As you can see from Dave Fry's SPY chart, we have set a new record for this decade for low volume on a full market day. Last Christmas Eve was 43M on a half day, for example, but the Christmas Eve before that was 53M and those were the lowest two days I could find before I got bored looking (very scientific).
Anyway, the point is that 38.9M is VERY LOW VOLUME – so low that paying attention to a dot on a chart that is drawn in such a light touch is just silly. That makes yesterday's jaunt over 2,000 completely meaningless and more so with the additional evidence of the intraday action which, as Dave notes, could not have been more manipulated.
This is why we have been pressing our bear bets. Even though we have peace in Gaza and peace in Ukraine (for today) and even though we've forgotten about Europe's negative GDP and China's plunging property prices and Ebola – we still couldn't find more than 38.9M buyers for SPY – that's just sad!
The year is 2002, America has just woken up with the worst post dot.com hangover ever. Paul Krugman then, just as now, writes worthless op-eds for the NYT. And then, just as now, the Keynsian acolyte recommended excess spending as the solution to all of America problems. Only this one time, at band camp, Krugman went too far. If there is one thing that everyone can agree on, it is that the Housing Bubble is arguably the worst thing to ever happen to America, bringing with it such pestilence and locusts as the credit bubble, the end of free market capitalism, and the inception of American-style crony capitalism. Those who ignored it, even though it was staring them in the face, such as Greenspan and Bernanke, now have their reputation teetering on the edge of oblivion. So what can we say of those who openly endorsed it as a solution to America’s problems?
Enter exhibit A: New York Times, August 2, 2002, "Dubya’s Double Dip?" Name the author: "The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." If you said Krugman, you win. Indeed, the idiocy of Keynesianism knew no bounds then, as it does now. The solution then, as now, to all problems was more bubbles, more spending, more deficits. So we have the implosion tech bubble: And what does Krugman want to create, to fix it? Why, create a housing bubble… Well, at least we know now how that advice played out.
And now what? He wants another trillion in fiscal stimulus… Quadrillion? Sextillion (arguably this cool sounding number is at least 2-4 years away before the Fed brings it into the daily vernacular)?…
Orders placed with U.S. factories declined in May more than forecast, a sign that manufacturing may be starting to cool.
The 1.4 percent decrease in bookings was the biggest since March 2009 and followed a revised 1 percent gain in April, the Commerce Department said today in Washington. Economists forecast orders would drop 0.5 percent, according to the median projection in a Bloomberg News survey.
Estimates of total orders in the Bloomberg survey of 70 economists ranged from a decline of 2 percent to a gain of 1.5 percent. The decrease in May was the first in nine months.
Manufacturing in June expanded at the slowest pace this year as factories received fewer orders and demand from abroad slowed, a report showed yesterday. The Institute for Supply Management’s manufacturing gauge fell to 56.2 from 59.7 a month earlier. Readings greater than 50 indicate expansion. The Tempe, Arizona- based group’s new orders measure fell to the lowest level since October.
Demand for durable goods, which make up just over half of total factory demand, decreased 0.6 percent in May. Shipments of durable goods fell 0.3 percent.
Bookings of non-durable goods, including food, petroleum and chemicals, decreased 2.1 percent. The decline reflected a drop in the value of orders for petroleum products, clothing, fertilizers and beverages.
Orders for capital goods excluding aircraft and military equipment, a measure of future business investment, increased 3.9 percent after a 2.8 percent drop in April. Shipments of these goods, used in calculating gross domestic product, rose 1.4 percent after rising 0.4 percent.
Factory inventories declined 0.4 percent in May, and manufacturers had enough goods on hand to last 1.25 months at the current sales pace.
Recovery Withers on the Vine
You should not have to be a genius to figure out the rebound in manufacturing was a result of four factors now withering on the vine.
Housing incentives pushing demand forward on appliances
Rebound in auto sales from extremely depressed levels
Is Europe going to lead the world recovery? China? US Consumers?
It’s basically incredible that this is happening with unemployment in the euro area still rising, and only slight labor market progress in the US.
The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered — specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound.
Given my recent two posts on greed (“More on greed, regulation, Lehman and the financial industry” and “Greed is not good”), Berger’s remarks bear posting. What I find most interesting about this commentary is the tie between the belief in market forces and greed – which on an individual level is defined as selfish and excessive. The question is whether greed, which has historically been viewed as a negative on a personal level and condemned by most major religions in the past, can actually be beneficial on a society-wide level. Berger says no and I agree. Markets are not self-correcting. As a result, regulatory oversight is necessary to prevent harm from excessive risk taking.
