Dow Surges Nearly 400 Points Even As Turkey Crisis Deepens

Apparently, those mystery buyers who emerged Wednesday after the Dow was down 360 points were not quite finished with their stock buying spree. On Thursday, blue chips were all the rage, with the Dow soaring nearly 400 points on the day, it's best one-day performance since a 428-point advance on April 10.

So, that's more than 750 points in less than two days. The message is clear: buy stocks. Buy stocks with dividends. Disregard the price you are paying.

Obviously, something is afoot, though it seems that these recent buys are wrong-footed, at the least.

Friday will open lower, though there's no telling where stocks will go after that. Turkey's currency crisis is not going to improve in a day or two, or even in a few weeks or months. The economy of the crossroads nation is going to be a basket case for years. The same is true of Argentina, which is suffering through another crisis, something that occurs on a regular basis in South America. Venezuela's economy is dead, Brazil is devolving into widespread chaos, and the rest of the so-called EM (Emerging Market) economies are being clubbed to death by a strong US dollar.

Now, perhaps the rest of the world suffering is good for the advanced nations such as the US and in Europe, but that should be viewed as a short-sighted point of view in the long run.

Eventually, between their currencies deteriorating and President Trump piling on tariffs and sanctions, most of the world's emerging market nations will not be very emergent at all. Rather, their economies will suffer, their populations will grow increasingly restive, and trade with them will decline.

The silver lining for the United States is that such conditions should drive more domestic innovation and jobs. Eventually, the smaller nations will adjust to the new normal and maybe the US will muddle through. However, this is not the kind of environment that necessitates massive investment in well-entrenched industries.

Or, maybe it is. Maybe these dip-buying professional traders really do know it all.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61
8/15/18	25,162.41	-137.51	-245.12
8/16/18	25,558.73	+396.32	+151.20

At the Close, Thursday, August 16, 2017:
Dow Jones Industrial Average: 25,558.73, +396.32 (+1.58%)
NASDAQ: 7,806.52, +32.41 (+0.42%)
S&P 500: 2,840.69, +22.32 (+0.79%)
NYSE Composite: 12,841.28, +118.19 (+0.93%)

Stocks Down Sharply Before Mystery Buyers Catch Falling Knife

The Dow was down 335 point early in the day, but some investors who apparently know more than anybody else stepped in and cut those losses by nearly 200 points by the close of trading.

Let that sink in for a moment.

Who are these savvy speculators? Why did they choose to buy this particular dip at this moment in time. Surely there have been better buying opportunities in the recent past.

Central banks run the markets and can ruin the markets at their own whim.

Keep that in mind always, but especially on days when losses are trimmed inter-day.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61
8/15/18	25,162.41	-137.51	-245.12

At the Close, Wednesday, August 15, 2018:
Dow Jones Industrial Average: 25,162.41, -137.51 (-0.54%)
NASDAQ: 7,774.12, -96.78 (-1.23%)
S&P 500: 2,818.37, -21.59 (-0.76%)
NYSE Composite: 12,723.09, -112.22 (-0.87%)

Stocks Post Gains As Turkey Currency Crisis Moves Off Front Page

Stocks rebounded sharply on Tuesday, ending a series of lower closes which saw the Dow drop four straight sessions.

Gains were made in response to the Turkey story moving off page one and onto the list of disturbing problems in the global economy. For what it's worth, thanks to the widespread use of computer algorithms, 21st century stock markets have become more a kind of knee-jerk referendum on current financial and political news, as opposed to the 20th century model with discounted future earnings.

Thus, measurements such as p/e ratios are shunned in favor of more momentum-style observations and manipulations and old models for valuations are routinely disregarded as old hat. In conjunction with the dominant 24-hour news cycle, trading in robust markets such as are available in the US and other developed countries has become a day-to-day operation for many of the greater brokerages.

No longer content with 10-20% annual returns, the proliferation of options, futures, ETFs and other market-distorting, derivative opportunities offer potential for hedging, pair trades, and a myriad of other exotic strategies, schemes, and systems.

Thus, when a currency fails, such as happened in Venezuela and is currently underway in Turkey, markets are prone to react with immediacy before returning to the status quo.

That's the story with today's gains, though the larger issue remains unresolved. The markets have had their say and now move on to the next big thing. This manner of shoulder-shrugging complacency is what makes markets more and more fragile, as, with each big event that has an initial response but no resolution, the underlying morass of problematic financial issues piles higher and higher.

Since the financial crisis of 2008-09, markets have increasingly operated inside a vacuum, fitted with appropriate blinders to geo-political changes and financial disruptions. It's assumed that central banks, which now control almost all of global finance, can handle any issues that may pop up, either with massive buying, interest rate adjusting, or soothing words from the top-most chiefs.

