Troubling Pattern Continues on Mixed Data

For some reason, stocks continue to take on the same daily trading pattern that has persisted for roughly four weeks now. All of the major indices will start sharply to the downside, only to gather momentum throughout the session.

How stocks go up, after being down early, is a matter for some conjecture. It could be simply a function of the HFT computers which account for 70% off all trading action, it could be an algo designed to take profits early in the day and reinvest later, or it could be something sinister, like market manipulation via the PPT (Plunge Protection Team), which, despite scary market conditions and a shaky economy, still wants to give the impression that the US is in the midst of a recovery.

Whatever the case, it's disturbing to see the same or similar patterns, day in and day out, but conclusions cannot be drawn on patterns alone. Suffice it to say that it's out there for everyone to see - like a zombie market rising from the dead - and until there's a positive catalyst or the wheels fall completely off this liquidity-fueled rally (now into its sixth month without even a five percent pullback), there's little anybody can do about it except confirm its existence.

There were plenty of reasons to sell off today, as China lowered its 2012 GDP estimate from 8% to 7.5% (we should be so fortunate). That half percent may be insignificant, though it is largely understandable, as global growth has pretty much stalled for the past two years and China has been the major exporter during that time. As the People's Republic turns its attention more to the domestic side of things, it should be a signal that the export boom that was largely fed by the US and Europe has come to an end.

European PMI fell to 49.3 in February from 50.4 in January, another sign that Europe is careening toward a recession, and that certainly cannot be good news for the US, either. Besides the absurdity of their dragged-out debt crisis, high prices for fuel and food, and the necessity for structural reform, Europe continues to appear as the proverbial straw that will break the back of the global economic camel. All bourses in Europe finished in the red on the day.

Here in the US, the ISM Services Index showed some resilience, gaining to 57.3 after a print of 56.8 in January, leading some commentators to suggest that strong data in the services sector should result in a lower unemployment rate for February when the BLS issues its non-farm payroll data set on Friday.

One of the more reliable indicators, however continues to display weakness. That would be the Dow Jones Transports, which has not followed the rally of late. After peaking on February 3rd, the index has lost close to 5% since, and any Dow Theory analyst worth his salt will tell you that if the Transports don't confirm a move in the blue chip, there's almost certainly trouble ahead.

And again today, trading volume was absolutely dismal.

Then again, the world didn't end in 2008, but the road back has been long and hard. Food for thought.

Dow 12,962.81, -14.76 (0.11%)
NASDAQ 2,950.48, -25.71 (0.86%)
S&P 500 1,364.33, -5.30 (0.39%)
NYSE Composite 8,091.28, -33.90 (0.42%)
NASDAQ Volume 1,677,286,125
NYSE Volume 3,402,625,250
Combined NYSE & NASDAQ Advance - Decline: 2383-3225
Combined NYSE & NASDAQ New highs - New lows: 132-49 (trending toward convergence)
WTI crude oil: 106.72, +0.02
Gold: 1,703.90, -5.90
Silver: 33.70, -0.83

Down Day All Around as Week Ends; Spain says 'No' to Austerity

Either everybody and their brothers-in-law were taking profits on Friday or there's some kind of disturbance in the Force, because not only were stocks down, but so were oil, gold and silver.

Just for the record, it was another brutally low volume day in equities and very light on economic data. Sure enough, however, our friends in Europe attempted to make things interesting as Spanish Prime Minister Mariano Rajoy defied his EU overlords in Brussels by setting a softer budget target than originally agreed upon.

The targeted budget deficit for 2012 was supposed to be no larger than 4.4 percent of GDP, but Rajoy targeted a deficit that will amount to 5.8 percent of assumed GDP.

Of course, the numbers game is a nebulous one, especially considering Spain's unemployment rate hovering around 20% nationwide.

As EU leaders prepared for a summit beginning Saturday in Brussels, they were greeted by hundreds of union protesters railing against austerity. Similar protest were held in Greece and Spain. Across Spain, students protested cuts to education budgets and the demonstrators clashed with police in Barcelona.

