7/18/14…it takes a plane downing (review of this weeks trading)

Quote of the Day from the Friars Club Encyclopedia of Jokes: “A study of economics finds that the best time to buy anything is last year.” – Marty Allen

Bloomberg Quote of the Day: “Things don’t change; people change.” – Henry David Thoreau, and
“If you can’t feed a hundred people, then feed just one.” – Mother Teresa…besides yourself!

Bloomberg Top Stories:
*AbbVie Seals $54.8 Billion Shire Deal in Booming Tax Migration From U.S.
*Stocks in Europe Retreat With Russian Equities as Treasuries,Yen Decline
*Canada’s Inflation Unexpectedly Accelerated to 2.4% in June on Food Costs – note there are 2 types of inflation…induced by demand and cost induced which lowers demand for other goods…like wages not increasing accordingly???
*Bitcoin Can’t Shake Bubble Image in Global Poll After 45% Price Collapse – what the hell is wrong with people who fear the dollar so much they buy these…hey, I got some tulip bulbs…
*GE Earnings Meet Estimate as Retail Finance IPO Targeted for End of July
*Microsoft Job Cuts Can’t Cool Seattle as Demand for Code Writers Sizzled
*Malaysian Air Declines Most in Nine Weeks After Plane Shot Down in Ukraine – duh! Twice!
*Greece Seen Needing Third Bailout With Debt Sales Insufficient to Plug Gap – but bonds?
*Portugal Explores Santander Interest in BES Investment, El Economista Says
*Bank CoCo Insurance to Surge in Scandinavia as Conversion Triggers Are Set
*Pound Bulls Seen Profiting on Euro Wagers Beating Dollar: Market Reversal
*Americans Unlike Asia-to-Europe Show No Qualms With Pot to Guns
*Kurdish Oil Takeover Fuels Independence Dreams Amid Iraqi Collapse – thank you, Cheney!
*Russia and Ukraine Trade Accusations Over Downed Malaysia Airlines Plane
*Israel Readies Broader Gaza Offensive After Pushing Forces Into Territory
*Grieving Families Gather Again at Malaysia Airport, This Time Without Hope
*Scottish Independence Gains Voter Support With Referendum Two Months Away
Last THREE Days Market Summary:

No, TB did not take a vacation…far from it…he had problems with both computers and had to buy a new desktop. Tried to do an update yesterday but laptop would not cooperate and Word kept erasing what he was writing. Then came yesterday…TB was checking on client portfolios and noted they were all up…as were the indices…then a couple of minutes later everything was in the ‘red’ – bonds excepted…and later Gold caught on…Crude not so much. Here we go with the summary of everything this week:

Monday: An ‘up’ day…but here’s the thing: all indices were up from 0.5%-0.7% (except the strongest index year-to-date, Dow Utilities which plunged 1.1%)- amazingly synced, and total NYSE Volume was a strong 3.44B shares BUT shares traded on the NYSE floor remained at a weak 592M shares – just 9M more than Monday’s weak level. Even that was only achieved by 120M shares trading AT THE BELL!!!Advance/Declines and breadth were solidly positive and new highs nearly doubled to 235 while new lows remain weak and steady. VIX declined below ‘12’ to 11.82 -.26. Bonds closed weaker especially long TIP – closed at 0.99%!

Tuesday: A mixed session with Dow +0.5%, Transports +0.5%, the rest -0.02% (Utilities) to -0.5% (Nasdaq)…but one big loser: Russell 2000 -1%!!! A warning? Despite the mixed session both A/D’s and Breadth were negative! New highs plunged; new lows rose. VIX 11.96 +.14 range rising. Bonds closed slightly better while Gold and Crude declined – the former closing below $1300; latter breaking $100

Wednesday: stocks put in a modest up session on average of late volume. Just about A/D’s and breadth only slightly positive on NYSE and slightly NEGATIVE on Nasdaq! New highs up modestly, lows stable. Bonds were modestly higher as were Gold and Crude.
Bonds closed lower. Gold plunged, trading down to $1302, lowest since 6/19 – when the rally began, before closing at $1306.70 -$30.70, while Crude barely budged…that is, if you ignore its low of $100.22 – lowest since May 12th and closed at $100.91 +.08. It has been up just once in the last 11 session!

