If you understand anything about Socionomics, the widely-misunderstood study of people and markets which has Elliott Wave principles at its roots, you'd understand that the current, prolonged rally is nothing more than part of a corrective phase.
For Dow Theorists, the rally represents a bull move inside of of a secular bear market, or primary trend.
Either of those theories would be sufficient to explain away the outstanding gains of the past 13 months, but, it appears to be getting long in the tooth (though I've been saying that since January, so I'll take my forty lashes now, thank you), especially as 1st quarter earnings season approaches forthwith.
Much of the earnings expectations for stocks has already been "baked into the cake," so to speak, and, if that's the case, both the Dow Theorists and Elliott Wavers will be proven right over the next three weeks. However, nobody knows the future and nobody has yet invented a fool-proof predictive tool for markets, so we look upon this week's and todays gains as something of a marvel of modern media. Either that or there's a serious short squeeze going on out there.
For the second straight session, stocks have started slowly and gained momentum, finishing at or near their highs, usually a solid sign for the bulls, but today's reversion to low volume puts a less-optimistic spin on the day's trading.
Dow 10,997.35, +70.28 (0.64%)
NASDAQ 2,454.05, +17.24 (0.71%)
S&P 500 1,194.37, +7.94 (0.67%)
NYSE Composite 7,628.99, +63.66 (0.84%)
Advancing issues out-muscled decliners, 4028-2392; new highs jumped again, to 686; new lows were up as well, but only to 61. Volume fell back into its dull habits. Once again, stocks are being driven higher by speculation, not fundamentals, and, even though social mood may be improving, the overall dynamics of the global economy remain challenging. Greece comes to mind, as does California and New York states.
NYSE Volume 4,972,624,000
NASDAQ Volume 2,056,057,875
Commodities were mixed once more, with oil down for the third straight day, off 49 cents, to $84.92, though gold was higher by $8.90, to $1,161.10 and silver picked up 22 cents, to finish the week at $18.34. Gold is at a 3-month high, while silver has made its thrid foray above the $18 mark since November. It has not been able to continue rallies past the $18.25-18.55 range.
What this all means for stocks, money and your personal economy depends entirely on your allocation and how long you intend to remain invested. Cash appears to be less of a choice right now, which is as good a reason as any to build cash reserves. when nobody else is doing it, it's usually the perfect time.
In the coming weeks, we'll determine how prescient that idea is.
Friday, April 9, 2010
Thursday, April 8, 2010
Unemployment, Retail Offer Mixed Picture
Stocks opened the day to the downside, nervous about the persistently high level of unemployment claims. Initial claim came in this morning at 460,000, about 25,000 more than had been expected. They've been in that mid-400,000 range for months and don't seem to be changing much. Continuing claims were down by 131,000, which somewhat tempered the pessimism.
Once stocks began trading, however, everybody became a buyer in what turned into a day-long rally, ending on the upside for all of the major indices. Retail sales figures for March were generally superior, though they did happen to include the week prior to Easter, which fell in April last year, skewing comparisons for same-store sales throughout the industry.
Again, they proved good enough to entice investors to buy, or at least not run screaming from them. Most of the economic data of late has been mixed, except for housing and unemployment, which remain seminally ugly.
Dow 10,927.07, +29.55 (0.27%)
NASDAQ 2,436.81, +5.65 (0.23%)
S&P 500 1,186.43, +3.99 (0.34%)
NYSE Composite 7,565.33, +19.15 (0.25%)
Advancers took back the edge from decliners, 3396-3016. New highs are beginning to come back to earth, only 398 of them today, as opposed to 27 new lows. Volume was better than normal, though still below 2003-07 levels.
NYSE Volume 5,246,828,500
NASDAQ Volume 2,342,815,500
Oil trended lower for the second straight day, losing 49 cents, to $85.39. Gold dipped 10 cents, to $1,152.20 and silver fell 7 cents, to $18.12. The day in commodities lacked clear direction.
More attention was being paid to Tiger Woods' return to golf at the Masters than the prices of stocks today. Between that distraction and generally nice weather, it's surprising anybody even shows up to trade on the Street these days.
