1/4/12…a rally of sorts

Bloomberg Top Stories:

 

*Bank Earnings Increase 57% in Analysts Forecasts Which Proved Wrong in 2011 – trust us!

*Stocks Fall in Europe as U.S. Futures Decline; Euro Weakens, Copper Slides – not again???

*Revealing Interest Rate Forecasts Advances Bernanke’s Transparency Drive – selectively!

*Chesapeake Energy Falls Short of Exit From Junk Status – not thanks to nat gas prices!

*BofA Trust Preferreds Tempt U.S. Investors With Yields Rivaling Junk Bonds

*Widest Yield Gap Supports Once-Bankrupt Orange County’s Notes

*Mitt Romney Beats Santorum by Eight Votes to Win Iowan Republican Caucuses – BIG YAWN!

*Iowa Republican Vote Delivers Muddle as Splintered Party Fails to Coalesce – surprised???

*U.S. Spurns Iran’s Demand to Keep Aircraft Carrier Out of the Persian Gulf

 

Volume soared to 3.87B shares from 2.24B shares, still below the average of 4B shares, as high frequency trades drove the market higher in hopes of catching the incoming investors…will it work? NYSE stocks executed on the Big Board also rose to 855M shares from 588M shares, highest since 12/20 but still about 150 million short of the twelve month average! 33 of the last 36 sessions have been less than 1B! Advance/Declines were positive: +3.3:1 vs -1.1:1 vs +3.7:1 vs -4:1 on NYSE and +2.8:1 vs -1.1:1 vs +2.6:1 vs -4:1 on Nasdaq. Breadth was similar: +4.5x vs -1.2x vs +10.2x vs -22x on NYSE and +4.6x vs -1.5x vs +5.2x vs -9x on Nasdaq. New 52 week highs surged back to 301 from 209 while new lows fell by about half to 38 from 91.The ratio has is about 8x positive! The S&P VIX declined modestly to 22.97 -.43. A pittance on a rally of this magnitude…and yet another caution flag!

Here are the results of the past two sessions: Dow +1.5% vs -0.6%; Transports +0.9% vs -0.5%; S&P 500 +1.6% vs -0.4%; Nasdaq Composite +1.7% vs -0.3%; Nasdaq 100 +1.9% vs -0.3%; Russell 2000 +1.5% vs -0.5%; NYSE Financials +2.6%!!! vs -0.2%.  Leaders: BAC +4.3%!!! vs +1.8% vs +3.3% vs -3.6% vs -2.1%; C +7.7%!!! vs +2.4% vs -2.9% vs -2%; GE +2.5% vs -0.9% vs +1.4% vs -1.1% vs -1.2%; C -1.7%. Didn’t we see this a year ago on optimism???

Global equity markets weaker, except Japan which was closed yesterday: FTSE -0.2% vs +1.2%; CAC40 -1% vs -0.7%; DAX -0.8% vs +0.7%; Nikkei +1.2% vs closed; Hang Seng -0.8% vs +2.4%; Korean KOSPI -0.5% vs +2.7%; Indian Sensex -0.4% vs +2.7%. U.S. Futures weaker: DOW -36; SPX -4; NDQ -2. Bonds trying to shake off yesterday’s beating but 10’s and 30’s still below 2% and 3% respectively. 10 yr 1.94% +1/32. RECORD low 9/23 of 1.6855%; 30 yr 2.97% +3/16!!!; Long TIP 0.77% +5/16. 0.57% at high six weeks ago. The 5 yr TIP yields MINUS 0.90%!!!; 10 yr -0.11%!!!. 3 mo. Libor 0.58%, and 0.81%. Bills 0.00% one month. 3 months 0.01%. 6 months 0.05%.

Gold rallied sharply closing right on $1600 but below the 200 day. It closed at $1600.50 +$37.70 and is now $1600.80 +.30. The record high is $1923.70, a buying climax on 9/6. RES is 1690, the 40 day and $1695, the 50 day m/a and $1627, the 200 day. Crude closed on a huge rally to $103.90, highest since 5/31!!! And closed at $102.96 +$4.13!!! Last Tuesday was the first close above $100 since 12/13 and highest since 11/16! It is now $102.83 -.63.  Major sup is the 40/50 day m/a at $98.32-97.08. Sup at $100.

…a big rally on big volume but smelling of high frequency trades and other speculators. For one thing the big gainers were BANKS…on higher earnings forecasts…just as they predicted a year ago…if you keep saying it, eventually you may be right, right? Biggest volume was BofA at 245M shares which gave it a 4.3% boost. Next came Citi and GE, each with 57M shares and gaining 7.7% and 2.5% respectively! But get this…big board volume only rose to 855M well shy of the 1.033B share average of the past 12 months…remember too there are not many willing sellers in the first trading day of the year on no news.

Yesterday, TB provided the returns for the month, quarter, and year, with only one big winner: Dow Utilities. In Tuesday’s rally there was just one losing index: Dow Utilities which fell by 1.9%!!! Just in case you think it is easy to play this game…prove that it isn’t. The Utilities loss was about 10% of the fourth quarter gain and 13% of the years gain…in just one session! Think about it!

With the Iowa caucuses out of the way, we need something else to focus on…if you were seriously interested in how a small group of Iowan’s voted…TB was not! The results are more puzzling than helpful to the GOP…

. . .   – – –  . . . note that the same old SOS applies…perhaps more so!

Bernanke is all about transparency…he wants to signal his interest rate targets, etc. But what he didn’t want us to know was the size and worse, WHO got all those TARP funds. Bloomberg had to sue under the Freedom of Information Act, and what they got back showed not only was it grossly understated…a fact Bernanke continues to deny…but who got the money. So it is pretty strange that now he sees the light and wants to be transparent…going forward of course.

Nothing else worthy of comment today so just going to pack it in.

Have a wonderful day!

TB

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