The Justice Department is previewing its anti-trust case against Google (NASDAQ:GOOG) (NASDAQ:GOOGL) (emphasis added):

The Justice Department on Wednesday plans to brief officials from state attorneys general offices on its antitrust action against Google, in what is expected to be one of the final steps before filing a landmark case against the tech giant.

….

The case is expected to focus on the company’s search business, and whether the company used its dominant search position to block rivals and harm consumers, according to some of the people. The suit may also accuse the company of anticompetitive practices in the ad tech market, but that part of the investigation hasn’t been as fully developed as the case on search, the people said.

The government hasn’t brought serious anti-trust action since the Microsoft (NASDAQ:MSFT) decision – which Microsoft won due to some very good lawyering. While this might appear to be a slam-dunk on the surface, Google will be paying some of the world’s sharpest legal minds to supply the company’s defense. This will be a long and protracted fight.

Dallas Fed President Kaplan expressed concern that the Fed’s new rate policy will encourage excessive risk-taking (emphasis added):

“My concern is about building up excess risk-taking which can create fragilities and other excesses in the system that are hard to see in real-time and easier to see in hindsight. They could create issues for us to meet our goals,” he said. “That was the reason I felt that the costs were not worth the benefits.”

This is the natural result of low interest rates. Normally during weak economic times, investors are just as concerned with safety as income, which means they gravitate towards the safety of government bonds. But when those rates are low, investors seek out higher-yielding assets such as corporate bonds and dividend-paying stocks. This phenomenon may already be occurring since the market is already very expensive.

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Existing home sales are still rising (emphasis added):

Total existing-home sales,1Existing-Home Sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 2.4% from July to a seasonally-adjusted annual rate of 6.00 million in August. Sales as a whole rose year-over-year, up 10.5% from a year ago (5.43 million in August 2019).

“Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market,” said Lawrence Yun, NAR’s chief economist. “Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.”

Here’s a chart of the data from Calculated Risk:Housing is in very good shape.

Let’s take a look at today’s performance tables:The markets snapped their losing streak today. The QQQ led the way higher, gaining 1.88%. Performance drops off after that; the OEF gained 1.24% while the SPY was up 1.04%. The treasury market was more or less unchanged while micro-caps lost a bit.The reason for the market’s rally is apparent from the sector performance tables; consumer discretionary, communication services, and tech led the market higher. Since these are three of the largest SPY and QQQ components, the indexes were more or less bound to rise.

The most likely description of the current market action is that it’s in a correction but not the beginning of a new bear market. The patterns are those of a continuation pattern, not a reversal. Specifically, the most prominent pattern is a flag or pennant pattern:The SPY has been forming one for most of September. So has the QQQ … … and the OEF.

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That does not mean a new leg higher is pre-ordained. Chart-watching is not an exact science, after all. But so far, the markets are acting more like they’re in a correction than the start of a new bear market.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.



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