Shifting forces were at work the second last week of July, and while the winds of change didn't quite blow stocks away, the dollar's value, precious metals and bond yields saw wild swings.
Bloomberg's dollar index finished the week at 94.435, edging below the level seen at the trough of the March stock market lows (94.895), and lower for the year (96.389, 12/31/19). It was also the lowest recorded reading since September 2018 (94.220).
While the dollar may have been reeling against competing fiat currencies, it was dealt a knockdown blow by precious metals, especially silver, which had it's best week in more than 40 years. Spot Silver closed at 19.33 per ounce on July 17, traded as high as 23.00 on July 22 before settling into a close at 22.77 on the 24th, a gain of 17.80% in just five trading days.
Gold was also making headlines, with spot gold closing out the week at 1,902.02, a record closing price, surpassing the previous high in US$ of 1895.60 from 2011. While the dollar's weakness was a contributing factor in the rise of precious metals, it wasn't the only one. Continued strong demand, which many dealers are calling "unprecedented", massive purchases by the gold and silver ETF funds, and shortages due to mining shutdowns over the past four months have all been weighing on gold and silver prices.
With faith in fiat currencies and the governments that rule by them weakening, gold, silver, and other hard assets are beginning to be looked upon more favorably as the global economy melts away, multi-national protests persist, and unemployment rages. The first rise in initial weekly US unemployment claims in nearly four months sent shock waves across markets and had a dampening effect on stocks in particular.
WTI crude oil, which had remained moored around the $40/barrel mark for most of the month, was bid slightly higher during the week, closing above $41 for the first time since March. Producers, desperate for higher prices see the falling dollar as an aid to their plight. Global prices are in flux, especially with China buying directly from many producers, including Russia and Iran, bypassing the long-standing dollar hegemony completely. If the dollar continues to decline, the price of oil will certainly rise, affecting just about every finished product in some manner. The condition appears ripe for $50 oil and $2.00 gas at the pump though seasonal demand could keep a lid on prices through the fall.
Treasury yields fell on the long end, with the 30-year taking the brunt of the action, closing out the week at 1.23%, a decline of a full 10 basis points from the previous Friday reading. The benchmark 10-year note slipped from 0.64% to 0.59%, and persisted through Thursday and Friday at that level. Even the one-month maturity bill fell from 0.11 to 0.10%, cramming the entire complex into a 113 basis point box.
The shift in sentiment from bullish on stocks to mildly bearish was, in the main, attributable to the decimation in second quarter earnings as companies lost ground across the equity spectrum. Tech, energy, finance, consumer, and industrial sectors were all affected by the shutdowns and stay-at-home orders prevalent during the second quarter and that was reflected in some very dismal reports, especially from banks and finance stocks, which were forced to add significantly to credit loss reserves over the quarter.
With the reopening of most state economies in the US, there was hope for some relief and a return to pre-COVID conditions, but the recent rise of infections in many states has caused a reversal of the reopening protocols and has tempered enthusiasm for a quick recovery. The COVID crisis seems to have a long-lasting effect, not just on people's health but on the economy in general. The outlook for the fall is not particularly promising either.
Wrapping up this Weekend Wrap, here are the most current prices - including shipping - for select precious metal items on eBay:
Item: Low / High / Average / Median
1 oz silver coin: 27.11 / 46.85 / 35.34 / 34.97
1 oz silver bar: 28.00 / 51.95 / 34.33 / 33.75
1 oz gold coin: 1,850.00 / 2,045.42 / 1,982.27 / 1,995.10
1 oz gold bar: 1,985.22 / 2,019.69 / 2,006.68 / 2,010.15
At the Close, Friday, July 24, 2020:
Dow: 26,469.89, -182.44 (-0.68%)
NASDAQ: 10,363.18, -98.24 (-0.94%)
S&P 500: 3,215.63, -20.03 (-0.62%)
NYSE: 12,461.78, -49.09 (-0.39%)
For the Week:
Dow: -202.06 (-0.76%)
NASDAQ: -140.01 (1.33%)
S&P 500: -9.10 (-0.28%)
NYSE: +59.04 (+0.48%)
Showing posts with label US dollar. Show all posts
Showing posts with label US dollar. Show all posts
Sunday, July 26, 2020
Monday, May 7, 2018
Index Divergence Not A Pretty Sight; Higher Dollar, Oil, Gas Prices To Kill Economy
Friday's across the board gains in stocks managed to get the Dow into positive territory for the month, but paradoxically, not the week, which included the last day of April, a 148-point decline.
Thus, three of the major indices took it on the collective chins, with only the NASDAQ allowing for gains on a weekly basis. This kind of divergence - often seen in bear markets - is just another signal to astute investors that all is not well in the land of unicorns and lollipops otherwise known as Wall Street.
There's a significant amount of panic on display if one know where to look for it, one the best locations being the dollar index, which has been staging a rather relentless rally since mid-April, rising from 89.42 to 92.89, which may not seem like much on the surface, but in real terms, it's a huge matter to international trade. Companies not nimble enough to adjust to sudden currency movements may be caught flat-footed, on the wrong sides of trades, with losses in capital amounting to staggering sums if not accordingly hedged.
A rising dollar does rather damaging things to trading partners and to the US itself. Most obvious is that a strong dollar makes imports cheaper, dampens commodity prices should cause oil prices to decline, but, since the United States has become the world's largest producer of crude, perversely, oil is rising in tandem with the dollar (by Monday morning it had crested above $70/barrel), a condition which is going to cause some considerable pain to Americans who use more distilled products (gasoline) than any other nation.
If there's anything that will put a lid on economic expansion, it's high fuel prices, and the current level, if it remains so, primarily threatens the budgets of small businesses and individuals, acting as an up-front tax on production and consumption.
Practically every recession in modern history has been tied to the price of oil and/or gas. The current runaway price surge, if not contained and reversed, is likely to send the economy into a vicious tailspin. Since consumer credit is at an all-time high, the average driver cannot afford to spend more on fuel, be it to power an automobile, heat a home, or run a small business.
Once again, nefarious forces are at work, spiking the dollar and the price of crude simultaneously, when there is oil sloshing around everywhere and dollars returning to their US home thanks to congress and the president's tax reforms.
Those dollars, upon return, are being used by corporations for more stock buybacks, boosting - temporarily - stock prices, and are not reaching the consumption level, keeping inflation somewhat in check. The good news is that consumer goods will not skyrocket in price, though getting to the stores (what few of them remain) to buy such will cost more and more.
Greed will go where greed wants, and it always seems to manifest itself most profoundly in the price of a gallon of gas. Thank Larry Kudlow for this windfall for the Exxons and Chevrons of the world as his "king dollar" theory will be tested on the world stage.
Dow Jones Industrial Average May Scorecard:
At the Close, Friday, May 4, 2018:
Dow Jones Industrial Average: 24,262.51, +332.36 (+1.39%)
NASDAQ: 7,209.62, +121.47 (+1.71%)
S&P 500: 2,663.42, +33.69 (+1.28%)
NYSE Composite: 12,493.35, +100.84 (+0.81%)
For the Week:
Dow: -48.68 (-0.20%)
NASDAQ: +89.92 (+1.26%)
S&P 500: -6.49 (-0.24%)
NYSE Composite: -100.68 (-0.80%)
Thus, three of the major indices took it on the collective chins, with only the NASDAQ allowing for gains on a weekly basis. This kind of divergence - often seen in bear markets - is just another signal to astute investors that all is not well in the land of unicorns and lollipops otherwise known as Wall Street.
There's a significant amount of panic on display if one know where to look for it, one the best locations being the dollar index, which has been staging a rather relentless rally since mid-April, rising from 89.42 to 92.89, which may not seem like much on the surface, but in real terms, it's a huge matter to international trade. Companies not nimble enough to adjust to sudden currency movements may be caught flat-footed, on the wrong sides of trades, with losses in capital amounting to staggering sums if not accordingly hedged.
A rising dollar does rather damaging things to trading partners and to the US itself. Most obvious is that a strong dollar makes imports cheaper, dampens commodity prices should cause oil prices to decline, but, since the United States has become the world's largest producer of crude, perversely, oil is rising in tandem with the dollar (by Monday morning it had crested above $70/barrel), a condition which is going to cause some considerable pain to Americans who use more distilled products (gasoline) than any other nation.
If there's anything that will put a lid on economic expansion, it's high fuel prices, and the current level, if it remains so, primarily threatens the budgets of small businesses and individuals, acting as an up-front tax on production and consumption.
Practically every recession in modern history has been tied to the price of oil and/or gas. The current runaway price surge, if not contained and reversed, is likely to send the economy into a vicious tailspin. Since consumer credit is at an all-time high, the average driver cannot afford to spend more on fuel, be it to power an automobile, heat a home, or run a small business.
Once again, nefarious forces are at work, spiking the dollar and the price of crude simultaneously, when there is oil sloshing around everywhere and dollars returning to their US home thanks to congress and the president's tax reforms.
Those dollars, upon return, are being used by corporations for more stock buybacks, boosting - temporarily - stock prices, and are not reaching the consumption level, keeping inflation somewhat in check. The good news is that consumer goods will not skyrocket in price, though getting to the stores (what few of them remain) to buy such will cost more and more.
Greed will go where greed wants, and it always seems to manifest itself most profoundly in the price of a gallon of gas. Thank Larry Kudlow for this windfall for the Exxons and Chevrons of the world as his "king dollar" theory will be tested on the world stage.
Dow Jones Industrial Average May Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 5/1/18 | 24,099.05 | -64.10 | -64.10 |
| 5/2/18 | 23,924.98 | -174.07 | -238.17 |
| 5/3/18 | 23,930.15 | +5.17 | -233.00 |
| 5/4/18 | 24,262.51 | +332.36 | +99.36 |
At the Close, Friday, May 4, 2018:
Dow Jones Industrial Average: 24,262.51, +332.36 (+1.39%)
NASDAQ: 7,209.62, +121.47 (+1.71%)
S&P 500: 2,663.42, +33.69 (+1.28%)
NYSE Composite: 12,493.35, +100.84 (+0.81%)
For the Week:
Dow: -48.68 (-0.20%)
NASDAQ: +89.92 (+1.26%)
S&P 500: -6.49 (-0.24%)
NYSE Composite: -100.68 (-0.80%)
Saturday, January 20, 2018
Conceptually, Wall Street is Irrational and Stocks Are Poor (at best) Long-Term Investments
Follow the logic:
US federal government shuts down, stocks go up.
US Dollar collapse: stocks go higher (but inflation kills your purchasing power).
Nuclear war: stocks go ballistic (parabolic path, but the world is mostly ash).
TEOTWAWKI: Stocks take off towards infinity (no way to cash out, i.e, can't take it with you, though).
Ergo, bad news is good news, again.
And you thought investing was easy...
At the Close, Friday, January 19, 2018:
Dow: 26,071.72, +53.91 (+0.21%)
NASDAQ: 7,336.38, +40.33 (+0.55%)
S&P 500: 2,810.30, +12.27 (+0.44%)
NYSE Composite: 13,384.13, +68.55 (+0.51%)
For the Week:
Dow: +268.53 (+1.04%)
NASDAQ: +40.33 (+0.55%)
S&P 500: +24.06 (+0.86%)
NYSE Composite: +90.12 (+0.68%)
US federal government shuts down, stocks go up.
US Dollar collapse: stocks go higher (but inflation kills your purchasing power).
Nuclear war: stocks go ballistic (parabolic path, but the world is mostly ash).
TEOTWAWKI: Stocks take off towards infinity (no way to cash out, i.e, can't take it with you, though).
Ergo, bad news is good news, again.
And you thought investing was easy...
