Stocks Creamed At Opening, Rally For Minor Losses

As mentioned in the most recent post, stocks tested a variety of support levels on Tuesday and actually crashed right through them early in the session.

But, about 10:30 am ET, a rally began, first in fits and starts, but by noon, it was well underway, lifting stocks well off their lows and continuing until... until... well, no, the major indices didn't turn positive, not even for a fleeting instant. By 3:00 pm all of the "greater fools" had been had, the dip buyers had bought all the dips they could and stocks drifted slightly lower into the close.

What started with the Dow down nearly 550 points, the NASDAQ off by more than 200, the S&P losing more than 60 points and the NYSE Composite down 264, ended with merely pedestrian losses and investors wiping the sweat from their furrowed brows. Once again, as has happened so many times during the Fed-led bull market of the 2010s, stocks averted catastrophe and sailed through the day thanks to so-called bargain hunters, that rare breed of speculators who believe buying a stock that's three to five percent off its highs is some kind of grand deal.

This is more than likely the coordinated work of central banks, who are not ever audited, who can created limitless amounts of funny money with the push of a button, and who have done so regularly in order to keep alive the dreams of prosperity and financial security for millions, by inventing - and then investing - trillions.

Behind the scene presented to the unsuspecting, unprofessional investing class - those people with retirements and life savings locked into 401k and other accounts - there was real damage. One index that did not recover very well at all was the Dow Jones Transportation Index, which slipped 199 points, to 10,237.02, a loss of 1.90%, sending it well below the key level of 10,397.23, its most recent low, from October 11, while also descending into correction territory for a second time this month, below 10,413.

With the transports falling like a bowling ball off a cliff, the importance of transportation to the rest of the economy has to be put into question. If nothing's moving, or, at least moving with less alacrity and determination, how strong is the whole economy? With their relevance to the Industrials via Dow Theory and in real life practice, the transports are the answer in search of a question, the question being how long can the slip-slide-recover charade continue before the bottom falls completely out?

The other fly in the financial ointment is, and has been, oil. WTI crude lost ground again today, sliding more than four percent into the low-$66 range, well off the $76/barrel high recently achieved. Not to offer a punnish perception, but oil greases the skids of industry and transportation. Lower pricing for the world's most vital commodity can mean one of three things: 1) lack of demand, 2) oversupply, 3) global recession. Of course, a combination of all three might be the correct analysis, though the implications of such a paroxysm might trigger a more virile reaction amongst the monied class.

Considering the ramifications of the major indices falling straight through support levels and then rebounding to more respectable levels, plus the demise of oil and the transports, one can easily conclude that the October volatility that has been apparent since the start of the month is nowhere near abatement. Even the mediocre losses today add to somebody's misery, though the pain felt is being doled out in small units, much like Chinese water torture, rather than having investors suffer the quick blade of the guillotine in a sudden crash (that may be saved for closer to the mid-term elections).

Stating the very, very obvious, this is far from over.

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

At the Close, Tuesday, October 23, 2018:
Dow Jones Industrial Average: 25,191.43, -125.98 (-0.50%)
NASDAQ: 7,437.54, -31.09 (-0.42%)
S&P 500: 2,740.69, -15.19 (-0.55%)
NYSE Composite: 12,287.44, -87.33 (-0.71%)

Stocks Slammed As Interest Rates Climb; Fed Officials Not Concerned

While the losses on Thursday weren't quite at the disaster level, the declines were significant enough to get people's attention. The Dow lost 200 points, the first time that has occurred since July 11 (-219.21), though it could have been much worse. The 30 blue chips were down more than 350 points early in the afternoon, but some "buy the dip" specialists stepped in to rally stocks into the close.

The NASDAQ fared much worse than its peers, as investors scrambled out of speculative tech stocks, some of which carry significant debt loads. With interest rates rising, debt servicing costs are going to be scrutinized as they can materially contribute to deterioration of bottom lines.

With a decline of 1.81%, the NASDAQ losses were nearly one percent worse than the S&P (-0.82%) and easily outdid the Dow Industrials (-0.75%).

Blaming rising interest rates for all equity woes might be a bit of a stretch, but it is becoming more of a concern as the 10-year note yield kicked higher, reaching 3.20%, an attractive number for those who wish to reduced risk, and apparently, many do.

Other indices slid lower as well, with the Russell 2000 and Dow Transports also in the red. This indicates that investor sentiment may have soured, and this could be serious, coming so close to reporting of third quarter earnings.

An interesting development is the Federal Reserve's ebullient attitude toward the US economy. Chairman Jerome Powell seems to be in the camp that the economy will continue to expand, and he is echoed by other Fed officials, though their giddy projections are in stark contrast to some of the biggest players on Wall Street, including Ray Dalio, Peter Boockvar, and Stanley Druckenmiller, to name just a few. The insightful article is posted at investopedia.com by Matthew Johnston, and can be found here.

That Fed officials are touting the economy is more than a little disconcerting, being that they're cold-hearted bankers and have held interest rates down near zero for a long time. Additionally, they're in the process of unloading trillions in excess securities and they'd like nothing more than to see that proceed smoothly. Surely, they'd like to collect more interest from everybody, so their comments about the strength of the economy are extremely self-serving.

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

At the Close, Thursday, October 4, 2018:
Dow Jones Industrial Average: 26,627.48, -200.91 (-0.75%)
NASDAQ: 7,879.51, -145.57 (-1.81%)
S&P 500: 2,901.61, -23.90 (-0.82%)
NYSE Composite: 13,042.29, -76.25 (-0.58%)

Caution Thrown To (Bitter Cold) Wind, As Investors Ignore Tech and Weather Threats

Across the board gains were the order de jour on the second day of trading in the new year.

As on Tuesday, the NASDAQ outpaced the other major averages, continuing its meteoric rise beyond the 7,000 mark with tech stocks leading the way despite an admission from Intel (INTC) that their chips have a serious flaw, affecting nearly all chips made by the company over the past ten years.

The world's largest chipmaker was not immediately taken to the woodshed and whipped, though shares of the company were down more than three percent and are off another one-and-a-half percent in pre-market trading on Thursday.

Rival chipmaker, Advanced Micro Devices (AMD), was the main beneficiary of the Intel news, its stock advancing more than five percent on the day, though it appeared that AMD chips are also vulnerable, though not to the same extent nor by the same exploits as Intel chips.

While the immediate impact may be slim, the long-term repercussions of this revelation may be significant. The world's major chip manufacturers may be facing a black swan event once hackers devise attacks that could legitimately effect computers and servers worldwide, for years.

Traders were not on the defensive, however, as the lure of early gains overwhelmed any concerns for troubles ahead, such as the massive snowstorm and bitter cold that is expected to affect most of the Northeast in days ahead. The storm - being called a Bomb Cyclone - is primarily focused off the Eastern coast of mainland North America, though New York, New Jersey, and Massachusetts were making preparations for a major winter weather event which has already bettered Southern cities such as Charleston, SC, and Savannah, GA.

The apparent complacency of equity speculators is somewhat confounding, given the potential for severe disruptions from weather and technology in coming days.

On the other end of the asset spectrum, precious metals responded to a slight rise in the dollar index, blunting a strong run for gold and silver over the past three weeks, though the selling seemed to be transitory, with the metals recovering early on Thursday morning as the dollar fell to fresh lows (91.933).

On Thursday morning, prior to the opening bell on Wall Street, ADP private payroll data for December showed a massive 250,000 job gain for the final month of 2017. While the AMD numbers are preliminary and subject to revision, they are sending a strong signal in advance of Friday's BLS non-farm payroll dataset for December.

With caution being thrown largely to the (bitterly cold) wind, Friday and/or Monday could be a day of "selling the news," or, as has been the case for the past nine years, the stock market rally will not be impeded by facts nor insinuations of negativity.

At the Close, Wednesday, January 3, 2018:
Dow: 24,922.68, +98.67 (+0.40%)
NASDAQ: 7,065.53, +58.63 (+0.84%)
S&P 500: 2,713.06, +17.25 (+0.64%)
NYSE Composite: 12,957.28, +54.55 (+0.42%)

Stocks Still on Pause as Year Winds Down

The Dow Industrials, NASDAQ, and the S&P 500 each closed lower for the fourth time in the past five sessions.

