2/4/15…the death of bonds was greatly exaggerated

TB’s Wine Quote of the Day: “Wine to the left of me, more wine on the right; here I am, stuck in the middle with you.” – TB

Bloomberg Quote of the Day: “Pleasure in the job puts perfection in the work.” – Aristotle

Overnight Global Markets:

European equity markets consolidating following Tuesday’s strength on Greek capitulation to the EU, Asia higher led by Japan: UK -0.6% vs +1.1% vs – vs 0.5% vs -0.5%; France -0.3% vs +1.1% vs –0.2% vs -0.7% vs -0.1%; Germany -0.4% vs +0.7% vs +0.4% vs -0.5% vs +0.1%; Japan +2% vs -1.3%!!! vs -0.7% vs +0.4% vs -1.1%!; Hang Seng +0.5% vs +0.3% vs –0.1% vs -0.4% vs -1.1%! Korea +0.6% vs – vs +0.2% vs -0.1% vs -0.5% vs +0.9%; India -0.4% vs -0.4% vs -0.2% vs -1.7%!!! vs +0.4% vs +1%. U.S. equity futures trading lower but in a tight range: DOW -33 (range 74); SPX –7.10 (10) NDQ -15.50 (19).

Global Money Markets: Libor: 0.252% 3 mos; 0.357%; 6 mos – still hovering near their recent record lows! The Fed Funds rate has averaged 0.09% and is now 0.12-0.14% – 0.14% is the 9-month high! T-Bills: 0.01%, 1 mo; 0.02%, 3 mos; 0.06% 6 mos; 0.20% 1-yr – highest since their 0.25% – the 12-month high!

U.S. Treasury Bonds attempting to come back following the Greeks backing down on their demands that the EU writedown loans: 1.78% +1/8; 30’s 2.37% +1/4; Long TIP: 0.61% +1/4

European Bonds: mixed with only significant mover being Greece which is giving back 12bp’s of yesterday’s 132bp gain! There will certainly be more correction to follow: Germany 0.34% –; UK 1.47% +1; France 0.56% -1; Italy 1.54% -2; Spain 1.44% -2; Portugal 2.49% -6; Greece 9.38% +12: Recent range is: 7.03% to 10.79%!!! – cycle low: 5.42%; Crisis high: 12.57%. Japan: 0.37% +2; low is 0.19%!

Dollar Index relatively quiet following the reaction to Greece’s ‘dramatic’ move. Last Monday’s 95.527 is highest since 9/30/03! Currently 93.78 +.19. Euro holding Tuesday’s gains: 1.1460 +.0017, following last Monday’s 1.1098 – an 11-year low!!! Sterling 1.5226 +.0035, high $1.1519, after bottoming out last Monday at $1.4952, with critical support at $1.48, a double-bottom from 3/29-31/2013! Yen stabilizing at $117.41 –, in quiet trading – support is 119, the 40/50 day m/a’s! 1/15’s 115.86 was best since 12/17/14’s 115.57 – weak since peak Oct. ‘14: 105.23; recent best 2/4/14 @ 100.76!!! Record: 12/30/11: 75.35!!!

Commodities: Gold trying to recover from Tuesday’s selloff along with bonds on Greece. It is now $1266.50 +$6.20; last Thursday it bounced off the 200 day ($1253.97). Silver continues to ignore Gold’s problems and is currently $17.36 +.03 with an o/n high of $17.55, following Friday’s bounce off the 200 day ($16.76). Crude is giving back about half of yesterday’s gain and is currently $51.44 -$1.61 with support/resistance at $51.73; o/n high us $52.56, following its retrace from the 1/29 low of $43.58 Caution!!!

Tuesday’s Market Summary:

Not even going to decipher yesterday’s markets. It started out with the new ‘improved’ Greek government backing down on the pledge that got them elected: they pulled back on their demand that the EU writedown the loans that saved them. Now that was a good reason for a rally…on short-covering! What does it mean though? According to German Chancellor Angela Merkel it will takes months to work out. Got it: months not days!

It is obvious though there were huge short positions in EU and U.S. stocks and that is what we saw today…but despite the magnitude of the rally, the S&P closed at 2050, just above the 40/50 day m/a’s (2039/2044). The Dow closed right on them at 17666. Transports missed at 8902 vs 8926-64. Nasdaq Composite closed just above while the NDQ 100 closed 1 point below. The Russell 2000’s low was 1 point ABOVE the 200 day and the high and close were 4 points below a triple top from 1/26-1/28 at 1201 which will be required watching. Even Dow Utilities were up 0.3% however and remain strong. YTD (price only!): Dow Utilities +3.8%; Nasdaq Comp and 100 -0.2%; S&P 500 -0.4%; Russell 2000 -0.6%; Dow 30 -0.9%; Dow Transports -2.6%!!! NYSE Financials are still off 3.2% led by the big (KBW) Banks -6.4%!!! Volume was a strong 4.6B shares; A/D’s and Breadth were solid and positive for a 2nd day; New 52 week highs rose back to 290 while new lows plunged to 55. The VIX dove but still closed in bear territory at 1.40 -2.03. This is not a good time to try to be a hero…or impress your friends! Go slow!

