11/19/13…at the margin

Today’s Quote from the Friars Club Encyclopedia of Jokes: “I’ve got nothing against kids. I just follow the advice on every bottle in my medicine cabinet: Keep away from Children.” – unattributed…natch!

Bloomberg Quote of the Day: “And that’s the way it is.” – Walter Cronkite – whatever happened to ‘reporters’? Television ‘news’?

TB’s Quote of the Day: “Walmart Store Holding Thanksgiving Food Drive For Its Own Workers” – just one store but how shameful of the company and those who oppose living wage laws

http://www.huffingtonpost.com/2013/11/18/walmart-food-drive_n_4296618.html?utm_hp_ref=tw

Bloomberg Top Stories:

*Chinese Steer billions Away From China for Safety – you can’t make this up!

*China Bank Crisis Looms as Empty Factories Mark $6.6 Trillion Credit Binge

*Stocks in Europe Drop From Five-Year High With S&P Futures; Aussie Rallies

*JPMorgan Said to Agree on Final Details of $13 Billion Mortgage Settlement

*Fed Ponders How to Temper Tapering to Avoid Sudden Lurch in Interest Rates – !

*Tesla Model S Probed by U.S. After Catching Fire Three Times in Five Weeks – oops!

*Best Buy Tumbles After Saying Holiday Promotions Will Hurt Profit Margins

*Norway Backs Down on Talk of Splitting $800 Billion Sovereign Oil Fund

*BOE Tells Bankers Covering Up Bad Behavior by Colleagues to Repay Bonuses – ?!?

*Corporate Bond Trades Shrink to The Smallest in Year as Dealers Retreat – !!!

*Boeing Beats Airbus in Dubai Airplane Battle as 777x Wide-Body Takes Off

*Barclays Sees Weak Mexican Economy Threat to Peso Bond Market Gains 

*Hondo to Nissan Bet Minicars Will Be Next Big Thing in Japan Market Battle

*Beirut Explosions Near Iranian Embassy Kill 23 Including Cultural Attache

*Obamacare Consultants Warned of Website Failure in March, Document Shows

*Typhoon May Be ‘Last Alarm Bell’ on Climate-Change Risk, Bank Ki-Moon Says – at least Nero did something while Rome burned…fiddle around. We just sit there!

*Littoral Ship’s Communications Found Lacking by U.S. GAO – our newest ship!

*Espresso Machines at $20,000 Bring Corner Café Flavors Into Home Kitchens – ugh!

Monday’s Market Summary:

Fizzle…again! Up out of the chute then down and downer. We…the world…rallied on China growth…mindlessly believing their blather which was in contrast to data last week. Would you trust any data created by the Chinese government? End of story!

Only the Dow held on to even a smidgeon of the early rally and it close up just 0.1%! S&P 500 lost 0.4%, Dow Transports 0.3%, Dow Utilities were flat. The bad news was the usual three on down days: both Nasdaq indices and the Russell 2000 small cap: -0.9%, -1%, and -0.8%!!! NYSE Financials to their credit were FLAT.

NYSE Volume dipped, and on a down day at least that’s a good thing, 3.15B shares vs 3.24B vs 3.24B vs 3.13B vs 3.35B – all below average of about 3.6B shares. REAL NYSE Volume also fell to a below average 655M shares vs 796M shares, the only time above 700M last week which brought up the average for the week to a still well below average 663M shares – last Monday’s 538M shares was lowest since August 5th !

Advance/Declines and Breadth were both negative. New 52 week highs rose likely on the initial positive burst to 514 vs 430 vs 444 vs 331 vs 226, while new lows slipped to 56 vs 66 vs 102 vs 93 vs 64 (Vets Day – never short a thin market). VIX jumped but remains low, closing at 13.10 +.91, stopping at six closes below 13 since 10/18, AND negating Fridays low print of 11.99, first time below 12 intraday. Yesterday’s high was 13.22!

Bonds had modest gains, Gold tanked by $15!, and Crude declined and remains weak.

The Nasdaq 100 plunged by 31 points (-1%), following a piddling 7.5 point gain, vs +0.3% vs +0.3% vs +1.2% vs +0.1%, with just 5:1 declining! Compare to positives of +9:1, +1.5:1, +1.1:1, +9:1, and -13:1…warning signals? SEVEN members lost more than a point and ZERO gained: APPL -5.2 vs -2.5 vs +6 vs +0.1% vs +0.1% vs -1.1 vs +6.6 vs -6.7 vs -3.9 vs -0.9 vs +5.4; FB -5.1; MSFT -5 vs -1.1 vs -1 vs +6 vs -1.8 vs -1.3 vs +1.9 vs -4.7 vs +11.3!!! vs +5.2; TSLA -1.5; GILD -1.2 vs +1.2; AMZN/CSCO -1.1.

