Flash back to March 6, 2009 and what does one find?
The S&P 500 was trading at 666.79, which would eventually become known as "the bottom," the intraday low for stocks after the great crash which began in earnest in October of 2008.
As late as September 19, 2008, the S&P had traded as well the mid 1200s, closing, on that date, at 1255.08. Nearing the end of October, the same index was in the 800s (October 27: 848.92), nearly a 33% haircut in just over a month.
Gains that had taken years to produce were dissipated in less than 30 trading sessions. That was only a sideshow. The slide that began in 2007, started from a high point of 1565.15 (the close on October 9, 2007) had taken a full year to gut the S&P, cutting the valuation nearly in half. The rest of the damage would be done in the fall and winter of 2008-09, for a total rout of 57.4%, wiping out the savings of millions of Americans and foreign investors.
Most people aren't aware of the extraordinary measures taken by the Federal Reserve and other central banks around the world to stop the plunge, but perhaps the most instructive - and eventually damaging - measure was taken by the FASB (Federal Accounting Standards Board) on April 2nd, 2009, to suspend rule 157, relieving financial institutions - primarily the too-big-to-fail banks - of the rigors of mark-to-market accounting. The banks would no longer have to value assets at any perceived market value, but at any value they deemed "reasonable" or otherwise flattering to their balance sheets.
At the time, the banks were saddled with billions of dollars worth of nearly-worthless mortgages, which they themselves had originated, or bought, in the bubbly real estate market of the early-to-mid 2000s. The entire bubble they created had burst, assets were impaired, homeowners were walking away from commitments they should never have made on houses they normally could never had qualified to buy.
Eventually, the Fed came in and rescued the banks further, buying up all the toxic paper in various rounds of QE, the last one ending in 2014. By then the markets had recovered, stocks had soared to new, unimaginable heights, and the global economy was pronounced "saved."
But, the FASB has never reinstated rule 157, meaning, in simple terms, that bank assets are still, to this day, based on fictional valuations.
To get an idea just how far down the rabbit hole price discovery has gone, just contemplate for a moment that Erin Andrews has been awarded a judgment of $55 million for being peeped upon in a hotel and having a video of her distributed online. Some models have posed au natural for significantly less.
Seriously, is anybody's body, or their pride, worth $55 million? The hotel she is suing isn't even worth anything close to that amount of money, so, in effect, this jury basically awarded the victim the entire assets of the hotel, and more.
Andrews will never see that money, however. Nobody has all of it. She will get some, her lawyers will get a third or more, of whatever she can recover, but, in essence, Erin Andrews is now a hotel owner.
Yes, she was wronged, but the point is that price discovery was done away with in 2009 with the suspension of rule 157, and nobody can place accurate valuations on anything.
Is gold worth $1200 an ounce, or $600, or $30,000. Is your car worth $35,000? Who knows? It's all relative now.
And relativity, in the sciences at least, is still theoretical.
So is existence. And we're back to where we began. Whoever can set the prices, dictates the terms. For now, the markets - as rigged and manipulated as they are - sets the prices. That's not going to last.
Good night.
S&P 500: 2,001.76, +1.77 (0.09%)
Dow: 17,073.95, +67.18 (0.40%)
NASDAQ: 4,708.25, -8.77 (0.19%)
Crude Oil 37.87 +5.43% Gold 1,268.40 -0.18% EUR/USD 1.1014 -0.0018% 10-Yr Bond 1.9020 +1.01% Corn 359.50 +0.35% Copper 2.28 +0.24% Silver 15.67 -0.15% Natural Gas 1.69 +1.56% Russell 2000 1,094.15 +1.13% VIX 17.35 +2.91% BATS 1000 20,677.17 0.00% GBP/USD 1.4257 -0.04% USD/JPY 113.4160 +0.03%
Monday, March 7, 2016
Thursday, March 3, 2016
All Eyes on Non-Farm Payrolls, But ECB and FOMC Hold More Intrigue for Stocks
Following Wednesday's low-volume advances (lowest of the year), stocks followed a similar pattern in Thursday's trading regimen, slumping at the open, only to rise through the day and close modestly green.
While the talking heads on Bloomberg and CNBC are hyperventilating over the February non-farm payroll report due out tomorrow morning, the true market-moving events concern central banks and they don't occur until next week and the following, beginning with the ECB policy announcement on March 10, and the FOMC meeting March 15-16.
