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]

Dow's Recent Gains Are Adding Up

With the midterm election turmoil nearly out of the way, stocks have begun the month of November in grand, year-ending fashion, the Dow Jones Industrial Average posting gains in three of the last four sessions, and, extending back into the final days of October, five of the last six were winners.

This string of positives has managed to erase much of the pain that accompanied October, which registered as the worst month of 2018 for stocks. In the past seven sessions, the Dow has advanced nearly 1200 points, an impressive performance, and should continue the path forward since there are few impediments ahead.

The Fed's FOMC meeting this Wednesday and Thursday should prove a non-event, as the committee is almost certain to stand pat on interest rates until the December meeting, when a 25 basis point hike in the federal funds rate is a virtual lock.

The overall outlook is strong for stocks presently, though headwinds could still emerge, October's declines still fresh in the mind, but, sentiment seems to have shifted from selling into rallies to buying on dips once again, and the Dow has regained roughly half of the losses incurred since marking an all-time high on October 3rd.

Other indices have followed suit, though the NASDAQ continues to lag, with many of the tech leaders now laggards, representing, to some, buying opportunities. To others, these tech firms have become no-go zones, appealing only to the most speculative of investing types.

Markets prefer stability, and November appears to offer plenty in the way of complacency and compliant data readings. With holidays straight ahead, it would not be a surprise to stocks exceed their previous highs.

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

At the Close, Tuesday, October 6, 2018:
Dow Jones Industrial Average: 25,635.01, +173.31 (+0.68%)
NASDAQ: 7,375.96, +47.11 (+0.64%)
S&P 500: 2,755.45, +17.14 (+0.63%)
NYSE Composite: 12,480.06, +55.75 (+0.45%)

WEEKEND WRAP: Bombs Away, Markets Crack, Mid-Term Turmoil

October is always full of surprises, whether they be political or financial in nature.

This week was not an exception, but, rather, the rule. Losses being sustained this month - since a topping out on October 3 - have been more severe and more significant than those encountered during February and March of this year.

That's saying quite a bit, since those winter months were quite scary. President Trump was under assault from Robert Mueller, the Special Prosecutor assigned to look into allegations (not a crime, mind you, but mere allegations, an unprecedented situation in American jurisprudence) of collusion with Russian operatives in the 2016 presidential election. Since there's been no mention of "Russia, Russia, Russia" for more than a few months now, it's safe to say that Trump was right all along: the entire investigation was a massive witch hunt.

Fast forwarding to October, Trump is still being assailed, though lately it's been over what really rankles Democrats and other detractors of the billionaire in the White House: his manners, or lack thereof, his incessant tweeting, and his very obvious disdain for liberals, Democrats and especially the media at his campaign rallies. Trump gets under people's skins. Some of it is by design. He likes making people uncomfortable. It's a way of seeing what they're made of; whether they'll lash out emotionally or display grace under pressure. For the most part, the people he's attacked, prodded, and called out have reacted with a modicum of restraint, though astute observers of the political class can tell that some, like Nancy Pelosi or Maxime Waters, are becoming unhinged or already were and Trump's thumping on them is only exacerbating their conditions of unease.

Not to belabor the point, but Trump hasn't been a bad president. In many regards, he's been good for the country. It's his rhetoric that annoys people, even his supporters. He's just not very mild-mannered or even-tempered as Americans are used to in their politicians. Some people actually enjoy his brash, unvarnished behaviors, taking them as a breath of fresh air and realism, apart from the usual stultified, superficial, and, yes, condescending attitude so popular among the Washington, DC elite.

Wall Street has taken a semi-political stance on Mr. Trump. Largely, they'll tolerate his decisions and commentaries on trade, tariffs, jobs, the economy, the Federal Reserve, and unemployment. Beneath the surface in many board rooms, however, there's a distaste for his bluster and boldness. It's just not the way things are done in higher-up circles of business. C-Suite executives prefer evenhandedness couched in cloudy rhetoric, ensconced in data points. Thus, there's a willingness to blame corporate shortfalls on this president. He presents himself as a convenient scapegoat and Wall Street honchos are more than willing to cast blame his way.

More than a few earnings reports this week included references to Trump's tariffs - those either in place or those he's only proposed - as excuses for shortfalls in revenue or earnings, or, most often, in forward guidance. There is a not-so-cleverly-disguised blame game being played at the highest levels of corporate America. Executives in growing numbers are calling out Trump's trade policies as a rationale for their own failures, and, for some, rightly so.

President Trump never promised Wall Street or anybody else a Rose Garden party. He always knew, and often made clear, that his imposition of tariffs on a variety of trading parties - but particularly, China - were going to have some negative effects. Naturally, he was right. Prices for many things made outside US borders are going up, a direct result of tariffs, but the end goal is not higher prices, but fairer trade, and that is not going to occur without some pain, and some of that will be significant.

Laying ahead for the economy, Wall Street and US consumers are higher prices right at the most inopportune time, the holiday buying season. When the final tallies from the fourth quarter are posted via retail sales figures and fourth quarter earnings in January, 2019, the numbers are likely to cause an even bigger shock. With all of America preconditioned for ever-expanding economic data, the fourth quarter of 2018 may look to some like the end of the world, if certain conditions are met, those being, retailers will slash prices to boost demand, resulting in lower profit margins and poor performance for some major companies. Trump and his terrible tariffs will be blamed.

