Absurdity has found a new home: the US equity markets.
Somebody wake me up when the nightmare is over, because I cannot find any good reason to buy stocks right now, so, I must be dreaming.
War planes fly over Libya and Israeli jets take out a Hammas stronghold in Gaza. So, that's the good news, right? R-r-r-r-i-g-h-t. The Japanese government is lying to its people about radioactivity levels. That must be the bad news. And AT&T is going to gobble up T-Mobile, so we'll have one fewer cell phone provider. Does anyone recall the day that AT&T was broken up because its business constituted a monopoly?
Don't worry, the hologram of Eric Holder will do nothing. Anti-trust? In trust we trust, I guess.
The following numbers mean nothing. It's all just a paper moon.
Dow 12,036.53, +178.01 (1.50%)
NASDAQ 2,692.09, +48.42 (1.83%)
S&P 500 1,298.38, +19.18 (1.50%)
NYSE Composite 8,256.36, +139.96 (1.72%)
Advancing issues absolutely slaughtered decliners, 5182-1379. Stocks shot up at the open and stayed afloat all day. NASDAQ registered 90 new highs and 30 new lows. The NYSE had 129 new highs and just 9 new lows. Pathetic. Volume was in an abyss, especially on the NASDAQ.
NASDAQ Volume 1,766,817,250
NYSE Volume 5,027,389,500
WTI hit $102.33 a barrel on the NYMEX, up $1.26 on the day. Gold soared $10.30, to $1,426.40. Silver was up 94 cents to an even $36.00. Both are approaching recent multi-year or record highs. But everything is just fine. Notice how the news media shifted focus away from Japan and towards Libya. Well, guns and rockets and missiles launched from warships is much more entertaining than those invisible radioactive isotopes being spewed continuously into the air and the sea in Japan. So, bang, bang, bang. It's good TV.
We have entered an age in our culture in which nothing really makes much sense any more. Spend $200,000 for your kid's education so he or she can get a $35,000 a year job and have to pay back a mountain of debt. Blow up a country for its oil. Don't report on uncontrolled radioactivity that will kill thousands, maybe hundreds of thousands, maybe more. Buy stocks because some broker who knows less about economics and money than you do told you it was a good deal. Sit back and relax, watch TV. This is March Madness, after all, and we're not talking basketball.
BTW: According to the Supreme Court, the Fed will have to release documents relating to loans taken out by banks from the discount window in April and May, 2008, before the stock market crash.
They knew. But they wouldn't tell you.
Monday, March 21, 2011
Friday, March 18, 2011
Rally Fades Into Close; Wall Street is Full of Bull
A momentous gap up open - all part of the arbitrage plan for scraping money on quadruple options expiration - finished the rally which began on Thursday, as usual, based upon nothing but "sentiment" and, of course, those computer algos which buy, buy, buy.
As stated here the past two days, any rallies under the current climate will be sharp and short-lived. Consider this one over, as the rally faded by half into the close.
Cheerleading CNBC was flashing a "best two-day Dow rally since December" headline, which is somewhat sad in a journalistic sense, since the NASDAQ was down nearly 4% for the week and the Dow and S&P finished the week with losses in the 1.5% area.
Dow 11,858.52, +83.93 (0.71%)
NASDAQ 2,643.67, +7.62 (0.29%)
S&P 500 1,279.20, +5.48 (0.43%)
NYSE Composite 8,116.40, +51.54 (0.64%)
Advancing issues defeated decliners, 4575-1915. NASDAQ new highs: 49; new lows: 42. That snaps a six day winning streak for new lows. On the NYSE, new highs beat new lows, 49-17. That means new highs have been better than new lows 4 of the past 7 days. Volume was particularly high today, due in large part to options expiration.
NASDAQ Volume 2,652,983,000
NYSE Volume 5,778,696,000
Crude oil fell 35 cents on the NYMEX, to $101.07, now that the UN has offered to stop the indiscriminate killing of his own people by forces loyal to president and lunatic-in-chief, Khadaffi.
Gold got back on track, gaining $11.90, to $1,416.10. Silver caught a bid as well, up 80 cents, to $35.06.
