Showing posts with label volatility. Show all posts
Showing posts with label volatility. Show all posts

Wednesday, March 11, 2020

Record Rise on NASDAQ; Big Gains on Dow, S&P Relieve Bear Market Fears... for Now

(Simultaneously published at Downtown Magazine)

In case anybody is growing weary of the recent volatility that has sent stocks soaring and diving over the past three to four weeks, prepare for more of the same. There will be no respite in daily swings of two percent, three percent or more, as yesterday proved, as stocks staged a monumental rally in the latter part of the the session, the Dow rising more than 1000 points in the final two hours.

At the end of the day, all major indices were approaching gains of five percent. Keeping with the trend of record-breaking sessions, the Dow's rise was the third largest point gain in market history. The other two occurred earlier this month. On March 2nd, the Industrials set the mark with a gain of 1,293.96 points. Tow days later, it came close to breaking that, up by 1,173.45 points.

With an eye toward the VIX - the market's preferred measure of volatility - this kind of roller coaster ride should continue until there's resolution to the downside. The VIX has recently hovered in the 40-50 range, ripping as high as 55. Normal volatility is usually measured in the teens.

The NASDAQ and S&P also experienced massive upside Tuesday afternoon, resulting in a record point gain on the NASDAQ, up 393.58 points, surpassing the record set just over a week ago, on March 2nd (+384.80). The S&P's gain of 135.67 points fell just shy of the record mark, also recorded on March 2nd, at +136.01.

In this regime of wild swings, it's probable that some traders are going to make massive profits while others fail miserably. It's all about timing and nerves. Anybody with poor timing and a thin appetite for risk is likely to be wiped out in short order. Those who relish the thrill of the hunt and have money to burn should come out ahead in the end, varying trades between long and short, at least until the market overseers ban short sales or profiting on put options.

It may not be obvious to the general public, but where this is head seems pretty clear. The coronavirus, COVID-19, has wreaked havoc on human society, thus disrupting the normal flow of business, a trend that's only just begun. Businesses are only beginning to feel the effects of breaks in the supply chain from China, and soon enough the entire planet's trade will be paralyzed by delays, outages, work stoppages, quarantines, deaths, and all the assorted maladies that accompany global pandemics, the likes of which have not presented themselves in the lifetimes of anybody alive today.

Estimates from medical experts are frightening, which is why the numbers being released by the CDC in the United States are nothing short of a bad joke. Over the past week, the CDC has "officially" recorded anywhere between 2 and 19 new cases of COVID-19 daily, this in a country with a projected population of 333,546,000.

Actual incidence of infection is orders of magnitude higher; that can be safely assumed. With the aid of the CDC, the US government has chosen to protect the economy rather than the people, a strategy doomed to fail. Without effective measures for controlling and containing the spread of the disease - as has been accomplished to a relatively high degree in places like Hong Kong, Singapore, and South Korea - via testing, contact tracking, and quarantine - it will spread virtually unchecked through a population. The evidence from the epicenter in Wuhan, China is compelling in this regard. Akin to what happened there, the US approach is dangerously close to causing a widespread outbreak in any number of cities by ignoring simple precautions and putting money ahead of human health.

What would an economy look like with 200 deaths per day, hospitals overwhelmed and people forced to stay indoors and away from others for weeks at a time? We, and some European nations are about to find out. With a population spoiled by the luxuries of freedom, it's not going to be much fun watching entitled populations melt down under the imposition of travel bans, quarantines, and other draconian measures.

As for stocks, well, their pathway will be all but assured. The Dow Jones Industrials bounced off a mark of declination on Tuesday when it bottomed out at 23,690.34. It was down 19.88% from the intraday high of 29,568.57, recorded on February 12 of this year. It was about to fall into bear market territory. The day's gains may have staved off capitulation for now, but it's coming, and soon. The end of the 11-year bull market and the beginning of what could be a prolonged bear market is at hand.

