5/16/14…just another manic Friday…oh and Gundlach’s bond comments!

Don’t know why this didn’t get posted Friday…sorry. TB


Quote of the Day from the Friars Club Encyclopedia of Jokes: “I’ve been in love with the same woman for forty-one years. If my wife finds out, she’ll kill me.” – Henny Youngman

Bloomberg Quote of the Day: “You only die once, but for such a long time.” – Moliere

Bloomberg Top Stories

*Housing Starts Jumped 13% in April as U.S. Builders Overcame Winter Freeze

*European Stocks Pare Drop With S&P Futures on U.S. Housing-Starts Data –note: starts!

*Credit Suisse Said Near $2.5 Billion Accord With U.S. in Tax-Evasion Probe- keeps on giving!

*Bill Miller Wagers Gundlach’s Bearish Housing Position Is Set to Backfire – see below!

*Darden to Sell Red Lobster to Golden Gate Capital for $2.1 Billion in Cash –dumped!

*Deutsche Bank Warns Employees in Video Against Boastful, Vulgar Behavior – that’s rich!!!

*RBC Benefits After Boosting Investment in Surging Gunmaker Smith & Wesson – kaboom!

*Goldman Expansion Off Wall Street Leads Investors Deep Into Heart of Texas – yee haw!

*What Barclays’ $4 Million Error Says About Market’s Anxiety – Oops…‘fat-finger’ trade!

*Putin Spin Doctor Ketchum Pitches Russian Pancakes While Ignoring Ukraine…???

*Modi’s Bloc Ousts Ghandi Dynasty in Biggest India Election in 30 Years

*California Firefighters Aided by Calmer Winds Make Progress in San Diego

*Bid to Revive U.S. Tax Cuts Halted as Divided Senate Feuds Over Amendments

*Turkish Coal Mine where 284 Died Lacked Rescue Chamber Optional Under Law – sad…


Thursday’s Market Summary:

First things first…one: today is options expiration! Red flags following the past two days weakness…and bond strength…which brings us to point two: Jeffrey Gundlach speaking at an Altegris conference said that the long bond is due for a ‘melt-up’ – kind of an oxymoron don’t you think? But that makes TB highly suspicious of the bond rally on WEDNESDAY which had no obvious reason? You don’t think hedge funds would actually front-run something like this??? Oh, wait…Gundlach is CEO of DoubleLine Funds….not a hedge fund but could someone have found out he was going to say this??? Note he is BEARISH on real estate…ignore starts today!

Gundlach – bond ‘melt up’

The opposite of a ‘melt-up’ is a melt-down and that is what happened to stocks yesterday. Note, as usual the run up earlier in the week to record highs and reversal the same day…then a huge pounding yesterday…you decide!

Total NYSE Volume rose to 3.53B shares…wait…wasn’t this a ‘down’ day…oh, yeah, I forgot! That is just about average but compare to the prior FOUR session which were either up or mixed” 2.81B vs 2.86B vs 2.98B vs 3B – that is a 2.9B share average or about 600M below average and you can bet that a big chunk of that came in the final fifteen…mainly five minutes and at the close! This is not a market…it’s a goddamn casino with loaded dice, marked cards, and magnets on the roulette wheel! Real trades on the floor of the NYSE surged to 750M or 25M above the 12-month average…not much but consider the average since 5/4 was just 661M shares with only one day registering more than 700M shares (April 30th’s 908M – monthend!). Since 3/31’s (quarterend) 2.0B shares and one of the highest ever there have been exactly FIVE 800M share days and just that one 908M share day on 4/30. Now look at this: every day trades ‘at the close’ ran 50M shares with 50-100M posted after the close…that is pathetic! – yesterday it was 120M shares!!! Starting 15 minutes before the close 218M shares traded…retail? Ya, sure, ya betcha!

A/D’s had one good day in the last two weeks and the last three days have blown it away: Last Monday: NYSE -2.3x vs -2.1x vs -1.2x vs +3.7x; Nasdaq -2.1x vs -2.8x vs -1.9x vs +3.7x. Breadth too: NYSE -4x!!! vs -2.1x vs -1.1x vs +5.2x; Nasdaq -2.5x vs -3.3x vs -1.3x vs 5.3x. Oh, wait…there’s more: New 52 Week Highshave plunged the last two session: 71!!! vs 107 vs 208 vs 233 vs 93!!! Now look at New Lows: 180 vs 102 vs 62 vs 65 vs 214!!! Wake up, bulls!!!


On Tuesday the Dow eked out a new record high of 16735…the old one set on 4/4 was 16631 before plunging to 16015 (-4.4%) on 4/11…just SIX days later; S&P was even worse…1902 vs 1897 with the same drop as the Dow to 1814 (-4.4%). The Nasdaq Comp peaked on 3/6 and is off 6.2% since then…the 100 -3.9%. Dow Transports are the only one doing well and had a new high yesterday and still held above the old one but look vulnerable. How about the Russell 2000 small cap – a proxy for broad economic strength vs earnings -peaked on March 4 at 1213 and is now 1103 (-9.1%!!!)As for the winner year to date, Dow Utilities, they peaked on 4/30 and are off 3.6% since then but still positive for the month and quarter.

