Weekend Wrap: Dow, S&P At Record Levels, Tech Shunned, Fed To Raise Rates

This was a banner week for the Dow Jones Industrial Average, ramping nearly 590 points - the most since late March - and eclipsing the old record high close from January 26 (26,616.71) and leaving it in the dust.

While the Dow and S&P set records, tech stocks didn't fare as well, closing down for the week as investors continued to shed shares of some of the more widely-held US companies, like Facebook (FB), Netflix (NFLX), Alphabet, nee Google (GOOG), Amazon (AMZN), and Apple (AAPL).

The biggest losers were Amazon (-55.18, -2.80%) and Apple (-6.18, -2.76%) as traders recorded record volume on the AA's of the so-called FAANGs.

Bond yields spiked, with the 10-year note rising beyond the Maginot line of 3.00%, ending the week with a yield of 3.07%.

Precious metals continued to remain in the doldrums, with gold and silver still hovering just above three-year lows.

The week ahead should provide some volatility as the Fed's FOMC policy meeting convenes Tuesday and Wednesday, with a policy announcement set for Wednesday afternoon which is anticipated to raise the federal funds rate for the seventh consecutive quarter, to 2.00-2.25%.

Playing a dangerous game of chicken with the market, the Fed continues its attempt to pour cold water on the emerging strong economy and the even-stronger US dollar, which has smashed currencies in countries from Turkey to Argentina into financial chaos.

The Fed insists upon rate increases to slow the economy, though it's unclear that the US economy is expanding at anything approaching red-hot status. While second quarter GDP came in higher than expectations, at 4.2 percent annualized, the three prior readings, from the third and fourth quarters of 2017 and the 2018 first quarter were still cool, at 2.8%, 2.3%, and 2.2%, respectively.

GDP in the second quarter was the highest since the third quarter of 2014. More than a few analysts and economists have expressed fears of a second half downturn in GDP growth. Should their forecasts come to fruition it would be seen as a strike against the aggressive Fed rate-hiking and an appeal for them to stop before they crush the nascent American expansion.

After the Fed's policy announcement this week, the third estimate of GDP growth will be revealed on Thursday, September 27.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34
9/5/18	25,974.99	+22.51	+10.17
9/6/18	25,995.87	+20.88	+31.05
9/7/18	25,916.54	-79.33	-48.28
9/10/18	25,857.07	-59.47	-107.75
9/11/18	25,971.06	+113.99	+6.24
9/12/18	25,998.92	+27.86	+34.10
9/13/18	26,145.99	+147.07	+181.17
9/14/18	26,154.67	+8.68	+189.85
9/17/18	26,062.12	-92.55	+97.30
9/18/18	26,246.96	+184.84	+282.14
9/19/18	26,405.76	+158.80	+440.94
9/20/18	26,656.98	+251.22	+692.16
9/21/18	26,743.50	+86.52	+778.68

At the Close, Friday, September 21, 2018:
Dow Jones Industrial Average: 26,743.50, +86.52 (+0.32%)
NASDAQ: 7,986.96, -41.28 (-0.51%)
S&P 500: 2,929.67, -1.08 (-0.04%)
NYSE Composite: 13,236.44, +11.33 (+0.09%)

For the Week:
Dow: +588.83 (+2.25%)
NASDAQ: -23.09 (-0.29%)
S&P 500: +24.69 (+0.85%)
NYSE Composite: +185.92 (+1.42%)

Dow Theory Thwarted; Bulls Back In Charge As Industrials Register New All-Time High

In what has to be regarded as a false signal from the Dow Theory tracking primary trends, the Dow Jones Industrial Average posted a new all-time closing high on Thursday, finishing the session at 26,656.98, eclipsing the previous record close of 26,616.71 reached on January 26, 2108.

In the interim, the Dow suffered through a shallow correction in February and March, gradually regaining its momentum in the second quarter, gaining 158.97 points for all of April, May, and June. During that period, however, other indices were exhibiting strength, especially the NASDAQ, which soared to record highs in June, followed by more all-time highs in July and August.

The S&P 500 took longer to recover, finally reaching a new apex on August 24, though the index showed considerable resilience and strength from April though the summer. It too finished at a record, gaining 22.80 points, it's best single-day gain in nearly two months.

The bear market, primary trend reversal signal sent via Dow Theory was initially triggered when the industrial average made a new short-term low on March 23, at 23,533.20, and confirmed on April 9, when the Transportation Index also closed at a new recent low of 10,119.35.

Skeptics noted that the transports, immediately after reaching that critical low, immediately rebounded with a 650-point rally over the next seven sessions. The aftermath from the signal forward didn't appear to be anything even remotely resembling a bear market, and if it was, the signal was too late and not useful for trading purposes. In fact, had one paid heed to the primary trend signal, one would have missed out on some sizable gains from April though the present.

