Stocks Turn Ugly In Short Session: Time Out On Wall Street

The Dow took a nearly 300-point round trip from top to bottom on the second trading day of the third quarter, rising by more than 137 points before collapsing in the final hour to close 1/2 percent lower. The NASDAQ was beaten down further, off 65 points on the day (-0.86%).

Markets can become discouraged by many factors, but for this current one, it seems to be merely a matter of during out after nine-plus years of unprecedented fantasy. Speculators, those eager early-day traders who took it on the chin today as they have on many other recent sessions, have to be concerned that investors might catch on to the fact that the global economy is not all roses and unicorns, but rather a patchwork of central bank machinations that have distorted what used to be free markets into stealthy, clandestine, controlled entities.

If that becomes the case, the second leg of the bear market will commence in short order and likely not cease until well after the Dow falls 20% from the January 26 high (26,616.71), a process that could last anywhere from three to six months. This is shaping up to be a long drawdown of asset values, considering that the central bankers will not readily abandon their chosen "low unemployment and moderate inflation" narrative, of which practically everyone who matters is in disbelief already. The proof is in stock market and bond returns, both of which suggest contraction instead of a healthy growth environment.

July 4, Independence Day in the United States, will be an anchor on foreign markets because there will be no trading on the day. China has already intervened in their equity markets to stem the outflows. Italy, and thus, all of the EU, is staring directly at a major solvency crisis which could explode and uncouple the southern nation from the rest of Europe. Already, the new Italian government has ECB officials on edge.

Argentina is already a basket case, as is Venezuela, with Brazil close to chaos as well.

Maybe it's time the politicians in Washington stop focusing on the "evil" Russians (who are doing quite well, despite sanctions and expulsions of their diplomats by the US), and begin taking account of the rest of the world, which seems to be not right at all.

Dow Jones Industrial Average July Scorecard:

Date	Close	Gain/Loss	Cum. G/L
7/2/18	24,307.18	+35.77	+35.77
7/3/18	24,174.82	-132.36	-96.59

At the Close, Tuesday, July 3, 2018:
Dow Jones Industrial Average: 24,174.82, -132.36 (-0.54%)
NASDAQ: 7,502.67, -65.01 (-0.86%)
S&P 500: 2,713.22, -13.49 (-0.49%)
NYSE Composite: 12,494.70, +9.12 (+0.07%)

Stocks Start Slow, Finish Well To Open Third Quarter

Starting off the third quarter by stumbling into the red, US stock indices bounced off their early lows to erase the losses and post gains late in the afternoon.

With the notable exception of the NYSE Composite, the major exchanges posted small advances in what really looked like coordinated buying by forces unseen (hint: central banks, led by the Federal Reserve and the PPT).

Most of the rest of the world finished lower on the day, so the US market appears to be an outlier, because, well, America rocks, ya know.

Monday's finish was nothing more than market noise and should be regarded as such. Tuesday's session is shortened so that the brokers and dealers can beat the traffic out to the Hamptons. The exchanges will close at 1:00 pm EDT and remain closed on Wednesday, July 4, in appreciation of Independence Day.

Dow Jones Industrial Average July Scorecard:

Date	Close	Gain/Loss	Cum. G/L
7/2/18	24,307.18	+35.77	+35.77

At the Close, Monday, July 2, 2018:
Dow Jones Industrial Average: 24,307.18, +35.77 (+0.15%)
NASDAQ: 7,567.69, +57.38 (+0.76%)
S&P 500: 2,726.71, +8.34 (+0.31%)
NYSE Composite: 12,485.58, -18.67 (-0.15%)

Weekend Wrap: End Of Quarter Fade Troubling at Half-Year Mark

Stocks were flying higher early on Friday, the final trading session of the second quarter, but, late in the day, waves of selling sent all of the major indices well off their highs by the close.

While the selling did not sent the averages into negative ground, sentiment the past two weeks has not been satisfying to investors, neither those with longer term aspirations nor for the speculative excesses in the short and day-trading regime.

The S&P and NASDAQ closed out the quarter with better success than the Dow, though the 30 industrial stocks comprising the Dow Jones Industrial Average continue to lead the market in the US and to a large extent are a barometer for business globally.

