Once again, US equity markets showed incredible resiliency, closing with tiny losses in the face of dour economic news and a sputtering trading regimen.
With options expiration just two days away, stocks skidded close to support levels, but by the end of the day had recovered most of the lost ground and finished with modest losses.
The biggest news of the day was threefold: Warren Buffett and Goldman Sachs announced a $500 million initiative for lending to small businesses; American Express (AXP) Announced the purchase of AOL founder Ted Case's Revolution Money, a PayPal competitor; and October housing starts fell 10.6% from September and 30.6% from a year ago.
All of that news hit the street before the opening bell, the slack housing data contributing to an overall slide right out of the gate.
Dow 10,426.31, -11.11 (0.11%)
NASDAQ 2,193.14, -10.64 (0.48%)
S&P 500 1,109.80, -0.52 (0.05%)
NYSE Composite 7,226.71, -7.35 (0.10%)
By the end of the day, however, stocks stood just below where they had at the end of Monday. For the full session, declining issues beat advancers, 3716-2726. New highs beat new lows, 324-67. Volume was, as has been the case since Spring, weak.
NYSE Volume 4,902,849,500
NASDAQ Volume 1,951,870,250
Oil finished higher, up 44 cents, at $79.58. Gold rose $1.90, to $1,141.30, but was up over $1,151.00, a new record. Silver continued to ascend, up just 3 cents, to $18.42.
Trades will continue to be pushed along by the usual suspects: the US Dollar and options expiration, though the latter may not have much impact after mid-day tomorrow.
Wednesday, November 18, 2009
Tuesday, November 17, 2009
Logic-Defying Market Clambers Over Dollar, Data, Higher
The dollar was stronger against the Euro and the Pound.
Didn't matter.
Capacity Utilization was flat. Retailers warned of softer holiday season. The Fed was out jawboning about the dollar, bubbles and overpriced markets. More stocks closed lower than higher.
Didn't matter.
Industrial production was lower than expected and the PPI was also up less than anticipated.
None of this mattered to a market that only knows one direction presently. Up. Up. And up some more.
All of the major indices, except the NYSE Composite, closed at new 13-month highs on the day. The moves were made despite Home Depot (HD) and retailer Target (TGT) reporting earnings, warning about a slow holiday season and finishing lower. It's a market right out of a bad horror flick, that refuses to obey, refuses to die. It's the Energizer Bunny in disguise. It keeps going and going and going. There's hardly any reason to report on it, except to tell that it's up once again, or to analyze it, because any technical or fundamental analysis will be proven wrong within a session of two. It's not that one should be upset that stocks are going up, rather, to the contrary. It's just that one would like to see some rationale for the movement.
Dow 10,437.42, +30.46 (0.29%)
NASDAQ 2,203.78, +5.93 (0.27%)
S&P 500 1,110.31, +1.01 (0.09%)
NYSE Composite 7,234.06, -3.04 (0.04%)
Losers beat winners, 3502-2921. New highs were ahead of new lows, 378-72. There was no volume of which to speak. It was the weakest day, volume-wise, in the last two weeks.
NYSE Volume 4,423,809,500
NASDAQ Volume 1,837,747,125
Commodities, despite the dollar stronger against most foreign currencies, mostly finished with gains. Oil closed up 24 cents, to $79.14. Gold finished unchanged at $1,139.20, while silver slid 3 cents to $18.37.
Most of the trade today, as it likely will tomorrow, had more to do with options expiration than anything else. Anything that could have moved the market would have moved it lower. Obviously, nobody was paying any attention to the normal forces at play. This market is about as tricky to play as any ever seen. Many, who have made their money in the earlier run-up, are already out, which may be the best idea of all.
Didn't matter.
Capacity Utilization was flat. Retailers warned of softer holiday season. The Fed was out jawboning about the dollar, bubbles and overpriced markets. More stocks closed lower than higher.
Didn't matter.
Industrial production was lower than expected and the PPI was also up less than anticipated.
None of this mattered to a market that only knows one direction presently. Up. Up. And up some more.
All of the major indices, except the NYSE Composite, closed at new 13-month highs on the day. The moves were made despite Home Depot (HD) and retailer Target (TGT) reporting earnings, warning about a slow holiday season and finishing lower. It's a market right out of a bad horror flick, that refuses to obey, refuses to die. It's the Energizer Bunny in disguise. It keeps going and going and going. There's hardly any reason to report on it, except to tell that it's up once again, or to analyze it, because any technical or fundamental analysis will be proven wrong within a session of two. It's not that one should be upset that stocks are going up, rather, to the contrary. It's just that one would like to see some rationale for the movement.
