2/2/12…a rally without volume

Bloomberg Top Stories:

 

*Facebook Seeks to Raise Up to $5 Billion in Biggest Internet IPO on Record

*European Stocks Pare Gains With U.S. Futures Little Changed; Oil Declines – big time!

*Mastercard Fourth-Quarter Profit of $4.03 a Share Beats Estimate of $3.91 – lowered bar!

*ECB May Hold Out on Greek Swap Until Investor Deal Reached on Debt Burden

*Bank Cyber Risk Rises in U.S. as Foreign Hackers Exploit Lax User Security – 4 digit pins???

*Morgan Stanley Facebook Role May Cement IPO Lead for Third Year Running

*NYSE at 42% of CME is Niederauer’s Dilemma After German Merger Fails

*U.S. Auto Sales Highest Since Recession While Discounts Get Smaller

*Rail Bottlenecks Thwart India’s Efforts to Solve Power Shortages

*Romney Defends Comment on ‘Poor’ while Staying on Attack Against Gingrich

*Egypt Lawmakers Hold Emergency Debate After Soccer Riot Kills More Than 70

*Harvard Targeted in U.S. Probe of Discrimination Against Asian-Americans

*News Corp.’s Times Being Probed for Computer Hacking, Lawmaker Watson Says

*Super Bowl Lands on Taxpayer’s Back as Indianapolis Stadium Deal sours  

 

Volume plunged again to 3.38B shares following the well above average 4.13B shares Tuesday in a strong session right out of the chute, holding on to much of the opening gains, but closing near the session lows. This breaks a string of four straight down days for the Dow, mostly minor. Once again NYSE Financials were the best sector, up 2.1% followed by the Russell 2000 small cap +1.9%. NYSE stocks executed on the Big Board however pulled back from Tuesday’s slight above average session, the first since 12/16, to 893M shares from 1.03B shares, about 120M below average. 52 of the last 56 sessions have been less than 1B! Advance/Declines were very positive: +5x vs +1.4x vs -1.8x vs +1.9x vs -1.1x on NYSE and +3x vs +1.1x vs -2x vs +1.9x vs -1.2xon Nasdaq. Breadth was even better: +7.9x vs 1x vs -2.4x vs +1.1x vs  -2x on NYSE and +6.8x vs +1.1x vs -1.3x vs +1.3x vs -2x on Nasdaq. New 52 week highs surged to 474 vs 330, a cycle high while new lows slipped to 21 vs 25. The ratio climbed to 24x positive!!! The S&P VIX plunged to 18.41 -1.03, lowest since 1/20!  Perhaps the rally is real???…but the volume???

Here are the results of the past five sessions: Dow +1% vs -0.2% vs -0.1% vs -0.6% vs -0.2%; Transports +0.6% vs -0.1% vs -0.4% vs +0.8% vs +0.4%; Dow Utilities +0.6% vs +0.5% vs -0.3% vs -1.3% vs +0.1%; S&P 500 +1.2% vs -0.1% vs -0.3% vs -0.2% vs -0.6%; Nasdaq Composite +1.3% vs +0.1% vs -0.2% vs +0.4% vs -0.5%; Nasdaq 100 +1% vs +0.1% vs +0.1% vs +0.3% vs -0.5%; Russell 2000 +1.9%! vs +0.1% vs -0.8% vs +0.8% vs -0.3%; NYSE Financials +2.1%!!! vs +0.4% vs -1.2% vs +0.3% vs -0.4%. NYSE Leaders: BAC +3.4% vs +6.9% vs -3%!!! vs -0.1% vs -0.7%; C +3.9% vs F -0.2% vs +1.7% vs +0.7% vs -4.2% vs -1.1% vs -0.9% vs +1.3%; S +5.2% vs -1.9%.