Once stocks began trading, however, everybody became a buyer in what turned into a day-long rally, ending on the upside for all of the major indices. Retail sales figures for March were generally superior, though they did happen to include the week prior to Easter, which fell in April last year, skewing comparisons for same-store sales throughout the industry.
Again, they proved good enough to entice investors to buy, or at least not run screaming from them. Most of the economic data of late has been mixed, except for housing and unemployment, which remain seminally ugly.
Dow 10,927.07, +29.55 (0.27%)
NASDAQ 2,436.81, +5.65 (0.23%)
S&P 500 1,186.43, +3.99 (0.34%)
NYSE Composite 7,565.33, +19.15 (0.25%)
Advancers took back the edge from decliners, 3396-3016. New highs are beginning to come back to earth, only 398 of them today, as opposed to 27 new lows. Volume was better than normal, though still below 2003-07 levels.
NYSE Volume 5,246,828,500
NASDAQ Volume 2,342,815,500
Oil trended lower for the second straight day, losing 49 cents, to $85.39. Gold dipped 10 cents, to $1,152.20 and silver fell 7 cents, to $18.12. The day in commodities lacked clear direction.
More attention was being paid to Tiger Woods' return to golf at the Masters than the prices of stocks today. Between that distraction and generally nice weather, it's surprising anybody even shows up to trade on the Street these days.
Wednesday, April 7, 2010
Savvy Consumers Shun Credit; Markets React Poorly
There truly is a disconnect between Wall Street and Main Street. The pinstriped crowd looks at the world through some-colored glasses, and while we're not sure whether they're rose or some other shade, their view of the world is certainly clouded by dollar signs, at the least. Their vision is that of an amorphous blob, a mass of numbers and data points and signals, charts and vector graphs all pointing in one orderly direction: toward their commission check. It is difficult for the average Wall Streeter to comprehend how people could miss a payment, budget and save, or go without something they desire.
Main Street's view is much more realistic. People are paid - and taxed - according to their worth, for the most part. You produce or you go home. You work or you become part of the underclass. Most Main Street Americans - businesspeople and consumers alike - comparison shop, love a good bargain and are generally (as compared to their Wall Street counterparts) frugal. They try to make ends meet, keep their places of employment and their homes clean and operable and they do most of these manual chores themselves. They understand just how much a dollar can buy and how many dollars they need to get through the week and the month. They have real needs and many of them are just a paycheck or three away from despair, if not already there.
These differences were never more noticeable than this afternoon, when the Federal Reserve announced that consumer credit outstanding declined at an annual rate of 5.6%, seasonally adjusted, down $11.5 billion, to $2.448 trillion in Febraury.
Wall Street's reaction to Main Street's frugality? You guessed it: fear and near-panic. Consumers not spending like drunken sailors is anathema to Wall Street. And not using credit is regarded as almost other-worldly. Wall Street just cannot get it through their heads that the rest of the world doesn't drive a Bentley, wear $2000 suits and fly to Curacao for weekends. Thus, when evidence like today's consumer credit condition - in decline 16 of the past 17 months - the investor class runs scared.
Sooner or later, they're also going to find out that many people can't afford the homes they're living in, and when that reality strikes home, it will make today's little scurry to the downside look like a walk in the park.
To illustrate just how much a drag on the US economy housing really is, this post and these graphs point out how far above historical levels housing prices galloped in the 2000s and just how poor the government's attempts to "stimulate" the market have been.
Since that's a story for another day, suffice it to say that Wall Street took a hit from the old reality pie straight in the kisser this afternoon. Following an exceptionally-well-received 10-year Treasury auction (another condition the "experts" had completely wrong), stocks were basically treading water until just before 3:00 pm, when the consumer credit news hit.
The Dow was off 124 points at the worst level, having earlier recovered lost ground after the $21 billion, 10-year Treasury auction which witnessed a 3.72 bid-to-cover ratio (far above the recent average of 2.87) and a solid 3.90% yield rate, which pushed 10-year yields further down, to 3.86%, by day's end. Yesterday, I wrote about fears of the 10-year heading North of 4% and why it isn't going to happen. Today we saw what was true. Indirect bidders (foreign central banks) accounted for 42% of the total, suggesting that maybe some people like US Treasuries at under 4% more than Greek's at around 7%.