At the Close, Tuesday, March 10, 2020:
Dow Jones Industrial Average: 25,018.16, +1,167.14 (+4.89%)
NASDAQ: 8,344.25, +393.58 (+4.95%)
S&P 500: 2,882.23, +135.67 (+4.94%)
NYSE: 11,793.27, +494.84 (+4.38%)

Wednesday, September 18, 2019

Anticipating Federal Funds Rate Slash, Fed Conducts Repo for Cash-Strapped Banks

In case you missed it, on Tuesday, the Federal Reserve conducted a repurchasing event - known in the business as a "repo" - to inject cash into the system, which had run low on reserves.

Essentially, the primary dealers, among them the nation's largest banks, found themselves a little short on cash and needed to sell some bonds back to the Fed. In all, the Fed took back $53 billion and the system survived a rare liquidity crunch. It was the first repo auction since the great Financial Crisis of 2008.

This kind of activity may not be so rare going forward. The Financial Times reports that the Fed is holding another repo auction on Wednesday morning, offering up $75 billion in cash in exchange for various types of bonds, most typically, Treasuries or Mortgage-backed securities (MBS).

What triggered the double-dip into repo-land is the unusually high volatility in bond markets, which have been whipsawed of late. The benchmark 10-year-note, for instance, has yielded as low as 1.46% and as high as 1.90% just this month, and currently sits at a yield of 1.81%. The high rate at which bonds are turned over by the primary dealers and others may have left some banks upside down, or wrong-footed, this week.

The second repo has taken place, ending before 8:30 am, Wednesday morning.

The results were less-than-encouraging going forward. The auction was oversubscribed by $5 billion, meaning somebody has a short-term cash flow problem. The Fed offered up $75 billion and $80 was bid, so somebody didn't get what they were seeking. $5 billion is a lot of money, no matter how you slice it. This is going to show up somewhere and it won't be pretty. Prepare for bank failures at an increasing rate.

Otherwise, the markets stay relatively calm on the surface, with futures modestly in the red. At 2:00 pm ET Wednesday, the FOMC will announce their policy directive, ending a two-day meeting. They are widely expected to decrease the federal funds rate by 25 basis points, from 2.00-2.25 to 1.75-2.00.

If the idea of a range, rather than a distinct point for the federal funds rate seems different, it is. The Fed used to just set the rate at a distinct point, like 2.50%, but now they issue a range. That change occurred in 2008, when they dropped the rate to zero, or actually, 0.00 to 0.25. The Fed didn't like the rate being exactly zero bacuse that would have sent a bad signal, so they changed to a range.

What really happened is that the global fiat currency economy broke in 2008. ZIRP and the various forms of QE were bandages when a splint and a cast were needed. The system is still broken, moreso than in 2008 and the injury, once a break, is now amplified with a fever, an infection, and the hospital is out of meds.


At the Close, Tuesday, September 17, 2019:
Dow Jones Industrial Average: 27,110.80, +33.98 (+0.13%)
NASDAQ: 8,186.02, +32.47 (+0.40%)
S&P 500: 3,005.70, +7.74 (+0.26%)
NYSE Composite: 13,131.41, +23.43 (+0.18%)

Tuesday, September 10, 2019

Stocks Flat; Britain Should Leave The EU ASAP

Markets - whatever is left of them - seemed to be running on fumes Monday, as no Trump tweets nor economic news were sufficient to move stocks in general either way.

This kind of quiet may be just what investors are seeking: less volatility, less media madness, a more sanguine environment and some degree of security and safety. With all the talk of recession, the past few months have spooked some of the more ardent longs, but the market is still not conducive to short trades in any form.

One could conclude from recent action that stocks will hold their ground and move to new highs, as has been the case throughout the run from 2009 (buy the dip philosophy), and with another 1/4 point rate cut from the Fed a sure thing next week, that is the likely trading strategy for the day-trader and short-termer. Long term investors should be seeking value or growth, best, a combination of the two. With interest rates so low, dividend-yielding stocks with long track records are the safest and surest, plus, many will survive well under difficult conditions, should a recession actually arrive.

Central banks still have control of markets, a condition that may persist for quite a long time. It should serve memory well to reconsider the aftermath of the 2008 crash, wherein central banks coordinated to save everything, even unworthy companies, from default.