After ADP's February private sector number coming in at 214,000 Wednesday morning, the market is expecting something in that range from the BLS, with consensus just a shade below 200,000.
Whatever the number, it should weigh on any rate decision the Fed has planned or is considering. Another 25 basis point hike in the federal funds rate at this meeting has been largely discounted by the market, meaning, that if the Fed stands pat on rates, then it is tacit understanding that their goal of four more hikes by the end of the year is very much being scrapped.
There are simply too many negative forces pulling at the Fed for them to do another rate hike. Everything from the fragile US economy to the cratering Yuan and Chinese GDP growth to the nut-case presidential primaries are under consideration by the most politically-motivated central bank in the known universe.
That is to say nothing of the 1500-point hissy fit thrown by the DJIA after the most recent rate increase, in December of last year.
Stocks continue to keep to the script here, with the S&P within hailing distance of 2000, and the Dow closing in fast on 17,000. Both are admirable short-term goals, but they will hardly prove to be persistent. Stocks are becoming severely overbought and overvalued, and charts show all kinds of evidence that the bull run from 2009 has ended. Besides, there's growing fears of a recession looming, especially after the poor performance not only of the past two quarters, but of the general seven-year-long recovery.
The key level is 17,200 for the Dow, a point at which there is a significant patch of heavily-fortified resistance.
The Bureau of Labor Statistics (BLS) will release the February non-farm payroll report at 8:30 am ET, Friday.
S&P 500: 1,993.40, +6.95 (0.35%)
Dow: 16,943.90, +44.58 (0.26%)
NASDAQ: 4,707.42, +4.00 (0.09%)
Crude Oil 34.60 -0.17% Gold 1,262.10 +1.63% EUR/USD 1.0963 +0.89% 10-Yr Bond 1.83 -0.97% Corn 355.50 -0.21% Copper 2.21 +1.26% Silver 15.23 +1.38% Natural Gas 1.64 -2.09% Russell 2000 1,076.05 +0.97% VIX 16.70 -2.28% BATS 1000 20,677.17 0.00% GBP/USD 1.4178 +0.71% USD/JPY 113.65
While the talking heads on Bloomberg and CNBC are hyperventilating over the February non-farm payroll report due out tomorrow morning, the true market-moving events concern central banks and they don't occur until next week and the following, beginning with the ECB policy announcement on March 10, and the FOMC meeting March 15-16.
After ADP's February private sector number coming in at 214,000 Wednesday morning, the market is expecting something in that range from the BLS, with consensus just a shade below 200,000.
Whatever the number, it should weigh on any rate decision the Fed has planned or is considering. Another 25 basis point hike in the federal funds rate at this meeting has been largely discounted by the market, meaning, that if the Fed stands pat on rates, then it is tacit understanding that their goal of four more hikes by the end of the year is very much being scrapped.
There are simply too many negative forces pulling at the Fed for them to do another rate hike. Everything from the fragile US economy to the cratering Yuan and Chinese GDP growth to the nut-case presidential primaries are under consideration by the most politically-motivated central bank in the known universe.
That is to say nothing of the 1500-point hissy fit thrown by the DJIA after the most recent rate increase, in December of last year.
Stocks continue to keep to the script here, with the S&P within hailing distance of 2000, and the Dow closing in fast on 17,000. Both are admirable short-term goals, but they will hardly prove to be persistent. Stocks are becoming severely overbought and overvalued, and charts show all kinds of evidence that the bull run from 2009 has ended. Besides, there's growing fears of a recession looming, especially after the poor performance not only of the past two quarters, but of the general seven-year-long recovery.
The key level is 17,200 for the Dow, a point at which there is a significant patch of heavily-fortified resistance.
The Bureau of Labor Statistics (BLS) will release the February non-farm payroll report at 8:30 am ET, Friday.
S&P 500: 1,993.40, +6.95 (0.35%)
Dow: 16,943.90, +44.58 (0.26%)
NASDAQ: 4,707.42, +4.00 (0.09%)
Crude Oil 34.60 -0.17% Gold 1,262.10 +1.63% EUR/USD 1.0963 +0.89% 10-Yr Bond 1.83 -0.97% Corn 355.50 -0.21% Copper 2.21 +1.26% Silver 15.23 +1.38% Natural Gas 1.64 -2.09% Russell 2000 1,076.05 +0.97% VIX 16.70 -2.28% BATS 1000 20,677.17 0.00% GBP/USD 1.4178 +0.71% USD/JPY 113.65
Wednesday, March 2, 2016
Market Steady Ahead of NFP; ADP Reports Jobs Creation Strong
The snapback rally in stocks off the January lows cannot be understated, nor can it be stopped. There are simply not enough reasons to not own stocks, being that commodities have been decimated, bonds are beyond the reach or intellect of ordinary investors, and the fact that most of the investment advisors and fund managers of the world are reaching for yield, putting stocks first, to the detriment of everything and anything else.
