Chart Talk {09.06.17}

The Dow Jones Industrial Average is the index that the average investor knows.  It is also the one that usually garners all the headlines so on a day when it loses 234 points investors pay attention.  That decline though needs to be put into some context.  First it took the combination of North Korea claiming to have detonated a hydrogen bomb over the weekend, the aftermath of hurricane Harvey in Texas and the prospect of hurricane Irma barreling towards Florida to give us that decline.  It didn't help that the index was also very overbought by our work.  Yesterday's action basically erased last week's gains in the index.  The index was down a bit over 1%.  In that context not too much of an extreme move.  Back in the day before volatility seemed to go off on a permanent vacation, these sort of moves were much more frequent.  Oh and it took all the bad news I mentioned above to bring about that decline.  

Now you know, I've said I think there's a higher probability that stocks could hit a rough patch here in the early fall.  So far that scenario hasn't panned out but I think we need to watch events out in the world very carefully right now.  The Korean situation is something I'm keenly focused on and Irma has the potential to wreck havoc in many places.  How the currents steer her in the coming days will impact millions of lives and cost somebody somewhere billions of dollars.  Yet, if we can get beyond  these events and somehow they become less of a "risk off" element than they were yesterday, we'll move into the latter half of 2017.  Without outside catalysts markets historically act pretty well in the 4th quarter of the year.  With the economy going strong and hopefully some of these extenuating circumstances resolved things would have the potential to perhaps look a bit different in a month or two.  We see.  We still have to get through Irma and Korea first.

Chart comes to us from Tradingview.com.  Annotations are mine.

*Long a small legacy position of an ETF related to the Dow Jones Industrial Average in a few client accounts.