4/4/13…fact vs. conventional wisdom…

From the Friars Club Encyclopedia of Jokes: “Definition of a power struggle: When your boss has the power and you have the struggle.” – try asking for a raise today???

Bloomberg Top Stories:

*Draghi Says ECB Monetary Policy Will Be Acommodative as Long as Necessary-yawn

*First-Time Jobless Claims in U.S. Increased More Than Forecast Last Week–sequester?

*Kuroda Starts Campaign to End Two Decades of Stagnation With Bond Buying-arigato!

*Stocks in Europe Fall With Euro on ECB While Yen Weakens Most Since 2011 – !!!

*RBS Rides Euro’s Decline as the World’s Most Accurate Currency Forecaster

*Deutsche Bank Said to be Probed by Regulators Over Hidden Losses in Crisis – !!!

*Spain Defying ECB Bailout Calls Beats German Bonds This Year – for how long???

*Apple’s Delayed Spaceship Campus Is Seen Costlier than World Trade Center

*North Korea Escalates Nuclear Threat Against U.S. as Worker Access Blocked

*Corzine Knew MF Global Oversight Systems Were Fatally Flawed, Freeh Says – duh!

…patience is not only a virtue but it yields rewards! The market tanked on solid volume, led by the Russell 2000 small cap -1.7%! (hint: when the economic outlook is good, smaller companies rally…and vice versa!). All indices were down, advance/declines and breadth were decidedly negative and the VIX Rose nearly 10%…a trifecta!!!  Here are some takeaways that are highly reminiscent of a market ‘top’:

*Dow Transports were the second worst performer after being worst for two days, declining by 1.3% vs -1.2% vs -1.5%, eradicating Thursday’s 1% gain. The S&P 500 and Nasdaq Composite fell by 1.1%, the 100 by 0.9% and the Dow by 0.8% or 111 points but 45 minutes (note that time frame again), before the close it was down 136! Short-covering rally – nothing more! This market is totally controlled by high frequency geeks!.

*NYSE Volume ROSE to 4.04B shares (highest since 3/15’s options expiry!) vs 3.29B vs 2.74B vs 3.27B vs 2.9B shares. REAL Volume rose to 812M shares vs 639M vs 573M shares vs 876M (high since since 3/15) vs 596M shares vs 558M shares –the range since 2/11 is 558M to 1.825B on 3/15’s options expiry and a near 12 month high, second only to 12/21’s 1.88B shares. Note that 3/15’s (options expiry) was the only day since 2/28 to register over 1B shares! Ave vol. 12 mos. 738M, ytd 717M. There have been just 11 800+M shares in 2013 – mostly on DOWN days!

  1. new 52 week highs which have ranged from 121-709, plunged to 193 vs 417 vs 388 vs 613 vs 348 vs 422 vs 512. New lows nearly doubled to 114 vs 64 vs 69 vs 36 vs 60 vs 44 vs 56 vs 33 vs 36 vs 43 vs 50; recent high 98.
  2. Advance/Declines were HIGHLY NEGATIVE at -3.7x vs -1.1x vs -2.2x vs +1.7x vs +1.1x vs +2.2x on NYSE and -3.3x vs -1.3x vs -2.7x vs +1.3x vs -1.1x vs +1.4x on Nasdaq. Breadth was even worse at -5.7x!!! vs -1.2x vs -3.4x vs +1.7x vs -1.1x vs +2.5x on NYSE and -4.3x!!! vs +1.1x vs -3x vs +1.6x vs +1.5x vs +1.7x on Nasdaq.
  3. The Dow fell by 0.8% vs +0.6% vs +0.4% vs -0.2% vs +0.8% vs -0.4%. Dow Transports were 2nd worst at -1.3% vs -1.2% vs -1.5% vs +1%, while Dow Utilities finally dipped by 0.3% vs +0.3% vs +0.2% vs +1.2%.The two Nasdaq indices fell by 1.1% and 0.9% respectively with the 100 having 92 decliners and only Apple and Facebook showing real gains. The Russell 2000 FELL for a  third day and was worst performer at -1.7% vs -0.5% vs -1.3% vs -0.1%…hmmm. NYSE Financials FELL by 1.6% vs +0.7% vs -0.8% vs +0.4% vs -0.4% vs +0.5% vs -0.6%. Brokers -2.1% while the two bank indices fell by 0.2% and 1.2% respecitively!. BofA not only the most active but down 2.8% to close at $11.81 – below $12 for first time since 3/6- the range is $11.11, on 12/17 to $12.78 on 3/20. Note: 12 cents is a 1% change!!! GE -1.5%; C -3.7%!!!
  4. Lastly, volatility (S&P VIX), roared back from 12.78 to close at 14.21 +1.23 or 11.2% with a high of 14.66 (from a multi-year low!!!), it is oscillating wildly in a narrow range of 12.30-14.66, average 13.23, and is again back ABOVE the 40/50 day m/a’s (13.53/13.49) and approaching the 200 day at 15.72…ytd the average has been 13.53 with a range of 19.28 (2/25!) to 11.05 (3/14) – 12 mo. ave 16.64!!!

