Euro Bailout Revives Markets... and How!

If anyone was thinking the markets couldn't get any more extreme than they did last week, Monday morning's festival of funding, courtesy of the European Union and the IMF, to the tune of nearly $1 Trillion.

According the the Wall Street Journal:

The U.S. market's surging open followed strong gains in the Asian and European markets after the European Union agreed to a EUR750 billion ($955 billion) bailout, including EUR440 billion of loans from euro-zone governments, EUR60 billion from a European Union emergency fund and EUR250 billion from the International Monetary Fund.

Most of the gains came right at the open, which kept individual investors shut out for the most part. The major indices gapped up within 5 minutes of the open by roughly 4%.

Following Thursday's "magic moments," which witnessed a drop and subsequent rebound on the Dow in a matter of less than 15 minutes, market observers have plenty reason for skepticism. After Bob Brinker called the Thursday move, "manipulation," veteran trader Art Cashin, head of floor operations at UBS, said live on CNBC, referring to Friday's non-farm payroll report, "188,000 was a guess by the Bureau of Labor Statistics." Further, he said, "keep your eye on the referee. This game isn't on the up and up," referring to possibly the entire market.

All of this market volatility should come as no surprise to anybody who's been following the financial crisis over the past 2 1/2 - 3 years. Nations, and their political leaders, have a vested interest in keeping their worthless currencies in play, regardless the consequences down the road. Mountains of debt have been piled upon other mountains of debt around the world. The EU bailout was a long time in coming and a hard morsel to chew on for beleaguered leaders. Essentially, they had no choice, though the future seems as uncertain as ever, if not more so.

Stocks bounded higher in Europe and the US, with the average index gaining somewhere between 3 and 5 percent. Asian markets were more subdued, excepting Indonesia and India, which were both highr by 3 1/2 to 4%.

As usual, bank stocks - both in the US and in Europe - led the advance.

Dow 10,785.14, + 404.71 (3.90%)
NASDAQ 2,374.67, +109.03 (4.81%)
S&P 500 1,159.73, +48.85 (4.40%)
NYSE Composite 7,257.62, +341.44 (4.94%)

Advancing issues led decliners by an enormous margin, 6036-696. New highs regained their edge over new lows, though not my a meaningful margin, considering the momentous advance. There were 143 new highs to just 37 new lows. The idea that there were any new lows at all was remarkable, and also notable was the volume, at lower levels than on most of last week's down days.

NYSE Volume 7,876,002,500.00
NASDAQ Volume 2,858,059,750.00

Chances are good that throwing a trillion dollars at Europe's problems will stabilize markets for a while, but, like their TARP counterpart in the fall of 2008, the effects could be very short-lived. As with the TARP in the US, the average European citizen will not likely embrace the bailout of banks and government while the populace goes hungry.

Commodities were mixed on the news. Oil regained some of what it lost over the past week, gaining $1.69, to $76.80, but gold was down $9.60, to $1,200.40. Silver slit the difference, gaining 10 cents, to $18.53.

Largely ignored were two items: Ratings agency, Moody's, received a Wells Notice from the SEC, signaling that enforcement action was forthcoming; Fannie Mae posted a $13 billion loss for the first quarter and asked for another $8.4 billion in federal assistance.

One thing that seems certain: The comparisons of Wall Street to Las Vegas are unfair. Las Vegas is a much more friendly place for individuals. The odds stay the same and the rules don't change over the weekend. These comparisons are only giving Las Vegas - a place where anyone and everyone gets a fair shake - a bad name and should cease. We'd like to call Wall Street a den of wolves, but we actually like wolves.

Bob Brinker Calls Market Turmoil "Manipulation"

Over the weekend, Bob Brinker, host of the nationally-syndicated financial talk show, Money Talk, characterized the market turmoil of this past Thursday, May 6, 2010, as "manipulation," which has been the stance of this blog since the event occurred.

This may be a notable development, though likely it is not, in that whereas, I, a blogger without an enormous following, have mentioned the manipulation of the stock market numerous times over the past few years without fanfare, but when a national radio host with the reputation and longevity of a Bob Brinker says the very same thing about a specific situation, there may be something to it.

Brinker did not elaborate on who might be doing the manipulation, but the mere fact that he used the word, was something of a shock. My gut feeling is that if Bob Brinker thinks the market was manipulated this past Thursday, then there are surely others who believe the same or at least are thinking along the same lines.