Dow 10,437.42, +30.46 (0.29%)
NASDAQ 2,203.78, +5.93 (0.27%)
S&P 500 1,110.31, +1.01 (0.09%)
NYSE Composite 7,234.06, -3.04 (0.04%)
Losers beat winners, 3502-2921. New highs were ahead of new lows, 378-72. There was no volume of which to speak. It was the weakest day, volume-wise, in the last two weeks.
NYSE Volume 4,423,809,500
NASDAQ Volume 1,837,747,125
Commodities, despite the dollar stronger against most foreign currencies, mostly finished with gains. Oil closed up 24 cents, to $79.14. Gold finished unchanged at $1,139.20, while silver slid 3 cents to $18.37.
Most of the trade today, as it likely will tomorrow, had more to do with options expiration than anything else. Anything that could have moved the market would have moved it lower. Obviously, nobody was paying any attention to the normal forces at play. This market is about as tricky to play as any ever seen. Many, who have made their money in the earlier run-up, are already out, which may be the best idea of all.
Monday, November 16, 2009
All Major Indices At YTD Highs
Each of the major indices - the Dow Jones Industrials, Dow Jones Transports, S&P 500, NASDAQ and NYSE Composite closed today at highs for the year. For all of the indices, these are new 52-week highs as well, as the markets continue to recover from the financial meltdown of last fall.
Of particular interest to traders were the gains on the S&P and Dow Jones Transports - especially the latter, which confirmed new highs on the Industrials, to the delight of the Dow theorists. The S&P closed above the magical 1100 mark, which for many has been viewed as an impenetrable line of resistance. The S&P had failed in three prior attempts to close above that figure.
Stocks were once again buoyed by what's become known as the "risk trade", playing the weak dollar, which works in inverse relationship to stocks. The buck was bashed again; stocks flew. It's that simple.
There were a couple of hiccups which were worth noting. Around 12:00 noon, when Fed Chairman Ben Bernanke's remarks to the Economic Club of New York were released, stocks took a bit of a nosedive on the chairman's comment that the Fed had tools available to promote the US dollar, and again, right after 3:00 pm, when Meredith Whitney announced on CNBC hat she hasn't been "this bearish in a year," and viewed stocks as overvalued, with prices unrelated to fundamentals. Both times the markets dipped, then quickly recovered, but it may be notable that the indices did close off their highs for the day, with some serious tape-painting occurring at right before the final bell. In the case of the DJ Transports, the index finished the day at 1046.50, just a point above the previous high (October 20, 4055.11), hardly a ringing endorsement.
While nobody can deny anything the Fed chairman said, nor, for that matter, Whitney's views on the market, the trade is still based on a fundamentally flawed equation: that of a cheaper dollar making stocks worth more. The disconnect between a cheaper dollar and rising stocks is alarming because, while the lower dollar makes US exports more affordable overseas, it also has the relative effect of higher import prices which will no doubt negatively affect a working population that continues to see its standard of living in decline - again, one of the effects of the drooping dollar.
So, it's entirely possible that the Fed can be right, meredith Whitney can be right, but stocks will continue to go higher regardless, all due to the inverse US dollar - US equities trade.
With a number of key economic reports due out tomorrow before the opening bell, including PPI, TIC outflows and capacity utilization, trader's hope is that the numbers are overall negative toward the US economy, because that would once again slam the greenback and make stocks move higher. It's one of the most perverse trades ever seen, though after the financial implosion of 2008 and the Madoff rip-off, anything that works is simply tolerated and played until it no longer works.
Dow 10,406.96, +136.49 (1.33%)
NASDAQ 2,197.85, +29.97 (1.38%)
S&P 500 1,109.30, +15.82 (1.45%)
NYSE Composite 7,237.10, +117.21 (1.65%
Advancing issues, as expected, far outdistanced decliners, 5156-1410. New highs pounded new lows, 688-96. Volume, however, was again on the anemic side.
NYSE Volume 5,300,401,500
NASDAQ Volume 2,050,422,375
Commodities also took advantage of the weaker greenback. Oil gained $2.55, to $78.90. Gold shot to new records, up $22.70, to $1,139.40, and silver finally took off, adding $1.03, to $18.41, a record close for 2009.
Of particular interest to traders were the gains on the S&P and Dow Jones Transports - especially the latter, which confirmed new highs on the Industrials, to the delight of the Dow theorists. The S&P closed above the magical 1100 mark, which for many has been viewed as an impenetrable line of resistance. The S&P had failed in three prior attempts to close above that figure.