The Spanish demonstrations were large, estimated in the tens of thousands.

Back here on planet America, there were no protests of any size to speak of, though it seemed like everyone was more in a mood to forget about money and budgets and just go home for the weekend.

Dow 12,977.57, -2.73 (0.02%)
NASDAQ 2,976.19, -12.78 (0.43%)
S&P 500 1,369.63, -4.46 (0.32%)
NYSE Composite 8,125.17, -49.94 (0.61%)
NASDAQ Volume 1,754,632,875
NYSE Volume 3,346,330,500
Combined NYSE & NASDAQ Advance - Decline: 1748-3844
Combined NYSE & NASDAQ New highs - New lows: 185-42 (beginning of convergence?)
WTI crude oil: 106.70, -2.14
Gold: 1,709.80, -12.40
Silver: 34.52, -1.14

Metals, Stocks Rebound; Oil Continues Relentless Rise

After a one-day hiatus from the usual upward trend, stocks, and especially gold and silver rebounded in the midst of the liquidity-fueled rally, though the move in the metals - especially silver - was stronger than the one in equities.

Keeping the lid on stocks somewhat throughout the session were lingering fears of an oil price shock, as WTI crude rose again, mostly on nothing but idle speculation over the situation in Iran, which is largely unfounded and without credibility as the closure of the Strait of Hormuz by the Iranians would be tantamount to economic suicide since they also use the strait to ship their oil produce.

Nonetheless, oil was up almost $2.00 on floor trading and wholesale gas prices rose by another nine cents, a cost which will almost all be passed along to the (un)happy motorists.

The national average for unleaded regular stood at $3.78/gallon according to AAA, with the highest price on the mainland being found in California ($4.33) and the lowest in Wyoming, at $3.17. The states of Oregon, Washington, New York and Illinois are closing in on the $4.00 mark, despite national consumption having dropped to historic low levels over the past six months.

Also putting a damper on investor enthusiasm was today's big miss on the ISM Index, which came in at 52.4 for February, after a reading of 54.1 in January and expectations for 54.7, though that was tempered with another solid reading on initial unemployment claims, which again came in at 351K. Last week's 351K was revised upward to 353K.

Even though gold didn't even come close to recovering the losses from Wednesday, it is still above its trend line and the price of silver moved back above what everyone believes to be key support/resistance at $35.50.

With little on the calendar for Friday, traders will be looking for any kind of catalyst. Perhaps our friends across the pond in Europe will provide some theatrics. They've been eerily quiet for almost two full days... seems like an eternity.

Dow 12,980.30, +28.23 (0.22%)
NASDAQ 2,988.97, +22.08 (0.74%)
S&P 500 1,374.09, +8.41 (0.62%)
NYSE Composite 8,175.20, +61.95 (0.76%)
NASDAQ Volume 1,887,835,875
NYSE Volume 3,910,319,750
Combined NYSE & NASDAQ Advance - Decline: 3532-2096
Combined NYSE & NASDAQ New highs - New lows: 244-30
WTI crude oil: 108.84, +1.77
Gold: 1,722.20, +10.90
Silver: 35.66, +1.02

Much Ado About LTRO, or, Ben-Zero Bernanke's Attack on Gold (and silver)

As mentioned here yesterday, the turbid markets were about to get a lot more interesting with the ECB's LTRO and Ben Bernanke's testimony before the House.

What a fascinating and interesting look inside the workings of coordinated central bank policy it was.

Europe's LTRO went off, as expected, without a hitch. According to the Wall Street Journal:

The European Central Bank released the results Wednesday of the second round of its long-term refinancing operation. A total of 800 banks participated, and the ECB allotted €529.53 billion in the three-year refinancing operation.

This was more than the €489 billion the ECB loaned out to 523 banks in December on the same terms, 1% over three years. Giddy-up!

