Weekend Wrap: Trump Tariffs, Fed Funds, Draghi and ECB Dominate Markets

The prior week was expected to produce shock waves in markets, but on the US stock exchanges, the reaction was rather muted.

While the Dow put in a loss for the week, the NASDAQ surged to new all-time highs and the S&P 500 finished the week nearly unchanged.

Most of the reactive trading happened elsewhere, in the forex, bond, and commodity markets, which witnessed major swings in the aftermath of a rate hike by the Federal Reserve and an announcement of the end of QE by Mario Draghi of the ECB. The latter seemed to cause more impact, as Draghi set a timetable for the end of monetary easing at the end of 2018.

All of the European bourses closed lower on Friday in response to Draghi's announcement.

The dual central bank announcements overshadowed President Trump's successful negotiation with North Korea. Trump's meeting with Kim Jong-un resulted in an agreement between the two countries for more normalized relations, setting a framework for denuclearization by the North Koreans and suspension of war games conducted jointly by South Korea and the US.

Also igniting markets was President Trump's refusal to sign off on the G7 memorandum, following a meeting with "friendly" nations in which Trump promised tariffs on all manner of imports from the likes of Italy, Germany, Japan, Canada, France and Great Britain. Before that news even died down, with the other G7 nations promising retaliatory tariffs, the President slapped another $50 billion in tariffs on China, with the Chinese responding with tariffs on US imports.

With so much news crowding into one week, it was not easy for investors to find a path of least resistance. Along with Europe, US stocks fell off sharply on Friday, but recovered most of the losses by the close of trading for the week.

After the Fed raised the federal funds rate by 25 basis points on Wednesday, the yield on the 10-year note briefly crossed the 3.00% line, closing at 2.98 on the 13th, but falling back to 2.93% by Friday, the 15th of June. More importantly, the spread between the five-year and the 10 dropped to just 12 basis points, as the five-year note finished the week at 2.81.

Spreads were compressed, with the 2s-10s at 38 basis points and 2s-30s at 50. The 5s-30s spread was 23 basis points. These are the lowest spreads recorded since 2007, just prior to the Great Financial Crisis.

The Euro got crushed in currency markets, while gold and silver - both of which had been rallying all week - were crushed during Friday's COMEX session, with silver taking the brunt of the selling, off four percent, from a high of 17.30 per troy ounce on Thursday to a low at 16.40 on Friday before recovering slightly to close at 16.54. Gold was over $1300 per ounce on Thursday, but was slammed to a six month low at $1275 on Friday.

For more detail on the explosive week in precious metals and beyond, Ed Steer's weekly commentary can be found at the GoldSeek site, here.

Doug Noland's weekly Credit Bubble Bulletin commentary, detailing the recent movements in credit and currencies is titled "The Great Fallacy".

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

At the Close, Friday, June 15, 2018:
Dow Jones Industrial Average: 25,090.48, -84.83 (-0.34%)
NASDAQ: 7,746.38, -14.66 (-0.19%)
S&P 500: 2,779.42, -3.07 (-0.11%)
NYSE Composite: 12,734.63, -37.32 (-0.29%)

For the Week:
Dow: -226.05 (-0.89%)
NASDAQ: +100.87 (+1.32%)
S&P 500: +0.63 (+0.02%)
NYSE Composite: -97.43 (-0.76%)

Dow Lower, NASDAQ Higher; Which One Is Right?

There's been an interesting dynamic to the market over not just the past few days, but for the past six months, though it has become somewhat pronounced recently, and that is the divergence between the staid, centered 30 stocks that comprise the Dow Jones Industrial Average and the thousands which populate the NASDAQ composite exchange.

Whenever the Dow is up, it's almost certain that the NASDAQ will produce gains as well, but, when the Dow is lower, the NASDAQ is often higher, which means there are not only some major differences of opinion on which stocks to own, but also on the general nature and direction of the economy.

It appears that those invested primarily in Dow stocks are probably more conservative in their investment approach, primarily due to the collective pre-eminence of the Dow components and the fact that all stocks in the Dow pay dividends.

The NASDAQ has always been more of a speculator's paradise, where some of the best new technology, finance, energy, and medical stocks reside. It's also home to many smaller firms with limited histories and even more limited earnings records. In fact, many stocks listed on the NASDAQ don't have any earnings at all. Those are fledgling enterprises operating at a loss, a not unusual circumstance, but one of which many funds and investment advisors steer clear.

To say that stocks traded on the NASDAQ are possibly of lower quality long term and risk-sensitive would be an understatement. Consider the leading percentage gainers in today's big move to yet another all-time high.

Destination Maternity (DEST), Etsy (ETSY), Nightstar Therapeutics ADR (NITE), iQIYI ADR (IQ), and Dropbox (DBX) were the five biggest gainers.

Of those, maybe you've heard of Etsy and Dropbox. The others? Probably not. That's where the speculators are playing.

Not only is the NASDAQ home to new ideas and new companies, many of the big tech names are listed there. The top 20 most actives today included the likes of Intel, Cisco, Comcast, 21st Century Fox, Apple, Netflix, Microsoft, Facebook, and Zynga, a pretty good sampling of large, established entertainment and media companies.

Apparently, the NASDAQ is where the action is, as it has outperformed the Dow quite handily this year.

The Dow still carries the weight of the world, though, and it's been sluggish.

Which one is on the correct path? Absolutely, time will tell.

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

At the Close, Thursday, June 14, 2018:
Dow Jones Industrial Average: 25,175.31, -25.89 (-0.10%)
NASDAQ: 7,761.04, +65.34 (+0.85%)
S&P 500: 2,782.49, +6.86 (+0.25%)
NYSE Composite: 12,773.15, -12.30 (-0.10%)

Stocks Slide After FOMC Raises Federal Funds Rate

As was widely expected, the Federal Open Market Committee (FOMC) of the Federal Reserve issued a policy directive to increase the federal funds rate to 1.75-2.00%, marking the seventh rate hike in the current cycle, bringing interest rates further toward normalcy while inching the economy closer to recession.

As every recession one the past 40 years has at least partially been aided by Fed rate increases, this time is no different, as the FOMC issued the second 25 basis point increase of the year, with prospects of another 50 basis point increase through the end of the year.

Conjecture has been steady that the Fed would hike rates either three or four times in 2018. Today's hawkish tone indicated that four equal 25 basis point increases is the most likely outcome, with 25 basis point hikes in September and December.

Stocks were wary going into the June meeting, which concluded today at 2:00 pm EDT and was followed by a press briefing from Fed Chairman Jay Powell, who did little to allay fears that the Fed would continue its reckless path in the face of what can best be called tepid economic data.

After the first rate hike in February, stocks nosedived, and they did a prelude to an encore performance after the announcement, though the losses were contained and ganged into the final few minutes of trading, the Dow suffering the biggest percentage decline and a nearly 120-point selloff.