 

European equity markets weaker, Asia higher: FTSE -0.2% vs +1.3% vs +0.7% vs -0.8% vs -0.5%; CAC 40 +0.1% vs +1.5% vs +1.5% vs -1.1% vs -0.5%; DAX -0.1% vs +2% vs +1% vs -0.8% vs +0.2%; Nikkei +0.8% vs +0.1% vs +0.1% vs -0.5% vs -0.4%; Hang Seng +2%! vs -0.3% vs +1.1% vs -1.7% vs +0.3%; Korean KOSPI +1.3% vs +0.2% vs +0.8% vs -1.2%! vs +0.4%; Indian Sensex +0.8% vs +0.6% vs +2% vs -2.2% vs +0.9%. U.S. Futures little changed: DOW -9; SPX -1; NDQ -1.50. Bonds slightly higher: 10’s and 30’s below 2% and 3% respectively 10 yr 1.82% +1/16. RECORD low 9/23 of 1.6855%; 30 yr 2.99% +1/16; Long TIP 0.60% +3/16; 0.57% at high. The 5 yr TIP yields MINUS 1.34% vs -1.30%; 10 yr -0.23%. Bills 0.05% 1 month; 0.06% 3 months, 6 months 0.09%. Reverse Repo 0.25% steady. 3 mo. Libor 0.53%, and 0.77%, gradually declining!

Gold closed higher at $1749.50 +$9.10 with an intraday high just above $1756, the highest since 12/5! It is well above the 200 day ($1652), and has been above $1600 for 16 straight sessions. It is now $1748.80 -.70, o/n high $1756.70. The record high is $1923.70, a buying climax on 9/6. Sup is $1667, the 50 day, further support $1653, the 40 day m/a. Res is $1770, the 12/2 high! Crude collapsing, closing at $97.61 -$1.87! It is now $96.97 -.64, with res at $100 and at the 40 day (99.21), the 50 day (99.14), and major support at $95, the 200 day, all declining.

 

…Tuesday, volume without a rally, yesterday volume fell off but we had a big rally…without retail support! For a second straight session the winner was NYSE Financials and that should give you pause…why are they rallying??? Perhaps the rally was due to the ‘golden cross’ where the 50 day moving average crossed above the 200 day on the SPX. But there is far too much noise to give much meaning to this, and if so it could spell ‘sell in May and go away” – or sooner!

 

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

Ok, here we go…by googling incomes, and various combinations TB came up with some interesting factoids. All of the data came from U.S. government data from various sources.

 

Whereas in 1980 the average CEO earned 10-15x the average salaried worker, by 1990 it had risen to 107x, 1995 180x, peaked in 2000 at 525x (in the U.S. Europe was even higher). Meanwhile the minimum wage declined by 9.3% over this period and average workers pay rose by just 4.3%! While corporate profits rose by 106.7%. the S&P 500 rose 260.8%, due to rising p/e’s, and average CEO pay rose 298.2%. From 1995- 2000, average CEO compensation rose by 409.7% vs 328.6% for the S&P 500.

 

As for the average production worker, the salary was $28,315 in 2005, but if they had been paid at the same rate as CEO’s they would have earned $138,278 in 2001 and only declined to $108,138 in 2005. Of course, this is apples and oranges but how did CEO’s get so much ego to believe the success of a company is due entirely to themselves and a few close associates? TB is not implying the workers should earn this much but clearly the CEO’s are grossly overpaid as a group.

 

TB has no fault with paying CEO’s for doing a good job, but during this period and even today we are rewarding mediocrity while insuring against their failure through ‘golden parachutes.’ Look at this from 2009: Mark Hurd CEO of HP was the highest paid CEO at $24.2 million, later thrown out for improprieties and got another handful of money to go away quietly; while John Stumf, CEO of Wells Fargo who was unquestionably the best financial company CEO, earned $5.6 million; but the best CEO of all was Steve Jobs, who earned the grand sum of $1! That is what skin in the game is all about and if we extrapolate from this: the lower you pay the CEO the better the performance…what say you?

 

Lastly, Mitt Romney was in Minneapolis yesterday and was first ‘glittered’ by the OWS group, before saying that “90-95% of Americans are struggling,” and that he will solve their problems. If that number is correct, how does the GOP defend its tax structure AND slashing the budget deficit? Further, he told reporters he was very concerned about all Americans but no so much about the poorest as they have social nets to protect them. He has since been trying to correct this comment taken out of context while Newt attacked him saying he is for all Americans…but is he? Really?

 

TB leaves for San Francisco Bay Area tomorrow and might not be able to get a report out before he has to leave. He will return on February 23, and be posting on an occasional basis in the meantime.

 

All the best!

TB

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