1. Moving the Markets

The major indexes pulled back for a change as volume and the hunt for Dow 20,000 slowed down ahead of the Christmas Holiday. Healthcare and real estate were the primary losers today.

Banking stocks in Europe round-tripped this morning as the shares of Italy’s problem child, Monte Paschi, crashed, soared and plunged again amidst on-again, off-again bail-out headlines. It now appears that the bloodletting has also spread to Spanish banks following a court ruling against them for mortgage fraud.

I think these EU problems are just the beginning, so it’s important to note that the consequences of Italy’s banks owning $360 billion in non-performing loans will spread at some point to France and Germany and subsequently make it across the pond to the U.S. While this may not be imminent, it’s something to keep an eye on.

After some of the investment heavyweights like Bill Gross and Jeff Gundlach have been commenting in regards to the reckless post-election rally with things like “there is going to be a buyer’s remorse period,” it was El-Erian’s turn today agreeing that “now is a good time to take advantage of the latest rallies in global financial markets and scale back from risk,” along with “it makes total sense to take some money off the table.”

I especially liked his viewpoint that “We’ve priced in no policy mistakes. We’ve priced in no market accidents, and we’ve ignored all sorts of political issues.”  So, let me be the voice of reason again, just as the Dow may make another attempt at breaking the 20,000 barrier, and point out the importance of having a sell stop discipline in place.

Bob Farrell’s market rule #2 says it best: “Excess in one direction will lead to an opposite excess in the other direction.”

Just be prepared.

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1. Moving the Markets

The recklessness and utter abandon with which the markets have been rallying, since the election, is simply astounding. Caution, risk aversion or view of economic fundamentals do either not exist or are simply ignored. It is financial engineering combined with market manipulation at its finest.

Such was the case again today as the Dow attempted to breach the 20,000 level but failed; however, the dollar kept on chugging along and rose to its highest levels in 14 years, which is not a good thing for companies involved in exports due to them possibly being priced out of some markets. About 40% of the S&P 500 members are selling internationally and any possible fallout will sure be known over the next two quarters.

Wall Street’s focus and the main driver of this rally remain fixed on one thing and one thing only: The Trump agenda with its tax cuts, infrastructure spending, deregulation and the subsequent anticipated boost to businesses.

In the end, it’s nothing but hope with 2017 economic growth expectations remaining stuck near cycle lows as the chart shows:

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1. Moving the Markets

It was a reluctant rally with investors being hesitant considering that the major indexes were still hovering near all-time highs; bond markets finally managed to stage a modest recovery after the drubbing of the past few weeks.

Not helping matters were reports from Germany that a truck ran into a crowded Christmas market in Berlin killing 9 and injuring an estimated 50 people. In Turkey, the Russian Ambassador in charge of Syrian piece-talks was attacked and killed as he was getting ready to give a speech.

And, of course, today was voting day for the Electoral College the official result of which will not be known until early next year.

Hong Kong stocks corrected, Italian banks crashed, the NYSE suspended trading for a while, after which equities rallied, and we’re still waiting for the moment in time that the Dow hits the 20,000 level or has two down days in a row, which it has not seen for 7 weeks.

It was a tumultuous day with no clear direction.

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