But, today was a day for repositioning, after ADP got the party started by reporting that private employers added 214,000 jobs in February. [Full report here]
Stocks initially had the blues, trading in the red for most of the morning, until European markets closed, then quickly erasing all losses, hugging the UNCH line for the remainder of the session.
While stocks were lacking in volatility and volume, commodities got a bit of a boost, with oil, gold and silver headed handily higher.
It was a lackluster session due to uncertainty about next week's FOMC meeting, one which the Fed could conceivably raise interest rates, though analysts have largely dismissed that possibility.
The interim rally in stocks has, since the middle of February, clawed back more than two-thirds of the losses incurred during the six-week decline from the start of January to the middle of February. Nothing seems to be able to send stocks back to their 2016 lows, though getting back to all-time highs would be something of a surprise, considering the slow growth rates of economies around the world, and especially in developed nations.
There's a week left before the FOMC meeting, at which point sentiment may take a turn to the negative, though, if the Fed continues to keep rates at their abnormally low rates, the party crowd on Wall Street is likely to break out the champagne, hats, and favors, bidding up equities beyond reasonable valuations (some say they already have).
This is just normal churn, but no time to either stake out new positions nor panic. The markets seem content - like the US economy - to muddle along, delivering unsensational profits in a low-inflation, low-growth environment.
Friday's non-farm payroll report - as meaningless and unprovable as their spurious numbers might be - may provide some idea of sentiment going forward, but, at this point, the Fed is holding the most volatile hand of all the players, and they're not likely to bluff or fold. In typical Fed fashion, they'll be more likely to check, rather than raise the ante or call the hands.
Wednesday's Sleeper:
S&P 500: 1,986.45, +8.10 (0.41%)
DOW: 16,899.32, +34.24 (0.20%)
NASDAQ: 4,703.42, +13.83 (0.29%)
Crude Oil 34.65 +0.73% Gold 1,241.70 +0.89% EUR/USD 1.0867 -0.01% 10-Yr Bond 1.8480 +0.76% Corn 355.75 +0.07% Copper 2.19 +2.21% Silver 15.01 +1.69% Natural Gas 1.67 -4.13% Russell 2000 1,065.67 +1.06% VIX 17.12 -3.28% BATS 1000 20,677.17 0.00% GBP/USD 1.4079 +0.91% USD/JPY 113.38
But, today was a day for repositioning, after ADP got the party started by reporting that private employers added 214,000 jobs in February. [Full report here]
Stocks initially had the blues, trading in the red for most of the morning, until European markets closed, then quickly erasing all losses, hugging the UNCH line for the remainder of the session.
While stocks were lacking in volatility and volume, commodities got a bit of a boost, with oil, gold and silver headed handily higher.
It was a lackluster session due to uncertainty about next week's FOMC meeting, one which the Fed could conceivably raise interest rates, though analysts have largely dismissed that possibility.
The interim rally in stocks has, since the middle of February, clawed back more than two-thirds of the losses incurred during the six-week decline from the start of January to the middle of February. Nothing seems to be able to send stocks back to their 2016 lows, though getting back to all-time highs would be something of a surprise, considering the slow growth rates of economies around the world, and especially in developed nations.
There's a week left before the FOMC meeting, at which point sentiment may take a turn to the negative, though, if the Fed continues to keep rates at their abnormally low rates, the party crowd on Wall Street is likely to break out the champagne, hats, and favors, bidding up equities beyond reasonable valuations (some say they already have).
This is just normal churn, but no time to either stake out new positions nor panic. The markets seem content - like the US economy - to muddle along, delivering unsensational profits in a low-inflation, low-growth environment.
Friday's non-farm payroll report - as meaningless and unprovable as their spurious numbers might be - may provide some idea of sentiment going forward, but, at this point, the Fed is holding the most volatile hand of all the players, and they're not likely to bluff or fold. In typical Fed fashion, they'll be more likely to check, rather than raise the ante or call the hands.
