Peaks, Valleys and Trading Ranges: Stocks Stuck In Trader's Paradise

Another day, another volatile session with a 216-point trading range on the Dow has investors concerned, but traders - those commission-or-volume-based entities that make markets - ebullient.

The range of trade on the day was nothing of concern to anybody, since the levels are far from the extremes. Those extremes on the Dow, since February 8 include a February 26 high of 25,709 and a March 23 low of 23,533 and are dignified on charts as significant peaks and valleys. With the Dow closing somewhere betwixt and between is indicative of a market that simply cannot make up its own mind, since there are roughly equal parts sellers and buyers, but barely any conviction on either side.

Stocks will continue to trade in this 2100-point range until there is some decisive catalyst to lead them either higher or lower. Presently, there is nothing to encourage the bulls nor the bears that a breakout or breakdown is about to occur. What happens during these volatile but rangebound periods are fairly discernable patterns of behavior, most notably stocks bouncing higher off the 200-day moving averages of the various major indices, or correcting lower off the 50-day moving averages.

Stocks being tied to computers and the computers run by algorithms, programmatic trading is ensured.

There isn't much to be said or inferred from this sideways pattern, except that the range continues to be on the low side, with all-time highs from January 26 (26,616.71) becoming a smaller and smaller object in the rear view mirror of the stock market race car.

Nothing is likely to change this pattern until either the peak or valley is breached, though the odds are good that the valley breach will be the eventual winner, leading to a more vicious, faster-paced downturn.

That's not to say that the Dow could not add significantly from its current level. It's a distinct possibility, but one that would probably fail as the index approaches that February 26 peak.

Throw away all the fundamentals, dismiss all the geopolitical news, ignore all data and just focus on the chart. Sometimes - and now is one of those times - it is really that simple.

Dow Jones Industrial Average May Scorecard:

Date	Close	Gain/Loss	Cum. G/L
5/1/18	24,099.05	-64.10	-64.10
5/2/18	23,924.98	-174.07	-238.17
5/3/18	23,930.15	+5.17	-233.00
5/4/18	24,262.51	+332.36	+99.36
5/7/18	24,357.32	+94.81	+194.17

At the Close, Monday, May 7, 2018:
Dow Jones Industrial Average: 24,357.32, +94.81 (+0.39%)
NASDAQ: 7,265.21, +55.60 (+0.77%)
S&P 500: 2,672.63, +9.21 (+0.35%)
NYSE Composite: 12,519.75, +26.40 (+0.21%)

Stocks Bounce, Dead Cat Variety, Then Fade

Nothing much to see here, though the Dow has managed to stay in a relatively tight range, below the interim high and above the interim low, still negative for the month.

Further patience, with a slight bias to the short side, is advised

Dow Jones Industrial Average March Scorecard:

Date	Close	Gain/Loss	Cum. G/L
3/1/18	24,608.98	-420.22	-420.22
3/2/18	24,538.06	-70.92	-491.14
3/5/18	24,874.76	+336.70	-154.44
3/6/18	24,884.12	+9.36	-145.08
3/7/18	24,801.36	-82.76	-227.84
3/8/18	24,895.21	+93.85	-133.99
3/9/18	25,335.74	+440.53	+306.54
3/12/18	25,178.61	-157.13	+149.41
3/13/18	25,007.03	-171.58	-22.17
3/14/18	24,758.12	-248.91	-271.08
3/15/18	24,873.66	+115.54	-155.54

At the Close, Thursday, March 15, 2018:
Dow Jones Industrial Average: 24,873.66, +115.54 (+0.47%)
NASDAQ: 7,481.74, -15.07 (-0.20%)
S&P 500: 2,747.33, -2.15 (-0.08%)
NYSE Composite: 12,743.61, -19.06 (-0.15%)

Added:

Report from upstate NY (30 miles east of Rochester) Crash is coming, very soon. Restaurants are closing everywhere. Most of the small towns, like Sodus, Macedon, Clyde, Newark have plenty of retail space for lease, much of it on the block for over two years.

Retail is awful. Only the biggest, best-established stores are surviving, and that's all they're doing. People are over-taxed, stressed out, debt-laden zombies. Average of $22k per student in most districts. Upstate NY (from Albany west to Buffalo) has been in a depression for the past 20 years, but, seriously, it's getting worse. People are down to buying just necessities and trying to pay off credit card and school debt. Forget about mortgages. It's like the sub-prime crisis is still ongoing. Monroe County (Rochester) lists two to three foreclosures a day.

The narrative that we're in "recovery" or "expansion" is complete horse manure. As soon as you make some money, there's the revenue guy or the locals erecting more stupid regulations to make life more difficult.

A true cleansing is needed. Start by closing all the schools. Screw the overpaid, fat, stupid teachers and their huge pension load. They suck. They don't teach; they only take. Same for most government employees. Then sack half the municipal and state employees. Then 50% of the federal employees. When half of the nation is on welfare, cut that off, shoot the worthless eaters and start over.