At the Close, Friday, January 19, 2018:
Dow: 26,071.72, +53.91 (+0.21%)
NASDAQ: 7,336.38, +40.33 (+0.55%)
S&P 500: 2,810.30, +12.27 (+0.44%)
NYSE Composite: 13,384.13, +68.55 (+0.51%)
For the Week:
Dow: +268.53 (+1.04%)
NASDAQ: +40.33 (+0.55%)
S&P 500: +24.06 (+0.86%)
NYSE Composite: +90.12 (+0.68%)
Wednesday, April 24, 2013
Flash Crash Proves Individuals are OUT of the Market and Computers Run the Show
As mentioned briefly yesterday, US and European markets are a joke. They are manipulated beyond one's wildest imagination and almost exclusively, the trading is done by computer algorithms, as was made entirely too clear by the action in yesterday's hacked AP Twitter account-flash crash.
In case you missed it - after all, it was only a four minute event - stocks lost all of their gains when somebody hacked into the Twitter account of the Associated Press (AP) and posted that there were two explosions at the white House and that President Barack Obama had been injured.
The tweet was a hoax, but the computers - which cannot deduce and make value judgements - responded by selling off all stocks. Volume, as displayed in animations from nanex.net completely dried up, leaving a few computers trading with a few other computers.
In other words, there were very few, if any, human responses to the fake tweet. Welcome to the bidless US stock markets, where only the computers can get the best prices and humans are relegated to a back seat. Any wonder why individual investors are wary of the stock markets? The same conditions likely exist - though not in such a pronounced manner - in forex and commodity markets.
It's time the American people disengage from this lunacy where only the bankers, exchanges and traders profit.
Take, for instance, today's trading, in which, when all was said and done at the close, the S&P gained a penny, the NASDAQ, 32 cents, while the Dow was down 43 points and the NYSE Composite gained almost 34 points. Surely that makes sense to some master algo inside a supercomputer somewhere beneath the trading floors, but to us dumb humans, it's somewhat confounding and confusing.
CNBC's Rick Santelli astutely pointed out that the other trade impacted by the phony tweet was none other than the Japanese Yen - US Dollar cross and the Yen/Euro cross, making the point that the Yen is now also tied into US stocks by HFT algos. Lovely.
Sooner or later, there's going to be a mistake somewhere, or some purposeful key-logging or hacking that completely disrupts trading in markets nearly around the world, and by then it will be too late. Obviously, having algos that trade on the basis of tweeted information is rife with flaws and ripe for harvest by nefarious forces.
As far as today's trading is concerned, nothing really mattered, even though the US was hit with another poor economic report, this one on durable goods orders for March, which came in at -5.1% on expectations of -3.1, so it was a bad miss on an equally bad forecast.
The spate of bad economic data has been partially offset of late by fairly good earnings reports from a smorgasbord of companies, close to half the S&P 500 having already reported. Of course, the algos are all over those, programmed to buy heavily on any earnings beats and disregard most misses.
Reality seems to have evaded Wall Street on a semi-permanent basis, but, Wall Street has never purported to have been a place for well-grounded types of people in the first place.
With sociopaths running the computers which trade the world, humans are bound to get bruised, and badly.
Gold and silver got a little bit of a bid, but a good chuck of it after the COMEX trading session ended. Oil was the top-performer with a gain of more than two percent. Oil never seems to be able to stay down for long. Funny how that always seems to be the case.
Dow 14,676.30, -43.16 (0.29%)
NASDAQ 3,269.65, +0.32 (0.01%)
S&P 500 1,578.79, +0.01 (0.00%)
NYSE Composite 9,147.77, +32.65 (0.37%)
NASDAQ Volume... 1,643,812,625.00
NYSE Volume 3,647,139,250
Combined NYSE & NASDAQ Advance - Decline: 4021-2343
Combined NYSE & NASDAQ New highs - New lows: 381-36
WTI crude oil: 91.43, +2.25
Gold: 1,423.70, +14.90
Silver: 22.83, +0.016
In case you missed it - after all, it was only a four minute event - stocks lost all of their gains when somebody hacked into the Twitter account of the Associated Press (AP) and posted that there were two explosions at the white House and that President Barack Obama had been injured.
The tweet was a hoax, but the computers - which cannot deduce and make value judgements - responded by selling off all stocks. Volume, as displayed in animations from nanex.net completely dried up, leaving a few computers trading with a few other computers.
In other words, there were very few, if any, human responses to the fake tweet. Welcome to the bidless US stock markets, where only the computers can get the best prices and humans are relegated to a back seat. Any wonder why individual investors are wary of the stock markets? The same conditions likely exist - though not in such a pronounced manner - in forex and commodity markets.
It's time the American people disengage from this lunacy where only the bankers, exchanges and traders profit.
Take, for instance, today's trading, in which, when all was said and done at the close, the S&P gained a penny, the NASDAQ, 32 cents, while the Dow was down 43 points and the NYSE Composite gained almost 34 points. Surely that makes sense to some master algo inside a supercomputer somewhere beneath the trading floors, but to us dumb humans, it's somewhat confounding and confusing.
CNBC's Rick Santelli astutely pointed out that the other trade impacted by the phony tweet was none other than the Japanese Yen - US Dollar cross and the Yen/Euro cross, making the point that the Yen is now also tied into US stocks by HFT algos. Lovely.
Sooner or later, there's going to be a mistake somewhere, or some purposeful key-logging or hacking that completely disrupts trading in markets nearly around the world, and by then it will be too late. Obviously, having algos that trade on the basis of tweeted information is rife with flaws and ripe for harvest by nefarious forces.
As far as today's trading is concerned, nothing really mattered, even though the US was hit with another poor economic report, this one on durable goods orders for March, which came in at -5.1% on expectations of -3.1, so it was a bad miss on an equally bad forecast.
The spate of bad economic data has been partially offset of late by fairly good earnings reports from a smorgasbord of companies, close to half the S&P 500 having already reported. Of course, the algos are all over those, programmed to buy heavily on any earnings beats and disregard most misses.
Reality seems to have evaded Wall Street on a semi-permanent basis, but, Wall Street has never purported to have been a place for well-grounded types of people in the first place.
With sociopaths running the computers which trade the world, humans are bound to get bruised, and badly.
Gold and silver got a little bit of a bid, but a good chuck of it after the COMEX trading session ended. Oil was the top-performer with a gain of more than two percent. Oil never seems to be able to stay down for long. Funny how that always seems to be the case.
Dow 14,676.30, -43.16 (0.29%)
NASDAQ 3,269.65, +0.32 (0.01%)
S&P 500 1,578.79, +0.01 (0.00%)
NYSE Composite 9,147.77, +32.65 (0.37%)
NASDAQ Volume... 1,643,812,625.00
NYSE Volume 3,647,139,250
Combined NYSE & NASDAQ Advance - Decline: 4021-2343
Combined NYSE & NASDAQ New highs - New lows: 381-36
WTI crude oil: 91.43, +2.25
Gold: 1,423.70, +14.90
Silver: 22.83, +0.016
Friday, May 6, 2011
Skimming Off the Fear Factor
Another week in the books for the crippled economy saw stocks rise on a better-than-expected jobs report and commodities take a bit of a breather as the dollar and bonds both gained.
for the week, the major averages were down anywhere from 1.3% to 1.7%, with the Dow faring best and the S&P the worst.
For analysis of the control factor in all trading, see this morning's post.
When the BLS' non-farm payroll report came out prior to the opening bell, futured roared back to life and equity markets opened sharply higher. The Dow was up as many as 175 points, but the rally fizzled as renewed weakness in Europe prompted a flight to safety to the US dollar.
News that Greece was pondering a move to leave the EU, or at least abandon the Euro as its main currency, kept the Euro sliding right into the weekend.
As the dollar gained strength, trades came off in risk assets, mainly equities, as investors were once again cheered then spooked by forces other than fundamentals.
Dow 12,638.74, +54.57 (0.43%)
NASDAQ 2,827.56, +12.84 (0.46%)
S&P 500 1,340.20, +5.10 (0.38%)
NYSE Composite 8,425.90, +28.50 (0.34%)
Advancing issues finished well ahead of decliners on the day, 4144-2356. New highs beat new lows on the NASDAQ, 68-36. The story was more exaggerated on the NYSE, where 133 new highs towered over 15 new lows. Volume was back in the doldrums, following heavy flight volume the previous two sessions.
NASDAQ Volume 2,007,823,250
NYSE Volume 4,907,953,500
After being whipsawed into submission, a few brave souls ventured back into the commodity trade, but it was definitely not for the faint of heart. NYMEX WTI crude oil continued to sell off, losing another $2.62, to finish out the week in NY at $97.18.
Gold bugs were welcomed back with open arms, as the shiny yellow metal yielded a gain of $19.30, to stand at $1492.40 as of this writing. Silver was less warmly received, but still managed to bounce of the lows and add 65 cents, to $35.31, though there is still concern another round of trimming is yet on the way.
The calendar for next week is rather light until Thursday, which kicks off with unemployment claims, PPI and retail sales, followed on Friday with the monthly CPI figures and the University of Michigan consumer sentiment index. With first quarter earnings now winding down, the markets will be looking for clues for direction, as this week's action has left many dazed and confused.
for the week, the major averages were down anywhere from 1.3% to 1.7%, with the Dow faring best and the S&P the worst.
For analysis of the control factor in all trading, see this morning's post.
When the BLS' non-farm payroll report came out prior to the opening bell, futured roared back to life and equity markets opened sharply higher. The Dow was up as many as 175 points, but the rally fizzled as renewed weakness in Europe prompted a flight to safety to the US dollar.
News that Greece was pondering a move to leave the EU, or at least abandon the Euro as its main currency, kept the Euro sliding right into the weekend.
As the dollar gained strength, trades came off in risk assets, mainly equities, as investors were once again cheered then spooked by forces other than fundamentals.
Dow 12,638.74, +54.57 (0.43%)
NASDAQ 2,827.56, +12.84 (0.46%)
S&P 500 1,340.20, +5.10 (0.38%)
NYSE Composite 8,425.90, +28.50 (0.34%)
Advancing issues finished well ahead of decliners on the day, 4144-2356. New highs beat new lows on the NASDAQ, 68-36. The story was more exaggerated on the NYSE, where 133 new highs towered over 15 new lows. Volume was back in the doldrums, following heavy flight volume the previous two sessions.
NASDAQ Volume 2,007,823,250
NYSE Volume 4,907,953,500
After being whipsawed into submission, a few brave souls ventured back into the commodity trade, but it was definitely not for the faint of heart. NYMEX WTI crude oil continued to sell off, losing another $2.62, to finish out the week in NY at $97.18.
Gold bugs were welcomed back with open arms, as the shiny yellow metal yielded a gain of $19.30, to stand at $1492.40 as of this writing. Silver was less warmly received, but still managed to bounce of the lows and add 65 cents, to $35.31, though there is still concern another round of trimming is yet on the way.
The calendar for next week is rather light until Thursday, which kicks off with unemployment claims, PPI and retail sales, followed on Friday with the monthly CPI figures and the University of Michigan consumer sentiment index. With first quarter earnings now winding down, the markets will be looking for clues for direction, as this week's action has left many dazed and confused.
Wednesday, April 20, 2011
Buy More Stocks Because the Dollar is Worthless
If anyone has any kind of notion that today's massive uptick in stocks had anything to do with the strength of the US economy, they'd better go back to economics 101 and check the chapter on currency devaluation.
Oh, there is no chapter on that? Well, allow me to explain how the dollar was absolutely savaged by - of all things - the Euro, and a host of other currencies including, but not limited to: the Aussie dollar, the Canadian looney, the Chinese Yuan and especially, the Swiss Franc.
