6/3/13…the not so merry month of June…did you sell???

Today’s column is dedicated to the memory of TB’s uncle, Elvon M. Darusmont, who passed away Friday at the age of 93…his uncle, friend, and mentor.

Bloomberg Quote of the Day: “This above all: to thine own self be true.” – William Shakespeare…let the others fend for themselves! TB

This week’s economic calendar is packed with important indicators. The highlight of the week will be the May ISM Manufacturing Survey (Monday) and May Employment Situation (Friday). We will also get the April Construction Spending and May Motor Vehicle Sales (Monday), April International Trade (Tuesday), May ADP Employment, Q1 Preliminary Productivity & Costs – Final, May ISM Non-Manufacturing Survey, April Factory Orders and Beige Book (Wednesday) and April Consumer Credit (Friday). Courtesy of Economic Advisory Service

Bloomberg Top Stories:

*SAC Capital Insiders Said to See Most Client Cash Pulled by Start of 2014

*U.S. Stock Futures Advance as Franc Weakens; Turkey Protests Roil Markets

*Emerging Market Dominoes to Slide as Societe Generale Sees Rand-Led Rout

*Bonds Tumble Most Since 2004 as Optimism on Growth Feeds Rally in Stocks – ???

*Chrysler U.S. Sales Beat Estimates as Ram Leads Surge in Pickup Deliveries

*Carlyle Sets Record With $1.3 Billon Sale of Madison Avenue Office Tower

*Northern Ireland Foreclosure Demands Rise Most in U.K. Economy

*U.S. Cancer Drug Shortages Force 50% of Doctors to Ration, Delay Treatment   

Just when you thought it was safe…emphasis on YOU…stocks got slammed…not just slammed but destroyed after holding up most of the day then falling like a stone. Take the Dow…please! It rallied 68 points by midmorning after a few ‘up and down’ gyrations of no importance, then it began a slide after hitting a new record high of 15392, leveled off around even for nearly two hours then began a death slide that accelerated into the close losing 90 points in the final 45 minutes, before closing at the session low!!! Hey, that sounds an awful lot like Apple when it peaked last year, no? What caused the swoon?

As TB wrote on Friday: to hell with weak economic data!!! At the end of the day (sorry, no pun intended), all indices were down and the Dow was the best performer, -0.8% (ex the beaten up Dow Utilities which were off just 0.6% but have now lost  while all others lost 1% or more…NYSE Financials were trashed falling 1.7%  Note that the NYSE floor volume was similar in pattern to the prior three sessions with it crossing 500M shares just 25 minutes before the close…although the indices were already being battered. Then, 90 million shares up to the close with another 100 million on the close to bring it to 1.13B shares! Total NYSE volume was a strong 3.91B shares – once again proving its hard to keep a strong market ‘up’. Wake up investors…the casino is open…and you are the pawns. Despite all the ‘evidence’ that the high freaks provide liquidity, it is false and has been proven on every major selloff of the past year…that’s where the volume is as they complete their ‘pump and dump’ without supporting the selloff. How else do you explain declines like that in 45 minutes. Unfortunately, we aren’t privy to the total volume numbers by the minute but you can extrapolate from the floor number and see that the major portion of the volume was at the end of the day…on a Friday no less! Vegas anyone? At least there you know the odds! But as W.C. Fields said, “never give a sucker an even break.” NEVER!!!

Lastly, TB has had a running battle with his ‘bull’ friends, over p/e’s. He doesn’t dispute that they are not stretched on an historical basis BUT…doesn’t the p/e being attractive ore even fair value imply sustainability of earnings…and thus rising revenues? Sunday’s WSJ added to his (not a permabear) case: while the multiples are not ‘stretched’ revnues aren’t growing, a potentially troubling sign according to Jack Ablin, CIO at BMO Private Bank. But the best point is using the Robert Schiller method (you recall the guy who was mocked by the equity geeks over his ‘irrational exuberance’ and later the mortgage guru’s (who stood to make even more money), and who measures stock prices over the average corporate earnings over the past decade to compute the p/e. Using this metric, the multiple surges to 23 times earnings versus the historical 16 times multiple.

Think about it: profit margins are near 58-year highs and nearly 75% above their historical trendline, yet corporate profits are ‘tepid’ and seem ‘close to their peak, according to Doug Kass of Seabreeze Partners Management. Not that it matters but TB concurs! What have you got in  your wallet?

So let’s see what else happened:

* Dow 30 -1.4%!!! (range 276 points, loss 208!!!)  vs +0.1% vs -0.7% vs +0.7% vs +0.1%; Dow Transports -0.8% vs +0.2% vs -1.1%! vs flat vs -0.5%; Russell 2000 -1% vs +0.6% vs -1%! vs +1.3% vs -0.1%; Dow Utilities -0.6% vs flat vs -1.5%!!! vs -1.4%!!! vs -1.1%!!! vs -0.6%! vs -1.6%!!! – down 6.8% over the past six sessions with nary an up day, and since hitting a posting a near record  high on 4/30, have plunged 10.4%!!!; S&P 500 -1.4%! +0.4% vs -0.7% vs +0.6% vs -0.1% vs -0.3%; Nasdaq Composite -1% vs +0.7% vs -0.6% vs  +0.9% vs flat; NDQ 100 -1% vs +0.6% vs -0.6% vs +0.7% vs flat.

