The Bond Market Was Right

Dan Stewart CFA®
President/Chief Investment Officer
NorAm Asset Management

I have stated in my last few newsletters the I was concerned due the strength in treasury bonds.  Even in the face of a higher PPI on Wednesday, bonds were up 1%!? They were telegraphing something was wrong under the surface.

The bond market is much bigger and deeper than the stock market, and when things don’t add up, the bond market is usually right.  This time was no different.  that it would be important to hold the line at the upper end of this range, otherwise stocks were headed lower.  Well, that is exactly what happened.

Stocks were taken to the woodshed yesterday.  It was broad based selling across the board and there was no place to hide.  Even energy, the strongest sector, declined.

The DOW was down -167 points, or -1%.  And this is with DOW component Cisco Systems (CSCO) up 6% after beating estimates after the bell on Wednesday.  In fact, only 2 out of 30 stocks – AT&T (T) and CSCO – were in the green on the DOW.

The S&P was down almost -1% and the NASDAQ -3/4%.  CSCO, due to its size of 125 billion market cap, also helped dampen the slide on the NASDAQ.

Up Volume was only 20% on the NYSE and 29% on the NASDAQ.  Advancing issues were 29% and 32% respectively.  Total volume was higher than the past few previous days.  The whole point is that selling was widespread and somewhat intense.

The big question is whether selling was intense enough to attract new buying.  The S&P 500 closed at 1870, just above its 50 day moving average (50 DMA) of 1868.

In fact, intra-day it touched its 50 DMA and reversed higher (see S&P 500 graph).  It will now be important to hold above the 50 DMA as many technical traders observe this indicator.

As this Bull market ages, it will become more “narrow” and selective, both by sector and individual stocks.  You must focus on the strongest sectors, and then the strongest stocks within those sectors.

For a complimentary portfolio review, e-mail me at Dan.Stewart@NorAmAsset.com and we would be happy to review positions.  We can evaluate your sector exposure and individual stock risk.

We have a few economic reports including  Housing Starts and Building Permits.  We have no companies reporting on the S&P 500, and therefore the DOW.

We only have few small and cap companies reporting in the broader markets.  I have listed 4 below.

Remember to tune into The Wall Street Shuffle Saturdays on 1190 AM at 10 a.m. in DFW.  You can also listen via iHeart radio.

I hope you enjoy the show.  If you have any investment questions you would like discussed on the air or specific investment questions in which you would like personal advice, e-mail me at Dan.Stewart@NorAmAsset.com and I will be happy to respond.

Dan Stewart CFA®
Chief Investment Officer
NorAm Asset Management

Economic Reports Today:

Housing Starts
Building Permits
US Housing Starts Revisions
University of Michigan Consumer Confidence

Some Notable Earnings Reports Today:

Canadian Solar (CSIQ)
Biglari Holdings (BH)
Amphio Pharmaceuticals (AMPE)
Advanced Emissions Solutions (ADES – after market)


The information presented is for educational and entertainment purposes only.  Opinions and information expressed are based upon information considered reliable.  However, factors are constantly changing and should not be relied upon. You need to do and verify your own research.
Moreover, no reader or listener should assume that any information or discussion presented serves as personalized investment advice from NorAm Asset Management, Inc. or from any other investment professional, and is not an offer of solicitation for the sale or purchase of any specific securities, investments, or investment strategies. You need to have your own, individual investment advice suitable for your personal situation.
Investments involve risk and unless otherwise stated are not guaranteed.