Sitting Bull

Sitting Bull.  No, not the famous Lacota Leader of Little Bighorn Battle fame.  I am talking about the market, of course.  Yesterday’s news cycle was a battle between, what many were calling, the longest bull market in history and the beltway turmoil caused by the Manafort conviction and the Cohen plea deal. Sounds like the day was teed up for a real powerhouse, but alas, markets ambled their way through the session into a mixed close.  There appeared on screen and tape many challengers to the bull market run story with many claiming that, while this may have been the longest bull market, the ones of the 1920’s and 1990’s featured a far more robust bull.  A bull market is the surge that occurs after a greater than 20% drop and continues until another drop of greater than 20% happens.  The last such drop occurred and bottomed out in March 2009 and the surge that followed lasted for 3,453 days, growing more than 300% since… well it will last 3,454 today, but who is counting.  What does it really mean to you?  Drum roll please…….. Nothing!  This current bull run can be attributed to several key factors: buy the dip mentality, an unprecedented accommodative monetary policy, fiscal stimulus, stock buybacks, and earnings growth.  Dare I mention FANGS!  All of these are good for investors and as long as they persist so will the bull market.  Bull markets actually typically end in a recession caused by cyclical factors and interest rate hikes.  Speaking of interest rate hikes, the Fed released its minutes from their last FOMC meeting and it appears quite clear that they are prepared to continue to raise rates, despite the recent Presidential bullying.  They see inflation on target but note the strong labor market, which will be the ultimate rain on the parade.  The release didn’t seem to faze the lazy equity markets, but fixed income and currency traders certainly took note.  Remember that those markets typically are the ones to sound the early warning bell.  Yesterday I reported a 60% chance of a December rate hike and that probability has since gone up to 66.1%, so someone besides me may actually read through those minutes. Regarding the potential for more political upset and Presidential legal issues, well it appears that markets have finally become immune to the noise.  That being said, markets may be able to get a bit more out of this bull market in the months ahead.

Equity markets closed mixed yesterday with the S&P500 and Dow closing slightly lower while the Russell 2000 and NASDAQ closed in the green.  All four indices remain constructive, three of which remain within striking distance of all time highs and the surging Russell 2000 at its all time high.  West Texas Intermediate Crude got a nice, and much needed boost yesterday as a report of inventory draw downs came out.  A step up in Iran sanction talk also helped boost the commodity, which will encounter resistance around 69/70 (see chart 11 in my attached daily chartbook).  Read my yesterday’s “What’s in a Number?” Geek-Out Wednesday description of resistance.  The yield curve continues to flatten and starts today’s session at 21 basis points and 10 year treasury yields are at 2.82% just above the 2.8% Fibonacci resistance line (see charts 18 – 20 in my attached daily chartbook).  With no economic releases today, traders will continue heap adoration onto the retail sector, which had a solid earnings season.  Lowes and Target gave traders a reason to cheer yesterday and today we will hear from Gap stores.  In this vacuum, traders will continue to debate whether this record bull mark is worth noting or just a bunch of bull.

daily chartbook 2018-08-23