This week was also overwhelmed by the "one big story" about the mad bomber from Florida who sent poorly-designed pipe bombs to former presidents and officials, presidential detractors, and a few current office-holders, all of whom shared one characteristic: they disliked or disagreed with President Donald J. Trump. Fortunately, the bomb-maker was highly unprofessional. None of his masterpieces of terror actually detonated.

Nevertheless, the "suspicious" packages that appeared all at once in mailrooms, postal facilities and elsewhere engendered a media frenzy and resulted in a quick arrest of the very obvious suspect, Cesar Sayoc. His background and the continuing investigation and eventual trial will extend well beyond the mid-term elections. For those wearing tin-foil caps and assigning this event to the "false flag" files, Sayoc's timing appeared to be too coincidentally close to election day. There's all sorts of spin. Most of it is not worth a moment's reflection.

Which brings up the matter of the mid-term elections, as if they were some world-changing event upon which the ultimate survival of American democracy and the rule of law hinged. That's how the media would have us view it, though contention for House of Representative seats occurs every two years without fail. Which party controls it gives power over committees to the winning side, the losers left to plot ways to undermine and unseat their successful opponents. This one's a little different, as it is something of a referendum on the Trump presidency, or so we've been told. The results won't matter much in the larger scheme of things since Washington DC politicians seldom do anything well, or right, or, at all. The mid-terms are just an excuse for advertising companies to make money and for politicians to claim they're on the right sides of various issues. Generally speaking, the American public would be better off if there were less politicking, less government overall, and less preening and posing for cameras by the stuffy types that populate the interior the DC Beltway.

How does politics affect stock prices: a little, but, in the end, not much at all. The mid-terms are all about bloviating and posturing and ballot-box stuffing, and boasting. Whoever wins will claim the juicy committee chairs. Should the House flip from Republican to Democrat this year, though, it will be an unmitigated mess, rom media crowing about the victory of globalism over nationalism, to absurd proposals to impeach President Trump. That is the one scenario that even Wall Street is afraid to embrace. It could unhinge everybody and everything.

Notwithstanding any such Democrat miasma, the mid-terms will come and go in another 10 days or so, and with it any chance to blame either party for the downfall of the economy (which is actually doing quite well) or for particular industries or companies. They'll be done and the media can dance around the implications until the new political faces are sworn in come January. None of it will make any difference to stocks, bonds, or the prices of oil, natural gas, gold, silver, sugar, tea, coffee, or Diet Pepsi. Nothing. Unless the Democrats take control of the House. Then, look out.

As far as stocks are concerned, well, they're still largely overvalued by most traditional measures, those being straight up PE ratios or the more in-vogue CAPE (Cyclically Adjusted Price Earnings) ratio, a Robert Schiller concept that measures PE over a 10-year period rather than just the most recent one. It's sensible, and now, widely employed. According to the current chart, the CAPE is at 30.00, down a little due to the recent sliding, but still above 2008 levels and about even with 1929's Black Tuesday, from which the stock market crashed and was a contributing factor in the Great Depression.

That said, this bout of volatility in markets is not about to abate. Not by any means. All of the major indices closed out the week below their 200-day moving averages, and, maybe more importantly, the weekly charts put them below their 40-month moving averages, something that hasn't happened since 2008-09.

Stating the all-too-obvious, markets move in cycles, and the bullish cycle is about over. The bearish case - and this again is confirmed by Dow Theory, and we will spare readers the explicit numbers for now - has been signaled and is already underway. The only way up from here is to get to the bottom. There will be bumps, grinds, irrational exuberance, toil, trouble, relief rallies and false alarms, but the trend is your friend and the trend, friend, is down.

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

At the Close, Friday, October 26, 2018:
Dow Jones Industrial Average: 24,688.31, -296.24 (-1.19%)
NASDAQ: 7,167.21, -151.12 (-2.06%)
S&P 500: 2,658.69, -46.88 (-1.73%)
NYSE Composite: 11,976.95, -141.90 (-1.17%)

For the Week:
Dow: -756.03 (-2.97%)
NASDAQ: -281.81 (-3.78%)
S&P 500: -109.09 (-3.94%)
NYSE Composite: -480.32 (-3.86%)

Weekend Recap: Wild Wall Street Ride Continues Push Higher

Amid the swirling winds of Washington's political circus, the nation's financial sector continued to take all the body blows, low blows, and talking head shots dished out by the deep state in perfect stride, carrying the averages to new highs on Wednesday following President Trump's speech before a joint assembly of congress.

With one eye on the political process and the other on the Federal Reserve, stocks continued to dance forward into March, with two key dates upcoming: Friday, March 10, when the February non-farm payroll report is released, and, Wednesday, March 15, the conclusion of a two-day FOMC meeting largely expected to result in an increase in the federal funds rate, from 0.50-0.75 to 0.75 to 1.00.

The jobs report will be crucial in terms of setting the agenda for the Fed governors. If expectations are met and job growth continues to be robust, the Fed will almost certainly announce a rate hike. Falling short of expectations could lead to another month of inaction on interest rates.