Wednesday's Sleeper:
S&P 500: 1,986.45, +8.10 (0.41%)
DOW: 16,899.32, +34.24 (0.20%)
NASDAQ: 4,703.42, +13.83 (0.29%)
Crude Oil 34.65 +0.73% Gold 1,241.70 +0.89% EUR/USD 1.0867 -0.01% 10-Yr Bond 1.8480 +0.76% Corn 355.75 +0.07% Copper 2.19 +2.21% Silver 15.01 +1.69% Natural Gas 1.67 -4.13% Russell 2000 1,065.67 +1.06% VIX 17.12 -3.28% BATS 1000 20,677.17 0.00% GBP/USD 1.4079 +0.91% USD/JPY 113.38
Tuesday, March 1, 2016
Stars Align for Markets Amid Super Tuesday March Madness
While the Dems and Reps fight in various primaries for the right to represent as a party leader of the USA, US equity markets calmly said adieu at the opening bell and never gave a backward glance.
Tuesday's advance was one of the top three of the year, pushing off from the 50-day moving average on the Dow, which may well have been the anointed starting point for this leg of the extended rally. The close today was at the best level in nearly two months, something of a needed salve for banged-up bulls.
While there was little in the way of encouraging news for stocks to sound off so vociferously, there was certainly no absence of chart-wise subjectivism from which to spark.
As for a relationship to Donald Trump's or Hillary Clinton's seemingly unstoppable rise to become the nominee of their respective parties, there is probably none, though wiser people have made dumber bets that Hillary will be the eventual next president and further take out the case that she will be good for the economy. That happens to be the confirmed thinking of the status quo, which sees more Clinton-esque policies as somehow good for Wall Street (note: big hitters on the street have given heartily to her campaign and to the Clinton Foundation, whereas Mr. Trump has been largely self-funded).
Even bonds were in alignment with the general mood, the 10-year note closing at a multi-week high of 1.83%.
S&P 500: 1,978.35, +46.12 (2.39%)
Dow: 16,865.08, +348.58 (2.11%)
NASDAQ: 4,689.60, +131.65 (2.89%)
Crude Oil 34.39 +1.90% Gold 1,236.60 +0.18% EUR/USD 1.0871 -0.12% 10-Yr Bond 1.83 +5.40% Corn 356.00 -0.28% Copper 2.15 +0.63% Silver 14.92 +0.01% Natural Gas 1.74 +1.46% Russell 2000 1,054.49 +1.99% VIX 17.70 -13.87% BATS 1000 20,677.17 0.00% GBP/USD 1.3950 +0.17% USD/JPY 113.9270 +1.32%
Tuesday's advance was one of the top three of the year, pushing off from the 50-day moving average on the Dow, which may well have been the anointed starting point for this leg of the extended rally. The close today was at the best level in nearly two months, something of a needed salve for banged-up bulls.
While there was little in the way of encouraging news for stocks to sound off so vociferously, there was certainly no absence of chart-wise subjectivism from which to spark.
As for a relationship to Donald Trump's or Hillary Clinton's seemingly unstoppable rise to become the nominee of their respective parties, there is probably none, though wiser people have made dumber bets that Hillary will be the eventual next president and further take out the case that she will be good for the economy. That happens to be the confirmed thinking of the status quo, which sees more Clinton-esque policies as somehow good for Wall Street (note: big hitters on the street have given heartily to her campaign and to the Clinton Foundation, whereas Mr. Trump has been largely self-funded).
Even bonds were in alignment with the general mood, the 10-year note closing at a multi-week high of 1.83%.
S&P 500: 1,978.35, +46.12 (2.39%)
Dow: 16,865.08, +348.58 (2.11%)
NASDAQ: 4,689.60, +131.65 (2.89%)
Crude Oil 34.39 +1.90% Gold 1,236.60 +0.18% EUR/USD 1.0871 -0.12% 10-Yr Bond 1.83 +5.40% Corn 356.00 -0.28% Copper 2.15 +0.63% Silver 14.92 +0.01% Natural Gas 1.74 +1.46% Russell 2000 1,054.49 +1.99% VIX 17.70 -13.87% BATS 1000 20,677.17 0.00% GBP/USD 1.3950 +0.17% USD/JPY 113.9270 +1.32%
Monday, February 29, 2016
Stormy Monday Portends Trouble for Bullish Case
It's the last day of February. The market bulls could have added a little window dressing to make their case, but, instead, stocks vacillated from the open until just before noon, with losses mounting through the afternoon and into the close.
