Weekend Wrap: Dow Ends Losing Streak at 8, Week Was Rough For Stocks

In what could easily bee seen as a week of transition - either from fantasy to reality or speculation to fundamental investing - all of the major averages lost value, led by the Dow Industrials, which suffered its worst weekly loss (-2.03%) since mid-March.

Since the day before the Fed raised rates on June 13, the Dow had been in a free-fall, losing 860 points over a span of eight trading sessions, before receiving on Friday to post a somewhat insignificant, symbolic gain. It was almost as though the Dow Industrials were collectively saying, "we're OK, we're still here, don't worry," while all along the smart money was leaving in droves for either safety in bonds, higher yields in the risky NASDAQ, or the venerable hideout in the Hamptons for the summer. In some cases, all three avenues of escape were likely employed.

Not that any of them did anybody any good, as the NASDAQ took its first weekly spill in the past five and bonds vacillated around the unchanged mark for the week. The 10-year-note closed out the week at 2.90%, well below any expectations from the runaway inflation and "solid" economy promoted by the Federal Reserve. If inflation and the economy were truly getting away, bonds would surely reflect the condition, but they are instead contracting, with the yield curve continuing to point toward inversion, and, if not a complete recession within the next 6 months to two years, at least a slowdown or moderation.

Neither result would be particularly beneficial to the interests of the Fed, which has to try to keep a straight face while propagandizing the condition of the economy. Spreads on the 2s-30s contracted one basis point on the week, to 48; the 2s-10s dropped two basis points to 34, while the 5s-30s expanded from 25 to 27 basis points.

After last Friday's smackdown, precious metals saw little change over the course of the week, though silver (16.45) fared better than gold (1271.10). Persistent calls for a breakout among the prominent "bug" pundits have produced nothing but a series of short-term run-ups followed by timely price busts.

Oil was the place to be on Friday, when OPEC failed to announce expected production increases. On Saturday, however, with markets closed, OPEC and a number of oil-producing countries such as Russia, Mexico and Kazakhstan, agreed to share an increase of a million barrels per day.

How the increases would be shared was not immediately disclosed, but, the Saturday announcement is sure to snap back against the 3.74 (+5.71%) gain on Friday that pushed the price of WTI crude oil to $69.28 per barrel.

With summer officially arriving on Thursday (June 21), the pessimistic view of stocks could begin to prevail, as the adage of "sell in May" might more aptly be applied as "swoon in June."

The Dow slipped back to a point where it is more than 2000 points below the January high (26,616.71, January 26), and prospects going forward - as a drop-off in earnings is expected over the next three quarters - are not yet dire, though they may be characterized as "challenging."

A powerful (and very long) article on fiat money, gold, silver, and cryptocurrencies by former member of the US House of Representatives and candidate for president, Ron Paul, is on the Mises Institute website, 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
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
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37
6/20/18	24,657.80	-42.41	+241.96
6/21/18	24,461.70	-196.10	+45.86
6/22/18	24,580.89	+119.19	+165.05

At the Close, Friday, June 22, 2018:
Dow Jones Industrial Average: 24,580.89, +119.19 (+0.49%)
NASDAQ: 7,692.82, -20.14 (-0.26%)
S&P 500: 2,754.88, +5.12 (+0.19%)
NYSE Composite: 12,639.57, +79.34 (+0.63%)

For the Week:
Dow: -509.59 (-2.03%)
NASDAQ: -53.56 (-0.69%)
S&P 500: -24.78 (-0.89%)
NYSE Composite: -95.07 (-0.75%)

Dow Industrials Down 8th Straight Day, Damage Spreading

Well, there goes (almost) all of the gains made on the Dow between June 1 and June 11. Eight-day losing streaks (as any addicted gambler will tell you) can do nasty things to your bottom line. In this case, it's looking squarely at end-of-quarter results, which, at this exact juncture, is a small gain. April was +50.81, May +252.59, June +45.86, for a whopping grand total of 349.26, a little short of 1 1/2 percent gain.

While there are still six trading days left in June and in the quarter, there's the distinct possibility that the Dow, already in a confirmed bear market since April 9, is heading still lower, looking at the recent (March 23) bottom of 23,533.20 for any kind of support.