I'm in my mid-60s and I have to admit, I've never seen the economy in worse condition. Ever since 2008, it's been every man for himself. Pretty darn sad. We used to have a good country, but it's been going downhill for several generations. Half of the youth are worthless and will be dangerous.

Bankruptcy filings will erupt in the second half this year unless there's dramatic change from within. Trump can't do it all, but he's fighting a deflation monster nobody wants to admit exists.

Here, with a foot of snow on the ground five days before Spring, things are looking pretty damn bleak.

Yellen And Fed Fail; Market Confidence Fades; Stockman Is Right; 13 Weeks On Dow Range

It's Friday, it's summer, so this recap of the events of the day and the week will be as brief as possible.

First up, the weekend's required reading is David Stockman's Abolish the FOMC, bring back the green eyeshades, in which the former Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan proposes an elegant yet simple solution to the current and ongoing tyranny of central bank incompetence.

In as few words as possible, Stockman proposes that the market set interest rates, pining for the halcyon days of true price discovery. The post is well worth twenty minutes of reading.

As for stocks, globally, the week was something of a disaster, with massive falls in Asia and Europe, though there was something of a rebound on Thursday. US indices struggled though the opacity of another FOMC policy decision (nothing) and fell into a funk on Thursday morning, with the Dow dipping below the magic 17,000 mark, but magically rallying for a noticeable gain for the day.

Friday was not so euphoric, with options expiration afoot (we suspect most of the big players cashed out on Thursday), though it was somewhat dramatic, as all three majors traded in the red the entire session. The Dow actually touched down just above 17,600, keeping the magical 500-point range (to 18,000 on the upside) intact for a thirteenth consecutive week.

This particular range-bound trading pattern does have a precedent, that being the 23-week span from February to early July of last year, when the blue chip index traded generally between 17,750 to 18,250, making an all-time high in the process (mid-May).

So, despite the two semi-corrections in August of 2015 and January of this year, the Dow has now settled into a regime just 250 points below the previous plateau. Welcome to the world of paper games.

Friday was simply get-away day, aided greatly by the NY Fed, which lowered its second and third quarter estimates for GDP growth to 2.1%, which is still probably too high. With that, unless the fourth quarter is gangbusters, along with the 0.7% rate of growth for GDP in the first quarter, it will be tough for GDP to hit the 2.0% target (that's a joke, right?) for this year.

Maybe the elections will trigger a change for 2017. Maybe not.

In any case, it's too far ahead to look. Brexit vote comes up Thursday, which could trigger fireworks, though some of the smart money is saying the vote will be for the UK to stay in the EU, and it will be rigged.

Happy hunting!

Friday's Fallout:
S&P 500: 2,071.22, -6.77 (0.33%)
Dow: 17,675.16, -57.94 (0.33%)
NASDAQ: 4,800.34, -44.58 (0.92%)

Crude Oil 48.07 +4.03% Gold 1,296.80 -0.12% EUR/USD 1.1279 +0.46% 10-Yr Bond 1.6180 +3.45% Corn 436.25 +2.59% Copper 2.05 +0.29% Silver 17.47 -0.78% Natural Gas 2.89 +1.16% Russell 2000 1,145.11 -0.27% VIX 19.28 -0.46% BATS 1000 20,677.17 0.00% GBP/USD 1.4355 +1.03% USD/JPY 104.2060 -0.10%

For the week:
Dow: -190.31, (-1.07%)
S&P 500: -24.85 (-1.19%)
NASDAQ: -94.21 (-1.92%)

NASDAQ Breaks Out in w/e April 24, 2015

Not much to report in terms of market activity, except that all the major averages were higher for the week, though remaining in a very tight range that has persisted since the first week of February.

The Dow Jones Industrials have vacillated between roughly 17,600 and the high of 18,288 (about a 700-point spread) for 11 weeks running, generating plenty of noise, but nothing substantial upon which to base future market-turning events.

Thus, the ongoing view is rather cool and contained, the bulls mostly winning the war, what with the Fed's continued blabbering over interest rates. Current outlook is for the Fed to keep rates at the zero-bound for as far as the eye can see, which would be until next year, maybe.

Sustained weakness in the US and global economies has kept a lid on any proposed rate hikes. Meanwhile, most of the stronger economies of Europe (an oxymoron if ever there was one) have fallen prey to negative rates and renewed fears of either a Greek exit from the EU (Grexit) and/or fears and outright signs of deflation.

Oil prices ramped back up to their highest levels in four months, dragging fuel prices at the gas pump higher, all occurring amid a record growth of reserves. The oil market is not - like most markets around the world - free from price-fixing and mauling by major manipulators.

For the week, the Dow gained 253.84 (1.42%); the S&P added 36.51 (1.75%); and, the NASDAQ popped 160.27 points (3.25%), breaking through to new closing highs not seen in 15 years (5092.08). Clearly, the real money is being made in momentum plays and the NAZ is where they are.

Irrational? We give you exuberance and euphoria.