All-Time Highs Likely Not Attainable, Nor Sustainable

Let's take a stroll down memory lane.

It's a short stroll, to just over a year ago, when the Dow, S&P and NASDAQ each made all-time highs.

The dates, and the levels are shown below:

S&P 500: 2134.28 (intra-day); 2130.82 (close), May 21, 2015 (both)
Dow Jones Industrials: 18,351.36 (intra-day); 18,312.39 (close), May 19, 2015 (both)
NASDAQ: 5164.36 (intra-day, June 24, 2015); 5160.09 (close, June 23, 2015)

For the first trading day of May, the forward move was largely based on nothing other than bad economic data (manufacturing output is at its lowest level since 2009), other than the "good" news that Atlantic City avoided defaulting on a $1.8 million bond obligation and possible bankruptcy.

When the Jersey shore city announced they were making good on their scheduled payment to creditors - right around noon - that was enough for the markets to get off the proverbial flat-line and go diagonal the rest of the session.

Stocks ended the day with solid gains, erasing nearly half the losses from the prior week, putting some skepticism to the time-worn "sell in May and go away" adage.

Anyone believing that the US averages are going to meet or exceed the all-time highs from one year ago are betting against the odds simply because the May through October time frame historically offers the lowest returns of any six-month period, based on data from 1928 to the present. [See chart at right]

Not only that, but the continued creep of deteriorating business conditions presages a continuation of the slow growth that's been typical for the past seven-plus years at best or a slide into outright recession, at worst. Recall that the first estimate of first quarter GDP was a disappointing 0.5%, which is pretty darn close to going backwards.

Thus, with the numbers above as targets, it is clear that the indices would have to move more than two percent between May and October - and sustain those levels - in order to attain and hold new all-time highs, an unlikely event.

For hard-core stock investors, this is a cold truth, one which promises to inflict a high degree of pain and loss for those who play against the odds.

Monday's Millings:
S&P 500: 2,081.43, +16.13 (0.78%)
Dow: 17,891.16, +117.52 (0.66%)
NASDAQ: 4,817.59, +42.24 (0.88%)

Crude Oil 44.77 -2.50% Gold 1,293.00 +0.19% EUR/USD 1.1533 +0.62% 10-Yr Bond 1.8650 +2.53% Corn 390.00 -0.45% Copper 2.26 -0.90% Silver 17.57 -1.40% Natural Gas 2.04 -6.57% Russell 2000 1,140.92 +0.89% VIX 14.68 -6.50% BATS 1000 20,677.17 0.00% GBP/USD 1.4674 +0.56% USD/JPY 106.3950 +0.08%

Rough Week For Stocks; Gold, Silver Outperform Everything

A frantic, algo-churning, late-day rally brought the US averages back to respectability, but stocks ended the week - and the month of April (no window dressing) - on a sour note Friday, with all the averages losing, but especially the NASDAQ, down more than 2.5% on the week.

The week's events included an ostensibly neutral FOMC policy meeting midweek, at which the Fed kept rates at their unusually-accomodative level, prompting speculation that their next meeting (June) might indeed move the federal funds rate from its current level of 0.25-0.50, another 25 basis points higher, to 0.50 to 0.75.

With credibility becoming more and more of an issue for central bankers globally, the rationale for another rate hike is obvious, though the wisdom of one would be suspect. A rise in rates would likely trigger another waterfall event in equities, something which the Fed wishes to avoid with all due intent.

However, with CPI running below their desired level of 2.0% and news Friday that first quarter GDP was an anemic 0.5%, barely above recession level, the assorted Ph.d. crowd in Washington seems trapped once more.

Looking ahead, the big number for the week will be Friday, when non-farm payrolls for April are released prior to the market open. In the interim, more companies will be reporting first quarter results, which have been moribund for the most part.

If trends continue at the current pace and in the same direction, there would be almost no reason for the Fed to raise rates in June, excepting that the almighty dollar may be coming under further pressure. The unwind of the USD/JPY pair carry trade is putting downward pressure on the dollar and doesn't appear to be abating.

If there was one bright spot for the manipulators-in-charge, it was in the oil patch, with WTI crude trading at multiple-month highs. With an enormous glut still affecting worldwide prices coupled with the refusal of major producers to slow their production speaks volumes to the lack of democracy in what should be a strict supply-demand market. Prices have nearly doubled since touching down in the $26 range earlier in the year, a move that may prove problematic and unsustainable.

More challenges to the status quo will appear this week and beyond, as there is almost nobody who believes in the tortured figures the BLS produces for jobs. Any uptick in the unemployment rate will be a shock and a body blow to the Fed's plans, with the potential not only of a complete stoppage rate increase talk, but a potential reversal and the specter of NIRP (negative interest rate policy), the same that has swept Japan and Europe to - and possibly over - the edge of the monetary cliff.

Meanwhile, the herd appears to be turning to investments without counter-party risk and no interest: gold and silver, which don't pay dividends but also do not require storage by a bank (unless in enormous quantity). It certainly seems that the age of fiat money is wobbling badly.

For the week:
Dow: -229.97 (1.28%)
S&P 500: -26.27 (1.26%)
NASDAQ: -130.87 (2.67%)

Friday's (un)Funnies:
S&P 500: 2,065.30, -10.51 (0.51%)
Dow: 17,773.64, -57.12 (0.32%)
NASDAQ: 4,775.36, -29.93 (0.62%)

Crude Oil 45.99 -0.09% Gold 1,296.30 +2.36% EUR/USD 1.1452 +0.88% 10-Yr Bond 1.82 -1.03% Corn 391.50 +0.06% Copper 2.28 +2.04% Silver 17.88 +1.63% Natural Gas 2.14 +3.03% Russell 2000 1,130.84 -0.84% VIX 15.72 +3.29% BATS 1000 20,677.17 0.00% GBP/USD 1.4610 +0.04% USD/JPY 106.3900 -1.58%

US 1Q GDP 0.5%; Get Used To It

The US economy - which, according to official sources, grew by a non-robust 0.5% in the first quarter - is just fine... if you believe in stability.