Stocks were once again buoyed by what's become known as the "risk trade", playing the weak dollar, which works in inverse relationship to stocks. The buck was bashed again; stocks flew. It's that simple.
There were a couple of hiccups which were worth noting. Around 12:00 noon, when Fed Chairman Ben Bernanke's remarks to the Economic Club of New York were released, stocks took a bit of a nosedive on the chairman's comment that the Fed had tools available to promote the US dollar, and again, right after 3:00 pm, when Meredith Whitney announced on CNBC hat she hasn't been "this bearish in a year," and viewed stocks as overvalued, with prices unrelated to fundamentals. Both times the markets dipped, then quickly recovered, but it may be notable that the indices did close off their highs for the day, with some serious tape-painting occurring at right before the final bell. In the case of the DJ Transports, the index finished the day at 1046.50, just a point above the previous high (October 20, 4055.11), hardly a ringing endorsement.
While nobody can deny anything the Fed chairman said, nor, for that matter, Whitney's views on the market, the trade is still based on a fundamentally flawed equation: that of a cheaper dollar making stocks worth more. The disconnect between a cheaper dollar and rising stocks is alarming because, while the lower dollar makes US exports more affordable overseas, it also has the relative effect of higher import prices which will no doubt negatively affect a working population that continues to see its standard of living in decline - again, one of the effects of the drooping dollar.
So, it's entirely possible that the Fed can be right, meredith Whitney can be right, but stocks will continue to go higher regardless, all due to the inverse US dollar - US equities trade.
With a number of key economic reports due out tomorrow before the opening bell, including PPI, TIC outflows and capacity utilization, trader's hope is that the numbers are overall negative toward the US economy, because that would once again slam the greenback and make stocks move higher. It's one of the most perverse trades ever seen, though after the financial implosion of 2008 and the Madoff rip-off, anything that works is simply tolerated and played until it no longer works.
Dow 10,406.96, +136.49 (1.33%)
NASDAQ 2,197.85, +29.97 (1.38%)
S&P 500 1,109.30, +15.82 (1.45%)
NYSE Composite 7,237.10, +117.21 (1.65%
Advancing issues, as expected, far outdistanced decliners, 5156-1410. New highs pounded new lows, 688-96. Volume, however, was again on the anemic side.
NYSE Volume 5,300,401,500
NASDAQ Volume 2,050,422,375
Commodities also took advantage of the weaker greenback. Oil gained $2.55, to $78.90. Gold shot to new records, up $22.70, to $1,139.40, and silver finally took off, adding $1.03, to $18.41, a record close for 2009.
Friday, November 13, 2009
Inverse US Dollar, US Stocks Relationship Continues to Boost Stocks
Once again, the inverse relationship between the US Dollar and US equity markets trumped all other trading strategies and boosted stocks on the final day fo trading for the week.
To get an understanding of how perverse and destructive this relationship has become, consider the trading action this morning, when the university of Michigan released consumer sentiment data for October. The reading, released at 9:55 am ET, fell from 70.6 in October to 66.0 in November. As the numbers hit the street the Dow Jones Industrials fell from a gain of 40 points to slightly into the negative, which would be considered a rational market reaction. However, when the forex traders got hold of the data, viewed as negative for the US economy, they immediately began to sell US Dollars into other currencies, sending the Dollar Index lower.
Faced with the prospect of virtually free money, traders poured into US stocks, turning the indices completely around in a matter of minutes. Within the hour, the Dow was up more than 80 points, with the other indices following suit. As the US Dollar continued to weaken throughout the day against other currencies, stocks held or improved gains overall in a liquidity-driven advance that had nothing at all to do with fundamentals, economic conditions or technical indications.
This is the trade that has produced the 8-month-long rally, as the Fed cut rates to zero and instituted policies that promote liquidity and risk, the very same elements which caused the near-collapse of worldwide financial systems last fall. In the long run, the inverse relationship is destructive to America's best interests, but in the short term, Wall Street is enjoying one of the greatest rallies of all time.
Dow 10,270.47, +73.00 (0.72%)
NASDAQ 2,167.88, +18.86 (0.88%)
S&P 500 1,093.48, +6.24 (0.57%)
NYSE Composite 7,119.89, +56.84 (0.80%)
On the day, advancing issues beat decliners by a healthy margin, 4005-1804, but new highs did not expand their edge over new lows, with the reading of 215-75. Volume was ridiculously low, about what one would expect from a 1/2 session in a normal market, further impressing the idea that the rally, based almost entirely on liquidity, is at its end, unsustainable.