The transportation index made a fresh record close at 11,436.35, on August 21 and has since finished higher than that on a tuber of occasions. The new high close on the Dow Jones Transportation Index was the first signal that the primary market trend was about to reverse again. It was just a matter of time and playing catch-up for the Dow to achieve a new record.

Whatever the market rationale - be it the Trump effect, animal spirits, or simply the general attractiveness of US markets caused by the recent strong dollar - stocks continue to be the best investments available to the general public and the larger institutional investing community.

Where the market goes from here is, as always, an open question, though it appears that the longest bull market in history will continue apace. Nothing, not even regular, quarterly interest rate increases by the Federal Reserve, has been able to slow down the US equity express.

On the heels of solid performances in July and August, the Dow is poised to post the best quarterly results of the year when the third quarter concludes in just one week, September 28. The Dow added 1143.78 points in July, 557.29 in August, and has racked up a gain of 692.16 in September.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34
9/5/18	25,974.99	+22.51	+10.17
9/6/18	25,995.87	+20.88	+31.05
9/7/18	25,916.54	-79.33	-48.28
9/10/18	25,857.07	-59.47	-107.75
9/11/18	25,971.06	+113.99	+6.24
9/12/18	25,998.92	+27.86	+34.10
9/13/18	26,145.99	+147.07	+181.17
9/14/18	26,154.67	+8.68	+189.85
9/17/18	26,062.12	-92.55	+97.30
9/18/18	26,246.96	+184.84	+282.14
9/19/18	26,405.76	+158.80	+440.94
9/20/18	26,656.98	+251.22	+692.16

At the Close, Thursday, September 20, 2018:
Dow Jones Industrial Average: 26,656.98, +251.22 (+0.95%)
NASDAQ: 8,028.23, +78.19 (+0.98%)
S&P 500: 2,930.75, +22.80 (+0.78%)
NYSE Composite: 13,225.11, +103.14 (+0.79%)

Blue Chips Gain, Dow, S&P Closing In On Records

As the Dow zipped ahead Wednesday, tech stocks on the NASDAQ were shunned and the S&P 500 was nearly flat, though approaching its all-time high (2,914.04, August 29).

The highly-anticipated trade wars touted by the Trump-hating press have yet to materialize, and multi-national corporations are adjusting to the new world of tariffs as opposed to the falsely-defined "free trade" policies of the past three decades.

With President Trump rewriting the parameters of global commerce, US companies are, as they should, making adjustments to currency distortions and disputes arising from the sudden departure from the past. That being the case, Dow stocks are performing favorably, while tech vacillates. The key to direction seems to be headed by the banking and financial sectors, which underpin all commercial activity.

Seeking to normalize interest rates, the Fed is set to raise the federal funds rate again in less than a week, at their September 25-26 FOMC meeting. Bank stocks have been largely untouched by any kind of organized selling pressure, which leads to complacency on trading desks and within investor portfolios. Passive index funds continue to perform well, despite perceived distress over presidential policies and political hijinks.

There's so much bullishness apparent that contrary practitioners have toes in the water, many of them already burned by bounces in the market structure. This is not an environment in which one would readily short stocks, as the bull market rages on without so much as a five percent pullback since the lows of February and March.

The money is out there, most funds fully invested without a worry in the world. That's a condition that usually leads to disaster, though this time looks to be truly different. If President Trump MAGA promise can be gauged at all, the stock market might be a proxy for the health of the American economy and it is doing quite well.

The Dow has posted gains in six of the last seven sessions, adding nearly 550 points over that span.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34
9/5/18	25,974.99	+22.51	+10.17
9/6/18	25,995.87	+20.88	+31.05
9/7/18	25,916.54	-79.33	-48.28
9/10/18	25,857.07	-59.47	-107.75
9/11/18	25,971.06	+113.99	+6.24
9/12/18	25,998.92	+27.86	+34.10
9/13/18	26,145.99	+147.07	+181.17
9/14/18	26,154.67	+8.68	+189.85
9/17/18	26,062.12	-92.55	+97.30
9/18/18	26,246.96	+184.84	+282.14
9/19/18	26,405.76	+158.80	+440.94

At the Close, Wednesday, September 19, 2018:
Dow Jones Industrial Average: 26,405.76, +158.80 (+0.61%)
NASDAQ: 7,950.04, -6.07 (-0.08%)
S&P 500: 2,907.95, +3.64 (+0.13%)
NYSE Composite: 13,121.97, +29.99 (+0.23%)

Traders Shrug, Stocks Rip Higher

Bear market in Emerging Markets? No problem.

Upcoming Fed rate hike? Why worry?

Trade war with China? Nah.

The general attitude on Tuesday - following a somewhat dismal start to the week - seemed to be the old "buy the dip" mantra that boosted stocks high for most of the last ten years in the extended bull market.

As long as nothing major appears to disrupt the global money flow, traders in New York seem to be content buying stocks at just about any price, any multiple, any day, any time.

Tuesday's trading was a textbook example of momentum trading on the absence of news, good, bad, or otherwise. Stocks got off to a solid start and added to their gains throughout the session, with the markets in lockstep for a change.

