Tuesday, May 31, 2011

Something Is Not Right

Nothing like a three-day weekend to rekindle those old "animal spirits" in the stock market.

Today's outsize gains come courtesy of the banking criminal cartel, whose sole mission in life is to separate regular people from their money. There was no good reason for stocks to go up, much the less by this inordinate amount. In the real world, economic indicators all pointed to a much weaker US economy than the mainstream media has been hyping, but the Wall Street floozies pumped their paper garbage all the same, and, apparently, there were plenty of pigeons to be plucked.

Before the market even opened, the S&P/Case Shiller 20-city index showed that the value of residential real estate has now fallen more than during the Great Depression. That's not some figure picked out of the blue. The link comes from none other than CNBC's Diana Olick, one very savvy real estate reporter who - unlike others from her network - can be trusted to share pertinent facts.

Olick points out that the big banks will definitely face more write-downs due to the massive unwind in real estate. Those big banks - PM Morgan Chase (JPM), Bank of America (BAC), Wells Fargo (WCF) and Citigroup (C) all finished 0.5 to 1.0% higher today. Either investors are whistling past their own graves or there is something definitely wrong with this picture. The banks are among the most unhealthy institutions in our unhealthy economy. The sooner they are wound down and bankrupted - because they really are insolvent, despite massive inflows of cash from the US taxpayer - the US can begin healing. Until then, we will head down the path of dollar destruction and desperation.

Just 15 minutes into the trading session, Chicago PMI posted a horrible read, with the index falling from 67.6 in April to 56.6 in May. Though the perma-bulls will contend that the index is still positive (anything over 50 is considered expansionary), an 11-point drop in one month is simply jaw-dropping. This actually took a little wind out of the Wall Street sails, as stocks drifted off their gap-up opening highs, hitting a bottom around midday. From there, however, the 30-minute attention span that seems to cover most of the trading public, kicked back in and stocks surged into the close, even though there was no catalyst - such as a sinking dollar - to prompt the gains.

Again, absent a falling dollar, stocks should have been flat or lower, considering how generally bad was the news today, but also every economic report from the past three weeks. Something is crooked, rotten, bad, awful, wrong, but since the stock market is now the special province of four or five major players, we may never know what the game really is until it comes.

At some point, Wall Street will be reconnected to Main Street, though the impression is clear that there will be many tears and disjointed days such as this. Until then, we can only marvel at the absurdity of centrally-planned economies and their formerly-free stock markets.

Dow 12,569.79, +128.21 (1.03%)
NASDAQ 2,835.30, +38.44 (1.37%)
S&P 500 1,345.20, +14.10 (1.06%)
NYSE Compos 8,477.28, +90.94 (1.08%)

Advancing issues buried decliners, 4904-1755. On the NASDAQ, 135 new highs dwarfed 46 new lows. The NYSE, not to be outdone, posted 224 new highs and just 11 new lows. Volume was terrific, something we have not witnessed since the collapse in 2008.

NASDAQ Volume 2,561,412,750
NYSE Volume 4,560,891,500

Oil was jacked another 2.11, to $102.70 per barrel for WTI crude. Gold lost $4.00, to $1535.10, but silver finished higher, up 40 cents, to $38.47.

The dollar index only fell 0.303, to 74.61. This was not a DXY move that could have produced the kind of gains seen today.

Something is definitely not right, and until we find out just what it is making stocks look like the values of the century, all due caution should be employed.

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