It being Martin Luther King Jr. Day, markets in the US are closed, but that didn't stop what looks to be more than 50,000 (actual number was about 22,000) patriots from heading down to Richmond, Virginia for the state's annual "Lobby Day," usually an opportunity for Virginia citizens to meet with their legislators and discuss various agendas facing the state.
This year, most people won't even get a chance to see a legislator, as Governor Ralph Shearer Northam (he of blackface shame) last week declared a state of emergency for the state capitol from January 17 to January 21, over fears of violence stemming from the gun rights crowds expected.
Northam was wrong to declare the emergency. After all, beyond the extra police presence, there are so many well-armed citizens in attendance, anybody thinking of causing trouble would probably think twice.
It's still early, and very chilly, in Richmond right now, but so far, the crowds have been peaceful. The day should end without incident unless something gets stirred up by anti-gun reactionaries like Antifa or a false flag event staged by one of the three-letter agencies overseeing the ongoings.
With many live streams being broadcast and thousands of people with cell phones, it's unlikely anything underhanded should happen, and if something does happen, it's likely to be recorded. This isn't going to be a rerun of the melee at Charlottesville back in 2017.
If Virginia's Lobby Day doesn't produce any grotesque footage for the fake media, then Tuesday, all eyes will turn to the impeachment trial which opens in the Senate. This is another made-for-TV type event, but Republicans led by Mitch McConnell (R-KY) are doing their level best to blunt the desired effect the Democrats are seeking, which is to drag out a long trial, complete with new witnesses, demands for documents, calls of a cover-up, issues of executive privilege ruled upon by the Supreme Court and other such nonsense.
The impeachment of President Trump was a sham from the start, when Intelligence Committee chairman Adam Schiff launched a plot and counseled a "whistleblower" over a single phone call made by Trump to Ukraine president Zelensky.
Drawing from shades of the Bill Clinton impeachment, there never was, nor never will be any "there" there.
If cooler heads (Republicans) prevail, this sorry escape into stupidity should be all over in less than two weeks. Many Americans wish it could end in two days, if not sooner.
With all the tumultuous political theater taking place it's a wonder that stocks move at all, especially in an upward direction, though the recent buying spree - which began in September 2019 - has been aptly aided by continuous money printing and liquidity being shoved into the REPO market by the Federal Reserve. Until the Fed ceases its now-daily operations, stocks will never suffer losses. It's just a matter of fact. Like Warren Buffett supposedly quipped, "Give me a trillion dollars and I'll show you a good time, too."
Meanwhile, inflation will be ramping up sooner, as per the wishes of the Fed, whose various voices and charts keep telling the American public that the US economy hasn't yet met their target of two percent inflation, as if higher inflation were a good thing (it's not). All along, however, inflation has been raging in health care, education, and housing, but those factors are not apparently part of the Fed's purview. Therefore, they continue to print at a rate faster than previous bouts of QE while Chairman Jerome Powell insists this round of liquidity pumping is "not QE."
Sure, we'll buy that. And that horse over there is actually a rabbit.
Just how hard has the liquidity pump been working?
Since mid-October, on a weekly basis, the Dow has been up 10 weeks, down three; the NASDAQ, since late September, 14 weekly gains, two weeks with losses; S&P: 13 up, two down; NYSE: 13 up, two down.
That's a nice-looking rabbit ya got there. Mind if I ride him?
At the Close, Friday, January 17, 2020:
Dow Jones Industrial Average: 29,348.10, +50.50 (+0.17%)
NASDAQ: 9,388.94, +31.81 (+0.34%)
S&P 500: 3,329.62, +12.81 (+0.39%)
NYSE: 14,183.20, +41.40 (+0.29%)
For the Week:
Dow: +524.33 (+1.82%)
NASDAQ: +210.08 (+2.29%)
S&P 500: +64.27 (+1.97%)
NYSE: +225.23 (+1.61%)
Showing posts with label Ukraine. Show all posts
Showing posts with label Ukraine. Show all posts
Monday, January 20, 2020
Sunday, November 3, 2019
WEEKEND WRAP: Fed Delivers, S&P, NASDAQ Make All-Time Highs
With the FOMC decision Wednesday to reduced the federal funds overnight lending rate another 25 basis points, to a range of 1.50-1.75%, stocks took a the rest of decision day and Thursday to digest the news, then ramped stocks on Friday, sending the NASDAQ and S&P 500 to record closings and the Dow Jones Industrials and NYSE Composite near all-time highs.
While the third consecutive rate cut was able to reawaken some of Wall Street's animal spirits, it may be the last one for a while. Changing the wording in some parts of their statement, the Fed took on a more hawkish stance concerning rates going forward. Fed policy will remain data dependent, but not necessarily active. That didn't bother stock traders, who saw the opportunity to ignite what may extend into a holiday rally, and ran with it.
Wall Street's enthusiasm came a day after the US House of Representatives voted along strict party lines to make their impeachment inquiry against President Trump just a little more public than it has been up to this point, wherein Democrats, led by Chairman of the Permanent Select Committee on Intelligence, Adam Schiff, held secret, closed door depositions and heard hearsay testimony from various witnesses in connection with a phone call the president made to Ukraine President Volodymyr Zelensky back in July.
The charges the Democrats have alleged against Mr. Trump may be scurrilous at worst and inconsequential at best, but that hasn't prevented the Democrats to continue to spread stories to their friends in the corrupt mainstream media to smear the president in the run-up to the 2020 election. Not a single Republican voted in favor of the resolution which formally enshrined the inquiry and expanded it to other committees.
Washington being thus rendered impotent as it wastes the taxpayer dime on ridiculous accusations and pointless investigations - along the same lines as the 2+ years of the infamous Mueller probe - it does give Wall Street some relief, understanding that the government will be introducing no new laws or regulations that might impede the current, long-standing bull run.
Elsewhere, outside the United States, the world is burning, either through popular strife in countries and places as diverse as Chile, Hong Kong, and Spain (Catalonia), or by economic policy, especially the brunt instrumentality of negative interest rates, in many European countries.
China's economic slowdown became an issue this week as well, demonstrating that the Chinese hard-line stance on trade negotiations with the United States is a charade. The Chinese government knows full well that it needs cooperation with its main trading partner, but insists on slow-walking any formal agreement. President Trump is well aware of China's condition and has maintained his equally-tough positions through whatever negotiations have been made or planned. China is eventually going to lose its grip and be forced to come to terms with the United States or risk popular uprisings of its own people.
Ignoring the background noise of geopolitics, companies continued to roll out third quarter earnings reports which were modest, but nowhere near disastrous. Additionally, US GDP came in at a stronger-than-expected 1.9% in the first estimate, and October job growth was muted, but well beyond expectations, delivering a non-farm payroll report that saw job gains of 128,000, following an upwardly revised 180,000 increase in September, easily beating market expectations of 89,000. Even though the BLS report is a damaged documentary on true economic growth, the trading community saw this as a positive one and responded accordingly.