Expect more volatility until the conditions on the ground at Japan's disabled nuclear facility is either better explained by Japanese authorities or the situation somehow settled. It is still a very dangerous overhang to all risk assets, which is why gold, silver and goods are still safe bets.
As stated here the past two days, any rallies under the current climate will be sharp and short-lived. Consider this one over, as the rally faded by half into the close.
Cheerleading CNBC was flashing a "best two-day Dow rally since December" headline, which is somewhat sad in a journalistic sense, since the NASDAQ was down nearly 4% for the week and the Dow and S&P finished the week with losses in the 1.5% area.
Dow 11,858.52, +83.93 (0.71%)
NASDAQ 2,643.67, +7.62 (0.29%)
S&P 500 1,279.20, +5.48 (0.43%)
NYSE Composite 8,116.40, +51.54 (0.64%)
Advancing issues defeated decliners, 4575-1915. NASDAQ new highs: 49; new lows: 42. That snaps a six day winning streak for new lows. On the NYSE, new highs beat new lows, 49-17. That means new highs have been better than new lows 4 of the past 7 days. Volume was particularly high today, due in large part to options expiration.
NASDAQ Volume 2,652,983,000
NYSE Volume 5,778,696,000
Crude oil fell 35 cents on the NYMEX, to $101.07, now that the UN has offered to stop the indiscriminate killing of his own people by forces loyal to president and lunatic-in-chief, Khadaffi.
Gold got back on track, gaining $11.90, to $1,416.10. Silver caught a bid as well, up 80 cents, to $35.06.
Expect more volatility until the conditions on the ground at Japan's disabled nuclear facility is either better explained by Japanese authorities or the situation somehow settled. It is still a very dangerous overhang to all risk assets, which is why gold, silver and goods are still safe bets.
Thursday, March 17, 2011
The Expected Snap-Back Rally Occurs Right on Time
As mentioned in this space yesterday,
Well, today was it. If there's one thing the self-appointed Masters of the Universe on Wall Street and in Washington absolutely cannot tolerate, it is human events spinning beyond their ability to control them, because their power declines under such circumstances, and their sole response is to turn up the algos on their stock-buying computers and send equity prices ever further into the stratosphere of the absurd.
Today's mammoth run-up was well conceived and not derailed by any further bad news coming out of Japan, though what to do about those rebellious peasants in the Middle East still remains a problem for our sweet, elite masters. For a microcosmic view of it all, note how stocks and oil advanced smartly, with gold lagging and silver falling even more.
The elitist snobs will tolerate gold, even hoard it in times of panic, but they hate silver, because if gold is the metal of kings and monarchs, silver is the coin of gentlemen and lower rabble. The great wazoos and muckety-mucks will have nothing to do with it, which is why it continues to be supressed at every opportunity, by now, an open secret.
We'll maintain that silver is still the best investment for the current condition, despite its wild swings. Eventually, as we saw in the latter half of 2010, it will stay with and surpass gold in percentage gain.
In the meantime, the Bank of Japan (BOJ) will meet with their effete counterparts in the G7 to receive approval for intervention in their rapidly-appreciating currency. In other words, with money inflows to Japan, the Yen is becoming stronger, making more capital available for eventual reconstruction efforts, while at the same time boosting the price of its exports, which is considered a negative for the globalist agenda. The Bank of Japan will seek to buy up Yen, squeezing some of the liquidity out of it and stabilizing it against other floating currencies.
It's a bit of a complex condition, causing money flow disruptions and imbalances. In the meantime, the US dollar continues to depreciate, falling to a 4-month low, dipping just below the 76 mark at 75.995 on the dollar index.
Dow 11,774.59, +161.29 (1.39%)
NASDAQ 2,636.05, +19.23 (0.73%)
S&P 500 1,273.72, +16.84 (1.34%)
NYSE Composite 8,064.86, +134.99 (1.70%)
Despite the big headline numbers, the internals were less convincing that today's rally was anything more than money-tossing, as advancing issues beat decliners, 4438-2072, though new lows retained their edge over new highs on the NASDAQ, 56-35, for the sixth consecutive session. On the NYSE, it was nearly a dead heat, with 30 new highs and 28 new lows. Over the past six session, the advantage has gone to either side an equal three times apiece.
