12/19/13…’taper’ this!

Joke of the Day from the Friar’s Club Encyclopedia of Jokes: In all matters of opinion, our adversaries are insane.” – Mark Twain

Bloomberg Quote of the Day: “If you have to ask what jazz is, you’ll never know.” – Louis Armstrong…what does (did) he know!

 Let the tapering begin! From yesterday’s FOMC statement:

” Information received since the Federal Open Market Committee met in October indicates that economic activity is expanding at a moderate pace. Labor market conditions have shown further improvement; the unemployment rate has declined but remains elevated.”

Question: if we are doing marginally better, yet the labor participation rate is the lowest in three decades, doesn’t it stand to reason that tapering $10B, equally split between the $40 billion of mortgages and $45 billion of treasuries will cause rates to rise further? If you doubt this look at the weekly MBA survey below:

Mortgage activity fell moderately in the latest week, declining for the 8th time in the last 13 weeks and was its lowest level since November 2000. Applications have dropped by 60.4% over the past seven months (since early May), coincident with an increase in mortgage rates. Applications were on a rising trend, albeit amid substantial volatility, for the past year-and-a-half, and peaked in May, but then the trend topped out and began steadily retreating. Home buying declined modestly and the 4-week average has weakened modestly since May. Refinancing activity declined for the 6th week in the last 13 weeks, due to the recent higher interest rates. Courtesy of Economic Advisory Service

Market Reaction: stocks, which had languished most of the day, rallied with the Dow touching 16173 – just one point shy of the 11/29/13 record high; Bonds which opened higher declined slightly, climbed again, were unstable initially on the FOMC news, then closed weak – the long bond had an ‘outside day’…higher high, lower low. Lost 5/8, while the long TIP took the brunt closing at 1.57% -1-1/16! Back near September highs!   

Bloomberg Top Stories:

*Stocks in Europe Advance on Fed Tapering as Asian Currencies, Gold Weaken

*Jobless Claims in U.S. Unexpectedly Climb; Year-End Distortions Are Cited – hmmee did retailers hire early and now are regretting it? Target spamming me with sales!

*Lloyds Said to Join RBS in Banning Employees From Chat Rooms Amid Probes – hey, what if they are transcripting these…could be interesting: let’s set Libor at x.xx%

*Zuckerberg Selling Facebook Shars to Pay Taxes Amid $3.9B Offering – get this: company offering 27M shares, insiders 43M (Zuckerberg selling 41.36M). Stock prices are no longer determined by fundamentals but supply/demand. Want some?

*Target Says Data on 40 Million Payment Cards Hacked in Breach of Security EGAD!

*Darden to Split Off Red Lobster Chain, Halt Acquisitions as Sales Decrease – !!!

*AstraZeneca to Control Bristol-Myers Diabetes Venture in $4.3 Billion Deal

*Fed Finds Elixer for Tapering QE as Markets Embrace (?) Interest Rate Outlook – huh?

*How Secret Currency Traders’ Club Devised Rates I World’s Biggest Market – groan!

*Tea Party-Business Rift Documented on Scorecards Measuring U.S. Lawmakers - !!!

*Brown Gets Incentives Pot to Lure Companies to California – another case of using artificial stimulus to bring ‘em in…they come…someone else ante’s up – they go!

Wednesday’s Market Summary:

Have to read below…ok, TB was wrong about Dow not seeing 16k again this year (as he was wrong about Twitter, but see headline story on Facebook), but Friday ‘may’ be a different story. Watch for follow-thru today which is lacking as of now: not a good thing.

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The Nasdaq 100 rose 40 points vs -6.5 vs -19 points vs -4 vs -9 vs -45. Breadth was very positive at +8:1 vs -1.1 vs +2.1 vs 1:1 vs -7:3 vs -11:1!!! More than a dozen members gained more than an index point, while two lost more than a point: GILD +4.3; GOOG +3.6; AMZN +3.4; CMCSA/INTC +2.3; BIDU +1.2 (Note the ‘regulars’ missing the cut…as for losers what happened to APPL -3.4 vs -2 vs +2.5 vs -4.9 vs -0.7 vs -3.4; MU -1.  