On the dollar index (not a particularly great way to value US paper money, but sufficient for this discussion), the loss was 74 cents, or nearly one percent, meaning everything you buy that isn't produced in the United States - which is just about everything - costs 1% more today than it did yesterday. The corresponding rise in stocks only helps alleviate the pain for the richy-rich amongst us, but they usually find tax dodges or off-shore accounts for their hordes of cash anyhow.
The rest of you schmucks are just going to have to take it, see? You pay more so the Fed can print more billions, give them to the primary dealers and allow the government to continue overspending until eternity, which is a long, long, time. Next week, it will likely get worse, with gas heading for $5.00 a gallon nationally, and everything else going up accordingly, eventually, the average household will be able to buy food and fuel and little else, all the while watching those who own stocks make fortunes.
While the wizards of Wall Street frolic in the fields of greenbacks, you and I will be left holding the bag, containing manure, and be taxed into oblivion. Don't worry about Medicare and Social Security, most of us will die off before any benefits are actually paid out.
It's an ugly, severely evil set-up by the banks and our hands-out congress to create two distinct classes in the United States: the super, super rich and everyone else. You and I must learn how to raise our own crops and subsist off the land leased by our wealthy masters. Welcome to the golden age of feudalism!
I have nothing more to add except that if you haven't started some plants growing in your back yard and already own some silver or gold or both, you need to do so immediately, as time is running short and planting season is upon us. We are nearing the point of complete collapse of the middle class.
If your kids are planning to go to a big university and go into hock to the tune of $40, $50 or as much as $100,000 to get their degree, it might be time to sit them down and explain that their high school diploma will be sufficient, in their bleak future, to work as a mechanic, a gardener, or a chamber maid. Their dreams of becoming the next great biologist or astronaut will have to be put on indefinite hold.
Dow 12,453.54, +186.79 (1.52%)
NASDAQ 2,802.51, +57.54 (2.10%)
S&P 500 1,330.36, +17.74 (1.35%)
NYSE Composite 8,457.65, +125.62 (1.51%)
Advancing issues pounded decliners, 5245-1347. There were 133 new highs and 29 new lows. On the NYSE, 193 new highs and 16 new lows was the order of the day. Volume was relatively solid on the NASDAQ, where all the momentum stocks reside, but the usual miserable figures were posted on the NYSE. Almost all of the day's gains were made at the open, so the futures players made fortunes; the rest of the session was nothing more than churning.
NASDAQ Volume 2,112,464,250
NYSE Volume 4,657,346,000
Crude oil made a huge move of nearly 3%, gaining $3.17, to $111.45, making that $5.00 gallon of gas that the oil barons dream about that much closer to reality. Gold blasted through the $1500 mark again, but was taken down to $1,498.90, a gain of a mere $3.80. Silver continues to dazzle, gaining another 54 cents on the day, finishing in New York at $44.46.
While some argue that gold and silver are bubbles, if that is the case, then what is to be said of stocks, which have doubled off their March 2009 lows? Gold and silver are only a third to a fifth of the way to where they are eventually going. With every new dollar printed by the Chairman of the Fed, Ben Bernanke, an ounce of precious metals costs a little bit more, and that's about the only good news I can report today.
EDIT: Following the COMEX close in New York, gold bounced to $1502.10, and silver shot up to $45.22 an ounce at 5:18 pm EDT.
Oh, there is no chapter on that? Well, allow me to explain how the dollar was absolutely savaged by - of all things - the Euro, and a host of other currencies including, but not limited to: the Aussie dollar, the Canadian looney, the Chinese Yuan and especially, the Swiss Franc.
On the dollar index (not a particularly great way to value US paper money, but sufficient for this discussion), the loss was 74 cents, or nearly one percent, meaning everything you buy that isn't produced in the United States - which is just about everything - costs 1% more today than it did yesterday. The corresponding rise in stocks only helps alleviate the pain for the richy-rich amongst us, but they usually find tax dodges or off-shore accounts for their hordes of cash anyhow.
The rest of you schmucks are just going to have to take it, see? You pay more so the Fed can print more billions, give them to the primary dealers and allow the government to continue overspending until eternity, which is a long, long, time. Next week, it will likely get worse, with gas heading for $5.00 a gallon nationally, and everything else going up accordingly, eventually, the average household will be able to buy food and fuel and little else, all the while watching those who own stocks make fortunes.
While the wizards of Wall Street frolic in the fields of greenbacks, you and I will be left holding the bag, containing manure, and be taxed into oblivion. Don't worry about Medicare and Social Security, most of us will die off before any benefits are actually paid out.
It's an ugly, severely evil set-up by the banks and our hands-out congress to create two distinct classes in the United States: the super, super rich and everyone else. You and I must learn how to raise our own crops and subsist off the land leased by our wealthy masters. Welcome to the golden age of feudalism!
I have nothing more to add except that if you haven't started some plants growing in your back yard and already own some silver or gold or both, you need to do so immediately, as time is running short and planting season is upon us. We are nearing the point of complete collapse of the middle class.
If your kids are planning to go to a big university and go into hock to the tune of $40, $50 or as much as $100,000 to get their degree, it might be time to sit them down and explain that their high school diploma will be sufficient, in their bleak future, to work as a mechanic, a gardener, or a chamber maid. Their dreams of becoming the next great biologist or astronaut will have to be put on indefinite hold.
Dow 12,453.54, +186.79 (1.52%)
NASDAQ 2,802.51, +57.54 (2.10%)
S&P 500 1,330.36, +17.74 (1.35%)
NYSE Composite 8,457.65, +125.62 (1.51%)
Advancing issues pounded decliners, 5245-1347. There were 133 new highs and 29 new lows. On the NYSE, 193 new highs and 16 new lows was the order of the day. Volume was relatively solid on the NASDAQ, where all the momentum stocks reside, but the usual miserable figures were posted on the NYSE. Almost all of the day's gains were made at the open, so the futures players made fortunes; the rest of the session was nothing more than churning.
NASDAQ Volume 2,112,464,250
NYSE Volume 4,657,346,000
Crude oil made a huge move of nearly 3%, gaining $3.17, to $111.45, making that $5.00 gallon of gas that the oil barons dream about that much closer to reality. Gold blasted through the $1500 mark again, but was taken down to $1,498.90, a gain of a mere $3.80. Silver continues to dazzle, gaining another 54 cents on the day, finishing in New York at $44.46.
While some argue that gold and silver are bubbles, if that is the case, then what is to be said of stocks, which have doubled off their March 2009 lows? Gold and silver are only a third to a fifth of the way to where they are eventually going. With every new dollar printed by the Chairman of the Fed, Ben Bernanke, an ounce of precious metals costs a little bit more, and that's about the only good news I can report today.
EDIT: Following the COMEX close in New York, gold bounced to $1502.10, and silver shot up to $45.22 an ounce at 5:18 pm EDT.
Thursday, March 25, 2010
Turn-Around Thursday: Greece, US $$ Bury Stock Gains?
Well, it's simply not all sunshine and roses out there after all. On a day in which market pumpers from the major brokerages were attempting to take the Dow over the magical 11,000 mark, turmoil in the Eurozone and strength of the US dollar killed all hopes of a smooth recovery.
The headlines from the various media would have you believe that investors are snapping up stocks like jelly beans on Easter morning and that the bad, old world of Europe, which just can't get its own house in order caused so much worry that everybody sold at once around 3:00 in the afternoon.
Folks, don't be silly. The selling began as soon as the dow crossed the threshold of 10,500, around 1:30 pm. There was no news at that point, except some rumors that Jean Claude Trichet, president of the Europen Central Bank, warned that the bailout of Greece should not involve the International Monetary Fund (IMF), a US export which has consistently stolen wealth from less-fortunate or less-well-armed nations. As it turns out, the EU will be in partnership with the IMF, with the latter handling 1/3 of the Greece debt solution. Good for us, though only if you agree with bullying smaller countries.
It's a working plan, without firm details, though Greece's senior notes are now graded as junk, BBB-. What happened at 3:00? Nothing, except that an ordinary time of day for heavy traders to make moves. And they did all move almost at once, selling, so as to lock in their profits from earlier in the session. This is nothing new. It is a normal trading day move, and nothing more. Reading anything more into a mid-session reversal is usually a bad idea, though this kind of thing could become more commonplace. If stocks continue to gallop higher, look for astute traders to take day-trade profits over and over again.
Dollar strength is good for the US economy, folks. Don't let anybody try to tell you otherwise. A stronger dollar means imports cost less. Sure, exports are more expensive and thus, less marketable around the world, but that shouldn't matter - either to you or most multi-national corporations - you don't export and the big companies nowadays have their manufacturing offshore, in other countries, where labor is cheaper. Besides, they're selling things like industrial tractors, nuclear plants and other extremely high-ticket items where price pretty much takes a back seat to other functions like delivery time and overall quality.
So, sure, the US dollar was marked up today, not because the US is in such outstanding shape, but because Europe is a basket case. US dollars just looked better by comparison, at least for the short term. The trend is positive for US consumers, maybe not for US companies as a rule, but, by no means is a stronger dollar anything but good.
Thus, trader sentiment, and the lust for a quick profit, had more to do with turning a 90-point move higher on the dow into a 5-point gain at the close, and a 25-point NASDAQ gain into a small loss. Tough cookies. Live with it.
Dow 10,841.21, +5.06 (0.05%)
NASDAQ 2,397.41, -1.35 (0.06%)
S&P 500 1,165.73, -1.99 (0.17%)
NYSE Composite 7,385.60, -22.56 (0.30%)
Surprisingly, volume was excellent, though most of the moves were made in the latter part of the day, when selling was the correct option. Losers outslugged winners, 3936-2583. There were 751 new highs to just 85 new lows.
NYSE Volume 6,429,545,000
NASDAQ Volume 2,589,351,750
The rise in the dollar shot dead a rally in oil and the metals. Crude for May delivery fell 8 cents, to $80.53. Gold, which was up sharply, closed with a gain of just $4.10, at $1,092.70. Silver picked up 10 cents, to close at $16.73 per ounce.
In two stories which have importance only in the context of a post-government era of semi-autonomous anarchy, California will vote in November to legalize marijuana and former Assistant Secretary of the Treasury and popular truth-telling writer Paul Craig Roberts said he is retiring from the writing business, ending his last column with the words, "As the pen is censored and its might extinguished, I am signing off."
The headlines from the various media would have you believe that investors are snapping up stocks like jelly beans on Easter morning and that the bad, old world of Europe, which just can't get its own house in order caused so much worry that everybody sold at once around 3:00 in the afternoon.
Folks, don't be silly. The selling began as soon as the dow crossed the threshold of 10,500, around 1:30 pm. There was no news at that point, except some rumors that Jean Claude Trichet, president of the Europen Central Bank, warned that the bailout of Greece should not involve the International Monetary Fund (IMF), a US export which has consistently stolen wealth from less-fortunate or less-well-armed nations. As it turns out, the EU will be in partnership with the IMF, with the latter handling 1/3 of the Greece debt solution. Good for us, though only if you agree with bullying smaller countries.
It's a working plan, without firm details, though Greece's senior notes are now graded as junk, BBB-. What happened at 3:00? Nothing, except that an ordinary time of day for heavy traders to make moves. And they did all move almost at once, selling, so as to lock in their profits from earlier in the session. This is nothing new. It is a normal trading day move, and nothing more. Reading anything more into a mid-session reversal is usually a bad idea, though this kind of thing could become more commonplace. If stocks continue to gallop higher, look for astute traders to take day-trade profits over and over again.
Dollar strength is good for the US economy, folks. Don't let anybody try to tell you otherwise. A stronger dollar means imports cost less. Sure, exports are more expensive and thus, less marketable around the world, but that shouldn't matter - either to you or most multi-national corporations - you don't export and the big companies nowadays have their manufacturing offshore, in other countries, where labor is cheaper. Besides, they're selling things like industrial tractors, nuclear plants and other extremely high-ticket items where price pretty much takes a back seat to other functions like delivery time and overall quality.
