1. Moving the markets

An early rally fizzled out mid-day with the major indexes suddenly tanking and closing modestly in the red. Today’s session had the feel of a typical summer day with volume disappearing causing the S&P sectors to trade lower and directionless.

However, the object in focus that may impact markets tomorrow is the annual meeting of the bankers in Jackson Hole, WY where Fed head Powell will be the most watched and analyzed speaker.

I don’t think any more earthshaking news will be forthcoming other than what yesterday’s minutes from the last meeting revealed. But, the anxious crowd hopes for more clarity. Hmm, the details I outlined yesterday couldn’t be any clearer…

On the economic data front, 2 more bad reports surfaced. New home sales took a hit by falling to a 9-month low, while manufacturing tumbled, missed expectations and dropped for the 3^rd month in a row.

ZH featured some worthwhile charts that show some of the current decoupling of a variety of important indexes.

1. Chinese Yuan and US stocks
2. Bonds and US Stocks
3. Yield Curve and US Stocks
4. Commodities and US Stocks
5. World Stocks and US Stocks
6. Macro and US Stocks
7. Global Central Bank Balance Sheets and US Stocks

So, what do these charts mean? They simply show that things are out of sync and eventually will adjust themselves and recouple. As always, no one has the answer as to which direction the adjustment will play out; we simply must be patient and observe the developments and see if any of them will affect our Trend Tracking Indexes (TTIs).

Read More

1. Moving the markets

The major indexes hugged the unchanged line for most of the day but were not able to remain above it at closing. The exception was the Nasdaq, which managed to notch another positive session.

The Dow’s and S&P’s pullbacks were modest and influenced by the Fed’s decision to maintain its hawkish stance. The released minutes indicate that if economic data points stay strong “it would likely soon be appropriate to take another step in removing policy accommodation.” Translation: Our planned rate hikes remain on track.

However, they issued one disclaimer in stating that “any tightening will have to pause if the US trade tensions with partners continue to escalate.” So, there you have it. Nothing has changed from the prior meeting, and they will act according to their interpretation of the events as they unfold.

Overall, the markets have managed to overcome some of the obstacles in the recent months, namely the back and forth tug-of-war with our various trading partners, which so far have not affected the earnings season. Now, the latest debacle has surfaced in the form of a possible legal drama surrounding Trump and his personal attorney, a saga which is sure to be regurgitated over and over my MSM, but it’s not clear if it will have any impact on equities.

The US Dollar’s trend reversal continued as it dipped to its lowest level in 2 weeks, while interest rates dropped with the 10-year yield slipping 3 basis points to end at 2.82%. However, over the past 2 weeks bonds have decoupled from stocks as this chart shows. We will have to wait and see who is right…

Looking at the big picture is economist David Rosenberg, who summed things up like this:

“With the sub-par resale home sale report, the running tally so far this month shows 12 data-points missing consensus views to the downside; 5 beating; and 3 in-line. If that characterizes a strong economy, I’d be interested to see what a weak one looks like.”

Read More

1. Moving the markets

The rally gathered steam and continued for the fourth straight day despite some weakness setting in towards the end of the session. I guess it was a case of the nerves not only due the S&P 500 notching an intra-day record but also gaining on the day when stocks tied the record for longest bull market in history, according to MarketWatch. The Russell 2000 and the Dow transports set records as well.

Despite Trump’s rhetoric to the contrary, optimism still prevails that the US/China trade dispute will be resolved amicably, which has been a supporting factor for equities along with solid corporate earnings.

With earnings season just about being over, a new focal point is needed to provide the ammo for further market advances. With no essential economic data on deck, that focus has been on the Fed, which will release the minutes from their latest meeting tomorrow around lunchtime.

This is followed by a speech from Fed head Powell on Friday, where much hope is put on clarification of some of the potential market headwinds, such as impact of current trade policy, plans for further rate hikes, and the effect of the Turkish currency crises on other emerging markets.

As I am writing this, Trump’s personal lawyer Michael Cohen pleaded guilty to a variety of charges. The futures markets were modestly affected with the major indexes currently giving back some of today’s gains. I don’t think this will be much of a market moving affair, but you can never be sure until we see how this plays out tomorrow.

Read More

1. Moving the markets

Sentiment was predominantly bullish with the major indexes scoring another winning session supported by a couple of billion-dollar mergers. At the same time, optimism reigned supreme that a solution will be found to bring the trade-tug-of-war between the US and China to a mutually acceptable conclusion.

As the WSJ reported Friday, negotiators are mapping out talks with the aim to have a resolution in place by November. If this comes to pass, a lot of market uncertainty would be removed, which would increase the odds of renewed strength in the equity markets. On the other hand, Trump just announced that he “does not anticipate much progress from the trade talks” and “there was not timeframe” for ending the dispute.

Right now, however, the reality looks quite different in that 25% tariffs on $16 billion of Chinese imports will be implemented later this week. That for sure will provoke a retaliatory move from China.

Outside the US, the events in Turkey continue to be troubling, as the lira and the stock market have been hammered and high inflation, political instability and debt, along with potential contagion, remain a constant focal point for global investors.

Bond bears were the ones that suffered some losses today, as yields weakened, and bonds rallied. The 10-year lost 5 basis points to close at 2.82%, its lowest since the end of May. It’s not clear yet if that was the result of reports announcing that Trump accused the Fed of not being dovish enough.

On deck for this Wednesday is the release of the minutes from the Fed’s most recent meeting. Every word will be scrutinized to gain insight into the path of intended interest rate policy over the remainder of the year.

Read More