The bond market took the news in stride, with the 10-year note barely budging, continuing to nose around the 3.00% yield level. Silver was the unanimous winner of the day, as gold's little sister initially fell, but then shot up 25 cents, ending the day one $17.00 the ounce for the first time since mid-April.

What lies ahead for markets the remainder of the week is an assessment of inflation (both CPI and PPI were up sharply in the most recent disclosures) and the overall economy. With trade wars looming larger than ever and productivity stalled, there exists a very good chance that a recession could be in the cards within the next six to 12 months, while scores of analysts weigh in on the dubious nature of the government's official gauges of inflation, unemployment and GDP.

Thursday's trade promises to be choppy, as sentiment is leaning toward being equally split between a bullish and bearish stance on stocks. Valuations maintain their loftiness, but money has to flow somewhere, and there are still plenty of fund managers looking for further gains this year.

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

At the Close, Wednesday, June 13, 2018:
Dow Jones Industrial Average: 25,201.20, -119.53 (-0.47%)
NASDAQ: 7,695.70, -8.09 (-0.11%)
S&P 500: 2,775.63, -11.22 (-0.40%)
NYSE Composite: 12,785.75, -58.96 (-0.46%)

FOMC On Deck: Stock Rally Should End at 2:00 pm EDT

Void of volatility the past two days, US and global stock markets are about to get shock treatment courtesy of the Federal Reserve's FOMC, which will almost certainly increase the federal funds rate by 25 basis points, to 1.75-2.00%, the highest rate in well over a decade.

While the expected rate hike is well-anticipated, priced in (according to the usual suspect sources), and measured (one 25 BP hike per quarter is the new normal), markets will still see the rising rate environment for what it is: an economy killer, attracting all money to US treasuries and out of competing negative or near-zero-interest-paying bills, notes and bonds in other countries.

When the FOMC announces its policy decision at 2:00 pm EDT, the world will change in some small but all bad ways. Credit card payers will see their required monthly debt installments rise, any interest-rate sensitive debt obligations (most of it) will become more expensive, and, perhaps most important of all, stock buybacks will no longer appear to be the bargain they once were, when companies could borrow at extremely low interest rates to repurchase their own stock, rather than invest in capital equipment and labor.

The elephant in the room is the buyback scheme, one which has boosted stock prices to dizzying levels, based largely on lowered expectations via reducing the number of shares outstanding. Companies which had chosen to engage in the dumbest money move in recent history will still be clueless about how to expand their existing businesses. They will not invest in their own operations. They will not increase wages nor hire more human capital. They will continue their cowardly retreat into self-interested stock incentive bonuses for key executives, as if those people are the only ones in the organization who matter.

Sadly, US corporations are badly managed and have been for quite some time. The rot within the boardrooms and executive suites began many decades ago and has only accelerated though the first two decades of the new century, long after the "Greed is Good" Gordon Gecko exclamation point from the 90s.

Today, the fictional Mr. Gecko would be ridiculed for his naivety, modesty, and restraint by the avaricious purveyors of corporate theft currently occupying the positions of CEO and CFO at many major corporations traded globally.

As corporate executives continue to be glorified as champions of free enterprise and business leaders, elevated to the level of gods and goddesses, the corruption that has engulfed the entire political and economic spectrum will come to full bloom, the excesses and poor decisions exacerbated by tightening finial conditions. Just when everything becomes more dear and out of reach to the ordinaries, the wealthy and connected will resort to outright, in-your-face larceny, justified by an entitled mindset.

Once it begins to get worse, the levels of lawlessness, greed, immorality, and corruption will become unbearable, but, as it was in 2008 and 2009, none of the most obvious criminals will go to jail. Few will even be indicted.

When it's obvious that stocks are going to continue devaluing - a condition that's probably well-understood already by the elite - the rats will jump ship en masse along with their ill-gotten gains.

The short-term rally that began on June 1 may not end immediately after the FOMC decision, but it almost certainly will end shortly thereafter. The NASDAQ made a new all-time high on Tuesday while the Dow languished with a minor loss, ending a four-day win streak as it reached the upper band of its recent trend line.

Now comes the losing.

Next comes the lying.

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

At the Close, Tuesday, June 12, 2018:
Dow Jones Industrial Average: 25,320.73, -1.58 (-0.01%)
NASDAQ: 7,703.79, +43.87 (+0.57%)
S&P 500: 2,786.85, +4.85 (+0.17%)
NYSE Composite: 12,844.72, -12.24 (-0.10%)

Stocks Lose Luster In Late Trading

Getting the usual Monday morning boost, stocks experienced widespread gains throughout the day but faded badly into the close, with the Dow suffering the worst, dropping 80 points off its early afternoon high at 25,402.83.

The blue chips ended the day with a gain of just less than six points, the smallest percentage higher (0.02%) of the major indices.

Monday's subdued trading preceded the signing of an historic agreement to denuclearize North Korea, signed Tuesday morning, Singapore time, by President Trump and North Korean leader, Kim Jong-un. The late-day selloff might have been a precursor to more meaningful action to come Tuesday and Wednesday as the Federal Reserve plans a widely-anticipated increase to the federal funds rate, also known as the overnight or interbank rate, the price banks pay to loan funds to each other or to and from the Federal Reserve.

With the FOMC set to open the rate policy meeting on Tuesday and conclude Wednesday afternoon, treasury bonds displayed relative quiet, though yields rose moderately across the treasury spectrum.

Most worrying to bond traders and economists is the continuing flattening of the yield curve, as it approaches possible inversion, a condition that has presaged every recession since 1955.

The 2-10-year spread reached its lowest point in the current cycle, dropping to 43 basis points. The 5-30 spread stood at a mere 30 basis points (0.30%) at the close of trading Monday.

Further rate hikes by the Fed treated to choke off investment and send shorter maturities higher while longer ones stand firm. Both the 5-year note and 30-year bond have risen in yield by six basis points since June 1, though the stability is not expected to last long past this week's FOMC meeting.

As far as trading is concerned, there is likely to be a period of quietude Tuesday and Wednesday morning, leading up to the policy announcement at 2:00 pm EDT.

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

At the Close, Monday, June 11, 2018:
Dow Jones Industrial Average: 25,322.31, +5.78 (+0.02%)
NASDAQ: 7,659.93, +14.41 (+0.19%)
S&P 500: 2,782.00, +2.97 (+0.11%)
NYSE Composite: 12,856.96, +24.89 (+0.19%)

Dow Soars Past Rivals; Upcoming: Trump Talks, Fed Rate Decision (Weekend Wrap & Monday Briefing)

Ripping past rival indices, the Dow Jones Industrial Average scored its biggest point increase since January, adding 681 points while boosting its June increase to 900 points, also the best monthly gain since January.

Whether the bullish sentiment will prevail through the remaining 15 trading days of June may be addressed in the week ahead, one which will witness President Trump's negotiating skills at work when he meets with North Korea's Kim Jong-un in Singapore, an epic event that looks to end nearly seven decades of armed confrontation on the Korean peninsula.