It's an odd way to make a buck, but that's the norm, for now.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83
8/14/18	25,299.92	+112.22	-107.61

At the Close, Tuesday, August 14, 2018:
Dow Jones Industrial Average: 25,299.92, +112.22 (+0.45%)
NASDAQ: 7,870.89, +51.19 (+0.65%)
S&P 500: 2,839.96, +18.03 (+0.64%)
NYSE Composite: 12,835.31, +71.65 (+0.56%)

Stocks Extend Losses on Stormy Monday

As severe thunderstorms raged across parts of the Northeast causing flooding, Wall Street had a storm of its own brewing as stocks stumbled, the Dow losing ground for the fourth consecutive day.

What has caused most of the recent turmoil in stocks emanates from half a world away from the US financial center, as Turkey's lira has crashed, panicking banks with investments in the nation of 80 million, disrupting markets globally.

The Dow Industrials' four-day losing streak has ripped 440 points off the index, turning an August gain of 221 points into a 219-point loss for the month.

While the move has not been large by percentage terms, Turkey's problems are far from being resolved. In addition to the currency failure, Turkey's stock market (^XU100) has also fallen sharply (down more than 25% since late January) and US tariffs imposed by President Trump are exacerbating the unruly conditions.

Treasury yields have bounced around, with the 10-year note hitting three percent on August 1, but has backed down 12 basis points, quoted at 2.88% Monday. The 30-year bond peaked at 3.13% on the first of August and has since fallen to 3.05%, leaving the spread between 10s and 30s at 17 basis points, a widening of four bips since August 1.

With the two-year note yield dropping from 2.67 to 2.61 in the month, the yield curve seems to be better behaved than in the early months of 2018. The spread on 2s-30s has remained somewhat steady. The latest quote showed a 44 basis point spread.

The remainder of the week may prove costly to bullish speculation. July was a banner month for stocks, the best since January, but the euphoria has faded.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39
8/13/18	25,187.70	-125.44	-219.83

At the Close, Monday, August 13, 2018:
Dow Jones Industrial Average: 25,187.70, -125.44 (-0.50%)
NASDAQ: 7,819.71, -19.40 (-0.25%)
S&P 500: 2,821.93, -11.35 (-0.40%)
NYSE Composite: 12,763.66, -79.83 (-0.62%)

Weekend Wrap: Dow Slammed, Wiping Out August Gains

Against the backdrop of news that Turkey's lira was crashing against foreign currencies, stocks were hammered lower in nearly every market around the world Friday, the hardest hit regionally being Germany's DAX (-1.99%), Brazil's Ibovesta (-2.86%), and Japan's NIKKEI 255 (-1.33%).

The lira, Turkey's official currency fell 20% on Friday, a dramatic move seldom seen in FX markets.

The American bourses being the last to finish out the week, the results were expectably negative, though not nearly approaching the levels seen in Europe and Asia.

The decline was, however, significant enough to send three of the four major US indices to weekly losses. For the Dow, S&P, and NASDAQ Composite, this week ended a string of five consecutive winners. The NASDAQ posted its fourth gain in the past six weeks. Even though Friday's 52-point loss on the NAZ was harrowing, the tech-laden index still closed within 100 points of its all-time high.

The issue of Turkey's lira crashing is made all the more intriguing by its geographical location, at the nexus of Europe, Asia, and the Middle East. With a population of 80 million, the diverse ethnicity of its population has trended more toward Islam in recent years, troubling to the visionaries of the greater world's economies, especially since it is a NATO ally and member of the European Union, though it does not share the common euro currency.

Some European banks with heavy exposure may be at risk from the turmoil in the crossroads nation, though the financial concerns run side by side with political and military issues.

While stocks took a hit, the US dollar was bolstered, rising to 96.27, its highest level in over a year. That reaction translated to lower prices for crude oil. Gold and silver, along with other commodities, trended lower. Gold closed out the week at 1,219.20. Silver ended at 15.28, trending at levels not seen in two years.

In a general sense, the week served as a reminder to traders that despite optimistic sentiment, troubling, nettlesome issues are bubbling up just beneath the superficial veneer of global economies.

Dow Jones Industrial Average August Scorecard:

Date	Close	Gain/Loss	Cum. G/L
8/1/18	25,333.82	-81.37	-81.37
8/2/18	25,326.16	-7.66	-89.03
8/3/18	25,462.58	+136.42	+55.05
8/6/18	25,502.18	+39.60	+94.65
8/7/18	25,628.91	+126.73	+221.38
8/8/18	25,583.75	-45.16	+176.22
8/9/18	25,509.23	-74.52	+101.70
8/10/18	25,313.14	-196.09	-94.39

At the Close, Friday, August 10, 2018:
Dow Jones Industrial Average: 25,313.14, -196.09 (-0.77%)
NASDAQ: 7,839.11, -52.67 (-0.67%)
S&P 500: 2,833.28, -20.30 (-0.71%)
NYSE Composite: 12,843.49, -113.17 (-0.87%)

For the Week:
Dow: -149.44 (-0.59%)
NASDAQ: +27.10 (+0.35%)
S&P 500: -7.07 (-0.25%)
NYSE Composite: -109.85 (-0.85%)