I read the May 10 column in the Inquirer and, while I disagree with the ultimate conclusion which you imply, you, nonetheless, deserve credit for raising a provocative subject: whether people on Wall Street were influenced by Oliver Stone’s film "Wall Street" in engaging in beyond risky, reckless behavior which has brought down almost the entire edifice of modern American finance and has threatened an economic calamity akin to that of the 1930s.
In my view, your column actually raises two interesting issues: First, do the arts and popular culture (including film) influence society, or is it the other way around; and, second, what do attitudes expressed in Stone’s film say about professionals working in financial markets, the America financial elites and the financial system as a whole? In quoting the memorable words in the film of Stone’s character Gordon Gekko that, "greed is good," you really are raising a larger question of
In “Cancel All Student Debt — The Petitions Begin,” we outlined The White House’s plan to explore “new bankruptcy options” for former students who, by virtue of an anemic US economic “recovery” or by virtue of their having majored in a subject that was exceedingly unlikely to land them a good job in any economy, find themselves in dire financial straits. On the heels of that, the calls began for the government to simply “cancel” the country’s $1.3 trillion student debt pile. Here, in what is a classic passage, is how we assessed the situation:
Everywhere I go I’m asked, “Will there be inflation or deflation? Are we in a bull or bear market? Is the bond bull market over and will interest rates rise?”
The flippant answer to all those questions is “Yes.” And that can be the correct answer as well, but it depends on what your time frame is and what tools you use to measure the markets and inflation. One of the newer members of the Mauldin Economics team is Jawad Mian, who writes a powerful global macro letter from his base in Dubai. He has been making the case for the “end of the deflation trade” (or more properly the return of a reflationary period) and the knock-on effects that would cause. Longtime readers know that I am in the secular defla...
The tug of war between the bulls and bears has created an unusual situation this year, a historically tight trading range! The chart below reflects that the Dow Jones has traded within a 6.68% high to low trading range this year. That is the 4th tightest trading range through May, in the past 115 years.
CLICK ON CHART TO ENLARGE
The inset table to the right looks at future performance of the Dow following narrow trading ranges through May. As you can see, most of the time the market has ended the year to the upside. Will it be different this time?
Wednesday’s action was almost a 180 degree turn from Tuesday’s with the S&P 500 up 0.92% and the NASDAQ 1.47%. Sone vague belief in (yet another) resolution in Greece seemed to be the catalyst. Greek Prime Minister Alexis Tsipras said on Wednesday the negotiations are on the “final stretch” towards a positive deal, Reuters reported. Later in the day, German Finance Minister Wolfgang Schaeuble said there was not much progress in the Greek debt talks and he was surprised by the upbeat tone from some Greek government officials. Athens must make a 300 million euro payment to the International Monetary Fund on June 5, ahead of several other payments due to the IMF later in the month, for a total of 1.6 billion euros.
We’ll see if yesterday’s move was the head fake or today’s was shortly.
Early last week, stocks broke out, with the S&P 500 setting a new high with blue skies overhead. But then the market basically flat-lined for the rest of the week as bulls just couldn’t gather the fuel and conviction to take prices higher. In fact, the technical picture now has turned a bit defensive, at least for the short term, thus joining what has been a neutral-to-defensive tilt to our fundamentals-based Outlook rankings.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the t...
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Understanding the new normal of a business model is key to the success of any company. The managment of companies need to adapt to the changing demand, but first they must recognize what changes are taking place. Big Pharma's business model is changing rapidly, and much like the airline industry, there will be but a handful of pharma companies left at the end of this path.
Most Big Pharma companies have traditionally done everything from research and development (R&D) through to commercialisation themselves. Research was proprietary, and diseases were cherry picked on the back of academic research that was done using NIH grants. This was in the heyday of research, where multiple companies had drugs for the same target (Mevocor, Zocor, Crestor, Lipitor), and could reap the rewards on multiple scales. However, in the c...
Bitcoin, the virtual digital currency, has been called the future of banking, a dangerous fad, and almost everything in between, but we're finally about to get some solid data to help settle the debate.
On Monday, the Nasdaq (NDAQ) stock exchange said it would ...
Chris Kimble likes the idea of shorting the US dollar if it bounces higher. Phil's likes the dollar better long here. These views are not inconsistent, actually, the dollar could bounce and drop again. We'll be watching.
Phil writes: If the Fed begins to tighten OR if Greece defaults OR if China begins to fall apart OR if Japan begins to unwind, then the Dollar could move 10% higher. Without any of those things happening – you still have the Fed pursuing a relatively stronger currency policy than the rest of the G8. So, if anything, I think the pressure should be up, not down.
UNLESS that 95 line does ultimately fail (as opposed to this being bullish consolidation at the prior breakout point), then I'd prefer to sell the UUP Jan $25 puts for $0.85 and buy the Sept $24 call...
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
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Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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