12/18/14…a HUGE rally for the WRONG reasons! Caveat Emptor!

Quote of the Day from the Friars Club Encyclopedia of Jokes: “He’s so old that when he orders a three-minute egg, they ask for the money up front.” – Milton Berle
Bloomberg Quote of the Day: “In life as in a football game, the principle to follow is: Hit the line hard.” – Theodore Roosevelt…trivia: after his 12-year old son was injured in a football game he called for safer rules…once again, way ahead of his time. (Note: this was used a trivia question on This Week and only Newt Gingrich got it right!)

Bloomberg Top Stories:
*S&P Futures Jump as Stocks Soar From Russia to Dubai – they have to be kidding!
*Putin Strikes Uncompromising Stance by Blaming EU, U.S. for Russia Crisis – denial!
*Wells Fargo Rises to World’s Most-Valuable Lender Fueled by Bank Deposits – !!!
*Swiss Deposit Rate Pushed Below Zero in Echo of 1970’s to Halt Haven Dash – !!!
*Consumer Confidence in U.S. Climbs to Seven-Year High in Bloomberg Index
*Jobless Claims in U.S. Decrease to Lowest Level in Six Weeks Amid Growth
*Buffett’s Backup Investors Stumble as GM, Energy Bets Hurt Annual Results – oops!
*Dark Pools in Spotlight as EU Regulators Move to Fortify Financial Markets
*Barclays Shareholders Burned as Jenkins Persuades Analysts to Rate It Buy – bye!
*RadioShack Kept Alive by Traders With $25 Billion of Swaps – oh, oh!!!
*Rising Tides Make U.S. Front Yards Wetlands as Climate Change Takes Toll – DUH!
*Kraft Foods CEO to Leave Job This Month, With Chairman Stepping in to Role
*There’s a Blacklist in $800 Billion U.S. Loan Market and It’s Not Illegal
***Are the above headlines something that makes YOU want to race to buy stocks?***

Wednesday’s Market Summary:

An options expiry to remember…or perhaps forget! Round and round she goes, where she stops… ah! An amazing week “…filled with those events which alter and illuminate our lives…and you were there” (Walter Cronkite’s famous slug…who was he, you ask!). EIGHT straight sessions where at least ONE index has moved by 1%, most involved moves of nearly all indices accomplishing that feat, and four out of seven have been major down sessions. How bad? Bad enough that even with yesterday’s 288 point Dow rally, closing near the session high, it is STILL merely a ‘dead cat bounce’ (50% or less retracement from the massive selloff on 12/12 and only about a third from the 12/5 high! It included: FIVE consecutive lower highs, three consecutive lower lows, breaking the 40/50 day m/a’s and despite three attempts in a row to close above the 50 day, only yesterday was successful – but still below the 40 day! The Nasdaq’s similar and that is not a good sign (yesterday the 100 even had an ‘inside’ and close to parallel session, as did SPX! Dow Transports PLUNGED yesterday to their lowest since 10/30, negating the entire rally before reversing but still closing barely above the 50 day, marking its SEVENTH straight ‘lower high’ and EIGHTH straight ‘lower low’. The mercurial Russell 2000 small cap however, went to worst performer to best since the selloff began – in ONE session??? Wait, aren’t small caps supposed to be a sign of economic strength or weakness? They came to life yesterday after the Fed announcement of no rate hikes for ‘at least’ the next two meetings? Is marijuana use legal at FOMC meetings? Because someone, sorry Janet, is either ‘smoking rope’ or ‘drinking Kool-Aid ! Ah, perhaps they are merely looking at the U.S. and ignoring the rest of the world? Ya think? Movers yesterday were: Russell 2000 +3.1%!!!; SPX and both Nasdaq’s +2%; Dow Transports up just 0.8%; while Dow Utilities tacked on another 1.9%! So let’s now look at ytd and at 11/30 (with divs reinvested in the index – which in a rarity is only slightly better than putting the money in a one year T-Bill…unheard of when you are near record highs!): Dow 30 7.45% vs 10.95%; Dow Transports 21.49% vs 28.7%!!!; S&P 500 11.53% vs 15.46%; Nasdaq Comp 13.1% vs 17.82%; 100 18.22% vs 24.78%; Russell 2000 2.29% (note that a day earlier it was -0.92%!!!) vs +2.18%: NYSE Financials 6.36% vs 9.57%. That sums it up…oops…how could TB have forgotten Dow Utilities??? 28.41% vs s 29.57%!!! Remember too, that they don’t get the kicker they once did from dividends compared to NDQ and S&P.
NYSE Volume was HUGE at 4.92B shares for a second day – 5 of the last 6 have been 4+B!
As for A/D’s and Breadth they were strong but still pale compared to the weakest days; new 52 week highs rose but to a still very weak 118, while new lows declined to a still very high 223. The S&P VIX finally took a header BUT to a still very bearish 19.44 -4.13 AND with a high of 24.61 not much lower than Tuesday’s 25.20 high – highest since 10/17!

