Wednesday, March 28, 2018

Warning on Dow Theory Primary Trend: Watch the Dow Jones Transportation Index

This is a special note to followers of Dow Theory.

Presently, one must pay attention to the Dow Jones Transportation Index (^DJT). It has to close below 10,136.61, the Feb. 9 close, to confirm a change in the primary trend from Bull to Bear.

The Industrials already made the move this Friday past, but, according to Dow Theory (which is like 95% accurate - or better - when it comes to signaling primary directional changes), the Transports must confirm.

If it happens today (currently around 10,190) or tomorrow, bear in mind that markets are closed Friday (commemorating the day Jesus was crucified) and Sunday, the day Jesus rose from the dead, according to the Bible.

Far from bible-thumping, chronic venial sinners should bear in mind that Jesus may have risen from the dead, but the stock market probably won't.

Anyhow, when the transports confirm, then you'll have the answer to whether or not this is/was a turning point in the stock market.

Added, 10:48 am EDT: Transports have fallen below the target close for the second time today. The first fall was all the way down to 10,112.05, shortly after the opening bell. The most current drop has apparently bottomed (for now) at 10,121.22. Current conditions warrant monitoring the Transportation Index into the close.

Stocks Reverse Course, Midday, Post Huge Losses

Just for the record, there was no news, no catalyst, no event which caused stocks to end largely to the downside on Tuesday, after Monday's gains were attributed to the proposition of trade talks between China and the United States, an obvious straw man argument for equity appreciation.

Stocks were sailing right along until just after 1:00 pm EDT, but then proceeded to lose value for the remainder of the session. The NASDAQ, which was already in the red, posted a massive loss of 211 points, a decline of nearly three percent on the day.

Traders must have been caught wrong-footed, as Monday's massive spike seemed to indicate that all was well. Apparently, that was not the case, sending the Dow back down near the lows registered on Friday.

With markets closed on Friday, there remain just two trading days to the month, which almost certainly mark two straight months of losses, a rarity over the past nine years of bullishness. Notably, Monday's rise was on very slim volume compared to the number of sell orders seen on Friday and other recent down days.

Only the NASDAQ holds gains for the year and the first quarter. Fund statements are going to show minus signs for many investors, an unusual sight which may spur even more selling.

Interest rates on treasuries fell across the curve, with emphasis on the long end. The 10-year-note closed out with a 2.78% yield.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22
3/2/18 24,538.06 -70.92 -491.14
3/5/18 24,874.76 +336.70 -154.44
3/6/18 24,884.12 +9.36 -145.08
3/7/18 24,801.36 -82.76 -227.84
3/8/18 24,895.21 +93.85 -133.99
3/9/18 25,335.74 +440.53 +306.54
3/12/18 25,178.61 -157.13 +149.41
3/13/18 25,007.03, -171.58 -22.17
3/14/18 24,758.12 -248.91 -271.08
3/15/18 24,873.66 +115.54 -155.54
3/16/18 24,946.51 +72.85 -82.69
3/19/18 24,610.91 -335.60 -418.29
3/20/18 24,727.27 +116.36 -301.93
3/21/18 24,682.31 -44.96 -346.89
3/22/18 23,957.89 -724.42 -1071.31
3/23/18 23,533.20 -424.69 -1496.00
3/26/18 24,202.60 +669.40 -826.60
3/27/18 23,857.71 -344.89 -1171.49

At the Close, Tuesday, March 27, 2018:
Dow Jones Industrial Average: 23,857.71, -344.89 (-1.43%)
NASDAQ: 7,008.81, -211.74 (-2.93%)
S&P 500: 2,612.62, -45.93 (-1.73%)
NYSE Composite: 12,302.54, -130.61 (-1.05%)

Tuesday, March 27, 2018

So, Now There's No Trade War?