In any case, stocks were pumped after the presidential address in which Mr. Trump reiterated promises to build a wall on the border between Mexico and the United States, repeal and replace Obamacare, and set forth an overall economic agenda that will include budget cuts to various agencies, a trillion dollar infrastructure plan and a rejiggering of the tax code.

Should the President succeed even marginally on his lofty economic goals, stock pickers may well find themselves in a condition to ignore any moves by the Fed, freeing speculators from the tired monologue that has led the market for the past eight years running and continue the now third-longest expansion in stock market history.

Shrugging off such ancient notions as fundamental valuations and price-earnings ratios, investors have taken the stock markets literally to uncharted territories. The US dollar remains the currency of choice in most of the world and with that oil and most commodity prices have slumped and/or stabilized. Bonds continue to vacillate, though short term rates are beginning to show signs of stress, especially in consideration of upcoming budget and debt ceiling debates. Also on the minds of many in the investing community are elections in the Netherlands (in two weeks) and France (April 23) where populist candidates in the Donald Trump style are engaged in hotly contested races.

The populist surge sweeping the globe is unlikely to be quelled soon, either by technocrats in the European Union or entrenched politicians across a wide swath of nations, from Malaysia to Japan to Italy and Germany. The middle class in developed nations, having been squeezed financially by globalization, is in nearly full revolt. All the while, giant corporations appear confident that they will weather the ongoing stormy crises.

At the Close, 3.3.17:
Dow: 21,005.71, +2.74 (0.01%)
NASDAQ: 5,870.75, +9.53 (0.16%)
S&P 500: 2,383.12, +1.20 (0.05%)
NYSE Composite: 11,598.37, +22.46 (0.19%)

Since the election in early November, the NYSE Comp. and S&P 500 have closed higher 12 of 17 weeks, the Dow and NASDAQ, 13 of 17.

For the week ending 3.3.17:
Dow: +183.95 (0.88%)
NASDAQ: +25.45 (0.44%)
S&P 500: +15.78 (0.67%)
NYSE Composite: +57.08 (0.49%)

Dow Closes Below 18,000, S&P Under 2100, Trendiing Lower; Fed Null

Stocks took the usual FOMC do-nothing antics in stride but sold off late in the day, with the Dow Jones Industrials finishing below 18,000 and the S&P 500 under 2100.

For the S&P, it was the first close below 2100 since early July, leaving the broad index up just five percent on the year, floating just above its 200-day moving average.

Cause for such grief in stocks is likely tied to the presidential election, now less than a week away, and the continuing surge of Donald J. Trump in the polls as more and more dirt is coming up from under the Hillary Clinton rug.

Investors are worried that their fair-haired, lying, cheating, scandal-ridden candidate will not make it to the finish line ahead of Trump, whom the media and Clinton camp have tried in vain to paint as misogynist, racist, rapacious, in bed with Russia, and other flights of fantasy.

As sad as the media bias and misrepresentation has been, what is potentially more disturbing is how poorly the media and Democrats think of the American public as gullible, malleable and utterly useful only to the ends of the elite.

As was stated more than three weeks ago right here in Money Daily, it now appears that Trump is going to win the election in a backlash landslide.

And stocks don't like it. Too bad.

Hump Day or Trump Day?
17,960.60, -76.50 (-0.42%)

NASDAQ
5,105.57, -48.01 (-0.93%)

S&P 500
2,097.95, -13.77 (-0.65%)

NYSE COMPOSITE
10,349.57, -64.48 (-0.62%)

In Run-Up To Election, Markets Remain Shaky

As outlined in yesterday's post, US stock indices have been down since the beginning of August, presaging to the positive for the challenger party in the presidential election race.

While the outcome of a Trump victory is far from certain, what is clear is that traders and speculators are taking note of the fragile condition of the US and global economies, both of which have been side-stepping into the future since the crash of 2008-09.

Markets function largely on faith and hope, despair and confusion, greed and fear, and there seems to be ample supplies of all emotions all around. Puzzling analysts is how exactly a Clinton presidency would benefit markets, if only to keep the controlling interests in charge for another four years.

That may not be the best of circumstances, as Mr. Trump points out, because the global condition is quite completely on edge politically and likely over the edge financially. Nation-states are overburdened in debt, which has found its way back to the minions, a cause for unrest and potentially explosive social events.

With all that in the marco view, US companies, in the midst of third quarter earnings season, are, as has been the case for the past three years, struggling to find profits and any reason to be upbeat for the remainder of 2016 and into 2017.

There seems to be a dull thud re-occurring in the offices of CFOs and CEOs, that being the repeating sound of falling EPS and missed revenue figures, a double whammy for investors, though not many have fled the market as of this writing.

Thursday represents perhaps the biggest day of earnings season. Alphabet (GOOG), Amazon.com (AMZN), LinkedIn (LNKD) and Baidu (BIDU) are among companies set to report after the bell. Colgate-Palmolive (CL), Bristol-Meyers Squibb (BMY), Ford (F) and UPS (UPS) all report prior to the opening bell.

These results and some economic data (durable goods, pending home sales) will shape the day's trading. With just two days left in October, there's a slim chance that markets could rally back to positive for the past three months, which would be a good omen for the Hillary camp, but it is unlikely to happen unless some major news breaks that would spur a buying panic. It's happened before, but expect more oddities prior to election day next week.

