12/29/14…five thoughts for the new year…

Quote of the Day from the Friars Club Encyclopedia of Jokes: “On one issue at least, men and women agree: they both distrust women.” – H.L. Mencken

Bloomberg Quotes of the Day: “Passion, though a bad regulator, is a powerful thing.”   – Ralph Waldo Emerson

This week’s economic calendar is fairly light. The highlight of the week will be the December ISM Manufacturing Survey (Friday). We will also get December Dallas Fed Manufacturing (Monday), October Case-Shiller Home Prices and December Consumer Confidence (Tuesday), December Chicago PMI (Wednesday) and November Construction Spending (Friday).Courtesy of Economic Data Service

Bloomberg Top Stories:

*Greece Faces Early Election as Samara’s Presidential Nominee REJECTED- 9% bond

*AirAsia Search Fails for Second Day as Jet Seen to Have Crashed in Ocean

*Stocks in Europe Drop With Italian, Spanish Bonds on Greek President Vote

*U.S. Bond Market Sentiment Worst since Disastrous 2009 as Fed Shifts Tone -???

*Russia Economy Shrank Last Month for First Time Since 2009 Amid Ruble Rout

*Greek Shorts Ascendant in Hedge Against Potential Syriza Victory: Options

*Municipal Bond Sales in U.S. Top $43 Billion This Month, Highest of 2014 – caution!

*Icahn Seeks Talks With Manitowok board on Split of Crane, Food Divisions

*Sony’s ‘Interview’ Gets $15 Milllion in Online Sales After Cinema Threats

*Bank of Israel Decides to Leave Its Key Interest Rate Unchanged at 0.25%

*Ukraine Talks With Separatists Yield No Agreement as Clashes Flare in East

*Cameroonian Soldiers Kill 41 Boko Haram Militants After Attacks in North

*Mexican Bond Meltdown Wipes Out 2014 Returns as Peso Swoon Deepens

Friday’s Market Summary:

A funny thing happened on my way to the office (a journey of about 15 feet from my bed!). As FR’s (Frequent Readers), know, TB has been especially concerned about the performance of the market since the last ‘meaningful’ new high on November 21st. From there it ‘plateaued’ until December 7th (Pearl Harbor Day…coincidentally, on that date in 1994, Orange County filed for bankruptcy – the largest municipality to do so at the time…TB’s just sayin’), just EIGHT days. IF we are so bullish, shouldn’t we have, like the Energizer Bunny, kept going…and going? Instead, on Dec. 8th, the market took a header through the 40/50 day m/a’s and close to the dreaded 200 day. That was the Dow and S&P 500, which then bounced back to ‘eke out’ very minor new highs” 1% since the 11/21 high! The NDQ 100 and Dow Transports have recovered but not to new highs, while the Russell 2000 has surged to a new record high, but: its prior high was way back on July 1 and hit has traded very weak and volatile since, until gapping up on 12/18 and now with higher highs for 7 sessions culminating in a new record high on Friday, after creating another slight ‘up’ gap Friday…but what is the gain since the prior high? A puny 0.3% and that was with enormous volatility that that took it to lows not seen since August 2013!!! Wait: Aren’t small caps supposed to be a barometer of the economy? Perhaps, but if so… Of course Dow Utilities continue to surprise and impress: since their lows in October 2008 they are up 10.2% annualized with dividends reinvested, and lead by wide margin ytd at up 35%!!! Note that over more than the last five years you would not have lost a minutes sleep with this index! Hmmm.

Ah, but all of the guru’s are bullish, so we must go higher, right? Not so fast, because a late entry who actually did some research, Societe Generale, notes that since 1875, never before has the S&P 500 risen for seven consecutive years…never, until this year. Couple that with the sluggishness noted above and the fact that Goldman Sachs, Credit Suisse, and Barclays, all see the S&P 500 topping out at 2100 in 2015…compare and contrast to the aggressive bets out there! Highest TB has seen is 2350 – which is assuming a 13% growth rate…do you see that? Also, remember that brokers make money when the market rises: both securities and real estate ones! So what is their natural bias? If you said, to pan the market, go to the rear of the class!

