2nd Quarter Coming to A Close

What a wild Thursday! My gut tells me that volatility and some wild swings are coming. If you casually look at the stock market at the end of every day, today all you see is a 21 point down day in the Dow Jones. To the regular working Joe or Mary, it's just another ordinary day. It was anything but ordinary, take a look at this hourly chart on today's trading action in the Dow.

This morning started with a decent 150+ point plunge in the first hour of trade as you can see to the right end of the chart. Markets are known for taking steps up the staircase and when they fall, the markets can be referred to as falling down the elevator shaft. The US stock market has been steadily going up for the past 5 years, the past year it has gone up the staircase with ease and it really should not be that easy. The stock market has not seen a 10 percent correction in over 3 years, that is just not healthy. Markets go up and markets go down, someone that I read daily, says "stocks do not go to heaven, they do go to targets". I love that saying and I do feel very strongly that stocks are priced in a perfect world and that there is way too much complacency amongst the investing world.

So what caused stocks to come roaring back today to finish the day? We are in thin trading conditions with the 4th of July right around the corner, lots of traders around the globe are enjoying the World Cup Futbol, perhaps. It could be that we are in the final 3 trading days of the end of the quarter, month ends and quarter ends can bring in some big moves with what they call "window-dressing", where the portfolio managers are polishing up their performance for the clients. What happens in the next 2 sessions between Friday and Monday will be of no surprise to me, I will watch and get ready for the start of the new quarter starting on Tuesday.

As for the other markets, oil traded down to its breakout point @ $105 and bounced to $106. Let's see what happens tomorrow, I really was not that impressed with the bounce today. Gold and Silver still holding the large gains from last week with Gold trading above $1315 and Silver a touch above $21. The US Dollar is down the past 2 days but not much considering the abysmal revised negative 2.9 percent drop in the US 1st quarter GDP that was released yesterday. Yes negative 2.9%! Hello stock market at all time record highs!

Lastly, here is the weekly chart on the 10 Year Treasury Note. Please note, when bond prices are rising, the yield or interest rate is falling. As of the end of the day today, the rate on the 10 year note is 2.53%. Notice that this chart goes back 5 years, notice the trajectory in rates from left to right. This is from the FED and all its QE programs to keep the economy from cratering back in 2008 and 2009. Everyone keeps saying how interest rates have to rise, the market says otherwise! I do not know what will happen on any given day but I am pretty sure that interest rates rise when the economy is doing good and every now and then rates have to be pushed higher by the FED to slow things down. The media and stock market would have the public believe things are just swell, the interest rate market is saying something is rotten in the state of Denmark! Something's got to give....

We are definitely living in unprecedented times, all we can do is go with the flow. I hope I got my points across. Thanks for reading and enjoy your weekend!
TraderMartin