Volume was once-again telling. Though it was slightly elevated, it by no means was in a range indicative of an all-in rally. As mentioned previously, these kinds of things are normally sharp and short, especially in the light of tomorrow's quadruple witching day for options. There was plenty of arbitrage to go around for the sharpies.
NASDAQ Volume 2,011,827,250.00
NYSE Volume 4,743,120,500
Renewed tensions in the Middle East (and, no doubt, the insatiable urge to screw motorists with high gas prices) caused a run-up in crude, which elevated $3.42, to $101.42, on the NYMEX.
Gold gathered some momentum, gaining $8.10, to $1,404.20, but silver shed 21 cents, to $34.26, a price still close to recent 31-year highs.
With all the focus on the nuclear crisis in Japan, some revealing economic figures were released over the past two days. The PPI was up a whopping 1.6% in February, with the CPI chiming in with a gain of 0.5%. Inflation, that thing Ben Bernanke says is under control, temporary and not a problem (well, maybe not for him), isn't on its way here, it has arrived.
New housing starts were at some horrible four-decade low, with building proceeding at an annualized rate of 479,000 units. Industrial production fell 0.1% in February and capacity utilization dropped to 76.3% These kinds of numbers really gives one confidence that the liars in Washington have once again dropped the ball on the economy, all along telling us that we're "recovering."
In the wild new world normal, "recovery" is tantamount to Charlie Sheen's "winning" - an innocuous word, significant of absolutely nothing.
A decline in US stock markets will only trigger more printing, more inflation and an even more unbalanced global economy, one that was already teetering on the brink of disaster, even before the Japan debacle. However, such an inordinate infusion of capital may cause a snapback rally at any time. If such occurs, it will be easy to spot, as it will be sharp and large. The other characteristic of such an event is that it will have a relatively short duration - an afternoon, a day, a session and part of another, at most.
Well, today was it. If there's one thing the self-appointed Masters of the Universe on Wall Street and in Washington absolutely cannot tolerate, it is human events spinning beyond their ability to control them, because their power declines under such circumstances, and their sole response is to turn up the algos on their stock-buying computers and send equity prices ever further into the stratosphere of the absurd.
Today's mammoth run-up was well conceived and not derailed by any further bad news coming out of Japan, though what to do about those rebellious peasants in the Middle East still remains a problem for our sweet, elite masters. For a microcosmic view of it all, note how stocks and oil advanced smartly, with gold lagging and silver falling even more.
The elitist snobs will tolerate gold, even hoard it in times of panic, but they hate silver, because if gold is the metal of kings and monarchs, silver is the coin of gentlemen and lower rabble. The great wazoos and muckety-mucks will have nothing to do with it, which is why it continues to be supressed at every opportunity, by now, an open secret.
We'll maintain that silver is still the best investment for the current condition, despite its wild swings. Eventually, as we saw in the latter half of 2010, it will stay with and surpass gold in percentage gain.
In the meantime, the Bank of Japan (BOJ) will meet with their effete counterparts in the G7 to receive approval for intervention in their rapidly-appreciating currency. In other words, with money inflows to Japan, the Yen is becoming stronger, making more capital available for eventual reconstruction efforts, while at the same time boosting the price of its exports, which is considered a negative for the globalist agenda. The Bank of Japan will seek to buy up Yen, squeezing some of the liquidity out of it and stabilizing it against other floating currencies.
It's a bit of a complex condition, causing money flow disruptions and imbalances. In the meantime, the US dollar continues to depreciate, falling to a 4-month low, dipping just below the 76 mark at 75.995 on the dollar index.
