disaster, although it's all-time high was back on August 29.

The not-so-wild cards in the current scenario are the Fed's relentless assault on the federal funds rate, furiously raising a quarter point per quarter, inflation fueling via Trump's trade tariffs, and the stubbornness of wages to do anything but stagnate. It's a potpourri of potential pitfalls that are hard to ignore.

Like housing prices prior to the sub-prime crash, stock valuations do not always go up. This time is not different, and, judging by the frantic closing activity today, tomorrow could be a fully-loaded house of pain.

Unless the Dow rallies over the next two days, Octobers cumulative loss is looking to exceed the February and March losses combined.

And so it goes. Markets are cyclical and sometimes, secular. The latest days of trading feel like sometime has arrived.

Incidentally, today is the anniversary of Black Tuesday, October 29, 1929. Could that wicked buying in the final fifteen minutes have been an attempt to prevent history repeating?

Dow Jones Industrial Average October Scorecard:

Date Close Gain/Loss Cum. G/L
10/1/18 26,651.21 +192.90 +192.90
10/2/18 26,773.94 +122.73 +315.63
10/3/18 26,828.39 +54.45 +370.08
10/4/18 26,627.48 -200.91 +169.17
10/5/18 26,447.05 -180.43 -11.26
10/8/18 26,486.78 +39.73 +28.47
10/9/18 26,430.57 -56.21 -27.74
10/10/18 25,598.74 -831.83 -859.57
10/11/18 25,052.83 -545.91 -1,405.48
10/12/18 25,339.99 +287.16 -1,118.32
10/15/18 25,250.55 -89.44 -1,207.76
10/16/18 25,798.42 +547.87 -659.89
10/17/18 25,706.68 -91.74 -751.63
10/18/18 25,379.45 -327.23 -1,078.86
10/19/18 25,444.34 +64.89 -1,013.97
10/22/18 25,317.41 -126.93 -1,140.90
10/23/18 25,191.43 -125.98 -1,265.88
10/24/18 24,583.42 -608.01 -1,873.89
10/25/18 24,984.55 +401.13 -1,472.76
10/26/18 24,688.31 -296.24 -1,769.00
10/29/18 24,442.92 -245.39 -2,014.39

At the Close, Monday, October 29, 2018:
Dow Jones Industrial Average: 24,442.92, -245.39 (-0.99%)
NASDAQ: 7,050.29, -116.92 (-1.63%)
S&P 500: 2,641.25, -17.44 (-0.66%)
NYSE Composite: 11,942.15, -34.79 (-0.29%)

Tuesday, October 23, 2018

WARNING: Stocks Tumble Again, Key Levels About To Be Tested; Corporate Bag-Holders

As noted in the most recent WEEKEND WRAP, major US indices have been stretched lower to plumb their 200-day moving averages, with the NYSE Composite already having broken well below its 200-day.

While Monday's declines were not extraordinary, they were - with the obvious defection of the NASDAQ - uniform. Lock-step movement of the majors is usually cause for alarm, either to the upside or down, and, in this case, the S&P, Dow and Composite have been displaying the kind of cascading losses indicative that the move is not contained within a few select sectors, but rather, is broadly-based.

US stocks are not the only issues facing lower pricing. Stock indices around the world have been under severe pressure for most of October, extending back into August and September for most of Europe. Emerging markets, suffering losses most of the year - in the case of China, the decline began in 2015 - show no signs of recovering, their slide relentless and often violent.

Overnight, Hong Kong's Hang Send and Japan's NIKKEI indices were battered, the Hang Sent down, 3.06%, the NIKKEI off 2.67%. China's SSE Composite, already a basket case down more than 50% since 2015, fell another 2.26%.

Early on Tuesday, all European stock markets were lower. As has been the case for the past eight weeks, Germany's DAX was leading the way down.

When markets open in the US on Tuesday, the expectation if for further declines, as futures predict a very rough opening. S&P futures were off by as much as 37 points, NASDAQ futures were down more than 125 points, and Dow futures had fallen by more than 400 points by 8:00 am ET.

The immediate key levels for the major indices are obvious ones, as markets close in on the October 11 interim bottoms. The Dow is looking at its close of 25,051.55 on that date. Any intra-day move below that level would likely trigger even more selling pressure, as once again, Dow Theory rears its head, predicating a primary trend change from bullish to bearish.

