Written by Gary
The averages started out fin this morning, a bit flat and then melted to ‘not-so-flat’ and by noon it was all downhill from there as investors became increasing unsure of World events. George Soros Warns the chances of Greece leaving the euro area are now 50-50 and the country could go “down the drain.” Finally, Soros notes, what worries him the most is Ukraine and the CEO of Maersk the world’s largest container-shipper warned that global trade is slowing down.
By 4 pm U.S. stocks had drifted lower today, as equities kept in a tight range that corresponded with currency fluctuations as traders focused on the dollar’s strength and its possible effect on corporate earnings, plus more evidence of a hard landing for China’s economy.
Todays S&P 500 Chart
WTI oil is at 47.38 falling from morning highs of 47.99 (Chart Here), Brent has fallen to 55.12 from its high of 55.83 (Chart Here), and the U.S. Dollar is at 97.42, up from its low at 69.58 yesterday (Chart Here).
Our medium term indicators are leaning towards Hold portfolio of non-performers and the session market direction meter (for day traders) has remained neutral for most of the day. 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 flat, but remains above zero at +5.04. It is expect to move lower over the next few sessions.
Having some cash on hand now is not a bad strategy as negative market changes are happening everyday. 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.|
SAN FRANCISCO/NEW YORK (Reuters) – Google Inc hired Morgan Stanley Chief Financial Officer Ruth Porat as its own finance chief, a sign Google is aiming to rein in costs as it invests in new businesses such as self-driving cars and internet-connected eyeglasses.
WASHINGTON (Reuters) – Securities and Exchange Commission Chair Mary Jo White told lawmakers on Tuesday the agency would not try anew to craft rules to make it easier for shareholders to nominate corporate directors but that she was closely watching activists’ attempts to do just that.
Statements of opinion in securities filings are untrue only if they are not sincerely held, Justice Elena Kagan wrote for the majority.
ATHENS/BERLIN (Reuters) – Greece risks running out of cash by April 20 unless it secures fresh aid, a source familiar with the matter told Reuters on Tuesday, leaving it little time to convince skeptical creditors it is committed to economic reform.
NEW YORK (Reuters) – U.S. stocks drifted lower on Tuesday, as equities kept in a tight range that corresponded with currency fluctuations as traders focused on the dollar’s strength and its possible effect on corporate earnings.
NEW YORK (Reuters) – Brent crude oil fell on Tuesday as the dollar regained its footing against the euro and fears of global oversupply persisted, while U.S. crude was buoyed by strong domestic economic data.
For those who recall our summary of the most popular article of 2014, there was one common theme:” what readers founds most fascinating, and troubling, was the increasing preponderance of social disobedience, of covert, proxy or outright wars, and of civil unrest: all phenomena that accompany a world sliding deeper into distress, not as most central banks and their puppet media would have us believe, a global recovery.”
It should therefore hardly come as a surprise that as SocGen attempts to quantify the biggest Black Swans risks (and hopes) of 2015 (yes, a foolish endeavor since nobody can actually envision what a black swan may be, by its very definition an event that was predicted by no one), it notes that “political and financial risks now outnumber real economy risks.”
So what does SocGen believe are 2015’s black swans?
Here are the “bad” ones, alongside their estimated probability of occurring:
Ukraine crisis spills over to broader disruption (5%)
Deflate-thy-neighbor, or systemic EM crisis (10%)
Lower-than-expected price multipliers (15%)
Sharp repricing of G4 term premiums (20%)
UK election leads to Brexit vote (25%), Brexit (10%)
China hard-landing (30%)
Here are the “unexpected” events that would lead to a favorable outcome (sadly, these never actually occur).
Higher than expected price multipliers (15%)
Euro area fast track reform and growth friendly fiscal policies (10%)
WASHINGTON (Reuters) – U.S. consumer prices rebounded in February as gasoline prices rose for the first time since June, and there were also signs of an uptick in underlying inflation pressures, keeping the Federal Reserve on course to raise interest rates this year.
Submitted by David Stockman via Contra Corner blog,
Surveying the Fed’s handiwork during last week’s press conference, Janet Yellen noted that all was awesome except that stocks were now slightly “on the high side” of their historical range. You can say that again!
In fact, you can say that any one capable of uttering such tommyrot has been totally bamboozled by Wall Street’s sell-side con artists. Yes, the latter surely need to be monitored by the Feds. But that would be the kind of “Feds” who operate Uncle Sam’s non-elective hospitality facilities.
