5/16/13…stocks vs. the economy???

From the Friar’s Club Encyclopedia of Jokes: “Ever since Eve gave Adam the apple, there has been a misunderstanding between the sexes about gifts. ” – Nan Robertson

Bloomberg Quote of the Day: “Ambition is the last refuge of the failure.” – Oscar Wilde  

Bloomberg Top Stories:

*Firs-Time Unemployment Claims in U.S. Jump to Highest Level in Six Weeks – !!!

*U.S. Stock Index Futures Decline on Jobless Claims, Housing-Starts Reports

*Consumer Prices in U.S. Dropped More Than Forecast as fuel Costs Decrease – ???

*Housing Starts in U.S. Decreased in April to Five Months Low; Permits Surge

*Berkshire Hathaway is cut by S&P as Rating Company Revises Its Criteria: AA<AA+

*Dimon Profits Best Ever as Wall Street Allies Affirm JPMorgan Chairman-CEO – sad!

*Obama Administration Mistakes Hand Republicans Openings to Beset President

*Obama Forces Out IRS Chief in Bid to Contain Damage to Second-Term Agenda

Yet another stock rally – this time on ‘average’ volume – finally! Average is the ‘new normal.’ But if it turns on you and that could happen this week, where will the support be? Could we see another ‘flash crash’? We have options expiry tomorrow and a market that is dominated by high frequency traders – not institutional buyers…their only role in this has been to be paralyzed against selling to avoid being left behind (note that even the selloffs of late are minor and not on large volume…that could change – quickly! Again Dow Transports were best (+0.8% vs +1.9%), followed by Dow Utilities +0.7% while the Dow and S&P were each up 0.4%+. The Russell 2000 small cap bored us at +0.3% vs +1.3%. Records were again set in the Dow, S&P 500 and while the Nasdaq indices had ‘rally’ highs (neither near the levels of the dotcom boom), the 100 rose just 0.2% (6.6 index points led by GOOG +6.6; MSFT +2.4 and INTC and ORCL each up 1+. BUT AAPL lost TWELVE points while gainers beat losers by 7:3. Nothing to be proud of here, especially when we are at nosebleed levels. Meanwhile, NYSE Volume rose slightly again to an average 3.66B shares vs 3.43B from 2.86B shares – worst of year! REAL trades on the floor also rose to an average 738M shares vs 700M vs 594M, lowest since April 8! With tomorrow’s options expiry rapidly approaching the VIX has risen, albeit slightly for the last two sessions but remains low.

So let’s see what else happened:

*Dow Transports +0.8% vs +1.9% vs -0.5% vs -1.1% vs +0.2%; Russell 2000 +0.3% vs +1.3%! vs -0.1% vs -0.4% vs +0.1; Dow Utilities +0.7%! vs +0.5% vs -0.6% vs -1.5% vs -1.2%; S&P 500 +0.5% vs +1% vs flat vs -0.4% vs +0.4%; Nasdaq Composite +0.3% vs +0.9% vs +0.1% vs -0.1% vs +0.5%, NDQ 100 +0.2% vs +0.5% vs flat vs -0.2% vs +0.5% vs -0.1%, Dow 30 +0.4% vs +0.8% vs -0.2% vs -0.2% vs +0.3%.

*NYSE Volume rose to an average 3.66B vs 3.43B vs 2.86B (low for the year) vs 3.49B vs 3.55B vs 3.3B vs 3.05B. REAL NYSE Volume also rose to an average 738M shares vs  700M vs 594M (lowest since 4/8) vs 670M vs 727M (highest since 4/30). Recent highs were 975M (selloff) to 887M (rally). The average last week was a weak 720M shares vs 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 727M 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, but on trades of less than that 75 have been up and just 21 down…there have been 20 mixed sessions…hint: low volume rallies!!! …and lately low volume selloffs.

