Stocks, Bonds In Game Of Chicken With Fed, Economy

Who will blink first?

That's the essential question, especially whenever stocks advance in the face of disappointing news or data.

Just today, basking in the afterglow of Independence Day, the data was far from convincing of the official narrative that the economy is clicking, unemployment is low and happy days for all are just over the horizon.

Unemployment claims were higher than expected. For the last week of June, 231,000 were receiving government benefits. The low number of unemployment claims is partially due to a number of factors the government number crunchers don't readily report. First, there are no more extended claims. In most states, it's 26 weeks. That's it. Find a job in six months or be relegated to the "out of workforce" brigade, which are not counted in the official figures.

Additionally, with so many baby boomers retiring (supposedly at a rate of 10,000 a day, though it's likely much lower), there should be jobs aplenty. However, many of those older folks are not being replaced. Corporations are saving through attrition, or, at best, hiring replacements at much lower wages with fewer benefits.

Then there's job growth. The numbers delivered by ADP this morning were uninspiring. Private employers added 177,000 to their payrolls, well below the expected 190,000. Prior to the opening bell on Friday, the BLS releases the non-farm payroll data for June, which is expected to come in at around 195,000 new jobs, but whether the numbers match expectations or not, almost anybody with a functioning brain knows that the data is largely fudged and massaged and generally not reflective of local conditions.

Thus, the wizards on Wall Street are playing chicken in the market, and well they should. The Wall Street elite have the ability to hedge, shed positions before the general public, and make moves faster than anybody else, especially the home-gaming day-traders. They are selling when everyone else is buying and vice versa. They're pros. That's why they're making mega-bucks on Wall Street and you're not.

The Federal Reserve released the minutes from June's FOMC meeting at 2:00 today, which initially sent stocks down, but they recovered to close near their highs. The minutes sent mixed signals, but little to suggest that the Fed would not raise the federal funds rate by another 25 basis points in September, despite a flattening treasury yield curve, which is a harbinger of an economic downturn.

Again, the market pros played chicken and bid up stocks in the face of the Fed minutes which revealed little beyond what was already known.

Bond yields edged slightly higher, except for the 30-year, which shed one basis point to 2.95%. Spreads on the 2s-10s dipped to 29 basis points, and the 2s-30s dropped to 40 bips. Bond traders are staring directly at a flatline instead of a curve, with potential for inversion a real concern. They're selling the short end, buying the long, challenging the Fed to tighten twice more this year, a move that almost certainly would send wild signals through the trading community.

If all of that isn't enough to churn the stomach, Trump's China tariffs go into effect at midnight EDT.

Chicken. It's not what's for dinner. It's what Wall Street plays these days.

Dow Jones Industrial Average July Scorecard:

Date	Close	Gain/Loss	Cum. G/L
7/2/18	24,307.18	+35.77	+35.77
7/3/18	24,174.82	-132.36	-96.59
7/5/18	24,345.44	+181.92	+85.33

At the Close, Thursday, July 5, 2018:
Dow Jones Industrial Average: 24,345.44, +181.92 (+0.71%)
NASDAQ: 7,579.59, +83.75 (+1.03%)
S&P 500: 2,735.07, +21.85 (+0.81%)
NYSE Composite: 12,564.92, +90.53 (+0.56%)

Stocks Continue See-Saw Movement After Outrageously Mindless Fed Minutes

As mentioned yesterday, sharp one-day gains (Dow was up 428 points on Tuesday) should be discounted, since a clear sign of a bear market was issued by the Dow Transportation Index on Monday.

That should be the overriding theme with any and all sharp moves higher (+1.00% or more), or, in more pedestrian terms, we've moved from Buy The Dip to Sell The Rip because there is little confidence amongst traders at this juncture.

Since this is also the heart of earnings season, expect some individual stocks to outperform and those with influence may help carry the market higher. Consensus is for very strong first quarter earnings reports and there is little reason to believe that they won't be good, though probably not as good as many are hoping.

From today's activity, it's clear that there is no follow-though on commitments by traders as the major indices were uniformly in the red today. The Dow Industrials are now clinging to a mere 76-point gain for the month, barely out of correction territory, following a first quarter that was a loser. Prospects for a second quarter rebound in the stock market appear to be increasingly slim and built on false hope from an equally false narrative.

