7/2/13…a quarter to remember…to learn from!

From The Friars Club Encyclopedia of Jokes: “By trying, we can easily learn to endure adversity. Another man’s I mean.” – Mark Twain  

Bloomberg Quote of the Day: “Abused patience turns to fury.” – Thomas Fuller

Bloomberg Top Stories:

*How Fed Avoids Deterring Bondholders With 7% Jobless Rate Seen as Mystery – ??? 

*Stocks in Europe Decline as S&P 500 Futures Pare Gain, Treasuries Advance

*Banks in Japan Stay Bond-Addicted as Abenomics Fails to Stop Cash Hoarding

*Deutsche Bank Unseats JPMorgan in Second-Quarter Bond Underwriting League

*American Realty Capital Properties to Buy REIT in $3.1 Billion Transaction

*Gold Traders Seek Floor After $66 Billion Erased in Bear Rout – time to buy?

*Snowden Retracts Russian Asylum Bid as Options for Political Refuge Narrow

*Mursi Opponents Draw Strength From Army Ultimatum Rebuffed by President

*Jordan’s Monarchy Threatened as Middle East’s Chaos Flows Across Border – !!!

*San Francisco Transit Strike enters Day Two Upending Commute for 400,000 – !!!

 

It was a positive session…but once again on LOW volume. The only loser was Dow Utilities which plunged 1.3% after finally rallying 0.6% – since 6/18 it is down 2.2%. The only indices to have strong gains were the Russell 2000 +1.3%; Dow Transports +1.1% and the Nasdaq Composite +0.9%. Weakest were the Dow +0.4% and S&P 500 +0.5% followed by the NDQ 100 +0.6% and NYSE Financials +0.7%. The VIX continued its decline falling 2.9% but is still at a high 16.37. A/D’s and Breadth were both positive while new 52 week highs had a selloff high of 423 while new lows dropped to a very low 33! Gold offset some of its two day loss of $73.70 rising from the depths to $1255.70, a $32 gain! Long treasuries were idle as they are overnight but down sharply from their 22 month high of 3.63%!!! The low yield was 2.45% on 7/25/12.

As indicated above, NYSE Volume was a weak 3.08B shares vs 4.4B shares Friday, highest since 6/24’s 4.7B shares while floor-trades shares plunged to an average 714M shares (lowest since 6/18) from 1.75B shares. Since June 20th the average volume has been a whopping 1.11B shares with a low of 737M – 12-month average is 722M shares!

We remain in a tech wreck. The Nasdaq 100 rose 17.75 points (up just +0.6%) by 3:1 with four stocks doing the heavy lifting led by AAPL with 10.6!!! They combined for 15 of the 17.75 point gain! Four loses led by ORCL -2.5 subtracted 7.3 points…not a good day!

…here you go:

* Dow 30 +0.4% vs -0.8% vs +0.8% vs +1% vs +0.7% vs -0.9% vs +0.3% vs -2.3% vs -1.4%; Dow Transports +1.1% vs -0.4% vs +0.8% vs +0.8% vs +1.9%!!! vs -2%!!! vs -0.5% vs -2.2%!!! vs -1.2% vs +1%; Russell 2000 +1.3% vs -0.3% vs +1.1% vs +0.3% vs +1.1%! vs -1.3%! vs +0.3% vs -2.6%!!! vs -1.4%! vs +1.2%!; Dow Utilities -1.3% vs +0.6% vs -1.3%!!! vs +1.4%!!! vs flat vs +1.4%!!! vs +1.1%! vs -0.2% vs +1.3%!!! vs -2%! vs -2.3%!!!; S&P 500 +0.5% vs -0.4% vs +0.6% vs +1% vs +1% vs -1.2% vs +0.3% vs -2.5%!!! vs -1.4%!; Nasdaq Composite +0.9% vs flat vs +0.8% vs +0.9% vs +0.8% vs -1.1% vs -0.2% vs -2.3%!!! vs -1.1%!; NDQ 100 +0.6% vs +0.1% vs +0.5% vs +1% vs +0.6% vs -1% vs -0.4% vs -2.3% vs -1.2%!

