Another Sign of a Market Top

[Excerpted from Bill Cara's Daily Report]

In another of a series of clues to the possibility that US equity markets may have reached an intermediate-term cycle top, i.e., -8 to -12 percent of three months or more of falling prices to come, Tuesday’s action in US equity markets was negative, and then overnight there was a lot of outright bearish selling in Asia-Pacific markets. The Shanghai Composite, for example, was down -4.66%.

At the closing bell on Monday in New York, the S&P 500 (994.35 -12.75 -1.27%), the DJIA (9,241.45 -96.50 -1.03%) and the NASDAQ Composite (1,969.73 -22.51 -1.13%) closed off the lows, but down sharply in the final 15 minutes.

The leading sector in the US equity market, with a tiny gain, was Utilities (XLU +0.1%), while the biggest losing sector by far was Financials (XLF -3.7%), led south by Banks ($BKX -4.4%) and REITs ($DJR -2.9%). The Big Three US banks involved in 95% of the fatal credit default swap market (JP Morgan, Bank of America and Citi) had their share prices sink -3.4%, -5.0%, and -6.4%, respectively.

A semi-soft $USD (-0.11%) managed to push some commodities lower. Crude Oil ($WTIC 69.39 -1.21 -1.71%) was hit hard, but $GOLD (946.20 -0.10 -0.01%) was flat, having dropped -$7.60/oz the previous day.

For Cara 100 company stocks, the winner again was Brunswick Corp (BC +1.3%) after being up over +140% over the previous 4 weeks. The company has priced a $350 million senior debt offering. Big losers were Kookmin Bank of Korea (KB -5.0%) and Canada’s Suncor (SU -4.0%).

As the US Dollar managed to stay relatively unchanged during the session, the Yen (104.23 +1.29 +1.25%) was a big winner again, but the Canadian Dollar was hammered (90.74 -1.14 -1.24%). The Euro (141.51 +0.16 +0.11%) and Pound (164.84 +0.04 +0.02%) were small winners.

The US long bond ($USB 117.48 +1.08 +0.93%) was stronger for the third day in the past four, since the Bank of England proffered a debt deflationary spiral scenario that if true would benefit bonds over equities. Treasury yields dropped for the 30-year (4.453 -0.73 -1.61%), 10-year (3.693 -0.78 -2.07%) and the 5-year (2.689 -0.42 -1.54%) instruments. The Treasury bill yield (0.180 +0.20 +12.50%) gained.

Earlier Wednesday, most of the Austral-Asian markets closed sharply lower except for Australia where the All Ords index gained a bit (4,345.9 +0.27%). Japan’s Nikkei 225 (10,435.0 -1.42%), Hong Kong (20,435.2 -3.03%), Shanghai (3,112.7 -4.66%), and India (15,002.7 -0.48%) all dropped, but Shanghai and Hong Kong were the worst, largely because the commercial banks have been instructed to significant reduce new lending.

Before 6:30am ET Tuesday morning, the French CAC (3,472.3 6:24AM ET +0.47%), German DAX (5,309.7 6:09AM ET +0.45%) and FTSE 100 (4,692.0 6:09AM ET +0.44%) started to rebound, for no apparent reason other than speculation perhaps that Wednesday’s FOMC meeting might indicate that quantitative easing (i.e., more money printing) might be in order to stave a significant equity market sell-off at this point as well as to cover the costs of the Treasury department deficits without crowding interest rate markets. Typically, that money goes into debt, equity and commodity prices as opposed to bank loans that would support economic growth.

The spot (cash) market this morning saw the price of gold, palladium, platinum and silver a tad softer, but on the rise since about 4am ET when it became apparent that Asia equities were getting crushed and Europe might need a helping hand with a boost from central banks: (945.34 -0.92 -0.10% 06:28am ET); (268 -4 -1.47% 06:27am ET); (1233 -1 -0.08% 06:28am ET); and (14.26 -0.02 -0.14% 06:28am ET), respectively.

Euro:Dollar futures (1.4159 +0.0011 +0.08% 06:11am ET) were a tad stronger, but down a small bit since this time yesterday. An hour later, there were some more bids for the Euro.

Crude Oil futures (69.51 +0.06 +0.09% 06:11am ET) were quiet, still below 70, but gaining some bids in the past hour.

US equity market futures were quiet (9226 +10 +0.11% 06:11am ET) but after starting to pick up some bids earlier have been flat for an hour.

Comments

[TonyNasir:]

The top has already been reached - on Aug 7, confirmation of which came on Aug 11 when both DOW and $SPX broke down from an upward-slanting flag.

Aug 13 10:33 AM

[Spartacuss:]

Time to hang on to your shorts.

Aug 13 10:44 PM