Wednesday's Final Score:
Dow Jones Industrial Average
18,199.33, +30.06 (0.17%)

NASDAQ
5,250.27, -33.13 (-0.63%)

S&P 500
2,139.43, -3.73 (-0.17%)

NYSE Composite
10,528.19, -22.00 (-0.21%)

Fearless Rick Predicts: Trump To Win In Landslide Victory

Dispensing with the usual market noise and fury, today let’s look at the political spectrum, in particular, the presidential race.

In the aftermath of the leaked Trump video, the further Wikileaks of Hillary Clinton’s speeches to the Wall Street elite, and Sunday night’s debate, a common theme has emerged. The Democrats have, as usual, nothing more than empty rhetoric and the politics of personal destruction.

Republican candidate Trump has been dealt a bag of lies, dirty tricks, one-sided media reportage and bias, inaccurate, dubious polling data, slurs, baits, and typical trash talk, but he has not folded, not has he bent to the pressure in the least.

While Donald Trump may not be the ideal Republican candidate, he is largely better than his Democrat rival, Hillary Clinton, whose over 30 years of public service have yielded no tangible, positive results for the majority of Americans.

Trump is correct in pointing out that the Democrats - for whom the African-American populace slavishly vote for in every election, be it local, state or national in scale - have done nothing to enhance the ling conditions of the black community. The same goes for nearly every other minority. The Democrats are full of promises and negligent on deliverance. It is the same tactic trotted out year after year, in election after election. Democrats preach equality and tolerance, but demonstrate neither.

It’s time for Americans to see through the Democrat party as nothing more than socialism on steroids. Every problem is solved by more policies, more spending, higher taxes, greater regulation. The majority of taxpaying people in this country (and even tax-avoiders) are - or should be - fed up with the dictates and policies promulgated by the left and they should be energized enough to put an end to it next month, when millions will make their voices heard through their votes.

There are no sure things in life, but if ever there was a moment for a complete convulsion in the fabric of American life, it is now. Eight years of Obama’s socialism has led to this moment. Mr. Trump has prevailed over all his Republican rivals, many of whom - as much a part of the elite status quo as the Democrats - have withdrawn their support or never supported the nominee at all.

Hillary Clinton is another empty suit. Donald Trump is a businessman who has had great success and celebrity over the years. The Democrats have tried in vain to denigrate and demonize him precisely because they are afraid of losing the election and increasingly desperate.

If the truth be known, most of the polls are so wickedly biased toward the Democrats (see this story by Sharyl Attkisson for more) they cannot be believed. This race is not even close. More and more people are being swayed by the power of Trump’s persuasion for a greater America, for a return to traditional values, for supporting the constitution, lowering taxes, eliminating regulations and improving the quality of life for the middle class.

There should be no doubt when the buttons are pushed or levers pulled. Donald Trump will win the presidential election in an absolute, stunning landslide on a scale of Ronald Reagan’s victory in 1980.

The only caveat - and it is a serious one - is if the election is rigged and stolen outright by the Democrats or the powers that be. Both sides have done it and there is a very good chance that if Clinton is seen as losing midday on November 8, all bets are off, all votes will be nullified electronically or by other means. It’s a real threat, but, otherwise, Donald Trump will win convincingly.

Monday's Markets:
Dow Jones Industrial Average
18,329.04, +88.55 (0.49%)

NASDAQ
5,328.67, +36.27 (0.69%)

S&P 500
2,163.66, +9.92 (0.46%)

NYSE Composite
10,682.71, +55.79 (0.53%)

Presidential Debate Past; Stocks Return To Normal

With the results of Monday night's presidential debate clearly a mainstream victory for Hillary Clinton (according to the mainstream media, naturally), investors got the "all clear" Tuesday morning and immediately set about erasing the previous day's losses to a large extent.

There was nothing of note in the way of financial news, so the political news would have to suffice, and it apparently did.

With nothing now standing in the way of a Hillary Clinton victory in the November election, the smug Wall Street crowd felt good enough to boost stock prices for the average investor, despite Donald Trump's warning that the Fed was blowing bubbles and playing politics. Maybe the election doesn't matter that much.

All's well.

Tuesday's Shuffle
Dow Jones Industrial Average
18,228.30, +133.47 (0.74%)

NASDAQ
5,305.71, +48.22 (0.92%)

S&P 500
2,159.93, +13.83 (0.64%)

NYSE Composite
10,657.18, +32.30 (0.30%)

Stocks Slide Again; Is Market Anticipating A Trump Victory Or Government Shutdown?

Stocks fell for the second straight session, extending losses from Friday to open the new week.

Causes for the two-day selling spree are questionable, but Monday's New Home Sales release by the Commerce Department may be a good place to start. After surging in July, new home sales fell 7.6% nationally, following a July surge.

Perhaps even more troubling is that the median price of a new home sold in August was down 3.1% from July and down 5.3% from a year earlier.

That's a real problem because the home-selling business has been anything but brisk, though price increases were a good sign for the Federal Reserve, which is dying to find any hint of inflation (they love it; consumers hate it). Thus, if new homes are selling at a discount from the year earlier, one could probably safely assume that existing homes are seeing price pressure to the downside as well.