Is Brinker spreading fear uncertainty and doubt (FUD) recklessly, or issuing a heartfelt, albeit shrouded, warning to his loyal listeners? Really makes one wonder about what's really going on with the barons of finance and the Wall Street crowd.

Wall Street Whacked Again; Europe Overwhelms Positive Employment and Gulf Oil Spill

Following the worst recession since the Great Depression, the bulk of Americans still suffering through the slow, painful "recovery" process probably is cheering every daily decline in the stock market. Where Main Street to a large extent has plumbed the depths of poverty, Wall Street has had the pleasure of using taxpayer dollars to dig their way out of the mess they themselves caused, so it's not surprising that after Thursday's "fat finger" debacle many Americans are throwing a fat finger right back at the titans of finance and their profligate ways.

News outlets claimed that a mistaken trade, hitting a a "B" instead of an "M" - as in billions vs. millions of shares - caused yesterday's 998 point plummet, thus the "fat finger" excuse, which, by the way, has been largely discredited. The truth of what happened on May 6, 2010 may never be fully known, but the idea that insiders purposely sold huge quantities in a coordinated assault has some merit.

The goal of the traders causing the plunge (probably computer programmed) was to sell enough shares of enough companies to trigger momentum trading by other computers and individuals in addition to triggering stop loss trades that would exacerbate the situation. Then, as the market plunged, notably to almost a 1000-point loss on the Dow, scoop up quantities of the same stocks after their values had been decimated, in effect, reversing the old saw of "buy low, sell high," on its head, selling high and the buying low.

If this was a coordinated, widely-spread-out trading scheme - and there's no evidence indicating that it wasn't - it seemed to have worked to perfection. Two other elements lead one to believe that it could also have been a staged event. First, the near-1000-point drop bottomed just after 2:30. Had it occurred before that time and gone down more than 1000 points, the NYSE would have shut down. Likely not wanting to tempt fate, the schemers plied their scam just after 2:30 and stopped the skid just before the 1000-point-down level was attained.

Second, CNBC and networks worldwide were airing scenes of protesters in Greece being beaten back and dispersed by riot police at precisely the moment the stock market was skidding out of control. If this were labeled a terror attack, it would fit the definition precisely, because it terrorized not only people invested or watching on TV, but the traders on the floor and in brokerages around the world.

Additionally, CNBC had commentators in place in Greece and on the Iberian peninsula, plus they brought Jim Cramer (Mad Money) onto the set for a rare appearance. At the depth of the decline, host Erin Burnett brought up a chart of Proctor Gamble, which had plunged some 20 points in a manner of minutes. Cramer cooly called it a buy and it immediately reversed course and headed back near the unchanged mark.

Commentators on CNBC also started the "fat finger" rumor and produced an additional three hours of coverage later in the evening, complete with "Markets in Turmoil" graphics and coverage from around the financial universe.

So, was the sudden collapse and subsequent, immediate 600-point rally all about finances or all about ratings? The timing seemed to synch perfectly with the anarchist overtones emanating from Athens, and the swiftness of the entire affair (less than 20 minutes) was riveting television. CNBC reported today that their web site traffic shot through the roof during and after the event.

Whatever the cause of Thursday's melt down and up, the message was loud and clear: something is amiss on Wall Street when stocks can go to zero in the space of a couple of heartbeats and nobody knows exactly why. Investors were skittish and tentative on Friday, even after the government produced the best non-farm payroll report in four years.

The employment report for April showed the US economy creating 290,000 jobs in April, with only 66,000 of those coming in the form of temporary census workers. The BLS also upgraded the previous two months, showing even more job growth than had previously been reported. That kind of upbeat news still could not shake off the tremors from Thursday's wild ride nor the unsettled affairs in Greece and across Europe, where LIBOR (London InterBank Overnight Rate) - the rate of interest banks charge each other for overnight loans - shot up dramatically.

As the European overtone kept markets subdued, US bond yields held steady or declined and the dollar gained against most other currencies, expressing the view that the United States was the best of a bad bunch as far as investments were concerned. With all the reporting on Wall Street and Europe overwhelming the news wires, the story of oil continually gushing into the Gulf - with the oil slick making landfall yesterday in Louisiana - was sadly sent to a back burner.