Dow 11,774.59, +161.29 (1.39%)
NASDAQ 2,636.05, +19.23 (0.73%)
S&P 500 1,273.72, +16.84 (1.34%)
NYSE Composite 8,064.86, +134.99 (1.70%)
Despite the big headline numbers, the internals were less convincing that today's rally was anything more than money-tossing, as advancing issues beat decliners, 4438-2072, though new lows retained their edge over new highs on the NASDAQ, 56-35, for the sixth consecutive session. On the NYSE, it was nearly a dead heat, with 30 new highs and 28 new lows. Over the past six session, the advantage has gone to either side an equal three times apiece.
Volume was once-again telling. Though it was slightly elevated, it by no means was in a range indicative of an all-in rally. As mentioned previously, these kinds of things are normally sharp and short, especially in the light of tomorrow's quadruple witching day for options. There was plenty of arbitrage to go around for the sharpies.
NASDAQ Volume 2,011,827,250.00
NYSE Volume 4,743,120,500
Renewed tensions in the Middle East (and, no doubt, the insatiable urge to screw motorists with high gas prices) caused a run-up in crude, which elevated $3.42, to $101.42, on the NYMEX.
Gold gathered some momentum, gaining $8.10, to $1,404.20, but silver shed 21 cents, to $34.26, a price still close to recent 31-year highs.
With all the focus on the nuclear crisis in Japan, some revealing economic figures were released over the past two days. The PPI was up a whopping 1.6% in February, with the CPI chiming in with a gain of 0.5%. Inflation, that thing Ben Bernanke says is under control, temporary and not a problem (well, maybe not for him), isn't on its way here, it has arrived.
New housing starts were at some horrible four-decade low, with building proceeding at an annualized rate of 479,000 units. Industrial production fell 0.1% in February and capacity utilization dropped to 76.3% These kinds of numbers really gives one confidence that the liars in Washington have once again dropped the ball on the economy, all along telling us that we're "recovering."
In the wild new world normal, "recovery" is tantamount to Charlie Sheen's "winning" - an innocuous word, significant of absolutely nothing.
Wednesday, March 16, 2011
Fear Trumps Greed for a Day
As has been reported here over the past couple of days especially and for the better part of the past month, US stocks are heading lower.
Today's action was in stark contrast to the dip and rally from Tuesday, as news coming out of Japan just continues to worsen, as most thinking people assumed it would. Without going into the gory details, it appears that the nuclear plant that has been a problem since Friday's earthquake/tsunami is headed toward at least partial meltdown and at worst total meltdown.
Making matters even more horrifying is that there are six reactors at the site. Up until now, only four of the six reactors at the Fukushima Daiichi site have been affected, with all four of them spewing radioactive material at some time or another over the past five days, though it now appears that reactors #5 and #6 are at risk as well.
Information from the site has been sketchy at times, contradictory at others, but confusing and increasingly worse all along. It appears that the Japanese people are in for a long period of pain and suffering, and the implications are likely to be felt worldwide.
On Wall Street, where bulls ignore the obvious and bears hope against the worst, but bet on it, stocks were down in the early going until just before 11:00 am EDT, when news came, via a government official, that the situation at the plant had worsened considerably. That sent stocks into an absolute tailspin, with a full 1% decline within minutes of the news.
A rally was attempted when stocks hit their lows of the day at 2:00 pm, but it sputtered badly and the markets stared grimly at one of the largest one-day losses of the past two years.
Dow 11,613.30, -242.12 (2.04%)
NASDAQ 2,616.82, -50.51 (1.89%)
S&P 500 1,256.88, -24.99 (1.95%)
NYSE Composite 7,929.87, -162.24 (2.00%)
Confirming the carnage suggested by the headline numbers, declining issues battered advancers, 4889-1704. It's amazing it wasn't even more lopsided. Our leading current indicator has finally offered confirmation of a directional trend. New highs on the NASDAQ numbered 31, new lows, 74. On the NYSE, 31 new highs and 38 new lows. That makes five straight days on the NASDAQ that new lows have outnumbered new highs and three out of five on the NYSE.
If anyone's been waiting for indicators to flash red with sirens blaring, today was it. Japan's woes will continue to dominate the news for the foreseeable future and the associated supply chain issues of a globalized economy are beginning to come to light. Shipments of crucial parts are going to be delayed or stopped, trade will suffer and a large chunk of the world's third largest economy is going off-line for a while. Whether that is going to be weeks or months or years is still unknown, but the betting is that disruptions will extend through at least the end of the summer.