Perhaps the "struggling" banks - which will now park most of the money at the EBC for a 0.75% annual loss - thought that this was their last chance at almost-free money and more of them jumped at the chance, despite the stigma associated with suspect, "bailout" money, which is part of the reason why so many people the world over despise bankers. They will take when money's cheap, but they will not loan it out to businesses or individuals despite usurious rates of return. Rather, they will take a loss in order to retain their lofty position as worthy of "salvation."

Thus, the banks have become the scourge of the earth, keeping their wealth to themselves and impoverishing every man, woman and child on the planet in the process.

So, no big news there. More of the same by the kleptocracy.

European equity markets responded with a large yawn, finishing mixed, but mostly down, the worst hit being the UK's FTSE.

Buoyed by the success in Europe and a positive second revision to 2011 fourth quarter GDP (up to 3.0% after an intial reading of 2.8%), US stocks opened with a mild upside bias.

Then came round two, when the central bank plans really came together. As soon as Ben Bernanke started speaking, gold and silver began dropping, fast, like $3.50 in just over an hour for silver, from $37.50 to $34.00 the ounce.

Gold was off by as much as $80 in the same time span, and oil also took a hit, but - get this - oil recovered to finish the day with a gain. the precious metals, anathema to central bankers, recovered a bit, though not much.

The widely-spread rationale was that Bernanke was not his usual dovish self, as he didn't signal that any further quantitative easing (QE) was forthcoming from the Fed. Naturally, this cover story flies in the face of the Fed's lax monetary zero interest rate policy (ZIRP), Operation Twist and the ceaseless, clandestine money-pumping which the Federal Reserve has engaged in for the last three years running.

As a bonus, the central bank market interventionists even managed to take a little steam out of stocks, as all major US indices finished lower, but nowhere near the percentage losses suffered by those crazy gold and silver investors who believe - rightly - that the PMs are actually money and a better store of value than fiat money which is printed on demand by the globalists. Interestingly, trading volume today was the highest seen in weeks.

Perhaps precious metals investors should have known something bad was about to happen when Texas congressman and presidential candidate Ron Paul harangued Bernanke on inflation, monetary policy and the role of the Fed, brandishing a silver coin and telling the chairman that the Fed would eventually "self-destruct."

Here's the fascinating video:



A few more experts weighing in on today's "gold smash" included Jim Sincliar, who called today's action "window dressing" for more QE, and Sprott Asset Management's John Embry, who called out the bullion banks as manipulators.

The situation could not be more clear. Central banks will print, print, print until they've inflated away all wealth, and they will hate gold (and silver) and keep prices artificially low, until the day comes when they dump all their worthless paper assets en masse and buy up every last ounce of the yellow metal.

Until then, don't fall for the "no new QE" stories. The printing presses will run non-stop. They have to, since the global bankers, with tacit permission from the pals in government, have produced a no-win situation by trying to solve a solvency problem with liquidity, throwing more debt on top of already too much debt, as if pouring more water onto a drowning man is supposed to help save him.

Dow 12,952.07, -53.05 (0.41%)
NASDAQ 2,966.89, -19.87 (0.67%)
S&P 500 1,365.68, -6.50 (0.47%)
NYSE Composite 8,113.55, -58.00 (0.71%)
NASDAQ Volume 2,092,803,750
NYSE Volume 4,389,318,500
Combined NYSE & NASDAQ Advance - Decline: 1726-3925
Combined NYSE & NASDAQ New highs - New lows: 230-40
WTI crude oil: 107.07, +0.52
Gold: 1,711.30, -77.10
Silver: 34.58, -2.56

Dow Finally Closes Above 13,000 as Silver Breaks Out

Fueled by ever-larger injections of liquidity from the world's central banks, US equity markets have been disconnected from economic reality for some time, but today's shrug of the shoulders to two key economic reports has to make old-time "investors" wondering if hard numbers actually mean anything anymore.