Extrapolating from what is normally regarded as the biggest single purchase in a person's life, the cost of a home (or rent) going lower is going to put the brakes on inflation in a very large way, perhaps in a way that many people looking to sell are not going to appreciate. Recall that the last housing bust was a scant eight years ago. There are still underwater homeowners in various stages of despair, though the numbers have eased significantly over the years.

A downturn in housing prices, while great for new buyers, are overall anathema for the economy. How that squares with Wall Street's ongoing love-hate affair with the Fed and the call for higher interest rates is as yet unknown, but, after last week's stall on raising rates there's the distinct possibility that the Fed has called the market's bluff for the final time.

A FOMC meeting is sceduled for the first week in November, just prior to the election, so there's almost zero probability that the Fed would raise rates at that point, upsetting not just the market but the political class as well. That leaves December as the last chance for the Fed to raise rates, and looking back at their last December hike (a market disaster), there's some thinking that the almighty Fed may not want to repeat that particular episode.

One other potentiality for the sudden downturn in stocks is that inside money is looking seriously at a Donald Trump victory in November. Tonight's first debate (of three) between the Donald and Hillary Clinton may be a watershed moment in US political history. The most recent polls have the two candidates nearly even, as Mr. Trump has eviscerated Clinton's large post-convention lead, especially in some key battleground states such as Ohio, Pennsylvania, and Florida.

Why large investors may be nervous about a Trump victory is the gnawing, belly-aching suspicion that Trump may be good for small business but bad for big business. His platform is not well-formed, but, he has used the words "crony capitalism" to his populist advantage. It's code for "no more business as usual" which means many of the larger firms (think S&P 500) that have benefited from decades of competition-crushing regulations and legislation may be looking at a more level playing field which puts small businesses on a better footing, something with which they have no relevant experience. That opens up new possibilities that favor smaller competitors taking market share from larger ones, to the ultimate detriment of the US stock market, but probably to the betterment of the overall economy.

Not withstanding any other reasons to fear a Trump presidency, the elitists on Wall Street and in the nation's capitol simply do not know what to expect. That's why they're the status quo and Donald Trump spells big danger.

Another rationale for a market downturn is the continuing drama over keeping the federal government operating past this coming Friday. The president and congress are doing their usual dance of death surrounding a continuing resolution rater than an actual budget to avoid a government shutdown and the Friday deadline is looming large.

Lastly, this being the last week of September, maybe the marketeers are gearing up for an October to remember, as has occurred on numerous occasions in the past. Market crashes and corrections always seem to pop up in the harvest month, and this one offers even more uncertainty than usual.

Blue Monday:
Dow Jones Industrial Average
18,094.83, -166.62 (-0.91%)

NASDAQ
5,257.49, -48.26 (-0.91%)

S&P 500
2,146.10, -18.59 (-0.86%)

NYSE Composite
10,624.88, -93.11 (-0.87%)

Monday Blues: Stocks Fall; Is It The Trump, Clinton, Sanders or Putin Effect?

Over the weekend, the political climate became highly charged with the release of thousands of emails from the servers of the Democratic National Committee courtesy of Wikileaks and, as some presume, the assistance of Russian operatives. The propaganda nailing Russia as the bad guy was already underway as of the Sunday news shows. It's very likely to be completely spurious.

The leaked emails revealed a concerted effort to swing the primary vote toward the favored candidate, Hillary Clinton, and away from upstart radical, Bernie Sanders. To say the least, the emails were scandalous and disgusting, revealing just how deeply ingrained the status quo has become, and the lengths to which they will plumb in order to have public opinion bend to their will.

Suffering the most from the fallout was DNC chairwoman Debbie Wasserman Schultz, who was forced to announce her resignation as chair on Saturday. Ms. Schultz announced that she would gavel in the convention on Monday and gavel it out on Thursday.

Those plans fell completely apart on Monday as first, Ms. Schultz was shouted down as she attempted to address the Florida delegation, ironically, people from her own state. After being unceremoniously whisked from the stage, Ms. Schultz announced that she will not be associated with the convention in any way.

In two words: she's fired.

As has been mentioned on this blog in the past and as recently as the prior post which wrapped up last week, once the powers that be begin getting a whiff of a Donald Trump victory in November's presidential election, stocks will fall, leaving the Donald a mess not unlike what greeted Barack Obama in 2008.

So it is, when central banks and oligarchical politicians believe they can control not only markets, but the lives of the people investing in them.

The modern equivalent of torches and pitchforks are cellphone videos and anti-establishment signs.

Peace. It's a foreign concept in this period and the madness is swelling.

Monday's Politically-Charged Changes:
Dow Jones Industrial Average
18,493.06, -77.79 (-0.42%)

NASDAQ
5,097.63, -2.53 (-0.05%)

S&P 500
2,168.48, -6.55 (-0.30%)

NYSE Composite
10,752.43, -52.61 (-0.49%)

Calm Before the Storm; Markets Flat One Day Prior to Elections

Election Day is tomorrow, and markets mimicked the mood of the country, delivering a nothing session in the wake of the monumental event on the horizon.