  1. new 52 week highs had ranged from 121-793, They set another new high of 864! vs 793 vs 462 vs 613 vs 769 (recent range 100-864). New lows however rose sharply to 66 vs 38 vs 39 vs 37 vs 45 vs 36 vs 32 (recent range 29-237).
  2. Advance/Declines were slightly positive: +1.2x vs +2.1x vs -1.5x vs -1.8x vs +1.9x (recent range -7.1x to +4.4x) on NYSE and +1.3x vs +2.3x vs -1.2x vs -1.5x vs +1.4x (recent -3.5x to +3x). Breadth was similar: +2x vs +3.3x vs -1.4x vs -1.9x vs +2.3x (recent -10.5x to +6.4x!!!) on NYSE and +1.8x vs +2.4x vs +1.2x vs -1.1x vs +1.8x (recent -12.8x to +6.2x)  
  3. NYSE Financials rose 0.7% vs +0.9% vs 0.3% vs -0.8% vs + 0.6%. BofA rose another 0.8% to $13.44 +.10, now there are four $13 plus days since 4/11/11!
  4. Volatility (S&P VIX) rose modestly  for a second day, again ignoring the rally most likely due to Friday’s options expiration! The range since 4/12 11.99 (multi year low) to 18.20, and it is below the 40/50 day (13.37/13.61) and the 200 day (15.05)…ytd the range is 19.28 (2/25!) to 11.05 (3/14) – 12 mo. ave 16.10!

European equities weak, Asia mixed: UK -0.1% vs flat vs +0.2% vs +0.5% vs -0.1%; France +0.4% vs –0.1% vs flat vs +1% vs -0.9%; Germany -0.1% vs -0.1% vs +0.3% vs +0.7% vs -0.2%; Japan -0.4% vs +2.3%! vs -0.2% vs +2.9%! vs -0.7%; Hang Seng +0.2% vs +0.5% vs -0.3% vs +0.5% vs -0.1%; Korea +0.8% vs +0.1% vs +1% vs -1.8% vs +1.2%; India +0.2% vs +2.5%!!! vs +0.2% vs +0.7% vs -0.3%. U.S. stock futures little changed??? in another very narrow trading range session: DOW -6; SPX -1.80; NDQ +5.50! Market opening off slightly.

Bonds had a meaningless rally yesterday but it beat tanking as it has done since Bernanke spoke – the 30 yr is still ABOVE 3%…but gained 5/8 while 10’s rose by 3/8, and are up again overnight: 10 yr Treasury 1.91% +1/4 (recent range 2.06% to 1.63%!!!), and the 30 yr’s 3.26% to 2.82%!!!, now 3.12% +5/8. The long TIP is 0.72% +1/8 – still performing miserably since setting a new (record?) low of 0.36% on 4/5. It took out the recent high yield of 0.69% on 5/13 with a 0.74% Tuesday! Libor update: 0.274% 3 mos., 0.420% 6 mos. Foreign bond yields lower across the board…especially Greece and Portugal! Germany 1.35% -3; UK 1.88% -4; France 1.90% -4, Italy 3.96% -5; Spain 4.25% -7; Portugal 5.19% -12!; Greece 8.47% -13! vs 8.52% -56!!! vs 9.12%!!! -35!!! vs 9.44% vs 9.43% (recent range now 8.47%!!!-12.57%!). Japan 0.85% -1.  

Gold tanked again closing lower for a fourth day at $1396.20 -$28.30!!! with an intraday low of $1386.40, lowest since 4/17!. Last Friday’s high of $1487.20 was highest since 4/12. 4/16’s intraday low of $1321.50 – was lowest since Sept. ’10. Resistance remains way above at the 40 day/50 day: $1496-1515 – still falling! Overnight it is tanking again at $1376.00 -$20.40 with a session low of $1368!!! Crude closed little changed at $94.30 +.09, six days after posting a new rally high of $97.17, nearing a 12 month high! It is well above Sup/Res at the 40 day ($93.37), 50 day ($93.16) and 200 day ($92.15). Overnight it is $94.61 +.31.  4/18’s low of $85.61 was lowest since 12/11! The range is $85.61-$97.80 since June 29, 2012!!!!

Some random thoughts:

While TB is a total disbeliever in the rally – for economic reasons…as well as domination by high frequency traders while the SEC stands idly by, over time the best markets have been in ‘slow growth, LOW inflation’ environments. We certainly have that along with record earnings. This begs the question: with so many unemployed, dropping out of the labor pool, and underutilized, how long can that go on. While the p/e’s are manageable they could quickly soar to excessive if earnings growth declines sharply as one would reasonably expect. Look to today and tomorrow for clues on the continuation of the rally…and don’t fight the tape BUT also, don’t jump on a fast-moving train!

Meanwhile the government and both parties remain out of control and serving their and their big contributors interests, not those of the American people. We are in a mess, one of our own making with the help of the U.S. Supreme Court!

Have a great day!

TB

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