It's also quite evident that the Federal Reserve System presidents and FOMC governors are either blind, stupid, or deceitful, because in the minutes from the March meeting - released today - they were unanimous in their opinion that the economy was improving and that inflation was growing when the actual condition only mildly supports either viewpoint. Outside the rose-colored offices of the Eccles Building it's easy to see a squeezed middle class, cities that are beginning to look more like third-world sh--holes, complete with tent encampments, than the modern, urban paradise the Fed imagines.

Additionally, with individuals and families tapped out and heavily in debt, price pressure is almost nowhere to be found, except at the gas pump and the local, state, and federal tax offices.

The economy is made of mostly smoke and mirrors, built on mountains of debt.

Dow Jones Industrial Average April Scorecard:

Date	Close	Gain/Loss	Cum. G/L
4/2/18	23,644.19	-458.92	-458.92
4/3/18	24,033.36	+389.17	-69.75
4/4/18	24,264.30	+230.94	+161.19
4/5/18	24,505.22	+240.92	+402.11
4/6/18	23,932.76	-572.46	-170.35
4/9/18	23,979.10	+46.34	-134.01
4/10/18	24,407.86	+428.76	+294.66
4/11/18	24,189.45	-218.55	+76.11

At the Close, Wednesday, April 11, 2018:
Dow Jones Industrial Average: 24,189.45, -218.55 (-0.90%)
NASDAQ: 7,069.03, -25.27 (-0.36%)
S&P 500: 2,642.19, -14.68 (-0.55%)
NYSE Composite: 12,514.62, -51.35 (-0.41%)

Did The Fed Spook Markets Or Was the Short Squeeze Over?

Analysts must employ incredible amounts of self-control to keep from hysterical laughter or uncontrollable slobbering sobbing when trying to explain the ups-and-downs of the stock, bond, commodity and FX markets.

Simplistic explanations are usually best employed as rationales for the awkward and apparent non-coincidental wild intra-day swings and unexplained episodes of random volatility.

It was the Fed minutes. China. Draghi's comments. The dog ate my homework.

None of this really works or is remotely believable, but the talking heads on TV or in alternate media try to get a grip on what's moving the market, regardless.

Thus, it is better to not get into the practice of reading tea leaves or practicing voodoo economics in search of trading directions, market timing or some other resource which will make us all rich, or happy, or just not so confused. Markets move on emotions, herd behavior, greed and fear. There is also an oversupply of computers and algorithms which direct trading in one way or another. Once things start moving one way, they seem to accelerate in that direction, until something or somebody comes along to stop it.

Rinse, repeat.

The Dow accomplished what could be referred to the rise and fall of the Roman empire in just one session on Wednesday, rising as much as 300 points before giving it all up in the final hour-and-a-half plus another 167 points for good measure. It all added up to more losses for the Industrial Average with just four of the thirty component stocks finishing positive on the day.

In other words, it was a very bloody afternoon. Interest rates went soaring, precious metals were hammered (as usual), and the dollar index shot up in meteoric fashion.

TV commentators attributed the drop to the release of last month's FOMC minutes. Yeah, sure. That's why stocks went up immediately after the release, before the collapse, and why equity markets are poised for a positive open Thursday morning. Rinse, repeat. Gibberish.

The cause, as always, is the love of money, the root of all evil. Keep rooting; see what sprouts.

Here's the score:

Dow Jones Industrial Average February Scorecard:

Date	Close	Gain/Loss	Cum. G/L
2/1/18	26,186.71	+37.32	+37.32
2/2/18	25,520.96	-665.75	-628.43
2/5/18	24,345.75	-1,175.21	-1,803.64
2/6/18	24,912.77	+567.02	-1,236.62
2/7/18	24,893.35	-19.42	-1,256.04
2/8/18	23,860.46	-1,032.89	-2288.93
2/9/18	24,190.90	+330.44	-1958.49
2/12/18	24,601.27	+410.37	-1548.12
2/13/18	24,640.45	+39.18	-1508.94
2/14/18	24,893.49	+253.04	-1255.90
2/15/18	25,200.37	+306.88	-949.02
2/16/18	25,219.38	+19.01	-930.01
2/20/18	24,964.75	-254.63	-1184.64
2/21/18	24,797.78	-166.97	-1351.61

At the Close, Wednesday, February 21, 2018:
Dow Jones Industrial Average: 24,797.78, -166.97 (-0.67%)
NASDAQ: 7,218.23, -16.08 (-0.22%)
S&P 500: 2,701.33, -14.93 (-0.55%)
NYSE Composite: 12,695.53, -67.81 (-0.53%)

How to Make $10,000 in Six Hours Before FOMC Minutes Are Released

It helps to be an insider on Wall Street if you expect to make big money.