Sure the Greek bonds offer more bang for the buck, but, then again, their economy might just blow up, too. Risk-avoidance is "in" once again.
Dow 10,897.52, -72.47 (0.66%)
NASDAQ 2,431.16, -5.65 (0.23%)
S&P 500 1,182.44, -6.99 (0.59%)
NYSE Composite 7,546.18, -58.26 (0.77%)
For a change, declining issues outpaced gainers, 3928-2577; new highs remained high at 600, compared to just 48 new lows. The most significant numbers were the volume readings, however, which evidenced a noticeable spike in trading activity. From a technical perspective, after days of low volume gains, a high-volume decline is a harbinger of doom and a sign that a corrective phase could soon be upon the markets. Almost everybody knew that stocks were overbought heading into earnings season and these upcoming 2-3 weeks could be damaging to sentiment long term.
NYSE Volume 5,700,141,000
NASDAQ Volume 2,872,620,250
The commodity market seemed uniformly confused by the day's data. Crude oil took a bit of a breather, losing 96 cents, to $85.88, but gold galloped ahead $17.20, to $1,152.30 and silver pushed higher by 27 cents, to $18.18, close to 52-wee highs. The metals moves make no sense at all in what can only be described as a deflationary environment, unless there was a rampant short squeeze, which many suspect this was. The metal may be giving an extended head-fake or be reacting to the credit numbers in a flight to safety.
Either way, the US is far from being clear of the crisis. Wall Street may be just beginning to find out what Main Street already knows.
Main Street's view is much more realistic. People are paid - and taxed - according to their worth, for the most part. You produce or you go home. You work or you become part of the underclass. Most Main Street Americans - businesspeople and consumers alike - comparison shop, love a good bargain and are generally (as compared to their Wall Street counterparts) frugal. They try to make ends meet, keep their places of employment and their homes clean and operable and they do most of these manual chores themselves. They understand just how much a dollar can buy and how many dollars they need to get through the week and the month. They have real needs and many of them are just a paycheck or three away from despair, if not already there.
These differences were never more noticeable than this afternoon, when the Federal Reserve announced that consumer credit outstanding declined at an annual rate of 5.6%, seasonally adjusted, down $11.5 billion, to $2.448 trillion in Febraury.
Wall Street's reaction to Main Street's frugality? You guessed it: fear and near-panic. Consumers not spending like drunken sailors is anathema to Wall Street. And not using credit is regarded as almost other-worldly. Wall Street just cannot get it through their heads that the rest of the world doesn't drive a Bentley, wear $2000 suits and fly to Curacao for weekends. Thus, when evidence like today's consumer credit condition - in decline 16 of the past 17 months - the investor class runs scared.
Sooner or later, they're also going to find out that many people can't afford the homes they're living in, and when that reality strikes home, it will make today's little scurry to the downside look like a walk in the park.
To illustrate just how much a drag on the US economy housing really is, this post and these graphs point out how far above historical levels housing prices galloped in the 2000s and just how poor the government's attempts to "stimulate" the market have been.
Since that's a story for another day, suffice it to say that Wall Street took a hit from the old reality pie straight in the kisser this afternoon. Following an exceptionally-well-received 10-year Treasury auction (another condition the "experts" had completely wrong), stocks were basically treading water until just before 3:00 pm, when the consumer credit news hit.
The Dow was off 124 points at the worst level, having earlier recovered lost ground after the $21 billion, 10-year Treasury auction which witnessed a 3.72 bid-to-cover ratio (far above the recent average of 2.87) and a solid 3.90% yield rate, which pushed 10-year yields further down, to 3.86%, by day's end. Yesterday, I wrote about fears of the 10-year heading North of 4% and why it isn't going to happen. Today we saw what was true. Indirect bidders (foreign central banks) accounted for 42% of the total, suggesting that maybe some people like US Treasuries at under 4% more than Greek's at around 7%.
Sure the Greek bonds offer more bang for the buck, but, then again, their economy might just blow up, too. Risk-avoidance is "in" once again.