Thus, the Dow ended the month of June with a 144-point loss, and the quarter with a squeamish advance of 158.97 (April, +50.81; May +252.59), less than one percent.

At the year's midpoint, the Dow is down just over one percent. The S&P 500 is up better than two percent, while the NASDAQ is sporting a 9% gain, well into bubble territory.

2018 is turning out to be less and less impressive with each passing day. The search for yield is an everyday affair under current conditions, leaving little room for error. Investors are finding out rather suddenly that small mistakes are becoming more frequent, leading to steeper general losses. The trading environment is not for the faint of heart; cash is becoming more attractive, especially with the dollar resilient against many major foreign currencies.

Bloomberg’s Michael Regan noted Friday that global market caps have lost about $10 trillion since peaking in late January.

Bonds continue to fluctuate in narrow ranges, though consistently flattening the yield curve, with both short and long durations taking turns at lower yields. The 30-year bond ended the quarter at 2.98%, the 10-year note held at 2.85%, the five, 2.73%, and the 2-year, 2.52%.

Oil spiked in the final days of the month, just in time for the largest holiday travel week of summer.

The vix remains elevated with precious metals largely in the dumps. The most significant development for the upcoming, holiday-shortened week is Friday's non-farm payroll report for June. The expected number is +198,000 net new jobs for the month. It may be academic if the report comes close to consensus. A miss would surely be met with a negative reaction

With six months in the books, the second half kicks off on a very nervous note.

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
6/25/18	24,252.80	-328.09	-163.04
6/26/18	24,283.11	+30.31	-132.73
6/27/18	24,117.59	-165.52	-298.25
6/28/18	24,216.05	+98.46	-199.79
6/29/18	24,271.41	+55.36	-144.43

At the Close, Friday, June 29, 2018:
Dow Jones Industrial Average: 24,271.41, +55.36 (+0.23%)
NASDAQ: 7,510.30, +6.62 (+0.09%)
S&P 500: 2,718.37, +2.06 (+0.08%)
NYSE Composite: 12,504.25, +28.27 (+0.23%)

For the Week:
Dow: -309.48 (-1.26%)
NASDAQ: -182.51 (-2.37%)
S&P 500: -36.51 (-1.33%)
NYSE Composite: -135.32 (-1.07%)

Stocks Gain From Oversold Condition; 1Q GDP 2.0%

Nothing really to see here on the second-to-last trading day of the quarter, as stocks were due for a bit of a relief rally, which is exactly what this was, despite the bad news that first quarter GDP was revised lower, to 2.0% annualized.

The final estimate of GDP came as a bit of a shock to the know-it-alls on Wall Street, who collectively were looking for somewhere between 2.2% and 2.3% for the final figure. The fact that GDP underperformed (despite metrics that include everything other than drug dealing and prostitution) speaks volumes about the true state of the US economy, and, to a larger extent, that of the world.

Fading the Fed's favored position that the economy is solid, one would be better advised to consult one's stock broker or neighbor for a more accurate read on economic conditions. Savvy investors realize that GDP, as much as its inflated figures and inclusion of government expenditures belie a weakened state, isn't a very good measure of the health of an economy. The figures can be massaged and pushed around to fit any narrative, and usually are. What's happening in reality is that any growth is easily being eaten away by inflation, and any profits are funneled to the top 10% of the income gatherers, leaving the bottom 90% craving more and spending on credit while saving little to nothing.

A panoply of exaggerated expectations and flimsy figures is what the government number crunchers present, and it is so putrid that even their best efforts to make it appear palatable fall short. The United States has a hollowed out economy, devoid of a thriving middle class, replaced, over the past 20 years, with debt-ridden wannabes whose status is ultimately dependent on enormous wads of credit, from mortgages to school loans, to credit cards, to auto loans and leases, it is all a huge fallacy.

That stocks are able to even maintain some semblance of vigor is owed only to stock buybacks and the largesse of the central bank, which has fueled the massive facade with enough hot money and hot air to lift what is a limp and lifeless corpse off the deathbed... for now.