Since taking the oath of office in January, 2016, Trump has made North Korea a significant priority, alternating between insulting tweets (calling Jong-un "Little Rocket Boy," for instance), displays of military force, and back-room preliminary negotiations through surrogates from China, Japan, South Korea and US diplomats.

Official negotiations begin Tuesday, 9:00 am Singapore time, which translates nicely to 9:00 pm Eastern Daylight Time, assuring that late-night political junkies will have their plates full for the better part of the week.

Also on the agenda for the upcoming week is the Tuesday-Wednesday FOMC policy rate meeting, in which the Federal Reserve will likely hike the federal funds rate another 25 basis points, an action which is likely to have great impact on stocks as well as bonds. After hiking rates earlier this year, Fed officials have gone to great lengths to keep their rate increase policy in front of investors and the general public, with various officials parroting the themes that the economy is strong and that now is the right time to increase lending rates.

As opposed to normal Fed operations being somewhat behind the curve, the current roster seeks to appear out in front of the economic realities, though critics maintain that all the Fed is doing is preparing for a looming recession, arming themselves with enough interest rate ammunition to staunch an eventual downturn.

If the Fed does as expected it will hike rates from 0.00 to 0.25 to 1.75% to 2%. This will be the second rate hike this year and the seventh move since the start of the tightening cycle which began in December 2015.

While the small increases have been well-spaced, it's assumed that the Fed will continue to increase rates every three months, meaning that they will hike again in September and once more in December.

The trouble with such an optimistic outlook is that an increase in their base rate to 2.25-2.50 by year-end would put increased pressure on the stock market, as treasury yields would likely rise to levels above and beyond those of many dividend-paying stocks, without the associated risk.

Another anticipated action this coming week is the response from G7 members following their weekend meeting in which President Trump insulted the leaders of other nations in person and via Twitter. Trump's claim that G7 countries like France, Canada, Germany, and Italy have long been taking advantage of the US via unfair trade practices. The US president has been slapping tariffs on friends and foes alike and the backlash in tit-for-tat tariffs has already been forwarded by Canada, with the EU nations likely to impose their own retaliatory trade taxes on US goods.

While the trade wars have been building, the financial media has routinely blamed the tension for declines in the stock market. However, as trade talk went ballistic in the past week, stocks continued their ascent without interruption, proving once again that snap analysis of stock market moves are nothing other than pure fakery by an inept, disingenuous media elite. Trading decisions are largely not the result of current events, but rather, are outward-looking, with longer-term event horizons than a few days or weeks.

The effects of trade interruptions, tariffs and retaliation are unlikely to be felt in any meaningful way for many months, making the premature effusions of guilt by presidential association by the financial and mainstream press a rather large canard.

So, the first full week of trading in June went spectacularly for stocks, with the NASDAQ breaking to new all-time highs on Wednesday, before profit-taking took it back down on Thursday. Friday's 10-point gain on the NAZ left it roughly 50 points off the new closing high.

As for the benchmark Dow Industrials, they are cumulatively 1300 points behind the January record high of 26,616.71. There is a great deal of ground to be made up in any effort to convince investors that the bull market will continue, while those of the bearish camp point to the range-bound cycle of the past three months following the cascading February fall.

June may turn out to be a watershed month for stock pickers, as tech stocks have regained much of their luster while financials have languished. Due to the somewhat incestuous nature of Wall Street trading, all boats may rise or fall in coming days as the second quarter draws to a close and fed managers square their books in anticipation of second quarter reports.

While the prior week may have been a banner for bulls, the week ahead promises to be full of surprises, intrigue and potential pitfalls for investors.

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

At the Close, Friday, June 8, 2018:
Dow Jones Industrial Average: 25,316.53, +75.12 (+0.30%)
NASDAQ: 7,645.51, +10.44 (+0.14%)
S&P 500: 2,779.03, +8.66 (+0.31%)
NYSE Composite: 12,832.07, +43.56 (+0.34%)

For the Week:
Dow: +681.22 (+2.77%)
NASDAQ: +91.18 (+1.21%)
S&P 500: +44.41 (1.62%)
NYSE Composite: +211.24 (+1.67%)

Dow Rally Fades, NASDAQ Drops From New Highs; Bonds Rally Sharply

As the first full week of June trudged forward, stocks ripped higher in the New York morning before hitting afternoon speed bumps that saw the Dow fade from the day's highs and the NASDAQ retreat from Wednesday's new all-time highs.

Late in the day, treasury yields were hammered lower. The 10-year note was bid dramatically, the yield falling from the 3.00% level to 2.89% on heavy demand.

Markets were generally orderly except for the flash-crash action in the treasury market. While the 10-year was being bid, so was the 30-year bond, as the spread between the two longest-dated securities fell to 16-18 basis points, the obvious elephant in the room fear of an inverted curve.

The treasury curve has been flat and flattening for over a year, ever since the Federal Reserve announced plans to sell assets on their bloated balance sheet while also raising rates via the federal funds rate.

If anything is clear from recent market action it is that high levels of volatility are evident in everything from oil prices to stocks to bonds.

As far as the Dow is concerned, the past five sessions have seen the index ramp higher by 825 points, the only pause a 13-point decline on Tuesday. For chartists, the industrial index was approaching the higher end of its recent Bollinger band range and also nearing critical Fibonacci levels.

Astute market observers are likely unsurprised by recent activity, noting that the June meeting of the FOMC - at which a new, higher federal funds rate is likely to be announced - is just days away. Market veterans are trimming exposure and limiting risk, shifting their positions from stocks to bonds. The Fed's action in the coming week will culminate on Wednesday when the policy decision will be announced to the general public.

The Fed has been adamant in its position to raise rates, though it is still unclear whether they will hike three or four times this year. One rate increase is already in the books, and June's increase has been well-publicized. With the Fed actively affecting the treasury market, a 10-year note consistently above three percent poses a significant threat to the stock market, which has been shown to be at risk extremes this year. The safety of bonds appears to be more and more appealing as risk aversion rises with every violent action in stocks.

The NASDAQ continues to amaze and amuse, reaching an all-time high on Wednesday prior to Thursday's retreat. It's an outlier to the other major indices as the Dow, S&P and NYSE Composite continue to be range-bound below the January high points.

Something has to give in this scenario, since the Fed cannot have it both ways. A galloping stock market and rising bond yields cannot coexist in a peaceable manner. The money flows currently support a flight to the safety of bonds and Thursday's treasury stampede is more proof that smart money is quietly abandoning the most risky positions in stocks.

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

At the Close, Thursday, June 7, 2018:
Dow Jones Industrial Average: 25,241.41, +95.02 (+0.38%)
NASDAQ: 7,635.07, -54.17 (-0.70%)
S&P 500: 2,770.37, -1.98 (-0.07%)
NYSE Composite: 12,788.50, +10.27 (+0.08%)

How the Dow Divisor Helped Industrials Blast Through 25,000

The Dow Jones Industrial Average isn't really an average at all.