So, sure, the US dollar was marked up today, not because the US is in such outstanding shape, but because Europe is a basket case. US dollars just looked better by comparison, at least for the short term. The trend is positive for US consumers, maybe not for US companies as a rule, but, by no means is a stronger dollar anything but good.
Thus, trader sentiment, and the lust for a quick profit, had more to do with turning a 90-point move higher on the dow into a 5-point gain at the close, and a 25-point NASDAQ gain into a small loss. Tough cookies. Live with it.
Dow 10,841.21, +5.06 (0.05%)
NASDAQ 2,397.41, -1.35 (0.06%)
S&P 500 1,165.73, -1.99 (0.17%)
NYSE Composite 7,385.60, -22.56 (0.30%)
Surprisingly, volume was excellent, though most of the moves were made in the latter part of the day, when selling was the correct option. Losers outslugged winners, 3936-2583. There were 751 new highs to just 85 new lows.
NYSE Volume 6,429,545,000
NASDAQ Volume 2,589,351,750
The rise in the dollar shot dead a rally in oil and the metals. Crude for May delivery fell 8 cents, to $80.53. Gold, which was up sharply, closed with a gain of just $4.10, at $1,092.70. Silver picked up 10 cents, to close at $16.73 per ounce.
In two stories which have importance only in the context of a post-government era of semi-autonomous anarchy, California will vote in November to legalize marijuana and former Assistant Secretary of the Treasury and popular truth-telling writer Paul Craig Roberts said he is retiring from the writing business, ending his last column with the words, "As the pen is censored and its might extinguished, I am signing off."
Friday, December 11, 2009
Defying Dollar, Dow Closes Within 8 Cents of 52-Week High
For more than a little while, the trade has been to sell US dollars and buy US stocks. On Friday, the story was rather different, as buyers of Dow stocks, in particular, defied the dictum of the carry trade, buying stocks while the US Dollar was rising against other currencies. The questions on everybody's mind were, "Why?". Why now?", and "What about that Fed meeting next week?"
Answers for traders were not forthcoming, as they were bidding up Dow stocks to within 8 cents of its 52-week high at the close. That finish was meaningful, for a variety of reasons, not the least of which had to do with answers to the questions posed above.
Taking them one by one, here's a quick explanation:
Why? The reasons people buy stocks as they approach 52-week highs are as numerous as there are grains of sand on the beach, but in this case, it seemed to be with ulterior motive. Other possibilities include a massive short squeeze on Alcoa (AA), which was up a whopping 1.11, (8.22%). November retail sales came in better than expected (+1.3%) and the University of Michigan Consumer Sentiment reading was higher, at 73.4, following last month's 67.4. Naturally, that good news should have produced a stronger dollar. They did, but, remember the ulterior motive. Read on.
Why now? Stocks were bid up precisely to just below their closing 52-week high just in case technical analysts were peering in on the activities, and they surely were. Today was a planned day for such a rise because it had two significant elements going for it. First, it was Friday, meaning positions would be locked in until Monday, and, second, there is a Fed meeting next week in which it is widely expected that the FOMC will leave rates unchanged, but give more hints as to the exact date of the first, in what no doubt will be a series of, rate hikes. The other kicker is that some of that dubious Dubai debt is supposed to be repaid on Monday, and, if it isn't, chaos in financial markets could ensue.
What about that Fed meeting next week? As answered above, the FOMC will meet to discuss policy on Tuesday and Wednesday, the 15th and 16th, culminating in a policy decision and statement on Wednesday, right around 2:00 pm. That also coincides with options expiration on Friday, and if you think there aren't a boatload of players in that space, betting and hedging on the Fed decision, maybe you should go back to playing euchre with friends for nickels and dimes.
Obviously, there is a good deal of money riding on the events of next week, and the markers were laid down yesterday and today, but especially today, with the apparent end of the dollar carry trade. Don't buy into the argument that positions short the dollar and long stocks don't matter any more. That trade was very prevalent and has yet to be unwound. Today's rise on the Dow was a shot fired across the bows of many hedge funds who are trapped in losing positions. Fireworks should be expected right out of the gate on Monday.
Whoever was in control of today's trade on the Dow was using a great deal of leverage, meaning that today's move was very transient and temporary. Ask yourself if you'd be buying stocks at the end of the year, just as they're reaching new highs - highs, mind you, that have yet to be surpassed in any meaningful way since the end of October. Consider these data points for closes on the Dow, all 52-week highs:
November 17: 10,437.42
November 23: 10,450.95
November 25: 10,464.40
December 1: 10,471.58
Today's close was at 10,471,50 and there was no confirmation by the S&P or, even more importantly, the Dow Transportation Index. Ooops!
As a point of reference to illustrate just how difficult this area of resistance is proving to be, consider these recent closes on the S&P:
November 17: 1110.32
November 18: 1109.80
November 23: 1106.24
November 24: 1105.65
November 25: 1110.63
December 1: 1108.86
December 2: 1109.24
December 4: 1105.98
Today's close of 1106.41 is another meaningless near-top. Clearly, there's a distribution pattern taking place which is preventing stocks from breaking out to new highs.
By all accounts, it's just not going to happen. At least not any time soon. Take heed of the usefulness of the dollar carry or risk trade, and ignore the movements of today as just so much market noise. Buy low, sell high. What do you think the real tradrs are doing here?
And just in case you were wondering, the Dow finished higher for the week, with the NASDAQ and NYSE Composite lower. The S&P actually ended the week with a fractional gain, or, essentially flat.
Dow 10,471.50, +65.67 (0.63%)
NASDAQ 2,190.31, -0.55 (0.03%)
S&P 500 1,106.41, +4.06 (0.37%)
NYSE Composite 7,125.12, +20.62 (0.29%)
Advancers outnumbered decliners, 4043-2402, though you would have hardly guessed it looking just at the tape. Dow stocks were 21 up with 9 down. The two biggest movers to the upside were Alcoa (AA) and Bank of America (BAC), two dubious leaders, to be sure. New highs beat new lows, 348-60. Besides the days before and after Thanksgiving, NASDAQ volume was the lowest since September 4, a date that also preceded a holiday - Labor Day. NYSE volume was about average.
NYSE Volume 4,408,781,000
NASDAQ Volume 1,762,412,125
More evidence of some deviousness at play came from the commodities pits, where oil sold off for the 8th straight day, losing 89 cents, to $69.65. Meanwhile, major oil company Dow stocks, Chevron (CVX) and ExxonMobil (XOM) both traded higher throughout the session and finished with small gains, though gains nonetheless.
Gold, one of the main catalysts behind dollar strength, traded down again, off $6.60, to $1,119.60. Silver followed suit, losing 10 cents, to $17.09.
One should be well advised going into next week to not read very much into this week's action. Since stocks are at their highs, you've likely missed the move if you were not participating. If you were in, this could be a great time to take a little off the top or close positions should that be your preference. There's been plenty of play in March Index options against the Dow and S&P in particular. Large positions have been placed well out of the money, and while they may be there for protection, the possibility of a sharp correction, which has not yet occurred since the March lows, is growing. Eventually, there is going to be a 10-20% or larger downturn, though the timing of such an event is uncertain.
All good traders, like Boy Scouts, should be prepared.
Answers for traders were not forthcoming, as they were bidding up Dow stocks to within 8 cents of its 52-week high at the close. That finish was meaningful, for a variety of reasons, not the least of which had to do with answers to the questions posed above.
Taking them one by one, here's a quick explanation:
Why? The reasons people buy stocks as they approach 52-week highs are as numerous as there are grains of sand on the beach, but in this case, it seemed to be with ulterior motive. Other possibilities include a massive short squeeze on Alcoa (AA), which was up a whopping 1.11, (8.22%). November retail sales came in better than expected (+1.3%) and the University of Michigan Consumer Sentiment reading was higher, at 73.4, following last month's 67.4. Naturally, that good news should have produced a stronger dollar. They did, but, remember the ulterior motive. Read on.
Why now? Stocks were bid up precisely to just below their closing 52-week high just in case technical analysts were peering in on the activities, and they surely were. Today was a planned day for such a rise because it had two significant elements going for it. First, it was Friday, meaning positions would be locked in until Monday, and, second, there is a Fed meeting next week in which it is widely expected that the FOMC will leave rates unchanged, but give more hints as to the exact date of the first, in what no doubt will be a series of, rate hikes. The other kicker is that some of that dubious Dubai debt is supposed to be repaid on Monday, and, if it isn't, chaos in financial markets could ensue.
What about that Fed meeting next week? As answered above, the FOMC will meet to discuss policy on Tuesday and Wednesday, the 15th and 16th, culminating in a policy decision and statement on Wednesday, right around 2:00 pm. That also coincides with options expiration on Friday, and if you think there aren't a boatload of players in that space, betting and hedging on the Fed decision, maybe you should go back to playing euchre with friends for nickels and dimes.
Obviously, there is a good deal of money riding on the events of next week, and the markers were laid down yesterday and today, but especially today, with the apparent end of the dollar carry trade. Don't buy into the argument that positions short the dollar and long stocks don't matter any more. That trade was very prevalent and has yet to be unwound. Today's rise on the Dow was a shot fired across the bows of many hedge funds who are trapped in losing positions. Fireworks should be expected right out of the gate on Monday.
Whoever was in control of today's trade on the Dow was using a great deal of leverage, meaning that today's move was very transient and temporary. Ask yourself if you'd be buying stocks at the end of the year, just as they're reaching new highs - highs, mind you, that have yet to be surpassed in any meaningful way since the end of October. Consider these data points for closes on the Dow, all 52-week highs:
November 17: 10,437.42
November 23: 10,450.95
November 25: 10,464.40
December 1: 10,471.58
Today's close was at 10,471,50 and there was no confirmation by the S&P or, even more importantly, the Dow Transportation Index. Ooops!
As a point of reference to illustrate just how difficult this area of resistance is proving to be, consider these recent closes on the S&P:
November 17: 1110.32
November 18: 1109.80
November 23: 1106.24
November 24: 1105.65
November 25: 1110.63
December 1: 1108.86
December 2: 1109.24
December 4: 1105.98
Today's close of 1106.41 is another meaningless near-top. Clearly, there's a distribution pattern taking place which is preventing stocks from breaking out to new highs.
By all accounts, it's just not going to happen. At least not any time soon. Take heed of the usefulness of the dollar carry or risk trade, and ignore the movements of today as just so much market noise. Buy low, sell high. What do you think the real tradrs are doing here?
And just in case you were wondering, the Dow finished higher for the week, with the NASDAQ and NYSE Composite lower. The S&P actually ended the week with a fractional gain, or, essentially flat.
Dow 10,471.50, +65.67 (0.63%)
NASDAQ 2,190.31, -0.55 (0.03%)
S&P 500 1,106.41, +4.06 (0.37%)
NYSE Composite 7,125.12, +20.62 (0.29%)
Advancers outnumbered decliners, 4043-2402, though you would have hardly guessed it looking just at the tape. Dow stocks were 21 up with 9 down. The two biggest movers to the upside were Alcoa (AA) and Bank of America (BAC), two dubious leaders, to be sure. New highs beat new lows, 348-60. Besides the days before and after Thanksgiving, NASDAQ volume was the lowest since September 4, a date that also preceded a holiday - Labor Day. NYSE volume was about average.
NYSE Volume 4,408,781,000
NASDAQ Volume 1,762,412,125
More evidence of some deviousness at play came from the commodities pits, where oil sold off for the 8th straight day, losing 89 cents, to $69.65. Meanwhile, major oil company Dow stocks, Chevron (CVX) and ExxonMobil (XOM) both traded higher throughout the session and finished with small gains, though gains nonetheless.
