U.S. stocks rose today fueled by gains in the energy sector and speculation that upcoming first-quarter earnings reports might not be quite as bad as previously thought.
The averages traded mostly higher today on 'moderate' volume and tapering off the session high fractionally towards the end of the session
By 4 pm volume spiked to the higher end of 'moderate' for those traders wishing to make a last minute trade. Interestingly, the BTFDers have be undercover lately and haven't shown their heads. Do they know something we mere mortals lack?
Todays S&P 500 Chart
The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) pushed oil prices up to a new interim high and effectively doused the U.S. Dollar with cold ice, dropping it to the mid 98's
The Beige Book reported this afternoon that weakening activity was attributed in part to the strong dollar, falling oil prices, and the harsh winter. One can ignore all of the previous, because the only word that matters, "Weather"; weather was mentioned 71 times.
As it stands now most analysts agree we are going to revisit the historic SP500 highs set on 2-25-2015 in the next few sessions. What happen after that is being hotly contested by both the bulls and bears. Some believe that the NASDAQ has to reach 5133 first that was previously set in March, 2000 as that is the last major average to claim new historic highs. Whatever the case, it would be prudent to pay attention to what is going on if you are still holding onto some dog's.
Personally, I think this is all noise and we should see a nice, moderate 8% correction shortly. (Hey, I am paid to make guesses!) Seriously, the market can make moves very quickly and just because I am bearish on some days doesn't mean that I can't turn bullish in a heart-beat - that is trading.
WTI oil is at 55.95 falling from afternoon high of 58.67 (Chart Here), Brent has fallen to 62.84 from its high of 63.40 (Chart Here), and the U.S. Dollar has lost ground now at 98.56, up from its high at 99.57 (Chart Here).
Our medium term indicators are leaning towards SELL portfolio of non-performers and the session market direction meter (for day traders) is 68 % Bullish up from 37 % bullish this morning. We remain mostly conservatively bullish, but with a bearish slant. I am very concerned any downtrend could get very aggressive in the short-term and any volatility may also promote sudden reversals that will only please the day traders. The SP500 MACD has turned up, but remains above zero at +5.05. Watch the WTI oil prices as anything below $50 will be the first sign of a declining market in the works. Below $44 you had better put on your seat belt as the encroaching roller coaster ride may be be very bumpy.
Having some cash on hand now is not a bad strategy as negative market changes are happening everyday, 99% of them are minor, it is that 1% I am worried about. Many investors are starting to take in some profits from 'high-fliers' as a precaution and to build a better cash base for the 'dips'.
As of now, I do see some leading indicators that are warning of a 'long-term' reversal within six months. I believe one is most likely to occur later in 2015, but any market fluctuations we see now are more of a internal market rectification than a bear market. If you are not worried, then at least be cautious. A good rule is that one cannot be prepared for a situation if you do not anticipate the possibility of that situation materializing.
The Market in Perspective
Here are the headlines moving the markets. xxxxxxxxxxx
"We could now be at a crossroads," warns Deutsche Bank in its annual default study report. As the 'artificial bond market' is exposed and yield curves flatten on Fed rate hikes so carry risk-reward is reduced and default cycles have often been linked to the ebbing and flowing of the YC through time with a fairly long lead/lag. With HY defaults having spent 12 of the last 13 years below their long-term average (with the last 5 years the lowest in modern history), "a perfect default storm could be created for 2018 if the Fed raises rates in 2015."
Defaults will stay unusually low so long as current artificial conditions continue. However, as Deutshe Bank explains, the benign default environment of the last few years may be about to change...
HY defaults (using Single-Bs as a proxy) have now spent 12 of the last 13 years below their long-term average. The average for the last 12 years is now 1.5% (0.9% excluding 2009) against an average of 4.9% since 1983 (1983-2002 average 6.9%). In recent years we've explained this phenomenally low default environment by discussing the increasingly artificial demand for fixed income which has allowed more borrowers to access capital markets at cheaper rates. Although growth is currently low relative to history, funding costs are even lower relative to the past.
While nominal and real yields are likely to stay low in a world of heavy central bank intervention and ultra loose policy, we make the argument that yield curve (YC) changes could still contribute towards the next default cycle. In the US we have found that whilst ...
NEW YORK/ATHENS (Reuters) - Germany's finance minister said on Wednesday there was no prospect of the euro zone reaching a deal with Athens next week on economic reforms that would unlock bailout funds, potentially leaving Greece perilously short of money.
This will make every American feel much better about handing over that check today... as Simon Black notes today "I believe we have an obligation to starve the beast..."
As Sovereign Man's Simon Black notes, it was not always this way (and doesn't have to be anymore)...