Total NYSE Volume inched higher to a strong 4.93B shares vs 4.9B vs 4.38B vs 4.16B vs 3.93B vs 4.05B. Average volume since 9/30 remains slowly climbing from about 3.6B shares or about 600M more than the 12-month average and finally beginning to rise again!!! Shares traded on the NYSE floor (aka REAL) ditto at 1.05B shares, highest since 10/15’s options expiry of 1.22B, vs 1.02B vs 980M vs 941M vs 824M vs 913M. For comparison purposes, for the prior 12 months it is a historically weak 725M shares, but since 10/1: 830B shares – including a 1.22B (and four 1B+ share sessions). The lowest was 11/1’s 619M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: now at 22 – just one in Nov, and EIGHT 900M+ days: FOUR 800M days, THREE 900M and FOUR 1B share days – now TWO in Dec.

A/D’s were very positive after three negative sessions: NYSE: +6.7x!!! vs -1.4x vs -3.1x! vs -3.8x!!! vs +1.4x vs -4.6x!!!; Nasdaq +4x!!! vs -1.2x vs -2.5x vs -2.4x vs +1.5x vs -4.6x!!! Breadth was huge: NYSE +14.3x!!! vs -1.2x vs -4.1x! vs -4.7x!!! vs +1.2x vs -15.5x!!! (Unbelievable!); Nasdaq +9.5x!!! vs -2.1x vs -3.3x!!! vs -2.6x vs +2.2x vs -2.5x. New 52 Week Highs doubled to 118, but from an extremely weak 56!!! vs 78 vs 111 vs 201 vs 215 – their range for the year is 39-612!!! New Lows fell by nearly 2/3 but remain strong at 223 vs 712!!! vs 640 vs 603 vs 364 vs 460. The 2014 range is 24-1043!!! S&P VIX had a high of 24.61, short of Tuesday’s 25.20, which was highest since 10/17 before closing at $19.44 -4.13 (-18%!). Remains very bearish!!! Likely due to short covering ahead of Friday’s options expiration. During the brief ‘rally’ it only made back down to 15.94! We are now nearing those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!), and now a big possibility with options expiry this Friday! The average of the past 12 months is 14.08 and slowly climbing, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market closed weaker but still not far from Tuesday’s new 12-month lows! Note on 12/2, the 30 yr bottomed at 3.01%. The recent 12 month low yields (10’s 2.06%!; 30’s 2.69%! and long TIP 0.76%!!!), 10’s closed at 2.13% -5/8; 30’s 2.72% -11/16, and the long TIP 0.78% -3/4. Overnight, WEAK and diving: 10’s 2.21% -11/16; 30’s 2.81% -1-11/16! long TIP 0.85% also -1-11/16! Where is there a safe harbor?
Libor update: 0.243% 3 mos.; 0.340% 6 mos. Both not far off their recent record lows! The Fed Funds rate has averaged 0.09% and is currently 0.13-0.14% – barely, but a 9-month high. T-Bills: 0.02% one-month; 0.02% 3 mos; 0.23%!!! – STILL climbing slowly!
Foreign bond yields higher too ex-PIIGS (Benchmark is 10yr): Germany 0.62% +3; UK 1.87% +10!; France 0.89% +2; Italy 1.95% -1; Spain 1.74%! -2; Portugal 2.75%! -9!!!; Greece 8.37%!!! look at the last EIGHT days ranges: 7.03% to 8.88%!?! Not for the faint of heart! 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.35% –.

