5/6/13…does a rally make it right?

From the Friar’s Club Encyclopedia of Jokes: “LBJ always told the truth, except when his lips moved.” – Red Buttons

Bloomberg Quote of the Day: “Don’t be humble, you’re not that great.” – Golda Meir

This week’s economic calendar is fairly light. We will get March JOLTs Job Openings and March Consumer Credit (Tuesday), March Wholesale Trade (Thursday) and April Treasury Budget (Friday). Courtesy of Economic Advisory Service

Bloomberg Top Stories:

*Yen Weakens for a Third Day as S&P 500 Index Futures Trade Little Changed

*Dollar Seen Rising 9% Among Biggest Dealers Citing U.S. Economic Growth (sic)

*Hedge Fund Gold Bulls Split with Buffett as Traders Say ‘Sell’ After Rebound

*Housing Crash a Fading Memory as U.S. Mortgage Defaults Drop to 2007 Level – hah!

*JPMorgan Shareholders Urged to Split Dimon’s Role Following Trading Loss – how long has TB been saying Chmn/CEO is a conflict of interest in ANY corporation???

*Spanish Lending Pain Shows ECB Rate Cut Meaningless for Banks – do tell!

*Biggest Exodus Since Whitney Ignoring May Win-Streak History – May is fading!

*Europe Gauge Shows 15th Month of Contraction as Retail Sales Fall

Say it…get it out of your system…TB was WRONG! Yes, he was, but the opening suggested that the shorts were set and forced to cover…also, as is the case with the High Freaks, they reversed – from short to long. How else can you explain a rally of 100 points in the first TWO minutes of trading…you don’t honestly believe that REAL buyers are in trading at that point…even on a payrolls report! The high of 15009 was reached just over an hour after that (+178) – the rest of the day was spent slipsliding with a close at 14974 (+142). Convinced of the validity? Not this trader! But wait there’s more…

Volume rose to just 3.6B shares from the 3.5B average of the prior two days, in fact the week’s high volume of 3.67B shares (not much better than an average day was) on Tuesday – monthend! As for shares traded on the NYSE they were just 716M, with 116M on the close, and the weeks averages was a weak 720M. Opening volume there was normal, not the surge created by the High Freaks on the electronic trading platforms. Advance/Declines and Breadth were positive but unimpressive.

So, it will sell off today? Not likely, but it could…but certainly before options expiration on May 17th. Why? Only the headline data was good and that only due to it surpassing estimates. Hours worked declined, miniscule increases in hourly earnings, no new manufacturing jobs, a loss of 6k construction jobs…but retail? Wait…it gets better: those jobs are low paying and thanks to our brilliant economists who believe ‘a jobs a job’ they conveniently ignored the fact that many of those jobs were part-time, i.e no benefits and a result have having fewer full time workers (if you replace, or cut back, full time workers to part-time you increase the workforce but with negative economic value. As I wrote Friday: The Unemployment Rate declined to 7.5% vs 7.6%: recall last month the Labor Force declined by 496k! This week it rose by just 210k but ‘Household Employment’ which declined by 206K last month ROSE by 293k – do you believe that? Besides Household employment is a joke since you don’t even have to be paid or can ‘work’ on a computer for just ONE hour a week! Why do we bother with this nonsense? Because over time – not month to month – it does align with the establishment survey. Now look at REAL unemployment: Augmented (discouraged workers) 11.2% vs 11.4%!; now add in part-time for economic reasons and you get 13.9% vs 13.8% +0.1%!!!  

If it wasn’t so sick it would be laughable. Now ask yourself if this data…and it was all they had to trade on which was proven before the open by the surge in the futures immediately after the report posted. But there is more: then came Factory Orders. This is what Economic Advisory Service had to say: Factory orders declined sharply in March. This was the biggest monthly drop since August 2012.  Although factory orders had been growing since April 2009, the growth rate was slowing over the past 3 years and is now declining.  While still possibly influenced by sequestration, these data currently indicate that the recent softness in manufacturing activity and capital spending is likely to continue, at least for several more months. Also, the ISM Nor-Manufacturing survey showed a 4% decline and the previous day’s Manufacturing Survey showed slowing growth. Last Tuesday’s Chicago Fed Survey also showed slowing.

Now back to employment…if we continued to add the same number of jobs each month for two years we would be back to the levels of 2007. Oh, yeah, stocks are a screaming buy here…not!!!

The Nasdaq 100’s gain was vs +1.1% (identical to the S&P 500 and Composite!) vs -0.5% vs +0.7% It gained 33 points, half of which were in GILD, GOOG,AAPL(each +3.5+), and five others at 1+ each. Advancers ran 84:16.

So let’s see what else happened:

*Dow Transports +2.1% vs+1% vs -2.3%!!!; Russell 2000 +1.6% vs +1.7% vs -2.3%; Dow Utilities -0.3% vs -0.2% vs -1%! S&P 500 +1.1% vs +0.9% vs -0.9%; Nasdaq Composite +1.1% vs +1.3% vs -0.9%, NDQ 100 +1.1% vs +1.3% vs .-0.5%, NYSE Financials +0.9% vs +1% vs -1%!. Dow 30 +1% vs +0.9% vs -0.9%.

*NYSE Volume was slightly higher at 3.6B shares (on another big rally?) vs 3.5B shares vs 3.67B vs 2.88B shares (weakest in 16 sessions!!!). REAL NYSE Volume rose to a modest 716M shares vs 643M vs 697M vs 887M vs 599M shares (lowest since 4/8). Recent range is 975M (selloff) to 887M (rally). The average for the week was a weak 720M shares and last week was just 687M vs 859M vs 689M!!! The last options expiry came in at a solid but not great 914M shares. The 12-month average is just 732M 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! There have been just fifteen 800+M shares in 2013 – just 4 up, 11 down, and on trades of less than that 71 have been up and just 19 down…there have been 19 mixed sessions…hint: low volume rallies!!! Real buyers???