This might be a prime time to move from passive to active investing, with individual stocks preferred over ETFs or mutuals. Expect some noisy ups and downs over the next few months, though the next major event is Brexit, with a hard-line, no-deal escape from the EU by Great Britain set for October 31 by Boris Johnson, the most recent Prime Minister of the country.

It's been more than three years since jolly ole' England voted to leave the EU. Parliamentarians and stubborn bureaucrats have delayed the wishes of the people for too long and the wait may soon be over. Anything short of England removing itself from the EU - without onerous conditions - will be very bad for markets. The hyperbole of the media and those on the "remain" side of the issue have played the hysterics card for all it's worth.

Time is up. Populism should prevail in England and the result of leaving the EU, while dramatic, does not have to be traumatic.

At the Close, Monday, September 9, 2019:
Dow Jones Industrial Average: 26,835.51, +38.05 (+0.14%)
NASDAQ: 8,087.44, -15.64 (-0.19%)
S&P 500: 2,978.43, -0.28 (-0.01%)
NYSE Composite: 12,960.72, +27.34 (+0.21%)

Tuesday, November 13, 2018

Algos Plus Momentum, Herd Behavior Equals Wipeout In Stocks

Monday came as quite a surprise for many investors, as stocks sent a strong message of dislike about something, though nobody is certain just what sparked such a massive selling spree.

For the NASDAQ, it was complete wipeout of last week's gains, minus another 160 points. The other indices were down nearly as much as they were up all of last week.

As noted in Money Daily's Weekend Wrap, technical analysis, showing divergent positions amongst the major indices, was suggesting an imminent breakout in one direction or another. It seems that the market decided to make down the dominant direction... for now.

One might expect these divergences to be resolved in short order, though markets today are guided so much by programmatic trading and headline-chasing algorithms, it's difficult to pinpoint where the breaks are actually occurring and in just what direction they are going to move.

Volatility, as persisted throughout October, appears not to have abated, more than likely the result of many diverse factors, rather than just one. The increased employment of computer algorithms, combined with the market's distinctive her behavior, manifested as "momentum," produced another of 2018's banner sessions to the downside.

The Dow's 602-point drop was the 15th biggest in market history, but also the seventh largest of 2018, a distinction that will not be lost on market observers. 2018 figures to already be the most volatile year in market history.

All that can be said going into the holiday season is to be guardedly guarded. This time does appear to be different. America is beset by warring political parties in Washington and Wall Street is unhappy, at a time in which stocks are already overvalued and due for a mean reversion.

While this one-day event was a scary sight, it almost certainly will not be the last.

Dow Jones Industrial Average November Scorecard:

Date Close Gain/Loss Cum. G/L
11/1/18 25,380.74 +264.98 +264.98
11/2/18 25,270.83 -109.91 +155.07
11/5/18 25,461.70 +190.87 +345.94
11/6/18 25,635.01 +173.31 +519.25
11/7/18 26,180.30 +545.29 +1064.54
11/8/18 26,191.22 +10.92 +1075.46
11/9/18 25,989.30 -201.92 +873.54
11/12/18 25,387.18 -602.12 +271.42

At the Close, Monday, November 12, 2018:
Dow Jones Industrial Average: 25,387.18, -602.12 (-2.32%)
NASDAQ: 7,200.87, -206.03 (-2.78%)
S&P 500: 2,726.22, -54.79 (-1.97%)
NYSE Composite: 12,343.51, -194.02 (-1.55%)

Monday, November 5, 2018

WEEKEND WRAP: As Mid-Terms Approach, Stocks Gain, Volatility Remains

As October turned to November, volatility persisted with markets gyrating wildly, even as non-farm payroll data came in ahead of expectations and the US mid-term elections (Tuesday, November 6) approached.

Things looked like they were slipping away Friday afternoon, as the Dow registered a loss of 292 points approaching 2:30 pm ET. Near the lows of the day, out of the blue, buyers appeared suddenly, boosting the Dow 198 points in three minutes from 2:26 pm to 2:29 pm ET. A move like that had to be courtesy of the PPT, or, possibly massive, coordinated central bank buying (pretty much the same thing), because all the indices leapt higher at precisely the same time.