On August 5, 1861, facing rapidly deteriorating economic conditions and a horrible defeat at Bull Run, President Abraham Lincoln signed the Revenue Act of 1861 into law.
It was the first time in US history that the federal government would charge an income tax on its citizens. But Lincoln felt that it was vital to fund what would become one of the most unconscionably costly conflicts in US history.
The original law in 1861 set a flat tax rate of 3% on incomes above $800.
(Using the gold price as a benchmark, this is equivalent to 42.26 ounces, or roughly $50,500 in today's dollars. Not that there's any inflation.)
The income tax was tweaked occasionally throughout the war, and it lasted for a few years afterwards to help fund reconstruction.
But it was ultimately lifted in 1873 during the administration of Ulysses S. Grant. And aside from a single episode in 1894, there would be no income tax in the United States of America for nearly 40 years.
Ironically, during this 40 year period the United States emerged as the largest, most powerful economy in the world.
And they achieved this with no income tax. No inflat ...
[Last night's dismal data on GDP, Retail Sales, Industrial Production, and Fixed Asset Investment, confirms] the first hard data release of the month for China. Two-way trade in USD terms dropped 6.3% in the first quarter from its level of a year ago, the second most severe setback since the Crash and only the third such instance in the whole era of 'Opening Up'.
From a strictly local perspective, the bad news was mitigated by the fact that exports managed to eke out a modest YOY gain of 4.7% (though that still means they were effectively unchanged from 2013 levels) and so the trade surplus was left at a record seasonal high. For the rest of us, however, anxious as we are to sell more of our wares to China, there was no such comfort. Imports plunged by more than a sixth to a four-year low, registering a drop which, if nowhere near as large in percentage terms, was, when measured in numbers of dollars, equal to that suffered in the global freeze which ensued in the aftermath of the Lehman collapse.
SUPERCYCLE NO MORE Courtesy: Bloomberg
Though it always does to await the full data release for the first quarter - given the inordinate impact on comparisons of that highly moveable feast, the Lunar New Year - these numbers are fully consonant with the evidence presented during the first two months which showed flat non-residential electricity use and rail freight volumes down to seven year seaso ...
CHICAGO (Reuters) - Walgreens Boots Alliance Inc will continue to freeze salary increases for senior U.S. executives as part of plans to cut costs by more than $1 billion over three years, the drugstore chain said on Wednesday.
WASHINGTON (Reuters) - U.S. industrial output posted its biggest drop in more than 2-1/2 years in March in part as oil and gas well drilling plummeted, highlighting the negative impact of lower crude prices and a strong dollar on the economy.
There were the usual trite, forgettable highlights in the just released beige snow book, which as summarized by Bloomberg, had the following highlights:
FED: ECONOMY EXPANDED IN MOST REGIONS MID-FEB. TO END-MARCH
HIGHER RETAIL SALES REPORTED BY MAJORITY OF REGIONAL FED BANKS
BEIGE BOOK: LABOR MARKETS STABLE OR SHOWED MODEST IMPROVEMENT
REGIONAL FEDS NOTED MODEST UPWARD WAGE AND PRICE PRESSURE
One can ignore all of the above, because the only word that matters in the latest beige book was one: "Weather"
Here is a chart summarizing the mentions of "weather" since January 2014
Weakening activity was attributed in part to the strong dollar, falling oil prices, and the harsh winter weather.
Residential real estate activity was steady to improving across most Districts, although there was some slowing in housing starts due to abnormal seasonal patterns owing to the harsh weather.
The auto industry remained a source of strength in Cleveland and Chicago. Contacts in Boston, Philadelphia, Richmond, and Dallas believe harsh winter weather had a dampening effect on activity.
Demand for transportation and freight services was mixed. Freight haulers in Cleveland reported that volume has declined from the high levels seen late last year. They attributed it to harsh winter weather and fallout from the labor dispute at California ports, which lessened shipments to the District.
Among retailers, the outlook was generally optimistic in Boston, Philadelphia, Atlanta, St Louis, Kanas City, and Dallas. ...
SAN FRANCISCO (Reuters) - About 6 percent of U.S. adults plan to buy Apple Inc's smartwatch according to a Reuters/Ipsos poll, with men twice as likely as women to purchase Apple boss Tim Cook's first new major product.
Econintersect: The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) said "that the economy continued to expand across most regions from mid-February through the end of March". The previous report said "that economic activity continued to expand across most regions and sectors from early January through mid-February". Seems like the rate of growth is unchanged?