Bonds rallied. The yield curve, having un-inverted in early August, continued to steepen, with the 10-year note at 1.69% on Thursday before closing out the week at 1.73%. The longer-duration, 30-year bond, which had fallen under two percent in July, and was being sold off until this week, rallied sharply, with yields falling from 2.34% on Monday to 2.17% on Thursday, settling on Friday at 2.21%.
Gold and silver were also bid, gold regaining the $1500 per ounce level and silver shooting beyond $18 per ounce.
The week ahead features more madness from Washington, a slew of earnings reports, including some popular names like Shake Shack, Uber, UnderArmor, Sprint, Hertz, Groupon, Mariott (Monday), Chesapeake Energy and Newmont Mining (Tuesday), Roku, CVS Health, Square, Humana, Qualcom (Wednesday), Teva, Planet Fitness, AMC Entertainment, Cardinal Health, Stamps.com (Thursday), and Duke Energy and US Concrete (Friday). The Walt Disney Company (DIS), a Dow component, reports Thursday.
Barring any unforeseen negative developments like bank runs (China), riots and street killings (Hong Kong), or desultory commentary on negative interest rates (Denmark), all appears to be smooth sailing through Black Friday, which approaches rapidly, just 19 trading days hence.
Happy Holidays? Too soon?
At the Close, Friday, November 1, 2019:
Dow Jones Industrial Average: 27,347.36, +301.13 (+1.11%)
NASDAQ: 8,386.40, +94.04 (+1.13%)
S&P 500: 3,066.91, +29.35 (+0.97%)
NYSE Composite: 13,300.27, +128.46 (+0.98%)
For the Week:
Dow: +389.30 (+1.44%)
NASDAQ: +143.28 (+1.74%)
S&P 500: +29.35 (+0.97%)
NYSE Composite: +154.03 (+1.17%)
The following is dedicated to California Rep. Adam Schiff:
While the third consecutive rate cut was able to reawaken some of Wall Street's animal spirits, it may be the last one for a while. Changing the wording in some parts of their statement, the Fed took on a more hawkish stance concerning rates going forward. Fed policy will remain data dependent, but not necessarily active. That didn't bother stock traders, who saw the opportunity to ignite what may extend into a holiday rally, and ran with it.
Wall Street's enthusiasm came a day after the US House of Representatives voted along strict party lines to make their impeachment inquiry against President Trump just a little more public than it has been up to this point, wherein Democrats, led by Chairman of the Permanent Select Committee on Intelligence, Adam Schiff, held secret, closed door depositions and heard hearsay testimony from various witnesses in connection with a phone call the president made to Ukraine President Volodymyr Zelensky back in July.
The charges the Democrats have alleged against Mr. Trump may be scurrilous at worst and inconsequential at best, but that hasn't prevented the Democrats to continue to spread stories to their friends in the corrupt mainstream media to smear the president in the run-up to the 2020 election. Not a single Republican voted in favor of the resolution which formally enshrined the inquiry and expanded it to other committees.
Washington being thus rendered impotent as it wastes the taxpayer dime on ridiculous accusations and pointless investigations - along the same lines as the 2+ years of the infamous Mueller probe - it does give Wall Street some relief, understanding that the government will be introducing no new laws or regulations that might impede the current, long-standing bull run.
Elsewhere, outside the United States, the world is burning, either through popular strife in countries and places as diverse as Chile, Hong Kong, and Spain (Catalonia), or by economic policy, especially the brunt instrumentality of negative interest rates, in many European countries.
China's economic slowdown became an issue this week as well, demonstrating that the Chinese hard-line stance on trade negotiations with the United States is a charade. The Chinese government knows full well that it needs cooperation with its main trading partner, but insists on slow-walking any formal agreement. President Trump is well aware of China's condition and has maintained his equally-tough positions through whatever negotiations have been made or planned. China is eventually going to lose its grip and be forced to come to terms with the United States or risk popular uprisings of its own people.
Ignoring the background noise of geopolitics, companies continued to roll out third quarter earnings reports which were modest, but nowhere near disastrous. Additionally, US GDP came in at a stronger-than-expected 1.9% in the first estimate, and October job growth was muted, but well beyond expectations, delivering a non-farm payroll report that saw job gains of 128,000, following an upwardly revised 180,000 increase in September, easily beating market expectations of 89,000. Even though the BLS report is a damaged documentary on true economic growth, the trading community saw this as a positive one and responded accordingly.
Bonds rallied. The yield curve, having un-inverted in early August, continued to steepen, with the 10-year note at 1.69% on Thursday before closing out the week at 1.73%. The longer-duration, 30-year bond, which had fallen under two percent in July, and was being sold off until this week, rallied sharply, with yields falling from 2.34% on Monday to 2.17% on Thursday, settling on Friday at 2.21%.
Gold and silver were also bid, gold regaining the $1500 per ounce level and silver shooting beyond $18 per ounce.
The week ahead features more madness from Washington, a slew of earnings reports, including some popular names like Shake Shack, Uber, UnderArmor, Sprint, Hertz, Groupon, Mariott (Monday), Chesapeake Energy and Newmont Mining (Tuesday), Roku, CVS Health, Square, Humana, Qualcom (Wednesday), Teva, Planet Fitness, AMC Entertainment, Cardinal Health, Stamps.com (Thursday), and Duke Energy and US Concrete (Friday). The Walt Disney Company (DIS), a Dow component, reports Thursday.
Barring any unforeseen negative developments like bank runs (China), riots and street killings (Hong Kong), or desultory commentary on negative interest rates (Denmark), all appears to be smooth sailing through Black Friday, which approaches rapidly, just 19 trading days hence.
Happy Holidays? Too soon?
At the Close, Friday, November 1, 2019:
Dow Jones Industrial Average: 27,347.36, +301.13 (+1.11%)
NASDAQ: 8,386.40, +94.04 (+1.13%)
S&P 500: 3,066.91, +29.35 (+0.97%)
NYSE Composite: 13,300.27, +128.46 (+0.98%)
For the Week:
Dow: +389.30 (+1.44%)
NASDAQ: +143.28 (+1.74%)
S&P 500: +29.35 (+0.97%)
NYSE Composite: +154.03 (+1.17%)
The following is dedicated to California Rep. Adam Schiff:
Friday, September 27, 2019
Nothing Good Can Come From Impeachment
Stocks were lower on Thursday, amid impeachment charges being leveled against President Trump and further increases and concerns over the Fed's now-daily repurchase (REPO) auctions.
With the media and Democrat members of congress piling on the president with lies and accusations of bribery anda cover-up, Wall Street has reason to be concerned. It has been a Democrat prerogative to unseat or derail Mr. Trump since before he won the election over Hillary Clinton. Their "Russia-gate" investigation dragged the president and America through mud, muck, baseless accusations and political divisiveness for the better part of three years. The current Ukraine polemic is more of the same, stemming from the hopelessly corrupted intelligence agencies through congress, aided by media bleating.