Thursday: opened slightly lower, then the Dow ‘peaked’ at +13…stalled and then came the first news of the plane crash…minutes later announced as hit by a missile (took most of the afternoon before this was admitted…selloff was modest (Dow -105), then a rebound and then slowly and steadily lower for the remainder of the session…Dow closing -161 and just off the low…still above 40/50 day m/a’s though! All indices were off from 1.0% (Utilities) to -1.6% (Russell 2000). A/D’s and Breadth were decidedly negative!!! New Highs fell by a third; New lows up about as much. VIX closed at 14.54 +3.54!!! with a range of 10.85 (very bullish) to 15.35 (bearish!). Bonds rallied sharply (natch); Gold opened about $5 higher then went vertilcal following the news hitting $1325…still in recent range and closed up $17.10 at $1316.90; Crude was flat until the news then rose from $101.50 to $102.20 on the news (mild!)…then slowly rose to $103.10, then plunged back to $101.90(???), before zigzaging back to $103.94 before closing at $103.19.

Here are the indices for the week:
Dow: -0.9% vs +0.5% vs – vs +0.7% vs +0.2%
Dow Transports: -1.4% vs +0.6% vs +0.4% vs +0.7% vs+0.4%
Dow Utilities: -1% vs +0.5% vs +0.5% vs -1.1% vs -0.5%
S&P 500: -1.2% vs +0.5% vs -0.2% vs +0.5% vs +0.2%
Nasdaq Comp: -1.4% vs +0.4% vs -0.5% vs +0.6% vs +0.4%
NDQ 100: -1.4% vs +0.2% vs -0.4% vs +0.6% vs +0.6%
Russell 2000: -1.6% vs +0.5% vs -1% vs +0.6% vs -0.2%
NYSE Financials; -1.3% vs -0.2% +0.4% vs +0.5% vs – (
Total NYSE Volume reversed again to a solid 3.44B shares from 2.66B vs 3.14B vs 2.82B vs 3.22B vs 2.66B vs an extremely weak 1.99B. Last real above average volume was 4.25B (end of quarter). Real NYSE Volume barely budged, despite the rally, to 592M shares vs 583M vs 654M vs 570M vs 683M vs 602M vs 537M – second weakest since April 30th vs 597M –contrast to 1.49B at end of quarter. That and options expiry’s 1.72B shares the only ones above 800M since 4/28! The 12-month average remains at a very weak 704M. Since 4/30 the average volume has been just 673M shares (still falling), ranging from 531M to 1.72B.

Look at volume over the past week and note how minimal it was yesterday considering the impact of the plane downing: Total NYSE: 3.35B shares vs 3.37B vs 3.29B vs 3.44B vs 2.66B. Now look at floor trades on the NYSE: 705M (right on the WEAK 12-month average) vs 675M vs 731M vs 592M (very weak) vs 583M. Note: the average since 4/30 is just 675M shares – that is WEAK!!!

A/D’s were VERY negative (NASDAQ is telling us something!!!): NYSE -4.3x! vs +1.2x vs -2x vs +1.8x vs +1.2x; Nasdaq -2.5x! vs+1.7x vs 1:1 vs -3x! vs +1.2x vs -3.8x vs -3.9x. Breadth was miserable too: NYSE 5.3x!!! vs +1.8x vs -1.6x vs +2.1x vs +1.1x; Nasdaq -3.7x! vs -1.1x vs -1.7x vs +1.5x vs +1.3x vs -2.2x vs +1.5x vs -6.2x!!! vs -3.5x. New 52 Week Highs plunged to132 vs 186 vs 154 vs 235 vs 146 – recent range is 71-580!!! New Lows were modestly higher at 132 vs 79 vs 83 vs 53 vs 57 – recent range is 24-214.
S&P VIX rose sharply at put buying surged following the crash, closing at 14.54 +.3.54!!! vs 10.79!!! vs 11.96 vs 11.82 vs12.09 – full cycle??? The range extended to 10.85-15.35!!! to While in bullish territory it gives little credence to the positive sessions of late. 7/3’s close was a new recent low 10.32, slightly better than the 10.34 on June’s options expiration!