Gold, one of the main catalysts behind dollar strength, traded down again, off $6.60, to $1,119.60. Silver followed suit, losing 10 cents, to $17.09.
One should be well advised going into next week to not read very much into this week's action. Since stocks are at their highs, you've likely missed the move if you were not participating. If you were in, this could be a great time to take a little off the top or close positions should that be your preference. There's been plenty of play in March Index options against the Dow and S&P in particular. Large positions have been placed well out of the money, and while they may be there for protection, the possibility of a sharp correction, which has not yet occurred since the March lows, is growing. Eventually, there is going to be a 10-20% or larger downturn, though the timing of such an event is uncertain.
All good traders, like Boy Scouts, should be prepared.
Tuesday, December 8, 2009
Strong Dollar Whacks Stocks, Metals
The continuing saga that is the unwinding of the risk-carry trade on the back of the weaker US Dollar continued today in earnest as the greenback strengthened against a basket of world currencies, most notably, the Euro and British Pound. As strength in the dollar causes speculators who used the currency as free cash as it was falling to sell stocks and cover, US markets took a decidedly negative turn on Tuesday. Also adversely affected were the precious metals, which continued their quite precipitous decline.
Besides the US Dollar story, there was little else to move markets, although a report of declining same-store sales from McDonald's (MCD) and an earnings warning from 3M (MMM) helped push the Dow lower.
Dow 10,285.97, -104.14 (1.00%)
NASDAQ 2,172.99, -16.62 (0.76%)
S&P 500 1,091.93, -11.32 (1.03%)
NYSE Composite 7,056.26, -99.47 (1.39%)
Declining issues overwhelmed advancers, 4488-1987, a measure of more than 2:1, while new highs beat new lows, 217-51, with the margin now having declined for the fourth straight session from a high of 341 to today's 166, or, by more than half. Should the high-low indicator continue to weaken and eventually turn negative, the chances of a severe downturn would increase proportionately. As it is presently, the indicator is flashing only a slightly negative sign, though taken together with other indications, the market may be already past a turning point to the downside.
Volume remained consistently low, as traders seem to have already headed out of town for the holidays. Speaking of which, there are only 16 shopping days left until Christmas, and thus far, retailers have not offered any encouragement. The American consumer is spending with rarely-seen frugality this season, and the numbers may not even be good enough to surpass last year's dismal sales figures.
One caveat remains in place concerning holiday retail sales. Even though last year's figures were horrid, they may have been better than they should have been, given that the stinginess demonstrated by the banks was just beginning to take hold. More consumers were negatively affected in terms of credit during 2009 than prior to the shopping season of 2008. The financial collapse was only then a month or two old, so there was still a good deal of uncertainty and skepticism concerning the true depth of the crisis. It was only in January and February that the real impact of the financial crisis became real for many people. Bear in mind that stocks didn't bottom until March of this year, and the clanging impact of that bottoming is still resonant.
NYSE Volume 5,421,175,500
NASDAQ Volume 1,916,778,500
Commodities fell victim again to the stronger dollar, which, in the long term, is positive. Oil was lower by $1.31, closing at $72.62. Talk of testing the $70 level has been bantered about, but that is nothing but a number. The real test for oil will not occur until it approaches $65, and a stronger US Dollar should provide sufficient impetus to push it through that level down to more reasonable valuations. Yesterday, Saudi oil minister Ali al-Naimi proclaimed that the price of oil was "perfect" at $74/barrel. Today, he is likely a little less sanguine.
Gold dropped $20.60, to $1,143.40, though it has traded lower - down another $15 - after the official print at 1:30 pm. Silver was hit likewise, dropping 58 cents, to $17.79. Nearly every commodity price was lower on the day, with just corn and natural gas bucking the trend.
With just 16 trading days left in the year, the two key dates are next Friday, the 18th, which is a quadruple-witching day for options expiration, and the 31st, the final day of trading for the year. With Christmas and New Year's Day falling on Fridays, the year will end with two short weeks. The 24th will be a morning session only, with the trading floor closing at 1:00 pm. New Year's Eve, the 31st, will be a full trading session.
Besides the US Dollar story, there was little else to move markets, although a report of declining same-store sales from McDonald's (MCD) and an earnings warning from 3M (MMM) helped push the Dow lower.
Dow 10,285.97, -104.14 (1.00%)
NASDAQ 2,172.99, -16.62 (0.76%)
S&P 500 1,091.93, -11.32 (1.03%)
NYSE Composite 7,056.26, -99.47 (1.39%)
Declining issues overwhelmed advancers, 4488-1987, a measure of more than 2:1, while new highs beat new lows, 217-51, with the margin now having declined for the fourth straight session from a high of 341 to today's 166, or, by more than half. Should the high-low indicator continue to weaken and eventually turn negative, the chances of a severe downturn would increase proportionately. As it is presently, the indicator is flashing only a slightly negative sign, though taken together with other indications, the market may be already past a turning point to the downside.
Volume remained consistently low, as traders seem to have already headed out of town for the holidays. Speaking of which, there are only 16 shopping days left until Christmas, and thus far, retailers have not offered any encouragement. The American consumer is spending with rarely-seen frugality this season, and the numbers may not even be good enough to surpass last year's dismal sales figures.
One caveat remains in place concerning holiday retail sales. Even though last year's figures were horrid, they may have been better than they should have been, given that the stinginess demonstrated by the banks was just beginning to take hold. More consumers were negatively affected in terms of credit during 2009 than prior to the shopping season of 2008. The financial collapse was only then a month or two old, so there was still a good deal of uncertainty and skepticism concerning the true depth of the crisis. It was only in January and February that the real impact of the financial crisis became real for many people. Bear in mind that stocks didn't bottom until March of this year, and the clanging impact of that bottoming is still resonant.
NYSE Volume 5,421,175,500
NASDAQ Volume 1,916,778,500
Commodities fell victim again to the stronger dollar, which, in the long term, is positive. Oil was lower by $1.31, closing at $72.62. Talk of testing the $70 level has been bantered about, but that is nothing but a number. The real test for oil will not occur until it approaches $65, and a stronger US Dollar should provide sufficient impetus to push it through that level down to more reasonable valuations. Yesterday, Saudi oil minister Ali al-Naimi proclaimed that the price of oil was "perfect" at $74/barrel. Today, he is likely a little less sanguine.
Gold dropped $20.60, to $1,143.40, though it has traded lower - down another $15 - after the official print at 1:30 pm. Silver was hit likewise, dropping 58 cents, to $17.79. Nearly every commodity price was lower on the day, with just corn and natural gas bucking the trend.
With just 16 trading days left in the year, the two key dates are next Friday, the 18th, which is a quadruple-witching day for options expiration, and the 31st, the final day of trading for the year. With Christmas and New Year's Day falling on Fridays, the year will end with two short weeks. The 24th will be a morning session only, with the trading floor closing at 1:00 pm. New Year's Eve, the 31st, will be a full trading session.
Monday, December 7, 2009
Bernanke's Remarks Quite Revealing of Future Fed Policy
Federal Reserve Chairman Ben Bernanke reiterated previous comments and provided even more clues to future policy for the nation's central bank. Throughout his prepared remarks to the Economic Club of Washington, Bernanke hinted at a tightening of policy in the future, though he was resolute in never using qualifies such as "near" or "short", keeping any anticipated federal funds rate hike at arm's length, at least. He also mentioned, at various times, that the Fed had other means for reigning in inflation, not limited to rate adjustments, such as repurchasing agreements and liquidation of some assets on the Fed balance sheet.
-- Federal Reserve Chairman Ben Bernanke addressing the Economic Club of Washington
The mopping up of excess liquidity has likely already begun, sufficiently demonstrated by recent moves in currency and commodity markets. On the first day of trading for the week, gold was hard hit early in the day while stocks held onto fractional gains all morning. Following Bernanke's remarks, the markets began to unwind, falling off their highs (up more than 50 on the Dow) to register in the negative as the day ensued.
Gold and silver managed to pare losses, and while the US Dollar was lower against most currencies, it was not by very much as the Euro continued a strong run against the greenback. Stocks continued to struggle along, as they have over the past three sessions. The indices put in hard triple tops on December 2, 3 and 4, and those intra-day high levels have been, and will continue to be, difficult levels to overcome.
Contributing to the weakness is a fairly obvious short-term overbought condition of stocks and the coming end of the calendar year. Many professionals have already locked in substantial gains prior to the month (indeed, many fund managers were through at the end of October) and trading volumes have been thin. Profit taking seems more the order of the day than actual search for value or the staking out of new positions.
Dow 10,390.11, +1.21 (0.01%)
NASDAQ 2,189.61, -4.74 (0.22%)
S&P 500 1,103.25, -2.73 (0.25%)
NYSE Composite 7,155.73, -26.98 (0.38%)
Simple indicators were slightly skewed to a positive bias, with advancing issues outperforming decliners, 3380-3103. New highs finished ahead of new lows, 352-49. Volume was at the low end of the recent range, and, in fact, among the lowest trading volume of the past two months, another sign that overall market participation is on the wane. Similar conditions are being reported on options exchanges.
NYSE Volume 4,780,842,500
NASDAQ Volume 1,894,192,500
Commodities continue to slide, with oil down to 2 1/2 month lows, down $1.54, to $73.93. Gold, which was down as much as $29 during the day, fell $5.50, to $1,164.00. Silver was down 14 cents to $18.38, though, like gold, losses were far greater earlier in the session.
Most of the indications currently in play are calling for nothing greater than sideways trade, which, by itself, puts pressure on the downside. With the general consensus that the markets are tired and trading slow, the potential for some spillage is evident. If the current short-term climb in the dollar continues, spurred along either by better US economic news or a flight to currency safety, the bet for stocks is presently neutral to lower. Chasing performance at these elevated levels goes against the most fundamental tenet of investing: buy low, sell high.
It's obvious that the professional traders are, or already have been, selling.
The improvement in financial conditions this year and the resumption of growth over the summer offer the hope and expectation of continued recovery in the new year. However, significant headwinds remain, including tight credit conditions and a weak job market. The Federal Reserve has been aggressive in its efforts to stabilize our financial system and to support economic activity. At some point, however, we will need to unwind our accommodative policies in order to avoid higher inflation in the future. I am confident we have both the tools and the commitment to make that adjustment when it is needed and in a manner consistent with our mandate to foster employment and price stability.
-- Federal Reserve Chairman Ben Bernanke addressing the Economic Club of Washington
The mopping up of excess liquidity has likely already begun, sufficiently demonstrated by recent moves in currency and commodity markets. On the first day of trading for the week, gold was hard hit early in the day while stocks held onto fractional gains all morning. Following Bernanke's remarks, the markets began to unwind, falling off their highs (up more than 50 on the Dow) to register in the negative as the day ensued.
Gold and silver managed to pare losses, and while the US Dollar was lower against most currencies, it was not by very much as the Euro continued a strong run against the greenback. Stocks continued to struggle along, as they have over the past three sessions. The indices put in hard triple tops on December 2, 3 and 4, and those intra-day high levels have been, and will continue to be, difficult levels to overcome.
Contributing to the weakness is a fairly obvious short-term overbought condition of stocks and the coming end of the calendar year. Many professionals have already locked in substantial gains prior to the month (indeed, many fund managers were through at the end of October) and trading volumes have been thin. Profit taking seems more the order of the day than actual search for value or the staking out of new positions.
Dow 10,390.11, +1.21 (0.01%)
NASDAQ 2,189.61, -4.74 (0.22%)
S&P 500 1,103.25, -2.73 (0.25%)
NYSE Composite 7,155.73, -26.98 (0.38%)
Simple indicators were slightly skewed to a positive bias, with advancing issues outperforming decliners, 3380-3103. New highs finished ahead of new lows, 352-49. Volume was at the low end of the recent range, and, in fact, among the lowest trading volume of the past two months, another sign that overall market participation is on the wane. Similar conditions are being reported on options exchanges.