Alert and awake investors are aware of the dangers such unsubstantiated attacks on a sitting president are producing. As the rhetoric grows louder and more poignant the country will be pulled apart politically to even more extremes, putting the world's most powerful nation on the verge of widespread civil unrest.
Meanwhile, congress is essentially worthless in terms of passing meaningful legislation of benefit to the general population, something they have been unable to produce in nearly forty years. The only person getting anything done at the federal level is the president, though he is harassed and undercut by his opponents at every juncture.
In the widest general terms, this overblown impeachment proceeding in the House of Representatives and the six or seven investigating committees involved will engender nothing good.
At the Close, Thursday, September 26, 2019:
Dow Jones Industrial Average: 26,891.12, -79.59 (-0.30%)
NASDAQ: 8,030.66, -46.72 (-0.58%)
S&P 500: 2,977.62, -7.25 (-0.24%)
NYSE Composite: 13,028.74, -8.87 (-0.07%)
With the media and Democrat members of congress piling on the president with lies and accusations of bribery anda cover-up, Wall Street has reason to be concerned. It has been a Democrat prerogative to unseat or derail Mr. Trump since before he won the election over Hillary Clinton. Their "Russia-gate" investigation dragged the president and America through mud, muck, baseless accusations and political divisiveness for the better part of three years. The current Ukraine polemic is more of the same, stemming from the hopelessly corrupted intelligence agencies through congress, aided by media bleating.
Alert and awake investors are aware of the dangers such unsubstantiated attacks on a sitting president are producing. As the rhetoric grows louder and more poignant the country will be pulled apart politically to even more extremes, putting the world's most powerful nation on the verge of widespread civil unrest.
Meanwhile, congress is essentially worthless in terms of passing meaningful legislation of benefit to the general population, something they have been unable to produce in nearly forty years. The only person getting anything done at the federal level is the president, though he is harassed and undercut by his opponents at every juncture.
In the widest general terms, this overblown impeachment proceeding in the House of Representatives and the six or seven investigating committees involved will engender nothing good.
At the Close, Thursday, September 26, 2019:
Dow Jones Industrial Average: 26,891.12, -79.59 (-0.30%)
NASDAQ: 8,030.66, -46.72 (-0.58%)
S&P 500: 2,977.62, -7.25 (-0.24%)
NYSE Composite: 13,028.74, -8.87 (-0.07%)
Thursday, September 26, 2019
Impeachment, Liquidity Concerns Don't Slow Equity Traders, For Now
On Wednesday, he Fed conducted another in a series of overnight repurchase auctions (REPO) which was oversubscribed by the most since the operations began to be a daily fixture last week. Wednesday's overnight funding fiasco was for a maximum of $75 billion, but offers were up to $92 billion, meaning somebody didn't get ready cash for operations.
This is becoming more and more of a liquidity crisis, which, as learned from the Lehman crash of 2008, can readily become a solvency crisis, as Lehman and Bear Stearns before them both were forced into liquidation.
With the oversubscribed condition seemingly becoming worse by the day, the NY Fed quietly announced that the operations proposed last week - daily $75 billion overnight until October 10 and three $30 billion two-week terms - were to be raised to $100 billion overnight and $60 billion in the two-week auctions.
Markets seemed more concerned with making money quickly rather than focus on a looming issue or the impeachment farce currently making the rounds in Washington. For what it's worth, Wall Street either doesn't want to look or considers these events inconsequential. In the case of impeachment, they may be right, since the Democrats are pushing on a string in their flimsy argument that President Trump committed some kind of crime by discussing with the president of Ukraine some possibly-underhanded dealings by former vice president Joe Biden.
It's nonsense, as the White House has released the complete transcript of the two leaders' phone conversation and there is no quid pro quo element to it and the Bidens (Joe and his son, Hunter) were brought up by Ukrainian President Volodymyr Zelensky.
As far as the Fed's actions are concerned, traders are normally blind to the much larger world of bonds and credit. Doug Noland, a reputable bond and credit analyst (possibly the world's best) writes in his most recent credit bubble bulletin that the Fed's actions are a response to excessive speculative leverage, mainly in the bond markets, which have been whipsawed of late, but spilling over into equities and currencies - especially China - as well.
While the street may have its focus on near term profits and end-of-quarter positioning, real experts see nothing good from the Fed's reach for substantial amounts of liquidity and expect volatility to continue over the next month or more.
At the Close, Wednesday, September 25, 2019:
Dow Jones Industrial Average: 26,970.71, +162.94 (+0.61%)
NASDAQ: 8,077.38, +83.76 (+1.05%)
S&P 500: 2,984.87, +18.27 (+0.62%)
NYSE Composite: 13,037.61, +45.35 (+0.35%)
This is becoming more and more of a liquidity crisis, which, as learned from the Lehman crash of 2008, can readily become a solvency crisis, as Lehman and Bear Stearns before them both were forced into liquidation.
With the oversubscribed condition seemingly becoming worse by the day, the NY Fed quietly announced that the operations proposed last week - daily $75 billion overnight until October 10 and three $30 billion two-week terms - were to be raised to $100 billion overnight and $60 billion in the two-week auctions.
Markets seemed more concerned with making money quickly rather than focus on a looming issue or the impeachment farce currently making the rounds in Washington. For what it's worth, Wall Street either doesn't want to look or considers these events inconsequential. In the case of impeachment, they may be right, since the Democrats are pushing on a string in their flimsy argument that President Trump committed some kind of crime by discussing with the president of Ukraine some possibly-underhanded dealings by former vice president Joe Biden.
It's nonsense, as the White House has released the complete transcript of the two leaders' phone conversation and there is no quid pro quo element to it and the Bidens (Joe and his son, Hunter) were brought up by Ukrainian President Volodymyr Zelensky.
As far as the Fed's actions are concerned, traders are normally blind to the much larger world of bonds and credit. Doug Noland, a reputable bond and credit analyst (possibly the world's best) writes in his most recent credit bubble bulletin that the Fed's actions are a response to excessive speculative leverage, mainly in the bond markets, which have been whipsawed of late, but spilling over into equities and currencies - especially China - as well.
While the street may have its focus on near term profits and end-of-quarter positioning, real experts see nothing good from the Fed's reach for substantial amounts of liquidity and expect volatility to continue over the next month or more.
At the Close, Wednesday, September 25, 2019:
Dow Jones Industrial Average: 26,970.71, +162.94 (+0.61%)
NASDAQ: 8,077.38, +83.76 (+1.05%)
S&P 500: 2,984.87, +18.27 (+0.62%)
NYSE Composite: 13,037.61, +45.35 (+0.35%)
Tuesday, March 6, 2018
Stocks Bounce Back, Set To Continue Gains
After posting losses the first two trading days of March, stocks opened the new week with fresh gains, nearly erasing the red ink for the month. The Dow is still down more than 150 points for the month and much more than that from all-time highs (January 26 is looking smaller and smaller in the rear-view mirror), but stocks are poised to push higher on Tuesday on good news from the Korean Peninsula.