Twitter (TWTR) was a one trick pony giving back all of Friday’s gains and more to close at $41.14 – a new low close while the intraday low barely held above Vets Day’s $39.40 low…losing support?…and interest?

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

*NYSE Volume fell from an already weak 3.24B shares to 3.15B vs 3.13B vs 3.35B vs 3.12B vs 2.53B. The record high (?) is 4.82B shares on Q3 end of quarter while 2.52B is 4th weakest of 20131.96B is the low). REAL NYSE Volume fell sharply to a below average 655M shares from a high 796M vs 633M shares vs 678M vs 652M vs 538M, lowest since August 5th (2.06B shares on the Sept. expiry was 3rd highest ever: 6/30/06 3.38B; 7/12/02 2.29B while 482M on 7/3 on a shortened trading session is the 2013 low). The 12-month average is 722M shares. The average since 6/28’s 1.75B share day is just 700M shares, ranging from 482M to 2.025B shares on 9/20. There have been just EIGHT 1B+ share sessions! There have been 37 800M+ shares in 2013: 16 up, 19 down, and two mixed.

*New 52 week highs have ranged from 33-864. They rose sharply early to 514 vs 430 vs 445 vs 331 vs 226 vs 254. Recent high is a super-strong 890!!! New lows fell again to 56 vs 66 vs 74 vs 102 vs 93.  

  1. Advance/Declines were negative: -1.6x vs +1.9x vs +1.9x vs +2.2x vs -1.7x (recent range -17.5x to +6x) on NYSE and -1.7x vs +1.5x vs -1.1x vs +2.3x vs -1.2x (recent -4x!!! to +3.8x). Breadth was similar: -1.9x vs +2.3x vs +2.4x vs +4.3x vs -1.5x (recent -18.6x!!! to +7.2x!!!) on NYSE and -3x vs +2x vs -1.1x vs +5.5x vs +1.2x (recent -12.8x to +6.5x).  
  2. NYSE Financials were flat following +0.6% vs +0.6% vs +0.8% vs -0.7%. BofA most active but also FLAT EVEN following an intraday high of $15.17 – highest since 1/14/11!!! vs +0.8% vs +1.1% vs +2.2%, remaining at $14.91, still highest close since August 5th. It has struggled since hitting $15.03 on 8/1. Brokers -01% vs +0.9% vs -0.5% vs +1.3% vs -0.2%; KBW Banks -0.1% vs +0.3% vs +0.6% vs +0.9% vs -1.1%; Nasdaq Banks flat vs -0.2% vs +0.3% vs +0.9% vs -0.7% – small banks remain weak!
  3. Volatility (S&P VIX) rose a day after trading to 11.89 eradicated Friday’s close of 12.19, ending up at $13.10 +.91 with a range of 12.41-13.22… still only the 8th day to close with a 13 handle since 8/13! The recent range is 11.83-21.01!!! Since March 11th the average has been just 14.47…way below the five year average of 23.32~~~ and the 40/50/200 day: 14.63/14.58/14.33!!! It peaked at 22.79 on 12/28/12…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

Global stocks woke up and smelled…well…China! Korea strong, India higher but oddly Hang Seng is flat? UK –0.5% vs +0.5% vs +0.5% vs +0.4% vs -1.4%; France -0.9%! vs +0.8% vs +0.3% vs +0.7% vs -0.6%; Germany -0.2% vs +0.7% vs +0.3% vs 0.7% vs -0.6%; Japan -0.3% vs flat vs +2%! vs +2.2%!!! vs -0.2% vs +2.3%!!!; Hang Seng FLAT vs +2.7%!!! vs +1.7% vs +0.8% vs +1.4%; Korea +1%??? vs +0.3% vs +1.9% vs +0.2% vs -1.6% vs +0.9%; India +0.2% vs +2.2%!!! vs closed vs -0.4% vs -1%; U.S. stock futures little changed in another very narrow range: DOW +4; SPX -2.50; NDQ -0.25 – very narrow range last four sessions!

Bonds were slightly higher but giving back most of it overnight: 10 yr Treasury 2.68% -3/16 (recent range 1.63% to 2.99%), and the 30 yr range 2.67% to 3.90%, 3.77% -1/4. The long TIP is 1.46% -5/16. The (record?) low of 0.36% was set on 4/5. Recent high yield: 1.63%! Libor update: 0.239% 3 mos, 0.352% 6 mos. (both just above their new record lows!). Foreign bond yields little changed and mixed: Germany 1.70% +2; UK 2.72% -1; France 2.18% +1; Italy 4.05% -3; Spain 4.06% -1; Portugal 5.90% +2; Greece 8.29% +5. Recently: 7.71% – 12.57%. Japan 0.61% -1.