Stocks were down hard in the morning, but buyers stepped in to stabilize the situation, eventually boosting stocks in the final half hour to close near the highs of the day.

That's about it, since there were scant earnings announcements of little importance, and everybody laying down - or not - bets on tomorrow's election outcome. All the major indices close positive, though only slightly, and trading volume was sub-standard.

Dow 13,112.44, +19.28 (0.15%)
NASDAQ 2,999.66, +17.53 (0.59%)
S&P 500 1,417.26, +3.06 (0.22%)
NYSE Composite 8,240.26, +5.34 (0.06%)
NASDAQ Volume 1,464,733,000
NYSE Volume 2,898,888,000
Combined NYSE & NASDAQ Advance - Decline: 3016-2454
Combined NYSE & NASDAQ New highs - New lows: 102-79
WTI crude oil: 85.65, +0.79
Gold: 1,683.20, +8.00
Silver: 31.13, +0.271

Market Chart Alert: Dow Double Engulfing Day Signals Start of Turnaround

For as long as just about anyone who charts stocks and indices can remember, the pattern which appeared in today's session should be a primary signal that stocks are ready for an abrupt turn - and this one is decidedly to the downside.

Notwithstanding ongoing market manipulation to the contrary, which has pushed stocks to extreme levels over the past few months when just the opposite appeared more likely on poor data, low volume and other bearish signals, the double engulfing pattern - in which the high and low of today exceeded the highs and lows of the previous two sessions - is a bright red flashing light to chartists everywhere.

The Dow Jones Industrials took a rather abrupt turn late morning. After a slow start, the index reached the high point of the day (13,330.76) just before 11:00 am EDT, hovered in that area, then began a serious decline a short time later, finally dipping into the red around noon.

For the rest of the session, the Dow, carrying the other major indices along with it, continued a slow descent until bottoming out around 3:15 pm EDT at 13,186.60, eventually finishing just 16 points off the low, yet another bearish signal.

The trading range of 144 points exceeded the highs and lows from Friday and Monday's trading, on both sides and was the widest range since August 3rd, when the index ranged 148 points, but finished higher by 111 points.

The headwinds that have been pushing against stocks for a while (could be two months, two quarters or two years, depending on perspective) may finally be taking its toll on the trading community, though there's also sufficient data to determine that stocks have reached the upper limit for the short turn, coming a whisker within the 52-week high of 13,338.66, achieved on May 1st.

While the chart is eliciting a strong double-top formation, the gain from Dow 12035.09 to today's high - a rally of 1,295 points, or, roughly 10%, from June 4, was built on a series of sharp one-or-two-day upside moves with intermittent, short selloffs in between until the baby-step gains typical of the past two weeks.

In simpler terms, the market may just have run out of gas, the problems in Europe and the coming crucial elections and fiscal cliff all creating significant uncertainty in the minds of investors and traders.

A pull-back from these current nose-bleed levels would not be without precedent; indeed, the month of May shook out to the same amount as the gains in June, July and August combined.

What happens next is anyone's guess, and the transportation average is offering a bit of a clue, having finished the day just 0.23 short of the high made on Friday, a one-month high, but well short of the 52-week high set on May 2nd, 5334.52.

The issues plaguing the market and the general economy still are persistent and a shock to the system may be forthcoming, especially since neither the Europeans nor the Federal Reserve seem committed to further monetary easing, something market participants have been lobbying for over the past four to six months.

With November's elections coming fast, the Fed is very reluctant to make any abrupt announcements, while in Europe, the cries from Germany to stop the Ponzi-like bailouts of the southern sovereigns grows louder with each proceeding day.

Despite market breadth being only moderately negative and new highs - new lows reading nearly off the charts positive, we'll await confirmation from these and/or other metrics before making an all-red bear call.

Adding to the market consternation on the day were the continued run-up in safe haven assets, gold and silver, both reliable indicators of general fear in the marketplace.

As for the ongoing rally in crude oil, that is more a function of the time of year, when market insiders annually push prices to their highest levels preceding the Labor Day holiday, just two weeks hence.

Dow 13,203.58, -68.06 (0.51%)
NASDAQ 3,067.26, -8.95 (0.29%)
S&P 500 1,413.17, -4.96 (0.35%)
NYSE Composite 8,082.68, -11.65 (0.14%)
NASDAQ Volume 1,574,080,875
NYSE Volume 3,249,264,250
Combined NYSE & NASDAQ Advance - Decline: 2408-3071
Combined NYSE & NASDAQ New highs - New lows: 264-32
WTI crude oil: 96.68, +0.71
Gold: 1,642.90, +19.90
Silver: 29.43, +0.83

Commodities, Stocks Continue to Slide in Deflationary Downturn

It's time to look at some numbers in a broad macro view to get a handle of where the global economy is heading over the next six to twelve months.

In less than six months, Americans will head to the polls to either elect a new president or give Barack Obama the benefit of the doubt and return him for a second term. There are also key Senate races and all members of the House of Representatives are up for re-election. The implications of who becomes president and which party controls congress will have profound implications for the US economy going forward.

However, the presidency is the most important piece of the puzzle. In a nutshell, if Obama wins, we will have a continuation of the descent into a welfare state. If Romney takes it, bet on police state, with brutal, militarized police forces mobilized to quell citizen uprisings throughout the country.

