Thanks to this morning’s technical issue, which delayed this morning’s post, mwe have the luxury of looking at the markets when open.
Remember a couple of days back, we had a libretto (short plot summary) that suggested what we would see would include:
* Market high around August 26th plus or minus a week or two
* Run-up into the holiday week
* Sell off into the act5ual weekend of the holiday because “investors” are really a cowardly lot, who run at the first sign of trouble because in their world, interest and profit is not determined by time and risk, but rather by time only. If there’s risk involved, they head for this hills.
This morning, the nice, obedient market is doing exactly as scripted:
As of press time, the Dow is now nearly 100 points and it looks like the annual high may have been put in this week.
More importantly, however – on the technical side- is that the S&P 500 just made the 2,000 level. If it doesn’t come back and hold well above the 2,000 level, this could be one of those cases where the market hits the lower side of a strong psychological level (S&P 2,000) and doesn’t muster the conviction to punch through.
Or, goes the other line of thinking, it’s not uncommon for a market to hit a resistance layer, pull back and gather strength for a while, and then power through it. Sometimes this striking of the underside can take 2-4 times before the final outcome is known.
The next three months are often the worst part of the year, so things should become amusing quickly.
Another factor to consider? Gross Domestic Product data:has just been released:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 4.2 percent in the second quarter of 2014, according to the “second” estimate released by the Bureau of Economic Analysis.
In the first quarter, real GDP decreased 2.1 percent. The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month.
In the advance estimate, the increase in real GDP was 4.0 percent. With this second estimate for the second quarter, the general picture of economic growth remains the same; the increase in nonresidential fixed investment was larger than previously estimated, while the increase in private inventory investment was smaller than previously estimated (see “Revisions” on page 3).
The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
You might have thought that a 4.2% annualized increase in GDP would have powered the markets the other way (UP) but no, not the case…at least so far. I still think we will move higher from here and this may be little more than position-reshuffling before the long weekend so yes, I am still in my highly speculative long position.
More after this…
Ukraine Going Hot
Earlier this week, I told you that Ukraine wasn’t anywhere near over.
Sadly, the headlines this morning are bearing our what our sources have told us – that both NATO and Russia are continuing to move men and equipment into place for a showdown, although each has been care to remain just below the “press threshold” which is both a good thing – and bad.
This morning things are back above the US press threshold with reports that a Russian armored column has seized a key city in the eastern part of what used to be Ukraine, but which is quickly becoming a suburb of Moscow.
Given that the Russians could back this play with a lot more horsepower over the weekend, maybe the market is getting worried that the US/West is getting caught flat-footed [again] in world affairs.
Russian Bank-Jack
All of the events in Ukraine add up to something else that should worry the hell out of US officials. Even the cookie monster at State might grok this, even if ‘strategic standoff blown” is incomprehensible.
By now, you have no doubt already seen the reports that Russian hackers have hit at least two US banks.
But here’s the interesting worry-point: What if these hackers are merely setting up for a larger attack yet to come? Suppose that Russia is set to launch a full-scale Blitzkrieg kind of attack in Ukraine. Would it not make sense to time such an assault by wiping out as many Western banks as possible?
Oh, sure, payback for sanctions is one school of thought, but another is that this is the little war before the Big War. And that’s probably another reason why the market turned chicken this morning.
You Mean They Weren’t?
Ah…the fine line between function and legal as Angelina Jolie and Brad Pitt have formalized their relationship.
My question (that the non-financial press) doesn’t want to cover: Does this mean they will be filing a joint return, now? That’d be the real snooze angle to it.
Word from the Gar-Fish
Years ago, I used to occasionally appear with buds Pat Kelly and Space Young on the old KMET (LA’s) “Surf Report with a Beat” back in my George Garrett radio days. (Ure wasn’t recall-friendly, I was told). I be the GarFish…which was back when Mt. St. Helens what poppin.
And geez Louise, what a fine surf report (with or without the beat) this morning: Monster waves in SoCal from the passing of Hurricane Marie.
If there’s a secret government unit that controls weather, could ya’ll work on timing a bit? This would have been more useful (though more crowded) if it has been timed for the long weekend? Hoooo-yah.
We now return you to your regularly scheduled trouser trout…