Another tell-tale sign that today was a day of capitulation by the bulls in US stocks was told by the off-the-charts volume in today's trading. It was the largest volume day of 2011 and may still be dwarfed by the eventual follow-on decline. One caveat is that the Fed continues its abuse of the US dollar by printing more of them at every opportunity. A decline in US stock markets will only trigger more printing, more inflation and an even more unbalanced global economy, one that was already teetering on the brink of disaster, even before the Japan debacle. However, such an inordinate infusion of capital may cause a snapback rally at any time. If such occurs, it will be easy to spot, as it will be sharp and large. The other characteristic of such an event is that it will have a relatively short duration - an afternoon, a day, a session and part of another, at most.
NASDAQ Volume 2,596,625,000
NYSE Volume 6,569,946,500
Commodities caught some bids, as sellers of equities rushed to less-risky assets. Oil was up 80 cents, to $97.98 as conditions in the Middle East continue to rage on, unsettled. Gold gained $3.30, to $1,396.10, and silver was up 36 cents, to $34.47. The move in precious metals is particularly interesting as it is a break-away from equities. Tuesday, all assets fell in a rush to liquidity. Today, the players were placing bets: for precious metals and other valuable commodities and against stocks and currencies.
Since there is no quick fix to nuclear accidents, especially those being mentioned alongside Chernobyl - the worst ever - don't expect the plant in question in Japan to be repaired for some time, if ever. Officials are only now poring over whether to entomb the reactors with heavy doses of cement or continue containment efforts, which are not working very well at present.
At this point, any intelligent human should take advantage of the short-term decline in the precious metals, but also maintain a large sum of cash, outside of any investments. In a declining, deflationary event, which may be occurring at this very moment, cash will be king. In a complete rout of economy, society and civility, gold and silver will reign supreme. Both situations have great potential at the current time.
Today's action was in stark contrast to the dip and rally from Tuesday, as news coming out of Japan just continues to worsen, as most thinking people assumed it would. Without going into the gory details, it appears that the nuclear plant that has been a problem since Friday's earthquake/tsunami is headed toward at least partial meltdown and at worst total meltdown.
Making matters even more horrifying is that there are six reactors at the site. Up until now, only four of the six reactors at the Fukushima Daiichi site have been affected, with all four of them spewing radioactive material at some time or another over the past five days, though it now appears that reactors #5 and #6 are at risk as well.
Information from the site has been sketchy at times, contradictory at others, but confusing and increasingly worse all along. It appears that the Japanese people are in for a long period of pain and suffering, and the implications are likely to be felt worldwide.
On Wall Street, where bulls ignore the obvious and bears hope against the worst, but bet on it, stocks were down in the early going until just before 11:00 am EDT, when news came, via a government official, that the situation at the plant had worsened considerably. That sent stocks into an absolute tailspin, with a full 1% decline within minutes of the news.
A rally was attempted when stocks hit their lows of the day at 2:00 pm, but it sputtered badly and the markets stared grimly at one of the largest one-day losses of the past two years.
Dow 11,613.30, -242.12 (2.04%)
NASDAQ 2,616.82, -50.51 (1.89%)
S&P 500 1,256.88, -24.99 (1.95%)
NYSE Composite 7,929.87, -162.24 (2.00%)
Confirming the carnage suggested by the headline numbers, declining issues battered advancers, 4889-1704. It's amazing it wasn't even more lopsided. Our leading current indicator has finally offered confirmation of a directional trend. New highs on the NASDAQ numbered 31, new lows, 74. On the NYSE, 31 new highs and 38 new lows. That makes five straight days on the NASDAQ that new lows have outnumbered new highs and three out of five on the NYSE.
If anyone's been waiting for indicators to flash red with sirens blaring, today was it. Japan's woes will continue to dominate the news for the foreseeable future and the associated supply chain issues of a globalized economy are beginning to come to light. Shipments of crucial parts are going to be delayed or stopped, trade will suffer and a large chunk of the world's third largest economy is going off-line for a while. Whether that is going to be weeks or months or years is still unknown, but the betting is that disruptions will extend through at least the end of the summer.
