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I think you’ll find the best part of today’s letter is that it’s going to be pretty short. I had a nice article all finished up to send for this evening, but I wrote it in my home office, and simply forgot to forward it to my wife’s office.
I worked in her office all day, because she’s flying back home from NJ tonight, and her office is 50 miles closer to the airport, so I figured it would make sense to work here all day. Well it was a great plan. Except for the fact that I didn’t forward my article to myself, and so it sits there on my computer with no one there to send it.
Anyway, I titled today’s short note “Boom!” because if you were paying attention to the market today, it was a sluggish, choppy, flat mess pretty much all day. The S&P would gain 4 or 5, then I’d look and it would be up 1, then 3, then 6 then 1 again. It wasn’t terribly inspiring.
But at about 3:30 all hell broke loose. I started to see big volume bars hitting and the indexes were soaring higher. Obviously news had broken, but what news? The first screen I had open was Market Watch, and here’s what it said:
MW Europeans agree to lower industrial tariffs, import more U.S. soybeans: Dow Jones 15:40:00
MW Europeans agree to deal to avoid trade war: report 15:43:00
So, there was an announcement that Trump and the Europeans were getting considerably closer to agreements on trade, and the market lit up. Rolling into the close we had the DOW up 172, the S&P up 25. I’d call that a ‘boom” higher for sure.
Naturally everyone opposed to Trump is going to try and find every single thing they can think of to discredit this, but the fact is, like him or detest him, he’s shedding light on things that no one would touch for 40 years.
Naturally the other aspect of where this market is, is hinging on the earnings reports. After the bell Facebook reported and it didn’t seem as stellar as they had all hoped, but with today’s sort of momentum, I suppose they’ll get a pass. They are one of the infamous “FANG” stocks, and virtually every fund owns them.
But the interesting one to me is going to be Amazon Thursday evening. This “creature” has been dominating everything it gets its hands on, and while they never made a dime for 20 years, somehow they were given a pass to continue trading higher and higher and higher.
If they knock the cover off the ball, and judging by how much junk they sold on their “prime day”, I have to imagine that most of their quarter was pretty stellar. If that’s true, and they soar the markets higher again on that, we could very possibly see the S&P challenging its all-time high.
I didn’t think we’d see that happen. However, we’re not very far away from it. I have no issue admitting when I’m wrong and I’m wrong. I thought that this market could bounce to the 2800 level and run out of gas. I thought the line of resistance there, coupled with such things as the Feds hiking rates, and doing “QT” and possibly and earnings “peak”, might have stopped us there. But as I type this, we’re at 2846, and the all-time high is only 2875. They could do that in one day.
The question will become, what’s going to keep it going? If we break through the all time highs, do we “reset” the levels and head for 3000? That’s possible. Or, we break out and it ends up being a “blow off top” and that sets a top in the market for years? Both are possible.
If we actually do get good (better) trade deals, and China doesn’t really retaliate other than devaluing their Yuan (currency) you can make the case for higher. If however the Feds keep hiking rates and removing their “accommodation,” things get more interesting. If it was ever-lower rates and Quantitative easing that drove the market to all-time highs, doesn’t it stand to reason that rising rates and quantitative tightening will lead them lower?
The article I had wanted to send today, shows the differences in opinions about that. So I’ll save that for Sunday.
The latest issue of our free newsletter is up and this week we're just chatting about "living your life". I'm on record as having said many times that I think a global economic reset is going to take place. "Debts that can't be paid...won't be" comes to mind. So should we just live in caves and in fear? Or should we go to work, do the best we can and enjoy our friends and family?
In our view, you have to live life like nothing's going to happen, but do a little "prepping" that could get you through a short period of turmoil. Everyone should have the wherewithal to get through 2 - 3 weeks of a really bad situation.
So, take a read, it's free!
As you all may or may not know, I haven’t been “in the economic saddle” much lately because of my wife’s Surgery and follow ups. It’s been a rough couple weeks and I’ve had to spend a lot of time helping her. Things will get “right” again, it’s just a matter of time.
In fact, great strides were made just today, as her “drains” were removed and for the first time in a week, she can take a full shower instead of a sponge bath. For the past week, I’ve been the “drain maintenance” guy, the sponge bath guy, and the “make a poncho out of a garbage bag” guy so she could wash her hair in the sink. So, today was a stunning success!