If it were, one would take the price of each of the 30 components and divide the sum by 30. That would yield the average price. Since that number would barely move the needle on a day-to-day or minute-by-minute basis, something more was needed to satisfy the voracious appetite of investors. Ergo, the Dow Divisor.

The Dow Divisor is 0.14523396877348. Since it's a fraction of a point, the divisor doesn't actually divide anything. Rather, it's a multiplier, which serves to enhance the gains of the higher-priced stocks and minimize the losses of lower-priced shares. That explains why declines on the Dow are serious events. It's rigged to go higher regardless of volume.

One can clearly see - using such a valuation (weighted) method - why tin-hat theories abound about market manipulation. The Dow leads the market, not only in the US, but around the world. A big move on the Dow triggers the herd instinct to buy other stocks.

Boeing (BA) was the biggest percentage gainer on the day, adding 11.46 points to 371.56. But, thanks to the divisor, Boeing contributed nearly 79 points to the overall Dow gain, despite less than 4.5 million shares changing hands.

By contrast, General Electric was the big loser, dropping 1.16%. But, since GE is the lowest-priced stock on the index, by far, at 13.64, the point loss was a mediocre 0.16. The magic of the divisor meant GE's loss to the overall index was a measly 1.10 points, despite the fact that more than 62 million shares were traded, more than the total number of shares in the three next most-widely traded stocks, Pfizer (PFE), Microsoft (MSFT), and Intel (INTC) combined.

Only four Dow stocks traded lower on the day. In addition to GE, Wal-Mart, Pfizer, and The Travelers finished down, though modestly. Also contributing to the day's massive spike were 3M (MMM), Goldman Sachs (GS), and United Health (UNH), each trading above 200 per share. Their combined advance of 10.77 points were good for another 74 Dow points, despite the fact that they were three of the four least-traded stocks on the exchange (Pfizer was the second least-traded).

So, four low volume stocks were good for 150 points on the Dow. The other 22 gainers were cannon fodder against the bear case as the Dow Industrials outpaced the other indices by a wide margin. The day's gain resulted in the highest closing price on the Dow since March 13.

Happy Dow divisor days!

A couple of good reads on the Dow divisor can be found here and here.

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

At the Close, Wednesday, June 6, 2018:
Dow Jones Industrial Average: 25,146.39, +346.41 (+1.40%)
NASDAQ: 7,689.24, +51.38 (+0.67%)
S&P 500: 2,772.35, +23.55 (+0.86%)
NYSE Composite: 12,778.23, +119.53 (+0.94%)

Stocks Split as Dow Flirts with 25,000 Mark

The Dow Industrials and the NYSE Composite ended the day lower on Tuesday, while the S&P 500 and NASDAQ posted gains.

All of the moves were muted, amounting to nothing more than market noise, except for the frothy NASDAQ, which posted an all-time closing high at 7637.86, barely - by 0.59 points - topping the previous high from mid-May.

The soaring NASDAQ should remind veteran traders of the red-hot dot-com market of 1999 and early 2000, which ending in tatters, cascading lower in March of 2000 in one of the greatest stock market routs of all time.

It took the NASDAQ a full 13 years to regain those 2000 highs, with an additional collapse in 2007-09. If anybody is thinking that the NASDAQ is once again running full throttle on hope and hype, they're probably in the cautious camp that has seen this kind of market madness before.

The leading stocks of the NASDAQ are the usual suspect, overvalued companies - the FAANGS - and traders will be riding their valuations for as long as the good times roll. The obvious question is how long before these titans of technology roll over.

Nothing lasts forever, including stock manias based on companies that have recently come under fire for misdeeds and faulty business practices and products. Tesla (TSLA), Facebook (FB), Starbucks (SBUX), and Alphabet, parent of Google (GOOG) have each had bouts of bad publicity, though the fallout hasn't readily struck their valuations.

Amazon (AMZN) and Apple (AAPL) are testing their upper ranges, adding some supposed value nearly every day. Apple is approaching a valuation of one trillion dollars, while Amazon is not far behind. Is any company worth a trillion dollars? That is a lot of money.

Meanwhile, the Dow continues to plow along just below 25,000, a figure it has achieved only one time since March 13. While 25,000 is still 1600 points below the all-time high on that index, it appears to be a psychological barrier that may prove difficult to surpass and maintain.

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

At the Close, Tuesday, June 5, 2018:
Dow Jones Industrial Average: 24,799.98, -13.71 (-0.06%)
NASDAQ: 7,637.86, +31.40 (+0.41%)
S&P 500: 2,748.80, +1.93 (+0.07%)
NYSE Composite: 12,658.70, -15.21 (-0.12%)

Dow Jumps As Factory Orders Slump

Fast on the heels of four straight triple-digit moves from the prior week, the Dow Jones Industrial Average shot up 178 points to open the week and put the month of June solidly in the green, Monday's move happening on absolutely no news whatsoever.

If anything, data was poor, as factory orders slowed in April, down 0.8% after jumping a revised 1.7% in March, according to the Commerce Department.

Recent data has only served to confirm that the US economy is operating just beyond stall speed. All of the hoopla over tax cuts, President Trump's crowing over the jobs numbers and growing economy reinforces the growth narrative which has failed to reach much of mainstream America, especially those in the lower economic rungs.

While corporate profits may continue to surprise, it's suspected that very few homeless people own stocks or bonds. It's the forgotten part of the economic landscape that continues to be forgotten. Starting a business is still a dicey undertaking in the US, due mostly to onerous laws and regulations from the federal government on down to the local level.

Still, according to official statistics, the economy is chugging along, though the metrics employed to record and track the economy are antiquated and do not take into account the odious debt overhanging all aspects of American industry. When one takes into consideration all the borrowed money going into what comprises such data as GDP, the only conclusion is that the American experience continues to be goosed higher by ever-increasing government, business and individual borrowing.

What keeps economists and investors up late at night is the memory of 2008, when a global liquidity crisis sent the global economy to its knees. That kind of nagging worry will prove to keep a lid on excessive speculation. Renewed attention to risk aversion has been keeping the stock markets within a range for the last three months running and is likely to do so going forward.

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/2/18	24,813.69	+178.48	+397.85

At the Close, Monday, June 4, 2018:
Dow Jones Industrial Average: 24,813.69, +178.48 (+0.72%)
NASDAQ: 7,606.46, +52.13 (+0.69%)
S&P 500: 2,746.87, +12.25 (+0.45%)
NYSE Composite: 12,673.91, +53.08 (+0.42%)

Weekend Wrap: May Ends Dull, Jobs Data Sends Stocks Higher 1st of June

The see-sawing of the markets continued for another week ending in bifurcated manner, with the Dow and NYSE Composite suffering losses while the S&P and NASDAQ posted gains.

