7/26/13…Summers here…but do we want him at the Fed???

From The Friars Club Encyclopedia of Jokes: “Middle age occurs when you are too young to take up golf and too old to rush the net.” – Franklin P. Adams…and:

“I don’t think it’s fair to call people middle-aged just because they’re not so young anymore.” – Syd Hope

Bloomberg Quotes of the Day: “A satellite has not conscience.” – Edward R. Murrow …or a drone!

Bloomberg Top Stories:

*SAC’s Cohen Risks Losing Billion-Dollar Fortune While Keeping His Freedom

*China Orders Cuts in Excess Output as Li Reduces Reliance on Manufacturing

*Nomura’s Quarterly Profit Surges as Abe Stock Rally Spurs Brokerage Fees

*Yen Advances on Consumer Prices as Metals Fall; S&P 500 Futures Decline

*Boeing Dreamliner’s Emergency Beacon Had Damaged Wire, Japan’s ANA Says

*Deutsche Bank Gets Boos From Underwriting as Quarterly Profit Seen Rising

*Iron Ore Enters Bull Market as China Boosts Inventories, Steel Production

*Detroit’s 86-Cent Water Debt Seen Delivering Investors Profit – revenue bonds!

*Zuckerberg’s Wealth Soars $3.8 Billion on Facebook Profit From Mobile Ads

*Egypt Orders Mursi’s Detention Over Alleged Plotting of Attacks With Hamas

*Spanish Inquiry Into Train Crash That Left Dozens Dead Focuses on Speed

*Five Hackers Are Indicted in Largest Data-Breach Scheme in U.S. History

*Ma Says Taiwan People Override China’s Missiles in Deciding on Xi Meeting

When will the insanity end? Will we ever be back to ‘normal’ markets? Not until the Summer doldrums end…at least! Recapping: yesterday was another boring day with the Dow rising just 0.1%, Transports DOWN 0.1% following a 1% loss, S&P 500 +0.3%, both Nasdaq indices up 0.7% and the Russell 2000 the winner with a 1% gain – finally! Dow Utilities rose 0.4% as did NYSE Financials…Wednesday was a down day: stocks down, bonds down, gold down, crude down…get the picture? It made no sense.

Now let’s look inside NDQ 100 for more confusion…is there a trend in there? Doubtful.– compare to the leaders of the prior four sessions: the 100 rose 20 points vs +10 points vs -24 vs +10 vs -33 with 2:1 advancing vs 7:3 declining vs 3:1 declining vs 2:1 advancing  Leaders rotated again: 2/3 of the the gain was in 8 stocks: QCOM +3.1 vs -1.4; BIDU +3; AMGN +1.9; AMZN +1.8; CELF +1.7; GILD +1.3 vs +1; SBUX +1. Losers were MSFT -4.2 vs +1 vs -1.4 vs +4.6 vs -30!!! vs -3.2; GOOG -3.7; AAPL -1.8 vs +18!!! vs -6.1! vs +1.1 vs -5.6; BRCM -2.2; CMCSA -1.5. Here are some moves, not consecutive over the past week of GOOG -3.3, -1.7,+3.3, -3.3. What direction???

The VIX oscillated again in a range of 2.91-13.54, finally settling in at 12.97…no man’s land….Wednesday: it rose for a second day to 13.28 +.62…with a range of 12.69-13.49. 11.99, Monday’s 11.99 low was lowest since 5/17 – is the euphoria oveer? The market is very vulnerable to earnings reports which are coming in mixed. We remain in the summer doldrums…and that is not good for trend followers. A/D’s and Breadth were mixed for a second day…Nasdaq the loser…new 52 week highs higher were positive.