As the Dow continues the longest consecutive daily slide in the past 40 years, dating back to 1978, the recent losses have wiped out all gains for the year, leaving the Dow down one percent YTD. The record for longest daily losing Dow streak is 11 days, that level of pain occurring in 1971 (Nixon closes the gold window) and 1973 (OPEC?).

All is not gloom and doom, however. The NASDAQ is still 12% higher for the year and the S&P 500 is holding onto about a three percent gain for the year.

Losses are beginning to spread. The S&P has lost 37 points since June 12, and the NASDAQ was down 68 points just today. Whether these losses will stick and markets begin to behave more rationally, like the Dow, is a matter for the future. Since the February correction, analysts have warned investors that this is a stock pickers' market, noting that the easy days of just buying an index fund or playing the widely held stocks has come to an end. It's more about being adroit and making in-and-out moves, much like a day-trader. It's really nowhere for long term investors to be playing, as many stocks are still near all-time highs and are still carrying overpriced valuations, many based on earnings that have been manipulated higher by buyback sleight-of-hand.

Non-believers in the Dow Theory, which confirmed a primary trend change from a bull to a bear market on April 9, may be getting a bit nervous, though the recent bidding on the NASDAQ and Russell 2000 would suggest otherwise.

Once the floodgates are fully open, a condition which feels very much like all of this week, there will be no place to run to, nowhere to hide, except, maybe bonds, which have been stubborn but steady, the 10-year-note holding at 2.90% as of today, though there are indications the yield could go lower, given the number of investors seeking a safe place for their money.

So much for the Fed's grand plan to hike interest rates and unload their massive balance sheet into the public sphere. Since they play with make-believe money which they themselves conjured out of thin air, losses don't really matter to them, since they can make it all up with a few kind keystrokes on their magical money-printing computers.

As usual, it's the serfs that will get forty lashes in the form of lower stock prices and higher consumer prices... so, make that 80 lashes.

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
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37
6/20/18	24,657.80	-42.41	+241.96
6/21/18	24,461.70	-196.10	+45.86

At the Close, Thursday, June 21, 2018:
Dow Jones Industrial Average: 24,461.70, -196.10 (-0.80%)
NASDAQ: 7,712.95, -68.56 (-0.88%)
S&P 500: 2,749.76, -17.56 (-0.63%)
NYSE Composite: 12,560.24, -88.50 (-0.70%)

Dow Losing Streak Reaches Seven Days; Walgreens To Replace GE In Dow Index

No analysis needed to spot the recurring pattern of trading prominent on Wednesday. The Dow suffered its seventh straight losing session while the NASDAQ powered to new highs, mostly on the backs of the beloved tech stocks known as the FAANGs.

In the news, Walgreens Boots Alliance (WBA) is set to replace General Electric (GE) in the Dow Jones Industrial Average, effective prior to the open of trading on June 26. Walgreens is trading for 64.61, down from its all-time high of 86.55, June of 2015.

General Electric, which has been under pressure since near the end of last year, has lost nearly two thirds of its value in the past eight months. Shares have fallen from 31.60 per share in October, 2016, to the current per share price of 12.96. The company has lost over 80 percent of its value since 2000.

General Electric was an original member of the Dow when it was formed by Charles Dow in 1896 and a continuous member since 1907.

Since Walgreens is trading at five times the value of GE, an adjustment will be made to the Dow divisor, lest the index experience a rapid upside explosion due to the change. This is exactly how the Dow works, replacing weaker companies with stronger ones.

The is the 15th change in the structure of the Dow since 2004. Some of the companies formerly a part of the index but since removed in the 21st century include Eastman Kodak, International Paper, AT&T, AIG, Citigroup, Bank of America, General Motors, and Honeywell.

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
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37
6/20/18	24,657.80	-42.41	+241.96

At the Close, Wednesday, June 20, 2018:
Dow Jones Industrial Average: 24,657.80, -42.41 (-0.17%)
NASDAQ: 7,781.51, +55.93 (+0.72%)
S&P 500: 2,767.32, +4.73 (+0.17%)
NYSE Composite: 12,648.74, +9.76 (+0.08%)

Stocks Clobbered As US-China Trade War Heats Up

Today's tired showing by stocks, globally, demonstrated just how fragile the world's economic system is and how easily the best laid investment plans can go awry.

After President Trump announced plans for $50 billion in tariffs on Chinese imports and the Chinese countered with $50 billion of their own on US goods, Trump upped the ante by calling on his main trade representative to prepare another $200 billion in Chinese goods to be tariffed, should the Chinese actually go through with their retaliation.