Just as a for instance, take the trade in gold today prior to the Fed releasing the FOMC minutes from July at 2:00 pm ET.

At 8:00 am ET, gold was sitting right around $1270 per troy ounce. Six hours later, prior to the release of the FOMC minutes, it was at $1280 or above.

If one was so inclined, one could have placed a futures bid at 8:00 am and sold it at 2:00 pm, for a profit of $10 per troy ounce. Since futures are dealt with in lots of 100s, one would have had to made the order for 100 futures contracts. It would have cost a fraction of the actual value of the gold involved, but, upon selling, the profits would have netted somewhere in the neighborhood of $10,000, less commissions, which, as an insider, would be minimal.

Also, as an insider, one could probably have bought the futures via a margin account, thus putting up even less actual money.

Nice way to make a living, you say?

Well, if the Fed is nothing more than a stealth conduit for the wealthy and well-connected, it would surprise nobody if the contents of the FOMC minutes were leaked or casually mentioned in private conversation.

That's how corrupted markets work, and there's nothing more corrupted than the gold and silver futures markets, except maybe, the US equity markets.

What was discovered - among many views and opinions - in the FOMC minutes was that various members expressed a need to tighten policy, in other words, raise rates and/or roll off some of the excessive assets held by the Federal Reserve.

Roughly the same trade could have been made in various commodities, especially by being on the short side in WTI crude oil futures, or stocks, or by going long bonds. The Dow was up 87 points early in the day before reversing - well before the FOMC minutes release - finally closing just short of 26 points to the upside.

It is a nice way to make a living, especially when one has friends in high places.

At the Close, Wednesday, August 16, 2017:
Dow: 22,024.87, +25.88 (+0.12%)
NASDAQ 6,345.11, +12.10 (+0.19%)
S&P 500 2,468.11, +3.50 (+0.14%)
NYSE Composite: 11,865.33, +21.85 (+0.18%)

Stocks Split, NASDAQ Gains, Dow Flat

There is a definite surreal feel to stocks these early days of summer. While the NASDAQ has generally been the whipping boy through the latter stages of June and into July, the reverse was true on Wednesday as traders returned from a truncated long weekend.

The NASDAQ tacked on 40 points, but the other broad measure, the NYSE Composite, fell 26. The Dow was off by one point, while the S&P added three-and-a-half.

While this appears to be sector rotation and stock picking, the unruly movements may portend something more sinister in the near future. It could be nothing, but split decisions on the major indices usually indicate market turmoil, not the calm, placid environment with low VIX which has been a feature of the long bull run since March of 2009.

The VIX has been elevated of late and spiked recently, but hovering around the 11-12 region is nothing alarming. Should the VIX begin to rise day-over-day, worries may emerge and turn reluctant buyers into outright sellers.

Whatever the financial pundits insist about the strength of the economy, there are troubles, as indicated by the FOMC minutes from June which were released on Wednesday. The members were split over inflation and increases in the federal funds rate, a strong indication that the Fed - which has been relied upon excessively to control the economy - may not have the tools with which to battle a recessionary environment, which many believe is overdue.

In any case, this shortened week may not be enough to develop any kind of trend, other than extending the weird trading patterns which are becoming more and more confounding to fundamental analysts.

At the Close, 7/5/17:
Dow: 21,478.17, -1.10 (-0.01%)
NASDAQ: 6,150.86, +40.80 (0.67%)
S&P 500: 2,432.54, +3.53 (0.15%)
NYSE Composite: 11,809.49, -26.23 (-0.22%)

Fed Minutes Scare Traders, Turns Big Gains Into Losses

The headline says it all.

After perusing the minutes from the most recent FOMC meeting (mid-March), analysts and traders saw some language they didn't exactly like, even though it was probably a long-overdue dose of reality for the Wall Street speculators.

