12/23/14…if Crude is tanking, who needs Gold?

Quote of the Day from the Friars Club Encyclopedia of Jokes: “I went to the White House, met the president. We in trouble.” – Richard Prior, and:
“LBJ always told the truth, except when his lips moved.” – Red Buttons

Bloomberg Top Stories:
*U.S. Economy Expands by the Most in a Decade on Consumer-Spending – sustainable?
*Durable Goods orders in US Unexpectedly DECLINE 0.7% as Demand Dwindles–huh?
*Russian Lawmakers Pass Bank-Support Measures One Day After Rescuing Lender – !!!
*What’s Next for OPEC, Shale as Lower Prices Reshape Oil Market Into 2015 – most likely put the Fed on hold longer than they predicted!
*Ruble Gains Third Day as Exporters Told to Sell Foreign Exchange Holdings – does this remind you of ‘Been Down so Long It Looks Up to Me’? by Richard Farina?
*Attacks in France Leave 20 People Injured, Prompt Officials to Urge Calm – unlinked?
*Cheap Oil Putting Gold Out of a Job as Demand for Inflation Hedge Crumbles – !!!
*Oil-Dependent Hawaii Stands to Get Most Benefit From Crude Price Collapse – yep!
*Blackstone Joins With Jumbo Loan Borrowers in Applauding 2014 – oh joy!
*Euro Seen as Protection by Lithuanian Central Bank Governor Wary of Russia
*Cuba’s Now-Hot-Defaulted-Bond Market Comes Loaded With Buyer-Beware Labels – !
*Pesos Vanish at Record Pace as Argentina Combats Currency-Dumping Epidemic – !!!
*Risks From Decline in Oil Prices Could Exceed Benefits – by A. Gary Schilling – !!!

Monday’s Market Summary:

Whew! It just keeps getting more confusing! Best performer was Dow Transports +1%, followed by the Dow 30 +0.9%. The rest of them were up 0.3-0.4%. Who knew that both the Dow and S&P would close just off their 12/5 record highs? BUT, is that a good thing? Since then, there have now been THREE attempts to break through and all failed. Worse, since the 11/21 record high all the highs have been minimally higher: combined, just 0.39% – on both the Dow and S&P and THAT is not a sign of strength! As for Volume, it plunged back to a below average 3.34B shares from the new 12-month high of a HUGE 5.92B shares, while NYSE floor trades plunged to 791M shares, still above the 728M average, but…lowest in 11 sessions and compare to the average since 10/1 when it began to pick up, 860M, and since 12/1 when we got back to solid volume, 979M shares!
A/D’s and Breadth were only moderately positive, while new 52 week highs almost completely reversed to 352, while new lows were steady at 79. Volatility did decline sharply to 15.25, but that was almost at the low of the session range which was 15.03 and still very bearish! Still a very good time to keep your hands in your pockets. Anyone remember, Shel Silverstein’s, The Little Blue Engine That Couldn’t? Moral: sometimes, thinking you can isn’t enough.

Total NYSE Volume plunged to a well below average 3.34B share, lowest in 17 sessions (typical for December after options expiry), from that 12 month high of 5.9B shares vs 4.9B vs 4.93B vs 4.9B vs 4.38B. Average volume since 9/30 took a dip for the first time since 11/27’s low of 2.5B shares putting a dent in that nice 600M cushion over the 12 month average, expect more of the same Shares traded on the NYSE floor (aka REAL), also plunged but to a still above average 791M shares from that incredible 2.49B shares – 3-year high!!! vs 976B vs 1.05B vs 1.02B vs 980M vs 941M. For comparison purposes, for the prior 12 months it is a historically weak 728M shares, but since 10/1: 860B shares – including FIVE 1B+ share sessions), and since 12/1 979M shares!!! The lowest was 11/1’s 619M share session. April 30 – September 30 we had just SEVEN 800M shares…since 10/1: 22 – but just one in Nov, and NINE 900M+ days! FOUR 800M days, FOUR 900M and now FIVE 1B share days in Dec.!!!