In case you think that's fishy, consider what would have happened if the Fed and their central bank cronies had NOT done such things over the past ten years. The world would be a far different place and stocks like Apple wouldn't have the absurd valuation of nearly a trillion dollars. The market's been rigged for a long time, and it's not going to change anytime soon.

Whether or not one ascribes to conspiracy theories, the undeniable truth lies in the nearly ten years of market gains and the week past was another example of how Wall Street manages to play the numbers like Vladimir Horowitz on a Steinway grand piano.

The week began and ended with losses, bracketing three days of upside moves, the result a winning week for stocks, led by a 2.88% move on the NYSE Composite. The other indices were all higher by more than two percent. The week was the second of the last six in which stocks have ended positively.

While the moves were dramatic, only the Dow Industrials managed to close above their 200-day moving average and the 40-week moving average. The other majors remain below key levels and still appear vulnerable. The mid-term elections may trigger a knee-jerk reaction by Wall Street, though any such move is unlikely to be long-lasting. What is apparent is that some big money is moving out of stocks, as distribution has been an obvious element on any upside move. Dip-buyers may have moved markets higher this week, but every rally has been met with selling, indicating a trimming of positions.

Amid the whipsawing of stocks, bonds were selling off, with the 10-year note ending the week at 3.21 and the 30-year long bond yielding 3.46%, the highest in more than five years (June 2014).

The until story is in oil. Both Brent and WTI crude have been losing pricing power for the last six weeks, with WTI settling in the low $60s. The persistent declines and current price of $62.78/barrel is resulting in lower prices at the pump, with the US national average below $2.75/gallon, the lowest level since April of this year.

Lower oil and gas prices are usually a boost for the general economy, as consumers end up with more disposable cash after filling up their vehicles. It's also a boon for homeowners, who see lower fuel costs during heating months.

The big event this week will be Tuesday's mid-term elections. The general thinking is that if Republicans can hold the House and Senate, it will be seen as a referendum on President Trump's first two years in office. The Democrats are counting on a change in the House, with as many as 100 races in the toss-up category. A win in the House for Dems would be seen as a win, though their chances of taking control of the Senate are seen as slim. If such a scenario occurs, the result will be nothing but gridlock in Washington, which is usually a good thing for Wall Street.

Politics aside, the current conditions call for caution. There has been no sign of volatility easing, so the triple-digit daily moves on the Dow and NASDAQ are likely to continue until Thanksgiving at least.

Dow Jones Industrial Average November Scorecard:

Date Close Gain/Loss Cum. G/L
11/1/18 25,380.74 +264.98 +264.98
11/2/18 25,270.83 -109.91 +155.07

At the Close, Friday, November 2, 2018:
Dow Jones Industrial Average: 25,270.83, -109.91 (-0.43%)
NASDAQ: 7,356.99, -77.06 (-1.04%)
S&P 500: 2,723.06, -17.31 (-0.63%)
NYSE Composite: 12,321.80, -34.70 (-0.28%)

For the Week:
Dow: +582.52 (+2.36%)
NASDAQ: +189.78 (+2.65%)
S&P 500: +64.37 (+2.42%)
NYSE Composite: +344.85 (+2.88%)

Wednesday, March 21, 2018

Down, Down, Down, Up, Up, Down, Up

As the headline indicates, stocks are in an extreme state of fluctuation. The ups-and-downs in the headline indicate the direction of the Dow Jones Industrial Average for the past seven sessions.

The total point movement for those seven days is 1217.97 with the emphasis on the downside of over 600 points. The average change was 174.00, with only one day (March 16) posting a change of less than 115 points (+72.85). It is plain to see that volatility is quite high. Wednesday's rate policy decision from the FOMC should provide some idea of direction, though it is unlikely to calm markets at all.

The decision - probably a hike in the federal funds rate of 0.25% - is scheduled for Wednesday, 2:00 pm EDT with new Fed chairman Jerome Powell's first press conference at 2:30 pm EDT.

