Chalk this up to various theories of unintended consequences.
Even the brilliant thinkers at the Federal Reserve are unable to explain the strange divergence of bonds and the dollar over the past number of weeks because that's not the way it's supposed to go.
With the Fed becoming more hawkish as they attempt to unwind literally trillions of dollars worth of bonds on their vast balance sheet, interest rates have risen, but the value of the dollar in relation to other major currencies has taken a noticeable hit, not just in the past few weeks, but for the better part of the past year.
The mighty US dollar was beaten like a trailer park hooker, down nearly one percent on the day per the dollar index, which, in the forex universe, is a pretty severe move.
Other currencies were the beneficiaries of the dollar demise, with the British pound up 2.4%, Japan's yen up nearly one percent, and the Aussie dollar gaining 0.90%.
Fueled by Treasury Secretary Steven Mnuchin's comments at the World Economic Forum in Davos, Switzerland, that a weaker dollar was good for US trade, currency pairs were traded with one thing in mind: dollar dumping.
Bonds, however, failed to play along, with the 10-year benchmark unchanged at 2.65% and both long and short-dated maturities moving less than a basis point.
Besides the currencies of nations not the United States, commodities were bid large, with WTI oil futures making another in a series of three-year highs and precious metals continuing a rally that began in December but had recently stalled.
Not so today, as silver led the way with a gain of over three percent, topping out at 17.70, the highest since breaking briefly over $18 per ounce in early September of 2017. From a technical perspective, silver has ripped through a long, declining resistance line dating back to its peak in 2011. A clear breakout holding above $17.50 would be a significant development for the world's most unappreciated asset.
Gold was also well-taken, finishing in New York up $16.80 (1.50%), at $1358.70 the ounce.
Stocks meandered along the unchanged line, ending split, with the Dow higher while the NASDAQ and S&P fell.
With many pension funds chartered to rebalance by month's end, the rapid rise of equities in the early days of the new year may be coming to a quick conclusion. Estimates range from $12 to $120 billion of stocks which must be sold and converted to bonds in the next week. If that's the case, it will take a concerted effort from the central bank cartel (who also may be selling into the weakness) to keep the stock bubble adequately inflated.
If there's a downside other than stocks taking a much-needed shave, it's that any decline in the stock market will be blamed on President Trump and his administration's tough currency and trade policies.
The President is set to address the assemblage at Davos on Friday, concluding this year's fete of economic manipulators and would-be statist social constructionists.
The President is expected to deliver remarks touting America's re-emergence as the world's greatest economic force.
At the Close, Wednesday, January 24, 2018:
Dow: 26,252.12, +41.31 (0.16%)
S&P 500: 2,837.54, -1.59 (-0.06%)
NASDAQ: 7,415.06, -45.23 (-0.61%)
Showing posts with label divergence. Show all posts
Showing posts with label divergence. Show all posts
Wednesday, January 24, 2018
Thursday, May 24, 2012
Bifurcated Markets a Sure Sign of Trouble In Fantasy Finance Land
It should be pain as the day that there are many issues and headwinds facing financial markets in the current crisis situation. Today's trading, taking bounces up and down in a directionless trading session is yet another indictment of the power players' control - or lack thereof - during a turbulent period.
When markets react in odd ways, as similar ones diverge, correlations break down and generally things zig when they are expected to zag, one index is up while another is down, it's a sign of malaise and weariness, signifying not only trouble in the current time frame, but of more problems to come.
After Wednesday's hockey stick save off the lows on a temporary reversal of sentiment regarding Europe - which was wholly manufactured and false, by the way - in which all the major indices moved in the same direction at the same time, today's sloppiness could be attributed to speculative bets in different sectors, though the possibility that there are diverging opinions driving indices in different directions is palpable.
Even though the day's range - 120 points on the Dow; 32 points on the NASDAQ, the two did not move in anything even remotely resembling synchronicity. The Dow finished to the positive, the NASDAQ ended in the red.
Some may posit that these moves are by design, though that's a bit of a stretch even in this space, in which all conspiracy theories are given ample credit at least for the fact that somebody's paying attention.
In what was one of the least-inspiring trading days of the past two weeks, the best that can be said of today's performance was that it was at least back to the norm of low volume and moves without conviction. Europe has been quieted for the time being (don't worry, that will change), the Facebook IPO malaise is fading from the news cycle and JP Morgan is still losing money on the "London Whale" non-hedge hedge.
