Which Way Is Up? Markets Careen As Trump Makes Deal With EU, Facebook Falls From Grace

It's too early to call it a trend, but the Dow broke out of the trading range in which it had been ensconced for over four months after President Trump met with European Commission president Claude Junker and announced a breakthrough on trade and tariff negotiations between the European Union and the United States, forestalling what many feared would become a trade war.

The Dow, which had been lumbering below the unchanged line most of the session, broke above it shortly after 3:00 pm EDT, and then rocketed higher, gaining over 150 points in the final half hour of trading.

The other indices responded in similar manner, though after hours, Facebook (FB) took a severe lashing, losing 24% at one point, after its second quarter earnings failed to meet expectations. Facebook's fall sent NASDAQ futures into a 1.5% nosedive, though they're recovering prior to Thursday's opening bell.

What is most important to note about these developments is the movement in the Dow. According to Dow Theory, the index entered bear market conditions on April 9, when the Dow Jones Transportation Index confirmed the Industrial Average's February-March double-dip off January highs. Besides the reliability of Dow Theory in gauging market movement and primary trends, stocks have not readily behaved as they would in an ordinary bear market, with both the NASDAQ and S&P recovering to make all-time highs, the most recent, just Wednesday, as the NASDAQ set a new, high-water mark at the close.

The current episode of market mania is being driven by forces both unforeseen and unseen, most of it emanating from Washington, D.C., where, on one hand, President Trump's audacious approach to governance and world politics has thus far returned positive results, including Wednesday's breakthrough with the EC.

Thus, the number that bears watching continues to be the January 23 all-time closing high on the Dow of 26,616.71. While the index has broken above what was considerable resistance, it still has a wall of worry - and about 1200 points - to climb before the existence of bearish conditions can be eliminated.

On the other side of the coin, Facebook's woes may only be the beginning for the tech sector, the NASDAQ and the market as a whole. Next up on the chopping block appears to be Tesla (TSLA), whose CEO, Elon Musk, has been raising concerns about the company as a whole by his strange and possibly bi-polar behavior. Tesla is under considerable pressure to produce positive results after months of scrutiny over its cars exploding, production questions, quality concerns and the general mental well-being of its founder and CEO.

Tech stocks have largely been the driver behind the rise of the NASDAQ, whereas President Trump has been generally holding down the Dow. Now those two elements appear to be working in reverse, and the result could be a shock to both the upside on the Dow and the downside on the NASDAQ.

It's hard to imagine the two indices diverging for very long, but the future is unknowable. With Trump "winning" on many fronts, he still faces a massive horde of opposition in Washington, not only from Democrats and the so-called "deep state," but from members of his own party as well.

Add the Fed's unwinding of its balance sheet and relentless quarter-by-quarter raising of interest rates and you have an imperfect storm through which stock and bond speculators and investors must navigate.

Rough seas ahead, for certain, but in which direction? With so much on the deck and cross-currents blowing in every direction, trading should become volatile and choppy until November, when the midterm elections will likely determine the ultimate direction of not just the stock market but of the US and global economy as well.

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
7/13/18	25,019.41	+94.52	+748.00
7/16/18	25,064.36	+44.95	+792.95
7/17/18	25,119.89	+55.53	+848.48
7/18/18	25,199.29	+79.40	+927.88
7/19/18	25,064.50	-134.79	+793.09
7/20/18	25,058.12	-6.38	+786.71
7/23/18	25,044.29	-13.83	+772.88
7/24/18	25,241.94	+197.65	+970.53
7/25/18	25,414.10	+172.16	+1142.69

At the Close, Wednesday, July 25, 2018:
Dow Jones Industrial Average: 25,414.10, +172.16 (+0.68%)
NASDAQ: 7,932.24, +91.47 (+1.17%)
S&P 500: 2,846.07, +25.67 (+0.91%)
NYSE Composite: 12,933.63, +86.14 (+0.67%)

Stubborn Dow Remains Range-Bound; NASDAQ Dips

Since March 9, the Dow has traded in a fairly tight range - considering the time elapsed (nearly six months) - of just more than 1400 points, or less than six percent of total market value.