Talks between the North and South are apparently proceeding well, with the North - according to published reports - willing to denuclearize if the US and its allies can ensure its safety. The thought of nuking North Korea, being more of a paranoid construct in the mind of leader, Kim Jong-un, than any substantive reality, should not be a major obstacle should talks continue apace.
If the North and South states do eventually settle their differences, it would amount to nothing less than a complete coup for President Trump and his negotiating team, which has talked alternatively tough and sensible to the North Koreans. Resolution of the 65-year-old standoff would seem to be positive for all parties, depending on the terms of any definitive pact.
A re-emergence of North Korea into the union of so-called civilized nations might also pave the way for other countries, such as Ukraine and Iran, to proceed with normalization of policies, taking a step back from the brink of war or annihilation, nuclear or otherwise.
Dow Jones Industrial Average March Scorecard:
At the Close, Monday, March 5, 2018:
Dow Jones Industrial Average: 24,874.76, +336.70 (+1.37%)
NASDAQ: 7,330.70, +72.84 (+1.00%)
S&P 500: 2,720.94, +29.69 (+1.10%)
NYSE Composite: 12,680.73, +122.74 (+0.98%)
Talks between the North and South are apparently proceeding well, with the North - according to published reports - willing to denuclearize if the US and its allies can ensure its safety. The thought of nuking North Korea, being more of a paranoid construct in the mind of leader, Kim Jong-un, than any substantive reality, should not be a major obstacle should talks continue apace.
If the North and South states do eventually settle their differences, it would amount to nothing less than a complete coup for President Trump and his negotiating team, which has talked alternatively tough and sensible to the North Koreans. Resolution of the 65-year-old standoff would seem to be positive for all parties, depending on the terms of any definitive pact.
A re-emergence of North Korea into the union of so-called civilized nations might also pave the way for other countries, such as Ukraine and Iran, to proceed with normalization of policies, taking a step back from the brink of war or annihilation, nuclear or otherwise.
Dow Jones Industrial Average March Scorecard:
| Date | Close | Gain/Loss | Cum. G/L |
| 3/1/18 | 24,608.98 | -420.22 | -420.22 |
| 3/2/18 | 24,538.06 | -70.92 | -491.14 |
| 3/5/18 | 24,874.76 | +336.70 | -154.44 |
At the Close, Monday, March 5, 2018:
Dow Jones Industrial Average: 24,874.76, +336.70 (+1.37%)
NASDAQ: 7,330.70, +72.84 (+1.00%)
S&P 500: 2,720.94, +29.69 (+1.10%)
NYSE Composite: 12,680.73, +122.74 (+0.98%)
Friday, December 18, 2015
The Big Reset Has Begun; Prepare Accordingly; Stocks Skid to 2-Month Lows
Coincidence?
Try these events from the past three days:
Kerry meets with Putin, says Assad can stay as ruler of Syria. US policy neutered.
Biden calls off Turkey, tells them to stop violating Iraq's borders. US policy neutered.
Fed raised Fed funds rate, banks raise prime rate.
Putin publicly backs Trump.
Ukraine defaults on Russian debt. While this may appear bad for Russia, it's worse for Ukraine, and even worse for US policy.
Today, the plug will be pulled on over a trillion$ in SPY options. Winners and losers, lots of both.
The world has changed radically in the past week. Trump is now the de facto US President. Obama can go to Hawaii and stay there for all the world leaders care. Kerry had no power; now he has even less, if that's possible.
Just watch: terrorism will be a non-starter for 2016. US intel has been found out (by Putin) and he's putting an end to it all.
Will truth and justice return to America? Just like bankruptcy, gradually, then all of a sudden.
h/t to Ernest Hemingway
Then, there's this cryptic note - citing Jim Willie's Hat Trick Letter - found in the comments section on a Zero Hedge article.
At 11:00 am ET, the S&P already dumped 2030 and 2020. Getting closer to the magic mark of 2000.
Don't actually think it matters if it happens today, tomorrow, next week or next year. The crash has been underway since late May, the last time the NAZ, S&P and Dow all set new all time highs.
The trash is being taken to the dumpster. Watch terrorism disappear as a major story. The meme for 2016 will be economic security, and Trump will win easily.
In fact, since Putin's endorsement yesterday, some would wager that in the minds of most world leaders, Trump is already the US de facto president. Obummer is so over. Hillary is a non-starter. Change is good; best to be out in front of it. The elections will be all for show, since Trump is self-financed. The money machine(s) is/are grinding to a halt.
Americans are going to see the fruits of what the Fed and the federal government, state governments, and local governments have sewn: TRASH. Loads of TRASH, piled high, heaped upon more loads of TRASH.
Bankruptcies should absolutely soar in 2016. Corporate failures and bond defaults will accelerate. Pensions will default on payments. The US will slowly, painfully, resort to honest money. GOLD AND SILVER WILL SOAR.
A BIG THANK YOU TO JANET and THE FOMC. THANKS, YOU NITWITS.
David Stockman really nailed it in his post at Contra Corner Blog.
And, while the economy slowly crumbles, congress (which obviously didn't get the memo that they're fired) conveniently passed a $1.15 trillion omnibus budget bill with the notorious CISA government spying act included.
At the end of the week (the last full week of 2015), the figures for the major averages look pretty stupid.
The Dow was smacked down a whipping 367 points, closing at 17,128.59, the lowest closing price since mid-October. For the week, the DJI was off nearly one percent, down 136.62 points.
The S&P nearly got to the 2000 mark, closing down 36.43, at 2005.46 on the day, but lost just 6.95 for the week. On the NASDAQ, it was a 1.59% loss, down 79.47, at 4973.08. On a weekly basis, it doesn't look bad on the surface, as the NAZ lost a mere 10 points.
However, Monday, Tuesday and Wednesday were all up days for the major indices. Thursday and Friday were down, and down big, erasing all of the early-week gains. From the highs after the FOMC meeting, on Wednesday's close, the losses portend further losses next week. a cleansing of bad assets is well underway, and there are plenty of bad ones in all markets.
Also, the entire treasury curve flattened. The 10-year yield, in particular, dropped 10 basis points from 2:00 pm ET on Wednesday, the moment of the FMOC rate hike announcement, ending the week at 2.20%. If the Fed's master plan was working, shouldn't all bond yields - especially those of shorter durations - have gone up? This is a classic example of the market rejecting the Fed, with more to come, as the Fed thinks it's going to raise rates four more times in 2016, a recipe for economic cataclysm.
Lastly, keep a close eye on the banks (JPM, BAC, C, GS, WFC, MS) as they were all lower by 2-3% on the day.
David Bowie's Changes should suffice as an appropriate song for a truly epic week:
Try these events from the past three days:
Kerry meets with Putin, says Assad can stay as ruler of Syria. US policy neutered.