Dow 30 +1.8%!!! vs -0.1% vs +0.8% vs +0.1% vs -0.7% vs -0.8%; Dow Transports +1.2% vs-0.4% vs +0.9% vs +0.4% vs flat vs -1.6%; Russell 2000 +1.3% vs -0.1% vs +0.6% vs +0.3% vs +0.2% vs -1.6%; Dow Utilities +1.2%!?! vs +0.1% vs +0.7% vs -0.2% vs -0.1% vs -0.9% vs -1.1%; S&P 500 +1.7%! vs -0.3% vs +0.6% vs flat vs -0.4% vs -1.1%; Nasdaq Composite +1.2% vs -0.1% vs +0.6% vs +0.1% vs -0.1% vs -1.4% ; NDQ 100 +1.1% vs +0.7% vs -0.1% vs -0.3% vs -1.3%.

*NYSE Volume SOARED to a very high 4.29B shares from a below average 3.25B shares vs 3.16B vs 3.06B vs 3.37B vs 3.48B. The record high (?) is 4.82B shares on Q3 end of quarter while 11/29’s 1.59B is weakest of 2013, replacing 1.96B as the low). REAL NYSE Volume fell also rose sharply to 828M shares from a below average 668M vs 681M vs 633M vs 753M vs 741. Today ties the 11/26 high is 828M shares on 11/26! The 12-month average is 722M shares. This year there have been just NINE 1B+ share sessions! There have NOW been 39 800M+ shares in 2013: 17 up, 19 down, three mixed.

*New 52 week highs have ranged from 33-864. They doubled to 334 vs 164 vs 223 vs 83! vs 112 vs 199 vs 322. Recent high is a super-strong 890!!! New lows were stable at 131 vs 135 vs 133 vs 353 vs 239. Recent low is 35!  

  1. Advance/Declines were positive: +3.6x! vs -1.1x vs +2x vs +1.3x vs -1.4x vs -4x! (recent range -17.5x to +6x) on NYSE and +2.5x vs -1.2x vs +2.1x vs +1.4x vs -1.1x vs -3.3x! (recent -4x!!! to +3.8x). Breadth was similar: +4x! vs -1.3x vs +2.4x vs 1.2x vs -1.4x vs -6x!!! (recent -18.6x!!! to +7.2x!!!) on NYSE and +3.1x vs .+1.1x vs +2.8x vs +1.2x vs -1.3x vs -3.6x! (recent -12.8x to +6.5x).  
  2. NYSE Financials rose 2.1%! vs -0.5% vs +1.2%! vs +0.1% vs -0.4% vs -1.3%! BofA only FOURTH most active: +0.1%? vs -0.5% vs +0.7% vs -0.5% vs flat vs -2%!!!, closing at $15.20 +.02. 11/25’s 12-month high was $15.98, highest since 6/1/10. Brokers +1.8% vs -0.3% vs +0.3% vs +0.1% vs +0.3% vs -1%; KBW Banks +2.1% vs -0.8% vs +0.7% vs -0.2% vs +0.5% vs -1.4%! Nasdaq Banks +1.4% vs -0.7% vs +1.4%!?! vs -0.2% vs +0.6% vs -1.2% vs -0.9%.
  3. Volatility (S&P VIX) PLUNGED (is this a good thing with options expiry on Friday? Dunno): 13.80 -2.41, from 16.25; the range was a wide 13.74-16.21! It is between the 40/50 day m/a’s: 13.62/13.98, while the 200 day is 14.37. The recent range is 11.83-21.01!!! Since March 11th the average has been just 14.44…way below the five year average of 23.32. It peaked at 22.79 on 12/28/12…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

Bonds didn’t know what to do yesterday ahead of the FOMC: they were up slightly down slightly, puzzled by the FOMC, the closed weak on an ‘outside day’. Back near the high yields again, closing at 3.92% -5/8 on the 30 yr while the 10 yr closed at 2.89% -7/16. Overnight the 10 yr is taking the brunt again at 2.94% -3/8 (recent range 1.63% to 2.99%), and the 30 yr 3.90% +3/16 (recent range 2.67% to 3.92%). The long TIP is 1.60% -1/16 The (record?) low of 0.36% was set on 4/5. NOTE recent high yield: 1.63%! Libor update: 0.246% 3 mos, 0.348% 6 mos. (both near record lows!). Foreign bond yields mostly higher ex Greece: Germany 1.88% +4; UK 2.97% +5!; France 2.48% +3; Italy 4.09% +3; Spain 4.13% -1; Portugal 5.98% -1; Greece 8.46% -11! Recently: 7.71% – 12.57%. Japan 0.66% +1.