The Dow was up nearly 200 points prior to the release of the minutes at 2:00 pm ET, but quickly reversed course ending with a 41-point loss. The NASDAQ had been at all-time record levels, but closed down 14.

The two most blaring commentaries gleaned from the minutes were that some members of the committee saw stock prices as unreasonably high and a discussion about ratcheting down the Fed's bloated balance sheet, which balooned to over $4 trillion after the financial meltdown in 2008-09.

At the Close, April 5, 2017:
Dow: 20,648.15, -41.09 (-0.20%)
NASDAQ:5,864.48, -34.13 (-0.58%)
S&P 500: 2,352.95, -7.21 (-0.31%)
NYSE Composite: 11,423.36, -47.18 (-0.41%)

Fed Minutes Put March Rate Hike In Play

Editor's Note: With the luck of some extremely mild weather in Upstate New York (temps in the 60s today and expected the same for Thursday and Friday), the Money Daily team (Fearless Rick) has headed out to open up spring and summer camp a little early. That means the usual posting of Money Daily will not be the normal after the market close summary, but will be more sporadic for probably the next three to four weeks and may not be "daily" at all. Better weather brings on more responsibilities and a relaxed time frame.

Thanks,
Fearless Rick

Let's not beat around the bush. The Federal Reserve is intent on raising rates, which should surprise nobody, as the federal funds rate has been at or below one percent for the better part of 16 years.

Currently set at 0.50-0.75%, the key overnight rate has been largely responsible for a great deal of irresponsibility, not the least of which was the subprime disaster of 2008 and the resultant Great Financial Crisis which sent the global economy into one of the worst tailspins since the Great Depression of 1929-1938.

So, with the release today of the minutes from last month's FOMC meeting, it's compelling to think that a rate increase would be on the agenda at the next meeting, mid-March.

After all, the latest hike, in December of last year, hardly caused a ripple at all. Most experienced investors and money managers are aware of the need to "normalize" policy by the Fed and have preparing for such an event (or series of hikes, which is completely probable) since December of 2015.

With President Trump promising a fiscal stimulus plan, the Fed's belief that inflation will be the end result is a bit of a cockeyed argument, but, as always, the hyper-politicized Federal Reserve Board of Governors will say anything to get to their desired result. If the hikes come too quickly - they promised four this year - they can lay the blame on everybody's favorite political punching bag, Mr. Trump. Should things work out, the Fed will claim all the credit for "saving the financial system as we know it."

Either way, the Fed will come out smelling like the proverbial rose, even though they come closer to the stench of burning paper currency than that of a pretty flower.

March is now a "live" month for the Fed, though it should not go unnoticed that the Fed has and will likely continue to do not what they say, as in the case of last year's promise of three rate hikes, when in fact they actually performed just one (December).

With the stock indices hitting all-time highs on just about a daily basis, March would be as good a time as any to get rates another notch closer to one percent. In fact, a 50 basis point hike, to 1.00-1.25% wouldn't be such a bad idea. The stock markets are about to go belly up, despite being wildly overvalued.

Wall Street suffers from the absolute worst form of normalcy bias and that alone should prevent even a correction. Financial markets are in as weird a place as they've ever been, but expect the next crashing sounds to come from overseas, either to the West, as in Japan (or even China), or looking East at the failed experiment that is the European Union and the coming parity of the euro to the US dollar.

Fed Jawboning Flattens Stocks, Boosts Dollar, Sends Treasury Yields Soaring

Hearing all this Fed-speak, one might pine for the days of old, when central bankers were seen and not heard, when their meetings were the stuff of secrets and rituals and transparency was reserved for a type of adhesive tape.

The current roster of the federal reserve is a lineup of chattering old men and women more suited for a Sunday festival than the stuff of high finance.

Regardless of one's opinion of the federal reserve, one thing is certain: they have Wall Street on edge. With the release of the minutes from April's FOMC fiasco, the dollar surged - in the main against the yen and euro - stocks tanked back to break-even for the day and the 10-year note yield shot up like a rocket, ending the day at 1.88%, a move of nearly seven percent.

Oil and PMs fell, as planned. It's ridiculous.