Recently, it has been trading near the upper end of this range, but has repeatedly failed to surpass the previous interim high and is still another 1400-1500 points away from January's all-time high of 26,616.71.

The range, 23,924.98 - 25,335.74, has been wide enough to offer hope to both bulls and bears, though neither a breakout nor a breakdown has occurred, with much of the betting money on the latter. Current and prior sentiment sees a second half slowdown, with the Trump tax cuts already measured in, inflation becoming more of an issue, and the tariff tug-fo-war on the world stage only in the early stages.

Thus, seasoned investors are wary of sudden impulse moves such as today's and also have an eye toward the political spectrum, midterm elections and what now appears to be a runaway federal budget-busting deficit for the current fiscal year. These are the factors contributing to the skeptical view, while the more subdued bull case rests largely on the employment picture. Americans are well-employed at present, even though labor force participation remains near record lows.

Inside the demographics of the United States, there exists a virtuous cycle, in which retiring baby boomers give up jobs to millennials and Generation Xers, while spending their retirement incomes without a care. There's plenty of money to go around, though, with a country as large and diverse as the US, it's difficult to pigeonhole any particular stocks that should benefit the greatest.

Consumer staples are and have been the safest bets along with energy, tech, and basic materials, but the gains have been paltry outside the smoking tech sector. A diversified portfolio is probably the best insurance against a market rout, but being in the right stocks can prove tricky, if not altogether impossible to attain anything better than the average index fund.

On the day, the Dow and NASDAQ diverged, a sign that everything is not in sync, and that issues remain unresolved, though that is a normal case and not anything about which to be overly pessimistic.

With crosswinds at the crossroads of prosperity and desperation, there's more than ample rationale for either argument.

This remains a sit-tight-and-hold-cash condition.

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
7/13/18	25,019.41	+94.52	+748.00
7/16/18	25,064.36	+44.95	+792.95
7/17/18	25,119.89	+55.53	+848.48
7/18/18	25,199.29	+79.40	+927.88
7/19/18	25,064.50	-134.79	+793.09
7/20/18	25,058.12	-6.38	+786.71
7/23/18	25,044.29	-13.83	+772.88
7/24/18	25,241.94	+197.65	+970.53

At the Close, Tuesday, July 24, 2018:
Dow Jones Industrial Average: 25,241.94, +197.65 (+0.79%)
NASDAQ: 7,840.77, -1.10 (-0.01%)
S&P 500: 2,820.40, +13.42 (+0.48%)
NYSE Composite: 12,847.49, +53.44 (+0.42%)

Stocks Stagnate Prior To Google's Blowout Report

Stocks continued to loll around the unchanged mark to open the week's trading. The major indices have not moved much at all in the past week, though there could be a sudden lift after Alphabet, parent of Google (GOOG), reported second quarter earnings that smashed expectations.

The $5 billion fine leveled against Google the for antitrust violations by the European Union will barely dent the company's reported $100+ billion in cash and marketable securities.

While Google may stand alone atop the tech heap, it may need help lifting the rest of the market off the mark. Investors appear to be awaiting the report on second quarter GDP before making definitive decisions regarding stock purchases or sales.

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
7/13/18	25,019.41	+94.52	+748.00
7/16/18	25,064.36	+44.95	+792.95
7/17/18	25,119.89	+55.53	+848.48
7/18/18	25,199.29	+79.40	+927.88
7/19/18	25,064.50	-134.79	+793.09
7/20/18	25,058.12	-6.38	+786.71
7/23/18	25,044.29	-13.83	+772.88

At the Close, Monday, July 23, 2018:
Dow Jones Industrial Average: 25,044.29, -13.83 (-0.06%)
NASDAQ: 7,841.87, +21.67 (+0.28%)
S&P 500: 2,806.98, +5.15 (+0.18%)
NYSE Composite: 12,794.05, +4.14 (+0.03%)

Weekend Wrap: Friday's Pathetic Finish Prelude To Sell The News Fireworks

Stocks ended the week in a rather disturbing manner, with all the major indices limping home nearly unchanged for the day. That such a disappointment would occur on what's normally an options expiration day (it was), the lack of interest and volatility can be seen as a sign that either a) everybody who is anybody is on vacation, or, b) the market has reached saturation levels and is about to make a short term reversal.