NYSE Volume 4,780,842,500
NASDAQ Volume 1,894,192,500
Commodities continue to slide, with oil down to 2 1/2 month lows, down $1.54, to $73.93. Gold, which was down as much as $29 during the day, fell $5.50, to $1,164.00. Silver was down 14 cents to $18.38, though, like gold, losses were far greater earlier in the session.
Most of the indications currently in play are calling for nothing greater than sideways trade, which, by itself, puts pressure on the downside. With the general consensus that the markets are tired and trading slow, the potential for some spillage is evident. If the current short-term climb in the dollar continues, spurred along either by better US economic news or a flight to currency safety, the bet for stocks is presently neutral to lower. Chasing performance at these elevated levels goes against the most fundamental tenet of investing: buy low, sell high.
It's obvious that the professional traders are, or already have been, selling.
Friday, December 4, 2009
Grand Jobs Number Rally Spoiled by Risk Trade
When the November Non-farm Payrolls were announced at 8:30 am, coming in far better than even the most wide-eyed optimist could have anticipated (a loss of only 11,000 jobs, when the expectations were for a loss of 125-150,000), the various futures markets exploded to the upside signaling a higher open and the beginning of what should have been an outstanding rally in stocks.
While stocks initially responded, with the Dow up more than 150 points at its zenith, the US Dollar was also busy rallying against foreign currencies on the positive news. Just before 11:00 am, stocks had begun to slip, and before noon, they were in negative territory. In all, the Dow swung a full 200 points, registering the lows of the day at a 50-point loss.
Not only were the November jobs numbers staggeringly positive, but October's figures were revised as well, reflecting an improving unemployment picture in the United States. The official unemployment rate also dropped, from 10.2 to 10%, not an enormous movement, but one which offered a glimmer of hope as the year and the decade draws to a close.
However, the risk trade was being unwound by the good news, which is just one of the evil elements to dealing in free cash. Once the money begins to cost more, the game must end quickly, and, as is the usual case, with a good deal of messiness along the way. Thus, we are now encountering a condition in which the more good news is announced concerning the US economy, the worst it will affect stocks, if the dollar is a beneficiary of the news. In more mundane times, stocks improved in price as the dollar gained value. In the risk trade, the opposite is true. Stocks purchased with free, or declining money, go higher. The net result is a zero sum, though the feeling along the way is euphoric. Obviously, such a condition cannot maintain indefinitely, and today was just another part of the great unwinding.
While stocks managed gains, they were paltry compared to what the would have been under normal circumstances.
Dow 10,388.90, +22.75 (0.22%)
NASDAQ 2,194.35, +21.21 (0.98%)
S&P 500 1,105.98, +6.06 (0.55%)
NYSE Composite 7,182.71, +25.66 (0.36%)
Simple indicators reinforced the overall trade. Stocks were, at the high, more than 5-1 in favor of advancers, but managed to finish the day with just better than a 2-1 edge. Advancers were better than decliners by a score of 4508-1991.
NYSE Volume 6,935,438,000
NASDAQ Volume 2,237,404,500
Taking the most significant hit was gold, losing $49.30, to $1,169.00, and even another $12 lower after the official 1:30 pm close. Such was the case with silver as well, which dropped 61 cents, to $18.52. Oil fell 99 cents, to close at $75.47 per barrel.
The perversity of the risk trade is such that it will do damage to assets of all kinds as it is unwound, despite the true value of those underlying assets. It's a simple proposition. As the dollar rises, speculators must cover their positions, and do so by selling assets, causing them to fall. Just as they rose artificially as the dollar weakened, they will fall without any regard to fundamental value as the dollar rises. Eventually, an equilibrium will be reached when the trade is fully unwound, which could be a matter of months, depending on hedges and various other financial games, and there will more than likely be a few hedge funds which blow up in the process, though they will likely be small (we hope).
In the end, there will be more bargains for the patient, who wait out the end of liquidity and invest in appropriately undervalued assets. It's not going to be very pretty. Good news will turn stocks South, sometimes, and bad news may send them soaring. It's a very difficult trading regimen for the average investor to fathom. Surely, more than a few home traders will be scratching their head on today's abrupt turn-around, but that's what we have currently and we must live with it.
Maybe the best advice of all is to take profits and wait it out. There should be more rational investing periods in the future.
This one is not.
While stocks initially responded, with the Dow up more than 150 points at its zenith, the US Dollar was also busy rallying against foreign currencies on the positive news. Just before 11:00 am, stocks had begun to slip, and before noon, they were in negative territory. In all, the Dow swung a full 200 points, registering the lows of the day at a 50-point loss.
Not only were the November jobs numbers staggeringly positive, but October's figures were revised as well, reflecting an improving unemployment picture in the United States. The official unemployment rate also dropped, from 10.2 to 10%, not an enormous movement, but one which offered a glimmer of hope as the year and the decade draws to a close.
However, the risk trade was being unwound by the good news, which is just one of the evil elements to dealing in free cash. Once the money begins to cost more, the game must end quickly, and, as is the usual case, with a good deal of messiness along the way. Thus, we are now encountering a condition in which the more good news is announced concerning the US economy, the worst it will affect stocks, if the dollar is a beneficiary of the news. In more mundane times, stocks improved in price as the dollar gained value. In the risk trade, the opposite is true. Stocks purchased with free, or declining money, go higher. The net result is a zero sum, though the feeling along the way is euphoric. Obviously, such a condition cannot maintain indefinitely, and today was just another part of the great unwinding.
While stocks managed gains, they were paltry compared to what the would have been under normal circumstances.
Dow 10,388.90, +22.75 (0.22%)
NASDAQ 2,194.35, +21.21 (0.98%)
S&P 500 1,105.98, +6.06 (0.55%)
NYSE Composite 7,182.71, +25.66 (0.36%)
Simple indicators reinforced the overall trade. Stocks were, at the high, more than 5-1 in favor of advancers, but managed to finish the day with just better than a 2-1 edge. Advancers were better than decliners by a score of 4508-1991.
NYSE Volume 6,935,438,000
NASDAQ Volume 2,237,404,500
Taking the most significant hit was gold, losing $49.30, to $1,169.00, and even another $12 lower after the official 1:30 pm close. Such was the case with silver as well, which dropped 61 cents, to $18.52. Oil fell 99 cents, to close at $75.47 per barrel.
The perversity of the risk trade is such that it will do damage to assets of all kinds as it is unwound, despite the true value of those underlying assets. It's a simple proposition. As the dollar rises, speculators must cover their positions, and do so by selling assets, causing them to fall. Just as they rose artificially as the dollar weakened, they will fall without any regard to fundamental value as the dollar rises. Eventually, an equilibrium will be reached when the trade is fully unwound, which could be a matter of months, depending on hedges and various other financial games, and there will more than likely be a few hedge funds which blow up in the process, though they will likely be small (we hope).
In the end, there will be more bargains for the patient, who wait out the end of liquidity and invest in appropriately undervalued assets. It's not going to be very pretty. Good news will turn stocks South, sometimes, and bad news may send them soaring. It's a very difficult trading regimen for the average investor to fathom. Surely, more than a few home traders will be scratching their head on today's abrupt turn-around, but that's what we have currently and we must live with it.
Maybe the best advice of all is to take profits and wait it out. There should be more rational investing periods in the future.
This one is not.
Wednesday, December 2, 2009
ADP Employment Number Trumped by Stronger Dollar
The market loves liquidity, lately, the kind that gushes forth from the font of a weaker US dollar. And since the market did not get what it wanted today, stocks pouted, putting on their most forlorn looks and stubbornly refusing to come out of their basement room.
After a relatively strong start, boosted by the private ADP Employment Report for November (-169.000 jobs), stocks took note of the dollar's strength against both the Yen and the Euro and headed South for the day. Coming one day after a major uptick, it probably wasn't such a bad move, and consequently a light one, though many were more hopeful for some follow-through on the back of Tuesday's semi-sweet rally. When all was said and done, of the major markets, only the Dow Jones Industrials finished in the red. Other indices posted marginal gains.
The Forex wouldn't allow stocks to advance much at all, however, as the perverse risk trade trumped all bets, good, bad or indifferent.
Dow 10,452.68, -18.90 (0.18%)
NASDAQ 2,185.03, +9.22 (0.42%)
S&P 500 1,109.24, +0.38 (0.03%)
NYSE Composite 7,222.42, +10.34 (0.14%)
Internals belied the headline numbers. Advancing issued finished the day well ahead of decliners, 4091-2396, and new highs beat new lows, 467-86. Volume was surprisingly strong for such a light news day, once again slightly better than usual. These indications bode well for the remainder of the week and month. It should be reiterated that stocks have patterned in the same manner over the past three months, with the best gains in the first 10-12 days of the month.
NYSE Volume 4,568,939,000
NASDAQ Volume 2,076,633,000
Strength in the US Dollar didn't stop gold from continuing its dramatic climb, posting another record close at $1,213.00, after gaining $12.80 on the day. Silver improved, though only by 12 cents, to $19.33. Crude oil lost $1.77, to $76.60, though that decline was keyed mostly to improvement in existing supply than anything else. In general, the energy and food complexes were all lower, with precious metals the only sector showing gains.
After the close came news - from CNBC's Charlie Gasparino - that Bank of America would exit the government's TARP program, with plans to raise capital to repay the entire $45 billion to get out from under the government's thumb. Some of the reasoning behind such a move would surely include the search for a new CEO to replace Ken Lewis, who has stated that he would step down from the position at the end of 2009. Government strictures on pay levels for executives whose firms have received TARP funds have limited BofA's search for a new CEO. Lifting the government pressure from the firm would pave the way for a new Chief Executive free to earn a competitive salary.
The surprising announcement also revives the conspiracy theory that the entire "financial armageddon" scenario of 2008 was smoke and mirrors orchestrated by the banks in the largest swindle ever perpetrated on the public. If Bank of America - like many of its colleagues - can suddenly find the means to repay an emergency loan all in one fell swoop, the veracity of the entire financial industry should be scrutinized with a more curious eye.
No matter the case, Bank of America's departure from the TARP is welcome news at a time the market needs a bit of a catalyst to move ahead. Whether this is really the kind of event which will propel stocks will have to wait until tomorrow.
After a relatively strong start, boosted by the private ADP Employment Report for November (-169.000 jobs), stocks took note of the dollar's strength against both the Yen and the Euro and headed South for the day. Coming one day after a major uptick, it probably wasn't such a bad move, and consequently a light one, though many were more hopeful for some follow-through on the back of Tuesday's semi-sweet rally. When all was said and done, of the major markets, only the Dow Jones Industrials finished in the red. Other indices posted marginal gains.
The Forex wouldn't allow stocks to advance much at all, however, as the perverse risk trade trumped all bets, good, bad or indifferent.
Dow 10,452.68, -18.90 (0.18%)
NASDAQ 2,185.03, +9.22 (0.42%)
S&P 500 1,109.24, +0.38 (0.03%)
NYSE Composite 7,222.42, +10.34 (0.14%)
Internals belied the headline numbers. Advancing issued finished the day well ahead of decliners, 4091-2396, and new highs beat new lows, 467-86. Volume was surprisingly strong for such a light news day, once again slightly better than usual. These indications bode well for the remainder of the week and month. It should be reiterated that stocks have patterned in the same manner over the past three months, with the best gains in the first 10-12 days of the month.