Last week, all the financial media pundits could talk about was how President Trump was going to destroy the economy with his ill-advised tariffs, specifically targeting China, that great purveyor of cheap products that alternatively poison animals, emit toxic gasses, or break upon normal use (see Chinese nails, drill bits, concrete).

Well, over the weekend, the narrative somehow changed. Everything with China is "all good, nothing to see here, move along." And that's exactly what the slavish traders on Wall Street went about doing on Monday, sending the major indices soaring in one of the greatest one-day advances of all time.

The improvement on the NASDAQ was the ninth-largest ever. Interestingly, the eight advances bettering that number all occurred in the year 2000, except number one, which was a gain of 324.83 points in January of 2001. All of those gains were made in a bear market, after the NASDAQ dotcom bubble had burst.

On the Dow Jones Industrial Average, the 669.40 point gain was the largest since 2008, notably a period in which the economy was entering the Great Financial Crisis. Monday's advance was the third-best in market history.

The timing of news in relation to the market is becoming somewhat suspect, almost as if somebody was gaming the system. A similar move was just over a month ago, on February 6th, when the Dow gained 567.02 points a day after it fell a record 1,175.21 points (a Monday) and two days before it fell by the second-most ever, 1,032.89 (Thursday).

Putting a little more perspective on the matter, the Dow remains down 826 points in the month of March and is still 2400 points lower than the all-time high close on January 26 (26,616.71) and in the red for the year, albeit only 500 points down.

Therefore, Monday's gains should not be viewed in a vacuum. No single day should. It pays to have perspective, especially since Dow Theory confirmed a major trend reversal - from bull to bear - as of Friday's close (23,533.20), which was lower than the February 8 finish at 23,860.46.

Chasing this bull will eventually lead directly into the path of a very hungry bear.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22
3/2/18 24,538.06 -70.92 -491.14
3/5/18 24,874.76 +336.70 -154.44
3/6/18 24,884.12 +9.36 -145.08
3/7/18 24,801.36 -82.76 -227.84
3/8/18 24,895.21 +93.85 -133.99
3/9/18 25,335.74 +440.53 +306.54
3/12/18 25,178.61 -157.13 +149.41
3/13/18 25,007.03, -171.58 -22.17
3/14/18 24,758.12 -248.91 -271.08
3/15/18 24,873.66 +115.54 -155.54
3/16/18 24,946.51 +72.85 -82.69
3/19/18 24,610.91 -335.60 -418.29
3/20/18 24,727.27 +116.36 -301.93
3/21/18 24,682.31 -44.96 -346.89
3/22/18 23,957.89 -724.42 -1071.31
3/23/18 23,533.20 -424.69 -1496.00
3/26/18 24,202.60 +669.40 -826.60

At the Close, Monday, March 26, 2018:
Dow Jones Industrial Average: 24,202.60, +669.40 (+2.84%)
NASDAQ: 7,220.54, +227.88 (+3.26%)
S&P 500: 2,658.55, +70.29 (+2.72%)
NYSE Composite: 12,433.15, +255.45 (+2.10%)

Saturday, March 24, 2018

Stocks Crash Post-Fed Rate Hikes, But The Media Will Still Falsely Blame President Trump

Here are just a few of the headline items for the week that ended with two disastrous days after the FOMC policy rate decision to raise the federal funds rate to 1.50-1.75%, the sixth rate hike in the last 27 months and probably the one largest policy mistake in the history of the Federal Reserve System, an unconstitutional private banking system that has wreaked havoc on not only the economy of the United States of America, but of the entire planet.

Dow Jones Industrial Average fell 426 points, closing out the week at it's lowest level since November 22, 2017. The Dow is off nearly 1500 points for the month of March, a worse decline than that of February. In just the past week, the Dow has shed some 1410 points, a 5.67% drop.

The S&P 500 fell 5.9% on the week, the biggest drop in more than two years.

The NASDAQ 100 plunged 7.3% in the week, the most since August 2015. All of the major averages are negative for the year, except for the NASDAQ.