Dow 10,897.52, -72.47 (0.66%)
NASDAQ 2,431.16, -5.65 (0.23%)
S&P 500 1,182.44, -6.99 (0.59%)
NYSE Composite 7,546.18, -58.26 (0.77%)
For a change, declining issues outpaced gainers, 3928-2577; new highs remained high at 600, compared to just 48 new lows. The most significant numbers were the volume readings, however, which evidenced a noticeable spike in trading activity. From a technical perspective, after days of low volume gains, a high-volume decline is a harbinger of doom and a sign that a corrective phase could soon be upon the markets. Almost everybody knew that stocks were overbought heading into earnings season and these upcoming 2-3 weeks could be damaging to sentiment long term.
NYSE Volume 5,700,141,000
NASDAQ Volume 2,872,620,250
The commodity market seemed uniformly confused by the day's data. Crude oil took a bit of a breather, losing 96 cents, to $85.88, but gold galloped ahead $17.20, to $1,152.30 and silver pushed higher by 27 cents, to $18.18, close to 52-wee highs. The metals moves make no sense at all in what can only be described as a deflationary environment, unless there was a rampant short squeeze, which many suspect this was. The metal may be giving an extended head-fake or be reacting to the credit numbers in a flight to safety.
Either way, the US is far from being clear of the crisis. Wall Street may be just beginning to find out what Main Street already knows.
Tuesday, April 6, 2010
Fear and the 10-Year Treasury Yield
Talk is rampant in financial circles over the trending 10-year bond yield, the benchmark Treasury that touched the 4.00% mark on Monday. In general terms, rising bond yields mean rising interest rates overall, from everything from credit cards to home mortgages and also serves as a early warning sign for inflation.
The run-up of the 10-year bond yield has sparked new widespread fears that inflation may return to US markets, crimping the year-long rally in stocks and pounding down any hope for recovery in the housing sector. These fears are largely unfounded, however, because the alignment of Treasury yields to the real economy is simply not sensible at this time.
First, the Fed isn't going to move on interest rates any time soon, even though they merely follow the direction of the markets as a normal course of operations. Second, higher interest for loans is something of a mystical chimera, since only mortgage loans have been held lower by the unprecedented slump in residential housing. Credit card rates for most Americans are already sky-high, with no relief in sight from the immoral banks and credit lending companies.
Third, as an inducement to inflation, bond yields should work as a dead weight on equities, as investors can make worry-free money on Treasuries as opposed to stocks. If stocks, and their underlying companies are forced to pay more for money that is going to slow down everything, from sea to shining sea. Additionally, high unemployment is underpinning the entire economy, producing slack demand, though the incredible sums of stimulus money has worked as an inducement to spend, baby, spend.
Treasury yields on the 10-year have been abnormally low for some time and will probably remain so, until there are real, powerful signs of a sustained recovery. The 160,000 jobs created in March are a one-off, hardly indicative of a trend, though one would have to believe that businesses simply cannot cut many more workers.
There are more factors at work, including flat wage growth and tight lending standards which are keeping robust economic growth in check. The 10-year hit 4%, and backed off immediately, as is the cyclical nature of the beast. The chances that it will surpass that mark and remain there are about as good as they are for yields to fall back into the 4.4 to 4.6% range, which is where they're likely to head in coming weeks and months.
What may be the real concern not finding any voice anywhere, is that foreign investors have soured on the longer-term Treasury offerings, the 10 and 30-year bonds, and are demanding a better payout. That would make more sense than any other argument recently being offered.
Investors on Wall Street still don't seem very afraid of anything, as stocks fell early in the day but rebounded on US dollar weakness. The weak dollar - strong stocks trade continues to be the height of Spring fashion, even as wrong-headed as that condition appears to be.
Dow 10,969.99, -3.56 (0.03%)
NASDAQ 2,436.81, +7.28 (0.30%)
S&P 500 1,189.43, +1.99 (0.17%)
NYSE Composite 7,604.44, +3.51 (0.05%)
Volume remained subdued as advancing issues soared past decliners late in the day, 3706-2731. New highs beat new lows by better-than a 10-1 margin, 917-90.
