Stocks Gain, Dow Approaching Resistance Around 25,000

Stocks ramped higher on Thursday, taking back all of the losses from the prior day and advancing to its highest level since June 18. What lay ahead for the industrials is a trading areas that has proven to offer some resistance around and above 25,000.

In mid-June, at the tail end of a four-day rally, the Dow topped out at 25,322.31 (June 11), then stalled, sending the index tumbling more than 1200 points to 24,117.59 by June 27.

Will the pattern repeat? Obviously, it's too early to tell, but charts are suggesting that there will be some selling in this area. What may prompt any trading action are the emerging second quarter earnings reports, especially those on Friday from major banks.

Prior to Friday's open, the nation's largest bank by assets ($2.6 trillion), JP Morgan Chase (JPM) reported adjusted revenue of $28.39 billion, beating estimates of $27.34 billion and EPS of $2.29, also topping expectations of $2.2. Net income rose 18%, to $8.3 billion.

Citigroup (C) reported higher EPS, but missed on the revenue line. Shares were selling off slightly in pre-market trading.

Wells-Fargo (WFC) was down sharply prior to the opening bell after reporting a decline in net income applicable to common stock, which dipped to $4.79 billion, or 98 cents per share, in the quarter ended June 30, from $5.45 billion, or $1.08 per share a year ago. Analysts expected $1.12 per share.

Mixed results from the financial sector come as no surprise. Squeezed margins from the flattening yield curve has put pressure on bank stocks for some months. The financial sector has been one of the weakest through the second quarter and the pressure does not appear to be relenting any time soon.

Friday should be full of fireworks.

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
7/5/18	24,345.44	+181.92	+85.33
7/6/18	24,456.48	+99.74	+185.07
7/9/18	24,776.59	+320.11	+505.18
7/10/18	24,919.66	+143.07	+648.25
7/11/18	24,700.45	-219.21	+429.04
7/12/18	24,924.89	+224.44	+653.48

At the Close, Thursday, July 12, 2018:
Dow Jones Industrial Average: 24,924.89, +224.44 (+0.91%)
NASDAQ: 7,823.92, +107.30 (+1.39%)
S&P 500: 2,798.29, +24.27 (+0.87%)
NYSE Composite: 12,761.46, +79.87 (+0.63%)

Stock Selling Pressures Emerge As Bonds Present A Developing Skeptical Outlook

So much for summer doldrums.

Yes, that was the opening line of yesterday's post.

It's that kind of market, one that can turn on a dime, or a tweet, or, maybe even a look, a glance, a suggestion.

This is not for market neophytes, who will get skewered royally if they attempt to play and are not prepared to suffer small losses should positions prove unfavorable. Because small losses, left unaddressed, usually lead to larger losses, it's important to monitor all trades closely. Similarly, profits may be fleeting and momentary. It may be better to take short term gains under these conditions, than wait out months of bumps and grinds in expectation of sustained profits.

Current market conditions are strung out like an addict needing a fix. Any twitch can set it off, as evidenced on Wednesday, as short term euphoria faded into tight panic overnight.

Call it Trump-enomics, trade sabre-rattling, currency collapse, kind dollar, or whatever you like, what is underway is nothing less than a massive reordering of priorities. From individual well-being to international survival, nothing is off the table.

While stocks continue to zig-zag - the Dow fell once again into negative territory for the year - bonds seemingly know only one direction, toward the middle, as yield spreads on treasuries keep tightening.

Since the Fed has raised rates six times since December 2015, the yield on longer-dated maturities has not moved in tandem. In a growing, vibrant economy, yields on 10-year and 30-year bonds would be spiking higher in reaction to higher short-term rates, but presently, they are resistant. Thus, short-term rates are rising faster than longer-term, making it difficult for financial institutions to make money since they depend on the spread, i.e., borrowing short-term to lend long-term.

Simply put, it's tough to make much profit on a one percent (or less) margin.

