It’s been a long season of disappointment for the bears

It’s been a long season of disappointment for the bears. Chalk up another one. Once again, the Dow came to edge and didn’t jump. Tuesday was the big day. Markets started dropping like a rock on the apparent news of yet another “Russian collusion scandal” involving Trump’s son. You know all about it. But by the time it started turning up news broke the Senate decided to stay in session for the better part of August. Markets turned up and fully recovered.

Nothing to see here, it was as if nothing happened. Whether anything really happened in the office of Donald Jr. is something we’ll likely spend the rest of July unpacking. But as soon as the market dropped it started recovering and it started recovering before the Senate news was made public. That means one of two things. Either the market believes this latest scandal is another ‘nothing burger’ or word leaked to key insiders before the public knew the news about the Senate staying in session.

That leaves the Healthcare/tax reform debate open. They have no time to lose. That being said, McCain had surgery over the weekend and the entire debate has been postponed until he can participate. From what I’ve seen in Politico, he will be convalescing in Arizona for about a week while at the same time he is getting a lot of bad publicity as numerous news sources are alleging he is somehow involved in this latest scandal and the one concerning the fake British dossier on Trump from last year. I’m not going to unpack this for you but do you think the stress from one created the health problem? Whatever the case, we now get near the end of July without crucial debate and vote on the single most important decision facing the GOP and quite possibly the stock market.

Getting back to last Tuesday, the important aspect of all this was yet another failed attempt to go down. I didn’t realize at first until further meditation but as it turned out, last Tuesday’s low was 261 trading days from the Brexit low, opening the door for yet another bullish inversion of the cycle. I told my posse that Friday could’ve been the high at the close of this cycle at 263 if they came out of the chute lower or in the very least they would’ve sold into the close. But they did neither and it now looks like the bears whiffed again.

The other key point from last week is a week ago Friday I had a few good square outs in the semiconductor space for a leg up but that was just about the only area where the good readings did show up. Could the SOX rescue the market again? It looked very questionable for a couple of days but that’s exactly what happened. But even in tech there is a rotation working because the BTK is only flat and certain drug names are lagging. But the Transports broke through and now we are two weeks out from the Dow theory buy signal and everything continues to hold on. Even oil and oil stocks have improved. Housing and banking remained flat.

All of which gets me to my major concern which is the longer cycles coming due by the end of August. Did you see the VIX? On May 9, I had a reading of 9.56, June 9 it was 9.37 for a generational low. On Friday, it hit 9.50 again. This tells me the crowd is very complacent about all the risk out there. Either they don’t know, they don’t want to know or they do know and have become inured to the news.

The new debate is whether Amazon is a monopoly that needs to be broken up. Commerce Secretary Wilbur Ross says nothing in their behavior suggests they’ve gone over some anti-trust line (I’m paraphrasing). Here’s a company that started out by selling goods one used to buy at the brick and mortar. There’s nothing wrong there. What started out as an online bookseller has gone on to own seven private label fashion brands, an online shoe company, a French shipping company, the largest publisher of audio books in the United States. By my count at Wikipedia they’ve purchased above 70 online retailers over the years. There is the Washington Post and now the pending approval of Whole Foods. According to Investopedia, “Prime customers can watch television shows on its streaming service, order groceries using Amazon Fresh, shop for products from hairpins to lawn mowers on its site, automate homes and communicate with each other and plan their day using Alexa.”

Amazon also dominates politics given their $650 million contract to provide cloud services to the CIA. Since they own the Washington Post with the CIA as a major client they represented extremely biased coverage of the election last year and that continues to this day. Last week the Wall Street Journal reported the United States Postal Service subsidizes every box delivered by Amazon up to $1.46 which gives them an unfair advantage over every other competitor. Now Amazon has just as great an influence over our lives as John D. Rockefeller ever did. The fact they’ve eliminated competition in so many industries and control or have great power over the delivery system of those products also destroys competition.

There are whispers right now that Amazon has gone over the line. According to Bloomberg Doug Kass has taken a short position, saying government antitrust concerns will erode value. Michael Carrier, an antitrust expert at Rutgers School of Law says, “there’s a concern Amazon might be getting too big.” U.S. Representative David Cicilline, (D) from Rhode Island sent a letter to the House Judiciary Committee requesting hearings on the Whole Foods acquisition, suggesting the deal is part of a wave of consolidation that has “decreased wages and resulted in gross inequality in the workplace.”

Cicilline also wrote, “Amazon’s proposed acquisition of Whole Foods raises important questions concerning competition policy, such as how the transaction will affect the future of retail grocery stores, whether platform dominance impedes innovation, and if the antitrust laws are working effectively to ensure economic opportunity, choice and low prices for American families.”

We’ve talked so much about health care and tax reform as being kryptonite to the market. Let’s not forget it was when a judge announced there would be a penalty phase to antitrust trial of Microsoft back in 2000 that finally popped the Internet bubble. We have a President that loves to take credit for the incredible rally since November. He must also realize that if the monopolies are broken up the rally could break as well. Amazon is not the only monopoly. One can argue Facebook and Google also destroy competition in their industries. We’ll be watching this closely.

For Monday, markets opened flat and for a mid-summer day, could be the first of several paint drying days.