  1. new 52 week highs have ranged from 121-709, surged to 786 vs 411 vs 386 vs 486 vs 418 vs 267 vs  495 vs 400 vs 400 vs 237 vs 228 vs 106 vs 100. New lows fell to 36 vs 50 vs 61 vs 42 vs 29 vs 40 vs 34 vs 48 vs 43 vs 96 vs 82 vs 159 vs 237 vs 120 vs 197.
  2. Advance/Declines were positive but not great: +2.6x vs +3.1x vs -2.6x vs +2x vs +2.8x vs -1.4x vs  +1.8x vs +1.9x vs +4x vs +1.4x vs +2.6x vs -1.2x vs -3.5x vs +4.4x vs -7.1x on NYSE and +2.8x vs +3x vs -3.5x! vs +1.5x +2.1x vs -1.6x vs +1.7x vs +1.3x vs +3.4x 0.7% vs +1.5% vs +0.3% vs +1.3% vs  -0.8% vs -1.8%! Breadth was also positive: +3.7x vs +3.1x vs -4.5x!!! vs +1.6x vs +3.4x vs -1.8x vs +2.2x vs +2.1x vs +3.9x vs +1.6x vs +2.3x vs -1.3x vs -10.5x!!! vs +6.4x vs -7.2x vs -2.2x on NYSE and +2.5x vs +2.9x vs -2.7x vs +1.9x vs +2.3x vs -1.1x vs +1.8x vs +1.5x vs +3x vs +2.5x vs +2.3x vs -3x! vs -5.2x vs +6.2x vs -12.8x!!! vs -1.4x .  
  3. NYSE Financials rose by 0.9% vs 1% vs -1% vs +0.7% vs -0.1% vs +0.5%. BofA only ‘most active’ financial rose just 0.4% to $12.24 +.05 vs +0.4% vs -1.8% vs -0.6% vs -0.3%. Brokers rose 2.4% (GS +1.2%;MS +21%?). JPM fell by 0.9% while WFC rose by 0.9% and USB by 0.6%.
  4. Volatility (S&P VIX) declined again to 12.85 -.74, with a range of 13.58-14.48 – identical to Thursday! The range for the last two weeks is 12.06 (multi year low) to 18.20, and it is now back below the 40/50 day (13.49/13.85) and the 200 day (15.26)…ytd the range is 19.28 (2/25!) to 11.05 (3/14) – 12 mo. ave 16.43!!!

Global equities mixed: UK +0.9%! vs +0.7% vs -0.2% vs +0.7% vs -0.1%; France -0.2% vs +0.7% vs -0.3% vs +0.3% vs flat; Germany flat vs +0.9% vs +0.4% vs +0.5% vs +0.8%; Japan closed vs -0.8%! vs -0.8% vs -0.4% vs -0.2%; Hang Seng +1%! vs +0.1% vs -0.3% vs +0.7% vs +0.7%; Korea -0.2% vs +0.4% vs -0.3% vs closed vs +1.2%!; India +0.5% vs -0.8% vs +1.2%!!! vs closed vs +0.6%. U.S. stock futures little changed and in a VERY narrow trading range – indecisive!: DOW +5; SPX +0.80; NDQ +8.25 – will Friday be just one more in a string of low volume ‘one-day wonders’???

Bonds were totally destroyed on Friday and off slightly overnight. the 10 yr lost narly a point from 1.62% to 1.74%; 30’s lost 2-3/8 from 2.82% to 2.95%! and the long time lost over THREE points from 0.45% to 0.55% – a week ago it was 0.40%!! All or off slightly overnight: 10 yr Treasury 1.74% (recent range 2.06% to 1.63%!!!), and the 30 yr’s 3.26% to 2.82%!!!, now 2.96% vs 2.95% -1/8. The long TIP is now 0.55% – performing miserable since setting a new (record?) low of 0.36% on 4/5, before backing off to 0.55%! The recent high yield was 0.67% on 3/11! Libor update: 0.237% 3 mos., 0.425% 6 mos. Foreign bond yields mixed – problem countries modestly higher ex-Greece! Germany 1.24% +1; UK 1.71% -1; France 1.80% -2, Italy 3.88% +1 was 3.75% early Friday!; Spain 4.05% +3 was 3.94%; Portugal 5.42% +2; Greece 9.58% +4 vs 9.68%!!! – vs 10.09%!!! vs 10.64% vs 10.81% vs 10.92% vs 11.18% vs 11.13% vs 11.05% vs 11.08 vs 11.22% (recent range now 9.58%!!!-12.57%!)..   

Gold closed slightly higher but did have a new high early Friday of $1487.20, highest since 4/12, and closed at $1470.50 +$2.90. 4/16’s intraday low of $1321.50 – was lowest since Sept. ’10. Resistance remains way above at the 40 day/50 day: $1526-1538 – still falling! Overnight it is $1471.00 +$6.80. Crude closed higher again at $95.61 +$1.62 – swings are incredible!  Friday’s intraday high was $96.04,highest since 4/2. It is now well above Sup/Res at the the 40 day ($92.79), 50 day ($92.58) and 200 day ($91.82). It is now $95.20 -.42.  4/18’s low of $85.61 was lowest since 12/11! The range is now $85.61-$97.80 since June 29, 2012!!!!

Some random thoughts:

As long as we cheer gains in payrolls that are mediocre at best while wages stagnate at best (except for overpaid senior management in most cases), stocks can perform. This of course is aided by companies incurring debt to pay dividends (since it is so cheap), and to offset options being exercised…by senior management again. When will reality set in?

Beats the hell out of me!

TB

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