Traders were extremely cautious though not entirely on the sell side. The Dow dropped 279 points early in the day before rallying briefly into positive territory just 45 minutes later. The rally had no momentum, however, and stocks sold off in jumpy fashion through the remainder of the session.

Dow 10,380.43, -139.89 (1.33%)
NASDAQ 2,265.64, -54.00 (2.33%)
S&P 500 1,110.88, -17.27 (1.53%)
NYSE Composite 6,916.18, -95.74 (1.37%)

Market internals confirmed the ugly truth. Advancers were once again beaten severely by decliners, 4838-1775, and new lows exceeded new highs for the second straight day, 184-94, a significant development, signaling, in very certain terms, a continuance of the downturn. Volume was once again at fantastic heights, similar to Thursday's trading. It's obvious that much of the smart money has been heading for the exits en masse over the past two weeks and now the dumb money is following.

NYSE Volume 10,830,781,000.00
NASDAQ Volume 4,174,408,500.00

The unsettled nature of trading and uncertain future for Europe took oil down yet another notch, with crude futures closing down $2.00, to $75.11. The metals have divorced themselves from the energy complex, with gold rallying another $13.40, to $1,210.00, and silver adding 94 cents, to $18.43. Wall Street's high-velocity, highly volatile trading suggests that gold will continue to be a safe haven for wealth.

The week was among the ten worst ever for stocks, with the Dow suffering a 628-point decline. All of the major indices closed today at levels below the start of the year. They are all in negative territory for 2010.

The Dow Jones Industrials are down 7.4% from their April 26 high of 11,205.03. The NASDAQ is already technically in a correction, having fallen 10.5% from its recent high, while the S&P 500 is off 8.8%.

Stop losses? Maybe it's time to stop trading equities for the relative safety of bonds and metals. Unless conditions in various locales improve remarkably over the coming weeks, this slide should eviscerate much of the progress made in 2009. Think Dow 9000 and possibly lower, near-to-medium term.

Major Market Madness as EU Faces an Abyss

Greece has exploded into near-anarchy. Most of Southern Europe is about to enter similar circumstances, as Italy, Spain and Portugal face the same kind of debt crisis that is sweeping the globe. Ireland and Iceland have already felt the wrath of economic unwinding and the panic doesn't stop at small-country borders.

The unprecedentedly-swift breakdown which occurred today on US stock markets is a symptom of a wider contagion, a currency, central bank, sovereign confidence crisis.

Around 2:00 pm, with stocks already suffering significant losses and live video of protesters being attacked by riot police in Athens airing worldwide, markets turned even more dire, doubling their losses in a matter of minutes. By 2:15, the wheels were off as the Dow fell from 250 points down to a 990-point loss in the blink of an eye. For about 10 minutes, markets were in freefall. Traders reported a near-complete capitulation, with buyers completely absent from the market in almost all stocks.

Once again, however, the slide was staunched by some heavy-handed trading in futures and the more-than-likely subterfuge of the major investment banks and their allies in crime, the government-approved President's Working Group on Financial Markets (Plunge Protection Team. i.e., the PPT). As quickly as the markets fell, the rebounded. The Dow recovered to a loss of roughly 400 points and seemed to stabilize at that point. After a wild 15 minutes of trading that left everybody stunned and questioning exactly what happened, the markets churned onward toward the close, ending with massive losses, nonetheless.

Dow 10,520.32, -347.80 (3.20%)
NASDAQ 2,319.64, -82.65 (3.44%)
S&P 500 1,128.15, -37.72 (3.24%)
NYSE Composite 7,011.92, -246.10 (3.39%

The substantial declines on the day were more than bourn out by the internal indicators. Declining issues completely overwhelmed advancers, 6015-742, or, by a margin of about 9:1. It was one of the biggest one-day routs in recent years, and there have been a good number of those. The key measure was the number of new highs to new lows, which completely flipped over from a year-long trend. There were 612 new lows to 196 new highs, a complete reversal, which, if history is any kind of guide, is a loud siren that the bears are firmly back in control.

Another screaming indicator was the day's volume, literally off the charts. This is the kind of volume seen only at the extremes, likely one of the 5 or 10 highest-volume days in the history of US stock markets. Since the direction was decidedly to the downside, more selling should be expected in days to come.

