9/29/11…the quarterend blues

Bloomberg Top Stories:

 

*Euro Strengthens, Stocks in Europe Rise on Aid Vote; U.S. Futures Advance

(they rallied yesterday too…until they didn’t! Why do we trade of this stuff? TB)

*World Recession Seen Triggered by Europe Breakdown in Global Investor Poll

(THIS is what we should be trading off, not the mercurial Euro crisis! TB)

*German Unemployment Falls More Than Forecast as Economy Skirts Debt Crisis

*Pandit Sees Euro Surviving Crisis as Citigroup Limits Its Risk to Region – huh???

*China Economy Slowing to 5% Annual Rate by 2016 in Global Poll – trade off this!

*Deutsche Bank Said to End Drought in Bond Sales With Unsecured Notes Offer

*Ford Plans to Add 7,000 Jobs During Next Two Years in U.S. – oh joy!

*HP Shuffle Shows Top Technology jobs Harder to Fill as Startups Woe Talent

(Didn’t this happen in the dotcom boom/bust too? Underskilled labor force.)

*Emerging Market Hedging Prices Jump Amid Europe Infection Concern

*Smart-Money Index Recovery Foreshadows U.S. Stock Gains – What’s smart money?

*Small-Business Job-Engine Myth Hampers Efforts to Fight U.S. Unemployment

(both big business AND small business do not create jobs…start-ups do!)

 

Volume slumped to 4.3B shares from 4.9B shares (remember the market opened with a rally), way off 6.95B shares in last Thursday’s rout. For NYSE stocks while trades executed on the Big Board declined to 1B from 1.2B shares – further negating the two day rally. Advance/Declines were negative again; compare to prior two sessions: -5:1 vs +4.4:1 vs +2.7:1 on NYSE and -5.2:1 vs +3:1 vs +1.9:1 on Nasdaq. Breadth was horrible: -28x!!! vs +3.1x vs +8x vs +2x vs -22x!!! vs -19x!!! on NYSE and -13.4x!!! vs +3.8x vs +2.2x vs +5x vs -12x!!! vs -4x on Nasdaq, talk about negative! New 52 week highs reversed Tuesdays gain 18 vs 38 vs 20, and remain weak while new lows surged back to 259 vs 119 vs 499!!! The high last Thursday was 1499!!! This level has only been seen a few times…think 1987 and 2008 – the ratio is now -2.5:1 but still negative so little value there. The VIX continued to fall following surged closing the gap from Monday’s ‘key reversal’ (higher high, lower low and close below prior day’s low), and closed at 41.08 +3.37, and close to the 43.58 from last Thursday. 48 was the selloff high, not seen since 5/21/10: 48.20!

 

Here are the returns for the day/month/quarter/ytd: Dow -1.6%/-5.2%/-11.3%/-4.9%; Transports -2.9%/-8.8%/-21.6%/-16.7%; S&P 500 -2.1%/-5.6%/-12.8%/-8.5%; Nasdaq Composite -2.2%/-3.4%/-10.2%/-6.1%; 100 -1.5%/-0.9%/-4.5%/+0.1%; Russell 2000

-4.2%!!!/-10.3%/-21.2%/-16.8%; NYSE Financials -2.6%/-10.6%/-22.2%/-22.6% – the NDQ 100 is only one in the black ytd and hanging by a thread.

 

European stocks attempted to rally on bailout news then failed, Japan, Korea, India up: FTSE -0.7% vs -0.2% vs +3.1%!!! vs +0.8% vs -1.9% vs -4.5%; CAC 40 -0.1% vs +0.1% vs +4.2%!!! vs +2.3% vs -2.7% vs -4.9%; DAX -0.4% vs +0.1% vs +4.1%!!! vs +2.9% vs -3.1% vs -4.3%; Nikkei +1% vs +0.1% vs +2.9% vs -2.2% vs closed vs -2.1%; Hang Seng closed vs -0.7% vs +4.2%!!! vs -1.5% vs -1.4% vs -4.9%; Korean KOSPI +2.7%!!! vs -0.7% vs +5%!!! vs -2.6% vs -5.7%!!! vs -2.9%; Indian Sensex +1.5% vs -0.5% vs +3% vs -0.7%-1.2% vs -4.1%. EUROPE RALLY NEGATED!!! It was just quarterend window dressing! U.S. futures UP but they were yesterday too which created an enormous head fake!!!: DOW +50; SPX +5; NDQ +10. Yesterday was a down day…stocks, commodities, even bonds. Currently 10 yr 1.98% -1/64 after a RECORD low Friday of 1.6855%; 30 yr still above 3% from a low of 2.748%, 3.06% -3/16.