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
3/6/18 24,884.12 +9.36 -145.08
3/7/18 24,801.36 -82.76 -227.84
3/8/18 24,895.21 +93.85 -133.99
3/9/18 25,335.74 +440.53 +306.54
3/12/18 25,178.61 -157.13 +149.41
3/13/18 25,007.03, -171.58 -22.17
3/14/18 24,758.12 -248.91 -271.08
3/15/18 24,873.66 +115.54 -155.54
3/16/18 24,946.51 +72.85 -82.69
3/19/18 24,610.91 -335.60 -418.29
3/20/18 24,727.27 +116.36 -301.93

At the Close, Tuesday, March 20, 2018:
Dow Jones Industrial Average: 24,727.27, +116.36 (+0.47%)
NASDAQ: 7,364.30, +20.06 (+0.27%)
S&P 500: 2,716.94, +4.02 (+0.15%)
NYSE Composite: 12,663.64, +12.18 (+0.10%)

Friday, February 16, 2018

Rally On! Dow Regains More Than Half of February Losses

With the Dow Industrials posting the fifth straight positive session, he blue chip average has regained more than half of the losses incurred during the first six trading sessions of February.

Standing just above 25,200, the Dow has been an impressive performer following the instant, interest rate sensitive melt-down earlier in the month.

The Dow is up more than 1000 points this week, with Friday's session important as stock options reach expiration.

Last week's scare has morphed into this week's buying opportunity, as investors have scrambled back into stocks after equity funds experienced record outflows just a week prior.

Those who sold at the interim bottom may be experiencing some seller's remorse presently, though the stock market has still has some distance to travel back to all-time highs.

Has anything changed besides sentiment, which is now returning to bullishness after a spat of fear entered the minds of speculators?

Certainly, rising interest rates are a concern, with the 10-year-note reaching four-year highs. The value of the US dollar, as reflected in currency FX pairs and the Dollar Index, is another new feature of the cycle-weary market. The dollar has weakened considerably over the past 12 months and does not appear to have four support.

Higher interest rates on treasuries usually causes strengthening in the dollar, but not this time, befuddling the normally-smug bond and currency analysts. If bond yields continue to rise and the dollar does not recover substantially, then all manner of economic theory can be tossed out the proverbial window.

Whatever the case may be - not discounting the effect of accelerating volatility during the recent downturn - there remains considerable uncertainty which must somehow be resolved, either by a permanent change in market direction from bull to bear, or a continuation of the long rally off the GFC lows of 2009.

Dow Jones Industrial Average February Scorecard:

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

At the Close, Thursday, February 15, 2018:
Dow Jones Industrial Average: 25,200.37, +306.88 (+1.23%)
NASDAQ: 7,256.43, +112.81 (+1.58%)
S&P 500: 2,731.20, +32.57 (+1.21%)
NYSE Composite: 12,856.87, +110.15 (+0.86%)

Wednesday, September 7, 2016

Seriously, Nothing To See Here; Volatility Dead

It's getting more and more difficult to keep a straight face when discussing the so-called "markets," when they only react to the edicts and pronouncements from the Federal Reserve.

Maybe things are just better nowadays, with lower profits for the S&P 500 companies, but higher share prices. Something is going to give. Some day. Maybe.

Hump Day:
Dow Jones Industrial Average
18,526.14, -11.98 (-0.06%)

5,283.93, +8.02 (0.15%)

S&P 500
2,186.16, -0.32 (-0.01%)

NYSE Composite
10,890.01, -0.78 (-0.01%)

Thursday, March 10, 2016

Key Reversal As Dow Candlestick Engulfs Previous Four Sessions; ECB's Draghi To Blame

Money Daily been covering about this rally for the past two weeks but really didn't see the handwriting on the wall throughout. While saying the market would continue to rally at least until the ECB rate announcement by Mario Draghi (today), and possibly Yellen and the FOMC (on the 16th), there was no way to know when exactly it would stop or why.

But, now we all know. It was "buy the rumor, sell the news," all along. Everybody figured Draghi would go all in on QE and lowering the reserve rate (rumor) and he did (news), so, therein lies the reasons for first the pump in stocks and then the midday dump as Draghi then backtracked at his press conference, saying not to expect more over-the-top policy moves anytime soon.

