Another week, more all-time highs. For the Dow, that meant the 21,169 high at 170 days after Brexit held for 65 days. Do you think 69 days from that March 1 high will be significant? It might and just as important this week is 144 days from the early November low just before the election. The freight train has more cycle excuses to take a pause or even a fall.
How about in the natural, what would be the psychological reason to scare the markets? How about the Comey testimony? I despise bringing politics into my discussions on financial markets but these are not normal times. When it comes to Comey, he has already potentially committed perjury in his May 3 testimony to Congress when asked about whether someone may have politically asked him to back off any Russian investigation. You’ll recall his answer was, “Not in my experience.” This is the short answer but it came out of his mouth, not mine. Since that time, he has failed to produce a dossier or whatever he wants to call it. Are you tired of hearing about this yet?
Well, it’s going to dominate the headlines this week if Kathy Griffin doesn’t. I almost forgot, doesn’t the UK have an election this week? ISIS made sure you didn’t forget. In the meantime, it was a disappointing jobs report as the experts were calling for 185,000 and got 138,000. Do you think I am going to blame Trump for this? There was an exciting burst at the start because when you get a pro-business administration coming in after eight years where they didn’t average 3% GDP in any of those years, the bar is low. It took Reagan two years to turn around the economy. But Reagan didn’t have to deal with the Kathy Griffins of the world, which are too numerous to fathom. I warned you there would come a point where confidence would sap because of all the social unrest and interference to the growth agenda. I’m not the only one who is concerned. Respected economist Martin Armstrong paints a very dark picture if the left doesn’t back off and they achieve their misguided dream of removing Trump from office. We’ll leave it at that.
Technically, the stock market train kept rolling. But the U.S. dollar didn’t react well to the jobs news although it did retest to start the week. It’s also starting to break important support going back to election day. What was the catalyst to break support? It was the jobs report. If a measly jobs report can cause this kind of hysterical reaction, what would negative Comey testimony do? The best-case scenario for Dollar bulls would be a bad news bottom that would reverse course right near that stick bottom on Nov. 9.
How many of you have driven through the canyons in Los Angeles on the way to Beverly Hills or Malibu? You may have noticed all those homes held up by sticks on the edge of the mountain. I can tell you from personal experience they are strong, but a real mudslide storm will take them out. The theme of the week is going to be how strong support in the Greenback really is. Comey is no longer a credible witness but how much backlash will the markets be willing to take?
As far as the stock market is concerned, it looks decent in shrugging off a bad jobs report. But it has one area of concern which is Transports which remains a laggard. It has done well to recover as much as it has. But unless it stays the course, the Dow won’t end up going much higher. Biotech also recovered to a degree based on a couple of good days.
Here we are in June. On tap this month is the near-term cycle points this week but in the bigger picture, we have another seasonal change point coming up with the official start of summer. The Fed is expected to raise rates if for no other reason to keep their powder dry to use if and when the economy tanks. In case you noticed, the bond market went parabolic in the other direction on the jobs number which probably takes away some of the certainty surrounded this potential rate hike.
By signaling they’d do X number of hikes this year they painted themselves into a corner as the markets have certain expectations. If they don’t, we go around in a big circle where the market gets upset because they’ve been promised Trump’s growth agenda. My major premise for the year is the biggest threat to the market is any interruption to tax reform which is now in question. As the calendar hits June, we must start looking at the Congressional calendar because they like to take vacations and time is starting to run short. Markets were promised something by Labor Day and it’s starting to look like the end of the year.