NYSE Volume 11,772,131,000.00
NASDAQ Volume 4,292,823,500.00

Concerning the heavy selling that sent stocks into a short-lived abyss, the commentators on CNBC cited such simplistic theories as a computer glitch, false prints and other preposterous theories, all along avoid the obvious truth: the economic crisis did not end in March of 2009, when stocks began a year-long rally. Financial markets are still fragile, one might say, tenuous, and only clandestine moves by insiders kept stocks from recording a record sell-off.

At some point, CNBC or another expert may release a story explaining the sudden downturn on the back of a rogue trade or computer malfunction. Any such story should be viewed with an additional dose of skepticism if only because of the various levels the major indices broke through during the panic. All of them shattered their 50-day moving averages during the session and closed well below them. Markets have been trending lower for the better part of the past two weeks and this kind of momentum-turning-to-panic trading cannot be discounted as a one-off event.

The likelihood of further market declines in the very near term and extending into the longer term is very high. The debt-deflation bomb has not yet run its course. Not until massive amounts of money and companies are liquidated will the disease be purged from the global economy. Expect widespread panic in European markets as countries fall like dominoes with a side-effect around the world. US markets will not be spared, as the US is only the best among peers at this juncture. Major economies will survive, though France, Germany, Great Britain and the USA will be severely crippled by year's end.

Our beloved "recovery" has been a complete fabrication, fueled by the media and the mechanics of commerce in Washington and on Wall Street. Individual investors have largely shunned equities in favor of bonds and tangible assets such as gold, which was an outside winner on the day. Greece and the rest of the Southern European countries are financially on death's door, facing complete default. Soon, one will capitulate and flee the European Union and denounce the Euro. When that occurs, the ten-year experiment at cross-border governance will be essentially over. The EU will disintegrate and the Euro will be completely unwound. The main hope is that troops do not begin excursions into neighboring nations, as has been the centuries-old history of Europe.

Even today, as it has been throughout the life of the EU, the stronger Norther economies have considerable enmity toward their Southern neighbors. The chance of the entire continent devolving into skirmishes over currencies would neither be unexpected nor unprecedented. Wars are usually how nations resolve major financial squeezes and Europe is certainly in one now.

Besides the dire conditions in Europe, the Gulf oil spill remains unchecked and tomorrow's non-farm employment report - to be released to the public at 8:30 am ET - doesn't offer much optimism. Most of the supposed 185,000 jobs created in April will be attributed mostly to government hiring of temporary census workers and the whisper campaign is that not as many were needed due, ironically, of the efficiency of the operation. Should the non-farm number fall significantly below expectations - a real possibility - an immediate continuation of the plunge will probably occur.

The best hope is for the proverbial, "dead cat bounce," which might ease tensions temporarily, until, at best, the next round of crisis selling. So severely strained and wrought with fraud, inter-leveraging and toxicity, financial markets have entered a semi-permanent state of crisis. When this chapter of global finance is finally unwound, the world won't end, but the pain will have spread deeper and wider than anyone could have expected.

For the baby boomer generation, the nightmare may have only begun. Those without high debt may find themselves in better positions than many of their over-leveraged peers.

Some of the numbers emerging from this historic day in finance (and underscoring the idea that this was not a one-off event):

Crude oil futures continued their steady decline, losing another $2.86, to close at $77.11, the lowest print in months. Safe-haven gold improved by $22.30, climbing above the $1200 mark to finally settle at $1,196.90. Silver couldn't keep pace, losing 2 cents, to $17.49.

All of the major indices have suffered huge blows over the past two weeks, and all closed below their 50-day moving averages.

The Dow Jones Industrials are less than 100 points higher for the year. For the year, the NASDAQ is up only 50 points, the S&P ahead by just 13 points, the NYSE Composite - the broadest index - is down 173 points, all of that loss, and more, occurring today.

All of the 30 Dow components closed lower, many of them with 3.5 to 4.5% losses. Citigroup touched a low of 3.90, closing at 4.01, as all financial stocks were pounded lower.

Treasuries and the US dollar were sharply higher. The dollar index hit fresh highs while the Euro broke down to 14-month lows against the greenback. The benchmark 10-year treasury closed at a 3.40% yield, 55 basis points lower than just a month ago.

Geithner, Bernanke, and PPT Swing into Action

Let's see if we can get this story right for a change.