Not only is this an end of month Monday, but it is also the start of "jobs week," wherein all eyes will be peeled open in anticipation of Friday's non-farm payroll report for February. The structure of the market and the charts suggest that the rally of the prior two weeks has not only stalled out, but lost its bearings, since oil was markedly higher on the day. Stocks did not follow.
The problem with the oil/stocks pairing is that they are not and should not be aligned. Lower oil prices, have, over time, proven to be a boost for economies, but not necessarily the stock market. In reality, lower oil and distillate prices should be an overall boon for businesses, lowering a variable cost, thus potentially boosting profits. With the massive, global oversupply of crude that exists presently, the natural price of oil should be closer to $20 per barrel than $30.
Since the oil/stocks dichotomy is likely a false paradigm, the decoupling exposes the rigged market for what it really is: front-running algos, insider trading, forced trades at stops, short-covering rallies on vaporish volume and insidious surprise rebounds off questionable low points.
That's what makes today's slide all the more concerning. Perhaps the masks are coming off and the knives are coming out. We are undoubtably at the beginning of a secular bear market, with the long-toothed bull dying back in May of 2015. It's been downhill - with assorted fits and starts - since then, and markets are still in a search for the bottom.
Perhaps a one-off isn't enough to convince the bulls that the party is over. Stocks may well resume their rally as the week continues. As noted in Money Daily's weekend recap, the rally should have legs through the FOMC meeting before capitulation commences. However, it won't be the first time to be proven wrong, and surely not the last.
S&P 500: 1,932.23, -15.82 (0.81%)
Dow: 16,516.50, -123.47 (0.74%)
NASDAQ: 4,557.95, -32.52 (0.71%)
Crude Oil 33.89 +3.39% Gold 1,239.30 +1.55% EUR/USD 1.0877 -0.50% 10-Yr Bond 1.74 -1.25% Corn 357.25 -0.63% Copper 2.13 +0.19% Silver 14.94 +1.50% Natural Gas 1.71 -4.63% Russell 2000 1,033.90 -0.32% VIX 20.55 +3.74% BATS 1000 20,677.17 0.00% GBP/USD 1.3919 +0.41% USD/JPY 112.7050 -0.88%
Not only is this an end of month Monday, but it is also the start of "jobs week," wherein all eyes will be peeled open in anticipation of Friday's non-farm payroll report for February. The structure of the market and the charts suggest that the rally of the prior two weeks has not only stalled out, but lost its bearings, since oil was markedly higher on the day. Stocks did not follow.
The problem with the oil/stocks pairing is that they are not and should not be aligned. Lower oil prices, have, over time, proven to be a boost for economies, but not necessarily the stock market. In reality, lower oil and distillate prices should be an overall boon for businesses, lowering a variable cost, thus potentially boosting profits. With the massive, global oversupply of crude that exists presently, the natural price of oil should be closer to $20 per barrel than $30.
Since the oil/stocks dichotomy is likely a false paradigm, the decoupling exposes the rigged market for what it really is: front-running algos, insider trading, forced trades at stops, short-covering rallies on vaporish volume and insidious surprise rebounds off questionable low points.
That's what makes today's slide all the more concerning. Perhaps the masks are coming off and the knives are coming out. We are undoubtably at the beginning of a secular bear market, with the long-toothed bull dying back in May of 2015. It's been downhill - with assorted fits and starts - since then, and markets are still in a search for the bottom.
Perhaps a one-off isn't enough to convince the bulls that the party is over. Stocks may well resume their rally as the week continues. As noted in Money Daily's weekend recap, the rally should have legs through the FOMC meeting before capitulation commences. However, it won't be the first time to be proven wrong, and surely not the last.
S&P 500: 1,932.23, -15.82 (0.81%)
Dow: 16,516.50, -123.47 (0.74%)
NASDAQ: 4,557.95, -32.52 (0.71%)
Crude Oil 33.89 +3.39% Gold 1,239.30 +1.55% EUR/USD 1.0877 -0.50% 10-Yr Bond 1.74 -1.25% Corn 357.25 -0.63% Copper 2.13 +0.19% Silver 14.94 +1.50% Natural Gas 1.71 -4.63% Russell 2000 1,033.90 -0.32% VIX 20.55 +3.74% BATS 1000 20,677.17 0.00% GBP/USD 1.3919 +0.41% USD/JPY 112.7050 -0.88%
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