Prior to the open, the Commerce Department released durable order data for January, which showed a 4.0% decline over the prior month. (Shrug shoulders if you trade stocks)

At 10:00 am, S&P/Case-Shiller data on home prices came in with a loud thud, matching the durable number at -4.0% for December. The widely watched index of home prices has now exceeded the post-crash lows and is at its lowest level since February, 2003, a 33.8% drop from the peak. If there is a recovery in housing, it certainly is well-hidden.

Despite the negativity of stubborn reality, stocks managed to post small gains across the board, with the Dow Jones Industrials closing above 13,000 for the first time since May, 2008. (cue fanfare here)

So, now that everybody can pop the champagne and don their "Dow 13,000" beanies, what's next?

Just in case you've tired of the constancy of the stock market, hovering around Dow 13,000 for more than a week in a very slow-moving, retarded kind of way on abysmally-low volume, take heart! Things are about to get a whole lot more interesting beginning Wednesday.

That's the day the ECB unleases its latest attempt to advance liquidity and goose markets (and inflation) with the second installment of the LTRO (Long Term Refinancing Operation), in which European banks will be offered up to EUR500 billion in three-year loans at the bargain-basement price of 1% (how appropriate!).

Back in December, the ECB did the same thing, and EUR489 billion was snatched up by some 523 institutions, though much of the money was eventually parked right back at the ECB, earning a measly 0.25%, resulting in small, albeit manageable losses for many of Europe's largest banks. To the banks, the 0.75% negative carry seemed a good enough deal to have funds on hand should the crisis deepen or a rogue trader muck up the balance sheet.

Ideally, the ECB would like the funding banks to snatch up more of that juicy sovereign debt that continues to float around in the Eurozone like so much flotsam and jetsam, but the LTRO also carries something of a stench of its own, via the equity markets, where the takers of the nearly-free money are cast under a dubious light.

No matter the particular cases for individual banks, tomorrow's "funding" should be making headlines about the time US stock markets ring their bells of jubilation.

Also tomorrow, America's central banker, Ben Bernanke, chairman of the Federal Reserve, will be before congress, making his required testimony before the House Finance Committee. Since the chairman's stuttering mouthfuls usually carry significant weight for the financial markets, he might make some news, though probably not, being the conscientious type who only prefers to move markets the old fashioned way, by getting the printing presses rolling full boar in the basement at the Fed.

Thursday and Friday feature a full meeting of EU ministers, with the $2 Trillion "firewall" topping the agenda.

Now, to the casual observer, these events may not evoke much excitement, but financial market players will be glued to their tubes, pads or whatever electronic means they have of staying abreast of developments and there just may be some fireworks. Of course, there may not, as these bulwarks of capitalism are about as open-minded and free-speaking as corpses in straightjackets.

On the other hand, any kind of adventurous talk or under-over funding take-up could move markets substantially, which is just what some traders would like to experience, rather than the Chinese water torture of the past seven or so sessions.

Meanwhile, what equity traders hate to admit, is that silver has been outperforming just about every other asset class in the known universe, up 30% on the year and breaking through resistance today on a powerful move forward.

In an interview with King World News, chartist Dan Norcini notes that silver has breached resistance at $35.50 and broken above the 50-day moving average. Today's 4% move higher was largely due to shorts having to cover their positions. Norcini says shorts are panicked and the next resistance level is around $40/ounce.

In the below video, Jon Najarian of Options Monster explains how the big players are looking for a breakout in silver. Enjoy.

Dow 13,005.27, +23.76 (0.18%)
NASDAQ 2,986.76, +20.60 (0.69%)
S&P 500 1,372.18, +4.59 (0.34%)
NYSE Composite 8,171.84, +28.29 (0.35%)
NASDAQ Volume 1,755,641,125
NYSE Volume 3,487,070,500
Combined NYSE & NASDAQ Advance - Decline: 2805-2796
Combined NYSE & NASDAQ New highs - New lows: 253-21
WTI crude oil: 106.55, -2.05
Gold: 1,788.40, +13.50
Silver: 37.14, +1.62