Biden calls off Turkey, tells them to stop violating Iraq's borders. US policy neutered.
Fed raised Fed funds rate, banks raise prime rate.
Putin publicly backs Trump.
Ukraine defaults on Russian debt. While this may appear bad for Russia, it's worse for Ukraine, and even worse for US policy.
Today, the plug will be pulled on over a trillion$ in SPY options. Winners and losers, lots of both.
The world has changed radically in the past week. Trump is now the de facto US President. Obama can go to Hawaii and stay there for all the world leaders care. Kerry had no power; now he has even less, if that's possible.
Just watch: terrorism will be a non-starter for 2016. US intel has been found out (by Putin) and he's putting an end to it all.
Will truth and justice return to America? Just like bankruptcy, gradually, then all of a sudden.
h/t to Ernest Hemingway
Then, there's this cryptic note - citing Jim Willie's Hat Trick Letter - found in the comments section on a Zero Hedge article.
GLOBAL RESET HAS BEEN TRIGGERED, THE PROCESS BEGUN, THE VOICE FINALLY WARNS... THE EVENTS HAVE BEGUN, AND THE USFED RATE HIKE MIGHT HAVE BEEN PART OF THE GLOBAL DECISION. $$$
The Voice gives an urgent warning that finally the breakdown is accelerating, the damage profound, the effects unmistakable, the plug pulled. The officials have not undertaken any remedy for several years. His message is clear and stark, the first time such a communication has been given to the Jackass and colleagues. It was given just a few days before the USFed rate hike decision was made. "Guys, the plug has been pulled. Let the show begin. Our organization has been alerted accordingly to that effect this morning at 4am, that the deed is done. The battle trigger code has been chosen. It will get incredibly ugly, as real casualties will result. The annihilation of entire groups of people within the corrupt and criminal systems will be unimaginable to normal humanoids. These systems will be totally dismembered and crushed, never to be resurrected. The cabal is being caught in a grand dragnet, with the outcome certain to be their extermination, along with all their agents and collaborators. [1] The effects of this event driven scenario will become visible to the ordinary people in early 2016 and forward. Once the dust settles, it is clear to me that the human population will be noticeably lower, with fewer people roaming this planet." The Voice is referring to the Satanist Bank Cabal groups. We mere mortals hope that reason prevails, that remedy is agreed upon, that transition is orderly, so that a billion people do not needlessly perish. But the Anglo-Americans have their favorite nuclear and virus toys. We have seen ample evidence of their chemical plant explosions as a warm-up to main events.
Our organization has been alerted accordingly...
At 11:00 am ET, the S&P already dumped 2030 and 2020. Getting closer to the magic mark of 2000.
Don't actually think it matters if it happens today, tomorrow, next week or next year. The crash has been underway since late May, the last time the NAZ, S&P and Dow all set new all time highs.
The trash is being taken to the dumpster. Watch terrorism disappear as a major story. The meme for 2016 will be economic security, and Trump will win easily.
In fact, since Putin's endorsement yesterday, some would wager that in the minds of most world leaders, Trump is already the US de facto president. Obummer is so over. Hillary is a non-starter. Change is good; best to be out in front of it. The elections will be all for show, since Trump is self-financed. The money machine(s) is/are grinding to a halt.
Americans are going to see the fruits of what the Fed and the federal government, state governments, and local governments have sewn: TRASH. Loads of TRASH, piled high, heaped upon more loads of TRASH.
Bankruptcies should absolutely soar in 2016. Corporate failures and bond defaults will accelerate. Pensions will default on payments. The US will slowly, painfully, resort to honest money. GOLD AND SILVER WILL SOAR.
A BIG THANK YOU TO JANET and THE FOMC. THANKS, YOU NITWITS.David Stockman really nailed it in his post at Contra Corner Blog.
And, while the economy slowly crumbles, congress (which obviously didn't get the memo that they're fired) conveniently passed a $1.15 trillion omnibus budget bill with the notorious CISA government spying act included.
At the end of the week (the last full week of 2015), the figures for the major averages look pretty stupid.
The Dow was smacked down a whipping 367 points, closing at 17,128.59, the lowest closing price since mid-October. For the week, the DJI was off nearly one percent, down 136.62 points.
The S&P nearly got to the 2000 mark, closing down 36.43, at 2005.46 on the day, but lost just 6.95 for the week. On the NASDAQ, it was a 1.59% loss, down 79.47, at 4973.08. On a weekly basis, it doesn't look bad on the surface, as the NAZ lost a mere 10 points.
However, Monday, Tuesday and Wednesday were all up days for the major indices. Thursday and Friday were down, and down big, erasing all of the early-week gains. From the highs after the FOMC meeting, on Wednesday's close, the losses portend further losses next week. a cleansing of bad assets is well underway, and there are plenty of bad ones in all markets.
Also, the entire treasury curve flattened. The 10-year yield, in particular, dropped 10 basis points from 2:00 pm ET on Wednesday, the moment of the FMOC rate hike announcement, ending the week at 2.20%. If the Fed's master plan was working, shouldn't all bond yields - especially those of shorter durations - have gone up? This is a classic example of the market rejecting the Fed, with more to come, as the Fed thinks it's going to raise rates four more times in 2016, a recipe for economic cataclysm.
Lastly, keep a close eye on the banks (JPM, BAC, C, GS, WFC, MS) as they were all lower by 2-3% on the day.
David Bowie's Changes should suffice as an appropriate song for a truly epic week:
Thursday, February 6, 2014
Stocks March Higher Despite NFP Uncertainty
Stocks staged an enormous rally Thursday, just a day before crucial non-farm payroll data from January is to be released.
Friday's employment numbers - expected to be in the range of 185,000 - stand in stark contradiction to December's paltry 74,000 jobs created. While weather has been roundly blamed for everything from auto sales to bond rallies, it may turn out that the weather will not affect payroll data, as the survey week was one that did not contain a severe weather event.
Investors may be gaming the number, figuring that December's figures will almost certainly be upgraded and the potential for two straight disappointments are slim.
On the other hand, since there was little in the way of news or earnings releases to juice today's rally, the huge run-up in stocks may have been due primarily to short-covering, as the bears - fairly fat and sassy of late - may want to be out of the way of such a volatile data set on Friday morning.
In the meantime, nothing much has changed on a global outlook. In fact, a failed bond auction in Ukraine set off some alarm bells and currency issues remain from India to Brazil to Turkey to Argentina to Indonesia. In essence, the Fed's decision to trim $20 billion in total from their monthly bond-purchasing program over the past two months is affecting everyone, everywhere.
That message did not seem to reach the ears of the bulls, at least for one day. Stocks had fallen pretty far in a short period of time, so the old "oversold" rationale has been trotted out as an explanation. For the record, the S&P had fallen about 100 points in just over a month, so, some giveback was to be expected. Same with the Dow, which had surrendered over 1000 points before gaining back about 250 this week.