Unfortunately for the the huckster on Wall Street, the liars in Washington, and the genii at the Fed, low or no growth is bad.

Well, screw them. And, get used to it. Simply just don't take any increase in price for anything, especially taxes or other government fees. In fact, smart people should be looking to avoid paying at all.

That's enough for today. Tomorrow will be the same.

Wall Street. Ugh!

S&P 500: 2,075.81, -19.34 (0.92%)
Dow: 17,830.76, -210.79 (1.17%)
NASDAQ: 4,805.29, -57.85 (1.19%)

Crude Oil 45.79 -0.52% Gold 1,268.20 +0.14% EUR/USD 1.1352 -0.01% 10-Yr Bond 1.84 -1.18% Corn 390.50 +1.49% Copper 2.23 -0.25% Silver 17.64 +0.30% Natural Gas 2.06 -0.91% Russell 2000 1,140.40 -1.19% VIX 15.22 +10.53% BATS 1000 20,677.17 0.00% GBP/USD 1.4608 +0.03% USD/JPY 108.1815 +0.08%

Fed Leaves Rates Unchanged; Market Loves When Doves Fly

With only one member of the FOMC voting to raise rates (Ester George), the Fed decided to keep the federal funds rate at 1/4 to 1/2 percent.

The 9-1 vote was the expected result, being that conditions haven't changed much in the US economy since the last policy meeting in March. If anything, economic conditions have deteriorated, though the FOMC statement is chock-full of ambiguity and stocked with trap doors for easy escape should their policy need to change in any manner.

To wit:

Information received since the Federal Open Market Committee met in March indicates that labor market conditions have improved further even as growth in economic activity appears to have slowed. Growth in household spending has moderated, although households' real income has risen at a solid rate and consumer sentiment remains high. Since the beginning of the year, the housing sector has improved further but business fixed investment and net exports have been soft.

The Fed is boxed in, unable to raise rates, and likely unwilling, given the most recent reaction to any rate hike: a massive selling spree of equities.

All the Fed can do right now is keep the policy somewhat coherent and hope the stock market continues to climb, despite all indications that the economy is very, very weak.

Tomorrow, prior to the market open, the initial estimate of first quarter GDP will be released, and, a week and a day later, non-farm payroll data for April will be announced. There's a solid chance that both numbers will be anemic, with GDP settling in a range somewhere between 0.5% and 1.0% and April jobs coming in somewhere south of 200,000.

But, according to the Fed, everything is simply wonderful. Carry on and don't fret. The next FOMC policy meeting isn't until June 14-15, so, there's a month-and-a-half before we all go through the dumbest guessing game ever... again. With such a short span between now and a potential rate increase, the odds of that happening are about the same as the federal funds rate, or, less than a one percent chance.

Thanks, Janet!
S&P 500: 2,095.15, +3.45 (0.16%)
Dow: 18,041.55, +51.23 (0.28%)
NASDAQ: 4,863.14, -25.14 (0.51%)

Crude Oil 45.31 +2.88% Gold 1,247.30 +0.31% EUR/USD 1.1323 +0.21% 10-Yr Bond 1.86 -3.68% Corn 384.25 -0.77% Copper 2.23 -0.67% Silver 17.25 +0.79% Natural Gas 2.15 -0.51% Russell 2000 1,154.15 +0.30% VIX 13.77 -1.36% BATS 1000 20,677.17 0.00% GBP/USD 1.4542 -0.22% USD/JPY 111.4850 +0.18%

Stocks Stall Ahead Of FOMC; Apple Bytes

Not much in the way of movement happened with stocks as participants were more than willing to wait for tomorrow's non-event from the FOMC, in which the Fed governors are likely to double-down on their dovish rate policy, owing either to market pressures or the near-undeniability that the global economy is defunct without further central bank stimulus.

It is what the banker mobs have wrought: an economy devoid of social or economic mobility, except to the downside, as government and ultra-national corporations crowds out any meaningful enterprise.

After hours, Apple (AAPL) reported earnings for the first quarter, missing on both the top and bottom line, adding more credence to the global slowdown meme. Shares were trading more than seven percent lower in the after-hours.

At 2:00 pm EDT, the FOMC will issue their rate policy decision, keeping the federal funds rate at 0.25-0.50%, which might produce some happiness for the Wall Streeters, however, considering the paucity of positive earnings results this quarter and the anticipation of an ugly first quarter GDP estimate on Thursday (8:30 am), there may be few players prepared to rally.

In all, it's a messy situation which cannot be solved by conventional means at this point, that point being one in which "emergency" measures have been stretched out to seven years. The global economy is beyond the scope of the central bankers' control, a condition that is probably, in the long run, for the best.

Tuesday's Tiptoe:
S&P 500: 2,091.70, +3.91 (0.19%)
Dow: 17,990.32, +13.08 (0.07%)
NASDAQ: 4,888.31, -7.48 (0.15%)

Crude Oil 44.04 +3.28% Gold 1,245.20 +0.40% EUR/USD 1.1301 +0.26% 10-Yr Bond 1.93 +1.52% Corn 385.00 +0.85% Copper 2.25 -0.07% Silver 17.16 +0.89% Natural Gas 2.16 -1.01% Russell 2000 1,150.73 +1.11% VIX 13.96 -0.85% BATS 1000 20,682.61 0.00% GBP/USD 1.4582 +0.68% USD/JPY 111.3150 +0.07%