…here’s the book:

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

*NYSE Volume rose slightly to a still-weak 3.31B shares vs 3.07B vs 2.42B (3rd weakest of 2013), vs 2.77B vs 3.28B vs 3.44B (1.96B is the lowest of 2013). REAL NYSE Volume barely rose to a still very weak 677M shares vs 670M vs 608M vs 584M vs 872M vs 664M vs 666M (Hex?) vs 617M vs 562M (lowest since 7/3). The 12-month average is 719M shares and declining! The average since 6/30 is just 677M shares, ranging from 482M to 906M, 482M being the 2013 low! There have been just SEVEN 1B+ share sessions! There have been 28 800M+ shares in 2013: 10 up, 17 down, and one mixed, but on trades of less than that 91 have been up and 33 down …there have been 28 mixed sessions.

*New 52 week highs have ranged from 33-864. They dropped sharply to 410 vs 569 vs 545 vs 630 vs 494 vs 690. New lows tripled to 180 vs 60 vs 45 vs 103 vs 37 vs 27 –new low.  

  1. Advance/Declines were positive: +1.3x vs +1.3x vs +1.5x vs +1.3x vs 1:1 vs +2.1x (recent range -17.5x to +4.4x) on NYSE and +2x vs -1.2x vs -1.1x vs +1.5x vs -1.1x vs +1.6x (recent -3.5x to +3x). Breadth was also positive: +1.5x vs +1.4x vs +1.6x vs +1.8x vs -1.1x vs +2.3x (recent -18.6x!!! to +6.9x!!!) on NYSE and +2.6x vs -1.7x vs -1.3x vs +1.8x vs -1.6x vs +1.3x (recent -12.8x to +6.2x)  
  2. NYSE Financials rose 0.4% vs -0.1% vs flat vs +0.7% vs +0.1% vs +1.3%. BofA was most active rising to $14.83 +.12 two days after hitting $15.03, highest since Jan. 14 and now major res: +0.8% vs -1.6%! vs -0.1% vs +1.2% vs -0.1% vs +3.1% vs +2.8%. Brokers +0.75 after being flat for THREE days; KBW Banks -0.2% vs flat vs +0.1% vs +1% vs +0.3%; Nasdaq Banks -0.3% vs +0.3% vs +0.3% vs +0.9% vs +0.3%. That’s it!  
  3. Volatility (S&P VIX) slipped after rising for two days following two solid declines to 12.97 -.21.  On 7/23 it declined to 12.07, lowest since April 12th with a high of 13.06! VIX peaked at 20.49, plunged to 18.90 on June options expiry then closed at 20.11 on 6/24 and has been down since – a decline of 33%! 6/24’s session high of 21.91 was highest since 12/31/12 (22.72)!!! The range since April ‘12 is 11.05 (multi- year low o n 3/14/13) to 21.9, It is well below the 40/50 day (15.77/15.33) and the 200 day (14.97)!!!…ytd the range is 11.05 (3/14) to 21.92 (6/24)! Are stop orders with limits prudent?…TB’s just sayin’…and repeating…

Global stocks mixed, Japan clobbered: UK -0.3% vs -0.8% vs +0.9% vs +0.3% vs -0.3%; France +0.4% vs -0.8% vs +1.3% vs +0.3% vs +0.1%; Germany +0.5% vs -0.9% vs +1.2% vs +0.3% vs -0.1%; Japan DOWN 3%!!! vs -1.1%! vs -0.3% vs +0.8% vs +0.5% vs -1.5%; Hang Seng +0.3% vs -0.3% vs +0.2% vs +2.33%!!! vs +0.3%; Korea +0.1% vs -0.1% vs +0.4% vs +1.3%! vs +0.5%; India -0.3% vs -1.4% vs -1% vs +0.7% vs +0.1% vs +0.1%. U.S. equity futures lower and in a normal trading range for a 2nd day: DOW -57 vs -61; SPX -6.50 vs -7.30; NDQ -4.75 vs -2 – why so little???

