 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Thursday's Headlines 1. Markets Resume Gains 3. Fed Watch Markets Closed
 Rally Resumed U.S. markets resumed their June rally today, and the S&P500 is now up about 4% for the month following a dismal May. The gains were led by Disney, which jumped 4% on an analyst upgrade, and airline stocks, which have favorable tailwinds due to lower fuel costs and expected fare increases this summer.
Airlines were expected to face a difficult 2019 given the earlier price increase trends for crude oil, which jet fuel is derived from. As we know, oil prices have dropped precipitously this Spring, which should improve airline margins.
American Airlines and Southwest, two of the biggest carriers in the U.S., have both announced price increases over the past few days, and their competitors are likely to follow suit.
Here's American (AAL), Southwest (LUV) and United/Continental (UAL).
It was a pretty good day to fly the friendly skies.  Oil Spikes on Tanker Attacks Oil is a fairly sensitive commodity. We saw evidence of that today as oil futures spiked as high as 4% before settling back to a 2% gain, following attacks on two tanker ships off the coast of Iran in the Gulf of Oman near what is known as the Strait of Hormuz.
The Trump Administration blamed the attacks on Iran, which has threatened to block cargo ships in retaliation for U.S. sanctions on the country.
The tankers were reported to belong to businesses tied to Japan and Taiwan. Both vessels were evacuated and no casualties were reported.
Still, the threat of supply disruption in this highly contentious part of the Middle East was enough to drive prices higher.
The International Energy Administration will release its monthly inventory report tomorrow, and all signs point to a continuation of the themes that have been persistent all year:
Apart from those factors, global oil demand is slowing, and will continue to slow, according to the IEA's projections. Here's the forecast out to 2022, per the IEA:  Fed Watch The Federal Reserve's Open Market Committee will meet next week on interest rates and the drumbeat has been getting louder for a rate cut then, or in one of its subsequent meetings this year. According to the CME's Fed Watch tool, the probability of a cut next week is just 22.5%, although it's as high as 86% for the July 30-31 meeting.
The Wall Street Journal surveyed economists and found that 40 out of 46 of them expect the Fed to cut rates at that July meeting. On average, according to the WSJ, the economists expected the fed-funds rate will fall to 2.12% by the end of this year, and to 1.96% by the end of 2020, indicating they anticipate just one rate cut in 2019 and another next year.
Perspective While stocks tend to rise in anticipation of, and after a rate cut due to lower borrowing costs, it doesn't always play out that way. The averages are good, but it depends on what is happening in the U.S. and global economies at the time.
Ryan Detrick, LPL Sr. Market Strategist, did the research and he found that when the Fed cut rates in January 2001 and September 2007, deep market corrections and recessions followed. The cuts didn't push the economy into a recession...it was headed that way anyway. But they didn't help. With the S&P500 up 15% so far this year, its worth wondering what will happen time around. Here's how the last cuts played out:  Rate Cuts and the Treasury Market As we know, interest rate cuts hurt bond yields, especially government bonds. We have been writing about the inverted yield curve all year, and it has been an issue for bond investors, people living on a fixed income and financial stocks. We've also written a fair amount about how China is the largest foreign government owner of U.S. Treasury bonds, which is one of the complicating factors in the trade war.
It's worth noting, however, that U.S. Treasury bonds are among the most widely held assets in the world. A lot of that ownership is within pension funds, endowments and among institutional investors. Foreign ownership has grown substantially over the past two decades, but the ownership is still widespread. What happens to U.S. Treasury bonds, in other words, impacts a lot of people. I found this graphic from Bianco Research to be enlightening... and kind of beautiful. 
chart courtesy www.koyfin.com  American Airlines stock surged more than 6% today on news that the company had led a round of domestic fare increases successfully. Disney shot up more than 4%, too, on Morgan Stanley boosting the stock's price target from $135 to $160, on new information about Disney's streaming service, Disney+.  Twitter stock fell today on analysts' calls that the stock was overvalued.  Word of the Day Litecoin is outperforming its major peers, including Bitcoin. The token's mining rewards will be slashed in half in August. This year's top-performing cryptocurrency is up almost fourfold and you've likely never heard of it.
What is Litecoin, you ask? "Launched in the year 2011, Litecoin is an alternative cryptocurrency based on the model of Bitcoin. Litecoin was created by an MIT graduate and former Google engineer named Charlie Lee. Litecoin is based on an open source global payment network that is not controlled by any central authority. Litecoin differs from Bitcoins in aspects like faster block generation rate and use of scrypt as a proof of work scheme."  Today in History June 13th 1991 - The New York Stock Exchange begins after-hours trading for the first time ever. Two sessions from institutional investors extend the trading day to 5:15pm.
Fact Book for the Year 1997 (New York Stock Exchange, 1998), p. 91; Chart of the Day: Bitcoin Chart Pattern Warns of Potential Downside  Since early April – little more than two months ago – the market value of Bitcoin has surged more than 100%. And from its mid-December lows, the rise has been closer to 170%. Of course, this price movement pales in comparison to both the massive spike in 2017 and the subsequent collapse throughout 2018. But the recent rebound and partial recovery of the original cryptocurrency is still impressive – it suggests that interest in Bitcoin among investors remains high.
While the trend for the price of Bitcoin year-to-date is unmistakably to the upside, the chart may be suggesting a different story. Since mid-May, price has been forming what could soon become a technical head and shoulders pattern. A head and shoulders pattern is a chart formation that has three peaks – the outside two are close in height and the middle is the highest. In technical analysis, a head and shoulders pattern describes a specific chart formation that forecasts a potential bullish-to-bearish trend reversal. The head and shoulders pattern is believed to be one of the more reliable trend reversal patterns.
But for the Bitcoin head and shoulders pattern to be valid, the current right "shoulder" must not exceed the top of the "head" and must drop below the "neckline," which is the line connecting the first and second troughs. If this breakdown happens, it could signal either a significant correction of the current uptrend or a potential downside reversal. Such a reversal would be confirmed on a further breakdown below the 50-day moving average. Bitcoin has not traded below its 50-day moving average since February of this year.
In an opposite scenario, any price breakout above the top of the head would invalidate the head and shoulders pattern and likely lead to a continued uptrend for the cryptocurrency.
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Thursday, June 13, 2019
Taking Off
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