*NYSE Volume plunged to a WEAK 3.08B shares from 4.4B shares vs 3.31B vs 3.54B vs 3.63B vs 4.7B vs  5.51B vs 4.84B (2.91B is the 2nd lowest of 2013, 2.75B is the 2013 low). REAL NYSE Volume also plunged to an average 714M shares (lowest since 6/20)  from a strong 1.75B vs 738M vs794M vs 810M vs 968M vs 2.01B (595M is lowest since 5/24). Since 6/20 the average slipped to a still strong 1.1B shares. The 12-month average is 720M shares. The range since 2/11 is 558M to 2.01B eclipsing the 1.825B on 3/15’s options expiry. There have now been just SEVEN 1B+ share sessions! There have been 25 800M+ shares in 2013 – 8 up, 17 down, but on trades of less than that 85 have been up and 31 down…there have been 22 mixed sessions.

*New 52 week highs have ranged from 65-864. They jumped to 423 from a well below average 251 vs 234 from a weak 165 vs 122 vs 76 vs 98 vs 65 vs 257 vs 345. New lows were more than halved to 33 (a new recent low!) vs 87 vs 92 vs 137 vs 248 vs 715!!! vs 438 vs 550 vs 143 vs 104 vs 62!!!. Recent range was 33-715.

  1. Advance/Declines have been positive the last four sessions: +2.5x vs +1.1x vs +4.3x! vs +3.1x vs +4x! vs -6.5x! vs 1:1 vs -17.5x!!! vs -5.6x! (recent range -17.5x to +4.4x) on NYSE and +2.4x vs +1.1x vs +3.5x! vs +1.2x vs +2.5x! vs -3.3x!!! vs +1.5x vs -2.6x vs +2.3x vs +1.8x (recent -3.5x to +3x). Breadth was similar: +2.3x vs -1.3x vs +2.8x vs +6.6x! vs -10x!!! vs -1.1x vs -18.6x!!! vs -11x!!! vs +3.8x!(recent -18.6x!!! to +6.4x!!!) on NYSE and +2.1x vs -1.1x vs +2.7x vs +2.6x vs -2.6x vs -1.1x vs -11x vs -2.2x vs +3.1x vs +2.6x vs -2.3x (recent -12.8x to +6.2x)  
  2. NYSE Financials rose by +0.7% vs -0.5% vs +1.1% vs +0.9% vs +1.8% vs -1.4% vs +0.1% vs -2.7% vs -1.6% vs 0.7%; Brokers +1.7% vs -0.7% vs +0.9% vs +0.4% vs +1.5% vs -1%; KBW Banks +0.9% vs -0.1% vs +0.9% vs +1.1% vs  +0.9% vs +2.2%! vs -1.6%; Nasdaq Banks +1.7% vs +0.2% vs +1.7%! vs -0.4% vs +0.9%! vs -0.5% vs -0.8% vs +1%. BofA most active: +0.5% vs +0.7% vs +3%!!! vs -3.1%!!! vs -1.6% vs -2.3% vs -0.6%…. remains BELOW $13 at $12.93 +.07. Last time below $13 was on 5/9 with a high of $13.83 on 5/30! It is now down 2.6% since 6/18…look at the others: C -3.5%; JPM -3%; WFC UP 1.3%; USB UP 2.7% and a new 52 week high!; GS -7.6%!!!; MS -6.6%; UBS -4.8%! – bank lovers heed! Note: To hell with the Fed…brokers aren’t banks!!!
  3. Volatility (S&P VIX) plunged for a THIRD straight session but remains elevated, falling to 16.37 -.49 with a low of 16. 6/25’s session high of 21.91 highest since 12/31/12!!! The range since 4/12 is 11.99 (multi year low) to 21.92, way the 40/50 day (15.44/15.09) and the 200 day (15.04)…ytd the range is 11.05 (3/14) to 21.92 (6/24) – 12 mo. ave 15.35!

Global equities weaker – ex Japan: UK -0.5% vs +1.5%; France -0.7% vs +1.1%; Germany -1.2%!!! vs +0.5%; Japan +1.8%!!! vs +1.3%; Hang Seng -0.7% vs +1.8%; Korea flat vs -0.4%; India -0.6%. U.S. stocks little changed in a narrow range session: DOW +8; SPX +1.30; NDQ +5.50.

