The market ended Wednesday’s session on a high note, as the Dow joined other large equity indices with a late spurt on the word of a trade compromise with the European Union (EU).

The cooperation includes increased European imports of U.S. liquefied natural gas (LNG) and soybeans, along with the goal of zero tariffs on industrial goods. There is also talk of making the North Atlantic Treaty (NATO) stronger as well. This is amazing news. Not only does this provide the White House with a huge win, but it also gives President Trump an amazing leverage against Russia on regional influence and China on fair trade.

I love the focus on liquefied natural gas, which could be an economic gold mine for the United States.  Last year, LNG exports surged 400% with Mexico leaping to the top of the list of destinations followed by South Korea, China, Japan, and Jordan.

Beyond Trade Fears

A couple of days ago, I pointed to the Transportation Index (DJT) holding its 200-day moving average then breaking out through its 50-day moving average as a great sign for the stock market and the economy.   The moves in this index are the best proxy for the economy, and in my mind, it is far more significant than fear-mongering over tariffs.

Yesterday, the following names in the index crushed Wall Street financial consensus:

• (UPS) United Parcel
• (NSC) Norfolk Southern
• (R) Ryder System

I’m watching for this index to rally to 11,088 through there, it should form a double top at 11,373.

Meanwhile, I want to reiterate that since the trade battle began with the stern warnings and implementation, the stock market has been in a stealth rally. It’s masked in part by globalists going on television each day, claiming the “war” was hurting the market. The counterfactual argument that stocks would be higher is another specious angle because it’s just a guessing game.

Most of the experts I monitor were cautious to outright bearish coming into 2018 and the market is higher anyway. The biggest damage has come from inflation fears and deflation fears (go figure).

• DJIA +2.8%
• S&P 500 +6.5%
• NASDAQ +14.9%
• Russell 2000 +9.8%

Too Tech Reliant?

After the close on Wednesday, there were a lot of earnings results. The one dominating the headlines was Facebook (FB), which fell short on monthly average users. The initial reaction saw the stock down almost 10%, but I think the stock will rebound.  For me, this points to a much larger issue. Has too much money gone into too few tech stocks?

I understand there is probably room to run for the big tech names, but the massive amount of money earmarked for these investments clearly will be a problem on the downside. 

This is why investors need to be diversified and to not turn their accounts into a day at the races, looking for big moves each day.

On that note, I liked market breadth yesterday, especially beyond technology as the NYSE saw broader advances and wider leadership.

Market Breadth	NYSE	NASDAQ
Advancers	1,853	1,666
Decliners	1,115	1,269
Up Volume	2,198,639,090	1,173,280,520
Dow Volume	1,290,610,865	665,541,424
New 52-Week Highs	91	80
New 52-Week Lows	57	81

Today’s Session

The financial media will be focused on over reporting Facebook's earnings miss and under reporting the big news in the tariff battle.  Meanwhile, there are lots of moving parts to the market, including the latest wave of earnings. 

This morning headline June Durable Goods report missed consensus, but the more important component of business investment came in much better than anticipated, and May was revised up more than 100% from the initial read.

• June +0.6%
• May +0.7% (revised from +0.3%)
• April +2.0%

This adds even more excitement ahead of tomorrow’s initial read on second quarter GDP.   

 

 

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