It is funny nowadays to see how technically oriented this market is. Once S&P 1394 broke we immediately saw a swan dive of some 5 S&P points in minutes. Both carbon based and silicon based life forms are watching the same things. Once a level breaks, the stops are tripped and woosh we go.
While tomorrow at 8:30 AM we will probably better know our short term fate (gap up or gap down), unless the S&P 500 recovers that 1393/1394 level by end of day we have the issue of being back in this range from April of low 1360s to low 1390s. Usually I’d say the close will give us more information but the close today will be negated or affirmed by the reaction to the employment data tomorrow premarket.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
One of the “elite,” conomist Martin Feldstein was once considered one of the finalists for Greenspan’s spot, before a true sycophant, the Bernank, was appointed. The rest is history but seems Feldstein is having an Atlas Shrugged, John Galt moment about what has transpired.
“The stock market is, I think, responding to the Fed. I think the real danger is that this is a bubble in the stock market created by low long-term interest rates that the Fed has engineered….The danger is, like all bubbles, they burst at some point”
Other John Galt moments include the veteran investor space as another hedge fund titan, John Arnold closes shop in the energy arena. Rejection of the liquidity only theorem at work here? How long would any entity, let alone the balls to the walls moral hazard types survive in even a slightly more normalized world?
Another sign that John Galt Investor has about had it with central planned ‘conomies and markets combined with Ministry of Truth black propaganda are CNBC’s ratings. They are falling off a cliff. Some point the finger at Andrew Soskin, but he is merely a symptom. I see it as more disgust and disinterest in Fed Bubbles, TBTF rigged, manipulated markets. Another -$1.6 billion outflow from domestic equities, marking 10th consecutive weeks. This results in more vaccum tube trading, no depth, algo addled markets, with the few remaining participants drinking heavily of the spiked Kool Aid.
Tuesday ISM release and subsequent vacuum tube rally took the cake. It was an contradiction among a half dozen other data points pointing to ‘conomic rollover. We see a repeat of katie bar the door run ups, followed by reversals, wash, rinse, repeats.
Frankly how does anybody plan or do forecasts in a central bank bubble world. Clearly the quick buck artists aren’t even trying, but are merely gambling away. Memories about Worldcom, Enron, LTCM, and Lehman Brothers seem short. The Chesapeake Energy story shows that there are land mines out there galore. One has to ask, how long would some of these entities last without ZIRP, and the too big the fail crackpot theory? Only days would be my prediction. These implosions will take their governments with them.
For additional analysis on this topic and related trades subscribe to Russ Winter’s…
In the days before the May 6th elections in France, key German States, and Greece, the cat fight between [Merkel Sends Stern Warning] Merkel and the likely new French President Hollande escalates. Talk about the rats abandoning ship, but hey it’s all good. The charts demonstrates in spades the nature of the conflict, as France’s ‘conomy in particular is being routed.
The choices are resolving insolvent entities especially banks (a storm, but the more credible approach), or deflationary derailment: national priorities dominate, each country for it’s own, fail to distinguish between illiquidity and insolvency (the non-credible complete disaster). The later is by far the likely path underway, the former would require brave leadership. Printing money and bailouts to buy insolvent securities simply accelerates France, Germany, Italy and Spain’s ultimate cost.
Keeping a close on Germany and France, at last the hopium is wearing off in those countries as consumer PMI plunges. Obviously things are worse in France thus the feuding. I have a strong hunch the hopium in the US rolled over as well in April.
“The world over, governments and central banks are waging war on supply and demand- on the price mechanism.” - James Grant, interview here starts at 4:30
On the real economy and the hopium hates details front, fuel demand is down, and aircraft, like autos, is in a huge inventory stuffing mode. This is what a central bank/Ministry of Truth command and control maladjusted ‘conomy looks like.
US Jet Fuel Demand 4-wk avg= 1.4 mmbbl/d, DOWN 0.4% over yr ago
Gasoline demand 4-wk avg at 8.7 mmbbl/d; DOWN 4.2% from yr ago
The KC survey of Midwest manufacturing activity is showing the impact of the bloated inventory situation. April expectations are rolling over hard. Production was 35 in February, falling to 26 in April. Backlog of orders in February was 24 to 6 in April. Finished inventories 6 in February, minus 4 in April with a long ways to go. Workweek 7 in February to minus 6 in April.