In normal times, this kind of market action would be characterized as "distribution," a code-word for institutional selling, and maybe that's exactly what it is. As the Fed and other central banks have flooded markets with liquidity, the past nine years have been anything but normal, however, so these past few days could be better explained as "turning off the computers" as stocks have reached an exhaustion level.

It's also the week between Christmas and New Year, a time for friends, family, and a generally-accepted laid-back attitude toward work. Anybody who has worked for a living knows the value of down time, and that's probably what this little pause is all about. There's no need to delve further into the ether, trying to discern a pattern or conjure up an explanation. That would be just the kind of imaginative speculation that leads to bad investment decisions.

While the market has yet to make any meaningful moves to the downside, this little spat of sluggishness is probably nothing more than the result of non-chalance than anything else.

When stocks take a deep dive of more than two percent over a number of sessions, or technical levels are violated, only then may more analysis be deemed advisable. For now, it's better to have a hot toddy or two, relax with friends and family and let the markets sort themselves out over the final three days of trading, reeling from what was previously a torrid pace.

At the Close, Tuesday, December 26, 2017:
Dow: 24,746.21, -7.85 (-0.03%)
NASDAQ: 6,936.25, -23.71 (-0.34%)
S&P 500: 2,680.50, -2.84 (-0.11%)
NYSE Composite: 12,808.90, +11.46 (+0.09%)

Futures: Right Or Wrong Directional Trades; 12 Step Bloody Mary Redux

Stocks never had a chance on the first day of the first "full" week of trading (last week was only four days), dropping like rocks from a crumbling overpass at the open, only briefly showing any positive momentum and closing lower for the day, with the obvious exception of the wildly overpriced, speculative, and soon-to-crash NASDAQ.

The Dow refused to get even within earshot of 20,000, falling instead below 19,900 at the close, so the (so far) winning strategy of Fearless Rick remains intact. The peerless prognosticator called for "no Dow 20,000" by year-end 2016, and reiterates the same sentiment until June 2017, with a "may not" break over 20,000 until the year 2023.

It's a bold shot across the bow of the happy-happy, joy-joy "recovery" or the trumpeters of one Donald J. Trump, the president-elect who vows to "Make America Great Again." Not that Fearless Rick doubts the Donald; he backed his campaign from the start, predicting he would win the presidency as far back as December 31, 2016 (all the way at the end of the article), but the Trump years in the White House may be a calculated, "one step forward, two steps back," as radical policy shifts will cause some serious FUD (fear, uncertainty, doubt) and some liquidations that should have happened in 2008 or 2009 will occur under the Trump banner (see Sears, Mexico).

All of which brings up the point of futures and options, wherein one's ability to predict events beforehand is called into serious question. As a matter of fact, all investors are predisposed to make wagers on future events, whether they be into stocks, commodities or precious metals, because one would not "invest" in a company or anything without some idea that it would be worth more tomorrow or next month or next year than it is today.

Thus, investors fall into various camps, which, for matters better discussed elsewhere, are largely defined as "right until you're wrong" and "wrong until you're right."

The matter is simple, but real life examples provide the most descriptive narrative.

Take Fearless Rick's one-way bet on Dow 20,000. That's a case of being "right until you're wrong." So far, Rick is right and myriad derivative trades can be based upon his open principle, especially if one is to extend the time frame out to the ludicrous, or in this case, 2023.

Rick is also a precious metals speculator. In December he called for silver under $16 when it was trading in the range of $17 to $18. He was, early on, "wrong until he was right." The implications for investors - and one could take a lesson or two from the movie "The Big Short" for a glimpse at how extreme these future "wagers can become.

Speculation, prognostication and risk are not for everybody, especially those of feint heart. For the rest of us, it's a way of life.

It seems to be a law of nature, inflexible and inexorable, that those who will not risk cannot win.

--John Paul Jones

At The Close 1/9/16:
Dow: 19,887.38, -76.42 (-0.38%)
NASDAQ: 5,531.82, +10.76 (0.19%)
S&P 500: 2,268.90, -8.08 (-0.35%)
NYSE Composite: 11,169.79, -67.83 (-0.60%)

And, just because it's the preferred weather for Bloody Mary's, Fearless Rick's 12-Step Bloody Mary™
1. Glass
2. Ice
3. Vodka
4. garlic pepper
5. hot sauce
6. ground black pepper
7. worcestershire sauce
8. celery seed
9. tomato juice
10. lime (or lemon) juice
11. horseradish
12. combine, stir and drink.