Why? Draghi was giving Yellen and the Fed cover to keep rates where they are, for at least another month or meeting.

The main aspects of Draghi's "bazooka" approach are:
-- The key interest rate is dropped from 0.05% to ZERO.
-- Cut its deposit rate by 10 basis points, further into negative territory to -0.4%
-- The marginal lending rate, paid by banks to borrow from the ECB overnight, was cut from 0.3% to to 0.25%
-- Expanded the QE programme to €80bn (£61bn) a month, up from €60n
-- Expanded the LTRTO, offering more easy loans to Eurozone banks

Then we saw the usual late-day comeback, leaving US equity markets virtually unchanged, on a day that was arguably noteworthy and newsworthy. The markets, the speculators, had all of this priced in, and the gyrations were only to square their winners and losers.

This is the game. It's nothing more than a game, has no root in reality, fundamentals, supply/demand or any other tired metric of what we used to fondly call "analysis."

Markets are nothing more than tools for public entertainment and consumption. The central bankers, so long as they have the power to conjure endless amounts of fiat out of thin air, have complete control over all markets.

Finally, we are beginning to see the light at the end of the tunnel, though it appears to be just a flickering candle about to be snuffed out.

As far as technical analysis is concerned - again, giving the CNBC types and the marketeers sufficient cover - the Dow candlestick chart shows today as a key reversal day, with today's action - up, then down, then back up - engulfing the previous four sessions on the Dow. Interesting also is the pint at which the rally ended, almost exactly at the 200-day moving average. It's almost as if it was planned, though that kind of statement might brand one as a wearer of tin-foil hats and a believer in astrology or Scientology.

These kinds of "outside" reversals almost always signal a change in direction, so, outside of more malignant market manipulation, stocks should head south on Friday and continue in that general direction heading up to the FOMC meeting Tuesday and Wednesday of next week.

Upon the Fed keeping rates unchanged, it will be "mission accomplished" for the time being. multiple flavors of options expire on Friday, so expect volatility heading into the end of next week.

Then again, one could hold real assets outside the system, those being anything raised without the assistance of fiat money (think animal husbandry, vegetable gardening and barter), or the hated precious metals and/or gemstones.

In he end, people use money or currency to buy the things they need to lead free, comfortable lives. If one were to master the ability to minimize dependence on the fiat money system and maximize the ability to produce energy, food and goods, there would be little need for any kind of currency except that controlled by the actual buyers and sellers.

There, the survivalist, off-the-grid types make perfect sense.

Thursday's Round-trip Extravaganza:
S&P 500: 1,989.57, +0.31 (0.02%)
Dow: 16,995.13, -5.23 (0.03%)
NASDAQ: 4,662.16, -12.22 (0.26%)

Crude Oil 37.88 -1.07% Gold 1,271.90 +1.15% EUR/USD 1.1179 +1.64% 10-Yr Bond 1.9290 +1.96% Corn 363.00 +0.97% Copper 2.23 -0.31% Silver 15.59 +1.43% Natural Gas 1.80 +3.03% Russell 2000 1,063.99 -0.82% VIX 18.05 -1.58% BATS 1000 20,677.17 0.00% GBP/USD 1.4282 +0.49% USD/JPY 113.2420

Friday, June 21, 2013

Dead Cats Don't Bounce... Much; Stocks End Worst Week Since Obama Re-election

Hey, we're screwed.

Anybody buying stocks today must have had money to burn because the direction is definitely to the downside for the foreseeable future.

Interest rates kept creeping higher and stocks met what used to be support, now known as resistance. The S&P couldn't get past 1600 and the Dow failed repeatedly at 14,850, the previous intra-day low.

Stocks had their worst week since November 5-9, 2012, the week inclusive of the re-election for Bachus Obummer. It's not a coincidence. Thank you , thank you , thank you, Mr. Bernanke. Volume was even heavier than yesterday, likely the highest of the year. Love volatility or go home.

Watch closely the new highs vs. new lows, which have shifted to heavy overweight in new lows. This is not a drill. A bear market forecast could appear any time, since the Bull is already well past four years old.