NYSE Volume 3,936,243,500
NASDAQ Volume 1,840,433,000
Naturally, the weaker US Dollar helped commodities, though oil could not muster anything but to turn a large decline into a smaller one by day's end, dropping 59 cents, to $76.35, mostly on slack demand. Gold ramped up again, adding $10.20, to end the week at $1,116.80. Silver continued to lag behind its shiny cousin, gaining only 13 cents, to $17.39.
Next week will offer more earnings results from a variety of retailers, though economic reports are likely to dominate the financial news, with readings on retail sales, capacity utilization, PPI, CPI, housing starts and leading economic indicators among the data that will flow to investors.
To get an understanding of how perverse and destructive this relationship has become, consider the trading action this morning, when the university of Michigan released consumer sentiment data for October. The reading, released at 9:55 am ET, fell from 70.6 in October to 66.0 in November. As the numbers hit the street the Dow Jones Industrials fell from a gain of 40 points to slightly into the negative, which would be considered a rational market reaction. However, when the forex traders got hold of the data, viewed as negative for the US economy, they immediately began to sell US Dollars into other currencies, sending the Dollar Index lower.
Faced with the prospect of virtually free money, traders poured into US stocks, turning the indices completely around in a matter of minutes. Within the hour, the Dow was up more than 80 points, with the other indices following suit. As the US Dollar continued to weaken throughout the day against other currencies, stocks held or improved gains overall in a liquidity-driven advance that had nothing at all to do with fundamentals, economic conditions or technical indications.
This is the trade that has produced the 8-month-long rally, as the Fed cut rates to zero and instituted policies that promote liquidity and risk, the very same elements which caused the near-collapse of worldwide financial systems last fall. In the long run, the inverse relationship is destructive to America's best interests, but in the short term, Wall Street is enjoying one of the greatest rallies of all time.
Dow 10,270.47, +73.00 (0.72%)
NASDAQ 2,167.88, +18.86 (0.88%)
S&P 500 1,093.48, +6.24 (0.57%)
NYSE Composite 7,119.89, +56.84 (0.80%)
On the day, advancing issues beat decliners by a healthy margin, 4005-1804, but new highs did not expand their edge over new lows, with the reading of 215-75. Volume was ridiculously low, about what one would expect from a 1/2 session in a normal market, further impressing the idea that the rally, based almost entirely on liquidity, is at its end, unsustainable.
NYSE Volume 3,936,243,500
NASDAQ Volume 1,840,433,000
Naturally, the weaker US Dollar helped commodities, though oil could not muster anything but to turn a large decline into a smaller one by day's end, dropping 59 cents, to $76.35, mostly on slack demand. Gold ramped up again, adding $10.20, to end the week at $1,116.80. Silver continued to lag behind its shiny cousin, gaining only 13 cents, to $17.39.
Next week will offer more earnings results from a variety of retailers, though economic reports are likely to dominate the financial news, with readings on retail sales, capacity utilization, PPI, CPI, housing starts and leading economic indicators among the data that will flow to investors.
Thursday, November 12, 2009
S&P Confirmation Not Enough; Markets Trumped by Strong Dollar
As much as one would like to believe Tim Geithner's commitment to a strong dollar policy, skepticism will remain high until there's actual action behind his words. In the absence of official US action to strengthen the greenback, finance officials of other nations have apparently taken action over the past few days, boosting the dollar from a low of 74.8 on Wednesday morning to a high of 75.76 just before 4:00 pm ET today.
Continued weakness in the US dollar has been causing all manner of market distortions, especially in commodity and US equity markets. The trade over the past 6 months has been an easy inverse relationship between the dollar and US equities. Cheaper dollars made stocks cheaper to purchase, fueling a powerful rally in stocks. However, the relationship is eventually unsustainable, though breaking the vexing inverse trade will take more of the kind of quiet intervention witnessed today.
Leading the charge was the Euro, which fell sharply against the US dollar. It's almost a European mandate, as the high Euro is making European products more costly, thus, less competitive in world markets. There seems to be a concerted effort to strengthen the dollar - despite the subdued protestations by US officials and stock traders - at the expense of the Euro, the target level appearing to be somewhere above 76 on the dollar index. The target would appear to be somewhere below 1.45 Euros to the US Dollar, which will take some doing, as the Euro currently trades at 1.4842 to 1 US Dollar. The result will be a more competitive environment for European products and a moderation in the prices of US stocks.