Confirmation would come from the Transportation Index, which closed on October 11 at 10,397.23 and Monday at 10,435.76. Monday's loss of just three points on the transports was a shallow shadow of what's been an ugly performance since mid-September. Any close below 10,413 would put the index in correction territory, which was not reported on the October 11 flush.

As the S&P approaches its October 11 low of 2728.37, it is still three to four percentage points above correction (-10%), but the index has been hammered down of late with lower closing prices in 11 of the last 13 trading sessions.

The aforementioned NYSE Composite needs a close of 12,273 to qualify for correction mode. Its high dates all the way back to January 26, when it closed at an all-time high of 13,637.02. The composite is down more than nine percent from the highs and is down 3.6% year-to-date.

NASDAQ watchers will be eyeing the level of 7329.06, the October 11 closing low, after the index reached an all-time high of 8109.54 on August 31. A close of 7298 would be a 10% decline from that level.

Since October is traditionally the most volatile month, companies and investors will be seeking scapegoats and already some corporate types have singled out the threat or imposition of tariffs by President Trump as the primary cause for poor third quarter results.

Some analysts have touted the recent selloff as technical in nature, without important underlying rationale. Taking the case further afield, a recent note by JP Morgan analysts infers that the selling is not only technical in nature, but driven by the lack of corporate stock buybacks, typically halted or blacked out during earnings seasons.

The MarketWatch article which references the analysis is fascinating and full of charts and figures comparing the October breakdown to February's quickly-accelerating descent.

What the analysts fail to point out in their notes is that stocks rose dramatically during second quarter earnings season, from the end of June to near the end of July, putting the lie to their thesis. Stock buybacks have been the main driver of stocks since the aftermath of the 2008-09 crash, and are poised this year to reach a record above $900 billion.

At least, when stocks rebound near the end of the month (as the analysis suggests), we can finally proclaim to know just who those infamous buy the dip punters have been. If indications of a bear market continue to emerge, America's finest corporations, led by the best and brightest managers, will be the ultimate bag-holders, repurchasing their own stock at grossly elevated prices.

Only in America...

Dow Jones Industrial Average October Scorecard:

Date Close Gain/Loss Cum. G/L
10/1/18 26,651.21 +192.90 +192.90
10/2/18 26,773.94 +122.73 +315.63
10/3/18 26,828.39 +54.45 +370.08
10/4/18 26,627.48 -200.91 +169.17
10/5/18 26,447.05 -180.43 -11.26
10/8/18 26,486.78 +39.73 +28.47
10/9/18 26,430.57 -56.21 -27.74
10/10/18 25,598.74 -831.83 -859.57
10/11/18 25,052.83 -545.91 -1,405.48
10/12/18 25,339.99 +287.16 -1,118.32
10/15/18 25,250.55 -89.44 -1,207.76
10/16/18 25,798.42 +547.87 -659.89
10/17/18 25,706.68 -91.74 -751.63
10/18/18 25,379.45 -327.23 -1,078.86
10/19/18 25,444.34 +64.89 -1,013.97
10/22/18 25,317.41 -126.93 -1,140.90

At the Close, Monday, October 22, 2018:
Dow Jones Industrial Average: 25,317.41, -126.93 (-0.50%)
NASDAQ: 7,468.63, +19.60 (+0.26%)
S&P 500: 2,755.88: -11.90 (-0.43%)
NYSE Composite: 12,374.76, -82.51 (-0.66%)

Tuesday, August 21, 2018

Stocks Continue Rally, S&P 500 Reaches New All-Time High

There was cause for celebration on Wall Street and around America on Tuesday as the S&P 500 reached a new all-time record close, gaining 5.91 to finish the day at 2,862.96, four-and-a-half points beyond the previous high set just two weeks ago, on August 7th.

While the S&P and NASDAQ have surged to new records after the February correction, the Dow is still 800 points shy of its all-time mark, though, with the economy booming, there's little to no apprehension among investors. The widespread belief is that the Dow will push forward, despite the warnings from Dow Theorists who insist a bear market on the Dow Jones Industrial Average had commenced earlier in the year. Clearly, recent data disputes the veracity of any argument made by the venerable Dow Theory.

On Wednesday, stock pickers will be in a celebratory mood once again, marking the longest bull run in US market history, surpassing the dotcom run from 1990 to 2000. According to this LA Times story there is some disagreement, but there are few who argue that this bull run has been outstanding, starting on April 9, 2009, without as much as a 15% decline throughout the duration of the run.

