A Light Volume Rally In A Very Quiet But Nervous Market

By: Kent Engelke | Capitol Securities

Did the markets breathe a general sigh of relief that a major geopolitical event did not occur over the weekend? That was the accepted narrative for yesterday’s light volume advance. I found it disturbing that North Korea is still making bellicose statements, statements that most are taking as bluster.

I ask however, does the Trump administration share the same view? It was reported, albeit unconfirmed, the US is sending two more aircraft carriers to the waters off Korea. Is this the ultimate example of “Battleship Diplomacy?”

I vividly recall examples as to how the markets can be held hostage to every geopolitical event, both real and perceived. The complacency at this juncture is perhaps disturbing especially if Kim Jong Un is indeed this deranged paranoid lunatic as projected, since predicting the true intent of one’s actions in this state is close to impossible.

Markets were also relieved by Chinese data that was slightly better than expected.

Speaking of China, it was reported in the late afternoon that the US has received encouraging signs that China will pressure the Korean regime to dismantle its nuclear weapons program, a catalyst for a further advance.

Earnings season accelerates today. This week, several mega sized firms are posting results including Goldman Sachs, Bank of America, NetFlix and IBM. How will these results be interpreted?

Last night the foreign markets were down. London was down 1.62%, Paris was down 1.18% and Frankfurt was down 0.56%. China was down 0.79%, Japan was closed for a holiday and Hang Sang was down 1.39%.

The Dow should open nominally lower ahead of several earnings that exceeded expectations. The French election on Sunday is beginning to make headline news. Will the populists win another victory or will the establishment prevail? The answer I think is pivotal. The 10-year is up 6/32 to yield 2.23%.


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