Lastly volatility…S&P VIX has been bullish…fell to 12.13 Tuesday, and then up to just 12.17 yesterday…this after gapping down on the open Monday…it was the lowest since January 17th..but look: it rose then from 12.28 with an 11.88 low! To 21.48 on Feb. 3rd!!! +75%!!! AND it gapped up twice along the way! Yesterday it gapped up again (range 12.72-13.77 and closed at 13.17 +1.00!!! Still bullish? As TB said you ‘could’ have bought CHEAP puts Wednesdayas a hedge…and might ‘have been’ smart to do so!!! If history repeats…

Here are the latest ytd’s and where they were Wednesday: Dow -0.8% vs +0.2%; Trans +5.1% vs +5.9%!; Dow Utilities +9.3% vs +9.7%!!!; S&P 500 +1.2% vd +2.2%; Nasdaq Comp -2.6% vs -1.8%!; NDQ 100 -0.8% vs FLAT; Russell 2000 -5.8% vs -5.2% (remember this one is supposed to be closest to broad economic growth…got it?). Not commenting much on Financials since TB’s return as they are screwy with the index showing minor changes vs brokers/banks which doesn’t make sense: NYSE Financials -1.2%! vs -0.3% ytd; KBW Banks -3.3% vs -2.3%!?!; Nasdaq Banks -6.4% vs -5.8%…guess they weren’t fooled by those ‘special’ dividends…no sir!

…it’s a jungle out there! Still bullish? Then you didn’t read the Bloomberg headlines above!


Overnight Comments:

Bonds had a second STRONG session yesterday (see beginning of comments!) with the long end up over a point and are off slightly overnight. Monday’s ‘blip’ up: negated and more! Yield changes from Monday’s close, price was yesterday: the 10 yr closed at 2.50% +7/16 vs 2.66%; 30’s 3.33% +7/8 vs 3.50%. The long TIP was as low as 1.05% on 5/2, rose to 1.19% Monday and closed at 1.00% +1-9/16…over 3-1/2 in two days!!! Overnight slightly weaker…bonds have options too you know: 10’s 2.51% -1/8; 30’s 3.33% -3/16; and long TIP 1.0%!!! -3/16. Cycle highs: 30 yr high was 3.97% on 12/31; the 10 yr recent high 3.03%! Long TIP was 1.64%. The (record?) low of 0.36% was set on 4/5/13.

Libor update: 0.229% 3 mos.; 0.325% 6 mos., both just off their record lows, set in past week: 0.222% and 0.320% respectively! NOTE the Fed Funds rate has averaged 0.08% since 5/22/13 and is 0.07% -0.09%. Foreign bond market yields higher than yesterday’s closes ex-Italy/Spain which were weak along with Greece- but still below yesterday mornings post: Germany 1.32% +2; UK 2.55% +3; France 1.79%! +3; Italy 3.06% -4; Spain 2.95% -6; Portugal 3.74% +7; Greece was coming back from a rough period after hitting 5.83% on 2/24 then rising to 6.33% on 4/28, but look: 6.75% +11 vs 6.62%!!! +44!!! vs 6.16%. Range is 5.77% to 12.57%. Japan: 0.57% -1.

Gold closed higher after hitting $1309.20 Wednesday, closing at $1293.60 -$11.30 reversing Wednesday’s rally….it WAS a ‘Memorex’ rally! It closed below the 40/50/200 days and back below psych support level of $1300 with first res at the 40 day $1300, then the 200 day $1301, and the 50 day $1311. Following the ‘key reversal’ on 3/17 after printing new recent high of $1392.60, highest high since 9/4/13 – that ended in an outside day and nearly a negative key reversal!Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is weaker at $1289.10 -$4.50.20 with a low of $1287.70!.

Crude also closed lower at $101.50 -.83, following Wednesday’s session high of $102.65 – back to where it was in late April. 3/2’s session low was $97.37, lowest since 2/4! 1/14’s low was worst since 5/2/13: $91.24! The record high of $114.83 was on 5/2/11, the low since on 10/4/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. It is still above all three moving averages but not by much. Support at the 40 day ($101.26) then the 50 day ($100.98), and 200 day $100.42. The recent range is $85.61-$112.24 since March 1, 2012. Overnight it is slightly higher at $101.86 +.36 with a high of $102.04 and low of $101.39 – an inside session.

European equity markets little changed and mixed, Asia weaker: UK -0.1% vs — vs -0.2% vs +0.1%; France +0.1% vs -0.2% vs -0.1% vs +0.3%; Germany -0.3% vs – vs -0.1% vs +0.6%; Japan -1.4%! vs-0.8% vs -0.1% vs +2%!!! Hang Seng -0.1% vs +0.7% vs +1%!!! vs+0.4%; Korea +0.2% vs – vs +10.4% vs +0.9%; India +0.9% vs +0.4% vs -0.2% vs +1.4%! U.S. equity futures little changed: DOW -6 (range 44); S&P -0.50 (6); NDQ +0.25? (14).


Some random thoughts:

Nothing to say…but be sure to read Gundlach story in market summary

Just get through the options expiry and then have a great weekend!



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