In particular, the Dow has seen 12 weeks with positive results, versus 10 weeks of losses, resulting in a relatively flat index, down a mere 84.01 points since the 2017 year-end close (December 29) of 24.719.22, the gains all made in January, when the Dow topped out at 26,616.71 on January 26. The losses were mostly confined to the correction in February and another poor showing in March. April and May both were positive for the Dow, though those small gains still leave the index nearly 2000 points below the all-time high.

Two stocks - Boeing (BA) and Apple (AAPL) have kept the Dow from sliding back into correction territory. Since April 30, Apple gained 15%, Boing added 23 points, or about seven percent, though both stocks have basically flatlined since mid-month.

On the holiday-shortened week, the Dow recorded losses on Tuesday and Thursday (May 31), and gains on Wednesday and Friday (June 1), the latter upswing largely attributable to the better-than-expected June non-farm payroll release, getting the new month off to a flying start.

As has been evident since the February and March selloffs, this has become a trader's market, with individual stocks and sectors favored over pure index plays. All of the major averages have gravitated around their respective 50 and 200-day moving averages, the divergences seldom taking any of them far above or below those critical lines of support and/or resistance.

With summer coming on fast, volume continues to wither away, with select stocks getting the bulk of the trading action. Bullish deniers of the Dow Theory change from April will be hard-pressed to make much of a case for buying stocks during the hot weather, as the Dow's all-time high fades farther and farther away.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37

At the Close, Friday, June 1, 2018:
Dow Jones Industrial Average: 24,635.21, +219.37 (+0.90%)
NASDAQ: 7,554.33, +112.21 (+1.51%)
S&P 500: 2,734.62, +29.35 (+1.08%)
NYSE Composite: 12,620.83, +93.69 (+0.75%)

For the Week:
Dow: -117.48 (-0.48%)
NASDAQ: +120.48 (+1.62%)
S&P 500: +13.29 (+0.49%)
NYSE Composite: -14.12 (-0.11%)

Dow Gains One Percent in May; Remains Lower for the Year

Taken alone, May's one percent gain is appealing, given that repetition of that result for each month of the year would produce a 12% annual return, a desirable outcome for just about any investor.

Alas, the stock market is not a linear construct, nor is it without risk. The 13 sessions which showed gains were offset largely by nine days down. May 5th's gain of +332.36 (the best single day of the month) was overshadowed by the May 29 decline of 391.64 points, the largest drop of the month and the biggest decline since the Dow lost 572.46 points on April 6.

Despite the second straight month of gains, the Dow remains lower for the year, though marginally. The Industrials closed at 24,719.22 on December 29, 2017, and the close on May 31 of 24,415.84 is still more than one percent below that level and 2200 points away from the January 23 high of 26,616.71.

Contributing to the less-than-inspiring returns for the month were factors such as political turmoil stemming from the ongoing "Russiagate" investigation of President Trump, his administration and the operatives who helped him get elected in 2016. Also on the downside, the imposition or threat of tariffs on imports from China, and lately, from trading partners Mexico, Canada, and the European Union.

Hanging over the market is the specter of a bear market, which was technically triggered on April 9, when the Dow Transportation Index confirmed the downside shift of the Industrials two months prior.

The positives were less abundant. Low unemployment gives a boost to spirits, but is offset by companies complaining that they cannot fill positions and labor pay that remains stagnant. The on-again, off-again talks with North Korea helps underpin the market, but the president's effort to denuclearize the Korean peninsula has been fraught with complaints from his opponents and outside meddling.

Claims that GDP is improving are marginal, with the second estimate of the first quarter recently lowered from 2.3% growth to 2.2%.

Investors get credit for holding the proverbial line against further losses, such as those suffered in February and March, though one has to wonder if they are pushing on a string in their efforts to keep an overinflated market afloat on a sea of debt and doubt.

With the year nearly half done, a minus sign in front off the Dow year-to-date returns is an ominous sign that 2018 is shaping up as something radically different than last year's outsized gains.

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
5/31/18	24,415.84	-251.94	+252.59

At the Close, Thursday, May 31, 2018:
Dow Jones Industrial Average: 24,415.84, -251.94 (-1.02%)
NASDAQ: 7,442.12, -20.34 (-0.27%)
S&P 500: 2,705.27, -18.74 (-0.69%)
NYSE Composite: 12,527.14, -98.73 (-0.78%)

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%)

Will May End With A Bang Or A Thud? Italy And Tommy Robinson Creating European Chaos

Following a three-day weekend, US markets caught up to the panic that was gripping Europe, adding onto the global rout in stocks by sending the Dow Jones Industrials lower by nearly 400 points.

Tuesday's big fallout left the Dow's gains for the month at great risk. The Industrial Average was close to erasing all of May's gains before a late-stage rally brought the index back up by 147 points into the close.

With only two trading days left in the month, May looks to follow April with a gain of less than one percent. April's total gain was a mere 50 points, following massive losses in February (-1120.19) and March (-926.09). With Europe's problems far from over (Italy being the main culprit), selling in May could turn out to be the most prudent - if not cliched - advice as global events are continuing to tarnish the shine on America's nascent economic rebirth.

Italians, struggling with immigration issues, have seen their government devolve into autocracy, as president Sergio Mattarella unilaterally quashed the creation of a right-leaning government coalition.

Chaos in Italy has sparked a run on bonds and European banks, spreading to stocks. On Tuesday, most of the major national exchanges saw losses in excess of one percent, adding onto previous declines.

News out of Britain also contributed to the sea of madness, as authorities arrested activist Tommy Robinson and immediately sentenced him to 13 months in prison, adding a media ban on his arrest and the pedophile grooming trial on which he was attempting to report. The unjustified jailing of Robinson has sparked outrage and rallies for his release throughout Britain and some European capitals.

Overarching political events are merely masking the underlying weakness in global markets which still seem incapable of forgetting the Great Financial Crisis of 2008 and Europe's own mini-crisis in 2011. Since little to nothing was done to correct the issues which plagued the world's largest economies, the past appears to have risen from the crypt and threatens to plunge economics and nations into another depressing episode.

With the Dow taking its worst loss in over a month, January 23rd's all-time high of 26,616.71 is now four months off in the fading distance. Bear market dynamics continue to drive a stake into the heart of the "recovery" narrative.

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

At the Close, Tuesday, May 29, 2018:
Dow Jones Industrial Average: 24,361.45, -391.64 (-1.58%)
NASDAQ: 7,396.59, -37.26 (-0.50%)
S&P 500: 2,689.86, -31.47 (-1.16%)
NYSE Composite: 12,442.69, -192.25 (-1.52%)

Weekend Wrap: Oil Slips Lower, Stocks Stagnate, Bond Yields Plunge

On Friday, the Dow Jones Industrial Average bottomed out at 2:45 pm EDT, down by 124 points on the day. From that point - with an hour and fifteen minutes remaining in the session - stocks magically rose by 68 points to end the day down marginally.