On the day, volume was light, the advance-decline line was nearly 3:1 positive, but new highs just barely edged new lows, despite the huge, broad-based ramp in stocks. It appeared to be more of a "risk-off" kind of day rather than a serious, fundamental-based rally.
The 10-year note was sold off, registering a yield of 2.70, the highest in over a week. The troubling trend in short-dated maturities remained unresolved, with 3-month and 6-month bills matching up with identical 0.07% yields.
DOW 15,628.53, +188.30 (+1.22%)
NASDAQ 4,057.12, +45.57 (+1.14%)
S&P 1,773.43, +21.79 (+1.24%)
10-Yr Note 100.41, +0.20 (+0.20%) Yield: 2.70%
NASDAQ Volume 1.78 Bil
NYSE Volume 3.77 Bil
Combined NYSE & NASDAQ Advance - Decline: 4003-1691
Combined NYSE & NASDAQ New highs - New lows: 86-70
WTI crude oil: 97.84, +0.46
Gold: 1,257.20, +0.30
Silver: 19.93, +0.123
Corn: 443.00, -0.25
Friday's employment numbers - expected to be in the range of 185,000 - stand in stark contradiction to December's paltry 74,000 jobs created. While weather has been roundly blamed for everything from auto sales to bond rallies, it may turn out that the weather will not affect payroll data, as the survey week was one that did not contain a severe weather event.
Investors may be gaming the number, figuring that December's figures will almost certainly be upgraded and the potential for two straight disappointments are slim.
On the other hand, since there was little in the way of news or earnings releases to juice today's rally, the huge run-up in stocks may have been due primarily to short-covering, as the bears - fairly fat and sassy of late - may want to be out of the way of such a volatile data set on Friday morning.
In the meantime, nothing much has changed on a global outlook. In fact, a failed bond auction in Ukraine set off some alarm bells and currency issues remain from India to Brazil to Turkey to Argentina to Indonesia. In essence, the Fed's decision to trim $20 billion in total from their monthly bond-purchasing program over the past two months is affecting everyone, everywhere.
That message did not seem to reach the ears of the bulls, at least for one day. Stocks had fallen pretty far in a short period of time, so the old "oversold" rationale has been trotted out as an explanation. For the record, the S&P had fallen about 100 points in just over a month, so, some giveback was to be expected. Same with the Dow, which had surrendered over 1000 points before gaining back about 250 this week.
On the day, volume was light, the advance-decline line was nearly 3:1 positive, but new highs just barely edged new lows, despite the huge, broad-based ramp in stocks. It appeared to be more of a "risk-off" kind of day rather than a serious, fundamental-based rally.
The 10-year note was sold off, registering a yield of 2.70, the highest in over a week. The troubling trend in short-dated maturities remained unresolved, with 3-month and 6-month bills matching up with identical 0.07% yields.
DOW 15,628.53, +188.30 (+1.22%)
NASDAQ 4,057.12, +45.57 (+1.14%)
S&P 1,773.43, +21.79 (+1.24%)
10-Yr Note 100.41, +0.20 (+0.20%) Yield: 2.70%
NASDAQ Volume 1.78 Bil
NYSE Volume 3.77 Bil
Combined NYSE & NASDAQ Advance - Decline: 4003-1691
Combined NYSE & NASDAQ New highs - New lows: 86-70
WTI crude oil: 97.84, +0.46
Gold: 1,257.20, +0.30
Silver: 19.93, +0.123
Corn: 443.00, -0.25
Saturday, January 25, 2014
Saturday Afternoon Quarterback: The Day After the Great January Stock Slide
OK, it's Saturday, and the world hasn't ended, but what's important is to keep abreast of developments over the weekend in places like Argentina and Turkey, both of which are experiencing significant currency issues.
The other part of today's exercise is to see if there is anything that might give a clue to the future, and as to whether the massive selloff on Friday (and all week on the Dow) was a one-off, or if it is going to lead to more dislocations in stocks, a further decline, a 10% correction, or a bear market, which is where the fun really starts for those bent on restoring some semblance of sanity to stock valuations.
Yes, Cry for Argentina
Argentina, a country already shut off from foreign credit markets (could be a blessing in disguise) after the financial collapse of 2001-2002, has been in crisis mode for most of the past three years, with citizens unable to purchase US Dollars with their local currency, the peso, except on black markets, where the going rate is roughly 11-1 or 12-1.
Other restrictions on the movement of money have been imposed by the autocratic government of Christina Kirchner during the recent past, but on Friday, the government was said to be lifting the ban on the purchase of dollars, with an official rate of 8-to-1, and a 20% surcharge, pushing the "official" exchange rate closer to black market prices, though not equal to them. The new policy is said to take effect on Monday, though local chatter is that the government won't have enough dollars available by then to meet expected demand.
The black market is thriving in Argentina's cities, the Euro and US Dollar being the main currencies accepted for millions in hidden transactions. With inflation running at about 30% over the past year, this crisis seems to have legs, eventually resulting in full-blown currency rejection, prompting various economic, social and political problems, likely precisely what the overlords at the World Bank and IMF have in mind.
Argentina is Greece writ large, without bailouts. The take-away is that this is nothing short of economic warfare, with the citizenry being the victims via inflation, social unrest, political uncertainty, with the goal being having the government succumb to the demands of international bankers, who will grind the country down with crushing debt packages disguised as "aid."
Turkey Stew?
In a nutshell, Turkey, a country that is a geographic crossroad between Europe, Asia and the Middle East, is at more crossroads - economic, social and political - than its current leaders can handle. While the country is mostly Sunni Muslim, most of its neighbors to the South (Syria, Iran and Iraq) are Shiite. On the other side to the West is Europe, and the struggle to admit Turkey to the EU has been ongoing for nearly a decade.
The rapid devaluation of the lira, the country's official currency, was a design of European technocrats, who seek to weaken the country's finances to a point at which acceptance of the Euro as the "new" currency would be greeted with cheers of economic progress and stability, though opponents of entering into full-blown Euro acceptance consider that a move characteristic of failure, and point to the loss of sovereignty that would result.
To the North, lies Georgia, Russia and, across the Black Sea, the Ukraine, which has descended into a condition close to civil war, mostly over the issue of whether to join the European Union or throw in with Russia, which holds sway over the country's gas supply. This is somewhat of the same situation facing the Turks and makes the situation all the more confusing. With so much turmoil in the region already, it wouldn't take much of a spark to turn Turkey into a pretty large battlefield, some of it, mostly the southern region, already torn up by the Syrian conflict.
It doesn't take much imagination to see the Turkish situation spiraling wildly out of control. Al Queda already runs arms and terrorists through the country, and Russia also smuggles weaponry to Syria through it. If Turkey were to erupt into violence, one could easily see a wide swath of nations - from Egypt all the way to the Ukraine - as a war zone, much of it already engulfed by violence.