Scapegoating the tariffs put forward by President Trump has been the sport of the week on the likes of CNN, NBC, CBS, ABC. Surely, the Sunday talk shows will be hooting and hollering over what bad judgement the president has shown, when, in fact, it is the Federal Reserve's radical policies over the past ten years that have caused major distortions on Wall Street, a false sense of security in stocks as sound investments, impoverishment of many retirees who were denied any meaningful interest income on their savings due to the Fed's zero interest rate policy that prevailed from 2008 though 2015.

Meanwhile, the Fed, in a position to cause much further damage to the economy by raising rates while the nation is heavily indebted, has done just so, and has not backed off from its planned position to unwind its bloated balance sheet, and actually increase its sales of securities in the second half of 2008.

While the tariffs President Trump has put forward are certain to cause some disruption in some segments of the economy, they are not, on their own merit, the ultimate cause for a stock market collapse, such as is occurring presently.

There can be no other culprit than the Federal Reserve for the recent stock market volatility and massive outflows from stocks. Their policies have been the guiding force before, during and after the Great Financial Crisis of 2007-09, so there should be no doubting that their policies are still guiding investment decisions.

The entire global economic structure is currently under assault by coordinated central bank intervention, ongoing massive stock and bond buying and selling beyond their charters, and the continuing issuance of debt as fiat money on a global basis.

From the US federal government to individual citizens, the signs of financial stress are at breaking points. The federal government, already "officially" $21 trillion in debt, on Friday passed an omnibus spending bill of $1.3 trillion, causing further debt issuance and higher debt servicing costs thanks to the Fed's rate increases.

Corporations, which have binged on stock buybacks since 2009 and most recently increased their level of indebtedness and slothful management with the recent repatriation of an estimated $2 trillion based on the tax reform enacted by congress and singed into law by the president recently.

Individuals are more indebted than ever before, with credit card and student debt at all-time highs, variable rate mortgages increasingly difficult to service while incomes have barely budged for the past 20 years.

Additionally, the tax burden on some of the wealthiest Americans, with incomes over $100,000 per year, is upwards of 50%, enslaving these people to endless payments for governments (local, state, and federal) that have displayed absolutely no fiscal restraint.

Continued declines in the stock market are going to impact pension funds throughout the world, both pubic and private. Most public pension funds are massively underfunded, and heavily invested in stocks. A severe downturn - which has just begun - will bankrupt these entities, causing them to renew on promises made to workers.

A heavily-concentrated media will assure the public that the stock market collapse is entirely the fault of one man, President Donald J. Trump, while the true criminals of extortion and debt slavery are the central banks and their private, unconstitutional banking system, which has been favored and kept afloat by a supine congress.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22
3/2/18 24,538.06 -70.92 -491.14
3/5/18 24,874.76 +336.70 -154.44
3/6/18 24,884.12 +9.36 -145.08
3/7/18 24,801.36 -82.76 -227.84
3/8/18 24,895.21 +93.85 -133.99
3/9/18 25,335.74 +440.53 +306.54
3/12/18 25,178.61 -157.13 +149.41
3/13/18 25,007.03, -171.58 -22.17
3/14/18 24,758.12 -248.91 -271.08
3/15/18 24,873.66 +115.54 -155.54
3/16/18 24,946.51 +72.85 -82.69
3/19/18 24,610.91 -335.60 -418.29
3/20/18 24,727.27 +116.36 -301.93
3/21/18 24,682.31 -44.96 -346.89
3/22/18 23,957.89 -724.42 -1071.31
3/22/18 23,533.20 -424.69 -1496.00

At the Close, Friday, March 23, 2018:
Dow Jones Industrial Average: 23,533.20, -424.69 (-1.77%)
NASDAQ: 6,992.67, -174.01 (-2.43%)
S&P 500: 2,588.26, -55.43 (-2.10%)
NYSE Composite: 12,177.70, -199.69 (-1.61%)

For the Week:
Dow: -1413.31 (-5.67%)
NASDAQ: -489.32 (-6.54%)
S&P 500: -163.75 (-5.95%)
NYSE Composite: -606.68 (-4.75%)

Thursday, March 22, 2018

Stocks Slammed After Fed Rate Hike; Dow Reaches Correction Level, More Pain Looms

Being as they are truly ugly - and predictable (see yesterday's post and many more before that for reference) - it might be appropriate to post just the numbers.

