July 18th, 2012
in Gary's blogging
Midday Market Commentary For 07-18-2012
Markets sort of rounded out their climb and leveled off with volume levels ranging from anemic to almost moderate around 11 am. But as DaBoyz like it, they went ahead and continued to melt up the indexes after the volume started to dry up. I had to laugh last night watching the uninformed (like the talking heads on CNN and MSNBC) become euphorically ecstatic about the rising markets and blubbering, slobbering and generally verbalizing all kinds of crazy theories. Never once did they expound on the sobering financial disasters which are forming in China or the the EU – and in the US for that matter. The Fed's have convinced the 'sheeples' everything is good and the MSM is there to report it as the rubber-band of disaster is tightening ever so tightly.
Follow up:Along with the exaggerated MSM good news, the charts and other technical aspects are completely trashed because of the Fed's meddling and DaBoyz manipulations going on. The SP500 has reached a usually reliable bearish double top signal, while the DOW and low cap Russell 2000 are miles away from doing the same. The moving averages are certainly not resistances or support levels as all the indexes move back and forth them without hesitation and can't be counted on as guidance. The same goes for those magic lines depicting previous support and resistance levels. And I haven't talked about the approaching crossing of the 50 day MA over the 200 day MA which should have a deleterious effect on its own.
If this artificially propped up market is what the Fed had in mind that have done a great job. Unfortunately, they have disconnected themselves into believing the markets represent the economy and job creation. Neither of these important keystones has improved significantly as the 'Keynesian Money Mongers' continue to think in the terms of printing even money and even more debt. Which eventually will push this Nation closer to a financial catastrophe.
Considering all of the above, what is scaring the hell out of the smart money managers is, who is going to make the first move to sell. Why this is important is that the little guy, with maybe a couple of million, won't necessarily move the markets one way or the other when he decides to sell. It is the BIG funds that can move the markets when they start institutional selling. They can see the negative writing on the wall and none of them want to be caught in trying to catch a falling knife. While there is some institutional selling is going on, it is very slow and deliberate as they lighten up positions that will surly fall like a canon ball when the markets begin to decline in Ernest.
The DOW at 12:30 is at 12916 up 109.97 or 0.85%.
The 500 is at 1374 up 10.95 or 0.80%.
The $RUT is at 808.37 up 8.92 or 1.12%.
SPY is at 137.54 up 1.20 or 0.89%.
The trend is moderately positive and the current bias is up.
WTI oil is at 89.65 trading between 90.10 and 88.55 and the bias is negative.
Gold today at 1575 trading between 1584 and 1567 with a neutral bias.
Dr. Copper is at 3.47 up from 3.43 earlier.
The USD tumbled from 83.46 to 83.10 this morning and recovered to 83.16.
Foxnews reports U.S. housing starts jumped 6.9% in June from May to a 760,000-unit rate, topping estimates of a 745,000-unit rate and marking the highest rate since October 2008. Permits to build new homes fell 3.7% to a 755,000-unit rate, coming in under the 765,000-unit rate expected.
Evidently this news is one of the reasons the market jumped up at the opening. Sounds exciting at first, but upon closer examination it is more of the same 'ol, same 'ol. Please tell me where the good news is? It looks 'not so good' from my standpoint.
Finally, we get Goldman to agree to what I have been saying all along in that no significant easing UNTIL after the election. I have stated if further easing does comes it won't be until June, 2013. I further believe the “Easing” so far has gone on long enough with debt now rising to unsustainable levels. Further QE type easing is just not going to have the effect that the FED thinks it is going to have.
Most likely, baring any 'Black Swan' events, further Fed meddling be the 'coup de gras' to any market recovery. I foresee see heavy political pressure in the next term to stop the Fed in their tracks from implementation of further easing.
As Messers Frank and Paul take on the Bernank this morning, we reflect on the four easing options that the illustrious fed-head laid out in a statement-of-the-obvious that still managed to get the algos ripping.
As Goldman notes, his prepared remarks were terse (and lacking in 'easing options' discussion) - cautious on his outlook, concerned at Europe, and fearful of the 'fiscal cliff' - but his response in the Q&A were a little more revealing as he laid out his choices: asset purchases, discount window lending programs, changes in communication about the likely path of rates or the Fed balance sheet, or a cut in the interest rate on excess reserves.
We discuss each below but note, just as Goldman believes, that while we think that a modest easing step is a strong possibility at the August or September meeting, we suspect that a large move is more likely to come after the election or in early 2013 (and not before), barring a very rapid further deterioration in the already-cautious near term Fed economic outlook (which we assume implicitly brings the threat of deflation).
Everyone is talking about the QE3 implementation time frame in the August / September area. These so called experts have their heads up their arse as it can't happen then simply because of Presidential elections. The markets are expected to be in the dumps during that time frame, but QE3 isn't going to happen. If it does, look for the June, 2013 area.
“Today we get round 2 of Bernanke speaking/testifying on Capital Hill. Yesterday Bernanke didn’t hint the Fed was planning on doing anything but he repeated that the Fed “is prepared to take further action as appropriate to promote stronger economic recovery.”
Goldman Sachs says they expect the Fed to ease a small amount at the August or September meeting and take a bigger step in early 2013 after the election.
I don’t know what they’d ease.
Greece leaders were not able to identify the 11.7 billion euros worth of austerity cuts for 2013 and 2014 that was necessary to received the latest rescue package. They’ll meet again next week.”
Leavitt goes on to give out some good advise that I agree with. Wit this mornings opening reversal surprise one seriously needs to be defensive. If you have to take a position, make it a small one.
“I’m still being defensive. That means smaller position sizes and being quicker to take profits. I’m shooting for singles and an occasional double. No home runs right now. There are still too many headwinds. The condition of the market dictates our trading style. Don’t fight it. You can’t trade the same way month after month. You have to slightly alter your style based on what the market is offering.”
Bernanke Q&A: A smug Chairman refers to his collection of editorials from 2008 and 2009 warning of Fed policies causing hyperinflation and a collapse in the dollar. Others keep a collection of Bernanke's predictions, including those of 5 years ago to the day: "The U.S. economy appears likely to expand at a moderate pace ... with growth strengthening a bit in 2008." The Fed was slashing rates a month later.
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Written by Gary