On Friday, the Dow Jones Industrial Average bottomed out at 2:45 pm EDT, down by 124 points on the day. From that point - with an hour and fifteen minutes remaining in the session - stocks magically rose by 68 points to end the day down marginally.
This pattern had been tested on both Wednesday and Thursday, as stocks took deep losses on both days, though Friday's low was much later in the session than it was the previous two days. Friday's low was also more shallow, the implication being that a major force (such as the - hush now - PPT) came to the market's aid in the nick of time.
That there might have been intervention on Friday, and indeed, on all three days, is not far-fetched. Nobody in positions of power were interested in a market crash just before the Memorial Day weekend. That is being saved for a more opportune time, such as just prior to the November mid-term elections.
If this is too much intrigue and conspiracy theory for you, dear reader, you can stop reading right here, though the naivety of burying one's head in a sand dune isn't going to make you any smarter, nor is it going to grant you immunity from market dynamics, be they either contrived or natural.
As seen in the scorecard and weekly data below, the Dow ended with a small 38-point gain and is lower than where it was two weeks ago, the bulk of May's advance made during an eight-day run starting on the 3rd and ending on the 14th, which was, notably a Monday. Tuesday the 15th saw the streak ended with a thud of -193 points. Since then, stocks have essentially gone nowhere and this week saw minor advances on the major indices with the notable exception of the NYSE Composite, which suffered a loss commensurate with the gain on the NASDAQ.
Confused? Not yet. Trading in stocks, always a risky business, is about to become something that defies quantification. Money is moving around markets at a dizzying rate, fueled by geo-politics and, in the main, a massive amount of misunderstanding of how markets are being distorted and defiled.
It's now more than three months since the waterfall effects of February which sent stocks into a state of bearish hibernation or paralysis from which they have yet to recover. The longer stocks fail to reflate towards their all-time highs the stronger the argument for a bear market becomes.
The problem with a bear market at this juncture is that stocks continue to underpin all manner of funds, especially public employee pensions, which are already massively underfunded. An extended market decline would push these funds further underwater and possibly trigger a liquidity trap which would make the 2008-09 financial crisis appear tame by comparison.
States like Illinois, California, Connecticut and New Jersey have the biggest underfunding problem and a bear market would blow out all of their actuarial projections. Not that these massive pension funds are going to go broke right away, rather they would see their future positions eroded to a point at which raising taxes, seeking higher employee contributions, reduction in services, or slashing payouts to retires will all be proposals on the table in an effort to salvage the failed over-promises of delinquent politicians.
A pension crisis might be just the tip of the proverbial iceberg that is the cumulative national debt shared by federal and state governments, businesses and individuals. Of the three, private businesses are most likely the best insulated from a market downturn and subsequent liquidity emergency, though they are by no means standing on safe ground. With the average American family or individual deeply indebted, businesses large and small will suffer from decreased volume and a general deterioration of business conditions. Such conditions are already well underway in small, rural communities lacking sufficiently large markets and audiences. Some largely Northeast and Midwest areas have never recovered from the Great Financial Crisis of a decade ago and another negative event could be potentially devastating. Government would be unable to collect taxes from an overburdened population and businesses would be faced with the indelicate choices of laying off employees, cutting back on goods or services or closing the doors for good.
The heavy reliance on stocks alone to lead the nation out of the deep depression of 2008 has set the stage for a rather unwelcome asset collapse and recent stock market activity is serving fair warning.
The only data this week that suggested a possible way out or easing of the tightening conditions (which the Fed is fueling with reckless abandon) were the decline in oil prices (from above $72 to below $68) and the crunching of yields in the treasury market. The 10-year note topped out at 3.11% before ending the week massively lower, at 2.93%, a huge move in a significant market.
What oil and bonds are foretelling is nothing less than a full-blown recession within six to eight months, signaling that consumers cannot sustain demand for energy and businesses and government cannot withstand rising borrowing costs.
All of these conditions are contributing to a very volatile situation which, thus far, has been contained by the Fed and the deep underground traders, attempting to keep equity prices at premiums. The chances of this lasting though the summer into the fall are
Slim to None, and Slim has left town.
Dow Jones Industrial Average May Scorecard:
| Date |
Close |
Gain/Loss |
Cum. G/L |
| 5/1/18 |
24,099.05 |
-64.10 |
-64.10 |
| 5/2/18 |
23,924.98 |
-174.07 |
-238.17 |
| 5/3/18 |
23,930.15 |
+5.17 |
-233.00 |
| 5/4/18 |
24,262.51 |
+332.36 |
+99.36 |
| 5/7/18 |
24,357.32 |
+94.81 |
+194.17 |
| 5/8/18 |
24,360.21 |
+2.89 |
+197.06 |
| 5/9/18 |
24,542.54 |
+182.33 |
+379.39 |
| 5/10/18 |
24,739.53 |
+196.99 |
+576.38 |
| 5/11/18 |
24,831.17 |
+91.64 |
+668.02 |
| 5/14/18 |
24,899.41 |
+68.24 |
+736.26 |
| 5/15/18 |
24,706.41 |
-193.00 |
+543.26 |
| 5/16/18 |
24,768.93 |
+62.52 |
+605.78 |
| 5/17/18 |
24,713.98 |
-54.95 |
+550.73 |
| 5/18/18 |
24,715.09 |
+1.11 |
+551.84 |
| 5/21/18 |
25,013.29 |
+298.20 |
+850.04 |
| 5/22/18 |
24,834.41 |
-178.88 |
+671.16 |
| 5/23/18 |
24,886.81 |
+52.40 |
+723.56 |
| 5/24/18 |
24,811.76 |
-75.05 |
+648.51 |
| 5/25/18 |
24,753.09 |
-58.67 |
+589.84 |
At the Close, Friday, May 25, 2018:
Dow Jones Industrial Average: 24,753.09, -58.67 (-0.24%)
NASDAQ: 7,433.8535, +9.42 (+0.13%)
S&P 500: 2,721.33, -6.43 (-0.24%)
NYSE Composite: 12,634.94, -61.75 (-0.49%)
For the Week:
Dow: +38.00 (+0.15%)
NASDAQ: +79.51 (+1.08%)
S&P 500: +8.36 (+0.31%)
NYSE Composite: -82.48 (-0.65%)
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