Live market comments for 04-10-2012

April 10th, 2012
in Gary's blogging

After Market Close

The big news is the biggest U.S. aluminum producer, Alcoa (NYSE: AA) AA -2.52% has become the first Dow Jones Industrial Average company to post first- quarter financial results report after the close today.

Not entirely unexpected but much greater than the most optimistic forcasts Alcoa posted Q1 EPS of $0.10 beats by $0.13. Revenue of $6.01B (flat Y/Y) beats by $240M. Shares +4% after hours.

The $VIX hit 21.05, highest since March 6th. Which date coincides with the supports made for many of the markets. The European markets closed down earlier at an average of – 2.50 percent while the DOW closed down -1.65% and the SP500 down -1.71%. The $RUT (Russell 2000) closed down -2.40% AND below it 3-6 support of 786 at 784. When the small caps lead the down it is not a good sign.

Follow up:



"Recent market aversion to small caps is a yellow flag," writes Robert Sinn, noting a favorite indicator - the ratio of the DJIA (DIA) to the Russell 2000 (IWO) - has moved above 1.40, a level when breached that has often led to significant market sell-offs.

When the markets decline, there's no limit to what Wall Street will spend, say or do to make the public stick with the "stocks are a good investment" assumption.

The DOW broke through it support at 12742 and ended up at 12715. SPY's support at 134.50 still holds as SPY moved to 136.25 just above its 3-6-2012 support. Gold finished up at 1659, GLD at 161.21, SLV at 30.85, WTI oil off 1.4% and ended at 101.21, Brent at 119.37 and the USD at 80.05. Volume was higher around noon and tapered off remaining choppy to the close.



Volume Is Back

With ninety minutes left in the trading day, NYSE volume run-rate is its highest of the year for a non-OPEX day. S&P futures are also showing heavy volume - around 60% above average for the time of day.”

I expect the markets to open higher tomorrow morning because of the upbeat Alcoa's better than expected earnings, But Mr. Market might have other ideas as the devil is always in the details.

The 500 at the close.

The $RUT at the close.

The DOW at the close.

The Indexes.



S&P 500 Headed for Longest Decline Since Nov.

U.S. stocks declined for a fifth straight day, giving the Standard & Poor’s 500 Index its longest losing streak since November, as a surge in Spanish and Italian bond yields fueled concern Europe’s debt crisis is worsening.

The Morgan Stanley Cyclical Index (CYC) of companies most- dependent on the economy lost 2.5 percent. Bank of America Corp. (BAC) and Caterpillar Inc. (CAT) dropped at least 3.2 percent. Alcoa (AA) Inc. retreated 2.6 percent as it becomes the first company in the Dow Jones Industrial Average to report quarterly results. Best Buy Co. (BBY), the world’s largest electronics retailer, slumped 4.6 percent as Chief Executive Officer Brian Dunn resigned.

You might want to review an article I wrote last month.

The Correction Has Started: Have You Taken Shelter?


Midday Market Notes:

By noon the markets started to slide further down on increasing volume, all red. Investors are beginning to see the handwriting on the wall. Don't say I didn't tell you so on March 30th.

Supports have clearly been broken as the market melts down today. Analyzing charts are of little use because of the low volume for the past 3 months have skewed them into uselessness. The manipulation of DaBoyz, HFT's and the 'Five-Fingered-Financiers' who work the night shift haven't help either.

We know the market has been running somewhere above a 'true' level and we probably won't know for some time where the level really is, but I suspect it is just below the SP500's 1300.


At hand is the question, “Is this a correction or a full blown decent”? Again, a bit too early to tell and will probably have to wait until the 500's 1300 support is challenged.

The Russell 2000 is already at its support (786.20) made on March 5 this year and the DOW is close behind at 12780 with the 500 lagging at 1363. Piercing these support levels will certainly solidify the bears position without a doubt making a 5% “correction” entirely possible.

The markets have taken a time out and paused for the moment. A rise above the low point for the day is likely, but not enough reason to go long in my opinion.


$USD: Job openings in U.S. rose to 3.5 million in February; increased by 21,000 from January.

$USD: U.S. February Wholesales Inventories rise 0.9% vs. 0.5% expected. January's figure revised upwards to 0.6% from 0.4%.

$USD: US April IBD/TIPP economic optimism rises to 49.3 vs. 47.5 previous month. Forecast was 48.5.



Muppets Skewered: 10 Year Treasury At 1.999%

10Y Treasuries just broke below 2% yields for the first time in a month. Was it just 3 weeks ago that Goldman suggested selling bonds and buying stocks?”


Consolidation versus Crash

Whenever we are at an important market junction, I like to wargame a few scenarios:

What would the markets be doing if this was a major top? How would trade progress, what would the internals look, what sort of sentiment conditions would we have?
If this were a modest correction or consolidation, what characteristics should/would that have?
To me, that looks more like what I would imagine a consolidation should look like, and less like what the start of crash might be.
Yesterday, I got into it about the nature of trading versus investing with someone Paul Kedrosky calls “a prattling gasbag of idiocy.” As far as I can tell, this person has been Bearish for about six months, and was pounding his chest about avoiding a 1% decline — after missing the 24% rally since October 2011. (I hope that wasn't me he was talking about. <g>)

Market Opening:

The markets opened down with the DOW slipping to 12918 and is now at 12910 and the 500 following to 1380 then moving up to 1381 while the $RUT (Russell 2000) went to 802 and now is at 800. Gold moved down slightly and is at 1646. WTI oil went from 102.60 to where is is now at 102.25. Nothing is moving very fast.