None of the four averages followed at Money Daily closed more than one tenth of one percent from the previous day's finish. Trading was akin to a grandparent's canasta tournament. Nothing was risked. Nothing was lost. Nothing was gained.

Friday's trading can also be seen as an thumbnail sketch for the week. Within narrow ranges, the majors all finished up the week not far from where they had begun. It was simply one of the dullest weeks of trading in recent memory.

As expressed in Thursday's post, "Crossroads," there appears to be a stopping point for everything, especially the Dow Industrials at the level of 25,000- 25,300. The Dow was weakened materially in February, and, despite glowing employment and unemployment figures, plus an expected second quarter GDP estimate of over four percent to be made public this coming week (8:30 am EDT, Friday) the industrial average has yet to re-approach the previous all-time high (26,616.71, January 23, 2018).

With such a well-telegraphed number expected, a 4% GDP for the second quarter is likely already well-baked into most portfolio cakes, thus it may be wise to sit out this particular glowing government data headline release.

That the new high event continues to fade into memory without the Dow making a significant rally attempt tells a great deal about current market conditions. It signals that there is something seriously damaged in the economy, and it's probably not confined to the United States, since the central banks have acted as first-movers and lenders of last resort since 2008-09.

Change is afoot, and with change there are usually winners and a good share of casualties along the way. A major shakeout in the market is long overdue, despite the united forces of central banks forestalling such a watershed event. This has been the overriding theme of the past decade. While it may not end this week or next, it will end, and the result will be a general decline of 30-50 percent in major stock indices.

Otherwise, all the math in the world can be throw out the nearest window.

In the meantime, trade cautiously with an eye on fundamentals, which eventually will guide the way.

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
7/13/18	25,019.41	+94.52	+748.00
7/16/18	25,064.36	+44.95	+792.95
7/17/18	25,119.89	+55.53	+848.48
7/18/18	25,199.29	+79.40	+927.88
7/19/18	25,064.50	-134.79	+793.09
7/20/18	25,058.12	-6.38	+786.71

At the Close, Friday, July 20, 2018:
Dow Jones Industrial Average: 25,058.12, -6.38 (-0.03%)
NASDAQ: 7,820.20, -5.10 (-0.07%)
S&P 500: 2,801.83, -2.66 (-0.09%)
NYSE Composite: 12,789.91, +3.43 (+0.03%)

For the Week:
Dow: +38.71 (+0.15%)
NASDAQ: -5.78 (-0.07%)
S&P 500: +0.52 (+0.02%)
NYSE Composite: +20.41 (+0.16%)

Crossroads

The best version of the Cream´s Classic ´´Crossroads´´ from the 1968 Album ´´Wheels of Fire´´ even though the video is from the live concert at Winterland.

Simply put, if the Dow cannot close above 25,335.74 (March 9, 2018) the existence of a bear market will be on full display.

Granted, that number is more than 1300 points below the January 23 high of 26,616.71, but the point is this secondary high has yet to be exceeded, despite at least four (probably five) attempts.

Assuredly, the US economy is currently healthy and robust, but so are the warts and wounds, the result of many years of mismanagement. The Fed, working against expansion via its selfish balance sheet reduction scheme and relentless interest rate hikes, adds fuel to the eventual deflationary fire.

Today's nosedive - only the third negative close in 13 trading days this month - may have been nothing more than consolidation (profit taking), but the trading level is suspiciously bearish, considering the failed highs of the past four months.

Keep eyes on the numbers. The have been, and will continue to provide significant market signals.

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
7/13/18	25,019.41	+94.52	+748.00
7/16/18	25,064.36	+44.95	+792.95
7/17/18	25,119.89	+55.53	+848.48
7/18/18	25,199.29	+79.40	+927.88
7/19/18	25,064.50	-134.79	+793.09

At the Close, Thursday, July 19, 2018:
Dow Jones Industrial Average: 25,064.50, -134.79 (-0.53%)
NASDAQ: 7,825.30, -29.15 (-0.37%)
S&P 500: 2,804.49, -11.13 (-0.40%)
NYSE Composite: 12,786.48, -36.75 (-0.29%)