Another tell-tale sign that today was a day of capitulation by the bulls in US stocks was told by the off-the-charts volume in today's trading. It was the largest volume day of 2011 and may still be dwarfed by the eventual follow-on decline. One caveat is that the Fed continues its abuse of the US dollar by printing more of them at every opportunity. A decline in US stock markets will only trigger more printing, more inflation and an even more unbalanced global economy, one that was already teetering on the brink of disaster, even before the Japan debacle. However, such an inordinate infusion of capital may cause a snapback rally at any time. If such occurs, it will be easy to spot, as it will be sharp and large. The other characteristic of such an event is that it will have a relatively short duration - an afternoon, a day, a session and part of another, at most.
NASDAQ Volume 2,596,625,000
NYSE Volume 6,569,946,500
Commodities caught some bids, as sellers of equities rushed to less-risky assets. Oil was up 80 cents, to $97.98 as conditions in the Middle East continue to rage on, unsettled. Gold gained $3.30, to $1,396.10, and silver was up 36 cents, to $34.47. The move in precious metals is particularly interesting as it is a break-away from equities. Tuesday, all assets fell in a rush to liquidity. Today, the players were placing bets: for precious metals and other valuable commodities and against stocks and currencies.
Since there is no quick fix to nuclear accidents, especially those being mentioned alongside Chernobyl - the worst ever - don't expect the plant in question in Japan to be repaired for some time, if ever. Officials are only now poring over whether to entomb the reactors with heavy doses of cement or continue containment efforts, which are not working very well at present.
At this point, any intelligent human should take advantage of the short-term decline in the precious metals, but also maintain a large sum of cash, outside of any investments. In a declining, deflationary event, which may be occurring at this very moment, cash will be king. In a complete rout of economy, society and civility, gold and silver will reign supreme. Both situations have great potential at the current time.
Tuesday, March 15, 2011
Optimism Can Be Good or Bad
Americans are an optimistic lot. Nothing wrong with that, as long as some of the optimistic sentiment is grounded in reality. There's a big difference between wishing and hoping for some desired result that may not have a good chance of happening and confidence based on experience and factual data.
Overnight, conditions in Japan took a turn for the worse as another reactor at the damaged Fukushima Daiichi nuclear facility about 100 miles North of Tokyo suffered an explosion. Japanese officials tried to appear calm, but the fear and panic on their faces was not easy to hide. Reactor #2 at the plant incurred a violent explosion that reportedly damaged part of the containment vessel which holds the unstable rods of highly-charged uranium.
Shortly after that blast, a fire in reactor #4 was reported to have occurred in the pools holding spent fuel rods, also highly toxic and radioactive. Reactors #2 and #3 had already been damaged by xplosions in the aftermath of the 9.0 earthquake and tsunami which hit the island nation on Friday.
The Japanese stock market, the NIKKEI 225, suffered a substantial loss of nearly 11% before trading was halted. Other Asian markets took losses as well, and European markets were down more than 2% when stocks opened in New York.
The drop on the open was a stark and panic-stricken response to what appeared to be possible meltdown in the #2 reactor and spreading risk of contamination to a large area of Japan. A radius of 20 kilometers (12 miles) was evacuated and another in another area further out - to 30 kilometers - residents were told to stay inside due to increased risk of exposure to radioactive elements in the air.
Most of the news occurred during the night for Americans, so there was a bit of unease at the open. The Dow fell 310 points in the opening minutes of the session, with the other major indices taking similar falls.
But, as it turns out, that was the worst of it for US stocks, which rallied in a diagonal path all day as no new news came from Japan. While traders put their most optimistic attitude front and center, the conditions in Japan are still very much in a state of flux. For now, most of the damage has been contained, but the risk of complete meltdown of any one of the three badly-damaged reactors is still prevalent, which is why the attitude of the American traders and investors may be a bit premature.