WASHINGTON (Reuters) - Economic activity continued to expand from mid-February through the end of March, but a strong dollar and falling oil prices were hurting the manufacturing sector, the Federal Reserve said on Wednesday.
(Reuters) - Bank of America Corp, the No. 2 U.S. bank by assets, reported a better-than-expected first-quarter profit, reversing from a year-earlier loss, as legal costs fell steeply and the bank earned more from mortgage lending.
NEW YORK (Reuters) - Oil futures rallied and U.S. crude rose 5 percent to a 2015 peak on Wednesday after government data showed crude oil inventories in the United States rose less than expected last week.
Wolf Richter www.wolfstreet.com www.amazon.com/author/wolfrichter
It has been a persistently growing, ugly list of municipal bankruptcies: Detroit, MI; Vallejo, San Bernardino, Stockton, and Mammoth Lakes, CA; Jefferson County, AL. Harrisburg, PA; Central Falls, RI; Boise County, ID.
There are many more aspirants for that list, including cities bigger than Detroit. Detroit was the test case for shedding debt. If bankruptcy worked in Detroit, it might work in Chicago. Illinois Gov. Bruce Rauner wants to make Chapter 9 bankruptcies legal for cities in his state, which is facing its own mega-problems.
"Bankruptcy law exists for a reason; it's allowed in business so that businesses can get back on their feet and prosper again by restructuring their debts," Rauner said. "It's very important for governments to be able to do that, too."
His plan for sparing Illinois that fate is to cut state assistance to municipalities, which doesn't sit well with officials at these municipalities. Chicago Mayor Rahm Emanuel's office countered that balancing the state budget on the backs of the local governments is itself a "bankrupt" idea.
Puerto Rico doesn't even have access to a legal framework like bankruptcy to reduce its debts, but it won't be able to service them. It owes $73 billion to bondholders, about $20,000 per-capita â€" more than any of the 50 states. If you own a muni bond fund, you're probably a creditor. Bond-fund managers use its higher-yielding debt to goose their performance. But now some sort of ...
LOS ANGELES (Reuters) - McDonald's Corp's relations with its U.S. franchisees have hit a fresh low as the fast-food giant's new chief executive fights to turn around its domestic business amid fierce competition, according to a survey released Wednesday.
Geoff: Now Jim, we've kind of been seeing how things have been developing in China as far as the Shanghai Gold Exchange. So the question is, do you believe that China will ultimately control the price of gold? If so, when do you estimate this becoming a reality?
Jim Rogers : Well probably, but China will become the largest economy in the world in the foreseeable future. It will become the most important country in the world in the foreseeable future. When that happens, they're going to control the price of a lot of stuff, directly or indirectly. I don't see them controlling the price of gold anytime soon, as big as they are and as important as they are, there's just too much gold around the world for them to control it yet. But my children speak Mandarin. I moved to Asia so that my children would know Asia, and speak perfect Mandarin. China's the future, whether we like it ...
The slowly accelerating melt-up in stocks (amid earnings meeting massively lowered expectations, China's economy slumping, and US macro data hitting new multi-year lows) is aided and abetted by a collapse in VIX. Dow is above 18,000; S&P above 2,100, and Nasdaq above 5,000 - so everything is awesome. Trading volume remains well below a trending-lower average...
Earlier this year, WalMart became one of several corporate heavyweights to lift wages for its meagerly compensated workers, around 500,000 of which are now set to receive at least $9/hour and $10/hour by Q1 2016 (that of course assumes they make it on $9 an hour for another 12 months and don't seek out other employment by sheer necessity).
Meanwhile, as we noted earlier this month, the move by the country's largest retailer to pay a few extra pennies to its (basically) minimum wage employees comes at a cost to the company's suppliers because when you operate on the thinnest of margins in order to be the "low price leader," someone has to pay for those wage hikes and you can't pass along the costs to customers because many of your low-income patrons are operating from the same tax bracket as your low-paid employees. As such, the poor companies along the supply chain are forced to lower their prices and of course they're going to comply because well, you're WalMart meaning you're your vendors' biggest account pretty much by default. The outcome is that "while WMT (or MCD or GAP or Target) boosts the living standards of its employees by the smallest of fractions, it cripples the cost and wage structure of the entire ecosystem of vendors that feed into it, and what takes place is a veritable avalanche effect where a few cent increase for the lowest paid megacorp employees results in a tidal wave of layoffs for said megacorp's vendors."
If that doesn't turn out to be enough in the face of an economy which isn't really recovering and in which low-income shoppers are constrained by lackluster (and by that we mean nonexistent) wage growth, some sacrifices may have to be made. The problem is that laying people off and shuttering stores two months after a celebrated wage hi ...
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