Returning to Friday’s market which hit the highs half an hour after the open and closed AT the session lows, it appears that the 2013 high could be in February or even January – you decide! Best performer was…Dow Utilities UP 1.2%; followed by both Nasdaq’s and the Russell 2000 +0.7%(?), S&P 500 +0.3%; Dow Transports +0.2%; while the Dow 30 lagged at just up 0.1%.

Volume was a new 12+ month low of 1.7B shares while shares traded on the NYSE floor were just 447M shares, putting the average for the week at a week 570M shares (high was 791M and only day above the 12-month average of 728M shares). Compare to the average since 11/30 of 842M shares and now declining! A/D’s and Breadth were positive but average while new 52 week highs were slightly above average at 381 with new lows steady at a below average 59. The S&P VIX rose slightly for the first time in 5 sessions at 14.50 +.33,  after bottoming out at 14.01 yesterday and for two straight days the range has been entirely ‘14’s, which is still bearish!

Total NYSE Volume was slightly higher but remains weak at 1.7B shares vs 1.4B shares from an already weak 3.0B, lowest in 19 sessions (typical for December after options expiry), vs 3.34B vs 5.9B. Average volume since 9/30 which had a 600M cushion over the 12 month average (3.6B shares or so), continues to be hacked away Shares traded on the NYSE floor (aka REAL), also plunged to 343M shares, a new 2014 low and just ahead of 12/26/13’s 253M share session, from a below average 613M vs 791M vs 2.49B – 3-year high!!! vs 976B  vs 1.05B. For comparison purposes, for the prior 12 months it remains at a historically weak 729M shares (unaffected due to the 2012 low now left out). Since 10/1: 849B shares –  including FIVE 1B+ share sessions), and since 12/1 927M vs 961M shares!!! The lowest was 12/24’s 343M 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 FIVE 1B share days in Dec.!!! What now, pussycat?

A/D’s were moderately positive: NYSE: +2x vs 1:1 vs +1.8x vs +1.4x vs +1.8x vs +4.1x! vs +6.7x!!! Nasdaq +1.9x vs 1.4x vs +1.0x vs +1.6x vs +1.1x vs +3.2x vs 4x!!! Breadth was similar: NYSE +1.9x vs -1.2x vs +1.1x vs +2.3x vs +8.1x!!! vs +14.3x (compare to that incredible -15.5x on 12/16!!!); Nasdaq +2.3x vs 1.5x vs -1.3x vs +2.2x vs +1.4x vs +4.6x! vs -9.5x!!!. New 52 Week Highs slightly higher  381 vs 325 vs 488! vs 352 vs 467 vs 330 vs 118 vs 56!!! – their range for the year is 39-612!!! New Lows steady at a weak 57 vs 59 vs 92 vs 79 vs 82 vs 73 vs 223 vs 712!!! The 2014 range is 24-1043!!! S&P VIX spent the entire session with a ‘14’ handle for a 2nd session, significantly lower than Friday’s 17.20, but closed UP at 14.50 +.13 – compare to 12/16’s high of 25.20, which was highest since 10/17! We remain at risk of those bearish extremes that had a high of 31.06 (highest since 11/28/11!!!). The average of the past 12 months is 14.12 and slowly climbing, with a low of 10.28!…high close of 26.25 on 10/15/14!

U.S. bond market positive after after slip-sliding away from those new 12 month low yields two days ago (10’s 2.06%!; 30’s 2.69%! and long TIP 0.76%!!!), 10’s closed at 2.25% +1/8; 30’s 2.81% +7/16, and the long TIP 0.89% +7/16. Overnight higher again: 10’s 2.22% +1/4; 30’s 2.79% +5/8; long TIP 0.87% +5/8.

Libor update: 0.257% 3 mos.; 0.357% 6 mos. Both moving higher into yearend but still not that far off their recent record lows! The Fed Funds rate has averaged 0.09% and is currently 0.12-0.14% – at the new 9-month high. T-Bills: –0.00%!!! one-month; 0.00%! 3 mos; 0.22% – 0.25% is recent high!