Tomorrow it is, then. Another record.

Dow Jones Industrial Average August Scorecard:

Date Close Gain/Loss Cum. G/L
8/1/18 25,333.82 -81.37 -81.37
8/2/18 25,326.16 -7.66 -89.03
8/3/18 25,462.58 +136.42 +55.05
8/6/18 25,502.18 +39.60 +94.65
8/7/18 25,628.91 +126.73 +221.38
8/8/18 25,583.75 -45.16 +176.22
8/9/18 25,509.23 -74.52 +101.70
8/10/18 25,313.14 -196.09 -94.39
8/13/18 25,187.70 -125.44 -219.83
8/14/18 25,299.92 +112.22 -107.61
8/15/18 25,162.41 -137.51 -245.12
8/16/18 25,558.73 +396.32 +151.20
8/17/18 25,669.32 +110.59 +261.79
8/20/18 25,758.69 +89.37 +351.16
8/21/18 25,822.29 +63.60 +414.76

At the Close, Tuesday, August 21, 2018:
Dow Jones Industrial Average: 25,822.29, +63.60 (+0.25%)
NASDAQ: 7,859.17, +38.17 (+0.49%)
S&P 500: 2,862.96, +5.91 (+0.21%)
NYSE Composite: 12,996.76, +31.66 (+0.24%)

Thursday, July 26, 2018

Which Way Is Up? Markets Careen As Trump Makes Deal With EU, Facebook Falls From Grace

It's too early to call it a trend, but the Dow broke out of the trading range in which it had been ensconced for over four months after President Trump met with European Commission president Claude Junker and announced a breakthrough on trade and tariff negotiations between the European Union and the United States, forestalling what many feared would become a trade war.

The Dow, which had been lumbering below the unchanged line most of the session, broke above it shortly after 3:00 pm EDT, and then rocketed higher, gaining over 150 points in the final half hour of trading.

The other indices responded in similar manner, though after hours, Facebook (FB) took a severe lashing, losing 24% at one point, after its second quarter earnings failed to meet expectations. Facebook's fall sent NASDAQ futures into a 1.5% nosedive, though they're recovering prior to Thursday's opening bell.

What is most important to note about these developments is the movement in the Dow. According to Dow Theory, the index entered bear market conditions on April 9, when the Dow Jones Transportation Index confirmed the Industrial Average's February-March double-dip off January highs. Besides the reliability of Dow Theory in gauging market movement and primary trends, stocks have not readily behaved as they would in an ordinary bear market, with both the NASDAQ and S&P recovering to make all-time highs, the most recent, just Wednesday, as the NASDAQ set a new, high-water mark at the close.

The current episode of market mania is being driven by forces both unforeseen and unseen, most of it emanating from Washington, D.C., where, on one hand, President Trump's audacious approach to governance and world politics has thus far returned positive results, including Wednesday's breakthrough with the EC.

Thus, the number that bears watching continues to be the January 23 all-time closing high on the Dow of 26,616.71. While the index has broken above what was considerable resistance, it still has a wall of worry - and about 1200 points - to climb before the existence of bearish conditions can be eliminated.

On the other side of the coin, Facebook's woes may only be the beginning for the tech sector, the NASDAQ and the market as a whole. Next up on the chopping block appears to be Tesla (TSLA), whose CEO, Elon Musk, has been raising concerns about the company as a whole by his strange and possibly bi-polar behavior. Tesla is under considerable pressure to produce positive results after months of scrutiny over its cars exploding, production questions, quality concerns and the general mental well-being of its founder and CEO.

Tech stocks have largely been the driver behind the rise of the NASDAQ, whereas President Trump has been generally holding down the Dow. Now those two elements appear to be working in reverse, and the result could be a shock to both the upside on the Dow and the downside on the NASDAQ.

It's hard to imagine the two indices diverging for very long, but the future is unknowable. With Trump "winning" on many fronts, he still faces a massive horde of opposition in Washington, not only from Democrats and the so-called "deep state," but from members of his own party as well.

Add the Fed's unwinding of its balance sheet and relentless quarter-by-quarter raising of interest rates and you have an imperfect storm through which stock and bond speculators and investors must navigate.

Rough seas ahead, for certain, but in which direction? With so much on the deck and cross-currents blowing in every direction, trading should become volatile and choppy until November, when the midterm elections will likely determine the ultimate direction of not just the stock market but of the US and global economy as well.