Gold can’t catch a break falling $15 two days after trading to a four day high of $1293.80, and closed at $1272.30 -$15.10! The recent low is $1251 on 10/15 – lowest since 7/10. Recent high was $1375.40 on 9/19.  6/27’s intraday low was $1179.40 – lowest since at least 2011 and critical support. $1300 remains psychological resistance with major res now at the 40 day ($1311) and the 50 day ($1316), both dropping. Major resistance at $1375, the 9/19 high. The 200 day is at $1407. Overnight it is $1274.30 -$2.00.

Crude couldn’t hold on to Friday’s slight high of $94.55 countering Wednesday’s new recent low of $92.51, lowest since 6/4. It closed at $93.03 -.81. It has shown no sign of strength since 9/18’s surge to $108.49. 9/19’s session high was $108.99! Recent rally high and close are $110.70 and $110.53 respectively. It is way below the 40/50 day m/a’s ($98.89/100.44), both dropping rapidly now, and major resistance! The 200 day ($98.58) is converging with the 40 day!!! Thus very major resistance. 4/18’s low of $85.61 was lowest since 12/11! The recent range is $85.61-$112.24 since March 1, 2012. Overnight is slightly weaker at $92.67 -.36, with a session low of $92.52!

Some random thoughts:

What to talk about today? So many things…so little time. First, the headline at the top of the store TB hates…Walmart…not paying workers enough and store asking other employees to contribute food…gimme a break! Then the headline on Best Buy: just Sunday in the Minneapolis Star-Tribune there was an article on how deposed founder and Chairman, Richard M. Schulze has been selling gobs of stock – planned sales for his foundation and some new, while the article praised the earnings…too soon to tell TB thought…and today he was right. But why do you want to be buying when the owner of 18% of the stock is dumping into the rally? Remember Ken Lay? Angelo Mozillo? Makes you wonder, right…16 analysts continue to have it as a strong buy just 9 holds and 3 sells. Now we see impact of sales…lower margins! OOPS. Stock closed yesterday at $43.56 – open suggests $2 lower! A bridge too far?

Remember TESLA… the star performer? Despite the fact that they won’t be able to sell enough of the new ‘S’ model to justify price (p/e to growth is 11.7x!!!), now they have fires in the car and Feds are looking into it. (3 in just 5 weeks).

OK, now…what TB really wants to get to: margins…specifically stock buying on margin. We all know that is what caused the stock market crash in 1928. In addition, evidence points to the 2000 crash, and that margin borrowing peaked again in 2007 precipitating the decline which then thanks to bankers greed, became a rout.

It shouldn’t take a genius to figure out that when margin borrowing is explosive, it doesn’t take much to bring the market back to reality (remember the old saw about the guy who kept buying stock in a company and it kept rising…so he called his broker and said ‘sell!’, to which the broker replied, “to whom?”). Yet we are in denial of this simple fact, which, along with TB’s preaching on low volume despite the high frequency traders, has CNBC mouthpieces drooling at record highs…in this economy? In this world? With this government? With Americans set to leave their kids and grandkids worse off than themselves – for the first time since the Great Depression…and this on just a Great Recession! Wake up and smell the napalm!

In early 1998, TB wrote a piece on margin borrowing and how that was the cause of the stock market’s continued rise…and why every time it fell back to just the 40 day moving average it rebounded again…and again…until Y2k and then it didn’t…actually wouldn’t have made it that far had not Europeans taken up the slack and bought U.S. stock over Y2k fears…the last ones in! Also recall that Greenspan who in a speech at the Fed conclave in Jackson Hole in 2002 called for abolishing margin limits! This after he added all Nasdaq securities to the ‘marginable’ list effective 1/1/99…this included IPO’s even on the first day of trading!!! (Note however that no ‘respectable’ broker would lend against them…only the discounters who thrived on day traders and their margin fees!

Thanks to a good friend, TB received an article updating the margin debt status and in ‘real’ dollars we are near the levels of 2000 and above those of 2007! Can you spell ‘bubble’? Rather than regurgitate it for you, see for yourself! Here is the link:

http://www.businessinsider.com/chart-margin-debt-bearish-signal-2013-5

Read it and you decide…but don’t take this lightly…after all, it’s your money!

Have a great day!

TB

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