A/D’s were moderately positive for a 4th day but still nothing to see here: NYSE: +1.4x vs +1.8x vs +4.1x! vs 6.7x!!! vs -1.4x vs -3.1x! vs -3.8x!!!; Nasdaq +1.6x vs +1.1x vs +3.2x vs 4x!!! vs -1.2x vs -2.5x vs -2.4x. Breadth was better on Nasdaq only: NYSE +1.1x!?! vs +2.3x vs +8.1x!!! vs +14.3x!!! vs -1.2x vs -4.1x! vs -4.7x!!! vs +1.2x vs -15.5x!!! (Unbelievable!); Nasdaq +2.2x vs +1.4x vs +4.6x! vs 9.5x!!! vs -2.1x vs -3.3x!!! vs -2.6x. New 52 Week Highs retraced nearly all of Friday’s run-up at 352 vs 467 vs 330 vs 118 vs 56!!! vs 78 – their range for the year is 39-612!!! New Lows steady at a slightly higher than ‘normal’ 79 vs 82 vs 73 vs 223 vs 712!!! vs 640 vs 603. The 2014 range is 24-1043!!! S&P VIX had a high of 16.88 not much lower than Friday’s 17.20 – again, right after the open, then down to 15.03 before closing at 15.25 -1.24 – compare to last Tuesday’s high 25.20, which was highest since 10/17 During the prior brief ‘rally’ it only made back down to 15.94! We remain at risk of 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 14.11 and slowly climbing, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market closed slightly better after beginning the session weak, but once again driving towards those new 12 month low yields (10’s 2.06%!; 30’s 2.69%! and long TIP 0.76%!!!), 10’s closed at 2.16% +1/32; 30’s 2.74% +3/8, and the long TIP 0.81%! +1/2. Overnight turning weak: 10’s 2.20% -5/16; 30’s 2.78% -11/16; long TIP 0.84% -13/16. Talk about volatile!!!!
Libor update: 0.252% 3 mos.; 0.350% 6 mos. Both at high end of recent range but still not far off their recent record lows! The Fed Funds rate has averaged 0.09% and is currently locked at 0.13%; 0.14% is the new 9-month high. T-Bills: 0.00%! one-month; 0.04%! 3 mos; 0.25%!!! – at recent high!
Foreign bond yields little changed, ex-PIIGS which reversed yesterday’s gains??? Led by Greece – again! (Benchmark is 10yr): Germany 0.59%! -1; UK 1.84% +2; France 0.87%!! -1; Italy 1.92% –; Spain 1.65%! -1; Portugal 2.67% +1; Greece 8.20% vs 8.00% Monday early!!! +14!!!; look at the last 11 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: 0.33%! –.

Gold was slammed with a session of of just $1198! The low was $1172.20, lowest since 12/1, before settling at $1179.70 -$16.20!!! This breaks Wednesday’s low of $1184.00, and below $1200 now for the 6th time since 12/2 – $1200 is now MAJOR resistance! Rally’s over…right? Last week’s intraday high was $1238.00 – highest since 10/22/ This is the 5th straight sub-$1200 close which ended seven straight closes above. Stuck below the 40/50 day! 11/7’s low was $1130.40, the current 12-month low!). Now 34 of last 35 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!!! MAJOR RESISTANCE now at at $1200-1202 (psych), the 40 day ($1192!), the 50 day $1202, then the 200 day $1265. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. 11/7’s low was $1130.40! Overnight weaker again with a high of just $1184.90, low $1173, now $1176.10 -$3.90! Silver failed to hold $16, following its $17.27 high last week! $14.12 is the recent low, not seen in more than five years! Now $15.72 +.03.

Crude tried to inch higher gave up closing at $55.26 -$1.26 in a nearly ‘inside’ session, and remains VERY weak, following a 3-day high of $58.91, four days after plunging to $53.60, lowest since 5/6/09! 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 ($70.56!!!), then the 50 day ($72.93!), and lastly the 200 day ($92.82!), all STILL increasing their rate of decline! Will it test $50? The recent range is now $53.60-$112.24 since 3/1/12. Overnight, it is little changed in an inside session at $55.34 +.10. 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 Equity Markets:

European equities higher, Asia weaker, Japan closed: UK +0.3% vs +1% vs +0.4% vs +1.6%! vs -0.8% vs – vs -0.3% vs -1.5%!; France +1.1% vs +0.7% vs -0.7% vs +2.9%!!! vs -0.7% vs -1%! vs +0.1% vs -1.5%; Germany +0.4% vs +1.1% vs -0.8% vs -0.9% vs -0.6% vs +0.1% vs -1.4%! Japan closed vs +0.1% vs +2.4%!!! vs 2.3%!!! vs +0.4% vs -2%!!! vs -1.6%; Hang Seng -0.3% vs +1.3%! vs +1.3%! vs +1.1%! vs -0.4% vs -1.6%! vs -1%! Korea -0.2% vs +0.7% vs +1.7%! vs -0.1% vs-0.2% vs -0.9%; India -0.7% vs +1.2% vs +0.9% vs +1.6%! vs -0.3% vs -2%!!! vs -0.1% vs -0.9% vs -0.8%. U.S. equity higher: DOW +82 (96); SPX +10.10 (13); NDQ +16.50 (22). Hmm

Some random thoughts:

…only two more shopping days till Xmas! – still getting extensions daily on free-shipping and nice discounts…is this telling you something? All is not rosy with decline in Crude/gas. It could set us up for a fall as the costs could well exceed the benefits – especially for shale oil producers, the Keystone ex-Pipeline, offsetting those $20 a week ‘savings’ from cheaper gas…what if Congress does the right thing for once and raised the gas tax? The point is: either people get paid more (other than CEO’s!) or growth is and will continue to be limited. Bill Gross is calling this – disinflation, and is likely right. With the government already buy nine out of ten mortgages – while the banks retain the profitable 0.25% servicing with nil exposure, where do we go from here?

Note also that home sales declined while the prices continued to rise last month…meanwhile there are about 700 syndicates that purchased foreclosed property since 2008…and if they get nervous and dump? Just a few of TB’s least favorite things. Right?

Have a great day!

TB

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