Friday The 13th Sell-Off Nearly Breaks Through Downside Range On Dow Industrials

Yesterday, Money Daily extolled the virtues of ignoring intra-day movement on the major indices and pointed out that the last time the Dow Jones Industrial Average (DJIA) closed below the magic mark at 17,500, was nearly two months ago, on March 18 (17,481.89).

The waterfall decline on Dow stocks Friday put an exclamation mark on that post, as stocks fell to within a whisper of the bottom end of the tight range with 18,000 as the top and 17,500 as the bottom.

Friday's trading also assured that US indices would end the week in the red for the third straight week and fourth time in the past seven, suggesting the five closes above 18,000 in mid-April were aberrations rather than normative market behavior.

Thus, despite a completely phony report from the US Census that saw sales by U.S. retailers leap 1.3% in April, marking the biggest month-over-month gain in a year, the exodus from stocks continued unabated. While the indices have regained all of their losses from January and early February, institutional money has been selling all along, leaving the market largely in the hands of small investors and... please be seated, because this is a shocker... central banks.

It's widely understood that the Bank of Japan, that country's central bank, is heavily invested in its own stock market, propping up prices on the Nikkei, apparently to no avail, since the benchmark index is down sharply this year, and, unlike its counterpart in the US, has not rallied back to glory.

The Nikkei made a triple top last summer with peak closes in the 20,860 range. On Friday, the Nikkei closed at 16,412.21 and is down sharply on the year (it closed out 2015 at 19,033). Make no mistake, off its highs from June through August of last year, the Nikkei has fallen into bear market territory, even though the Bank of Japan has been furiously buying shares in the largest companies, as explained in this article by none other than the Wall Street Journal.

It was reported just the other day that the Swiss National Bank was wisely using some of its money to buy shares of Apple (AAPL) as Carl Icahn was liquidating his holdings in the company and the stock was slumping to two-year lows.

Is there any wonder that people have little faith in their governments and are rapidly losing faith in other institutions, especially those which conjure money out of thin air. When central banks are actively bidding in markets of all sorts - from precious metals to oil to stocks and bonds - how can there be any rational approach to investing or any kind of reasonable price discovery. Everything is subject to the inane whims of people in ivory towers who think they know more than anybody else about how the world should operate. In truth, they are destroying the system that spewed out their jobs and paychecks.

When people finally awaken to the massive misallocation of capital and enormous malinvestments by the issuers of paper money it's going to be too late. Central banks cannot - at least not in a rational world - buy up shares of everything in order to keep the global economy humming along while at the same time issuing critical mountains of debt in the form of digital deposits and bonds (which they are, in effect, also buying from themselves).

There will be a crash, a day of reckoning, probably multiple ones, when the cnetral bank global ponzi scheme is finally exposed, and that could happen at any time.

If the stock markets begin breaking down, it should be seen as a sign that the final chapter of extraordinary central bank policy which began with the financial crisis in 2008, is underway. The endgame is likely to resemble 50-70% declines in major stock indices, 10-year interest rates at zero of less (already there in some countries) and massive disruptions of businesses, bank closures, or worse, outright confiscation of deposits by the banks holding trillions of dollars, yen, yuan, euros and pounds.

This is not fiction, but the reality of the past eight years of nightmare economics spawned by the Federal Reserve and their brethren central bankers.

But, as it has been since the collapse of the global economy in 2008, when central banks have endless supplies of fictional fiat to spend, crashes like Friday's can be aborted, as was this one, right at 3:00 pm, with just an hour left in the trading day. Agents of the Fed stepped in at the most dangerous moment to hold the line at 17,500.

André Maginot would be impressed.

The only problem is that this kind of madness cannot go on forever without incredibly dangerous distortions and serious, lasting repercussions.

For the week:
DOW: -205.31 (-1.16%)
S&P 500: -10.53 (-0.51%)
NASDAQ: -18.48 (-0.39)

Friday's Fall:
S&P 500: 2,046.61, -17.50 (0.85%)
Dow: 17,535.32, -185.18 (1.05%)
NASDAQ: 4,717.68, -19.66 (0.41%)

Crude Oil 46.32 -0.81% Gold 1,274.80 +0.28% EUR/USD 1.1308 -0.58% 10-Yr Bond 1.70 -2.96% Corn 390.50 +0.39% Copper 2.08 +0.14% Silver 17.16 +0.30% Natural Gas 2.10 -2.55% Russell 2000 1,102.44 -0.56% VIX 15.04 +4.37% BATS 1000 20,677.17 0.00% GBP/USD 1.4359 -0.61% USD/JPY 108.6400 -0.40%

(NOT) Paying Attention To Intra-Day Swings

Shortly after the open today, the Dow had shot up 88 points.

By noon, it was down 87, thus, making a 1% move in the course of 2 1/2 hours.

Coincidence or central planning aside, the upside move equaled the downside move, nearly to the penny.

From noon until 2:00 pm, the Dow index clawed back all of the losses and was trading positively again, up around 40 points, or, just about half of the early day gains. Eventually, the Dow closed up a few points, more or less unchanged.

Day-traders may be scratching their collective skulls over this odd pattern, though it should be noted that almost none of the moves - to the up or downside - had anything at all to do with fundamentals, sentiment, forward-thinking, the presidential election cycle, or the price of pork in China.

It probably had everything to do with front-running algos which dominate the so-called "trading," which has become more of a skimming operation by firms like Citadel and other adherents of non-free market operations.