When the markets opened at 9:30 am in New York, the flood of news could not have been more distressing. Three bank employees lost their lives in Greece, where government employees and other activists openly clashed with police (see video below). European markets were suffering intense losses, ranging between 1.28% (Great Britain) and 3.16% (Greece).

Here in the US, the precursor to the government's monthly non-farm payroll report (due out Friday morning), the monthly ADP private sector employment report [PDF] showed little progress for the month of April, with a mere 32,000 new jobs being created, hardly the kind of news investors are seeking. Hiring simply has not materialized, no matter how many times President Obama says, "we're making progress," or the news media hoists up another flag for economic recovery.

Stock futures trended deeply lower prior to the opening bell, with bond yields falling fast and the US dollar strengthening against the Euro, in particular. Once the trading was underway, stocks were slammed, with the Dow down 107 points in the opening minutes of trade and the NASDAQ falling 42 points, piercing its 50-day moving average.

Apparently, this kind of rational market reaction to bad news was too much for our intrepid clandestine market riggers - the Plunge Protection Team (PPT) - which swung into action less than 15 minutes after the open. Suddenly, markets around the globe began to turn. All of the major indices headed higher, with the Dow actually registering positive numbers by midday.

Eventually, all of the major indices closed at or below their respective 50-day MAs, but that was after the PPT made certain that small investors were skewered and the major banks and financial firms didn't suffer too badly. The government, the media and the Wall Street elite have a vested interest in glad-handing everybody and spreading as much cheer as possible, no matter how bad the economy is. Not only is there a great deal of money at risk, but for the politicians and financiers, their jobs might be lost if the truth be set loose upon the American public.

The downturn is in full force, whether the undercover lever-pullers like it or not. They've been throwing wads of money - in the billions and trillions of dollars - at the economy, with no discernible results. No new jobs are being created and, despite the glowing reports from Wall Street firms, the American middle class is going down the tubes in a very big hurry.

Residential real estate has experienced a momentary pause in its decline, but foreclosures are only being slowed because the banks have too many properties already in their greedy, little hands. They are taking massive losses on a daily basis, but accounting rules manage to hide most of the sins.

As with the slow grind down from October 2007 to September 2008, this stock market decline will not be sudden, thanks to the internal workings of the government agents. It will be slow, because, according to the powers that be, that's better for the American public. Everything must revolve around the election cycle, another crooked enterprise.

Dow 10,868.12, -58.65 (0.54%)
NASDAQ 2,402.29, -21.96 (0.91%)
S&P 500 1,165.87, -7.73 (0.66%)
NYSE Composite 7,258.02, -79.23 (1.08%)

Declining issues beat down advancers, 5100-1510, better than 3:1. New highs bettered new lows by the slimmest margin in over a year, 151-133. When that indicator rolls over, you will know that the rout is on. With the levels so close, now would be a good time to liquidate large portions of your portfolio, because there may little left if you think you can ride the market down or actually believe that "things are getting better."

Volume was at or near its highest level of the year, due, no doubt, to the incredible amount of shares which had to be bought and sold to bring the market back from its early depths.

NYSE Volume 7,701,488,000.00
NASDAQ Volume 2,980,217,000.00

Commodities also turned higher after an early sell-off, though nothing could save the crude oil futures from slipping another $2.77, to $79.97. Just a few days ago, crude was selling for $86/barrel. It's the one hopeful element from deflation at work - food and fuel should become much more affordable.

Gold got a bit of a boost, for reasons unknown, gaining $6.00, to $1,174.60. Silver was beaten down again, dropping 31 cents, to $17.51.

Markets may take a breather on Thursday, though there is the chance that many traders will opt to get out of the way of Friday's non-farm payroll report. Also, there are major elections in Europe over the weekend, so holding for Monday might not be the most-favored play.

Make no doubt about it. Europe is already in tatters. Great Britain is on the brink along with Portugal, Italy, Ireland, Spain, and, of course, Greece, the poster child for socialism's demise. US policy-makers continue down the European path in many regards, especially in terms of public entitlements, unfunded liabilities and rampant, unpayable debt.

Sooner or later, these issues must be addressed. Spending our way out of the mess we're has been already amply proven to be a failed element of Keynesian economics.

Almost forgot: there's a small problem off the southern US coast. Something about an oil leak...