The Wider View
If the situation in Turkey, Syria and the Ukraine wasn't enough to destabilize markets, Argentina and the brewing banking crisis in China certainly have to be rankling the money-handlers.
Here is a brief clip and transcript (about eight minutes) that describes the shadow banking problems in China. Essentially, shadow banking enterprises are financing loans made to companies who borrowed from official channels and have run out of credit or the ability to borrow more on good terms from China's official banking system has been exhausted. The issue is one of rolling over credit in order to avoid default, but, as the article explains, China is going to slow and some industries will be negatively affected, and whole businesses shuttered.
With the difficulty of getting straight information out of China still a huge problem, it's unclear how bad China's debt-to-GDP ratio has become, though it is certainly more than the officially reported 125%.
Of course, with debt-to-GDP at that level or higher in the bulk of developed and emerging nations, China's problems just add to the mix, though it's like dropping a whole stick of butter into a small bowl of flour and milk. It's so big, it threatens to clog up the entire operation and that's what is most worrisome.
There are, naturally, many more reasons why stocks plunged on Friday, from Italy's unemployment at an all-time high of 12.7%, to Spain's unemployment dwarfing that, at 26.8%.
Other indicators include the Baltic Dry Index (BDI), which collapsed in the two weeks after the holidays by an unprecedented amount, and, China's most recent PMI, which the financial media give a wide berth for the cause of the selloff in US stocks. The PMI fell to 49.6, indicating contraction in the manufacturing sector, the lifeblood of the Chinese - and to a great degree, the global - economy.
Here at home, retailers are feeling the pinch from a horrid holiday shopping season, the worst since 2008. JC Penny and Sears have already announced store closings and layoffs. Target and Wal-Mart announced layoffs on Friday, though they were small in number.
Technicals Matter
Technically, US indices are in pretty good shape, overall. The Dow and S&P had been making new all-time highs at the end of 2013, but the performance in the first three full weeks of 2014 are not encouraging. With Friday's decline, the Dow ripped right through its 50-day moving average. On just Thursday and Friday, the Dow more than tripled its losses for the year. The two-day decline was more than 500 points, a number that represents a roughly 3% loss, but, since the index has risen so high, the point total of over 300 points on Friday has a psychological impact.
Imagine the Dow Jones Industrials as a 1600-pound animal, maybe a small hippo. A one-percent loss in weight - 16 pounds - wouldn't seem to matter much, but a 3% loss is close to 50 pounds, possibly worth notice. If the animal were to lose 10% (a correction, in market terms), or 160 pounds, veterinarians would be consulted, and, if a 20% loss in weight were to occur (indicative of a bear market), some might the 320-pound loss in weight was indicative of the animal having a severe disease.
The S&P likewise fell through its 50-day moving average, though the NASDAQ remained in suspended animation above its 50-day moving average, buoyed by Netflix and Google in recent days, though that position may be in jeopardy if the declines from the past few weeks persist and morph into something larger.
Key support areas on the Dow are at 15,450 and 1700 on the S&P, both the 200-day moving averages.
Also, the number of new lows exceeded new highs on Friday, the first time that has happened this year.
Forward Thinking
With earnings season in full gallop, next week should provide more fireworks. Apple and Google will be reporting, and those will be the big ones to watch. Since they are techs, they'll likely give the markets some pause and reason to ignore the declines of the past week, but the big enchilada is the two-day FOMC meeting on Tuesday and Wednesday, January 28 and 29, Ben Bernanke's last.
While the Fed didn't expressly say so when it announced the tapering of their bond purchase program by $10 billion last month, the fear on the Street is that they will announce another $10 billion reduction, bringing their monthly purchases down to $65 billion in February, from $85 billion in December.
Nowhere in its press release from last month
did the Fed even mention further cuts, so a reasonable expectation is that they will continue asset purchases at a rate of $75 billion per month, which, seriously, is more than enough, though market crybabies would like to see even more artificial stimulus.
Interest rates are also normalizing again, with the 10-year dropping to its lowest yield since prior to the "taper" announcement, closing Friday at a yield of 2.72%
Essentially, the turnback on Friday wasn't such a big deal, though any downturn is viewed with skepticism since the Fed is still supplying so much liquidity. If stocks can't maintain their current valuations, it means one of a couple of things. One, the Fed's policies are a complete failure, or, two, the economy is much weaker than anyone thought, or, three, stocks ran up to a highly overbought level and investors are just taking profits, albeit, at a rapid pace.
What's important to watch is how stocks act next week, the final week in January. The Fed announcement will be key, though they shouldn't influence markets considerably unless they taper even more, an unlikely event. If the major indices make it through the week without losing much or actually making gains, keep a close eye on the recent all-time highs on the S&P and the Dow. If these levels are not surpassed, that's a plain signal of a primary bear market. That should surprise nobody except perma-bulls, because this bull market will be a full five years old - 60 months - on March 9th. If the market makes a V bottom and rebounds past the highs (a correction and rebound), short at your own risk, because that would be a sign of a continuing liquidity-driven push higher.
One other indicator to consider is the January Barometer, which, at this juncture, looks certain to be negative. The direction of stocks in January has about a 90% correlation to direction for the rest of the year, so, unless there's a miracle rally this coming week, 2014 appears to be heading South.
For now, it's too early to call direction, but this brief summary of some of the key issues should provide background for all investors.
The other part of today's exercise is to see if there is anything that might give a clue to the future, and as to whether the massive selloff on Friday (and all week on the Dow) was a one-off, or if it is going to lead to more dislocations in stocks, a further decline, a 10% correction, or a bear market, which is where the fun really starts for those bent on restoring some semblance of sanity to stock valuations.
Yes, Cry for Argentina
Argentina, a country already shut off from foreign credit markets (could be a blessing in disguise) after the financial collapse of 2001-2002, has been in crisis mode for most of the past three years, with citizens unable to purchase US Dollars with their local currency, the peso, except on black markets, where the going rate is roughly 11-1 or 12-1.
Other restrictions on the movement of money have been imposed by the autocratic government of Christina Kirchner during the recent past, but on Friday, the government was said to be lifting the ban on the purchase of dollars, with an official rate of 8-to-1, and a 20% surcharge, pushing the "official" exchange rate closer to black market prices, though not equal to them. The new policy is said to take effect on Monday, though local chatter is that the government won't have enough dollars available by then to meet expected demand.
The black market is thriving in Argentina's cities, the Euro and US Dollar being the main currencies accepted for millions in hidden transactions. With inflation running at about 30% over the past year, this crisis seems to have legs, eventually resulting in full-blown currency rejection, prompting various economic, social and political problems, likely precisely what the overlords at the World Bank and IMF have in mind.
Argentina is Greece writ large, without bailouts. The take-away is that this is nothing short of economic warfare, with the citizenry being the victims via inflation, social unrest, political uncertainty, with the goal being having the government succumb to the demands of international bankers, who will grind the country down with crushing debt packages disguised as "aid."