This pattern had been tested on both Wednesday and Thursday, as stocks took deep losses on both days, though Friday's low was much later in the session than it was the previous two days. Friday's low was also more shallow, the implication being that a major force (such as the - hush now - PPT) came to the market's aid in the nick of time.

That there might have been intervention on Friday, and indeed, on all three days, is not far-fetched. Nobody in positions of power were interested in a market crash just before the Memorial Day weekend. That is being saved for a more opportune time, such as just prior to the November mid-term elections.

If this is too much intrigue and conspiracy theory for you, dear reader, you can stop reading right here, though the naivety of burying one's head in a sand dune isn't going to make you any smarter, nor is it going to grant you immunity from market dynamics, be they either contrived or natural.

As seen in the scorecard and weekly data below, the Dow ended with a small 38-point gain and is lower than where it was two weeks ago, the bulk of May's advance made during an eight-day run starting on the 3rd and ending on the 14th, which was, notably a Monday. Tuesday the 15th saw the streak ended with a thud of -193 points. Since then, stocks have essentially gone nowhere and this week saw minor advances on the major indices with the notable exception of the NYSE Composite, which suffered a loss commensurate with the gain on the NASDAQ.

Confused? Not yet. Trading in stocks, always a risky business, is about to become something that defies quantification. Money is moving around markets at a dizzying rate, fueled by geo-politics and, in the main, a massive amount of misunderstanding of how markets are being distorted and defiled.

It's now more than three months since the waterfall effects of February which sent stocks into a state of bearish hibernation or paralysis from which they have yet to recover. The longer stocks fail to reflate towards their all-time highs the stronger the argument for a bear market becomes.

The problem with a bear market at this juncture is that stocks continue to underpin all manner of funds, especially public employee pensions, which are already massively underfunded. An extended market decline would push these funds further underwater and possibly trigger a liquidity trap which would make the 2008-09 financial crisis appear tame by comparison.

States like Illinois, California, Connecticut and New Jersey have the biggest underfunding problem and a bear market would blow out all of their actuarial projections. Not that these massive pension funds are going to go broke right away, rather they would see their future positions eroded to a point at which raising taxes, seeking higher employee contributions, reduction in services, or slashing payouts to retires will all be proposals on the table in an effort to salvage the failed over-promises of delinquent politicians.

A pension crisis might be just the tip of the proverbial iceberg that is the cumulative national debt shared by federal and state governments, businesses and individuals. Of the three, private businesses are most likely the best insulated from a market downturn and subsequent liquidity emergency, though they are by no means standing on safe ground. With the average American family or individual deeply indebted, businesses large and small will suffer from decreased volume and a general deterioration of business conditions. Such conditions are already well underway in small, rural communities lacking sufficiently large markets and audiences. Some largely Northeast and Midwest areas have never recovered from the Great Financial Crisis of a decade ago and another negative event could be potentially devastating. Government would be unable to collect taxes from an overburdened population and businesses would be faced with the indelicate choices of laying off employees, cutting back on goods or services or closing the doors for good.

The heavy reliance on stocks alone to lead the nation out of the deep depression of 2008 has set the stage for a rather unwelcome asset collapse and recent stock market activity is serving fair warning.

The only data this week that suggested a possible way out or easing of the tightening conditions (which the Fed is fueling with reckless abandon) were the decline in oil prices (from above $72 to below $68) and the crunching of yields in the treasury market. The 10-year note topped out at 3.11% before ending the week massively lower, at 2.93%, a huge move in a significant market.

What oil and bonds are foretelling is nothing less than a full-blown recession within six to eight months, signaling that consumers cannot sustain demand for energy and businesses and government cannot withstand rising borrowing costs.

All of these conditions are contributing to a very volatile situation which, thus far, has been contained by the Fed and the deep underground traders, attempting to keep equity prices at premiums. The chances of this lasting though the summer into the fall are Slim to None, and Slim has left town.

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

At the Close, Friday, May 25, 2018:
Dow Jones Industrial Average: 24,753.09, -58.67 (-0.24%)
NASDAQ: 7,433.8535, +9.42 (+0.13%)
S&P 500: 2,721.33, -6.43 (-0.24%)
NYSE Composite: 12,634.94, -61.75 (-0.49%)

For the Week:
Dow: +38.00 (+0.15%)
NASDAQ: +79.51 (+1.08%)
S&P 500: +8.36 (+0.31%)
NYSE Composite: -82.48 (-0.65%)

Sliding Oil, Spanish Crisis, Mid-Week Ramp-Fest May Produce A Dizzying Friday Plunge

Just for the heck of it, let's look at the markets from a trader's perspective as the entire US population prepares to end the work week and head off for a three-day, fun-in-the-sun weekend.

Now, this trader, call him Bob, yeah, Trader Bob, has to be looking at the charts from Wednesday and Thursday, seeing that the Dow took a deep dive on both days before recovering, but also that Thursday's dive was deeper than Wednesday's and the closing level significantly lower as well. So, Trader Bob may be thinking, "This looks suspiciously like the work of the PPT or maybe even short-covering."

Scanning the headlines for Friday morning on his Bloomberg terminal, Trader Bob takes interest in a story out of Spain that is saying Prime Minister Mariano Rajoy is facing a vote of no confidence in that country's parliament, meaning that an entire country could be soon plunged into a chaotic situation. Bob also recalls that part of Spain - Catalonia - tried, unsuccessfully, to secede from the nation last year.

Then, Trader Bob sees the price of oil dropping off the chart, and notes that Saudi and Russian oil officials are stating that crude supply increases are likely in the near future.

Trader Bob, considering how much he's made for clients by going long oil futures, produces the following thought bubble:

Amazing, isn't it, that even Saudi government people and those pesky Russians understand some of the principles of economics?

Whoda thunk that if gas prices go up from about $2.30 a gallon to roughly $3.00 a gallon (a 30% increase), some people might not have as much disposable income?

And, if that lessened amount of disposable income is not spent on consumer goods, then whole industries might suffer?

And, if whole industries suffer, that might affect the greater economy?

It's not rocket science, it's the dismal science called economics.

So, what's Trader Bob likely to do Friday morning when the opening bell rings?

Well, for one thing, since he has 24-7 access to the futures market, he's dumping all his WTI crude futures calls. Fast. When the market opens, he's probably going to sell some stocks, just to get out in front of the herd, where he won't be trampled by the rush to the exits.

But, Trader Bob isn't actually convinced that a selloff is a done deal, so he's not going to get too far out in front, just enough to trim some of his more speculative positions. He doesn't want to be, as surfers call it, "hanging ten."

Trader Bob will be patient, with one eye on oil but a more focused eye on the US equity markets. If things go from bad to worse, he'll consider whether or not it's time to bail. 200 points down on the Dow would be a test of Thursday's low (24,605.40). Breaching that level might produce the stampede everyone on Wall Street fears.