NYSE Volume 4,615,025,000
NASDAQ Volume 2,122,137,250
Oil rose for the sixth straight day, as though the warmer weather would serve as an inducement for everyone in America to go out for a leisurely drive. Crude for May delivery rose 22 cents, to $86.84, based entirely on nothing. There's are better arguments for oil selling for lower prices than there exists for supporting higher ones: higher prices for energy serve as a tax on consumers and takes away from other discretionary spending. But, being summer in America and the media foisting the parlance of "recovery" upon us, $3.00 a gallon is already standard in larger metropolitan areas.
Gold finsihed ahead by $2.20, to $1,135.10, though silver fell 19 cents to $17.92. We may be close to a temporary top in metals and most other commodities as well. The global economy cannot withstand a bout of inflation at this juncture, especially with entire nations suffering from the debt bomb. Consumers seem to be still pretty well entrenched, so where the spending is coming from is anybody's guess.
The bond yield bulls have it all wrong. Longer-dated instruments aren't going to exacerbate an already steep yield curve.
The run-up of the 10-year bond yield has sparked new widespread fears that inflation may return to US markets, crimping the year-long rally in stocks and pounding down any hope for recovery in the housing sector. These fears are largely unfounded, however, because the alignment of Treasury yields to the real economy is simply not sensible at this time.
First, the Fed isn't going to move on interest rates any time soon, even though they merely follow the direction of the markets as a normal course of operations. Second, higher interest for loans is something of a mystical chimera, since only mortgage loans have been held lower by the unprecedented slump in residential housing. Credit card rates for most Americans are already sky-high, with no relief in sight from the immoral banks and credit lending companies.
Third, as an inducement to inflation, bond yields should work as a dead weight on equities, as investors can make worry-free money on Treasuries as opposed to stocks. If stocks, and their underlying companies are forced to pay more for money that is going to slow down everything, from sea to shining sea. Additionally, high unemployment is underpinning the entire economy, producing slack demand, though the incredible sums of stimulus money has worked as an inducement to spend, baby, spend.
Treasury yields on the 10-year have been abnormally low for some time and will probably remain so, until there are real, powerful signs of a sustained recovery. The 160,000 jobs created in March are a one-off, hardly indicative of a trend, though one would have to believe that businesses simply cannot cut many more workers.
There are more factors at work, including flat wage growth and tight lending standards which are keeping robust economic growth in check. The 10-year hit 4%, and backed off immediately, as is the cyclical nature of the beast. The chances that it will surpass that mark and remain there are about as good as they are for yields to fall back into the 4.4 to 4.6% range, which is where they're likely to head in coming weeks and months.
What may be the real concern not finding any voice anywhere, is that foreign investors have soured on the longer-term Treasury offerings, the 10 and 30-year bonds, and are demanding a better payout. That would make more sense than any other argument recently being offered.
Investors on Wall Street still don't seem very afraid of anything, as stocks fell early in the day but rebounded on US dollar weakness. The weak dollar - strong stocks trade continues to be the height of Spring fashion, even as wrong-headed as that condition appears to be.
Dow 10,969.99, -3.56 (0.03%)
NASDAQ 2,436.81, +7.28 (0.30%)
S&P 500 1,189.43, +1.99 (0.17%)
NYSE Composite 7,604.44, +3.51 (0.05%)
Volume remained subdued as advancing issues soared past decliners late in the day, 3706-2731. New highs beat new lows by better-than a 10-1 margin, 917-90.
NYSE Volume 4,615,025,000
NASDAQ Volume 2,122,137,250
Oil rose for the sixth straight day, as though the warmer weather would serve as an inducement for everyone in America to go out for a leisurely drive. Crude for May delivery rose 22 cents, to $86.84, based entirely on nothing. There's are better arguments for oil selling for lower prices than there exists for supporting higher ones: higher prices for energy serve as a tax on consumers and takes away from other discretionary spending. But, being summer in America and the media foisting the parlance of "recovery" upon us, $3.00 a gallon is already standard in larger metropolitan areas.