Price paid raw materials remain sky high at 54. Whirlpool states they are seeing a lot of inflationary pressure. That’s the other aspect of the hall of mirrors Bernanke put, the players hoard or substitute for money. China’s copper-hoarding tendencies might be funny if they didn’t threaten to “destroy the world as we know it,” FT‘s Izabella Kaminska writes. Visitors are said to be “astounded” by how much copper is stored in warehouses; Standard Chartered estimates “total copper inventory in China, which includes inventory outside of the bonded areas, has reached about 1M tonnes (mt).”
Improvement in first time unemployment claims is slowing. Actual, not seasonally manipulated data, including an adjustment for the usual weekly upward revision, shows that the year to year rate of change is on the cusp of a possible upside breakout, which would be good news for stock market bears if it happens.
Initial Unemployment Claims Chart- Click to enlarge
Here’s why it’s mind blowing. I’ve plotted it below on an inverse scale with the S&P 500 overlaid.
Unemployemt Claims and Stock Prices – Click to enlarge
That speaks for itself. As the improvement in claims has slowed, so have the gains in stock prices.
What’s the Fed’s role in all this? The chart below illustrates. As I have told my subscribers for years, the Fed triggered both the financial crash and the economic collapse when it pulled cash out of its System Open Market Account to fund the direct bailouts of AIG, Goldman Sacks and Pillages, Citi, DoucheBank et. al. Doing that crushed Lehman and other shaky Primary Dealers. Great for the ones that got the free money, bad for everybody else, especially working people and old retired people with a few bucks in savings. Yes, the depression would have happened anyway. The Fed just made it happen faster, more violently, and worse than it would have been, by transferring wealth from middle class workers and savers to the Lloyd Blankfiends and Jamie Demons of the world.
Unemployment and The Fed Chart- Click to enlarge
Lately, the Fed has gotten away with not growing its balance sheet because it is continuing to surreptitiously fund, cash out, and prop up the Primary Dealer casinos that own the Strip, …oops… the Street, to the tune of $30 billion a month in MBS buys. As long as it has done that, the layoffs and firings have continued to slow. There is zero chance that Fed will end this program in June because it knows what happens when it lets its balance sheet shrink, which it would if the MBS purchase end. Twist, the Treasury swap program is just a sideshow. The real game is the MBS replacements. That show must go on.
There were two major housing data releases today. One of them is important. The other was a misleading misdirection play, that is leaving its creator clueless.
Due to its peculiar and excessive smoothing methodology, the housing Case Chiller is always behind the curve. It uses a 3 month average of sale prices closed in the 3 months up to the last reported month, in this case December, January, and February. That means that the data represents the average price of contracts closed over a 3 month period with a time mid point of mid-November. Need I remind you, it is now the end of April. The Case Chiller data represents the market more than 5 months ago.
This would be like the Wall Street Journal reporting only the Down Jones Industrial Average 65 day moving average as of November 16. Really, who gives a crap about what the 3 month average of the Dow was 5 months ago? Do you? I didn’t think so. So why pay attention to the Case Chiller?
This is totally worthless data, yet the media continues to report it as if it means something.
Actually, there was a third release today. The Federal Housing Finance Agency (FHFA aka Foofah) monthly price index was also released today. The Foofah data is not quite as slow. It uses sales only from the last available month which in this case is February. It at least recognized that a turn took place for sales closed in February.
The Conmerce Department released its new home sales data. This is really crappy data because it uses a tiny sample survey that gets revised every month for 5 months until the sample size is statistically significant. That being said, it does have certain advantages, and the revisions have not been so large that they change the absolute direction of the index.
The new home sales price data, while more volatile than the ultrasmooth and useless Case Chiller, uses contract prices from the previous month, not closed sales from two, three or four months ago that went under contract two months before that. It is the most current index of actual contract selling prices, released with a lag of just a month. Trends can be isolated by deriving year to year changes. Median and average annual price changes in new home sales have…
Job one for the US Treasury and its Primary Dealer enforcers is to keep yields low during weeks when the Treasury has a big load of notes and bonds to sell. Next week is one of those weeks, so the casino owners and managers will do what they can to gin up reasons for the Treasury market to stay strong. That usually means they’ll try to shake cash out of the stock market tree.
One of the biggest games in the Wall Street weekly farce of separating customers from their money is the game of Beat the Number. They play it with earnings and with conomic expectations. Several Wall Street media PR firms survey the Street conomists about their consensual sexpectations for the conomic data releases for the week ahead. To play along, I have invented the Adlerconobot to assist in the parallel game of Guess the Miss. A positive miss is called a “beat,” while a negative miss is just a miss.