NYSE Volume 4,568,939,000
NASDAQ Volume 2,076,633,000
Strength in the US Dollar didn't stop gold from continuing its dramatic climb, posting another record close at $1,213.00, after gaining $12.80 on the day. Silver improved, though only by 12 cents, to $19.33. Crude oil lost $1.77, to $76.60, though that decline was keyed mostly to improvement in existing supply than anything else. In general, the energy and food complexes were all lower, with precious metals the only sector showing gains.
After the close came news - from CNBC's Charlie Gasparino - that Bank of America would exit the government's TARP program, with plans to raise capital to repay the entire $45 billion to get out from under the government's thumb. Some of the reasoning behind such a move would surely include the search for a new CEO to replace Ken Lewis, who has stated that he would step down from the position at the end of 2009. Government strictures on pay levels for executives whose firms have received TARP funds have limited BofA's search for a new CEO. Lifting the government pressure from the firm would pave the way for a new Chief Executive free to earn a competitive salary.
The surprising announcement also revives the conspiracy theory that the entire "financial armageddon" scenario of 2008 was smoke and mirrors orchestrated by the banks in the largest swindle ever perpetrated on the public. If Bank of America - like many of its colleagues - can suddenly find the means to repay an emergency loan all in one fell swoop, the veracity of the entire financial industry should be scrutinized with a more curious eye.
No matter the case, Bank of America's departure from the TARP is welcome news at a time the market needs a bit of a catalyst to move ahead. Whether this is really the kind of event which will propel stocks will have to wait until tomorrow.
Thursday, November 19, 2009
Perverse Dollar Trade Sends Stocks South
The US Dollar was stronger against most world currencies on Thursday. Stocks fell.
If that sounds odd to you, it should. The normal relationship of a strong dollar to strong stocks has been undercut in recent days as the new carry trade of borrowing cheap dollars and investing in risky equities has produced one of the more remarkable rallies of the past 100 years.
Sadly, it cannot continue. Eventually, days like today, when the dollar strengthens and stocks are obliterated as traders are forced to liquidate out of positions, will proliferate, killing the stock market rally. Either that, or, stocks continue to climb while we kill the dollar. Today's trading may have been illustrative in just how perverse and destructive the inverse relationship has become. One way or another, somebody's got to lose, when the truth is that a stronger dollar should encourage more investment in stocks and US companies, rather than the reverse.
There's a bit of illogic to this trade, so excuse me for thinking out loud here. If it's true that many of the hedge funds are already out of this market, then today's trade would not have occurred. There would have been honest bets on stocks, not liquidity-driven hedge-type activity. So, that argument is probably full of large holes.
Then there's the idea of trillions on the sidelines - some say as much as $3 trillion invested in money market funds, some more in bond funds and plenty in cash. Just because those people don't want to engage in the high risk of equities, it does not necessarily follow that they'll want to jump in when stocks are cheaper. Were that the case, they had ample opportunity back in the Winter of 2009-10. So, toss that rationale.
What makes sense is that the dollar will continue to weaken until the Fed signals that they're going to begin raising interest rates. Estimates of when that might happen range from June 2010 to some time in 2011. What's certain is that the Fed cannot keep rates at "near-zero" for much longer. Other nations have already begun raising interest rates - Australia and Norway to name two - while more are hinting at doing the same. When the Fed decides to begin raising rates the dollar will stop sliding against other currencies. It will actually begin gaining when our blessed federal government decides to start acting like adults and do something about the enormous deficits they are running.
Both of those events - Fed tightening and government responsibility - are inevitably tied to politics, and, with mid-term elections upcoming in less than a year, there's a good bet that there will be action by then, in fact, 4-6 months before the elections. So, June sounds like the right time for the Fed to boost 25 basis points, maybe even 50. It's also likely that the federal budgeting process will begin sounding more Republican, even though it will be dominated by Democrats.
So, where does that leave stocks? Little changed until then. The bull market remains intact, the carry trade goes on for a few more months, because, as the market is the ultimate discounting mechanism, the Fed moves will be baked in long before they actually occur. The rally should run nicely through January, and even into Spring, with a small respite during the summer and glorioski! another rally just in time for the election!
That's one way to play it. Ignore all the talk and chatter about the carry trade, weaker dollar, etc. and focus on good companies making money. Sooner or later, fundamentals will be your friend, and, by all indications, they're not too bad right now. A year from now, the crash of 2008 will be a fast-fading memory.
Dow 10,332.44, -93.87 (0.90%)
NASDAQ 2,156.82, -36.32 (1.66%)
S&P 500 1,094.90, -14.90 (1.34%)
NYSE Composite 7,117.64, -109.07 (1.51%)
Today's final numbers could have been much worse. The dollar actually weakened throughout the session, and stocks pared their losses after 10:30 am. The Dow was down 170 in the early going and gained much of that back by the closing bell. At the end, declining issues outnumbered advancing ones, 5210-1381, or nearly 4:1. It was one of the more lopsided days in recent memory, though hardly a rally-killer. It should be noted that options expire tomorrow, so much of the trading had to do with gains and losses on option trades. There were only 108 new highs, as compared to 67 new lows. The indication is that stocks are weak, though this measure cannot be trusted on a one-day move. We'll need more evidence that the bears have control before changing strategy, which remains bullish with a target of 10700 on the Dow by year end.
NYSE Volume 4,909,767,500
NASDAQ Volume 2,148,559,000
Commodities would be expected to take a hit, especially oil, which fell by $2.12, to $77.46, but gold actually rose $1.00, to $1,142.20. Silver gained 5 cents, to $18.46 per ounce. The precious metals markets have shown a recent trend away from the dollar trade. They can now be considered almost anti-currency, as they act as a hedge against all fiat (paper-based) currencies, which just happens to be everywhere in the world.
Other then the dollar movement, there was a little bit of news that might have moved markets so severely. Tim Geithner testified to the committee looking into financial reform, and any time Timmy opens his mouth in congress, it's usually a bad thing. A couple of members actually think he should resign. Not surprisingly, most of those requests for Mr.Geithner to step aside came from Republicans.
Early in the day, the entire world was reminded that bureaucracies seldom function perfectly, as air traffic across the nation was grounded due to an FAA "glitch."
Unemployment claims data was benign, and the week come to an end with no important economic data due out on Friday, and just 35 days until Christmas.
Leading Indicators for October were down slightly, while the Philadelphia Fed index was up. We have reached what is known as an inflection point.
After the bell, Dell (DELL) announced 3rd quarter results below expectations. The stock was trading down about a point, or 6.5% in after-hours activity. Gap Stores (GPS) reported a 25% improvement in profits, but the stock was being sold off after-hours, down about 1/2 a point, or 2.5%. Shares of the retailer, which includes GAP stores and Old Navy, have more thn doubled since their lows in March.
If that sounds odd to you, it should. The normal relationship of a strong dollar to strong stocks has been undercut in recent days as the new carry trade of borrowing cheap dollars and investing in risky equities has produced one of the more remarkable rallies of the past 100 years.
Sadly, it cannot continue. Eventually, days like today, when the dollar strengthens and stocks are obliterated as traders are forced to liquidate out of positions, will proliferate, killing the stock market rally. Either that, or, stocks continue to climb while we kill the dollar. Today's trading may have been illustrative in just how perverse and destructive the inverse relationship has become. One way or another, somebody's got to lose, when the truth is that a stronger dollar should encourage more investment in stocks and US companies, rather than the reverse.
There's a bit of illogic to this trade, so excuse me for thinking out loud here. If it's true that many of the hedge funds are already out of this market, then today's trade would not have occurred. There would have been honest bets on stocks, not liquidity-driven hedge-type activity. So, that argument is probably full of large holes.
Then there's the idea of trillions on the sidelines - some say as much as $3 trillion invested in money market funds, some more in bond funds and plenty in cash. Just because those people don't want to engage in the high risk of equities, it does not necessarily follow that they'll want to jump in when stocks are cheaper. Were that the case, they had ample opportunity back in the Winter of 2009-10. So, toss that rationale.
What makes sense is that the dollar will continue to weaken until the Fed signals that they're going to begin raising interest rates. Estimates of when that might happen range from June 2010 to some time in 2011. What's certain is that the Fed cannot keep rates at "near-zero" for much longer. Other nations have already begun raising interest rates - Australia and Norway to name two - while more are hinting at doing the same. When the Fed decides to begin raising rates the dollar will stop sliding against other currencies. It will actually begin gaining when our blessed federal government decides to start acting like adults and do something about the enormous deficits they are running.
Both of those events - Fed tightening and government responsibility - are inevitably tied to politics, and, with mid-term elections upcoming in less than a year, there's a good bet that there will be action by then, in fact, 4-6 months before the elections. So, June sounds like the right time for the Fed to boost 25 basis points, maybe even 50. It's also likely that the federal budgeting process will begin sounding more Republican, even though it will be dominated by Democrats.
So, where does that leave stocks? Little changed until then. The bull market remains intact, the carry trade goes on for a few more months, because, as the market is the ultimate discounting mechanism, the Fed moves will be baked in long before they actually occur. The rally should run nicely through January, and even into Spring, with a small respite during the summer and glorioski! another rally just in time for the election!
That's one way to play it. Ignore all the talk and chatter about the carry trade, weaker dollar, etc. and focus on good companies making money. Sooner or later, fundamentals will be your friend, and, by all indications, they're not too bad right now. A year from now, the crash of 2008 will be a fast-fading memory.
Dow 10,332.44, -93.87 (0.90%)
NASDAQ 2,156.82, -36.32 (1.66%)
S&P 500 1,094.90, -14.90 (1.34%)
NYSE Composite 7,117.64, -109.07 (1.51%)
Today's final numbers could have been much worse. The dollar actually weakened throughout the session, and stocks pared their losses after 10:30 am. The Dow was down 170 in the early going and gained much of that back by the closing bell. At the end, declining issues outnumbered advancing ones, 5210-1381, or nearly 4:1. It was one of the more lopsided days in recent memory, though hardly a rally-killer. It should be noted that options expire tomorrow, so much of the trading had to do with gains and losses on option trades. There were only 108 new highs, as compared to 67 new lows. The indication is that stocks are weak, though this measure cannot be trusted on a one-day move. We'll need more evidence that the bears have control before changing strategy, which remains bullish with a target of 10700 on the Dow by year end.
NYSE Volume 4,909,767,500
NASDAQ Volume 2,148,559,000
Commodities would be expected to take a hit, especially oil, which fell by $2.12, to $77.46, but gold actually rose $1.00, to $1,142.20. Silver gained 5 cents, to $18.46 per ounce. The precious metals markets have shown a recent trend away from the dollar trade. They can now be considered almost anti-currency, as they act as a hedge against all fiat (paper-based) currencies, which just happens to be everywhere in the world.
Other then the dollar movement, there was a little bit of news that might have moved markets so severely. Tim Geithner testified to the committee looking into financial reform, and any time Timmy opens his mouth in congress, it's usually a bad thing. A couple of members actually think he should resign. Not surprisingly, most of those requests for Mr.Geithner to step aside came from Republicans.
Early in the day, the entire world was reminded that bureaucracies seldom function perfectly, as air traffic across the nation was grounded due to an FAA "glitch."
Unemployment claims data was benign, and the week come to an end with no important economic data due out on Friday, and just 35 days until Christmas.
Leading Indicators for October were down slightly, while the Philadelphia Fed index was up. We have reached what is known as an inflection point.
After the bell, Dell (DELL) announced 3rd quarter results below expectations. The stock was trading down about a point, or 6.5% in after-hours activity. Gap Stores (GPS) reported a 25% improvement in profits, but the stock was being sold off after-hours, down about 1/2 a point, or 2.5%. Shares of the retailer, which includes GAP stores and Old Navy, have more thn doubled since their lows in March.