Gold closed slightly higher but remains well below $1200 at $1194.30 +.40 after putting in a low of $1184.00, lowest since 12/1, below $1200 for only 3rd time since 12/2 – $1200 is again resistance! Rally’s over…right? Last week’s intraday high was $1238.00 – highest since 10/22/ This is the 2nd sub-$1200 close which ended its seven straight $1200+ closes since 12/5 when the selloff began. Back below the 40/50 day! 11/7’s low was $1130.40, a new 12-month low!). Now 31 of last 32 sessions with prints below $1200. Last close above $1300 was on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! RESISTANCE again at $1200 (psych) and the 40 day ($1196!), the 50 day $1203, then the 200 day $1267 – all inching lower again! The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. 11/7’s low was $1130.40! Overnight it is slightly over $1200 at $1202.70 +8.20 with a high of $1213.90. Silver now back above $16 – barely after closing at $15.93, following its $17.27 high last week! This after a $14.12 recent low, not seen in more than five years!

Crude still searching for a bottom…but at least it traded up to $58.91 before closing at $56.47 up just 54 cents, a day after plunging again to $53.60, lowest since 5/6/09! – there had been 9 straight ‘lower lows’ and closes! Consider: 10/25’s high was $84.83. There have been 51!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13. The record high of $147.27 was on 9/30/08, the low since on 5/15/09 is $56.07: $89.85 is the average! Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($72.45!), then the 50 day ($74.77!), and lastly the 200 day (93.51!), all STILL increasing their rate of decline! Did we just avoid $50? The recent range is now $53.60-$112.24 since 3/1/12. Overnight, it is slighlty higher in an inside session at $57.08 -.73. Note that following the financial crisis it traded down to $32.40 on 12/31/08 from a high of $147.27 just three months earlier (-78%!!!).

Overnight Global Markets:

Global equities STRONG, Korea flat: UK +1.6%! vs -0.8% vs – vs -0.3% vs -1.5%!; France +2.9%!!! vs -0.7% vs -1%! vs +0.1% vs -1.5%! vs -0.4% vs +0.1% vs -1.8%!!! vs -0.9% vs +1.3% vs -0.9%; Germany -0.9% vs -0.6% vs +0.1% vs -1.4%! vs +0.1% vs +0.6% vs -1.6%!!! Japan +2.3%!!! vs +0.4% vs -2%!!! vs -1.6%!!! vs +0.7% vs -0.9% vs -2.3%!!!; Hang Seng +1.1%! vs -0.4% vs -1.6%!!! vs -1%! vs -0.3% vs -0.9% vs +0.1% vs -2.3%!!! Korea -0.1% vs-0.2% vs -0.9% vs -0.1% vs +0.3% vs -1.5%!!! vs -1.3%!; India +1.6%! vs -0.3% vs -2%!!! vs -0.1% vs -0.9% vs -0.8% vs +0.1% vs -1.2%! vs -1.2%! U.S. equity futures EXTREMELY strong: DOW +225!!! (250!); SPX +26.20! (31!); NDQ +59.25!!! (70!). U.S. markets opening in line!

Some random thoughts:

…if you believe that the above headlines warrant a rally, good luck! Read the Market Summary and you might not feel so elated. We could go down big time from here and if we do it is all the more reason to believe markets are RIGGED to favor flash traders and insiders…good luck!

Have a great day…but careful both today and tomorrow with options expiring!

TB

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