 

Gold held above $1600 yesterday ($1618.10) following Monday’s low of $1534, lowest since 7/6!) but is off slightly, $1614.80 -3.30. Did we put in a bottom? Monday’s low was nearly to the 200 day, $1527.20. We negated the spike to $1923.70, a buying climax on 9/6. Crude tanked yesterday breaking a two day winning streak(?) to $85 after putting in a low of $77.11 Monday, lowest since the reversal from $75.71 on 8/9! It closed 81.21 and is now $81.35 +.14.

…TB warned you about yesterday being the last day for T+3 settlement for quarter end which only affects hedge funds – directly but can have a significant impact on the overall market. The rest of us have to wait until Friday’s close.

Monday was a continuation of Friday’s rally following the inundation on Thursday. But on Tuesday the market opened up, following an overnight session that took global equity markets up 2-4% , then surrendered more than half of the gains, diving for the entire session until  6 mins. before close! Note that the highs took out the 40 day but failed to come close to the 50 day, and worse, FAILED, closing well below.

This is a bear market rally, or correction), only caused by quarterend and Buffett, and yes we remain in a secular bear market and will likely be in one for years. The recovery form the March 2009 lows ended on May2, followed by two lower high and lower lows…it seems natural that the Dow will test 10000, and the S&P, 1100 again – we have a triple bottom there, if so support lies at 1040 and 1010 (critical). Note also that the 50% retracement of the rally from the March 2009 lows rests at 1121, and the 61.8% (2nd Fib retrace) is 1014. Note these are on the cash market while the futures are slightly higher…and more closely watched by technicians (1126/1017).

YESTERDAY was a near carbon copy of Tuesday: both sessions the futures were up large before the session opened, strong openings then sold off…Wednesday after the first half hour, at least on Tuesday it climbed steadily until about two hours before the close then sold off…Both days the lows were put in minutes before the close but on Tuesday it bounced, yesterday it went out sick and just off the lows.

…waiting for Friday – the end of the quarter and unlike the last one no relief rally to salvage the quarter…or this time the last nine months! Then next week we get payrolls on Friday and don’t expect a surprise drop in unemployment this time like Germany had, we are not Germany, which knows what it is doing but is saddled with the rest of the Eurozone. Get out of the zone…the Eurozone! (Sound familiar: the Autozone commercial.)

. . .  – – –  . . .    . . .  – – –  . . .

It’s a wonderful day in the neighborhood…won’t you be my neighbor? Hmmm, it seems to TB that three generations of kids grew up listening to Mr. Rogers telling them they were ‘special’ only to find out they weren’t. You have to know your strengths and weaknesses before you can achieve anything, not believe you can do everything you set out to do (except for that special FEW). Worse, parents believed their kids were ‘special’ – coddled them, enriched them culturally, shoved SAT prep courses down their throats…screamed at their teachers and later professors for not realizing their kid was ‘special’ and that they didn’t get a high enough grade. Some of these ‘helicopter parents’ (not to be confused with Helicopter Ben of  Fed fame), went so far as to call their bosses when they got jobs saying they didn’t give them a good enough grade. TB can tell you that if that happened to him he would tell Mr. Special that his mom just cost him his job…go work for her since she appreciates you.

 

The above was somewhat tongue-in-cheek, but it explains why we have a huge labor force that lacks the skills to be competitive. We eliminated the tech and shop classes that most should have been in, not preparing for college when many would be lucky to merely graduate. That is what is wrong with our educational system and values…and it can’t be solved by merely throwing money at it.

 

Have a great day and remember only two shopping days until quarterend!

 

TB

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