Either way, the USA is in a tough spot, because neither the Republicans or Democrats will do anything remotely positive to improve conditions for millions of Americans.

Let's look at the numbers:

America's current deficit is $1.3 trillion for 2012.

The total US debt is beyond $15 trillion, and, if you add in unfunded liabilities - pensions, Social Security and Medicare - that number grows to somewhere between $125 and $150 trillion. That's a number that cannot be paid out or paid back easily.

In just the past 15 days, reality seems to have struck all the way from Washington to Wall Street. The economy is just barely limping along; in some areas of the country, local economies are dead or nearing a fatal state. More than half the US states face budget shortfalls for fiscal 2013 (starting July 1), the worst being California, Massachusetts (thank you, Mitt!), Illinois and Louisiana. The total gap for the states is estimated at $49 billion and that may be low.

Since the states have to balance their budgets, there will be layoffs and cuts in services. These will be anything but bullish for the general economy.

Retail sales have slowed for four straight months. In related news, JC Penny's (JCP) just today reported second quarter (non) earnings. They lost 0.25 cents per share on estimates of an 11-cent loss. Top-line revenue also missed the projected target of $3.41 billion, coming in at a squeamish $3.15 billion.

CEO Ron Johnson, who took over the reigns of the struggling merchandiser recently and had been widely praised as the master planner of Apple's signature stores, has a difficult road ahead. His Apple experience cannot be rightly compared to what he is dealing with at JC Penny's . Apple's stores were designed to sell only Apple products, which are unique and the envy of the retail world. Penny's deals with thousands of products from a multitude of vendors. It's not the same, and, even though Mr. Johnson is a bright fellow, he's in over his head in an environment that is not favorable to retailers.

Penny's also announced they were discontinuing their dividend of 80 cents per share. The stock was trading down more than 10% in the after-hours.

There are more than 44 million Americans - nearly one in six - receiving food stamps.

New home sales in 2011 had their worst year since 1961.

Stocks on the major averages are down between 4.5 and 5% in just the last 10 trading days. The Dow lost ground on nine of the last ten days; the S&P and NASDAQ have finished in the red eight of the last 10 sessions.

Meanwhile, the dollar index has soared, from 78.71 on April 27, to 81.26 at the close today. Meanwhile the Euro has collapsed to under 1.28 against the US dollar, finishing at 1.2729 at today's close. The move up in the value of the dollar has sent commodities screaming lower, with gold, oil and silver all suffering steep losses in the month of May. That's actually good news for Americans, particularly because lower oil prices eventually will translate into lower gas prices at the pump.

So, what is all of this data telling us? Surprisingly, despite tens of trillions of dollars pumped into the economy since 2008 by the Fed and the federal government, the wailing tone of deflation is unmistakable. Prices are falling rapidly, though incomes are stagnant or declining. There simply are not enough people working and making sufficient money to keep price levels high.

Anecdotally, food prices are coming down. Real estate remains in a moribund, deep slump and home foreclosures are once again rising. Everything will get cheaper as the economy continues down the inescapable path of deflation because the Federal Reserve's money spigot has directed all the flows to the banks, and they are not lending, mainly because they're still repairing their badly damaged balance sheets, and, even when they do cough up some dough, the borrower has to have absolutely pristine credit, a circumstance which is becoming something of a rarity.

Some say the US economy will be destroyed because its unpayable debts will undermine the value of the dollar and cause hyper-inflation. That may be so, though it's difficult to see inflation in anything when 15-20% of Americans are living in what's essentially a day-to-day fight for survival.

If hyper-inflation does one day come about and the dollar is smashed to a fraction of its former value, a deflationary depression will occur first. The government needs low interest rates to continue paying off the massive debt it has created, and will do everything it can to keep rates low.

But, because the Federal reserve has failed so miserably on the second part of its mandate - employment - all the money in the world (and the Fed has most of it now) cannot make people spend when they have no jobs, no prospects, and are worried about having enough food to eat tomorrow. Food prices are likely to stabilize, but, for the most part, the rest of the economy is toast, though it is still marginally better than that of Europe, of which half the countries are already in recession.

The money that was furnished to the banks by the American taxpayer, courtesy of the Fed and Treasury, went straight to financial institutions, and we know that they are profligate gamblers and thieves who will only enrich themselves, leaving Main Street, small business and the American public to fend for themselves in a mostly cash system which is quietly, albeit quickly, turning into a massive black market, underground economy.

Eventually, the government will fail horribly, and many will suffer. Those with wits, skills, cunning and a propensity to see the future and break rules, will prosper. Europe will fall first, but you can bet your bottom dollar (if you still have any) that their problems will come to roost on the shimmering shores of America.

