Monday, April 4, 2011

No Volume, No Follow-through After Jobs Data

With the markets closing Friday in a state of ebullience and optimism, the Monday morning hangover was worse than expected.

Stocks got out of the gate well, with the averages hitting their highs of the day early on, but there was no catalyst and thus, no enthusiasm for either buying or selling, though tech stocks suffered more than most.

Stocks drifted in listless fashion on what will almost certainly turn out to be one of the five lowest trading volume sessions of the year thus far. Appetite for risk has been muted by world events, the least of which being the continuing saga of the nuclear reactors melting down at Fukushima Daiichi facility in Japan.

High levels of radiation have been found hither and fro, even in the United States, where air and water readings were above safe levels in communities from the West coast all the way east to Pennsylvania.

As for Japan itself, the situation appears even more out of control, as both the government and TEPCO, the utility company responsible for the failures, have run out of viable options for containment. If not for the "fear factor" the mainstream media would be full of horror stories, but the prevailing wisdom is not to alarm the populace over what looks to be already as bad as or worse than the disaster of Chernobyl, 25 years ago, a man-made calamity now estimated to have caused over a million deaths and multiple times that number in birth defects, miscarriages, and diseases.

With Japan's nuclear woes - where the "dead zone" is expected to eventually be 30 to 40 miles in all directions from the plant - the general mood of the people is a thinly-disguised panic and a heightened level of distrust of authorities. Said distrust is with good cause. The officials handling the situation are either incompetent, stupid, afraid or a combination of all three, and have yet to reassure the Japanese people of anything, other than the situation remains a catastrophe with potential to become even worse.

High gas prices have also put a damper on the proceedings worldwide, with both Brent crude and West Texas Intermediate (WTI) hitting 33-month highs on the day. Continued unrest in the oil-rich Middle East and North African countries - Libya, Bahrain, Kuwait, Yemen and now Ivory Coast - haven't helped slow down the oil rally and the onset of $4/gallon gas in the US.

So, little surprise that nothing is moving in the world of high finance.

Dow 12,400.03, +23.31 (0.19%)
NASDAQ 2,789.19, -0.41 (0.01%)
S&P 500 1,332.87, +0.46 (0.03%)
NYSE Composite 8,482.41, +13.07 (0.15%)

The level of disdain could be clearly seen in market internals. Advancing issues narrowly bettered decliners on the day, 3006-2630, though NASDAQ new highs soared against new lows, 222-30, while on the NYSE, the bias was the same, with new highs beating new lows, 259-15. As mentioned earlier, volume was extremely light.

NASDAQ Volume 1,679,897,000
NYSE Volume 3,273,874,500

WTI crude futures hit $108.47, a gain of 53 cents, the highest level since June of 2008. Prices above $4.00 per gallon for regular unleaded have been reported in New York, Chicago and various California locales.

Gold inched closer to all-time highs, gaining $4.10, to $1,433.00, while silver exploded to 31-year highs, ending the NY session on the COMEX at $38.49, on a gain of 76 cents (2%).

The stark comparisons between the economic climate today and that of 2008 could not be clearer. High oil and gas prices, a stagnating stock market close to multi-year highs nearing the end of a long bull run, ramping foreclosures and falling real estate values, and political uncertainty carry all the trademarks which eventually led to the great unwinding in Fall 2008.

Three years hence, after trillions of dollars in stimulus, the very same banks that caused the calamity before are still leveraged to the hilt, hiding liabilities off the books and still in denial over their true, illiquid conditions.

For mood to change so impressively from good to bad over the weekend is stunning. Americans and the world at large should be prepared for another round of asset-crushing deflation once the Fed decides to stop printing dollars into existence come June.

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