1/12/15…what kind of week will it be? Volatile?

TB’s Wine Quote of the Day: “Wine improves with age. The older I get, the better I like it.” – anon

Bloomberg Quote of the Day: “Climate is what we expect, weather is what we get.” – Mark Twain; ‘whether’ or not we like it. TB

This week’s economic calendar is full of important indicators. The highlight of the week will be the December Retail Sales (Wednesday), December PPI (Thursday) and December CPI (Friday). We will also get November JOLTs Job Openings, December Treasury Budget (Tuesday), December Import & Export Prices, November Business Inventories and Beige Book (Wednesday), January Empire State Manufacturing and January Philadelphia Fed Manufacturing (Thursday), December Industrial Production and January Consumer Sentiment Preliminary (Friday). Courtesy of Economic Advisory Service

Recapping from Friday:

U.S. Non-Farm Payrolls rose by 252k in December in line with consensus 242k. Construction added 48k jobs (highest in 3 months), but Manufacturing just 17k (lowest in 3 months!), while Government added 12k jobs. Private Service-Providing firms added 173k, also lowest in 3 months, Leisure & Hospitality just 36k another 3 month low as was Retailing which plunged to 8k. Financial fell to 10k from 21k, Professional/Business Services 52k vs 87k with sub-category Temp Services 15k vs 24k, also a three month low! The Average Workweek was steady at 34.6 hours while Average Hourly Earnings DECLINED to $24.57 from $24.62 which was a blip up. So you see, not drilling down can be hazardous to your health!

The Unemployment Rate declined to 5.6% – lowest since and below the forecast of 5.8%, BUT…yes, another but…the Participation rate held steady at 59.2% just above the 58.6% multi-decade low from a year ago! Is that good when 40% of the labor pool isn’t even employed? Also, part-timers for economic reasons only declined to 6.79% from 6.85%, and while there were slight gains in Duration of Unemployment, those out of work for more than 27 weeks increased to 31.9% +0.9%. So here’s the real deal: 5.6%, plus discouraged workers, 6.7%; plus part time for economic reasons, 11.1% (+0.1% and only down from 13.0% a year ago), THAT is the U-6 unemployment rate and a far more important number.

Remember, that we are only adding jobs at slightly more than new workers come into the labor force…that is not sustainable for sound growth.

(TB called that one right! If you doubt this, see below!)

Overnight Global Markets:

European equity markets slightly higher…France and Germany strong, Asia mixed, Japan closed: UK+0.1% vs -0.7% vs +1.2% vs -0.3% vs -1.5%; France +1% vs -0.7% vs +1.2% vs +0.4% vs -2.6%; Germany +1.2%!!! vs -0.6% +1.2% vs +0.9% vs -2.3%; Japan closed +0.2% vs FLAT vs -3%!!! vs -0.2%; Hang Seng +0.5% vs +0.4% vs +0.8% vs -1%! vs -0.6% vs +1.1%; Korea -0.2% vs -0.2% vs +1/1%! +0.1% vs -1.7%!!! India +0.5% vs -0.3% vs -3%!!! vs -0.2% vs +1.4%! U.S. equity futures higher overnight, Dow gapped down UP on the open. U.S. markets opening weak despite overnight futures…hmmm.

Global Money Markets: Libor: 0.254% 3 mos.; 0.362% 6 mos. – and still not that far off their recent record lows! The Fed Funds rate has averaged 0.09% and is now 0.12-0.14% – which remains the 9-month high. T-Bills: +0.01%, one-month; 0.02%, 3 mos; 0.19% back from 0.25% – the new 12-month high set on 12/22/14!

Bonds: slightly weaker overnight but still strong: 10’s 1.95% -1/64; 30’s 2.54% -3/16; Long TIP: 0.71% -5/8. Coming off the best year since 2002, warning flags abound because IF the Fed tightens, the correction could be huge and if not? Where can they possibly go from here?