In keeping with the spirit of hating stocks and loving arable land, tools, machinery, goldfish ponds and pre-1965 silver coins, here's Billy Preston, circa 1974 (ugh, a bad year, but check out the hair)...

Dow 14,799.40, +41.08 (0.28%)
NASDAQ 3,357.25, -7.39 (0.22%)
S&P 500 1,592.43, +4.24 (0.27%)
NYSE Composite 9,018.57, +22.60 (0.25%)
NASDAQ Volume 2,685,610,750
NYSE Volume 6,174,438,000
Combined NYSE & NASDAQ Advance - Decline: 3467-3076
Combined NYSE & NASDAQ New highs - New lows: 80-343
WTI crude oil: 93.69, -1.45
Gold: 1,292.00, +5.80
Silver: 19.96, +0.136

Thursday, August 11, 2011

Markets in Stupid Mode

Sorry, but nobody can accurately analyze four consecutive days of 400+ point moves on the Dow.

It's just not normal, but this is what we get when there are no regulators, lax controls and machines doing 90% of the trading.

The only thing one can possibly take away from this is that markets, and most traders, have no idea what to expect from day-to-day and the entire equity complex is more than likely rigged to benefit high frequency traders and the TBTF banks.

Fundamental analysis more or less died in 2008, and now we are seeing the effects of a completely broken price discovery mechanism.

It's tough to get excited about a 400-point move higher when the day before was a 500-point move to the downside. Any attempt to justify this kind of activity should be met with blank stares and an excessive amount of skepticism because, over the past four days, nothing has fundamentally changed except the price people - or machines - are willing to pay for stocks, options, ETFs and mutual funds.

Seriously, it's not even worth attempting to analyze today's movements because tomorrow's are likely to be something completely different, rendering any judgments incorrect.

Dow 11,143.31, +423.37 (3.95%)
NASDAQ 2,492.68, +111.63 (4.69%)
S&P 500 1,172.64, +51.88 (4.63%)
NYSE Composite 7,257.57, +319.34 (4.60%)

Advancers beat decliners, 5816-965. On the NASDAQ, there were five (5) new highs and 131 new lows; the NYSE saw seven (7) stocks reach new highs, but 127 make new lows. It should be of some benefit to keep a close eye on the new highs-new lows indicator. Even on a massive upside day like today, very few stocks made new highs, though an inordinate number made new lows. That's a definitely bearish trend which has remained in place throughout the market turmoil.

Volume was on the high side again, though not nearly as robust as on the days when the markets turned lower. One gets the feeling that most of the trades are very short-term, and once the money's been made, the traders will exit and go looking for fresh meat. This isn't a stock market any more. It's close to being a casino, though that would give casinos a bad name.

NASDAQ Volume 3,091,521,750
NYSE Volume 7,798,956,500

Oil priced higher again, gaining $2.83, to close the NYMEX session at $85.72. Would it surprise anyone to see oil back above $90 shortly, with no change at all in prices for gasoline at the pump? It's all part of the elitists' plan to destroy the middle class.

Gold was slapped down after the CME announced it would raise margin requirements by 22%, losing $32.80, to $1,751.50. Silver nose-dived 66 cents, to $38.67.

A couple of things are for certain. The powers that be don't like gold and silver rising in price and the general direction of the market is down. We're still in correction territory, down more than 10% on the major indices, and these powerful rallies are fueled, in part, by short covering, the machine-driven trading and the allocations required by ETFs, one of the worst financial innovations of the last fifty years.

If ETFs are going to continue to be part of the market, they need to be excluded from making up part of the averages. In other words, spill them out into their own exchange, which would eliminate a lot of the volatility in markets today.

Of course, that will never happen.

Thank goodness tomorrow is Friday.

Friday, October 30, 2009

Volatility Returns to End Wild Week

If you're looking for direction in this market, you're not alone. Following a week in which triple-digit moves on the Dow Jones Industrials were the norm, with the other indices more or less in concert, investors are scratching their heads, backs, bottoms and anything else nearby in almost total confusion.