Global equity markets weaker ex-Japan – again!: UK -0.8% vs -0.4% vs +1.2% vs C vs C vs +0.4 vs +0.6%; France -0.3% vs  vs -0.2% vs +0.9% vs C vs C vs +0.4% vs -1.5%; Germany -0.3% vs-0.2% vs +1.1% vs C vs C vs +0.5%; Japan UP 2.2% vs +3%!!! vs -1.1% vs -2.1% vs +0.5% vs -1.3%!; Hang Seng -0.1% vs -0.1% vs +0.3% vs -0.7% vs C vs -0.7%; Kospi -1.2%!!! vs -0.2% vs -0.5% vs -0.4% vs +0.6%; India -1.6%! vs -1.2%! vs +0.9% vs +0.2% vs C vs 0.7%. U.S. stock futures little changed after climbing (Dow was +63 earlier): DOW +1; SPX +0.70; NDQ -1 – so much for the rally!!! Incredible…Dow is +54 after the open??? The rest though are MIXED!!!

Bonds were strong yesterday as stocks stunk…er sunk…strong again overnight: 10 yr Treasury 1.77% +3/4 (recent range was 2.06% to 1.85%), and the 30 yr’s 3.26% to 3.05%, closed 3.05%, now 3.02% +5/8!!! The long TIP is at a new low of 0.52% +7/8, the high yield was 0.67%! Libor update: 0.240% 3 mos., 0.442% 6 mos. – slipping again. Foreign bond yields all lower, led by France. Germany 1.25% -4; UK 1.72% -4; FRANCE 1.90 -8!, Italy 4.53 -5; Spain 4.88% -1; Portugal 6.14% -8!; Greece 11.2% flat vs 11.94% vs 12.09% vs 12.30% vs 12.57%!!! vs 11.66% vs 11.37% vs 11.48% vs 11.21% vs 11.06% vs 10.58%…exciting!!! Hoopa! Japan 0.44% -11!!!  

Gold destroyed and breaking down with $1600 a distint memory, closing at a WEAK $1553.50 -$21.40 – $46 in two days (lowest close since 5/16/12!!!! It is now way below resistance and the 1/17 high of $1699.90. The recent intraday high was $1618.30, almost to the 40 day on 3/21!  We are now below the 2/21/13 low of $1554.30 – not seen since May 2012! Last time it was below $1500 was Sept. 2011, now critical. The breakdown  puts first resistance at $1556.40, the 2/21/13 low , then the 40/50/200 day m/a’s $1606-1619 – falling steadily. Overnight it is $1546.40 -$7.10, with a new low of $1539.40, lowest since 6/29/11!!! Crude also slammed to $94.18 before closing at $94.45 -$1.64! wiping out gains since 3/25, and now sandwiched between the 50 day ($94.64) and 40 day ($94.13), two days following the rally intraday high of $97.35, highest since 2/15! The range is $91.60-$97.35 since 3/12! The recent low is $89.33, lowest since 12/26, set on March 4. Now $94.46 +.01.

Some random thoughts:

To paraphrase Abe Lincoln: You can fool some of the people all of the time and most of the people some of the time but you can only fool all the people for so long…and it is so long, sayonara Takahashi!

TB has been preaching that for the third straight year, sell in May and go away, may be the wisest choice…after all it is better to earn ZERO, than to lose a bunch, right?

How could we be so deluded by short term corporate earnings to ignore the global problems and our own unemployment which is only improving at the pace of a wounded snail and if the ADP numbers were corrected job growth slowed in March. Meanwhile, we have scoffed at the Euro’s problems, crises after crises, weak wage gains in this country despite which demand (mainly for autos lately!), has been increasing…how long can you do that?

Also, how much more can housing prices rise?…isn’t this a case of euphoria after coming off the dregs…aka a dead cat bounce? Were it not for record low mortgage rates that wouldn’t be possible. But what happens when either a) buyers get priced out again or skittish due to the levels and/or b) those who wished to sell but were underwater swell inventories as they race to put their homes on the market when demand begins to slow? The answer should be obvious and it could be a double dip.

All of this in the face of two (especially one) political parties that have made the U.S. government totally dysfunctional. Where is the outrage? Congress may have a low approval rating but at least YOUR representative and senator are doing a great job, right?

Have a great day!

TB

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