However, beyond the usual blathering nonsense from the financial "talking heads" in TV-land, it would be imprudent to not point out that the Dow Jones Industrial Average has fallen just into correction, down 10.30% from the all-time-high closing price of January 26 of this year.

With today's losses, the Dow is now down more than 1000 points for the month of March, after a collapse of 1100 points in February. This puts the blue chip average on track to reach bear market status by sometime between May 15 and June 21. The magic number for a 20% drop off the high is 21,293.37.

Think it can't happen? Reference the dotcom collapse of 2000, the GFC of 2008-09, or the crash in October 1929 whittled to the Great Depression.

Naturally, markets do not respond in straight lines, so there is the possibility of some gains between now and the next big political event, the mid-term elections in November. If the major averages are not in bear country by that time, there's something fundamentally wrong with any and all systems of market prediction.

The Dow has receded beyond the previous interim low, 24,538.04, and is very close to the absolute near-term bottom of February 8, of 23,860,46 (less than 100 points away).

Three of the four major averages are in the red for 2018, the lone survivor being the NASDAQ, sporting a gain of less than 300 points. With that in mind, further losses should be felt hardest in the NASDAQ, as it is front-loaded with tech and financial stocks. Being the most volatile of the indices, the NASDAQ could come under severe pressure as early as Friday (tomorrow), though a dead-cat bounce to end the week is also an understandable scenario.

with the Fed's rate hike being the proximate cause of the most recent selling, it's now behind the market, but so long as the Fed talks up rate increases and balance sheet unwinding it will bleed from stocks. The entirely false narrative of "recovery" and "growth" will become more vilified and ridiculed as weak economic data continues to roll forward. Estimates of first quarter GDP have fallen precipitously in recent days, as it is generally the worst period for GDP due largely to weather, and, this Winter has lingered longer than most (it's already Spring). There's snow on the ground and cold temperatures throughout the Northeast and into the Midwest.

The advance estimate of first quarter GDP will be announced the last week of April, on the 27th. It would be expected that any gains between here and then will be wiped away rather quickly when the figure comes in at something South of two percent.

Dow Jones Industrial Average March Scorecard:

Date Close Gain/Loss Cum. G/L
3/1/18 24,608.98 -420.22 -420.22
3/2/18 24,538.06 -70.92 -491.14
3/5/18 24,874.76 +336.70 -154.44
3/6/18 24,884.12 +9.36 -145.08
3/7/18 24,801.36 -82.76 -227.84
3/8/18 24,895.21 +93.85 -133.99
3/9/18 25,335.74 +440.53 +306.54
3/12/18 25,178.61 -157.13 +149.41
3/13/18 25,007.03, -171.58 -22.17
3/14/18 24,758.12 -248.91 -271.08
3/15/18 24,873.66 +115.54 -155.54
3/16/18 24,946.51 +72.85 -82.69
3/19/18 24,610.91 -335.60 -418.29
3/20/18 24,727.27 +116.36 -301.93
3/21/18 24,682.31 -44.96 -346.89
3/22/18 23,957.89 -724.42 -1071.31

At the Close, Thursday, March 22, 2018:
Dow Jones Industrial Average: 23,957.89, -724.42 (-2.93%)
NASDAQ: 7,166.68, -178.61 (-2.43%)
S&P 500: 2,643.69, -68.24 (-2.52%)
NYSE Composite: 12,377.39, -306.37 (-2.42%)