*NYSE Volume exploded late in the session to 3.91B shares vs 3.47B shares vs 3.56B vs 3.43B vs 2.75B (2013 low) vs 3.27B vs 4.32B.  REAL NYSE Volume also rose to 1.35B shares (highest since 3/15 and 2nd highest of the year!) vs 711 shares vs 722M vs 734M vs 587M. This takes out the recent highs of 975M (selloff) to 887M (rally). The average last week was another weak 728M shares vs 726M vs 720M vs 687M vs 859M vs 689M!!! The 12-month average is just 724M 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. This is only the fourth day this year to register over 1B shares! There have now been just 18 800M+ shares in 2013 – just 5 up, 13 down, but on trades of less than that 78 have been up and just 25 down…there have been 21 mixed sessions.

*new 52 week highs have ranged from 100-864. They fell on Friday to 221 vs 300 vs 175 vs 517 vs 138!!! vs 811. New lows were nearly TRIPLED to 290!!! vs 108 vs 191 vs 79 vs 49 (recent range now 29-290).

  1. Advance/Declines were very negative: -5.5x! vs +1.3x vs -3.8x!!! vs +1.4x vs -1.2% vs -1.4x vs -3.5x! (recent range -7.1x to +4.4x) on NYSE and -2.6x! vs +2x vs -2.3x vs +2.4x vs +1.1% vs +1.1x vs -2.9x! vs +1.2x vs -3.3x! (recent -3.5x to +3x). Breadth was even worse: -6.8x!!! vs +2x vs -1.7x vs +1.8x vs -1.5x (recent -10.5x to +6.4x!!!) on NYSE and -3.8x!!! vs +3.5x vs -1.6x vs +2.5x vs +1.1x (recent -12.8x to +6.2x)  
  2. NYSE Financials plunged 1.7%!!! vs + 0.8% from best to worst performer vs – 0.3% vs +0.7% vs -0.3%. BofA fell 1.1%! vs +3.3%??? vs +1.5%??? vs +0.8% vs flat to $13.68.15 -.15…but still 15th day above $13 since 4/11/11 – all this month! Brokers -1.4%; KBW Banks -1.7%; Nasdaq Banks -1.2%. Citi worst -2.5% a day after a 12 month high; JPM -2%; UBS -2.4%…MS only gainer +0.3% and a new 12 month high? Go figure!
  3. Volatility (S&P VIX) surged to 16.35, highest since 4/18, then closed just below at 16.30 +1.77!!! (10th day above 13 since May 2). The range since 4/12 11.99 (multi year low) to 18.20, and it is back above the 40/50 day (13.37/13.61) with res at 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 mixed, Asia weak, especially Japan!!!; UK -0.4% vs -0.9%! vs +0.2% vs -1.6% vs +1.8%; France +0.2% vs -0.7% vs +0.7% vs -1.3% vs +1.5%!; Germany +0.2% vs -0.6% vs +0.5% vs -1.5%!!!; Japan DOWN 3.7%!!! vs UP 1.4% vs DOWN 5.2%!!! vs +0.1% vs +1.2%; Hang Seng -0.5% vs -0.4% vs -0.3% vs -1.6%!!! vs +1.1%; Korea -0.6% vs +0.1% vs -0.1% vs +0.8% vs +0.3%; India -0.8% vs -2.3%!!! vs +0.3% vs -0.1% vs +0.7%. U.S. stock futures higher??? in an extremely narrow trading range  –  caution!: DOW +66; SPX +4; NDQ +5.

Bonds are weaker after not getting any benefit from the ‘purge’ in stocks on Frday and are weak again overnight: 10 yr Treasury 2.16% -5/16 (recent range now 2.17% to 1.63%!!!), and the 30 yr’s 3.33% to 2.82%!!!, now 3.31% -9/16. The long TIP continues to be hammered and is at another new high of 0.97% -3/4!!! – still the weakest link since a new (record?) low of 0.36% on 4/5. Since the Bernanke announcement on the 7th the high yield has gone from 0.82% set on 5/22 to 0.97%! Looks like it will break 1% soon…then all bets are off! Libor update: 0.273%!!! 3 mos., 0.415% 6 mos. Foreign bond yields higher ex-Greece and Japan! Germany 1.56% +5; UK 2.03%!!! +3; France 2.10% +3, Italy 4.18% +3; Spain 4.48% +7!; Portugal 5.33% +23!!!; Greece 9.11% -5 vs 9.20%!!! vs 8.80% vs 8.54% vs 8.39% vs 8.63% vs 8.54% vs 7.98% vs 7.97% vs 7.94% vs 7.96% vs 8.47% – it has now broken down from the rally! Recent range 7.94% to 12.57%). Japan 0.81% -4.  

Gold couldn’t hold Thursday’s gains and closed lower after just one day above $1400, at $1393.00 -$19.00! Thursday’s intraday high was $1417.70, highest since 5/15, despite Tuesday’s negative key reversal  Reversal of fortune? It has been down 11 of the last 15 sessions following 5/20’s intraday low of $1338, lowest since 4/18. 5/10’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 at the 40 day/50 day: $1440-1470 – falling rapidly now! Overnight it is $1393.20 +.20. Crude was destroyed negating Thursdays mild bounce from Wednesday’s rout, at $91.97 -$2.64!!! first close below the 200 day since 5/1 making it first resistance at $92.31! It is now way below the 40/50 day, just three days after a high of $95.92 – highest since 5/22!  The rally high was set 14 days at $97.17, nearing a 12 month high! Overnight it is slightly higher at $92.69 +.72, and slightly above the 200 day, with a session low of $91.26. Res at the 200 day (92.31!!!), 40 day ($93.23), 50 day ($93.64). 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:

How in the world have stocks ignored economic fundamentals, revenues that are stagnating and for banks only growing from cost-cutting and reduction of loan loss reserves? Ah, the Fed is buying…and now forced to keep going…or is it?

Don’t get suckered into a dead cat bounce.

Have a great week!

TB

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