Weekend Wrap: Stocks Still Shaky; NYSE Composite Collapsed

Friday's split markets didn't offer much in the way of either relief or direction as stocks spent the majority of the week languishing around recent lows. Other than Tuesday's spectacular "all clear" melt-up, the week as a whole offered another indication that either a correction or the beginning of a bear market is already underway.

Without the huge upside surprise of Tuesday - a very suspicious event that occurred out of the blue without any obvious motivating factor - the major indices would have broken down through key supports. As it is, the S&P and NASDAQ are resting right on their 200-day moving averages, while the Dow is somewhere in between its 200 and 50-day MA.

The NASDAQ fell for the ninth time in 12 sessions, the S&P, dropped 10 of the last 12, but the clearest message is being delivered by the most overlooked and broadest index, the NYSE Composite, which has clearly crossed the Rubicon into a dark area of investor despair, already having crashed through its 200-day moving average a week ago and trading well below it since.

Professionals notice these kinds of things, while the general public is usually informed of cataclysmic events after the fact. Closer inspection of the Composite reveals that not only is it down about three percent for the year, but it has spent the majority of 2018 in the red, having never fully recovered from February's free-fall like the other, more-favored indices.

Should anyone be worried? Of course. Worry is one of the great equalizing factors in markets. Anybody who fantasizes that stocks will go up without correction is fuzzy-headed. There is (or should be) a constant tiny voice in the back of one's head urging caution, conservation, and preservation. It's a natural instinct, as much a part of human nature as having two eyes. In some, the trait is over-developed, but for most, it's well-hidden, back behind the modern day facade of bliss and happiness.

This kind of media conditioning is nothing new, but it can be particularly dangerous to avoid asking hard questions when it comes to capital and investments. Thinking that "everything will be fine," or "the government will take care of it," only reinforces attitude hat somebody else has one's best interests in mind when the reality is more likely the complete opposite. In centuries past, financial welfare was more akin to warfare. People had to fight for everything in their lives. It is only in the past 100 years that "civilized" society has allowed the common man and woman to delegate factors of economic survival and prosperity to outsiders. The result has been positive for many, but it has also produced a sizable divergence: creating a small super-wealthy class that controls more financial assets than 90% of the population combined.

Thus, it the 10% or one-percenters who are currently moving the markets, as is normally the case. Ceding control over one's finances is a modern-day contrivance that has benefitted the rich more than the middle and lower classes, and they're going to move the markets in the ways that benefit themselves most. Whether or not that is beneficial to the general population is another question altogether.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1405.48
10/12/18	25,339.99	+287.16	-1118.32
10/15/18	25,250.55	-89.44	-1207.76
10/16/18	25,798.42	+547.87	-659.89
10/17/18	25,706.68	-91.74	-751.63
10/18/18	25,379.45	-327.23	-1078.86
10/19/18	25,444.34	+64.89	-1,013.97

At the Close, Friday, October 19, 2018:
Dow Jones Industrial Average: 25,444.34, +64.89 (+0.26%)
NASDAQ: 7,449.03, -36.11 (-0.48%)
S&P 500: 2,767.78, -1.00 (-0.04%)
NYSE Composite: 12,457.27, +11.79 (+0.09%)

For the Week:
Dow: +104.35 (+0.41%)
NASDAQ: -47.87 (-0.64%)
S&P 500: +0.65 (+0.02%)
NYSE Composite: +17.85 (+0.14%)

Stocks Can't Gain Traction; Tech, Industrials Lead Broad Decline

Continuing the stock rout that began in earnest two weeks ago became deeper and more pronounced on Thursday as broad declines sent speculators scurrying for cover.

The Dow Jones Industrial Average recorded its fifth triple-digit loss of the month and its eighth losing session in 14 trading days this month. The index is down nearly 1500 points from the all-time high reached at the close on October 3rd (26.828.39). If this isn't the beginning of a serious correction or bear market, it certainly looks like one.

Only five of the 30 Dow stocks managed gains, led by Verizon (VZ, 54.65, +0.69, +1.28%). Exxon Mobil and Chevron were also among the few winners, despite another day of declines in oil futures, which slumped below $69/barrel for the first time in a month. Mirroring the decline in stocks, WTI crude futures peaked on October 3rd at 76.20, but it's been all downhill since.

Caterpillar (CAT) was the Dow's biggest loser, dragged down nearly four percent on poor results from industry peers. CAT is off nearly 15% since October 3rd.

The other major indices suffered more serious losses, with the NASDAQ leading the way down, losing 157 points, more than a two percent drop. Once again, tech stocks dominated those losing ground, with Netflix, Google, Apple, and Tesla all declining by more than two percent.

There seems to be no escaping the cascade of falling stocks in October, traditionally one of the most volatile months for equities. No sector is particularly a safe haven, though utility stocks have largely been spared, thanks to low alpha and steady dividends.

The Dow needs only to finish Friday with a loss of 39 points or better to avoid a fourth straight weekly decline. A solid close to the week would also allow the S&P and NASDAQ to close out the week with gains, thanks to Tuesday's melt-up advance. However, stocks in Europe are losing ground in early Friday trading.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1405.48
10/12/18	25,339.99	+287.16	-1118.32
10/15/18	25,250.55	-89.44	-1207.76
10/16/18	25,798.42	+547.87	-659.89
10/17/18	25,706.68	-91.74	-751.63
10/18/18	25,379.45	-327.23	-1078.86

At the Close, Thursday, October 18, 2018:
Dow Jones Industrial Average: 25,379.45, -327.23 (-1.27%)
NASDAQ: 7,485.14, -157.56 (-2.06%)
S&P 500: 2,768.78, -40.43 (-1.44%)
NYSE Composite: 12,445.48, -167.57 (-1.33%)

Why Stocks Are Unlikely To Go Any Higher

Forget about today's Fed Minutes. Forget about corporate third quarter earnings lowing to markets this week and next, and for the next month.