Eventually, the weak dollar trade must be unwound because it is entirely wrong for the US. It's akin to selling the same products at lower and lower prices in each business cycle in a fire sale environment. The US standard of living would continue to fall as the currency is debased. As much as the Fed and Treasury are attempting such a debasement - with grand success thus far - our trading partners are not happy with the arrangement. While the eventuality of a debased US currency may be a fait acompli, current movement in the forex markets are forestalling the event as much as possible.
As the dollar gained strength today, stocks fell, cutting short the nascent rally which began last week. Markets once again seem to have topped out temporarily, and it may actually be time for a serious reversal, much of which will have little to do with fundamental valuations and more to do with technical levels driven by the dollar trade.
Confirmation of the new Dow Industrial highs, which were narrowly confirmed by the S&P yesterday, weren't enough to stop stocks from skidding lower. The Dow Transports fell sharply in non-confirmation, setting the stage for more downside in stocks.
Dow 10,197.47, -93.79 (0.91%)
NASDAQ 2,149.02, -17.88 (0.83%)
S&P 500 1,087.24, -11.27 (1.03%)
NYSE Composite 7,063.05, -92.31 (1.29%)
declining issues danced all over advancers on the day, 4558-1285, or about 5:2. There were 273 new highs to 86 new lows, a margin significantly narrower than yesterday's. Volume remained tepid.
NYSE Volume 4,341,626,500
NASDAQ Volume 2,219,716,750
Commodities were slammed by the dollar rise. Crude oil fell $2.34, to $76.94, with more downside indicated, as warm weather in the US Northeast and slack demand helped push down prices for all energy products. Gold was off $8.00, to $1,106.50, with silver falling 28 cents, back to $17.27.
The deflation trade reared its head once again, and it probably won't be the last time.
Continued weakness in the US dollar has been causing all manner of market distortions, especially in commodity and US equity markets. The trade over the past 6 months has been an easy inverse relationship between the dollar and US equities. Cheaper dollars made stocks cheaper to purchase, fueling a powerful rally in stocks. However, the relationship is eventually unsustainable, though breaking the vexing inverse trade will take more of the kind of quiet intervention witnessed today.
Leading the charge was the Euro, which fell sharply against the US dollar. It's almost a European mandate, as the high Euro is making European products more costly, thus, less competitive in world markets. There seems to be a concerted effort to strengthen the dollar - despite the subdued protestations by US officials and stock traders - at the expense of the Euro, the target level appearing to be somewhere above 76 on the dollar index. The target would appear to be somewhere below 1.45 Euros to the US Dollar, which will take some doing, as the Euro currently trades at 1.4842 to 1 US Dollar. The result will be a more competitive environment for European products and a moderation in the prices of US stocks.
Eventually, the weak dollar trade must be unwound because it is entirely wrong for the US. It's akin to selling the same products at lower and lower prices in each business cycle in a fire sale environment. The US standard of living would continue to fall as the currency is debased. As much as the Fed and Treasury are attempting such a debasement - with grand success thus far - our trading partners are not happy with the arrangement. While the eventuality of a debased US currency may be a fait acompli, current movement in the forex markets are forestalling the event as much as possible.
As the dollar gained strength today, stocks fell, cutting short the nascent rally which began last week. Markets once again seem to have topped out temporarily, and it may actually be time for a serious reversal, much of which will have little to do with fundamental valuations and more to do with technical levels driven by the dollar trade.
Confirmation of the new Dow Industrial highs, which were narrowly confirmed by the S&P yesterday, weren't enough to stop stocks from skidding lower. The Dow Transports fell sharply in non-confirmation, setting the stage for more downside in stocks.
Dow 10,197.47, -93.79 (0.91%)
NASDAQ 2,149.02, -17.88 (0.83%)
S&P 500 1,087.24, -11.27 (1.03%)
NYSE Composite 7,063.05, -92.31 (1.29%)
declining issues danced all over advancers on the day, 4558-1285, or about 5:2. There were 273 new highs to 86 new lows, a margin significantly narrower than yesterday's. Volume remained tepid.
NYSE Volume 4,341,626,500
NASDAQ Volume 2,219,716,750
Commodities were slammed by the dollar rise. Crude oil fell $2.34, to $76.94, with more downside indicated, as warm weather in the US Northeast and slack demand helped push down prices for all energy products. Gold was off $8.00, to $1,106.50, with silver falling 28 cents, back to $17.27.
The deflation trade reared its head once again, and it probably won't be the last time.
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