As with the previous two sessions, bulls continued to buy every little dip equities offered, squelching any hope on the part of the bears for the tailspin the markets seemed to be threatening late last week. Once again, the morning dip was bought, and equities ground higher all day, though they did not exit with a positive flourish as was the case yesterday. The action felt very much like a labored effort at end-of-month window dressing by fund managers. Then again, perhaps traders were simply scrambling to buy something to replace the Amazon stock they were dumping all day. After missing badly on revenue and profit, Amazon shares were pummeled relentlessly, ending the session 22% lower.
The Amazon news could not have been encouraging for retailers in general, especially given the Fed's Beige Book report in which half of the country's 12 regions revealed slowing economic growth. The report may also have played a hand in supporting equities since it helps make the case for a Fed pause next month. However, if this is the best the market can do on Fed-is-done news then the current run may be about to expire.
To further the case for a coming consumer recession, June figures for Florida home sales revealed what many of us anticipated: sales are plummeting. Year-over-year sales were down 30% statewide... compared to about 8% nationwide... and were hit as hard as 40% in some areas. In the higher-end market, prices are now showing year-over-year declines. It is only a matter of time before year-over-year declines hit the mid-range on a national scale. Then let's see how quickly consumers' wallets close up!
The big winners today were oil shares with gains mostly ranging in the 2-4% area. One of my favorites, Encore Acquisition, popped an impressive 5%. Late last week a sharp swoon in EAC shares chased out the weaker longs, myself included. However, I had made an enviable entry in mid-June leading to a 15% gain. Given the fact that I remain skeptical on oil's prospects this year, I would probably make the same decision again. In my opinion, this latest surge in oil shares is fueled in large part by speculation over hurricane season. I don't think it would be prudent to fade that line of thought with shorts, but rather wait for a more attractive point down the road to establish longer-term oil plays.
Overall, this week's action has not inspired me to do much other than sit around and watch what happens next. My view that we will see a much lower market this year has not wavered. It is the market's job to convince the bears they've been had while lulling the bulls into over-confident complacency. Once we reach that point, the market will move lower with conviction.