Optimism

The market continues to be filled with sound and fury, with wild daily swings that seem innocuous by the closing bell, but reflect forces on both sides struggling to set the pace. These narrow trading ranges can last for long periods of time when major indices are consolidating gains or simply struggling for direction.

The Dow Jones Industrial Average broke out through 16,000 in November 2013, and it seemed like it was off to the races; by December 2014, the index was testing 18,000. But it pulled back again testing that former resistance point (16,000) in February 2015. For the most part, the index was locked in a range for little more than two years.

Long term investors that didn’t fret were rewarded for their patience. Moreover, there were a ton of individual winners along the way. A positive in yesterday’s session was transportation, as the Dow Transportation index formed a cup and handle (bullish) formation.

The rally was sparked by the trucking mega-merger between Knight and Swift. Unfortunately, only the airlines have less weight in the Dow Jones Transportation Index than truckers. FedEx and UPS at 13% and 8.4%, respectively, have the most influence. Still, transportation, which had a meteoric rally after the election, looks poised to make a big move and perhaps test the top, north of 9.500.

Angst

With consumer purchasing lagging behind sentiment surveys, the street is becoming leery of history repeating itself in the form of a new credit crisis. Keep in mind, mortgages are $8.48 trillion or 68% of total debt outstanding and the 90-day delinquency rate is relatively low but many are focusing on student loans and autos.

Last week, March auto sales came in below consensus even as incentives keep growing. Overall, auto loans have rocketed to $1.2 trillion, but it’s the pace of delinquencies that really has investors concerned. While the current rate is below recent peak delinquency rate for autos, 5.27% in 4Q10, it’s a yellow flag.

Lenders have already begun to take proactive measures, swiftly shifting loans to higher levels of credit scored over the course of the past three quarters of 2016.

Today’s Session

The market looks to open sideways as President Trump meets with business leaders at the White House with a focus on infrastructure and how to pay for it. The options are clear, but murky, as each carries a degree of economic and political risk. However, this has surged to the top of the “Must Do” list after Obamacare replacement unraveled.

• Public-Private Investment
• Debt
• Taxes