Bloomberg Top Stories:
*Stocks in U.S. Rise Past Closing Records as Japan Boosts Stimulus Efforts – will it work?
*Consumer Spending in U.S. Unexpectedly Fell in September as Incomes Rose – yet a rally?
*JPMorgan Offers Hint at Mortgage Market Failure With Fannie Mae Securities – loss sharing?
*Kuroda’s Stimulus Jolts Markets With Assault on Japan’s Deflation Mindset – fade it???
*Russia Raises Interest Rate More Than Forecast in Effort to End Ruble Drop
*Exxon Mobil Finds Bright Spit in Tumbling Crude-Oil Price by Refining it
*Ally Auto-Loan, Securitization Documents Sought by SEC in Subprime Probe – oops!
*Abenomics Revived as BOJ Stimulus, Pension Fund Spur Global Stock Rally – good luck!
*Crude Oil Set for Biggest Monthly Decline Since 2012 on Global Oversupply
*Shale Boom Redrawing Global Oil Map as Alaskan Crude Now on Sale in Korea
*World’s Richest Bank on U.S. Expansion by Opening Family-Office Outposts
*Ukrainian Premier Gets Backing From President as Russia Agrees to Gas Deal
*Israel Allows Limited Access to Temple Mount as Thousands of Police Deploy
*Fracking Advocates Urged to Win Ugly by Discrediting Their Opponents – more sickness!
*Merkel Plays Down Incursions as Russian Fighter Jets Probe NATO’s Defenses
Thursday’s Market Summary:
Wrote the market summary yesterday and at the open the Dow was down along with all the other indices. Then…bewilderment…the other indices were flat to down and the Dow was up nearly 60 points? Thanks to the trusty Bloomberg it became apparent that the anchor, in fact most of the gain was due to Visa (V)! Remember this is a credit card company deriving its income from transaction fees. Yesterday it hit a new high of $236.65 after gapping up $10 on the open! Oh, and that is not just a 12-month high but a record high. Volume was 12.7M shares or about 3.6x average. So when the Dow opened the gain was almost entirely Visa! The Dow closed +221 with Visa alone accounting for 141 of those points! Scary…it is to TB, why it’s bubblicious!
Perhaps yesterday should have been Halloween because there were more things that went bump in the session. The Dow was up 1.3% – 0.8% ex-V, Dow Transports DOWN 0.9% (by 5:1!). The rest were up from 0.3% (NDQ 100) to 0.8% (Russell 2000). Oh, sorry, forgot one: Dow Utilities took honors +2.1%!!!…price alone now up 21.6% eclipsing all others! …well, if that don’t beat all…and it certainly did! A/D’s and Breadth were positive but not that much. Volume does not explain it. New 52 week highs climbed to 351 from 312 but new lows nearly doubled to a high 153 from 86. The VIX declined but just to 14.58, only its 2nd 14 handle since the meltdown…flashing bright yellow.
Some day…soon(?)…we will wake up to the madness of our markets…question is: when?
Total NYSE Volume slightly lower: 3.63B shares vs 3.74B vs 3.61B vs 3.47B vs 3.06B: average volume for October is 3.6B, or about 600M more than the recent average. Shares traded on the NYSE floor – affectionately referred to by TB as REAL volume: for October it is 864M shares and slipping!!! Volume was lower at 763M shares vs 823M vs 785M vs 760M vs 718M. For comparison purposes, for the prior 12 months it is a historically weak 711M shares…but thus far in October, 864M shares – from 895M a week ago – including that HUGE 1.22B share day – highest since 9/19. The lowest was 10/6’s 696M share session. April 30 – September 30 we had just SEVEN 800M shares…for October 14, with FIVE 900M+ days.
A/D’s were moderately positive: NYSE: +1.7x vs -1.3x vs +4.6x!!! vs -1.3x vs +1.6x; Nasdaq +1.7x vs -1.2x vs +3.8x! vs -1.1x vs +1.3x; Breadth was similar: NYSE +1.5x vs -1.6x vs +4.8x!!! vs -2.1x vs +1.8x; Nasdaq +1.1x vs -1.5x vs +5x!!! vs +1.1x vs +1.9x. New 52 Week Highs higher at 351 vs 312 vs 326 vs 161 vs 142 – their range for the year is 39-580!!! New Lows jumped to a high 153 vs 86 vs 80 vs 136 vs 82. The 2014 range is 24-1043!!! S&P VIX closed slightly lower at 14.58 -.57 for only its 3rd sub-15 close since peaking on 10/15. Still well below those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!). The range slipped but still 14.07-15.75. Remains bearish and well above 9/18’s 12.03 low close. The average of the past 12 months is 13.94, with a low of 10.32!…high close 26.35 on 10/14!