The Dow was down more than 100 points three days, culminating in the biggest move of the week on Friday (-249.85), and up nearly 200 points on just one day - Thursday - after the government announced the preliminary reading on 3rd quarter GDP at a positive 3.5%. Only Tuesday was tame, with the index up a mere 14 points.

For the week, the Dow lost 260 points, one of the larger weekly declines of the year, but shallow by percentage comparison, at 2.8%. The NASDAQ gave back 109 points, and was the worst performer on a percentage basis, with a loss of 5% for the five days just ended. 43 points were disgorged from the S&P 500, a 4.5% decline. The NYSE Composite was down 327 points, nearly matching the NASDAQ with a 4.7% drop.

The main catalyst for the wild swings in the market seem to have been two-fold. First, the date, October 30, marking the last trading day of the month, also was the final reporting day for many mutual funds, so profits were being locked in with wholesale selling of weak hands. Second, the dollar was very strong against the Euro in particular, and whenever that set-up has been present, stocks have been whacked. The entire rally from March through today has been fueled by a declining dollar, making commodities and US equities more attractive.

Dow 9,712.73, -249.85 (2.51%)
Nasdaq 2,045.11, -52.44 (2.50%)
S&P 500 1,036.18, -29.93 (2.81%)
NYSE Composite 6,739.45, -215.86 (3.10%)

Losers overwhelmed gainers, 5359-1162 (nearly 5-1), and underscoring the lack of direction, new lows scored over new lows by the narrow margin of 3, 89-86. Volume was again above the norm, though reading too much into the volume scenario may be risky. Both of the big down days - Wednesday and Friday - saw increased volume, though it bears notice that Wednesday was the day before the much-feared 3rd quarter GDP report, and Friday, as mentioned above, was the end of the year for many funds. Thus, these outliers may have overtly influenced the general direction and volume of trade.

NYSE Volume 7,883,697,500
Nasdaq Volume 2,512,938,000

As expected with the strong dollar scenario, commodity prices could not be maintained. Oil was slammed the hardest, it being the de facto favorite of the speculative groups, losing $2.87, to $77.00. Gold dipped $6.70, to finish the week at $1,040.40, while silver shed 40 cents, to close at $16.26.

Whether or not the closing figures are some kind of pivot point upon which one can trade one way or another is a matter for the chartists. The NASDAQ made an intra-day double-bottom at 1040, last touched on October 2, at the start of a brisk rally. The Dow is sitting right on its 50-day moving average, while the S&P has crossed over its 50-day MA three times in the last three sessions, is above support at 1019, but broke below the previous support line at 1039 on Friday.

It's a pivot point all right, the question is still which way?

The answer to that is probably more psychological than technical. Traditionally, a strong dollar was good for stocks, though in this situation, the liquidity trade is working the other way. At some point, the leadership of banks, materials and technology will have to give way, though technology will probably still stand up better through whatever short term condition is presented. Longer term, the dollar will decline, but as the Fed hints at raising rates - and then actually does - a change in attitude must attend if stocks are to continue to advance.

There is almost certainly going to be a period of pause, and we are likely in the middle of that right now. Another 4-7% decline on the major indices should be forthcoming while the market sorts out what to do with the absence of easy money. If there is no solution, stocks will continue to decline, at least until people think they're really cheap enough.

Much has been made of the huge amount of cash still sitting out the dance, and this may present those wallflowers with ample opportunity to put some of their money to work. Not a wholesale dive in, but at least sticking a toe in the water would suffice. That could spark another rally before the end of they year, but there's also a very good chance that the highs for 2009 have already been met.

Therefore, heading into next week, pay particular attention to the dollar, financials and basic materials or commodities, and be on the lookout for a divergence from the established trend. If the dollar is higher and stocks do not sell off, look for new leadership in the other sectors. If the dollar trades lower, expect the same trade, which does nobody any good, since we've already determined that it is flawed. A weak dollar cannot support a true recovery.

Best case scenario is another drift lower, or, maybe a swift downdraft for another week before volatility settles down. It doesn't mean that one should stop trading, only that one needs to buy protection and remain nimble.