Here’s the schedule of major releases for the week ahead with the Adlerconobot’s miss forecast. Feel free to play along. However, I must warn you, the real key to winning the game is not guessing whether it’s a beat or a miss, or by how much. The real key is guessing how the market will react. If you guess right, you win. If you guess wrong. Sorry. Better luck next week.
Look for the conomic releases to be weaker than conomists’ consensual sexpectations. If the numbers are really horrific that would be bullish, because really really weak is really really good. It means that Ben will print, and that means stocks will go up. But next week’s numbers won’t be horrific. They’ll miss but they’ll be so-so, not enough to scare anybody. That will leave traders confused. Sorry. Bearish for stocks.
First out at 9:00 AM Tuesday will be the housing Case Chiller. The consensus on that is for a year to year decline of -3.4%. My guess is that it should be -2.1% based on the Case Chiller’s ridiculous methodology. House prices are actually now up about 2.5% year to year. It will take another 4 months before the worthless, super lagged Case Chiller catches up with that fact.
At 10 AM Tuesday we’ll get the Con Board’s Con Con index. Worthless. If the…
The US Government has had a blockbuster tax season. The numbers are stunning.
Withholding is collected throughout the year with no relation to the tax due date. So far for April, withheld taxes are running 5.7% ahead of last April through the 18th. That suggests that things are going well for the US economy so far this month. Non-withheld, individual income taxes, which are affected by the due date, were up a whopping 55.6%. However, that’s attributable to last year’s conditions, not this year, so let’s not get too excited about that. Much of it was due to capital gains taxes, and we know how often they come along (cue Stevie Wonder).
On the other hand, corporate taxes collected in April are relevant to this year. The mid April due date for corporate taxes is for estimated taxes for the first quarter of 2012. Corporate tax for the full year 2011 was due on March 15. Therefore, the April number is a clear indication that, so far this year, corporations appear to be doing 7.6% better than last year.
Excise taxes for the first quarter aren’t due until April 30, but I suspect many businesses pay along with their quarterly estimated taxes, so this may be a decent early indicator for these taxes for Q1. Excise taxes are collected on:
Environmental products, such as domestic petroleum oil spills and ozone-depleting chemicals.
Communications and air transportation taxes
Fuels used in business
Purchase of trucks, trailers, semi-trailers (at a percentage of the sales price)
Ship passenger tax (per passenger)
Manufacturers Taxes on coal, taxable tires, gas guzzlers, etc.
Foreign insurance taxes
Sport fishing equipment, fishing rods, poles, outboard motors, etc.
These taxes would also appear to be an indicator of the direction of business conditions for the first quarter, although not the degree. So far, they’re up 10.2% in April.
Refunds are tied to last year, and they’re down versus 2010, suggesting that taxpayers owed more last year than in 2010 as the economy did better. No surprise there.
Interestingly, Uncle Sam has spent much less so far this month than last April to this point. The lower outlays and increased tax collections have sharply reduced the deficit for the month so far. I’m sure the government will make up…
The NAR reported today that their members settled 361,000 house sales in March (actual, not seasonally manipulated), up 74,000 from February. The median price rose 5.27% versus February and was up 2.5% versus March 2011. This was the largest monthly percentage price gain since June 2005. The year over year gain was the first significant year over year increase, not influenced by government giveaways, since 2006.
The sales volume gains continue to track reported gains in sales contracts 2 months after the contracts. This is consistent with a typical average 60 day period between contract and settlement. March closed sales were 7.7% less than January contracts. This is an improvement over February when the difference was 10% and a strong improvement over January when it was a record 36%. The average drop rate for the previous year was 12%. This rate was less than 6% until 2008. Assuming a drop rate in April that is similar to this March’s, closed sales in April will be around 420,000 which would continue a trend of slow improvement since the 2009 lows.
The March increase was below average for the month. March sales were up by 94,000 in 2011 and 108,000 in 2010, a number which was skewed by government programs. The average March gain for the past 5 years has been 94,000. Based on a big jump in contracts in February, April closed sales should show stronger improvement when the data is released next month.
Total listings in March stood at 2,370,000, a decline of 30,000 since February. Normally, listing inventories increase slightly in March. But listing inventory is at its lowest level in 5 years. The February inventory to contracts ratio of 5.3 indicated a tighter market than at any time since 2006. Low absolute price levels are causing would be sellers to withhold inventory because they are unable or unwilling to sell at current levels. The market has reached an uneasy equilibrium at low levels of demand, supply, and price. Contrary to conventional wisdom, shadow inventory is not a threat in most areas of the US because it is either in non competitive locations, or is becoming physically depreciated to the point that it is no longer competitive with existing homes in good condition.