Eventually, all of these items and more either get swept under the Wall Street rug of fraud and collusion or explode in the faces of the criminal cartel that traverses the canyons of lower Manhattan as glad-handing gentlemen.
One would suppose that a break in the action might be a good thing, though if one is circumspect enough to check the recent charts of the major indices, one would have to be blind not to notice that the Dow, S&P and NASDAQ are all trading well below their 50-day moving averages and hovering just above their 200-DMA, a dangerous position. They're also taken off about 50% of the move higher from mid-December to the end of April, a retracement that adherents of Fibonacci will note as an area of support. In that regard, the indices have moved in synchronous fashion, though with their own idiosyncratic tendencies.
Two telling signs from market internals suggest there easily could be more downside in days and weeks to come. The advance-decline line has been negative 12 of the last 17 sessions, while there have been more new lows than new highs for 10 consecutive sessions and on 14 of the last 15 trading days.
This is an interesting time for markets, stuck in no-man's land without the support of earnings, driven by news, events and data flow.
Dow 12,529.75, +33.60 (0.27%)
NASDAQ 2,839.38, -10.74 (0.38%)
S&P 500 1,320.68, -1.82 (0.14%)
NYSE Composite 7,552.35, -11.45 (0.15%)
NASDAQ Volume 1,737,819,375
NYSE Volume 3,776,796,750
Combined NYSE & NASDAQ Advance - Decline: 3082-2527
Combined NYSE & NASDAQ New highs - New lows: 55-111
WTI crude oil: 90.66, +0.76
Gold: 1,557.50, +9.10
Silver: 28.16, +0.64
When markets react in odd ways, as similar ones diverge, correlations break down and generally things zig when they are expected to zag, one index is up while another is down, it's a sign of malaise and weariness, signifying not only trouble in the current time frame, but of more problems to come.
After Wednesday's hockey stick save off the lows on a temporary reversal of sentiment regarding Europe - which was wholly manufactured and false, by the way - in which all the major indices moved in the same direction at the same time, today's sloppiness could be attributed to speculative bets in different sectors, though the possibility that there are diverging opinions driving indices in different directions is palpable.
Even though the day's range - 120 points on the Dow; 32 points on the NASDAQ, the two did not move in anything even remotely resembling synchronicity. The Dow finished to the positive, the NASDAQ ended in the red.
Some may posit that these moves are by design, though that's a bit of a stretch even in this space, in which all conspiracy theories are given ample credit at least for the fact that somebody's paying attention.
In what was one of the least-inspiring trading days of the past two weeks, the best that can be said of today's performance was that it was at least back to the norm of low volume and moves without conviction. Europe has been quieted for the time being (don't worry, that will change), the Facebook IPO malaise is fading from the news cycle and JP Morgan is still losing money on the "London Whale" non-hedge hedge.
Eventually, all of these items and more either get swept under the Wall Street rug of fraud and collusion or explode in the faces of the criminal cartel that traverses the canyons of lower Manhattan as glad-handing gentlemen.
One would suppose that a break in the action might be a good thing, though if one is circumspect enough to check the recent charts of the major indices, one would have to be blind not to notice that the Dow, S&P and NASDAQ are all trading well below their 50-day moving averages and hovering just above their 200-DMA, a dangerous position. They're also taken off about 50% of the move higher from mid-December to the end of April, a retracement that adherents of Fibonacci will note as an area of support. In that regard, the indices have moved in synchronous fashion, though with their own idiosyncratic tendencies.
Two telling signs from market internals suggest there easily could be more downside in days and weeks to come. The advance-decline line has been negative 12 of the last 17 sessions, while there have been more new lows than new highs for 10 consecutive sessions and on 14 of the last 15 trading days.
This is an interesting time for markets, stuck in no-man's land without the support of earnings, driven by news, events and data flow.
Dow 12,529.75, +33.60 (0.27%)
NASDAQ 2,839.38, -10.74 (0.38%)
S&P 500 1,320.68, -1.82 (0.14%)
NYSE Composite 7,552.35, -11.45 (0.15%)
NASDAQ Volume 1,737,819,375
NYSE Volume 3,776,796,750
Combined NYSE & NASDAQ Advance - Decline: 3082-2527
Combined NYSE & NASDAQ New highs - New lows: 55-111
WTI crude oil: 90.66, +0.76
Gold: 1,557.50, +9.10
Silver: 28.16, +0.64
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