The headline financial media will try to come up with story lines to match the mood, though none of them can adequately pass even the most rudimentary smell test. The financial talking heads in macro-land are faking it as best they can, while the market remains stuck in a no-man's land that's been in place for just about a year now (taking the long view), or, a truly narrow range on the Dow between 17,500 and 18,000 since March 18.

On 34 of the past 39 trading days (including today) the Dow closed within that range. Of the five days it closed outside that range, all of them were above the 18,000 line, the highest being 18,096, on April 20.

Essentially, stocks have been going nowhere for quite some time, especially over the past month and a half, in which the total range was roughly three percent.

Which brings us to the question of intra-day moves and whether or not to pay them any mind. Unless one is engaged in betting with friends on market swings, or day-trading (an occupation which can put your whole house in jeopardy), intra-day swings should be discounted dramatically. The old saying, "the trend is your friend," doesn't apply unless you're looking of weeks, months or years.

Going Nowhere, Slowly:
S&P 500: 2,064.11, -0.35 (0.02%)
Dow: 17,720.50, +9.38 (0.05%)
NASDAQ: 4,737.33, -23.35 (0.49%)

Crude Oil 46.39 -0.66% Gold 1,267.40 -0.30% EUR/USD 1.1376 +0.02% 10-Yr Bond 1.76 +1.15% Corn 387.50 -0.39% Copper 2.07 -0.05% Silver 17.08 -0.16% Natural Gas 2.13 -0.97% Russell 2000 1,108.60 -0.55% VIX 14.41 -1.91% BATS 1000 20,677.17 0.00% GBP/USD 1.4445 -0.01% USD/JPY 109.0300 -0.05%

The Great Give-Back; Stocks Looking Increasingly Risky

Remember all those big gains and happy faces on Wall Street after Tuesday's close?

All gone.

Because, stocks are tremendously overpriced.

Of course, there are other issues plaguing the US and global economies, but there really is no good reason to overpay for anything. From lettuce to gas to stone pavers, there's a worldwide oversupply of everything, and that includes stock certificates.

What is in short supply are honest politicians, central bankers who have morals, and honest money.

Buy gold. Buy silver.

Hump Day:
S&P 500: 2,064.46; -19.93 (0.96%)
Dow: 17,711.12, -217.23 (1.21%)
NASDAQ: 4,760.69, -49.19 (1.02%)

Crude Oil 45.99 +2.98% Gold 1,278.70 +1.10% EUR/USD 1.1427 -0.03% 10-Yr Bond 1.74 -1.31% Corn 376.25 -1.25% Copper 2.10 +0.26% Silver 17.45 +2.09% Natural Gas 2.17 +0.42% Russell 2000 1,114.74 -1.25% VIX 14.69 +7.78% BATS 1000 20,677.17 0.00% GBP/USD 1.4443 -0.03% USD/JPY 108.4565 +0.02%

Big, Baseless Rally Is Pointless; New All-Time Highs Pipe Dreams

BORING!

And baseless.

Here's the deal. When stocks outperform - on a YTD basis - gold and/or silver, in constant dollar terms, then you might have something. Until that time, stocks are simply paper blowing in the wind. Even if stocks shoot to new highs (previous all-time highs were about a year ago), they'll likely e worth the same or less in inflation-weighted terms, whereas precious metals (and other select assets) will be solid.

Most gold and silver investors have patiently been loading up over the past four years (many of them for much longer than that) and they are now sitting pretty. There are a good number of precious metals investors who hope the price suppression, which has been obvious for a long time, continues for another six months to a year, so they can buy more at depressed levels.

Be patient, my friend.

Holy Short Squeeze, Batman!
S&P 500: 2,084.39, +25.70 (1.25%)
Dow: 17,928.35, +222.44 (1.26%)
NASDAQ: 4,809.88, +59.67 (1.26%)

Crude Oil 44.47 +2.37% Gold 1,267.80 +0.09% EUR/USD 1.1370 -0.13% 10-Yr Bond 1.76 0.00% Corn 380.75 +3.18% Copper 2.10 -0.28% Silver 17.12 +0.21% Natural Gas 2.15 +2.43% Russell 2000 1,128.83 +0.95% VIX 13.65 -6.31% BATS 1000 20,677.17 0.00% GBP/USD 1.4444 +0.26% USD/JPY 109.2850 +0.78%

China's Commodity Carnage Crushes Crude, PMs

Overnight, China stocks fell as more poor economic data was presented, as hopes for a domestic recovery were sidelined by declining import and export data.

Additionally, commodity prices were negatively affected by government regulations which aim to crack down on speculation.

This translated into a very confused day for equity pros, though commodity traders apparently had the sell button surgically attached to their index fingers, with prices for oil down more than three percent while gold and silver took deep declines.

At the end of the day, stocks leveled off roughly where they began the day, though markets appear vulnerable to a downturn.

Monday's Mingle:
S&P 500: 2,058.69, +1.55 (0.08%)
Dow: 17,705.91, -34.72 (0.20%)
NASDAQ: 4,750.21, +14.05 (0.30%)

Crude Oil 43.24 -3.18% Gold 1,265.80 -0.06% EUR/USD 1.1382 -0.02% 10-Yr Bond 1.76 -1.07% Corn 369.25 -2.19% Copper 2.10 -0.19% Silver 17.07 -0.14% Natural Gas 2.10 -0.24% Russell 2000 1,118.25 +0.32% VIX 14.57 -1.02% BATS 1000 20,677.17 0.00% GBP/USD 1.4410 +0.03% USD/JPY 108.4335 -0.01%