Besides the nuclear plant situation, conditions on about a third of the main island remain challenging and desperate. Aid is only now reaching some of the victims, the death toll continues to mount and reconstruction is still weeks and months from even beginning. The scope of the devastation is being underplayed by American media. This is a disaster that will play out over months and years, not days and weeks.
The major indices still suffered substantial losses, though they easily could have been worse. The intra-day drops of the past two days have broken through support areas - areas that will be retested before any hint of a rally occurs.
Dow 11,855.42, -137.74 (1.15%)
NASDAQ 2,667.33, -33.64 (1.25%)
S&P 500 1,281.87, -14.52 (1.12%)
NYSE Composite 8,092.11, -101.85 (1.24%)
Declining issues slaughtered advancers, 5101-1536. There were 23 new highs on the NASDAQ, but those were overshadowed by 134 new lows. On the NYSE, only 29 stocks hit new highs, while 77 made new lows. This was the 4th consecutive day of new lows beating new highs on the NASDAQ and the second in the last four for the NYSE.
From a technical perspective, the high/low readings are beginning to develop into a trend, which, if confirmed by further continuation, will produce one of the strongest directional indicators to be found. The divergence of new highs and new lows normally becomes a long trm trend, lasting anywhere from six months to more than two years as it is a primary trend indicator. While there are no hard and fast rules surrounding that particular metric, any change lasting more than a week in duration should be confirmation of the new direction of the markets, in this case, down.
What is occurring inside the US markets is very much the result of too much money in the system. Today's action in global markets was a liquidity-driven event, as assets of all nature were liquidated in favor of the relative safety of cash. Since the Federal Reserve has been pumping money out at an unprecedented rate, today's sudden drop and subsequent rally has all the characteristics of a flooded market with an unstable or unreliable base.
It's very much the same as an old car that has trouble starting and running. A jump may get the batteries to deliver enough juice to get it rolling, but problems inside the engine cause it to stall out again. Fixes are short-term, before a mechanic says the engine needs a complete overhaul.
That is precisely the situation in US markets. The issues coming from Japan are masking real, structural problems below and the daily new highs vs. new lows on the NASDAQ are flashing warning lights that many are ignoring at the peril of their capital.
Volume was extremely high today as well, another bearish indication.
NASDAQ Volume 2,371,639,000
NYSE Volume 5,944,351,500
What made matters even more convincing that the drops in global markets were driven by a rush for liquidity were evident in commodities. WTI crude oil futures were absolutely hammered, losing $4.01, to $97.18. We can only hope that the world-wide community can see the oil market for what it really is - bloated with excessive supply and wildly overpriced as compared to real economic conditions - and continue selling it off until balance is restored at around the $75-85 per barrel level.
Gold was hit hard as investors raced into cash positions, losing $32.10 on the day, to 1,392.80, but down much more in earlier trading. Silver also took a substantial hit, off $1.72, to $34.12.
Once there is some clarity to Japan's situation, the precious metals should continue their interrupted rally, or, at the worst, outperform stocks in a big way.
There's still far too much uncertainty in the world to be fooling with paper assets unless you're a skilled day-trader who can afford to take occasional large losses. For the rest of us, the safety and security of gold and/or silver are second to none.
Overnight, conditions in Japan took a turn for the worse as another reactor at the damaged Fukushima Daiichi nuclear facility about 100 miles North of Tokyo suffered an explosion. Japanese officials tried to appear calm, but the fear and panic on their faces was not easy to hide. Reactor #2 at the plant incurred a violent explosion that reportedly damaged part of the containment vessel which holds the unstable rods of highly-charged uranium.
Shortly after that blast, a fire in reactor #4 was reported to have occurred in the pools holding spent fuel rods, also highly toxic and radioactive. Reactors #2 and #3 had already been damaged by xplosions in the aftermath of the 9.0 earthquake and tsunami which hit the island nation on Friday.
The Japanese stock market, the NIKKEI 225, suffered a substantial loss of nearly 11% before trading was halted. Other Asian markets took losses as well, and European markets were down more than 2% when stocks opened in New York.
