9/5/13…’Summers’ folly?…or just plain madness?

Today’s Quote from the Friars Club Encyclopedia of Jokes: “There is something magical about the fact that success comes faster to the guy your wife almost married.” – anon

Bloomberg Quote of the Day: “It is quite a three-pipe problem.” – Sir Arthur Conan Doyle

Bloomberg Top Stories:

*Initial Unemployment Claims in U.S. Declined More Than Forecast Last Week

*Draghi Signals ECB Watching Market-Rate Rises as Banks Repay Crisis Loans

*U.S. Stocks Little Changed After Jobless Report – ADP: smaller than expected gains

*Money Fund Lehman Moment Lurking Amid Failure to Prevent Catastrophic Runs

*Wall Street Sees Debt-Limit Negotiations Past Lew’s Mid-October Timetable

*Lloyds Bank Sale by U.K. Said to Face Hurdles Amid Fed Taper, Syria Crisis

*Brazilian IPO Surge Ends as Worlds’ Worst Stock Market Saps Demand

*Honduran Drug Violence Less Threatening Than Deficit, Central Banker Says

*Senate Panel Sets Goals Against Syria in Approving U.S. Military Strikes

*Obama-Putin Rift Over Syria Military Strike Widens as G-30 Summit Starts

Volume dropped on the NYSE but stocks rallied. Real NYSE volume dipped also but remains above 700M, about the 12 month average, for a third straight session. Best gainer was Dow Transports +1.2% vs the Russell 2000 +1.1%, followed closely by the Nasdaq 100 +1% (+33 points by 8:1…APPL added 8.5; GOOG +2.8; INTC +2.5; AMZN +2, and five others gaining one or more points but MSFT fell by 5.2!). Worst was Dow Utilities -0.2%, its third straight loss totaling -1.8%!

What does it mean…once again ‘dunno’.

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

*NYSE Volume slipped to a below average 3.3B shares vs 3.7B shares (2.52B is 4th weakest of 20131.96B is the low). REAL NYSE Volume has been above 700M for THREE days now but slipped to 728M vs 787M vs 768M shares (482M on 7/3 in a shortened trading session is the low). The 12-month average is 719M shares. The range since 6/28’s 1.75B share day, excluding the four sessions above 800M, is 482M-798M shares. The average since 6/28 is just 666M shares, ranging from 482M to 906M. There have been just SEVEN 1B+ share sessions! There have been 31 800M+ shares in 2013: 12 up, 17 down, and two mixed.

*New 52 week highs have ranged from 33-864. They rose to 158 vs 136. New lows fell to 60 vs 99 – 579-27 is the recent range.  

  1. Advance/Declines were positive: +2.5x vs +1.2x vs 1.9x vs 1.2x; (recent range -17.5x to +4.4x) on NYSE and +1.9x vs +1.9x vs +2.5x vs +1.4x (recent -3.5x to +3.8x). Breadth was a little better: +3.5x vs +2.1x vs +1.8x vs +1.2x (recent -18.6x!!! to +6.9x!!!) on NYSE and +3.2x vs +2.1x vs +3x vs +2.1x (recent -12.8x to +6.2x)  
  2. NYSE Financials rose by 0.9% vs +1.1%, again due to a sharp gain in Brokers. BofA was 2nd most active, +0.5% vs +0.9%, closing at $14.32 +.07. It has been weak since hitting $15.03 a month ago – highest since Jan. 14 and major res. Brokers +1.6%! vs +1.3%!; KBW Banks +0.7% vs +0.5%; Nasdaq Banks +0.3% vs +0.7%.  
  3. Volatility (S&P VIX) declined below 16 to 15.88 – .73 vs last Friday’s 17.01 but a week prior it was at 13.98. The recent range is now 11.83-17.81. It peaked at 22.79 on 12/28/12. It is above the 40 day (13.95), the 50 day (14.52) and the 50 day (14.59)…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

Global stocks higher: UK +0.6% vs -0.4%; France +0.6% vs -0.8%; Germany +0.3% vs -0.5%; Japan +0.1% vs +0.5%; Hang Seng +1.2% vs -0.3%; Korea +1% flat; India +2.2%!!! vs +1.8%!!!. U.S. equity futures little changed again in yet another very tight trading range: DOW -3; SPX +0.80; NDQ +1.25.