Thursday, November 12, 2009
S&P Confirmation Not Enough; Markets Trumped by Strong Dollar
As much as one would like to believe Tim Geithner's commitment to a strong dollar policy, skepticism will remain high until there's actual action behind his words. In the absence of official US action to strengthen the greenback, finance officials of other nations have apparently taken action over the past few days, boosting the dollar from a low of 74.8 on Wednesday morning to a high of 75.76 just before 4:00 pm ET today.
Continued weakness in the US dollar has been causing all manner of market distortions, especially in commodity and US equity markets. The trade over the past 6 months has been an easy inverse relationship between the dollar and US equities. Cheaper dollars made stocks cheaper to purchase, fueling a powerful rally in stocks. However, the relationship is eventually unsustainable, though breaking the vexing inverse trade will take more of the kind of quiet intervention witnessed today.
Leading the charge was the Euro, which fell sharply against the US dollar. It's almost a European mandate, as the high Euro is making European products more costly, thus, less competitive in world markets. There seems to be a concerted effort to strengthen the dollar - despite the subdued protestations by US officials and stock traders - at the expense of the Euro, the target level appearing to be somewhere above 76 on the dollar index. The target would appear to be somewhere below 1.45 Euros to the US Dollar, which will take some doing, as the Euro currently trades at 1.4842 to 1 US Dollar. The result will be a more competitive environment for European products and a moderation in the prices of US stocks.
Eventually, the weak dollar trade must be unwound because it is entirely wrong for the US. It's akin to selling the same products at lower and lower prices in each business cycle in a fire sale environment. The US standard of living would continue to fall as the currency is debased. As much as the Fed and Treasury are attempting such a debasement - with grand success thus far - our trading partners are not happy with the arrangement. While the eventuality of a debased US currency may be a fait acompli, current movement in the forex markets are forestalling the event as much as possible.
As the dollar gained strength today, stocks fell, cutting short the nascent rally which began last week. Markets once again seem to have topped out temporarily, and it may actually be time for a serious reversal, much of which will have little to do with fundamental valuations and more to do with technical levels driven by the dollar trade.
Confirmation of the new Dow Industrial highs, which were narrowly confirmed by the S&P yesterday, weren't enough to stop stocks from skidding lower. The Dow Transports fell sharply in non-confirmation, setting the stage for more downside in stocks.
Dow 10,197.47, -93.79 (0.91%)
NASDAQ 2,149.02, -17.88 (0.83%)
S&P 500 1,087.24, -11.27 (1.03%)
NYSE Composite 7,063.05, -92.31 (1.29%)
declining issues danced all over advancers on the day, 4558-1285, or about 5:2. There were 273 new highs to 86 new lows, a margin significantly narrower than yesterday's. Volume remained tepid.
NYSE Volume 4,341,626,500
NASDAQ Volume 2,219,716,750
Commodities were slammed by the dollar rise. Crude oil fell $2.34, to $76.94, with more downside indicated, as warm weather in the US Northeast and slack demand helped push down prices for all energy products. Gold was off $8.00, to $1,106.50, with silver falling 28 cents, back to $17.27.
The deflation trade reared its head once again, and it probably won't be the last time.
Continued weakness in the US dollar has been causing all manner of market distortions, especially in commodity and US equity markets. The trade over the past 6 months has been an easy inverse relationship between the dollar and US equities. Cheaper dollars made stocks cheaper to purchase, fueling a powerful rally in stocks. However, the relationship is eventually unsustainable, though breaking the vexing inverse trade will take more of the kind of quiet intervention witnessed today.
Leading the charge was the Euro, which fell sharply against the US dollar. It's almost a European mandate, as the high Euro is making European products more costly, thus, less competitive in world markets. There seems to be a concerted effort to strengthen the dollar - despite the subdued protestations by US officials and stock traders - at the expense of the Euro, the target level appearing to be somewhere above 76 on the dollar index. The target would appear to be somewhere below 1.45 Euros to the US Dollar, which will take some doing, as the Euro currently trades at 1.4842 to 1 US Dollar. The result will be a more competitive environment for European products and a moderation in the prices of US stocks.
Eventually, the weak dollar trade must be unwound because it is entirely wrong for the US. It's akin to selling the same products at lower and lower prices in each business cycle in a fire sale environment. The US standard of living would continue to fall as the currency is debased. As much as the Fed and Treasury are attempting such a debasement - with grand success thus far - our trading partners are not happy with the arrangement. While the eventuality of a debased US currency may be a fait acompli, current movement in the forex markets are forestalling the event as much as possible.
As the dollar gained strength today, stocks fell, cutting short the nascent rally which began last week. Markets once again seem to have topped out temporarily, and it may actually be time for a serious reversal, much of which will have little to do with fundamental valuations and more to do with technical levels driven by the dollar trade.
Confirmation of the new Dow Industrial highs, which were narrowly confirmed by the S&P yesterday, weren't enough to stop stocks from skidding lower. The Dow Transports fell sharply in non-confirmation, setting the stage for more downside in stocks.
Dow 10,197.47, -93.79 (0.91%)
NASDAQ 2,149.02, -17.88 (0.83%)
S&P 500 1,087.24, -11.27 (1.03%)
NYSE Composite 7,063.05, -92.31 (1.29%)
declining issues danced all over advancers on the day, 4558-1285, or about 5:2. There were 273 new highs to 86 new lows, a margin significantly narrower than yesterday's. Volume remained tepid.
NYSE Volume 4,341,626,500
NASDAQ Volume 2,219,716,750
Commodities were slammed by the dollar rise. Crude oil fell $2.34, to $76.94, with more downside indicated, as warm weather in the US Northeast and slack demand helped push down prices for all energy products. Gold was off $8.00, to $1,106.50, with silver falling 28 cents, back to $17.27.
The deflation trade reared its head once again, and it probably won't be the last time.
Friday, November 6, 2009
Poor Jobs Data Fails to Induce Selling
Prior to the opening bell, the highly-anticipated Non-farm Payroll announcement from the Labor Dept. initially sent futures into near free-fall, but, after a modest decline in the first few minutes of trading, stocks stabilized and spent the rest of the day hugging the flat line.
October saw 190,000 jobs lost in the US and the "official" unemployment rate crank up to 10.2%, the highest since 1982. That the jobless rate was so high just 27 years ago must have served as a salve of sorts to investors, because the markets took it in stride. There is also the growing understanding that many of the US firms listed on the stock exchanges do not rely on the United States as their primary markets, one of the myriad hidden factors of globalization. Thus, US employment is not as large a factor in many businesses, plus, due to the largesse of the federal government, many people who are not employed have fairly sizable disposable incomes, allowing those same US markets to function as though full employment was in force.
Of course, the federal punchbowl of benefits is not any way to grow an economy, but equity investors seem intent on pushing prices higher, so long as the Federal Reserve keeps rates at essentially zero and Uncle Sam continues to dole out the greenbacks. Naturally, the dollar continues to decline in value, a condition not lost on the macro-economic crowd.
Nevertheless, Friday was not the day to be selling stocks as the major indices eked out marginal gains. Monday, however, may be another story.
Dow 10,023.42, +17.46 (0.17%)
NASDAQ 2,112.44, +7.12 (0.34%)
S&P 500 1,069.30, +2.67 (0.25%)
NYSE Composite 6,958.29, +8.15 (0.12%)
As one might expect, winners and losers were nearly evenly split, with declining issues taking a small advantage, 3203-3177. New highs, though, soared well ahead of new lows, 209-61, widening the margin for the third consecutive session.
Volume was negligible, well below normal levels, though Fridays are becoming something of an outlier, with trading sluggish at the end of the week.
NYSE Volume 4,999,170,500
NASDAQ Volume 1,845,147,875
Commodities finished mixed, with oil down $2.19, at $77.43, gold ahead $6.70, to $1,096.00, and silver lower by 4 cents, to $17.38. After the enormous move by gold over the past three weeks - a 10% gain - it appears that the yellow metal has found its own market, diverging even from its fellow precious metals. Platinum was lower on the day, and copper was flat. Gold has gone its own way and cannot be counted on as anything but a separate asset class, and possibly a proxy against all fiat currencies.
The cross-currents in the markets lately have been extreme, adding to volatility in some cases, but also prviding significant headwinds to any upward movement in stocks. The indices are settled below recent highs, and it does not appear that there's enough of a catalyst anywhere - outside of the easy carry trade on the back of the declining dollar - to propel equities through their recent highs. Within days the focus will be on the holiday shopping season, and, while many Americans may not be able to luxuriate their friends and families with expensive gifts this season, well-heeled foreigners certainly can take advantage of the prices of goods denominated in US dollars, especially Europeans and Chinese shoppers. International centers such as New York, Los Angeles and Miami may very well see increased traffic from outsiders, while Americans do their holiday purchasing at the various discounters, striking something of a balance.
With 3rd quarter earnings season now nearly complete, the next few weeks may indeed be a true test of the fortitude of US markets and equities. One thing's for sure: it's not going to be dull.
October saw 190,000 jobs lost in the US and the "official" unemployment rate crank up to 10.2%, the highest since 1982. That the jobless rate was so high just 27 years ago must have served as a salve of sorts to investors, because the markets took it in stride. There is also the growing understanding that many of the US firms listed on the stock exchanges do not rely on the United States as their primary markets, one of the myriad hidden factors of globalization. Thus, US employment is not as large a factor in many businesses, plus, due to the largesse of the federal government, many people who are not employed have fairly sizable disposable incomes, allowing those same US markets to function as though full employment was in force.
Of course, the federal punchbowl of benefits is not any way to grow an economy, but equity investors seem intent on pushing prices higher, so long as the Federal Reserve keeps rates at essentially zero and Uncle Sam continues to dole out the greenbacks. Naturally, the dollar continues to decline in value, a condition not lost on the macro-economic crowd.
Nevertheless, Friday was not the day to be selling stocks as the major indices eked out marginal gains. Monday, however, may be another story.
Dow 10,023.42, +17.46 (0.17%)
NASDAQ 2,112.44, +7.12 (0.34%)
S&P 500 1,069.30, +2.67 (0.25%)
NYSE Composite 6,958.29, +8.15 (0.12%)
As one might expect, winners and losers were nearly evenly split, with declining issues taking a small advantage, 3203-3177. New highs, though, soared well ahead of new lows, 209-61, widening the margin for the third consecutive session.
Volume was negligible, well below normal levels, though Fridays are becoming something of an outlier, with trading sluggish at the end of the week.
NYSE Volume 4,999,170,500
NASDAQ Volume 1,845,147,875
Commodities finished mixed, with oil down $2.19, at $77.43, gold ahead $6.70, to $1,096.00, and silver lower by 4 cents, to $17.38. After the enormous move by gold over the past three weeks - a 10% gain - it appears that the yellow metal has found its own market, diverging even from its fellow precious metals. Platinum was lower on the day, and copper was flat. Gold has gone its own way and cannot be counted on as anything but a separate asset class, and possibly a proxy against all fiat currencies.
The cross-currents in the markets lately have been extreme, adding to volatility in some cases, but also prviding significant headwinds to any upward movement in stocks. The indices are settled below recent highs, and it does not appear that there's enough of a catalyst anywhere - outside of the easy carry trade on the back of the declining dollar - to propel equities through their recent highs. Within days the focus will be on the holiday shopping season, and, while many Americans may not be able to luxuriate their friends and families with expensive gifts this season, well-heeled foreigners certainly can take advantage of the prices of goods denominated in US dollars, especially Europeans and Chinese shoppers. International centers such as New York, Los Angeles and Miami may very well see increased traffic from outsiders, while Americans do their holiday purchasing at the various discounters, striking something of a balance.
With 3rd quarter earnings season now nearly complete, the next few weeks may indeed be a true test of the fortitude of US markets and equities. One thing's for sure: it's not going to be dull.
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