An hour prior to the opening bell, at 8:30, Bob sees the Dow, S&P, and NASDAQ futures plunging into the red. He sells more oil futures. He looks around the trading floor. Some of the younger traders are looking a little queasy, green in the face. The older, more experienced guys are handling it better, having coffee and donuts while taking up substantial short positions is selected stocks, some of them whacking away at oil companies, others focused on Facebook (FB) and Apple (AAPL).

Trader Bob's hands are getting sweaty. He knows that he's prone to panic attacks, but so is all of Wall Street. He's not thinking about a three-day weekend. He's thinking about selling everything and moving to Maine.

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

At the Close, Thursday, May 24, 2018:
Dow Jones Industrial Average: 24,811.76, -75.05 (-0.30%)
NASDAQ: 7,424.43, -1.53 (-0.02%)
S&P 500: 2,727.76, -5.53 (-0.20%)
NYSE Composite: 12,696.69, -46.71 (-0.37%)

Dow Turns Positive With Just 10 Minutes Left In Session; Thanks to Fed Minutes?

OK, lemmings, your nightly stock market news byte tells you that the Dow was up a whopping 52 points.

That's all you need to know, unless you want to know that the Dow and the other indices were down most of the day, with the industrials turning positive with just 10 minutes left in the trading day.

No need to worry about that 167-point drop by midday. By 4:00 pm EDT, that was ancient history because - according to the official narrative - the stock gurus were thrilled by the Fed Minutes from the May 2nd FOMC meeting.

Somehow, broad approval of two percent inflation and continued hiking of the federal funds rate (the betting is for four rate increases this year; one already in January) is good for the economy.

Just for fun, try out this nifty inflation calculator. You might be surprised to find that the cumulative rate of inflation since 1990 (28 years ago) is 91.7%, meaning the value of your dollars have decreased by nearly half. A $20 item in 1990 would cost $38.34 today.

Convinced that 2% inflation (about what it's been for the last 30 years) is a good thing? Think again. The Fed's mandate was to maintain stable prices, not constantly increasing prices. They've failed.

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

At the Close, Wednesday, May 23, 2018:
Dow Jones Industrial Average: 24,886.81, +52.40 (+0.21%)
NASDAQ: 7,425.96, +47.50 (+0.64%)
S&P 500: 2,733.29, +8.85 (+0.32%)
NYSE Composite: 12,743.40, -23.25 (-0.18%)

No Follow-Through for Stocks After Monday's Fake Ramp-Fest

Stocks opened higher but quickly reversed direction, resulting in the second-largest one-day point drop on the Dow Industrials in May.

Coincidentally, the lower close occurred on a Tuesday, similar to last week's Tuesday trashing of 193 points.

The financial media attributed the quick turnaround to President Trump's wavering on China trade negotiations, just as Monday's advance was credited to Treasury Secretary Steven Mnuchin's announcement that the proposed tariffs on imports from China were "on hold."

For weeks, the public has been fed nauseating nonsense about stocks reacting to trade and tariff proposals from President Trump and his administration, particularly relating to China. The idea that a single event or series of events, which, in fact, should be positive for American businesses, affecting the entire stock market is ludicrous on the surface and either disingenuous or naive reportage by the financial press.

Stocks have been trading in fits and starts since early February due, not to tariffs or day-to-day events, but, to larger economic issues and obvious overvaluation foisted upon the investing public by Wall Street hucksters and the phony incentives and spurious mutterings from Federal Reserve officials.

There is nothing even remotely connected to tariffs and trade affecting the price levels of stocks, especially since the president's tariffs are only proposals and not in force. Besides the obvious benefit the United States would obtain from lowering its trade deficit with the Chinese, just what is it that is so ominous and wrong about the imposition of tariffs that would level the trade playing field?

The rhetoric surrounding the proposed tariffs reeks of the same kind of anti-Trump noise heard from the mainstream media for the past eighteen months.

Normally, in a free market, stocks rise and fall based upon fundamental valuation metrics and some degree of emotion-based trading from the Wall Street herd. The current environment, driven by computer algorithms which respond to news headlines in knee-jerk fashion, is neither normal nor free.

It's time for a reversion to the mean and a restoration of of sanity in markets and the larger economy. This implies a devaluation of stocks across the board, a quieting of the voices which drive speculation, and regulations designed to minimize the effect of computer-driven excesses.

At the Close, Tuesday, May 22, 2018:
Dow Jones Industrial Average: 24,834.41, -178.88 (-0.72%)
NASDAQ: 7,378.4551, -15.5811 (-0.21%)
S&P 500: 2,724.44, -8.57 (-0.31%)
NYSE Composite: 12,766.65, -37.36 (-0.29%)

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%)

Weekend Wrap: Stocks Stuck In Limbo As Rise In Yields and Oil is Relentless

Anybody looking for volatility on Friday's options expiry was sorely disappointed with the rangebound markets and little change as a dull week came to an even duller finish.

What did move dramatically for the week was bond yields and oil, both of which spiked at the expense of the equity markets, all quite predictable.

As the case for a bear market in stocks continues to grow every day the January 26 high on the Dow of 26,616.71 gets further and further away, so the denial of the Wall Street crowd and pension fund maniacs which know nothing other than stocks, stocks, and more stocks, all the time, everywhere.

As the Money Daily Dow Scorecard below clearly shows, the 30 blue chip stocks were down for the week, though the losses were contained. None of the indices fell by more than one percent, the nearest to that the NASDAQ, with a loss of 0.66%.

Since the early February selloff, stocks have gone exactly nowhere, a point of emphasis for the bears who contend that despite the narrative of "full employment," a growing economy (2-3% is barely keeping pace with inflation; real growth is somewhere in the range of -3 to -5 percent), tax breaks and a strong dollar, undermining the false bravado of the bulls is oil soaring over $71/barrel for WTI crude and notching above $89/barrel this week for Brent crude, plus the 10-year note spiking to 3.11%.

Rising bond yields - which compete with stocks in the relative risk paradigm - and rising fuel prices make a very challenging environment for stock holders, especially those trying to beat the indices, which shouldn't be a tough job, though it has become so as everything is falling and the component parts are falling faster.

Stock pickers may find their task all the more challenging by crowded trades in favored sectors. Tech and consumer non-durables have been hammered recently, but the energy sector has fared much better, up something on the order of 8% on the year. Basic materials have been a disappointment for the most part, and dividend-carrying stocks are, again, barely keeping up with inflation.

It's a no-win market just about everywhere for those who only can go long, so the bears once again have the upper hand.

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

At the Close, Friday, May 18, 2018:
Dow Jones Industrial Average: 24,715.09, +1.11 (0.00%)
NASDAQ: 7,354.34, -28.13 (-0.38%)
S&P 500: 2,712.97, -7.16 (-0.26%)
NYSE Composite: 12,717.42, -30.41 (-0.24%)

For the Week:
Dow: -116.08 (-0.47%)
NASDAQ: -48.54 (-0.66%)
S&P 500: -14.75 (-0.54%)
NYSE Composite: -44.40 (-0.35%)

Stocks Stalled As Bull-Bear Debate Intensifies

Equities traded in tight ranges on the main exchanges Thursday, with the bears winning the day, albeit marginally.