U.S. bond market closed higher, surprising a day after the FOMC announcement of an end to the QE’s! The recent 12 month low yields (10’s 2.09%; 30’s 2.87%; and long TIP 0.83%), 10’s closed at 2.31% +3/32; 30’s 3.05% +3/32; and the long TIP 0.96% +1/32. Weaker overnight: 10’s 2.34% -1/4; 30’s 3.07% -1/2; and long TIP 0.96% -1/8. QE’s may end, but dump $4.3 trillion??? No way!
Libor update: 0.233% 3 mos.; 0.325% 6 mos., both steady and just above new record lows! The Fed Funds rate has averaged 0.09% but dropped to 0.05-0.07% overnight. T-Bills range from -0.01%!, one-month, to just 0.10% one year!!! Foreign bond yields mixed, but with a twist: this time the PIIGS are lower (Benchmark is 10yr): Germany 0.85% +1; UK 2.24% +2; France 1.20% -2; Italy 2.38% -7; Spain 2.11% -5; Portugal 3.23% -8; Greece 7.82% -7. 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.45% -1.
Gold is imploding: first it declined intraday to $1195.50 then barely came back to close at $111.98.60 -$26.80, putting the m/a’s out of sight and out of reach. So much for that recent high of $1255.60, highest since 9/10/14. There have now been three prints below $1200 since 12/31/13 – 10/3 and 10/6 and now 10/30. Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! Res is at $1200 (psychological), then the 40 day at $1228, the 50 day $1237, and the 200 day at $1284. Recent high was $1392.60 on 3/17, highest high since 9/4/13. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!! Overnight it is being shellacked with a low of $1160.50, and barely above it at $1163.50 +$35.10!!! Silver also breaking down with a low of $15.63 overnight, more than a five year low and heading towards $14.65, a multi-decade low!!!
Crude closed weaker at $81.12, still supported by Monday’s $79.44 intraday low – lowest since 6/29/12. 10/25’s high $84.83, low $79.44, defining October’s range. There have been 28!!! handles since peaking at $107.73 on June 13th at $107.73 highest since 9/19/13 (a huge down session which put it in freefall. The record high of $147.27 was on 9/30/08, the low since on 12/30/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($88.25), then the 50 day ($89.44), and lastly the 200 day (98.28), all accelerating to the downside. The range is now $79.44-$112.24 since 3/1/12. Overnight weaker at $79.66 -$1.46 with a low of $75.55!
Global equities roaring….Japan up a HUGE 4.8%!!!: UK +1.1%! vs -0.6% vs +0.6% vs +0.6% vs -0.6%; France +2.3%!!! vs -0.4% vs +0.1% vs +0.6% vs -1.4%; Germany +2.1%!!! vs -1% vs +0.6% vs -1.6% vs +1.4%; Japan +4.8%!!!!! vs +0.7% vs +1.5%! vs-0.3% vs +0.6%; Hang Seng +1.3%! vs -0.5% vs +1.3% vs +1.6% vs -0.7%; Korea +0.3% vs -0.1% vs +1.8%! vs -0.3% vs +0.3%; India +1.9%!!! vs +0.9% vs +0.9% vs +0.5% vs -0.4%. U.S. equity futures on a tear of their own and they did not gap up?: Dow +188 (range 222!!!); SPX+23.70 (28!); NDQ +65.50 (65!). U.S. markets opening strong!
Some random thoughts:
Yesterday’s column couldn’t have been timelier. Japan announces another stimulus program (note: none of them has succeeded since the 1989 crash). Markets going crazy…well almost all of them. Bonds are only slightly weaker…in fact TIPS are up on the day! Japan is up over 4% on the announcement…lots of short-covering…and what does one do on short covering? Fade it!
This is what happens when global markets are dominated and controlled by speculators. One big casino…knee-jerk trades. Note that Commodities – especially Gold and Crude are imploding…Gold losing over $60 in two session! Crude in danger of breaking down even further than recent weakness. So back to TB’s comments yesterday: the risk here is DE-flation…and in fact we are in it. Overnight the Fed Funds rated dropped to 0.5-0.7% from 0.8-.0.10% and the One-Month T-Bill is now yielding (sic) -0.01%! This is scary…and this with a consumer slowdown in the U.S., largely due to a lack of wage increase…and an overbought housing market.
Yes, Virginia, we do live in interesting times…enjoy your weekend…and THINK before you leap!