The Market Bull – December 17, 2018
The major averages close with large losses, unable to make progress despite little real news. It would appear that this will be an important week for the markets as they retest critical support levels. A failure here could push the markets significantly lower and put an end to the buy the dips strategy that has worked fairly well until now.
The New York Manufacturing Index plunged by more than half to 10.9 in December despite a significant jump in employment.
New orders fell sharply, price data slipped but remains fairly high.
The National Association of Home Builders Index continued its notable decline in December falling 4 points to 56 on a plunge in north east activity. The western region was unchanged at 65 and is the strongest of the 4.
Nothing says success like record debt levels, something already achieved globally in the aggregate and also hear at home in numerous categories, student, auto, credit card and corporate debt comes to mind.
Credit.com reports that household credit advanced 3.85% from a year ago in November on strength in credit card and auto loans despite higher interest rates. Delinquency rates remain very low at 2.47% but have picked up markedly of late for auto, and credit cards.
The trend is your friend until it isn’t. Is a well-worn investing truism most recently illustrated by the FANG stocks. But when the trend turns against you funny things start to happen. Things that most people thought were impossible or so remote to be not worth thinking about. One of the latest examples of this includes the failure of Wells Fargo and Barclay’s to price a junk bond offering when the banks were forced to keep a 415 million Dollar leveraged loan issue on the books when it failed to get a single bid. Similar events have occurred in Europe of late as well. Before you dismiss this as an isolated event with little or no significance. Keep in mind that corporations are up to their eyeballs in debt, much of it junk or high yield.
Additionally corporations generally don’t pay off their debts, preferring instead to roll them over or refinance them. This leaves the potential for a domino effect that could have significant repercussions.
Standard and Poors 500 Index closed at: 2,545.94 down 54.01
NASDAQ finished at: 6,753.73 down 156.93
Gold ended trading at: $1,249.90 up 8.50
This is Caleb Lawrence Registered Investment Adviser I can be reached directly 831-334-5318 or stop by my office 5321 Scotts Valley Drive in the Scotts Valley Plaza, Suite 202, Scotts Valley, Ca, 95066.
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