Take the Russell 2000 stock index. That’s smack dab in the Fed’s wheelhouse because upwards of 90% of the sales and earnings of the Russell 2000 are from domestic sources. So among the various market indicators, the small and mid-cap stocks which comprise the index should best capitalize the good works emanating from the Eccles Building. After all, the masters of the world’s reserve currency domiciled there profess no interest in the dollar’s exchange rate and aver that they can micro-manage the US economy because it is a closed bathtub not impacted by wages, prices and capital flows from abroad.
Well, the Russell 2000 closed at a new all-time high on Friday. At its index value of 1266 it is now up 260% from is post-crisis low. Undoubtedly, the nation’s labor-economist-in-chief believes that’s all to the good. But then surely no one told her it represents a valuation multiple of just about 90X LTM (latest 12 months) earnin …
The consumer price index rose for the first time in four months, the Labor Department said.
Use of standardized tests to measure students’ progress, and teachers’ effectiveness, has been found to have unintended consequences.
Purchasing managers reported that output in March expanded at the quickest pace since May 2011, according to a Markit Economics survey.
LONDON (Reuters) – Spain’s Telefonica said it had finalised a deal to sell its British mobile business O2 to Li Ka-shing’s Hutchison Whampoa for 10.25 billion pounds ($15.2 billion), confirming details announced earlier this year.
Back on June 3, 2013, following what was merely the latest observation of how broken the market is thanks to central banks manipulation and HFT rigging, we wrote the following:
And as happens with nearly 100% regularity nowadays, our snarky commentary on what takes place behind the scenes was once again almost 100% accurate. Because earlier today we learned precisely what happened.
(Reuters) – Greece will run out of money by April 20 unless it receives fresh aid from creditors, a source familiar with the familiar with the matter told Reuters on Tuesday.
Under the deal, worth about $15 billion, the company owned by the billionaire Li Ka-shing will combine O2 with another British phone business.
The profitability of today’s giant cruise ships depends on a tightly choreographed routine that’s part Nascar pit stop, part Noah’s Ark.
Broad gains in other categories also contributed to the gain, the first in four months.
Following its “visual to the world” message last night by test-firing an ICBM, America appears to shifting to ‘big stick’ diplomacy. Following Iran’s naval drills last week (attacking a replica US aircraft carrier), Sputnik News reports that as the nuclear negotiations between Iran and the P5+1 nations come to a head, the US begins Eagle Resolve, a massive military exercise in the Persian Gulf. Eagle Resolve will involve tactical exercises from the US Army, Marines, and various other military branches “with simulated portions of the exercise based on a fictional adversary.” Careful to ensure Obama does not lose his Nobel Peace Prize, a CENTCOM official explained, “the exercise is not intended as a signal to Iran.”
As Sputnik News reports,
This is how ridiculous government data has become: in the same month in which both Housing Starts and Existing Home sales significantly missed expectations, misses which were promptly blamed on the weather, the Census Bureau moments ago released a stunner of a New Home Sales number, which supposedly rose from an upward revised 500K to 539K, smashing expectations of 481K, a 25% spike from a year ago and up 7.8% from January, which incidentally is also the highest number since February 2008, even as the median home price dropped to the lowest since September.
And a close-up on the divergence…
Thanks to the biggest beat since 2005…
All of this would be great… if it was remotely credible. It isn’t, for three reasons.
First, as Census always admits in the fine print, the 90% confidence interval on the 7.8% increas is +/- 15.2%
The top 5% of San Francisco households (the highest ‘high income’ city in a recent study on income inequality) earns over 47 times the income of the bottom 20% in Detroit (the lowest ‘low income’ city). As WSJ reports, a recent Brookings Institution study finds Atlanta, GA has the widest gap between rich and poor in the nation (followed by San Francisco, Boston, and Miami) and Virginia Beach, CA has the least income inequality.
Atlanta, GA remains the most un-equal large city in America and Virginia Beach, CA the least…
For all the talk about rate hikes, the bond market seems to be completely oblivious to any threats of an imminent start of tightening by the Fed, and in the just concluded 2 Year auction, the Treasury moments ago sold $26 billion in 2 Year paper at a high yield of 0.598%, pricing through the When Issued of 0.601% and tight of last month’s 0.603%. While the yield dipped following the recent relapse of the US economy into a growth rate just above contraction, the Bid to Cover rose from 3.45% to 3.46%, perhaps driven by a jump in Direct take down, which allotted Direct dealers 18.3% of the final paper, Indirects holding 45.7% and Dealers left with just 36% of the auction, the lowest Direct takedown since October 2012.
Overall, a surprisingly solid auction, and the short-covering in the short-end after the announcement merely confirmed that the market was once again positioned incorrectly, and hoping for another weak bond auction which just refuses to come.
Yields are being squeezed lower post-auction…
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