Apologies to alcoholics everywhere, from drunks around the world.

Retail Sales, Inventory, PPI Fall; Stocks Full Steam Ahead

Events of the day no longer matter, as we are clearly in the final stages of a global financial catastrophe, one which few will see coming, though signs of malaise and deconstruction are everywhere.

On the day, March retail sales were reported to be off by 0.3%, that being a negative, as opposed to a positive, which was expected. Despite the obvious collapse of the consumer pocketbook, stocks disregarded the data - as per usual - and marched higher, with the Dow Jones Industrial Average arching towards the magic 18,000 mark, a number that has not been seen on Wall Street or anywhere since mid-July of last year.

PPI, an inaccurate guide to wholesale inflation, fell 0.1%, on expectations of a rise of 0.3%, another blow to the Fed's inflation targeting of two percent, and yet another arrow in the quiver of the punchy speculators who view all bad economic news as good.

Business inventories for February also fell, by 0.1%, a result of over-ramping holiday buying without the resultant sales. Businesses find themselves largely overstocked, and have no need to build inventories, especially at a time in which the global economy is either not growing at all or actually contracting.

Meanwhile, anecdotal reports of falling food prices are rafting throughout the US economy. One consumer reported a dozen eggs at $1.50, when they were $3.00 or more just six months ago, due largely to a 2015 bird flu which decimated the nation's chicken population.

Therein lies the conundrum: with gas prices low, food prices falling, consumers are still finding difficulty opening their wallets and spending. Primary culprits include excessive taxation, health care (Obamacare), college tuition, and high housing costs, be they either renting or owning, and, since making ends meet via interest on savings has become a relic of a bygone era, people are also paying down debt.

It doesn't matter to Wall Street. Main Street could shrivel up and die - which, in many smaller cities it already has - and stocks would still enjoy the speculative splendor of negligible interest rates.

Splurge, baby, splurge.

DJIA: 17,908.28, +187.03
S&P 500: 2,082.42, +20.70
NASDAQ: 4,947.42, +75.33

Crude Oil 41.55 -1.47% Gold 1,244.10 -1.33% EUR/USD 1.1277 -0.95% 10-Yr Bond 1.76 -1.07% Corn 373.75 +3.03% Copper 2.17 +1.14% Silver 16.24 +0.08% Natural Gas 2.04 +1.80% Russell 2000 1,129.93 +2.19% VIX 13.84 -6.80% BATS 1000 20,682.61 0.00% GBP/USD 1.4206 -0.43% USD/JPY 109.3075 +0.67%

April's Fools? 2nd Quarter Off to Poor Start; David Stockman Op-Ed on the Money

US stocks got ramped pretty hard in the first quarter of 2013, with the Dow up 11% and the S&P tagging along with a 10% gain.

In more normal economic times, those first quarter returns would equate into a rather solid year of gains, but in the "new normal" of Fed pumping of $85 billion monthly into the economy, through treasury and MBS purchases (both probably losing investments), it's just more of the same: profits for Wall Street traders and bankers, crumbs for the American public.

Stocks struggled right from the opening bell and traded in fairly narrow ranges on the major indices, with the NASDAQ being the hardest hit, oddly, since the NAZ is home to some of the more speculative darlings which Wall Street loves to pump (and dump).

So, the Dow and S&P set all-time highs at the close of the first quarter, but cascading headlong into earnings season, some investors are apparently not so sure those levels can be maintained.

Now that Cyprus is out of the headlines but not out of the memories of bank depositors worldwide, there's reason to believe the skeptics are correct, especially if one was to read the scathing op-ed by former congressman and budget director under Ronald Reagan, David Stockman, which appeared glaringly in Easter Sunday's New York Times, an oddity for the newspaper so beloved by liberals and adherents of Obama-nomics.