Bonds were little changed yesterday but weaker overnight in spite of a dull ADP Employment number: 10 yr Treasury 2.92% -3/16 (recent range 2.92% to 1.63%!!!), and the 30 yr range 2.67% to 3.92%, now 3.82% -3/8. The long TIP is now 1.57% -1/4. The (record?) low of 0.36% was set on 4/5. Recent high yield: 1.63%! Libor update: 0.258% 3 mos, 0.392% 6 mos, steady. Both remain near the Jan. 2010 record lows (0.245% and 0.382% respectively). Foreign bond yields higher across the board: Germany 1.99% +5; UK 2.93% +6; France 2.58% +6, Italy 4.42% +1; Spain 4.51% +1; Portugal 6.81% +15; Greece 10.18% +4. Look at some of its recent big moves: 10.03% +11; 9.75% +24!; 9.64% -18; 9.81% -10; 10.02% +19; 9.95% +17; 9.86% -13; 10.02% -16; 10.27% -1; 10.33% -25!; 10.85% +28!; 10.54% +40!!!; 10.85% -37!!!. Recent range: 8.04% to 12.57%. Japan 0.77% +1.

Gold closed weaker a day after a positive key reversal (higher high, lower low, close above the prior day’s high), giving back most of the gain! 8/14’s session low was $1271.80 – lowest since 7/17! 6/27’s intraday low was $1179.40 – lowest since at least 2011 and critical support. $1300 is psychological support, and it is well above both the 40 day ($1339) and the 50 day ($1319), both rising. The 200 day is at $1505. Overnight it is little changed at $1390.70.00 +0.70. Crude closed sharply lower at $107.23 -$1.31 in a narrow inside session. It remains above the 40/50 day m/a’s (106.38/105.19), both rising. The 200 day ($96.07) is distant support. 4/18’s low of $85.61 was lowest since 12/11! Major Res is the high the spike to $112.24 on 8/28. That move was immediately rejected! The range is $85.61-$112.24 since March 1, 2012. Overnight it is $107.58 +.39

Some random thoughts:

Finally getting past jet lag…it gets worse as you get older! First, travelling west you get energized, then give it back in spades returning east.

We had a very busy but enjoyable trip to Oregon…and without leaving the state drove 1,000 miles…Portland to Jacksonville to Eugene and back…plus wine tasting and a trip to the aviation museum at McMinnville – highly recommended!

Weather was great and this 68 year-old was best man at his nephew’s wedding to a wonderful woman.

It was a wonderful diversion to the markets and the growing problem of Syria, not to mention Egypt, which the stock market chooses to ignore…except for income producing stocks, and the bond market continues to free-fall with only brief respites.

It is a huge problem for money managers as the end of September and with it the third quarter rapidly approaches…also hard to forget the horrid third quarter of last year. The old saw goes that ‘the stock market climbs a wall of worry’ and it may be true now but if so only from the reallocation of money from bonds to stocks – but the question is: is that smart…or ‘dumb’ money…a huge chance of a double hit here.

All of this is compounded by the magnitude of daily moves in bonds. You look at a big hit and say “I better sell’ but you also know that it will only drive the prices lower as there is limited liquidity. Then the next day it rallies again…but now do you sell or wait to see if we have hit bottom? A huge quandary made worse by the persistent speculation on whether Larry Summers will be the next Fed Chairman…please Obama, do something right in your second and final term and appoint Janet Yellen…the bond market will applaud the move.

The revoltin’ development continues…so try to have a good week…stiff upper lip and all that!

TB

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