S&P 500: 2,047.63, +0.42 (0.02%)
Dow: 17,526.62, -3.36 (0.02%)
NASDAQ: 4,739.12, +23.39 (0.50%)

Crude Oil 48.40 -1.20% Gold 1,259.50 -1.36% EUR/USD 1.1217 -0.84% 10-Yr Bond 1.88 +6.88% Corn 399.50 +0.63% Copper 2.06 -1.17% Silver 16.92 -1.88% Natural Gas 2.01 -2.05% Russell 2000 1,102.95 +0.48% VIX 15.95 +2.44% BATS 1000 20,677.17 0.00% GBP/USD 1.4597 +0.94% USD/JPY 110.1950 +0.96%

Fed Minutes Send Shock Waves, Stocks Plummet

Was today the day that the skeptics and shorts have been waiting for the four months? The day the market turned and rolled over, ending ridiculous speculation that the rally had more legs and major indices - S&P, Dow - would reach all-time highs?

Maybe. And to think that it would be the Fed, the very same Federal Reserve that continues relentlessly pumping money at a rate of $85 billion a month into the market, that would cause the turn is simply delicious in its irony.

Stocks were cruising along aimlessly most of the session, down slightly, until last month's Fed minutes were released at 2:00 pm ET. The initial reaction was muted, as most algos were turned off for the event, not being able to peer into the minutes from the FOMC meeting of January 29-30.

The minutes revealed extensive discussion over the current expansionary Fed policy of QE, focused around the purchase of Treasury and mortgage-backed bonds that has been in effect since September of 2012 and whether or not the Fed should continue the policy along the lines of its current stature - until unemployment targets of 6.5% are met - or modify the existing arrangement as market actions warrant.

The committee discussed its options at the January meeting, but voted in favor of keeping the current polify intact, though today's minutes show that fissures in Fed policy are beginning to appear, with not all members completely in line with Chairman Ben Bernanke's policy of unusually easy money.

Once enough wall Street experts were able to read and comprehend what the Fed was transmitting, the selling ensued and at times became quite raucous, especially in the more speculative issues on, mainly on the NASDAQ, which suffered its worst loss of the year.

The Dow lost over 100 points on the day and the S&P pulled back substantially as well. Whether or not the declines will last for more than one session is still up in the air, but what is certain is that officials at the Fed are now openly questioning policy decisions - some insisting that QE is necessary and that the economy is too fragile to change policy, others suggesting that the extraordinary measures are leading to a bubble in equity markets, a view that is beginning to gain traction.

There's little doubt anywhere that if the Fed were to substantially reduce its asset-buying-binge, the economy - and especially the equity markets - would not respond favorably and the economy could be thrust into another round of recession, a reality that is much closer than anyone wishes to believe, after last quarter's -0.1 GDP print.

At this juncture, it would appear that the Fed has tied its own hands, and that any change in policy would be damaging to markets, if not the greater economy. Mere mention of discussion about change caused a selloff, so actual change would no doubt engender more severe reactions.

Dovetailing into the government's do-nothing policy regarding the upcoming sequestration issue, Fed policy should not materially change for the next three to six months, unless the president and congress find a way toward compromise on spending cuts without raising taxes, an outcome seen as remote by most.

How the market responds tomorrow and Friday will set the stage for the final week of February, which is loaded with important economic data releases, not the least of which is the second estimate on fourth quarter GDP on the 28th. Since next Friday is the first of March, the usual non-farm payroll data will be delayed until the 8th, giving the BLS more time to analyze and massage the data.

This may or may not be a significant turn in the markets, but for certain, it's an important development heading into at least three weeks of important data and serious fiscal issues that the government has thus far been reluctant to address.

Collateral damage was done in the precious metals as gold and silver took sizable hits after the Fed minutes release.

Dow 13,927.54, -108.13 (0.77%)
NASDAQ 3,164.41, -49.18 (1.53%)
S&P 500 1,511.95, -18.99 (1.24%)
NYSE Composite 8,883.63, -120.75 (1.34%)
NASDAQ Volume 1,998,613,000
NYSE Volume 4,576,938,000
Combined NYSE & NASDAQ Advance - Decline: 1519-5016
Combined NYSE & NASDAQ New highs - New lows: 470-59
WTI crude oil: 94.46, -2.20
Gold: 1,562.40, -41.80
Silver: 28.51, -0.912