As usual, the Dow Jones Industrial Average took the brunt of the day's carnage, shedding more than one percent, while the NASDAQ and S&P showed smaller percentage losses. The decline was the sixth straight for the mighty Dow, which has been under pressure since February of this year and is now even for the year (-19 points).

The other averages have fared better, but 2018 is not shaping up to be a year of excessive profit for equity investors.

Amid the chaos, bond yields continued to fall. The rush to safety is accelerating as the yield curve flattened even more through the day. The spread on the 2s-10s is now just 35 basis points, 5s-30s held steady at 25, 2s-30s are at 48, down one more basis point, the tightening spread making it more and more difficult for financial institutions to generate alpha, or profit, but the herd is heading in one direction and it's toward a recession.

As far as President Trump's intentions are concerned, "the Donald" is perfectly aware of what he's doing. By imposing steep tariffs on foreign goods he will bring most of the planet to its knees and likely cause a recession, though the timing couldn't be more perfect in political terms.

If a recession occurs within the next six to nine months, it would likely be over well before the next presidential race heats up in 2020. Figuring on a recession beginning in January or February of 2019 and running the average of 16 months, the economy would be on the upswing by July or August 2020, giving the president plenty of time to explain how some pain was necessary to restore vibrancy and a level playing field to the US economy.

It's not balderdash. It's the art of the deal.

And thus, with today's losses, more than two thirds of the gains made earlier in the month have been eviscerated.

It's only money.

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
6/18/18	24,987.47	-103.01	+571.63
6/19/18	24,700.21	-287.26	+284.37

At the Close, Tuesday, June 19, 2018:
Dow Jones Industrial Average: 24,700.21, -287.26 (-1.15%)
NASDAQ: 7,725.58, -21.44 (-0.28%)
S&P 500: 2,762.57, -11.18 (-0.40%)
NYSE Composite: 12,637.23, -71.40 (-0.56%)

Dow Losing Streak at Five Days; NASDAQ Resistant to Reality

After losing 84 points on Friday, the Dow extended its losing streak to five days, shedding 103 points to open the trading week. The total loss since June 11 is nothing to get excited about, a mere 335 points, less than 1 1/2 percent, but the lows set in intra-day trading both Friday and Monday were successively deeper.

Friday's low of 24,902.01, was exceeded Monday at 24,825.77, which was set just minutes into the session. The pattern of lower lows and lower closes over the past five sessions is a worrying sign to macro market watchers.

While the Dow slides, the NASDAQ continues to hold its own or make new gains, though the opening on Monday was ugly, with the NAZ down 70 points just after the bell. Today's tiny gain failed to excite anybody but the most committed bulls, who may be charging into a classic trap, with declining volume and indications from the Dow that aren't exactly encouraging.

This week got off to a poor start and there is little in the way of data to support any kind of news-driven uptick. It may turn out to be one of the duller weeks of the summer, which officially begins on Wednesday, June 20.

What's driving investors into speculative positions in the NASDAQ is the lack of positive returns from either Dow stocks or treasury bonds. The former appears too risky, with dividend yields ranging from 1.75% to 2.75% on the individual components, while the bond market continues to defy the Fed, as the 10-year note refuses to bang through the three percent mark.

Bonds barely budged today, but the yield curve tightened as the two year bill yield added one basis point to 2.56, and the 10-year slipped to 2.92, leaving the 2s-10s spread at a decade low 36 basis points.

That's a notable number, as the last time the spread was so slim was in 2007, just prior to one of the worst financial crashes in market history. As is sometimes quoted, "history may not always repeat, but it does often rhyme." Treasuries seem to be rhyming well with conditions prior to the GFC. Unrestrained credit, high leverage, overvaluation prominent in financial assets. In 2007, it was mostly hard assets, i.e., houses, that were rocketing in value. Today's only difference is that it's now stocks which are out of bounds for all but the most speculative players and plungers.

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
6/18/18	24,987.47	-103.01	+571.63

At the Close, Monday, June 18, 2018:
Dow Jones Industrial Average: 24,987.47, -103.01 (-0.41%)
NASDAQ: 7,747.02, +0.65 (+0.01%)
S&P 500: 2,773.87, -5.79 (-0.21%)
NYSE Composite: 12,706.73, -27.91 (-0.22%)