Dow Jones Industrial Average July Scorecard:

Date Close Gain/Loss Cum. G/L
7/2/18 24,307.18 +35.77 +35.77
7/3/18 24,174.82 -132.36 -96.59
7/5/18 24,345.44 +181.92 +85.33
7/6/18 24,456.48 +99.74 +185.07
7/9/18 24,776.59 +320.11 +505.18
7/10/18 24,919.66 +143.07 +648.25
7/11/18 24,700.45 -219.21 +429.04
7/12/18 24,924.89 +224.44 +653.48
7/13/18 25,019.41 +94.52 +748.00
7/16/18 25,064.36 +44.95 +792.95
7/17/18 25,119.89 +55.53 +848.48
7/18/18 25,199.29 +79.40 +927.88
7/19/18 25,064.50 -134.79 +793.09
7/20/18 25,058.12 -6.38 +786.71
7/23/18 25,044.29 -13.83 +772.88
7/24/18 25,241.94 +197.65 +970.53
7/25/18 25,414.10 +172.16 +1142.69

At the Close, Wednesday, July 25, 2018:
Dow Jones Industrial Average: 25,414.10, +172.16 (+0.68%)
NASDAQ: 7,932.24, +91.47 (+1.17%)
S&P 500: 2,846.07, +25.67 (+0.91%)
NYSE Composite: 12,933.63, +86.14 (+0.67%)

Wednesday, June 27, 2018

Dow Approaching Correction Territory; NASDAQ Smashed Lower Again

After calling yesterday's trading the "worst dead cat bounce ever", equity markets in the US clambered back into the high green on Wednesday morning. Running on nothing but day-trading and short-selling fumes, the markets turned dramatically just before noon and were in the red over the final two hours, led lower by the now-dead NASDAQ.

To say that the NASDAQ has nosedived recently would be putting it lightly, as the index has had only one winning session in the past five, and has shed some 336 points over that span, or, about 4.5% percent.

There has also been some pain over on the S&P 500, which really stalled out after making a double top around 2780 (2,782.00, June 11; 2779.66, June 15), is down a little more than three percent over the past two weeks.

While the Dow Industrials were down the least, percentage-wise, the point loss was the greatest among the various indices and the Dow also is leading the charge downhill, already well into the red for the year (-2.5%).

With today's closing price, the Dow is down 9.4% from the January 26 high (26,616.71), on the brink of making a second excursion into correction territory. Meanwhile, the S&P and NASDAQ are still clinging to gains YTD, but are off the January highs as well. The NASDAQ is down just a fraction from January, but the S&P is down six percent over the same span.

Today's Dow downdraft was the 10th session with a negative close in the past 12, as the Dow turned a 903-point gain in June into a 298-point loss, a rapid, 1200-point descent. Whatever can be said about the demise of the Dow over the past three weeks it certainly is not good and does not portend well for the remaining two trading days of the month. Avoiding another correction is probably at the top of the list for the bulls still standing, because this foray will likely be more lasting and also lead to further losses.

Bonds were being bought with both hands on the day, with the yield on the 10-year note down five basis points to 2.83%, the lowest yield since April 17. The 30-year bond lost six bips, closing below 3.00%, at 2.97. This is 13 basis points below the close of 3.10% on the date of the latest FOMC rate hike, June 13. That's quite significant, since the Fed is intent on pushing rates higher, but the market is steadfastly resisting.

This recent spree of bond buying is signaling some dire consequences ahead. If the economy is strong enough to raise rates - as the Fed believes - then why is the market heading in the opposite direction? It's obvious that somebody is wrong-footed, and in this case, the money's on the Fed, which is usually well behind the trend, but currently is seeking to create the trend, something that is pretty much impossible, regardless of how much weight and force the central bank wants to exert on markets.

A explosive, toxic condition is at hand. The Fed and financial media are pushing a narrative of "all's well," but the market is saying, "I don't think so." Something is about to give, and soon. Expect stocks to continue their summer swoon, along with the requisite bouts of euphoria (short covering), though the fear factor will eventually take strong hold of conditions.

As has been stated ad nauseum on these pages for months, "this is a bear market. Trade accordingly."