The drop on the open was a stark and panic-stricken response to what appeared to be possible meltdown in the #2 reactor and spreading risk of contamination to a large area of Japan. A radius of 20 kilometers (12 miles) was evacuated and another in another area further out - to 30 kilometers - residents were told to stay inside due to increased risk of exposure to radioactive elements in the air.
Most of the news occurred during the night for Americans, so there was a bit of unease at the open. The Dow fell 310 points in the opening minutes of the session, with the other major indices taking similar falls.
But, as it turns out, that was the worst of it for US stocks, which rallied in a diagonal path all day as no new news came from Japan. While traders put their most optimistic attitude front and center, the conditions in Japan are still very much in a state of flux. For now, most of the damage has been contained, but the risk of complete meltdown of any one of the three badly-damaged reactors is still prevalent, which is why the attitude of the American traders and investors may be a bit premature.
Besides the nuclear plant situation, conditions on about a third of the main island remain challenging and desperate. Aid is only now reaching some of the victims, the death toll continues to mount and reconstruction is still weeks and months from even beginning. The scope of the devastation is being underplayed by American media. This is a disaster that will play out over months and years, not days and weeks.
The major indices still suffered substantial losses, though they easily could have been worse. The intra-day drops of the past two days have broken through support areas - areas that will be retested before any hint of a rally occurs.
Dow 11,855.42, -137.74 (1.15%)
NASDAQ 2,667.33, -33.64 (1.25%)
S&P 500 1,281.87, -14.52 (1.12%)
NYSE Composite 8,092.11, -101.85 (1.24%)
Declining issues slaughtered advancers, 5101-1536. There were 23 new highs on the NASDAQ, but those were overshadowed by 134 new lows. On the NYSE, only 29 stocks hit new highs, while 77 made new lows. This was the 4th consecutive day of new lows beating new highs on the NASDAQ and the second in the last four for the NYSE.
From a technical perspective, the high/low readings are beginning to develop into a trend, which, if confirmed by further continuation, will produce one of the strongest directional indicators to be found. The divergence of new highs and new lows normally becomes a long trm trend, lasting anywhere from six months to more than two years as it is a primary trend indicator. While there are no hard and fast rules surrounding that particular metric, any change lasting more than a week in duration should be confirmation of the new direction of the markets, in this case, down.
What is occurring inside the US markets is very much the result of too much money in the system. Today's action in global markets was a liquidity-driven event, as assets of all nature were liquidated in favor of the relative safety of cash. Since the Federal Reserve has been pumping money out at an unprecedented rate, today's sudden drop and subsequent rally has all the characteristics of a flooded market with an unstable or unreliable base.
It's very much the same as an old car that has trouble starting and running. A jump may get the batteries to deliver enough juice to get it rolling, but problems inside the engine cause it to stall out again. Fixes are short-term, before a mechanic says the engine needs a complete overhaul.
That is precisely the situation in US markets. The issues coming from Japan are masking real, structural problems below and the daily new highs vs. new lows on the NASDAQ are flashing warning lights that many are ignoring at the peril of their capital.
Volume was extremely high today as well, another bearish indication.
NASDAQ Volume 2,371,639,000
NYSE Volume 5,944,351,500
What made matters even more convincing that the drops in global markets were driven by a rush for liquidity were evident in commodities. WTI crude oil futures were absolutely hammered, losing $4.01, to $97.18. We can only hope that the world-wide community can see the oil market for what it really is - bloated with excessive supply and wildly overpriced as compared to real economic conditions - and continue selling it off until balance is restored at around the $75-85 per barrel level.
Gold was hit hard as investors raced into cash positions, losing $32.10 on the day, to 1,392.80, but down much more in earlier trading. Silver also took a substantial hit, off $1.72, to $34.12.
Once there is some clarity to Japan's situation, the precious metals should continue their interrupted rally, or, at the worst, outperform stocks in a big way.
There's still far too much uncertainty in the world to be fooling with paper assets unless you're a skilled day-trader who can afford to take occasional large losses. For the rest of us, the safety and security of gold and/or silver are second to none.
Subscribe to:
Posts (Atom)
Posts