This dynamic has and will continue to scare equity market participants, whose fear is that their investments will rise only very gradually, if at all. The longer-dated treasuries serve as a hedge against the inherent risk in stocks. Even though they may not keep pace with inflation, the risk of losing money is nearly nil.

There are, of course, many more forces at play, including devastated markets in Japan and Europe, which recently (and presently) toyed with negative interest rates, forcing all yields lower. Thus, the US yields look generous by comparison with limited risk exposure.

For a more detailed analysis of interest rates and the dangers of an inverted yield curve, Investopedia offers a reasonable explanation, here.

A simplified approach may be developing as a new norm: minimize risk, accept lower returns, preserve capital rather than seeking bold - and thus, risky - profits.

The bond market, which is much larger than the equity market, often serves as a lid on runaway speculation in stocks. Currently, the lid is being lowered, slowly, but steadily.

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
7/5/18	24,345.44	+181.92	+85.33
7/6/18	24,456.48	+99.74	+185.07
7/9/18	24,776.59	+320.11	+505.18
7/10/18	24,919.66	+143.07	+648.25
7/11/18	24,700.45	-219.21	+429.04

At the Close, Wednesday, July 11, 2018:
Dow Jones Industrial Average: 24,700.45, -219.21 (-0.88%)
NASDAQ: 7,716.61, -42.59 (-0.55%)
S&P 500: 2,774.02, -19.82 (-0.71%)
NYSE Composite: 12,681.59, -133.05 (-1.04%)

Stock Investors Taking Advantage Of Calm Conditions

So much for summer doldrums.

In the first six trading days of July, the Dow Industrials have tacked on a hefty 648 points, leading many to begin believing that the minor correction from February was just that, minor, and now stocks are ready to be bought again nilly-willy. There has been only one negative close for the Dow this month and that came on the shortened session on the Tuesday prior to the Independence Day holiday.

For the past few days, an odd dynamic has taken place, with the Dow leading the other indices - especially out-performing the NASDAQ - which may be signaling a reversal from the prior three months. This change probably has little to do with the recent favorite whipping-boy: tariffs, but, there is the possibility that after closer analysis, many of the Dow stocks may be in position to benefit.

This is at least what seems to be occurring, though another possibility is that NASDAQ stocks have been overbought while the Dow was being oversold, thus the change in positions.

Whatever the case, investors in blue chips have been enjoying excellent gains and nobody is going to complain about that. With earnings about to take center stage in the Wall Street drama, Dow stocks may continue to rise, given optimistic projections for second quarter GDP and the part Dow stocks have played in this mini-rally.

Realistically, geopolitics have calmed for the time being, though under the surface there are relevant issues, not the least of which being England's struggle with post-Brexit negotiations, which has left Prime Minister Teresa May in quite the quandary.

May is promising a "soft Brexit" plan, due to be announced on Thursday via a white paper outlining the plan. Whatever May offers is sure to anger many and placate few, as nobody appears to be happy with half-measures, which has been the norm since the vote to leave the European Union two years ago. Not much has changed on the island nation and the process has been slow, disorderly, and generally lacking direction.

Look for the story to take on new life later in the week.

Back in the United States, President Trump seems to have thwarted almost all of his opponents, especially the ill-concieved Mueller investigation into Russia collusion in the 2016 presidential election. The entire affair is nothing but a complete farce, and the tide has turned against the special prosecutor and any friends he many have left in the deep state, liberal, leftist, obstructionist Democrats in congress.

With mid-term elections less than four months ahead, desperate Democrats have tried every conceivable attack on Trump and have come up empty-handed, even with a compliant press corps which seems also intent on demonizing Mr. Trump.

Meanwhile, some tariffs have already gone into effect, though the real implications are unlikely to be felt for some time, giving traders, fund managers and speculators ample time to play whatever games they feel fit to capture gains in this see-saw market.

If there is trouble ahead, it hasn't yet materialized, as unemployment remains low and the economy continues to show nascent signs of improvement. Inflation also has not truly had much effect, though the Federal Reserve's simultaneous deleveraging and rate hiking could cause significant problems.