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
6/15/18 25,090.48 -84.83 +674.64
6/18/18 24,987.47 -103.01 +571.63
6/19/18 24,700.21 -287.26 +284.37
6/20/18 24,657.80 -42.41 +241.96
6/21/18 24,461.70 -196.10 +45.86
6/22/18 24,580.89 +119.19 +165.05
6/25/18 24,252.80 -328.09 -163.04
6/26/18 24,283.11 +30.31 -132.73
6/27/18 24,117.59 -165.52 -298.25

At the Close, Wednesday, June 27, 2018:
Dow Jones Industrial Average: 24,117.59, -165.52 (-0.68%)
NASDAQ: 7,445.08, -116.54 (-1.54%)
S&P 500: 2,699.63, -23.43 (-0.86%)
NYSE Composite: 12,412.06, -98.49 (-0.79%)

Thursday, May 31, 2018

Going Nowhere Fast: Stock Churning a Wall Street Tool; Buy the Dip, Sell the Rip

Denial is NOT a river in Egypt, but, those who wish to traverse their world wearing blinders, colored glasses or even virtual reality goggles have been observed in the general vicinity of Wall and Broad Streets in lower Manhattan and their numbers are growing.

Stocks staged a strong dead cat bounce rally after three straight days of losses, the largest being Tuesday's nearly 400-point loss on the Dow Industrials that had the world shaking on stories of disunity and anti-EU behavior coming out of Italy.

Of course, in the United States, Italy, despite being the world's ninth largest economy (hard to imagine that) is taken as something of an outlier, as in "not our problem," so stocks were sent skyward by idle speculators, offsetting the mechanical smart money distribution that has been a feature of the markets since late January.

Just in case the recovery narrative is not taken seriously, the stock jockeys still have plenty of equities to alternatively pump, dump or hold, depending on the circumstance of the day. The bulls are attempting to extend the long bull market to ten years when in fact it ended - almost to the day - at nine years and one month, on April 9, 2018.

Since then, the Dow (and largely the other major averages) have travelled in a pretty tight range. On April 9, the Dow closed at 23,979.10, going as low since then to 23,924.98 (May 2) and as high as 25,013.29 (May 21). That 1088 point range (roughly 4%) has persisted for some seven weeks and shows no sign of breaking out anytime soon.

With May looking like a good bet to produce positive returns in the range of 300-650 points (Thursday is the final trading day of the month), the players in this Broadway-stlyed farce should be patting each others backs vigorously for a job well done, the losses of February and March now overshadowed by the plus signs for April and May.

All the bad stuff - like Wednesday's lowered first quarter GDP estimate to 2.2% from 2.3% or the weak ADP payroll report (178,000 May jobs) is, according to the churning crowd, behind us and it's roses and unicorns from here to eternity.

Naturally, anyone with a handful of functioning brain cells knows that the government and media are conspiring to deliver all manner of propaganda - from Russian collusion and election interference to "tight" employment conditions when 93 million Americans do not work for a living - so any mention of good times should probably not be taken too seriously.

The truth is somewhere in between what the government and media spoon-feed and wha tone sees and hears with one's own eyes and ears. The economy isn't great, nor is it about to collapse, though, admittedly, it's been 10 years since the last recession, so "bad times" are pretty much overdue. Unless one is conditioned to a Pavlovian reaction to headlines, such as the algorithms that drive market activity are, seeing the markets bouncing in a tight range should be cause for at least some caution, especially since that range is well below the last market high (26,616.71, Jan. 26).

The last trading day of the month shouldn't be anything notable as far as volatility is concerned, unless May's non-farm payroll numbers (due out Friday, June 1) are not pleasant and leaked. Even then, the rangebound Dow will remain.

And the deniers of a bear market will still be in denial.

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
5/22/18 24,834.41 -178.88 +671.16
5/23/18 24,886.81 +52.40 +723.56
5/24/18 24,811.76 -75.05 +648.51
5/25/18 24,753.09 -58.67 +589.84
5/29/18 24,361.45 -391.64 +198.20
5/30/18 24,667.78 +306.33 +504.53

At the Close, Wednesday, May 30, 2018:
Dow Jones Industrial Average: 24,667.78, +306.33 (+1.26%)
NASDAQ: 7,462.45, +65.86 (+0.89%)
S&P 500: 2,724.01, +34.15 (+1.27%)
NYSE Composite: 12,625.87, +183.18 (+1.47%)

Tuesday, May 22, 2018

Dow's Big Bear Market Rally Led Higher By Overvalued Boeing Shares

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%)