Turkey Stew?
In a nutshell, Turkey, a country that is a geographic crossroad between Europe, Asia and the Middle East, is at more crossroads - economic, social and political - than its current leaders can handle. While the country is mostly Sunni Muslim, most of its neighbors to the South (Syria, Iran and Iraq) are Shiite. On the other side to the West is Europe, and the struggle to admit Turkey to the EU has been ongoing for nearly a decade.
The rapid devaluation of the lira, the country's official currency, was a design of European technocrats, who seek to weaken the country's finances to a point at which acceptance of the Euro as the "new" currency would be greeted with cheers of economic progress and stability, though opponents of entering into full-blown Euro acceptance consider that a move characteristic of failure, and point to the loss of sovereignty that would result.
To the North, lies Georgia, Russia and, across the Black Sea, the Ukraine, which has descended into a condition close to civil war, mostly over the issue of whether to join the European Union or throw in with Russia, which holds sway over the country's gas supply. This is somewhat of the same situation facing the Turks and makes the situation all the more confusing. With so much turmoil in the region already, it wouldn't take much of a spark to turn Turkey into a pretty large battlefield, some of it, mostly the southern region, already torn up by the Syrian conflict.
It doesn't take much imagination to see the Turkish situation spiraling wildly out of control. Al Queda already runs arms and terrorists through the country, and Russia also smuggles weaponry to Syria through it. If Turkey were to erupt into violence, one could easily see a wide swath of nations - from Egypt all the way to the Ukraine - as a war zone, much of it already engulfed by violence.
The Wider View
If the situation in Turkey, Syria and the Ukraine wasn't enough to destabilize markets, Argentina and the brewing banking crisis in China certainly have to be rankling the money-handlers.
Here is a brief clip and transcript (about eight minutes) that describes the shadow banking problems in China. Essentially, shadow banking enterprises are financing loans made to companies who borrowed from official channels and have run out of credit or the ability to borrow more on good terms from China's official banking system has been exhausted. The issue is one of rolling over credit in order to avoid default, but, as the article explains, China is going to slow and some industries will be negatively affected, and whole businesses shuttered.
With the difficulty of getting straight information out of China still a huge problem, it's unclear how bad China's debt-to-GDP ratio has become, though it is certainly more than the officially reported 125%.
Of course, with debt-to-GDP at that level or higher in the bulk of developed and emerging nations, China's problems just add to the mix, though it's like dropping a whole stick of butter into a small bowl of flour and milk. It's so big, it threatens to clog up the entire operation and that's what is most worrisome.
There are, naturally, many more reasons why stocks plunged on Friday, from Italy's unemployment at an all-time high of 12.7%, to Spain's unemployment dwarfing that, at 26.8%.
Other indicators include the Baltic Dry Index (BDI), which collapsed in the two weeks after the holidays by an unprecedented amount, and, China's most recent PMI, which the financial media give a wide berth for the cause of the selloff in US stocks. The PMI fell to 49.6, indicating contraction in the manufacturing sector, the lifeblood of the Chinese - and to a great degree, the global - economy.
Here at home, retailers are feeling the pinch from a horrid holiday shopping season, the worst since 2008. JC Penny and Sears have already announced store closings and layoffs. Target and Wal-Mart announced layoffs on Friday, though they were small in number.
Technicals Matter
Technically, US indices are in pretty good shape, overall. The Dow and S&P had been making new all-time highs at the end of 2013, but the performance in the first three full weeks of 2014 are not encouraging. With Friday's decline, the Dow ripped right through its 50-day moving average. On just Thursday and Friday, the Dow more than tripled its losses for the year. The two-day decline was more than 500 points, a number that represents a roughly 3% loss, but, since the index has risen so high, the point total of over 300 points on Friday has a psychological impact.
Imagine the Dow Jones Industrials as a 1600-pound animal, maybe a small hippo. A one-percent loss in weight - 16 pounds - wouldn't seem to matter much, but a 3% loss is close to 50 pounds, possibly worth notice. If the animal were to lose 10% (a correction, in market terms), or 160 pounds, veterinarians would be consulted, and, if a 20% loss in weight were to occur (indicative of a bear market), some might the 320-pound loss in weight was indicative of the animal having a severe disease.
The S&P likewise fell through its 50-day moving average, though the NASDAQ remained in suspended animation above its 50-day moving average, buoyed by Netflix and Google in recent days, though that position may be in jeopardy if the declines from the past few weeks persist and morph into something larger.
Key support areas on the Dow are at 15,450 and 1700 on the S&P, both the 200-day moving averages.
Also, the number of new lows exceeded new highs on Friday, the first time that has happened this year.
Forward Thinking
With earnings season in full gallop, next week should provide more fireworks. Apple and Google will be reporting, and those will be the big ones to watch. Since they are techs, they'll likely give the markets some pause and reason to ignore the declines of the past week, but the big enchilada is the two-day FOMC meeting on Tuesday and Wednesday, January 28 and 29, Ben Bernanke's last.
While the Fed didn't expressly say so when it announced the tapering of their bond purchase program by $10 billion last month, the fear on the Street is that they will announce another $10 billion reduction, bringing their monthly purchases down to $65 billion in February, from $85 billion in December.
Nowhere in its press release from last month
did the Fed even mention further cuts, so a reasonable expectation is that they will continue asset purchases at a rate of $75 billion per month, which, seriously, is more than enough, though market crybabies would like to see even more artificial stimulus.
Interest rates are also normalizing again, with the 10-year dropping to its lowest yield since prior to the "taper" announcement, closing Friday at a yield of 2.72%
Essentially, the turnback on Friday wasn't such a big deal, though any downturn is viewed with skepticism since the Fed is still supplying so much liquidity. If stocks can't maintain their current valuations, it means one of a couple of things. One, the Fed's policies are a complete failure, or, two, the economy is much weaker than anyone thought, or, three, stocks ran up to a highly overbought level and investors are just taking profits, albeit, at a rapid pace.
What's important to watch is how stocks act next week, the final week in January. The Fed announcement will be key, though they shouldn't influence markets considerably unless they taper even more, an unlikely event. If the major indices make it through the week without losing much or actually making gains, keep a close eye on the recent all-time highs on the S&P and the Dow. If these levels are not surpassed, that's a plain signal of a primary bear market. That should surprise nobody except perma-bulls, because this bull market will be a full five years old - 60 months - on March 9th. If the market makes a V bottom and rebounds past the highs (a correction and rebound), short at your own risk, because that would be a sign of a continuing liquidity-driven push higher.
One other indicator to consider is the January Barometer, which, at this juncture, looks certain to be negative. The direction of stocks in January has about a 90% correlation to direction for the rest of the year, so, unless there's a miracle rally this coming week, 2014 appears to be heading South.
For now, it's too early to call direction, but this brief summary of some of the key issues should provide background for all investors.
Subscribe to:
Posts (Atom)
Posts