Dow 12,632.00, -63.35 (0.50%)
NASDAQ 2,893.76, -8.82 (0.30%)
S&P 500 1,330.66, -7.69 (0.57%)
NYSE Composite 7,635.81, -69.64 (0.90%)
NASDAQ Volume 1,835,801,375
NYSE Volume 4,114,145,250
Combined NYSE & NASDAQ Advance - Decline: 2214-3408
Combined NYSE & NASDAQ New highs - New lows: 77-236 (gap widening)
WTI crude oil: 93.98, -0.80
Gold: 1,557.10, -3.90
Silver: 28.08, -0.27

US and European Subdued Reaction to French, Greek Voting

The tide has turned in Europe... against austerity, whatever that means, and towards more socialistic societies in both France and Greece, as Francois Hollande defeated right wing president Nicolas Sarkozy on Sunday, and the Greek Parliamentary elections produced a government with no clear majority for any party and difficult coalitions to be formed ahead.

While the French election results represent a complete shift in sentiment, the issues for Greece will almost surely come to the forefront of Europe's continuing debt crisis as minority parties will almost surely attempt to block the wholesale gutting of the country by the ECB and IMF. Recent agreements over debt restructuring and repayment are already suffering serious difficulty; the opportunity for a disorderly default by the Hellenic nation certainly back on the table.

Reaction in Asia was negative, with all markets suffering losses, probably the eventual result for markets globally, once the "all is well" phony, manipulated response in Europe and America is worked through. european markets were mixed, as were those in the US, the result of more central planning and full-spectrum control, which will eventually fail.

There was no other economic news worth noting, though, as is usually the case in controlled, bogus markets, the day's results were muted and in plain opposition to facts.

There will almost certainly be a period of adjustment in the Western markets before the full brunt of a sea change in politics is accepted. Until then, expect markets in the US and Europe to behave as they have been, adrift on piles of freshly-printed worthless money, in denial of the truth and more than likely sideways before heading into the awaiting maw of the abyss into which they must fall.

Almost imperceptibly, the decline in equity prices has already begun. New lows bettered new highs for the second straight session, an indicator that should not be ignored during a period of rapid change.

Dow 13,008.53, -29.74 (0.23%)
NASDAQ 2,957.76, +1.42 (0.05%)
S&P 500 1,369.58, +0.48 (0.04%)
NYSE Composite 7,948.77, +15.47 (0.19%)
NASDAQ Volume 1,738,947,625
NYSE Volume 3,535,832,750
Combined NYSE & NASDAQ Advance - Decline: 3054-2523
Combined NYSE & NASDAQ New highs - New lows: 112-134
WTI crude oil: 97.94, -0.55
Gold: 1,639.10, -6.10
Silver: 30.12, -0.31

Thank Heavens the Elections Are Almost Over

Tomorrow, millions of Americans will go to the polls to elect another batch of worthless hooligans, crooks, thieves of all variety and generally people who can't do anything else but steal and spend other people's wealth.

The American system of representative democracy is so completely and irrevocably broken that there's little hope of it ever being repaired. People who are "elected" (make that "selected" by those in control of voting machines that don't produce a paper trail and are easily hacked) are supposed to represent the people of their district, city, town or state.

Sadly - and this has been an ongoing feature for quite some time - both newly-minted and re-elected representatives will be representing not the people, but the interests of the people who gave to their campaigns, mostly corporations or rich donors seeking special treatment. And they will get it, no matter the detriment to the public.

Anyone who cannot see that this is the operative nature of our politics is either not paying very close attention or is blinder than blind.

Essentially, the "big" races are those for control of the House of Representative and the US Senate. The Republican party, largely responsible for the fiscal calamity that is the US government and economy, is already claiming victory in the House, on the uncertain claim that they will restore "American values." It's the same old line that seems to be trotted out every couple of years, by both parties, both equally corrupt and useless.

Any change that occurs will no doubt be to the detriment of the majority of Americans, especially those known as middle class, now an endangered species.

Thank heavens this election cycle is finally coming to an end. Maybe the American public will have peace for a few weeks, or even days. We'd be better off if all the politicians just went home and stopped making so much noise.

In an apparent vote of no-confidence in anything, the markets today staged an incredible about-face on the back of a $2.5 billion POMO, otherwise known as quiet QE by the Fed. Stocks soared in the early going. Just after 10:00 am, the Dow was up almost 125 points, but spent the remainder of the session declining, actually going red for a short time, before a late-day rally boosted it back to break-even.

The S&P also ended marginally in the money, though the NYSE and NASDAQ weren't quite so fortunate. For those of the ilk that the Republicans will deliver peace, prosperity and zillions of new jobs, today's action was hardly reassuring. The market knows the economy stinks and congress will do little to change that. We are in the midst of a depression, one which neither party is willing to take blame for, though the truth is that both caused it.

Dow 11,124.62, +6.13 (0.06%)
NASDAQ 2,504.84, -2.57 (0.10%)
S&P 500 1,184.38, +1.12 (0.09%)
NYSE Composite 7,509.21, -4.14 (0.06%)
NASDAQ Volume 1,922,047,000.00
NYSE Volume 4,461,449,000

Oddly enough, declining issues far outweighed advancers, mostly on the NASDAQ, 3521-2915. New highs stretched to 540, against a mere 80 new lows. Volume was normal, meaning poor.

Crude oil was up $1.52, to $82.95. Gold fell $7.00, to close at $1,350.60. Silver lost a penny, finishing at $24.55.

Two things are for certain: 1. The USA is in a heap of trouble economically, and 2. looking to congress for answers is a huge mistake.

Is it too late to just cancel the elections and start over?