Is Everyone In And Waiting – For What I Might Ask?

March 28th, 2012
in Gary's blogging, midday post

Midday report. Currently the DOW has fallen to 13078, the 500 has also fallen to 1398, just below the 'magic' 1400 level. SSO is at 57.52, SPY is at 139.74, GLD is at 161.03, SLV at 30.99, WTI oil is at 105 and Brent is at 123.

The markets reversed their climb from yesterday with a 'minor' reversal to which at this point I give a grand yawn and another gulp of my Starbucks while I read my financial's. Up and down, up and down, day after day, for crying out loud, pick a direction and go with it. Two weeks ago I was relatively certain this was a bull market but then it showed its weakness. Not more than 2 sessions and it plowed ahead once again with $RUT leading the way. Today the market have moved down once again in a way that looks more like weakness than strength.

I am concerned once again regarding the validly of the market moves. Just when you think there is a trend forming, Mr. Market changes his mind and goes in another direction. Also, the risk/reward structure of this market is not in the favor of the trader nor the investor for that matter. The low volume the markets have been showing lately supports a lack of meaningful participation from the cash crowd and I find that deeply concerning. You and I know very well that we can't beat the insiders and HFT algo machines as they will take every dime you invest, one way or the other in these situations.

There is about an even split between the bear and bull pundits, each having plausible explanations for their arguments. I see the weakness of both sides and I lean towards the bears. One such argument is in Avery's article below concerning the BS in the BLS government numbers.

Government Says 4.1%, But General Mills Reports 10-11% Inflation by Avery Goodman

“. . . . based upon the work of statisticians working for our government, crude food prices have risen by a theoretical 4.14% over the last 12 months. That's just slightly more than the increase in their calculation of the alleged overall increase in consumer prices.

But, General Mills is one of the world's largest food companies and its experience is in reality, rather than theory. According to General Mills Chairman and Chief Executive Officer Ken Powell,

Our third-quarter results reflect strong worldwide sales growth for our business, but the 10-11 percent input cost inflation we're experiencing this year pressured our margins...

The General Mill's numbers fly in the face of what is coming from the BLS. A 6-7% discrepancy between reality, as expressed by General Mills, and the theoretical crude food products index cannot be easily explained away. The General Mills data tells us that the BLS and its methodology is off base.

Once we realize that government statistics are badly flawed, or altogether bogus, we can use our empirical knowledge to understand the real situation.

The problem with the statement below is when the train is being pushed from behind up a steep grade only going 3 MPH, there is plenty of reason to view its progress with skepticism. Clearly David is bullish, but I think he, like a lot of others, are NOT taking in account the low volume statistics of the markets. If there was more intensity to these lackluster markets, I would say he is correct, but there isn't and that is a REAL problem in prognosticating.

Three years ago David would be calling the shots accurately, but in this "New Normal" concept environment the charts have been trashed and the technical's are being ignored or at best misinterpreted. All that remains are the 'tea leaves', which including crystal balls, have always given me cloudy results.

Daily State Of The Markets: Taking No Chances? by David Moenning “Yes, I see the risks in the market. But after doing this for more than 25 years, I can also tell you that standing in front of a bull train is just plain dumb.”

There are more and more calls for a correction, including myself, yet no one has taken a stand – no volume! I am not in, so maybe that is the case for everyone else, but that is hard to believe. I mean , tens of thousands of traders and investors just sitting on their hands? Maybe, as one put it, the investment managers are all in just waiting. Just waiting to catch a falling knife is more like it. This sounds like a top when everyone thinks there is more to come, or they are not sure or just don't give a damn. Well I have a thought for you, that light at the end of the tunnel could be a speeding train!

@advfn: “A number of analysts have called for a correction by the markets, but traders seem reluctant to cash in on the recent gains and miss out on any further upside. “

And here is Keith voicing my concerns in his article below. It is way too quiet in the market place and yesterday was a prime example of 'there is nothing to get excited about'. So why all the hub-bub concerning a bull run from a never ending stream of pundits, a continuing run at that? Well there is isn't one or it would have happened by now. I find it difficult to believe there is really a market at all when the only players are the HFT machines and DaBoyz.

A Little Too Quiet On The Western Front: Aging Bull Showing Its Wear by Keith Springer

“. . . .the amount of the growth in liquidity in global systems has become staggering, with Helicopter Ben Bernanke's U.S. Federal Reserve's $2.9 trillion, the ECB's (European Central Bank) $3.6 trillion and the BOE's (Bank of England) $1.1 Trillion. Add in the BOJ (Bank of Japan) and other eurozone members, we cross $15 trillion that was not in the system pre-2008. This is equal to over one-third of total world equity values. It is this massive infusion of liquidity from world banks which has kept this market afloat and what will keep it from plummeting … for now.

The market is ready for a breather due to a rest in world printing presses and the pattern we have seen over the last few years of stocks going down as we lead into earnings season . . . .

The aging bull market is finally starting to show its age. The fact that it has been liquidity induced and not consumer driven tells us that we are clearly in a bubble, so when it ends, it's going to be ugly … really ugly, like 2001 and 2008 bubble ending ugly.

The classic early warning signs are just emerging. Small caps, which have been leading the way for many months, are starting to diverge and not do as well as larger cap stocks. This is common at the end of bull runs as bigger capitalization stocks are generally the last stocks to turn down at the end of a bull market. Typically, once this deterioration begins, it tends to spread from small-caps through the mid-caps and finally to the weaker big-caps, as profit-taking panic ensues and support fades.”

Keith is correct that the signs are there – AND waiting! I just hope, like a lot of others, that I can 'work' the correction. Just remember; no volume, no validation on your trades and they will be at risk. I dare anyone to bet that the market will be up or down tomorrow morning and be able to accurately defend their conviction.

Written by Gary

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