European Bonds: yields lower across the board, more new 12-month lows…look at Greece: -60bp’s.!!! (Benchmark is 10yr): Germany 0.48%!!! -1; UK 1.59%! -1; France 0.76%! -2; Italy 1.82%! -6; Spain 1.63%! -9!!!; Portugal 2.56%! -4; Greece 9.20% vs 9.84% vs 10.19% vs 10.29% vs 9.43 – look at the last 19 days range: 7.03% to 10.29%!!! 10/16’s close was 8.54%! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.26%! –.

Dollar: slightly weaker again overnight: Euro: $1.1820 off lowest since 6/2010!!! ($1.1754); Sterling $1.5149, off lowest since 8/13; Yen slightly better but remains extremely weak, now 118.86, failed rally on 1/7 to 118.06 – it has been weak since 8/14: 105!

Commodities: Gold higher o/n at $1224.20 +$8.10, with a high of $1231.30 – highest since 12/11 and the low has moved up to $1217.50, leaving a nice cushion to $1200. Silver traded to $16.69 o/n and is now $16.54 +.12. Crude is not only weak but traded down to $46.50 o/n, yet another new low, taking out $46.83 – minor support with next stop at $40! Major resistance at $50, then $53-59. Currently $46077 -$1.61…still betting on LOWER!!! Costco gas: $1.82 a gallon! That was Saturday…can’t wait for today’s!

Friday’s Market Summary:

Caveat emptor – seller too! Friday is the first options expiration of 2015 and that may explain how two days of rally – which followed two tankers – were diminished in capacity. Here’s the scoreboard for the first six sessions: Bulls 3; Bears 3…kind of like the two horses in the playoffs yesterday afternoon, no? Volume shrunk but was about at the 12 month average. Note that every session the magnitude and direction have been nearly identical for all indices except Dow Transports and Dow Utilities (as an aside, it would seem prudent to cut back on both of these sectors as well as stocks which grossly outperformed in 2014: or at least monitor very closely (as in the Bible and attributed to Jesus: “the least among you…shall be the greatest” – see, like Stephen Schwartzman and Lloyd Blankfein, TB is doing God’s work!!!). There is a pretty good track record for this occurring and is a major reason why money managers, trying to ‘window dress’ for year-end, hurt their own…and more importantly, their clients interests…all by following the blundering herd. Worst performer was Dow Transports -1.2% followed by Transports -1% and the rest between -0.9% (Russell 2000) and -0.5% (Dow Utilities). Note NYSE Fiancials were hammered -1.2%, and look: NYSE Brokers -1.9%!; KBW Banks and Nasdaq Banks -2.3%!!!; Note BofA has closed above $17 twice thus far and closed at $16.98…will that $17.90 close on 1/2 and the 12/31 high of $18.21 on 12/31 cap its rally? TB thinks so. Many however disagree and consider it undervalued…but then they also see JPM and Citi the same way. They are if you like the dividends: 0.71%; 2.66%; 0.08%! respectively…all but JPM (which is still historically low), are a bad joke. Even USB and WFC (2.25% and 2.56%, are inadequate. TB likes US Bank but talk is that Wells has reached apogee (peaked with a record high at $55.95 on 12/31 – see anything interesting about that date? …and closed Friday at $52.68 – 5.8% from 12/31 high. US Bank peaked on 12/23 at $46.10 – also a record, and closed Friday at $42.96 – down 6.8% from the high but note: it slashed through the 40/50 day m/a’s and should have solid support at the 200 day: $42.38…hmmm (for WFC that is at $51.57…could see both hit it this week…what do you think?

A/D’s and Breadth were negative (also at 3:3), while new 52 week highs were halved and new lows rose sharply. As for the S&P VIX (it too at 3:3), it rose to 17.55 so will Thursday’s low print of 16.89 be the end of the good news? Options expiry says yes!