Weekly initial jobless claims actually were down by approximately 16,000. That’s the actual not seasonally fudged number taking into account the fact that these are actual counts that are always revised up when complete data is in. I ignore the seasonally adjusted fictitious number, and have included an adjustment of +7,000 to the number reported in the government release to account for the normal upward revision in the final data. The adjustement is based on the average of the last 2 weekly revisions. For more on this, and why I only use actual, rather than seasonally smoothed fictitious numbers see this report. If you want to know the seasonally adjusted numbers, that nonsense is readily available from Hizzoner Bloomberg’s and Hacker Murdoch’s tout sheets.
This week’s number is much smaller than the decline for the same week in the past 2 years, and the average decline for this week in the past 10 years. In 2011, the drop in the same week of April was 66,195, and in 2010 when the economy was initially rebounding from the worst period of the depression, it was down by 76,470. The average decline this week for the 10 years from 2002 to 2011 was 30,786. That included both “normal” and recession periods, as well as bubble periods. The last time the weekly decline was this small at this point in April was in the week of April 11, 2009 at the nadir of the depression, when the drop was only 13,108.
These numbers are extremely volatile week to week. On balance, early April is a period where claims always increase. On the basis of the past 2 weeks, claims are up by 55,205 (including the upward adjustment for this week’s incomplete data.) This year does not fare well on that score either. It compares with last year’s increase of 28,017, and 2010′s 17,161. The average 2 week increase for this part of April for the past 10 years was 21,847. On the basis of short term performance this looks like an indication of economic weakening.
Initial Unemployment Claims Chart- Click to enlarge
On the basis of the year to year change, this week’s initial claims were down by 1.9%. That is a real slowing in the rate of improvement in the trend, which had consistently been…
Improvement in first time unemployment claims is slowing. Actual, not seasonally manipulated data, including an adjustment for the usual weekly upward revision, shows that the year to year rate of change is on the cusp of a possible upside breakout, which would be good news for stock market bears if it happens.
Initial Unemployment Claims Chart- Click to enlarge
Here’s why it’s mind blowing. I’ve plotted it below on an inverse scale with the S&P 500 overlaid.
Unemployemt Claims and Stock Prices - Click to enlarge
Major US Markets including (NYSEARCA:DIA), (NYSEARCA:SPY), (NASDAQ:QQQ), and (NYSEARCA:IWM) dropped over 3% each on Italian bond fears and an increased worry that Europe will not be able to bail out its 4th largest economy. Furthermore, the iShares MCSI Italy Fund (NYSEARCA:EWI) wiped out over 9% today, further illustrating the dire situation in Italy and the European Union: ...
The second economic disappointment of the day comes from the Dallas Fed, which dropped from -2.0 to -11.4 on expectations of -9.0- this was the 4th consecutive negative print month. The report was, in a word, horrible, with just 2 of the 15 constituent indices posting an increase, and the bulk solidly in the red, led by Unfilled and New Orders which dropped 16.8 and 11.2, respectively: not good for economic growth. On the employment side there was nothing good either, with both employment and hours worked declining by -...
Bloomberg reports that Diana Containerships (NASDAQ: DCIX) files to offer stock up to $172.5M. Diana Containerships says that Diana shipping will also buy $20M of stock.
Top 5 RisersStockRatingAnalysisVLOSTRONGBUYAn increasingly positive growth rate of past earnings, along with improving expectations for long term growth, make Valero a good prospect for high returns.KROSTRONGBUYKronos Worldwide has been gaining recognition from analysts as a good canditate for achieving higher than expected earnings along with higher overall projected valuation.SFIBUYiStar is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run.AMATSTRONGBUYApplied Materials has been...
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February is now past, and the Biotech Porfolio is loaded with winners and a miss (PLX). MRK is down a bit, but I expect that trade to recover, and one could be more agressive and double down on it, or play another round at the Jan13 $30 options for roughly the same price. Below is the summary, and note the grey boxes are ones that did not fill. I am still a fan of BMRN, and like DEPO as well. Now let's look at a few others.
Table 1. PSW Biotech Plays Since January 2011
 
Our newest play is Momenta Pharmaceuticals (MNTA), who is pursuing a three-part business model which includes complex generic equivalents in partnership with the Sandoz division of Novartis, proprietary compounds, and follow-on- biologics (FOB). It seems that this company is tied up in competition/litigation wit...
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(