Bonds closed modestly better again led by the long TIP – still recovering from that 2 point loss; Better still overnight: 10 yr Treasury 2.56% +1/16 (recent range 2.74% to 1.63%!!!), and the 30 yr range of 2.82% to 3.71%, currently 3.62% +5/16. The long TIP is 1.34% +5/16. The (record?) low of 0.36% was set on 4/5. Recent high 1.53%! Libor update: 0.265% 3 mos, 0.396% 6 mos. Both remain near the Jan. 2010 record lows (0.245% and 0.382% respectively). Foreign bond yields lower ex Italy: Germany 1.66% -1; UK 2.34% -4; France 2.27% -1, Italy 4.42% +3; Spain 4.62% -1; Portugal 6.30% -2; Greece 9.81% -11 vs 9.91% vs 10.02% +19 vs 9.81% vs 9.95% +17 vs 9.86% vs -13 vs 9.93% vs 10.07% vs 10.02% -16!!! vs 10.27% -19!!! vs 10.33% -25!!! vs 10.69% vs 10.85% +28!!! vs 10.52% vs 10.54% +40!!! vs 10.85% -37!!! vs 11.22%. Recent range: 8.04% to 12.57%.  Japan 0.78% -2. Greece: incredible!!!

 Gold closed higher and remains well above the critical $1300 closing at $1329.50 -$9.40. Tuesday’s session high was $1349.20 – highest since 6/20! 6/27’s intraday low was $1179.40 – lowest since at least 2011 and now critical support. $1300 remains psychological support, while the close puts it between the 40 day $1318 and near res at the 50 day $1332 – both still falling. lt is way below, the 200 day – $1561!!! Overnight it is slightly lower at $1324.70 -$5.00. Crude closed about even at $105.49 +.10 – with a session low of $104!!! This completely negates the rally that began on 7/12. It remains well above the 40/50 day m/a’s (99.94/98.95) – both climbing sharply! The 200 day ($93.39), also rising, is distant support. First support is $104.21-36 – a triple bottom from 7/10-7/12. 4/18’s low of $85.61 was lowest since 12/11! It is weaker at $104.54 -.95 on an inside session. The range is $85.61-$109.32 since March 1, 2012.

Some random thoughts:

 Readers have been asking my opinion of Larry Summers as Fed Chairman. I thought I made it clear but here is the best analysis from The Baseline Scenario:

By James Kwak

I generally refuse to be drawn into the Yellen-Summers horse race because (a) everything that can be said, has been said, (b) I have no original information or insight, and (c) it’s all speculation anyway. But I’m going to comment on one parenthesis in Felix Salmon’s good summary post, since it has broader application:

Summers is, to put it mildly, not good at charming those he considers to be his inferiors, but he’s surprisingly excellent at cultivating people with real power.

In my personal experience, especially in the business world, this is absolutely the worst personality trait you can find in anyone you are thinking of hiring. You see it a lot, especially in senior executives. Unfortunately, at the time of hiring, you only see the ability to manage up—not the inability to treat subordinates decently. By the time you figure it out, you’ve already suffered serious organizational damage. (Thanks to my friend Marcus Ryu for identifying this problem so clearly.)

Powerful, self-confident people—like Barack Obama—are especially vulnerable, because they tend to make decisions based on intuitive judgments, and they form those judgments based on personal impressions—exactly the thing that two-faced psychopaths are good at making. (I’m not saying that Larry Summers is necessarily a psychopath, mind you—but apparently a lot of corporate CEOs are.)

This is just another reason that it makes sense to hire people based on their objective records, not the warm fuzzy feeling you get from the job interview. Thankfully, Summers has a record to go on. Hopefully Obama will keep it in mind.

Don’t forget that Summers, along with Rubin and Greenspan not only pushed for the end to Glass-Steagall…at the behest of Citi’s Sandy Weill…but joined them in destroying the integrity of Brooksley Born (he later did the same to her at Harvard when he was president!). Larry just can’t ‘get along’ – so why is Obama putting up trial balloons on him? You’d have to ask him!

Have a great weekend!



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