Volume for the first 20 minutes is about as low as I have seen it, but mostly green as DaBoyz do their thing while the rest of us sit on our hands waiting to see where this is all going.

Today after the close Alcoa (NYSE: AA) AA -0.52% marks the beginning of the earning season and will most likely set the short term trend for Mr. market.

The early morning trend appears to be melting up, but hard to tell with the 500 a few cents in the green, the DOW is in the red along with the Russell 2000. Most likely it will reverse before the day is over. Possibly squeaking out a very small gain.


For Alcoa, Details More Important Than EPS (Video)

Alcoa kicks off first quarter earnings season after the close today and investors are more interested in the details broken down by business from the diversified company than their aggregate EPS results.”

I keep mentioning the problem with Iran and a possible war, well it gets worse by the day. Watch for the 'New Moon” each month for a possible time table for an attack. Don't be long during those dark night days. Here is a bit fron ZeroHedge.

Iran Escalates Again, Cuts Off Oil Shipments To Spain

Those hoping for a quick and painless resolution to the Iranian question may have just seen their hopes dashed, following the breaking news from Iranian Press TV, according to which not only is Iran not seeking to appease its Western counterparts, but is, in fact escalating.

From Press TV: "Tehran has cut oil supply to Spain after stopping crude export to Greece as part of its countersanctions, unnamed sources confirmed on Tuesday. Tehran also mulls cutting oil supply to Germany and Italy." "Countersactions" - lovely: another Swiss watch plan by the insolvent developed world. Said otherwise, one can hardly threaten to do something to a country, which is already doing so voluntarily, in the process hurting Europe's already crippled economies even more by removing the cheapest source of energy for both.

Which however begs the question: just how much more Iranian crude are China and India importing despite promises to the contrary, and open warnings from the US not to do so?


The US stock futures were up early this morning. The DOW up 13.00, the 500 up at 1.80 and the NASDAQ up at 7.75.

European markets are sharply lower today with shares in France off the most. The CAC 40 is down 1.63% while Germany's DAX is off 1.06% and London's FTSE 100 is lower by 1.03%. Asia closed mixed but the hang Seng closed down a big -1.15%.

The SP500 future is at 1375, SSO is flat at 56.12, SPY is flat at 138.08. Gold is at 1649 and falling, GLD is at 159.93 and SLV is at 30.73 also falling.

Copper yesterday moved down to its support and needs watching.



Earnings season for US stocks kicks off today, when aluminum maker Alcoa will report its first quarter results after the market close.


"Recent market aversion to small caps is a yellow flag," writes Robert Sinn, noting a favorite indicator - the ratio of the DJIA (DIA) to the Russell 2000 (IWO) - has moved above 1.40, a level when breached that has often led to significant market sell-offs.

Sony loss balloons. Sony (SNE) more than doubled its projected annual net loss to ¥520B ($6.4B) from a February forecast for a ¥220B loss, the result of taking a ¥300B charge in Q4 on taxes. This will be Sony's fourth consecutive year of net loss as the company struggles with a strong yen and fierce competition. Shares -8% premarket (7:15 ET).


1 Despite the gloomy Spanish outlook, it's Italy that's suffered the biggest stock market falls this morning.

The FTSE Mib fell as much as 2.8pc after reports suggested that the Italian government was ready to slash its 2012 growth forecast.

A report obtained by business daily Il Sole 24 Ore said that the Italian economy was now predicted to shrink by between 1.3pc and 1.5pc this year. The government's latest official forecast predicted a 0.4pc contraction.

2 The cost of insuring Spanish government debt against default keeps on rising. The spread on Spanish credit default swaps (CDS) widened by 15 basis points to 477bp in early trading. This from Markit's Gavan Nolan:

QuoteSpain will also be a major influence on spread direction this week. Its CDS spreads are close to a record (487bps, 23 Nov 2011) amid fears that its economy will continue to deteriorate and its banks need bailouts. ECB council member – and Bank of Spain governor – Miguel Ordonez said this morning that the country’s banks will need more capital if the economic downturn is worse than expected. Stating the obvious perhaps, but still a reminder that this will be a difficult year for Spain.

3 There may be pain in Spain this morning, but the ongoing crisis in Greece continues.

Ferry workers began a 48-hour strike on Tuesday, leaving travellers stranded on a day that marks the start of the high season for the tourism sector.

4 Back to Spain, where the European Commission has welcomed the new austerity measures announced in its latest budget. Spokesman Olivier Bailly said:

QuoteWe have seen the new measures which were announced yesterday by the Spanish government, and the Commission welcomes those favourably [...] as far as we're concerned, what was decided yesterday confirms both the Spanish government's determination to implement the necessary reforms, and furthermore the Spanish government's commitment to respect the 5.3 percent (of GDP) deficit for 2012.

5 Morgan Stanley has just issued a note titled "what we're watching in 2Q". In short, the answer is Europe, and its negative impact on equity markets. More from Morgan Stanley's European strategy team:

After a brief period of better news flow, European macro data is deteriorating again with the economic surprise index rolling over. [...] Within Europe, our economists’ -0.3% 2012 GDP growth forecast masks a significant divergence between a more optimistic outlook for the core against a more negative view on the periphery.

12.19 This neatly sums up some of today's market mayhem: The rumour is that Italy is preparing to downgrade its 2012 GDP forecasts from -0.4pc to between -1.3pc and -1.5pc (see 10.01). Italy's benchmark index is currently down 2.8pc, at 14,788.31.

To contact me with suggestions or deserved praise:


Written by Gary

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