Total NYSE Volume climbed back to 4.6B shares vs 3.98B vs 4.54B vs 4.1B vs 4B vs 3.31B, a low 2nd only to Jan.2’s 2.7B. – 12/24’s 12-month low was 1.4B shares. Shares traded on the NYSE floor rose to 981M shares, 2nd highest of ’15 vs 912M vs 1.22B (highest since 8/8/11!!!) vs 863M vs 856M vs 711M – 2nd lowest of ’15. 12/24’s 349M was the 12-month low…average is 742M shares! Since 1/5 the average is 868M shares. The average for Dec. peaked at 979M shares on Dec. 22nd.

Advance/Declines were strong, especially on NYSE and have now been positive 7 times in 16 sessions! NYSE: +3.8x! vs +2.7x vs -2x vs +2.1x vs -2.8x; Nasdaq +2.7x vs +1.8x vs -2.9x! vs +2.0x vs -3.1x! Breadth was even better: NYSE +7.4x!!! vs +4.5x! vs -2.6x vs +1.5x vs -8.7x!!! Nasdaq +3.8x! vs +2.4x vs -3.1x!!! vs +2.1x vs -2.7x. New 52 Week Highs reversed to 290 vs 239 vs 294 vs 457 vs 374 – their range for the last 12 mos. is 39-612!!! New Lows crumbled to 55 vs 162 vs 275 vs 187 vs 100 – 2015 high is 386 (12/16’s high was 712!!!) The 12-month range is 24-1043!!! S&P VIX traded lower in a range of 17.20-18.89 – yesterday’s LOW was 19.35! It closed at 17.33 -2.10 – BUT we have seen this happen before and it is STILL BEARISH!!! The recent high is 12/16’s 25.20, second only to 10/17’s (31.06!) – highest since 11/2/11!!! Average of the past 12 months is 14.59 and slowly climbing, with a low of 10.28!…high close was 26.25 on 10/15/14!

U.S. Bond Market closed WEAK due to Greece but still just above the prior low yields eradicated by Friday’s STRONG rally??? 10’s 1.80% -1-3/16 (1.64% low yield); 30’s 2.38% -3-1/8 (2.22% new low!); Long TIP 0.62% –2-13/16 (0.49% new low!). Watch closely!

Gold got hammered as they took off the ‘flight to safety’ trade a day after its biggest daily gain to the high since 2012 ($28.10) on Friday but look at the highs since Wednesday (its FIFTH straight lower high since peaking at $1307.80 on 1/22 – and a ‘negative key reversal’, breaking down after three straight ‘inside’ sessions, closing at $1260.30 -$16.60. Last Thursday’s low was $1251.00, $3 BELOW the 200 day ($1254) and the close of $1254.60 was lowest since 1/14 when the rally began. 11/7’s low, $1130.40 is the current 12-month low! 7/17’s session high was $1346.60, highest since March 19th!!! Support is the 200 day, $1254, followed by the 40 day $1229, and the 50 day at $1223. The 12-month high is $1392.60 on 3/17/14, highest high since 9/4/13. Silver bucked the trend closing at $17.29 +.04. The 200 day ($18.46) is resistance with support at the 40 day, $16.78, then the 50 day, $16.70. $14.12 is the recent low (12/1/14), first time in more than five years!

Crude traded up to $54.24 before settling at $53.05 +$3.48. That was the highest print since 1/2/15, three days after setting yet another a new 12-month low of $43.58. Last Thursday’s new low was $44.08, lowest since 3/09. $50-52 is now resistance/support. 12/17’s high was $58.98. Consider: 10/25/14’s high was $84.83. There have been 64!!! handles since peaking at $107.73 on June 13th, highest since 9/19/13, and if is off 59% since then! The record high of $147.27 was on 9/30/08. RES/SUP at the 40 day ($52.07!!!), then the 50 day ($55.89!!!), and lastly the 200 day ($85.58) – all continue to fall and are becoming support – albeit the hard way! The range is now $43.58-$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%!!!). So much for TB’s prediction of a bounce at $43.83, and a a test of that $32.40 March ’09 low looks like it could well occur…by the way that decline from the 9/20/08 high to the low took EXACTLY 6 months – we are now in the 8th month of decline!!!

Have a great day!

TB

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