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%)
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