Bonds did little yesterday after being off early in the session and are treading water overnight unchanged. 10 yr Treasury 2.48% -1/16 (recent range 2.62% to 1.63%!!!), and the 30 yr range is 3.60%!!! to 2.82%, currently 3.48% +1/16. The long TIP is now 1.25% +1/8 – still the weakest link since a new (record?) low of 0.36% on 4/5. Since peaking on April 5th the long TIP has still lost 23.5 points OR 22%. Recent high 1.53%! Libor update: 0.273% 3 mos., 0.413% 6 mos, still close to the Jan. 2010 record lows (0.245% and 0.382% respectively). Foreign bond mixed for a second day with Portugal and Greece losing ground: Germany 1.71% -1; UK 2.39% -3; France 2.31% -1, Italy 4.39% -2; Spain 4.58% -1; Portugal 6.38% +10!; Greece 10.762% +14!!!. Recent range: 8.04% to 12.57%.   

Gold staged a nice rally for a 2nd straight session but remains at multi-year lows. It closed at $1255.70 +$32!! with a session high of 41261.70 – contrast to Friday’s intraday low of $1179.40 – lowest since at least 2011 and now critical support. First res is now $1348.30, the 6/19 low! Major res is the 40 day/50 day: $1373-1388…both still plunging, and the 200 day – $1601!!! Slightly lower overnight at $1253.00 -$2.70 – o/n high was $1267.Crude closed sharply higher at $97.99+$1.43 on a ‘key reversal’ (although this hasn’t meant much lately) and a session high of $98.28, not seen since 6/19!. The range for June was $91.26 – $99.01 (highest since 9/17/12)! It is well above  the 40/50 day m/a’s (95.52/95.06), while the 200 day ($92.29), remains as support. Overnight it is $98.30 +.31 with a sesson high of $98.46. 4/18’s low of $85.61 was lowest since 12/11! The range is NOW $85.61-$98.46 since June 29, 2012.

Some random thoughts:

Promised you some returns and here they are…note the far right column – it levels out everything…except Financials:

INDEX

June

2nd Qtr.

YTD

12 mos.

3/31/2008

Dow Industrials

-1.4%

2.3%

13.8%

18.9%

6.8%

Dow Transports

-1.9%

0.2%

16.3%

20.4%

6.9%

Dow Utilities

0.8%

-4.3%

7.2%

5.2%

4.6%

S&P 500

-1.5%

2.8%

12.6%

20.6%

6.1%

Nasdaq Composite

-1.5%

5.1%

12.7%

17.8%

9.2%

Nasdaq 100

-2.4%

4.0%

9.4%

13.1%

10.9%

Russell 2000

-0.7%

4.1%

15.1%

24.2%

8.4%

NYSE Financials

-2.3%

3.7%

10.6%

30.3%

-8.3%

Gold ETF – GLD

-11.1%

-22.9%

-26.5%

-23.2%

5.4%

1-2yr Tsy ETF-SHY

0.0%

-0.2%

-0.2%

0.2%

1.5%

30 yr Tsy Bond

-3.1%

-2.9%

-5.9%

-10.5%

6.4%

TIP ETF – TIP

-3.8%

-7.1%

-7.2%

-5.0%

4.0%

Notes:

  1. Note that despite wide disparities recently, how similar longer returns are – except NYSE Financials
  2. Despite a collapsing bubble in gold longer term it has performed pretty well
  3. Note volatility in 30 yr treasury (assumes you rolled it at each auction!)
  4. Cash was not king and in fact was a constant loser!
  5. Why were people interested in TIPS (this is the indexed ETF – the long TIP looks much worse!)?

What this illustrates is how difficult a period this was to manage. You had to have conviction! That said, if you were overconfident you were…well…screwed!

Since I began managing client accounts in March 2008 this is the second worst quarter I have experienced…definitely the most volatile…3rd Quarter of 2008 was the worst: impossible to find a safe harbor yet in the end bonds prevailed – especially zeroes!!!

Hope you find this useful as you analyze your quarter and contemplate future strategy.

Two more days to the Fourth…then Friday’s payrolls follow!

TB

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