European bond markets mixed; PIIGS SLAMMED especially GREECE!!! (Benchmark is 10yr): Germany 0.56%!!! -3; UK 1.83%!  -5!; France 0.84% +2; Italy 2.00%! +11!!!; Spain 1.69% +9!!!; Portugal 2.72% +3; Greece 9.23%!!! vs 8.20% +103!!!; look at the last 12 days range: 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: 0.31% -1.

Gold closed strong but the high did not quite get there: $1199.10, before closing at $1195.30 +$21.80 – CAUTION. Last Monday’s low was $1172.20, lowest since 12/1! Dragged down by Crude and now below $1200 for the 9th time since 12/2: tell it goodbye as Harry Carey would have put it. Last week’s intraday high was $1238.00 – highest since 10/22. This is the 8th 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 37 of the last 38 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 SUP/RES at $1190-1199, the 40 day ($1190!), the 50 day $1199, then the 200 day $1264. The 12-month high is $1392.60 on 3/17, highest high since 9/4/13. 11/7’s low was $1130.40! Overnight $1193.70 -1.60 in a narrow range session. Silver above $16 for a 2nd session following a high of $16.31 on Thursday but following its $17.27 high the prior week! $14.12 is the recent low, not seen in more than five years!

Crude can’t get out of its own way and remains as close to its lows as the S&P 500 does to its high, closing at $54.73 -$1.11, but still inside Monday’s downdraft and remains VERY weak, following a 4-day high of $58.91, this 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 ($68.64!!!), then the 50 day ($71.30!), and lastly the 200 day ($92.18!) – could it be that they are finally flattening? If so, we could see a nice bounce but beware of the 40/50 day res! Still 6ikely to test $50 over the next couple of weeks! The recent range is now $53.60-$112.24 since 3/1/12. Overnight, it is slightly higher at $55.60 +.87 in yet another narrow inside session. 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 markets open again and weak after being closed for ‘Boxing Day’, Asia mixed: UK -0.2 vs closed vs +0.2% vs +0.3% vs +1% vs +0.4% vs +1.6%! France -0.7% vs closed vs -0.4% vs +1.1% vs +0.7% vs  -0.7% vs +2.9%!!!; Germany -0.8% vs closed vs +0.6% vs +0.4% vs +1.1% vs 0.8% vs -0.9%; Japan -0.5% vs +0.1% vs +1.2% vs closed vs +0.1% vs +2.4%! vs +2.3%!; Hang Seng +1.8%! vs +0.1% vs -0.3% vs +1.3%! vs +1.3%! vs +1.1%! Korea -1%!?! vs +0.1% vs +0.4% vs -0.2% vs +0.7% vs +1.7%!; India +0.6% vs +0.1% vs -1.1% vs -0.7% vs +1.2% vs  +0.9% vs +1.6%! vs -0.3% vs -2%!!! U.S. equity futures weakerr: DOW -47 (range 76); SPX -3.50 (11); NDQ -6 (21).

 

Some random thoughts:

…time to think about what kind of year 2014 has been and what will happen in 2015, right?

First, can stocks continue to ‘rally’? (see market summary above)

Second, can the GOP retain its lead in the 2016 elections? …or be like Dems 4 years ago?

Third, will the pending minimum wage increases in several states help the economy or create job loss? If it is the former the GOP is really going to be in trouble at federal AND state level! Note to CEO’s: your greed while all those under you except a few lieutenants, work harder and get nothing may be coming to an end!

Fourth, will we finally get some tax reform: now that we have been screwed with a GOP budget endorsed by Obama. Raise tax on wealthy, eliminate carried interest, raise the gas tax to offset the windfall and put it all into infrastructure which could create 3 million jobs…some of them from part-time no benefits.

Fifth, can we overcome the recent Supreme Court decisions and more importantly, could Obama get a replace passed if necessary? Not hardly!

That’s your five for today…submit your own ideas…

TB

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