Richard’s Comments

It was a good week for stocks, but the advance was not based on great values, it was based on expensive stocks becoming more expensive. In this kind of environment, the question becomes (at least for me it becomes) – "If I want to participate in the rally, how much do I dare risk?" Ah, that's always the question when stocks are in an historically expensive area. Because expensive = high risk.

By Chuck Butler

Welcome to another edition of On the Butler Patio… This week, we’re going to discuss two things that are front and center in my mind.  

First, we’ll talk about the retail sector’s problems, and they’re not all caused by Amazon. Second, we’ll talk about China’s crowding out of the petrodollar. So grab a beverage of your choice, and let's get to the patio!

Following another day of rising stock prices in the US, Asian and European markets followed suit, focusing more on good earnings prospects and less on geopolitical risks.  The Asia Dow was up 0.63%, and the STOXX 600 rose 0.29%.  UK shares were relieved that the latest economic data doesn't support additional interest rate increases there, leading that index to zoom up by 1.26%.

By Jon S. Strebler 

The seasonality of markets is something more often relevant to commodity traders. Back in the 1970s and ‘80s, I handled the trades for a program called Seasonal Opportunities in Spreads (SOS). The manager of the thing simultaneously bought one contract month of a particular commodity future, while selling another month of the same commodity, such as buying Dec Corn, selling July Corn. Sometimes the spreads involved trading two related commodities, such as buying Dec Silver, selling March Gold.

By Matthew Kerkhoff

If you were to compile a list of the most effective recession predictors, the term spread, or difference between short and long-term interest rates, would likely be at the top of that list.

This is because the term spread (also known as the slope of the yield curve) has an uncanny ability to predict economic slowdowns. Over the past 60 years, every recession we’ve experienced has been preceded by an inverted yield curve. Not only that, a negative term spread has ALWAYS been followed by an economic slowdown – even if it did not result in an official recession.

Richard’s Comments

The stock market loves to keep us confused and guessing. How typical of the market to rally during the days following a Dow Theory bear signal. We might even get a full correction coming up, but I doubt it. The market takes in ALL available knowledge, weighs that knowledge, and then, in due time, comes up with a conclusion. I take the recent Dow Theory signal as a "conclusion."