Total NYSE Volume dropped back to about average at 3.35B shares (1/2’s 2015 low was 2.5B vs 3.92B vs 3.79B vs 4.44B vs 3.77B – 12/24’s 12-month low was 1.4B shares. Shares traded on the NYSE floor dipped to an average 732M shares vs 848M vs 778M vs 942M – highest since 12/19. vs 845M vs 646M – 12/24’s 349M was the 12-month low…average is 733M shares! For the first week of 2015, the average is 829M – mostly to the downside and dropping. The average for Dec. peaked at 979M shares on Dec. 22nd and has declined steadily – now accelerating, since.

Advance/Decline’s turned negative: NYSE: -1.7x vs +3.3x vs +3.2x vs -2x vs -3.3x; Nasdaq -1.9x vs +2.9x vs +2.1x vs -3.2x vs -2.4x; Breadth was similar: NYSE -2.4x vs +5x!!! vs +2.8x vs -2.5x vs -7.3x!!! Nasdaq -1.7x vs +4.4x!!! vs +2.5x vs -3.3x! vs -4x!!! New 52 Week Highs were halved and remain volatile: 178 vs 342 vs 283 vs 206 vs 144 vs 148 – their range for the last 12 mos. is 39-612!!! New Lows rose to an above average 118 vs 78 vs 158 vs 223 vs 143 vs 52 (12/16’s high was 712!!!) The 12-month range is 24-1043!!! S&P VIX traded down to 16.44 then back up to 18.42 leaving a gap from 18.42 to 19.04. On Jan.6 it closed at 21.12 with an intraday high of 22.90, highest since 12/16’s high of 25.20, which was highest since 10/17(31.06!) which was the highest since 11/2//11!!! We remain at risk of those bearish extremes as we approach options expiration. The average of the past 12 months is 14.31 slowly and steadily climbing, with a low of 10.28!…high close was 26.25 on 10/15/14!

U.S. Bond market continued to oscillate closing up again and taking the 10-year once again below 2%. The score is now EIGHT rally days in the last 11 resulting in new 12-month low yields (10’s 1.94%; 30’s 2.50% and long TIP 0.66%!!!). Closes: 10’s 1.95%! +9/16; 30’s 2.54% +1-3/8; long TIP 0.69%! +15/16.

Gold traded up to $1224, now highest since 12/15 and closed firm at $1216.10 +$7.60 with a low of $1207 – higher high and higher low! This is the highest close since 12/11 and the fifth straight session without a print below $1200! It is no longer weak, with $1200 major psychological SUPPORT again, as well as the 40/50 day! $1239 is next resistance – and MAJOR! 11/7’s low was $1130.40, the current 12-month low! 42 of the last 46 sessions with prints below $1200. There hasn’t been a close above $1300 on 8/15. 7/17’s session high was $1346.60, highest since March 19th!!! MAJOR SUP now at the 40 day $1197, and the 50 day $1193, with major res at the 200 day $1256 – all stable. The 12-month high is $1392.60 on 3/17/14, highest high since 9/4/13. Silver too held above $16 closing at $16.42 – highest since 1/6’s $16.74. Recent high is $17.36 on 12/10. $14.12 is the recent low (12/1/14), not seen in more than five years!

Crude, for the first time in eight sessions did NOT hit a new low following Wednesday’s $46.83 print, still lowest since 4/30/09. It closed at $48.79 +.16 in a boring session. 10 days ago the high was $58.91 Consider: 10/25’s high was $84.83. There have been 61!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13, and if off 55% since then! The record high of $147.27 was on 9/30/08, the low since on 4/30/09 is $51.94. Recent rally high and close are $110.70 and $110.53 respectively. RES at the 40 day ($63.11!!!), then the 50 day ($66.37!!!), and lastly the 200 day ($90.25) – 50 day still in freefall. The recent range is now $46.83-$112.24 since 3/1/12. 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%!!!). TB’s bet? $42…don’t ask why…

Note: TB’s new wine blog is now posted at traderbillonwine.com

Have a great day and don’t forget options expiration on Friday!!!

TB

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