For now, the market is maintaining a good demeanor and bonds are behaving, despite the ever-flattening yield curve. 2s-10s persist at 28 basis points, while 5s-10s and 10s-30s each sport a decade-low 10 basis point spread.

The summer may turn out to be one of pleasant recreation, though veteran traders and market analysts should be always vigilant for abrupt changes in sentiment.

Right now, it's smooth sailing and everybody's along for the ride.

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
7/5/18	24,345.44	+181.92	+85.33
7/6/18	24,456.48	+99.74	+185.07
7/9/18	24,776.59	+320.11	+505.18
7/10/18	24,919.66	+143.07	+648.25

At the Close, Tuesday, July 10, 2018:
Dow Jones Industrial Average: 24,919.66, +143.07 (+0.58%)
NASDAQ: 7,759.20, +3.00 (+0.04%)
S&P 500: 2,793.84, +9.67 (+0.35%)
NYSE Composite: 12,814.64, +37.71 (+0.30%)

No News Sends Stocks Soaring

Animal spirits were alive and well on Wall Street to open the week, putting aside all the phony fears over President Trump's trade war with China and the rest of the known world.

Shrugging and buying has become a trademark of the easy money days since the crash in 2008 and recovered which started in 2009. Monday's buying spree comes at the tail end of the second longest bull market in history, and is likely a sign that the market is nearing exhaustion rather than a sign that everything is going swimmingly.

There was no noteworthy news to bring out the buyers.

Oddly enough it was the Dow Jones Industrial Average that led the way, posting its best gain in month. On June 6, the Dow ramped higher by +346.41.

Even odder, the three other indices posted identical gains of 0.88%.

Oddities will continue as traders pore over a flood of second quarter earnings reports the next few weeks.

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
7/5/18	24,345.44	+181.92	+85.33
7/6/18	24,456.48	+99.74	+185.07
7/9/18	24,776.59	+320.11	+505.18

At the Close, Monday, July 9, 2018:
Dow Jones Industrial Average: 24,776.59, +320.11 (+1.31%)
NASDAQ: 7,756.20, +67.81 (+0.88%)
S&P 500: 2,784.17, +24.35 (+0.88%)
NYSE Composite: 12,776.92, +112.04 (+0.88%)

Weekend Wrap: Stocks Celebrate The 4th With Solid Gains

Stocks bubbled up after the BLS reported June job gains of 213,000 in the non-farm payroll report, though the official unemployment rate rose to four percent as more people entered the workforce.

The increase, being more than the expected 195,000, was a positive spur to trading instincts and helped end one of the better weeks of the year, with all four major indices posting gains for the day and the week.

Fears of an extended trade war with China were put aside for the time being. With the nation basking in the glow of an Independence Day week, only one down day was recorded, that being Tuesday's shortened session, which seemed more an adjustment to price levels rather than a trend-starting event.

Earnings reports for the second quarter will soon be the talk of the town and with that narrative taking precedence, there's a very good chance that stocks may see some solid support for the rest of the month.

The Dow is already ahead for July, despite still being more than 2000 points from the January all-time highs. With trading volumes down, it won't take much tome markets and the mood has shifted to a summery, feeling-good groove.

Bonds being moribund, stocks will bear some near term interest. The longer term still appears shaky or shady on a fundamental basis.

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
7/5/18	24,345.44	+181.92	+85.33
7/6/18	24,456.48	+99.74	+185.07

At the Close, Friday, July 6, 2018:
Dow Jones Industrial Average: 24,456.48, +99.74 (+0.41%)
NASDAQ: 7,688.39, +101.96 (+1.34%)
S&P 500: 2,759.82, +23.21 (+0.85%)
NYSE Composite: 12,664.88, +79.67 (+0.63%)

For the Week:
Dow: +185.07 (+0.76%)
NASDAQ: +178.08 (+2.37%)
S&P 500: +41.45 (+1.52%)
NYSE Composite: +160.63 (+1.28%)