Forget all the gains made over the past nine years. The market has peaked, and there's good reasons to believe that and data to back it up.

First of all, stocks are wildly overvalued. By many measures, US equities are priced at the highest point they've ever been. Higher than during the dotcom phase, higher than the subprime wildness, stocks today are carrying just plain stupid valuations, like they are darling growth stocks with improving bottom lines. Many are not.

As an example, take Coca-Cola (KO) a standard of the Dow Industrials for many long years. KO is not a growth stock. It's an income stock with a dividend of 1.56, yielding a healthy 3.46% on its share price of around 45. But, here's the kicker. The P/E of Coca-Cola is a whopping 82. That's a number usually reserved for hot tech start-ups, not globally-engaged, long-in-the-tooth mature companies. It's a ridiculous situation because as the price of the stock falls, the dividend yield will rise, making it the attractive investment it is today.

But it's not. If Coke goes from 45 to 35 in a year or two, the dividend yield will be in a higher range. Revenue is falling. Earnings may be stable due to stock buybacks, which is a hidden portfolio killer. Other stocks like Coke exist, like McDonald's, Home Depot, Goldman Sachs, or just about half of the Dow Industrials.

If the simple overvaluation isn't enough to keep people from dumping their money into stocks, then there's the economic data, like unemployment, currently at 3.7%, which is an historic low. Economists generally consider anything below five percent as full employment because there are always a certain number of people changing jobs, retiring, or otherwise out of the employment market.

Inflation is moderate, but interest rates continue to rise, thanks to the Fed. Their rate hikes are putting a much needed brake on what could be a runaway speculative stock market and maybe already is. The Fed isn't going to suddenly stop raising rates, so, as 2018 winds down as a very dull year for stocks, bonds, currencies, and commodities, 2019 is shaping up to be even worse.

IN many ways, President Trump's promise to "Make America Great Again" may already have been kept. America is pretty great already. Anything more would be Nirvana. We've reached a peak. It's time to slow down a little. Recessions are healthy because they clear out excess malinvestment, like Sears, which recently filed for bankruptcy protection. Or Toys 'R Us, which went belly up last year but had been a zombie company for many years prior to its implosion.

There are other issues as well, from political turmoil in Europe, to trade tensions, to the huge credit bubble that's affecting individuals, businesses, and governments. They're all over-leveraged and deeply indebted.

For these reasons, stocks can't really go much higher, if at all. The bull run is coming to an end, but that's not necessarily bad news, it just means that investors will have to be more disciplined if they hope to profit.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1405.48
10/12/18	25,339.99	+287.16	-1118.32
10/15/18	25,250.55	-89.44	-1207.76
10/16/18	25,798.42	+547.87	-659.89
10/17/18	25,706.68	-91.74	-751.63

At the Close, Wednesday, October 17, 2018:
Dow Jones Industrial Average: 25,706.68, -91.74 (-0.36%)
NASDAQ: 7,642.70, -2.79 (-0.04%)
S&P 500: 2,809.21, -0.71 (-0.03%)
NYSE Composite: 12,613.05, -32.90 (-0.26%)

Stocks Soar On Relief Rally; Dow Remains More Than 1000 Points Off Highs

As if last week was nothing more than an annoyance, buyers emerged in droves on Tuesday, sending stocks on a skyrocket ride throughout the session.

The relief rally left stocks still well down from previous levels, however, with the Dow more than 1000 points lower than it was earlier in the month.

Current conditions in the market suggest a wait-and-see posture.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1405.48
10/12/18	25,339.99	+287.16	-1118.32
10/15/18	25,250.55	-89.44	-1207.76
10/16/18	25,798.42	+547.87	-659.89

At the Close, Tuesday, October 16, 2018:
Dow Jones Industrial Average: 25,798.42, +547.87 (+2.17%)
NASDAQ: 7,645.49, +214.75 (+2.89%)
S&P 500: 2,809.92, +59.13 (+2.15%)
NYSE Composite: 12,645.95, +220.27 (+1.77%)

Stocks Close Lower On Retail Sales Disappointment

Despite a sharp bounce-back rally on Friday, US stocks resumed their declines on Monday as disappointing retail sales and in-line earnings reports kept investors' animal spirits in check.

Retail sales for September were up just 0.1% on expectations of a rise of 0.6%, putting a damper on the market at the open and throughout the session.

Financial stocks were in focus as Bank of America (BAC) and Charles Schwab (SCHW) reported third quarter earnings on Monday. Bank of America said its earnings per share came in at 0.67 cents, above expectations of 0.62. Schwab's earnings were in line at 0.65 cents per share.

Globally, stocks in Europe were flat to slightly higher, as were Pacific Rim bourses. Japan's NIKKEI was down significantly, while the Hang Seng - Honk Kong's market - suffered a marginal loss.

Nothing new here. Significant developments may come later in the week as more companies report third quarter earnings.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1405.48
10/12/18	25,339.99	+287.16	-1118.32
10/15/18	25,250.55	-89.44	-1207.76

At the Close, Monday, October 15, 2018:
Dow Jones Industrial Average: 25,250.55, -89.44 (-0.35%)
NASDAQ: 7,430.74, -66.15 (-0.88%)
S&P 500: 2,750.79, -16.34 (-0.59%)
NYSE Composite: 12,425.68, -13.74 (-0.11%)