The small boost from retail stocks earlier in the week failed to extend to the general market. Cisco Sytems (CSCO) and Wal-Mart (WMT) each weighed heavily on the market despite both companies meeting analyst exceptions for first quarter earnings.

Current market mood is jaded, as companies that have reported acceptable earnings for the first quarter have been routinely punished by the market, with immediate selloffs the norm on receipt of news, whether good or bad. That kind of action is a pretty good indicator of distribution, an otherwise gentler term for profit-taking.

Heading into the tail end of the week, the Dow is looking considerably weaker than at the start, with Monday, May 14, the culmination of an eight-day winning streak, possibly marking the high-point of the month.

Friday is an options expiration day, so, some volatility is to be expected, though it's equally likely that many punters have already closed out their positions, which could leave the market with little upside. As odds go, the day looks very much like a toss-up, though a move of more than 150 points either way on the Dow is unlikely unless the herd gets a signal to scramble.

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

At the Close, Thursday, May 17, 2018:
Dow Jones Industrial Average: 24,713.98, -54.95 (-0.22%)
NASDAQ: 7,382.47, -15.82 (-0.21%)
S&P 500: 2,720.13, -2.33 (-0.09%)
NYSE Composite: 12,747.83, +4.03 (+0.03%)

How To Deal With A Bully: Retailers Gang Up On Amazon

Wednesday, it was Macy's (M) reporting solid sales growth in the first quarter, fueling some interest in retail stocks overall.

Thursday morning, Wal-Mart is reporting 33% growth in online sales for the first quarter, proving that Americans will go where service and price are balanced, as the nation's largest retailer continues to roll out its innovative "ship-to-store" option and discounted shipping (free two-day delivery).

Amazon, the king of online retailing, may have succeeded in killing off and/or absorbing some smaller chain store retailers and accelerating the demise of dinosaurs like Sears, but they're certainly not going to mash down the biggest companies, such as Macy's, JC Penney, and Wal-Mart. While Seattle-based Amazon can build as many warehouses and fulfillment centers to facilitate faster, more efficient delivery, it is still hampered by its lack of bona fide retail locations, though its recent acquisition of Whole Foods will change that to varying degrees in different sectors and geographical locations.

Wal-Mart, which has a significant footprint in the retail food space, probably isn't worried about the emergence of Whole Foods poaching its customers, because Whole Foods is largely a near-luxury brand, selling organics and other higher-priced goods, while Wal-Mart customers are accustomed to low-priced, competitive products.

The recent resurgence of retail in the face of the Amazon effect should buoy some stocks and create an environment that will only become increasingly competitive, both online and in the real, brick-and-mortar world. As retailing evolves into 21st-century standards, don't expect first-mover Amazon to extend its gains, though its presence will certainly be dominant. Innovation by those playin catch-up with the newer technology should prove to level the playing field somewhat in coming years.

Macy's earnings beat managed to squeeze some upside out of stocks on Wednesday. Thursday's rise or fall will have much to do with Was-Mart's success story, though it may not provide enough of a catalyst to pull the entire market higher.

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

At the Close, Wednesday, May 16, 2018:
Dow Jones Industrial Average: 24,768.93, +62.52 (+0.25%)
NASDAQ: 7,398.30, +46.67 (+0.63%)
S&P 500: 2,722.46, +11.01 (+0.41%)
NYSE Composite: 12,743.80, +39.17 (+0.31%)

Dow's 8-Day Rally Ends Abruptly; Bonds,Technicals The Likely Causes

Naming retailers as culprits for ending the recent uptick in stocks on Tuesday probably doesn't quite hit the mark, even though stock futures continued to slide after April retail sales data was produced at 8:30 am EDT, prior to the market opening.

Overall, retail sales improved by 0.3% over the month, matching lowered expectations after a surprise gain of 0.8% in March. Whether traders were somewhat disappointed in the number is a matter of some speculation, better left with a question mark than a definitive answer.

What did likely spook the markets was the abrupt rise in bond yields, as the 10-year-note zapped higher to yield 3.07% during the day, a number not seen since 2011. The 2-year yield saw 2.60%, its highest level since 2008.

These are concerning numbers to stock hawkers because they are considered fairly risk free methods of making money, whereas stocks - even those offering dividends - imply risk, as stock prices rise and fall.

With the February's recent turn in markets still fresh in the mind, there are more than a few traders taking money off the equity table and moving it toward the relative safety of bonds. Besides, after eight days of gains, the market was pretty well priced out, so profit-taking commenced. The herd being what it is, the selling turned into a small stampede.

Another concern is the continued high price of crude oil. WTI crude held steady at 71.17 in New York, though pockets of $3.00+ per gallon regular gas began to appear across the filling stations of America. The national average stands at $2.87/gallon, which is beginning to squeeze middle class budgets, especially those with long commutes and larger, less-fuel-economiic vehicles.

Unless bond yields and the price of gas come down quickly, today's 197-point decline could turn worse in coming days and weeks.

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

At the Close, Tuesday, May 15, 2018:
Dow Jones Industrial Average: 24,706.41, -193.00 (-0.78%)
NASDAQ: 7,351.63, -59.69 (-0.81%)
S&P 500: 2,711.45, -18.68 (-0.68%)
NYSE Composite: 12,704.56, -67.47 (-0.53%)

Dow Gains For 8th Straight Day; Tuesday Data Reads Important

Stocks started the week on a strong note, only to see the rally fade as the session wore on, leaving the indices with marginal gains, led by the Dow Industrials with a 0.27% rise, the eighth straight trading day in which the Dow has recorded a positive close.

Higher by 163 points in the 11:00 am hour, Dow stocks gave back nearly 100 points, or roughly two-fifths of their value by the end of the day.

With most major companies having already reported first quarter earnings, this may turn into a rather dull week, though Tuesday's trifecta of economic data releases - NY Fed Manufacturing, Retail Sales, and Durable Goods - may provide suitable trading fodder.

On Wednesday, Macy's (M) reports prior to the market open, while Cisco Systems (CSCO) reports after the close.

Thursday may be the most impactful session, as retailers Wal-Mart (WMT), Nordstrom (JWN), and JC Penney (JCP) each report before the opening bell.

Thus far, nearly at the halfway point of the month, "sell in May" has not been the preferred trading regimen. Rather, a family strong counter-rally has been tearing along, leaving the Dow at its best level in nearly two months.

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

At the Close, Monday, May 14, 2018:
Dow Jones Industrial Average: 24,899.41, +68.24 (+0.27%)
NASDAQ: 7,411.32, +8.43 (+0.11%)
S&P 500: 2,730.13, +2.41 (+0.09%)
NYSE Composite: 12,772.04, +10.22 (+0.08%)