The Dow was led higher by a wide swatch of companies, from Boeing (BA) to Nike (NKE), to Pfizer (PFE), Intel (INTC), and Home Depot (HD), all of which gained more than one percent on the day. 25 of 30 Dow components were winners, with just five losing ground.

Blue chips closed at their best level since the end of January, eclipsing the losses incurred in February and March, which are now fading into the deep recesses of trading memory. The Dow Jones Industrial Average is less than 400 points from making a new all-time high. Such a move would negate the Dow Theory bear market signal issued in April, as the Dow Transportation Index has already broken above its previous high.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34
9/5/18	25,974.99	+22.51	+10.17
9/6/18	25,995.87	+20.88	+31.05
9/7/18	25,916.54	-79.33	-48.28
9/10/18	25,857.07	-59.47	-107.75
9/11/18	25,971.06	+113.99	+6.24
9/12/18	25,998.92	+27.86	+34.10
9/13/18	26,145.99	+147.07	+181.17
9/14/18	26,154.67	+8.68	+189.85
9/17/18	26,062.12	-92.55	+97.30
9/18/18	26,246.96	+184.84	+282.14

At the Close, Tuesday, September 18, 2018:
Dow Jones Industrial Average: 26,246.96, +184.84 (+0.71%)
NASDAQ: 7,956.11, +60.32 (+0.76%)
S&P 500: 2,904.31, +15.51 (+0.54%)
NYSE Composite: 13,091.98, +60.07 (+0.46%)

Apple Leads Dow, Stocks Lower On Valuation, Dividend Yield Concerns

It's not like Apple (AAPL) isn't a rock-solid stock. The Cupertino, California-based company which has given the world smartphones, smart watches and really zippy computers isn't the world's largest company by market cap for nothing.

The issue is more one of value over speculation. Apple is fully-capitalized, has doubled in price in less than two years, but the kicker might be the dividend of 2.92 is less than one-and-a-half percent (1.30%), while the 10-year treasury note is currently yielding three percent and probably is going to be higher in coming months.

Those numbers have to give serious investors pause to reflect on whether the tech giant - a mature company, not an instant start-up by any means - can continue to provide appreciation value in excess to their dividend. T-bills offer yield with nearly zero risk. All stocks carry risk to the downside, and Apple may have peaked a few weeks ago when it hit an all-time high of 228.35 at the September 4 closing bell.

Investing isn't a game of chasing winners, it's a matter of timing, though most advisors will deny the thought of market-timing. Proper discipline would have one buying Apple when it looks like it's cheap. With a P/E of just under 20, it's close to being expensive, so some players are obviously taking chips off the table while the gains are fresh and probably taxed at the long-term capital rate. It would make sense to do so. There are other stocks which may perform better in the near future and the allure of risk-free money at three percent is strong.

Whatever the reason, Apple has been leveling off, but the selling got serious on Monday, with volume above 36 million shares, about 10 million higher than average. The stock closed down 5.96 points (-2.66%), leading all Dow components as the Dow and NASDAQ suffered outsized losses, the NASDAQ especially, down nearly 1.5%.

Google (GOOG) also took a pretty big hit on Monday, losing 16.48 (1.41%), as did tech darling, Netflix (NFLX), which was broadly sold, -14.21 (3.90%), to 350.35.

The Dow Jones Industrial Average saw an even split with 15 gainers to 15 losers, but of the six stocks that trade for more than 200 per share, five of them declined, led by Apple. The others were Boeing (BA), UnitedHealth (UNH), Goldman Sachs (GS) and Home Depot (HD). The sole 200+ share price winner was 3M (MMM), which finished at 209.53, up 1.65 points (+0.79%).

Markets overall took a bit of a beating on Monday, though it wasn't enough for anybody to start yelling 'fire' on Wall Street. That may come when the Fed meets next week (September 24-25) and announces the third rate hike of 2018. That may prove to be more this market can bear.

Dow Jones Industrial Average September Scorecard:

Date	Close	Gain/Loss	Cum. G/L
9/4/18	25,952.48	-12.34	-12.34
9/5/18	25,974.99	+22.51	+10.17
9/6/18	25,995.87	+20.88	+31.05
9/7/18	25,916.54	-79.33	-48.28
9/10/18	25,857.07	-59.47	-107.75
9/11/18	25,971.06	+113.99	+6.24
9/12/18	25,998.92	+27.86	+34.10
9/13/18	26,145.99	+147.07	+181.17
9/14/18	26,154.67	+8.68	+189.85
9/17/18	26,062.12	-92.55	+97.30

At the Close, Monday, September 17, 2018:
Dow Jones Industrial Average: 26,062.12, -92.55 (-0.35%)
NASDAQ: 7,895.79, -114.25 (-1.43%)
S&P 500: 2,888.80, -16.18 (-0.56%)
NYSE Composite: 13,031.91, -18.61 (-0.14%)