Numbers don't lie, and the best come from the bond pits, which was relatively calm, but still flatter in the middle, with the spread on 5s-10s falling to a mere 11 basis points. The 30-year bond remained steady at 2.97%, while the ten year ticked up one bip, making the 10s-30s spread just 13 basis points, which is not much interest for 20 years of waiting. Bonds continue to tell the real story, and it's not a happy one. Credit is tightening, slowly but certainly, and the Fed is creating a chokepoint for the economy which will lead only in one direction, to recession.

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
6/25/18	24,252.80	-328.09	-163.04
6/26/18	24,283.11	+30.31	-132.73
6/27/18	24,117.59	-165.52	-298.25
6/28/18	24,216.05	+98.46	-199.79

At the Close, Thursday, June 28, 2018:
Dow Jones Industrial Average: 24,216.05, +98.46 (+0.41%)
NASDAQ: 7,503.68, +58.60 (+0.79%)
S&P 500: 2,716.31, +16.68 (+0.62%)
NYSE Composite: 12,475.98, +63.91 (+0.51%)

Dow Approaching Correction Territory; NASDAQ Smashed Lower Again

After calling yesterday's trading the "worst dead cat bounce ever", equity markets in the US clambered back into the high green on Wednesday morning. Running on nothing but day-trading and short-selling fumes, the markets turned dramatically just before noon and were in the red over the final two hours, led lower by the now-dead NASDAQ.

To say that the NASDAQ has nosedived recently would be putting it lightly, as the index has had only one winning session in the past five, and has shed some 336 points over that span, or, about 4.5% percent.

There has also been some pain over on the S&P 500, which really stalled out after making a double top around 2780 (2,782.00, June 11; 2779.66, June 15), is down a little more than three percent over the past two weeks.

While the Dow Industrials were down the least, percentage-wise, the point loss was the greatest among the various indices and the Dow also is leading the charge downhill, already well into the red for the year (-2.5%).

With today's closing price, the Dow is down 9.4% from the January 26 high (26,616.71), on the brink of making a second excursion into correction territory. Meanwhile, the S&P and NASDAQ are still clinging to gains YTD, but are off the January highs as well. The NASDAQ is down just a fraction from January, but the S&P is down six percent over the same span.

Today's Dow downdraft was the 10th session with a negative close in the past 12, as the Dow turned a 903-point gain in June into a 298-point loss, a rapid, 1200-point descent. Whatever can be said about the demise of the Dow over the past three weeks it certainly is not good and does not portend well for the remaining two trading days of the month. Avoiding another correction is probably at the top of the list for the bulls still standing, because this foray will likely be more lasting and also lead to further losses.

Bonds were being bought with both hands on the day, with the yield on the 10-year note down five basis points to 2.83%, the lowest yield since April 17. The 30-year bond lost six bips, closing below 3.00%, at 2.97. This is 13 basis points below the close of 3.10% on the date of the latest FOMC rate hike, June 13. That's quite significant, since the Fed is intent on pushing rates higher, but the market is steadfastly resisting.

This recent spree of bond buying is signaling some dire consequences ahead. If the economy is strong enough to raise rates - as the Fed believes - then why is the market heading in the opposite direction? It's obvious that somebody is wrong-footed, and in this case, the money's on the Fed, which is usually well behind the trend, but currently is seeking to create the trend, something that is pretty much impossible, regardless of how much weight and force the central bank wants to exert on markets.

A explosive, toxic condition is at hand. The Fed and financial media are pushing a narrative of "all's well," but the market is saying, "I don't think so." Something is about to give, and soon. Expect stocks to continue their summer swoon, along with the requisite bouts of euphoria (short covering), though the fear factor will eventually take strong hold of conditions.

As has been stated ad nauseum on these pages for months, "this is a bear market. Trade accordingly."

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
6/25/18	24,252.80	-328.09	-163.04
6/26/18	24,283.11	+30.31	-132.73
6/27/18	24,117.59	-165.52	-298.25

At the Close, Wednesday, June 27, 2018:
Dow Jones Industrial Average: 24,117.59, -165.52 (-0.68%)
NASDAQ: 7,445.08, -116.54 (-1.54%)
S&P 500: 2,699.63, -23.43 (-0.86%)
NYSE Composite: 12,412.06, -98.49 (-0.79%)