Written by Gary
Midday Market Commentary For 09-23-2013
A couple of minor gaps left when the markets surged upward (9-18-13) were filled as the averages melted downward. The morning lows as have been recovered by a quarter percent, but weakness and a sour outlook by investors keep the numbers from rising and bullish sentiment at bay.
By noon, the averages were still very much in the red with a slight positive trending that is not expected to reverse itself. Volume was also elevated.
Having said that, I would not be surprised of anything at any time. This casino market is tied in with the Fed so closely that when ‘Ol Ben sneezed this morning we saw the market bump up?
Most financial savvy investors realize that this market is somewhat like a zombie on steroids as nothing seems to be able to kill it. This zombie market is going to have to come to terms with the house of cards it is climbing as its weight alone is going to collapse it sooner or later.
If the Fed was worried about ‘froth’ in the markets earlier in the year, then this chart should have them panicking.
Of course, as Jim Bullard noted Friday, there is no bubble because everyone knows there is no bubble but judging by the massive surge in covenant-lite loan issuance, there is a bubble in forced demand for leveraged loans.
At $188.7 billion, the 2013 issuance of these highly unsafe loans (which have seen huge inflows since the Fed started talking taper back in May) is almost double that of the peak of the last credit bubble in 2007 and is five times the size of 2012 YTD issuance at this time.
As Reuters notes, Covenant-lite loans used to be reserved for stronger companies and credits, but are now so common in the U.S. leveraged loan market that investors are becoming wary of some credits with a full covenant package.
With corporate leverage at all-time highs, what could go wrong?
The DOW at 12:30 is at 15406 down 45 or -0.29%.
The SP500 is at 1702 down 8 or -0.47%.
SPY is at 169.93 down 0.79 or -0.46%.
The $RUT is at 1068 down 5 or -0.46%.
NASDAQ is at 3761 down 14 or -0.36%.
NASDAQ 100 is at 3219 down 5 or -0.16%.
The longer trend is up, the past months trend is bullish, the past 5 sessions have been a wash and the current bias is trending up.
WTI oil is trading between 105.10 and 103.15 today. The session bias is bearish and is currently trading down at 103.67.
Brent Crude is trading between 109.44 and 107.78 today. The session bias is bearish and is currently trading down at 108.06.
Gold is trading in a narrow zone from 1332.02 earlier to 1313.61 and is currently trading down at 1327.40.
Dr. Copper is at 3.297 rising from 3.265 earlier.
The US dollar is trading between 80.39 and 80.64 and is currently trading down at 80.53, the bias is currently negative.
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Written by Gary