Thursday, May 24, 2012

Bifurcated Markets a Sure Sign of Trouble In Fantasy Finance Land

It should be pain as the day that there are many issues and headwinds facing financial markets in the current crisis situation. Today's trading, taking bounces up and down in a directionless trading session is yet another indictment of the power players' control - or lack thereof - during a turbulent period.

When markets react in odd ways, as similar ones diverge, correlations break down and generally things zig when they are expected to zag, one index is up while another is down, it's a sign of malaise and weariness, signifying not only trouble in the current time frame, but of more problems to come.

After Wednesday's hockey stick save off the lows on a temporary reversal of sentiment regarding Europe - which was wholly manufactured and false, by the way - in which all the major indices moved in the same direction at the same time, today's sloppiness could be attributed to speculative bets in different sectors, though the possibility that there are diverging opinions driving indices in different directions is palpable.

Even though the day's range - 120 points on the Dow; 32 points on the NASDAQ, the two did not move in anything even remotely resembling synchronicity. The Dow finished to the positive, the NASDAQ ended in the red.

Some may posit that these moves are by design, though that's a bit of a stretch even in this space, in which all conspiracy theories are given ample credit at least for the fact that somebody's paying attention.

In what was one of the least-inspiring trading days of the past two weeks, the best that can be said of today's performance was that it was at least back to the norm of low volume and moves without conviction. Europe has been quieted for the time being (don't worry, that will change), the Facebook IPO malaise is fading from the news cycle and JP Morgan is still losing money on the "London Whale" non-hedge hedge.

Eventually, all of these items and more either get swept under the Wall Street rug of fraud and collusion or explode in the faces of the criminal cartel that traverses the canyons of lower Manhattan as glad-handing gentlemen.

One would suppose that a break in the action might be a good thing, though if one is circumspect enough to check the recent charts of the major indices, one would have to be blind not to notice that the Dow, S&P and NASDAQ are all trading well below their 50-day moving averages and hovering just above their 200-DMA, a dangerous position. They're also taken off about 50% of the move higher from mid-December to the end of April, a retracement that adherents of Fibonacci will note as an area of support. In that regard, the indices have moved in synchronous fashion, though with their own idiosyncratic tendencies.

Two telling signs from market internals suggest there easily could be more downside in days and weeks to come. The advance-decline line has been negative 12 of the last 17 sessions, while there have been more new lows than new highs for 10 consecutive sessions and on 14 of the last 15 trading days.

This is an interesting time for markets, stuck in no-man's land without the support of earnings, driven by news, events and data flow.

Dow 12,529.75, +33.60 (0.27%)
NASDAQ 2,839.38, -10.74 (0.38%)
S&P 500 1,320.68, -1.82 (0.14%)
NYSE Composite 7,552.35, -11.45 (0.15%)
NASDAQ Volume 1,737,819,375
NYSE Volume 3,776,796,750
Combined NYSE & NASDAQ Advance - Decline: 3082-2527
Combined NYSE & NASDAQ New highs - New lows: 55-111
WTI crude oil: 90.66, +0.76
Gold: 1,557.50, +9.10
Silver: 28.16, +0.64

No comments: