4/13/12…Friday the 13th AND Dow 13k?

Bloomberg Quote of the Day: “Any informed borrower is simply less vulnerable to fraud and abuse.” – Alan Greenspan…now you know why they preyed on the uninformed and vulnerable!

…and:

“Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” – John D.Rockefeller. To TB that is one sad statement, yet one many of our millionaires and billionaires share today. Guess his handing out dimes to people in foodlines was just for show. TB

 

TB’s Quote of the Day: “You can fool some of the people all of the time, and some of the people some of the time, but you can’t fool all of the people all of the time.” – Abraham Lincoln. But Abe can you fool just enough of them to get elected or create a financial crisis? TB  

 

Bloomberg Top Stories:

 

*Stocks Fall in Europe as Commodities Decline on China GDP; Won Strengthens

*Biggest Banks in Europe May Need to Hold 17% Core Capital in EU Draft Plan

*Spanish Bank Borrowing From ECB Soared Almost 50% in March to Reach Record

*Spanish Bonds Tumble as Draghi’s Debt Panacea Found Wanting – carrot/stick!

*JPMorgan Earnings Exceed Estimates on Mortgage-Loan Profits; Shares Climb

*Dimon Said to Transform JPMorgan’s Treasury for Prop Trading Under Macris – not good!  

*Frugality Fatigue Spurs Americans to Trade Up as Consumer Optimism Grows – then what?

*Wal-Mart Loses Fourth Senior China Executive After Market Share Declines

*North Korean Rocket Disintegrates in Setback for Kim’s Four-Month-Old Rule – great news!

*Iranians Decry Nuclear Double Standard as Military Threats Loom Over Table – ahem, China?

*Syrian Cease-Fire to Be Tested on Prayer Day as Protests Challenge Assad – taking bets?    

There are two consistencies to stocks: higher volume days are on declines and magnitude of moves is lower on up sessions…read into that what you will. Yesterday we offset most of the losses from Tuesday less than half the losses since April 2, so technically still a dead cat bounce. Worse the Dow and S&P have come back to or near the 40/50 day moving averages so we better have some good news today for a continuation, especially since next Friday is options expiry for April.  Volume was slightly lower at 3.59B shares vs 3.77B shares on NYSE listed stocks (compare to 4.66B on Tuesday’s downdraft). NYSE stocks executed on the Big Board slipped for a third day to 741M shares from 790M after the surge to 972M on the selloff, and 200M below the falling 12 month average (972M)! Since 2/29 there have now been just THREE ‘average’ days, including 3/16’s high for 2012, and the average has fallen to 798M shares. Since 11/1 there have been just eight 1B share days…only three in 2012! Since 2/6 there have been FIVE sessions less than 700M shares. 100 of the last 110 sessions have been less than the 12 month average! Advance/Declines were positive for a second day: +4.6x vs +3.8x vs -5.8x!!! vs -4x! vs -1.4x vs -4x! on NYSE and +2.1x vs +3.6x vs -4.5x! vs -2.4x vs -1.1x vs -5x! on Nasdaq. Breadth was better especially on NYSE: +9.5x!!! vs +3.7x vs -12.9x!!! vs -8x!!! vs -2x vs -6x! on NYSE but +4.5x vs  +4.3x vs -11.7x!!! vs -5.2x! vs -1.2x vs -8x!!! on Nasdaq. New 52 week highs were higher but remain weak: 122 vs 76, high was 420 on 3/26, while new lows were about halved to 43 vs 74. The ratio was positive by about 3x but…vs 1:1 vs -3x!!! vs -2x vs +1.2x vs -2x. The S&P VIX plunged back to the convergence of the 40/50 day m/a’s (16.93-17.30) after gapping up Tuesday with a high of 21.06, highest since March 6! It closed at 17.20 -2.82! This closes the gap from the long weekend 4/5-4/9 but will options expiry next week alter things? March 16’s intraday low of 13.66 was lowest since 6/20/07’s 12.75!!!

Here are the results of the last seven sessions – 5 of 7 down. Dow +1.4% vs +0.7% vs -1.7% vs -1% vs -0.1% vs -1%! vs -0.5%; Transports +2.2% vs +0.9% vs -2.1%! vs -1.7%! vs +0.2% vs -0.4% vs -0.2%; Dow Utilities +0.5% vs +0.3% vs -1.3%??? vs -0.6% vs -0.5% vs  flat vs flat; S&P 500 +1.4% vs +0.7% vs -1.7%! vs -1.1% vs -0.1% vs -1% vs -0.4%; Nasdaq Composite +1.3% vs +0.8% vs -1.8%!!! vs -1.1% vs +0.4%? vs -1.5%! vs -0.2%; Nasdaq 100 +1.2% vs +0.5% vs -1.6% vs -0.8% vs +0.6% vs -1.4%!! vs -0.1%; Russell 2000 +1.5% vs +1.6% vs -2.4%!!!! vs -1.8%!!! vs -0.3% vs -1.7%!!! vs -0.7%; NYSE Financials +1.9% vs +1.6% vs -2.2%!! vs -1.4%! vs -0.3% vs -1.6%!!! vs -1%. NYSE Financial Leaders: BAC +3.4% vs +3.8% vs -4.4%!!! vs -3.3%!! vs +0.3% vs -3.1%!! vs -2%! Citi not a leader but since peaking at $38.40 on 3/19, it is still off 9.2% after closing up for a second day at $34.63, from Tuesday’s close of $32.86 (-14.4%)!!! !

European equity markets down, Asia up, for  second session  FTSE -0.4% vs -0.3% vs +0.7% vs -0.9% vs closed; CAC40 -1.1% vs -0.5% vs +1.4% vs -1.6% vs closed ; DAX -0.9% vs -0.1% vs +1.5% vs -1.1% vs closed; Nikkei +1.2%! vs +0.7% vs -0.8% vs -0.1% vs -0.81%; Hang Seng +1.8%!! vs +0.9% vs -1.1% vs -1.2% vs closed; Korean KOSPI +1.2% vs -0.4% vs closed vs -0.1% vs -1.6%; Indian Sensex DOWN 1.4% vs +0.8% vs -0.3% vs +0.1% vs -1.5%. U.S. stocks futures weaker: DOW -65; SPX -7.20; NDQ -12! Bonds rallying with 10’s once again near 2% but 30’s lagging 3%.10 yr 2.01% +3/8 vs low Tuesday of 1.98%! RECORD low 9/23 of 1.6855%; 30 yr 3.17 +13/16; Long TIP 0.75% +15/16. It was 0.57% at high. The 5 yr TIP yields MINUS 1.31%; 10 yr -.29%. Bills 0.07% 1 month; 0.08% 3 months, 6 months 0.12%. Reverse Repo 0.25%. 3 mo. Libor 0.47%, and 0.73%; steady.

Gold closed below $1700 for a 22nd straight session, but gained $20, making the hit $107 since 2/28, closing $1680.60 +$20.30.. 2/28’s $1792.70 intraday high was not seen since 11/16! It has been above $1600 since Jan. 31, which remains below major support!!! The record high is $1923.70, a buying climax on 9/6. Res is $1694, the 40 day and $1696, the 200 day, then $1703, the 50 day. It is now $1673.30 -$7.30. Crude rallied again, closing at $103.64 +.94. Tuesday’s low of $100.68 was worst since 2/15/12! It remains well below the range of $105-110 which had held since 2/21!!! RES still at the 50 day (104.11), the 40 day (105.49), and major support at $95.76, the 200 day, all still rising. Slightly weaker overnight, now $103.16 -.48. $101.08, the April 4 low is still minor support – Tuesday’s low $100.58!!! – lowest since 2/15/12!.

TB believes yesterday’s rally was due to the volatility and strong down move since the selloff. While we recovered about half the loss since the selloff began on 4/5, positions may have been squared already ahead of next Friday’s options expiry. Still, anything can happen between now and Tuesday, but expect a return to the downside before expiry.

As for Dow 13000, it finally hit it on 2/21, the day CNBC was throwing a celebration party (on the second time around?), but failed to close above it until 2/28! Then it dropped below from 2/29-3/12 (while VIX soared), before climbing back from 3/13-4/5 as money managers caught the fever and hedgies and high frequency traders outpaced them. Then it plunged again, but without the urgency of buying, TB does not believe the pattern will be replicated. You decide.

The VIX plunged, falling a big 2.82 to17.20 – about neutral and adding credence to positions being squared ahead of next weeks expiry. Tuesday’s intraday high of 21.06 – was highest since March 6 but that was before the quarterend rally and TB is betting no rational managers wants to add to positions this early in the quarter, especially if lagging due to not holding Apple (which has been in a modest decline of late. TB wrote to a client that owns Apple:

 

Apple has MAJOR support at $600…funny, this shows how algorithmic trading is driving it with the hedgies. Look below: $575. caused by gapping up on 3/14, then $550, $516, $500, $486, $450, $420, $422, $400, $377, $363 – where latest rally began! Not saying this will happen…more likely $575 is low on a big market sell-off. Remember: they sell what they can sell in a plunge…fundamentals go out the window.

 

TB believes Apple should declare a 10:1 stock split (just now Google announced a 2:1 split). Despite analysts and Warren Buffett’s admonishments that it is meaningless, both stocks are over $600 a share, they say it doesn’t matter since the dollar amount is the same. TB believes this to be false due to small buyers not wanting to concentrate that much of their portfolio in a single stock, so you widen your audience. That is why Google should also have done at least 5:1 or 10:1 and Apple the same. Not to mention dividend reinvestments which would end up buying more shares quicker.

TB recommends either staying sidelined or setting trailing stops…you decide.

. . .   – – –  . . .  (SOS)   . . .   – – –  . . .  (SOS)   . . .   – – –  . . .  (SOS)   . . .   – – –  . . .  (SOS)

…what is Friday the 13th without Freddie? …or will he mastermind an intraday high above Dow 13k then begin yet another swoon? This time it could be worse without Apple to drive the rally. Don’t forget next Friday’s options expiration and given the sharp drop in volatility (VIX) yesterday, we could see 13k followed by a selloff as early as today.

To prove TB is not an ideologue, he believes the statement by Dem strategist, Hillary Rosen that Ann Romney “never worked a day in her life,” was not only stupid but had no bearing on her husband’s drive for the presidency. Unlike, Rush Limbaugh on the more serious calling a woman who testified for birth control a ‘slut’ and ‘prostitute’, she apologized before sponsors threatened to cost ole Rush money. Also, unlike the GOP, and Romney (“I wouldn’t have used those words” without condemning the statement), the Dem leadership countered (that is leadership, not being afraid to offend some extremist supporters).

But the more important issue is what has happened to our civility. What have we Americans become…un-American? American’s don’t do this! …or didn’t. But you haven’t seen anything yet. Wait until the presidential campaign goes into high gear.

Some of you may not like Tom Friedman but he wrote the first intelligent column TB has seen on solving the deficit. Also, unlike the extremists he blames Obama for not adopting Simpson-Bowles while condemning Paul Ryan’s claims that it is Simpson-Bowles. You can’t accept half of a plan and then claim it as cover. Here is the link: Friedman

The day that the Simpson-Bowles report was delivered to the White House, Obama beat a retreat leaving it to Obama. This was a fatal error. Had he endorsed it, as Friedman says, he would have set the stage for a debate over how to solve the budget crisis sensibly, over the strenuous objects of their idol, and extortionist, Grover Norquist. Instead, the money spoke and as if Main Street hasn’t suffered enough, the tax increase side of the solution was not only ignored but ridiculed (only $55 billion would be collected over the next ten years by raising taxes on the top 1% – TB would bet you that figure is low but to sneeze at that sum is ludicrous if in fact there is a crisis!).

For God’s sake people put your ideology aside and think about your children and grandchildren (an about kids and families of others, who would be torn apart by the Ryan Plan). All on a promise to close to the tax loopholes, but as Friedman points out they have not named a single specific one they would close. Why? Because of the extortionist, that’s why! It is time for the GOP leadership to start acting as adults and for the Dems to become realistic, but as long as ideology controls the right, it will not happen. This even as there is only a slim chance that the GOP can win the presidency (this from their own leadership). So now they are betting on controlling both houses and neutralizing Obama, a bad idea in a second term, but when people are uncertain they love splitting power between Congress and the presidency. TB concurs, so long as they start doing their job and compromising to find a fair, real, and lasting solution. So far, that is not in the cards.

How did we stoop so low as to allow superpacs and the candidates themselves to make politics a bloodsportby attacking anyone or anything that stands in the path of victory? Like most true Americans, TB is sick!

Lastly, the Best Buy saga continues. Today we learn that the company has hired two high-powered attorney’s, one a former SEC enforcement official, to pursue the investigation which at the least involves a female employee, and at worst is another Mark Hurd (HPQ) scandal. We have to wake up CEO’s to their responsibility..and it isn’t just to themselves. Moreover, we have to wake up the faux boards who are failing miserably to represent shareholders…Best Buy may be an exception…hopefully.

Have a great weekend! Monday will be a discussion of banking and the Volcker Rule.

TB

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