Gold finsihed ahead by $2.20, to $1,135.10, though silver fell 19 cents to $17.92. We may be close to a temporary top in metals and most other commodities as well. The global economy cannot withstand a bout of inflation at this juncture, especially with entire nations suffering from the debt bomb. Consumers seem to be still pretty well entrenched, so where the spending is coming from is anybody's guess.
The bond yield bulls have it all wrong. Longer-dated instruments aren't going to exacerbate an already steep yield curve.
Monday, April 5, 2010
Self-fulfilling Market
Does it take a genius to see where the market is headed and why the rally which began a year ago is probably the most overblown equity bubble of all time?
Probably. And you're probably not a genius, so you have to trust the talking (nodding) heads on CNBC and Fox Finance for direction. Or maybe your broker, or cabbie, or the shoeshine guy.
Stocks just keep going higher, and we all know that they shouldn't be where they are, especially when unemployment is still at 9.7% and the housing market is in the midst of a 10 year slump. Why complain? We're all getting richer.
Well, OK. Former VP Dick Cheney said "deficits don't matter." He also said the Iraqi resistance was in "their last throes." That was 2005. So, take your advice from him if you like, but many of us with just a little dose of common sense understand that deficits do matter and that Dick Cheney was - and is - a liar galore.
Dow 10,973.55, +46.48 (0.43%)
NASDAQ 2,429.53, +26.95 (1.12%)
S&P 500 1,187.44, +9.34 (0.79%)
NYSE Composite 7,600.93, +61.91 (0.82%)
Advancing issues socked it to decliners again, 4872-1690, almost a 3-1 margin; new highs beat new lows, 926-106. Volume, however, was so low that it now has become an embarrassment to any serious student of markets. The persistence of low volume in the market is indicative of one that is self-funded, and when the wheels come off, when the game is over, these very same self-funders will be rending each other's flesh, just like in 2008.
NYSE Volume 4,269,053,500
NASDAQ Volume 2,050,514,750
Crude oil broke through some key resistance and gained $1.75 on the day, closing at $86.62, the highest price in nearly 18 months. And it's done this in an environment full of surplus. We should expect Dick Cheney to come out of his crypt and declare that supply and demand doesn't matter, either.
Gold is closing in on its all-time high, gaining $7.80, to $1,132.90. Silver scored another 23 cents to finish at $18.10.
It's all just so perfect for a world full of suckers who don't want to feel any hardship.
Probably. And you're probably not a genius, so you have to trust the talking (nodding) heads on CNBC and Fox Finance for direction. Or maybe your broker, or cabbie, or the shoeshine guy.
Stocks just keep going higher, and we all know that they shouldn't be where they are, especially when unemployment is still at 9.7% and the housing market is in the midst of a 10 year slump. Why complain? We're all getting richer.
Well, OK. Former VP Dick Cheney said "deficits don't matter." He also said the Iraqi resistance was in "their last throes." That was 2005. So, take your advice from him if you like, but many of us with just a little dose of common sense understand that deficits do matter and that Dick Cheney was - and is - a liar galore.
Dow 10,973.55, +46.48 (0.43%)
NASDAQ 2,429.53, +26.95 (1.12%)
S&P 500 1,187.44, +9.34 (0.79%)
NYSE Composite 7,600.93, +61.91 (0.82%)
Advancing issues socked it to decliners again, 4872-1690, almost a 3-1 margin; new highs beat new lows, 926-106. Volume, however, was so low that it now has become an embarrassment to any serious student of markets. The persistence of low volume in the market is indicative of one that is self-funded, and when the wheels come off, when the game is over, these very same self-funders will be rending each other's flesh, just like in 2008.
NYSE Volume 4,269,053,500
NASDAQ Volume 2,050,514,750
Crude oil broke through some key resistance and gained $1.75 on the day, closing at $86.62, the highest price in nearly 18 months. And it's done this in an environment full of surplus. We should expect Dick Cheney to come out of his crypt and declare that supply and demand doesn't matter, either.
Gold is closing in on its all-time high, gaining $7.80, to $1,132.90. Silver scored another 23 cents to finish at $18.10.
It's all just so perfect for a world full of suckers who don't want to feel any hardship.
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