Gold was weird again yesterday falling to $1215.20, close to the low and ended the session at $1217.50 -$12.60 – BUT for the second time in two weeks the CFTC SETTLED it much higher at $1235.00 UP $4.90….hello??? 12/6’s’s low was $1222.60, following that positive ‘key reversal’! Recent high is $1375.40 on 9/19. 6/27’s intraday low was $1179.40 – lowest since at least 2011 and critical support. $1300 remains psychological resistance with major res at the 40 day ($1275!) and the 50 day ($1280!). Major resistance at $1375, the 9/19 high. The 200 day is a $1368. Overnight it is TRASHED falling to $1197.10 -$37.30!!!! – lowest since 6/28!!! It is now $1202.80 -$32.20!!!

Crude closed slightly higher at $97.80 +.58, nothing remarkable, three days after trading to $96.26, lowest since 12/3. Note the double top at the high of $98.75 not seen since 10/22. On 11-27 it printed a new low of $91.77, lowest since 6/3!!! The record high of $114.83 was on 5/2/11, the low since on 10/4/11 was $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. It remains above the 40 day m/a ($95.56) and the 50 day (96.67), both are dropping AND major support! The 200 day is $98.75, and very major resistance! 4/18’s low of $85.61 was lowest since 12/11! The recent range is $85.61-$112.24 since March 1, 2012. Overnight it is little changed at $97.65 -.15.

 

Overnight markets:

 

Global stocks STRONG, ex Hong Kong…thank you Fed! UK +0.8% vs +0.3% vs -0.4% vs +1% vs +0.2%; France +1% vs +0.7% vs -1% vs +1.3% vs +0.3%; Germany +1.1% vs +1.1% vs -0.4% vs +1.7% vs +0.1%; Japan +1.7% vs +2%! vs+0.8% vs -1.6% vs +0.4% vs -1.1%; Hang Seng -1.1%! vs +0.3% vs -0.2% vs -0.6% vs +0.1%; Korea +0.1% vs +0.5% vs +0.2% vs -0.1% vs -0.3% vs -0.5%; India -0.7% vs +1.2% vs -0.2% vs -0.3% vs -1% vs -1.2%. U.S. stock futures LOWER: DOW -69; SPX -9.40; NDQ -19….told you to be careful ahead of expiry!

Some random thoughts:

How about the Fed…got it right! …well, that’s what Bloomberg headline says…for now? TB printed both an excerpt from the statement and yesterday’s weekly MBA survey. Why? Two reasons: first the Fed cited a slow growing economy and better employment situation…really? With the labor participation rate at the lowest in three decades??? With part-timers comprising most of the jobs, and with no benefits? With Congress failing to extend emergency unemployment benefits (remember what they said; when their benefits expire they will get jobs?). Number two highlights the decline of 3.5%-6% decline in mortgage apps, purchase apps, and re-fi’s! A steady downward trend…better think twice Fed!

Last week we learned that American’s have recovered about all the lost wealth since 2007…really? THAT folks, it MEDIAN…excluding the fact that it is the top 1% that got it back…oh, yeah and the stock market? That is one of the reasons for the widening wealth gap due to the percentage owned by wealthy vs overall…and don’t say what about real estate…who do you think was buying those home at or near the bottom? Average Joe?…think again!

TB is fired up and now reading a very short but data packed book. Before he tells you keep an open mind…mostly facts supported by data…the author Robert Reich! Beyond Outrage. Got it on line from the library, written just after the last election. You owe yourself to read it…without bias…you may have other thoughts. Naturally more blame on GOP, and dismissed Dems as placating them, but the power wielded by the financial community and top 1%’ers has truly created a plutocracy that is endangering our way of life. Lots of statistics presented in a friendly manner. Mirrors much of what TB says.

He approves of the ‘Occupiers’ but leave out their destruction. He suggests a strong group, whereas they were free-style with no leadership…a form of anarchy. But they were the only ones who stood up for the majority of Americans.

You owe it to your kids to read it…and see what we are leaving them…a travesty!

TB

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