Overnight markets:

Bonds closed very strong (TEN basis points!!!) following the crash news which brought on a flight to quality: 10 yr closed at 2.45%!!! +11/16. 30 yr closed 3.27% +1-3/8. The long TIP, which hit a low of 0.96% on 7/11, took that out closing at 0.913%!!! +1-15/16! Overnight they are weaker but holding most of gains: 10’s 2.48% -1/4; 30’s 3.28% -5/16; and long TIP 0.93% -1/2. 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: 0.232% 3 mos.; 0.325% 6 mos., both remain near their record lows, set recently: 0.222% and 0.320% respectively! NOTE the Fed Funds rate has averaged 0.09% since 5/22/13 and is 0.09-0.10% where it has been for weeks! Foreign bond yields mixed and holding gains: Germany 1.15% –; UK 2.58% -1; France 1.57% –; Italy 2.81% +2; Spain 2.62% –; Portugal 3.67% –; Greece 6.15% +2…even with news they will require yet another bailout??? The recent high on selloff was 6.75%. Highly volatile!!! Recent range 5.42% to 12.57%. Japan: 0.54% +1.

Gold rallied on the news and rose to $1325 before settling at $1316.90 +$17.10 – first close above $1300 in three days! Psychological support remains at $1,300. Last Thursday’s session high was $1346.60, highest since March 19th!!! Now just 2 closes below $1300 in 19 sessions since plunging on 4/14! 6/9’s $1240.20 was lowest since 1/31/14!!! It is back above all three key moving averages which remain near locked and are CRITICAL: 50 day $1292, then the 40 day $1292 and 200 day $1288!!! Note the recent high of $1392.60 on 3/17, highest high since 9/4/13, then ended the session with a negative key reversal sparking the downturn! Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is slightly lower at $1309.80 -$7.10 in a narrow inside session – watch $1300!!!.

Crude finally rebounded after the plane downing, closing at $103.19 +$2.99. Tuesday’s session low was $90.01 – lowest since 3/21 – SIX handles since 6/30! 6/20’s run to $107.73 – highest since 9/19/13, a huge down session – has it in freefall with critical support next at $99.94 – the 200 day! 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 now back above the 50 day ($103.61) with RES at the 40 day $104.15, SUP the 200 day $99.92!!! The range is $85.61-$112.24 since March 1, 2012. Overnight it is weaker at $103.13 -.06 after trading up to $103.94.

Global equity markets weaker again (plane downing came in last hour of European trading; Asia was closed): UK -0.4%; France -0.2%; Germany -0.7%; Japan -1%; Hang Seng -0.3%; Korea -0.1%; India +0.3% vs -0.1% vs -1.4%! vs -0.3% vs -0.5% vs -2%! U.S. equity futures – only Dow in narrow range???: DOW +3 (range 26); SPX +2.20 (16); NDQ +10 (32)

Some random thoughts:

…what a difference a day makes! A couple of days ago we were grousing about longer lines at check-in for flights due to forced power-ups of cell phones, computers, etc. Now we have a whole new fear…being shot down by a missile! In 1993, the Ruskies shot down a Korean Air 747 which had lost its IFF transmitter (TB would like to know how the pilot that fired the rockets feels today; then during the Gulf War we accidentally shot down a smaller airliner; now this. This was a sophisticated missile to take out an aircraft at 33,000 feet…and thus points to the Russians as having provided it to their own rebels who had no IFF to determine whether it was hostile…even then it was no threat merely perceived (?) as a transport…hmmm. Already the accusations and denials of culpability are flying.

But here is the thing…Al Qaeda and other groups have some sophisticated missiles…enough to do this? Imagine if that plane had been over U.S. airspace??? Think of the impact on the economy as people become afraid to fly…after all, the attack could be made on take-off or landing and not require more than a handheld ground to air missile. Think about all those take-offs and landings in Kabul…and Baghdad!!!

The market reaction was muted…and puzzling…except for the plunge in Malaysia Air which must be feeling very unlucky…or plagued!

Have a great weekend…relax and put this all behind you…or try to!
TB

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