The opinion piece, aptly titled, "Sundown in America" detailed a litany of statistics and trends that protray America as a failing economy headed by a flailing Federal Reserve, which has embarked upon, in Stockman's words, "a radical, uncharted spree of money printing."

It's a must-read for anyone who doesn't believe the stats trotted out by the usual bullish analysts and government mouthpieces, because it debunks the myths surrounding unemployment figures, growth projections, the sustainability of enormous government deficits and the inevitable end-game of a bond market bubble of massive proportions.

For those who wish to remain soothed by willful ignorance (99% of the population), skip it and just go shopping, cell phone in hand, of course, believing that everything is under control and those problems we hear about in other countries simply can't happen here, because we're America, damn it.

However, those who believe what their own eyes see and their own ears hear, might want to ponder the long-term ramifications of more than a decade of easy money, electronically printed into existence by the Federal Reserve and dutifully sucked up by the thieving class of politicians and bankers that have profited handsomely while the rest of the country suffered and continues to wallow in a slow-to-no-growth environment.

Additionally, the one statistic of note today was the March reading of the ISM index, which fell to a ten-month low of 51.3 on a forecast of 54.0, after positing a splendid 54.2 in February. One of the more closely-watched numbers on Wall Street delivered what may be the first of many blows to confidence of market gain continuity this week.

Whatever the case, the double whammy of Stockton's searing indictment of US fiscal and monetary policies and a poor reading on manufacturing, was net negative for equities today.

Beyond that, volume fell to it's lowest level of the year and the advance-decline line was the worst in weeks, prompting concerns that those who were eating well in the first quarter may become the meal in the second three months of the year.

Dow 14,572.85, -5.69 (0.04%)
NASDAQ 3,239.17, -28.35 (0.87%)
S&P 500 1,562.17, -7.02 (0.45%)
NYSE Composite 9,057.65, -49.39 (0.54%)
NASDAQ Volume 1,446,869,375
NYSE Volume 3,019,881,750
Combined NYSE & NASDAQ Advance - Decline: 1900-4482
Combined NYSE & NASDAQ New highs - New lows: 357-60
WTI crude oil: 97.07, -0.16
Gold: 1,600.90, +5.20
Silver: 27.94, -0.379

Alcoa Rumors Propels Dow 102 Higher

There are days that bring one to wonder where investors get their ideas and then there are days like this.

Amid speculation that a pair of Australian mining companies - BHP Billiton Ltd. and Rio Tinto PLC - each plan to offer as much as $40 billion to purchase American aluminum giant Alcoa (AA), the Dow Jones Industrials leapt out of the gate at the opening bell and never looked back.

The story, attributed to the London Times, citing unnamed sources, set the Dow ablaze in New York.

By the end of the day (after the market closed), the Washington Post was reporting that "few analysts believed the U.S. aluminum giant was about to be gobbled up."

My theory: These kinds of things are dreamt up and ginned up by sharpies inside the brokerages to make a quick killing in an overnight options trade and have little, if any, basis in reality. They're especially attractive during slow news periods.

Alcoa closed just a shade under 33 on Monday, but opened above 35 on Tuesday, peaking at 36.05 within the first hour of trading. It ended at the day at 35. February options expire on Friday.

While there's nothing ostensibly illegal about planting a story (though it's a thin line), it does create an uneven playing field for those in the know. Getting Alcoa to move 2 points on the open is no mean feat. The stock has ranged between 23 and 38 for nearly the past 4 years. It's not one of the more volatile stocks in the game. In fact, it's rather a dull trading vehicle.

The moral of this particular story is that market manipulation comes in all shapes and sizes. And, while no one is immune, a fraud can usually be spotted relatively easily.

If traders are this desperate to make a buck, we could be witness to the final snorts of this 52-month long bull market. Only the most hopeful would count on a continuation of this surge through the rest of the week.

Others will view today with a healthy dose of skepticism.

The Dow gained 102.30, the S&P added 10.89, but the Nasdaq lagged, gaining only 9.50, roughly half the gain, in percentage terms, of the other indices.

Oil changed course on Tuesday, gaining $1.25 to close at $59.06 though the price is largely being held aloft by continuing cold weather in the US Northeast. With Spring's warming just around the corner, and oil prices failing to overtop $60, the good news for drivers and homeowners is due shortly.