Monday - 5-7-2012
Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Quote of the Day
"It [high-frequency-trading] should be called "front-running with a computer algorithm," and it should be a crime." **
~ John Genter ~
Stocks Crater on Lousy Jobs News*
Ugg - The un-Happy Anniversary of the Flash Crash...**
Crude-oil stockpiles have climbed to the highest level in 21 years ***
2- million miles of USA pipelines and the Government/ Media / Obama holds up 1,700 miles of the Keystone.
Stocks were hit hard off about 2% following the crummy Jobs report.* Volume was up 4% on the Nas and slightly below average on the NYSE. All the major indexes ended below their 50-day moving average. Recent "price" support held. Importantly the Dow Transports held right at the 50-day moving average and was off - "only" 1.07%. The EuroLand debt crisis also helped sink stocks as manufacturing and services output contracted. Another big unknown; France, Germany and Greece prepared for elections over the weekend. The Socialist Francois Hollande beat conservative Nicolas Sarkozy with 51.7% of Sunday's runoff vote. Spain remains the big 8-ball - it's only a matter of time before it blows sky high - ah la the Greek mess but much, much worse. The Euro just broke to 3-month lows and the MSCI Asian Pacific Index is off over 2%.
The QE3 printing press is being greased-up... "Money from no-where and chicks for free"... something like that... from a distant part of the brain that's been in repose....
* Terrible Jobs News:
Since Dec 2007 the U.S.population grew by 9.6 million while household employment is down 4.4 million. According Friday's data released by the Bureau of Labor Statistics, the civilian labor force shed 342,000 workers in April and remains below where it stood when the economic recovery started 34 months ago. IBD reported recently that more than 5 million workers and their families have enrolled in the disability program since President Obama took office.
The Economy Slows:
Recent news that U.S. GDP grew by 2.2%, less than expectations of 2.5% - and less than the 3% in Q4.
Earnings Remain Strong:
Analysts believe the companies will show 13 straight quarters of higher-than-expected earnings and record profits through 2014, with earnings rising up to 14% in 2012. To date EPS in Q-1 were up 7.1% in the S&P 500 (SPX) with 275 companies reporting [4.7% without Apple (NASDAQ:AAPL)]. Not quite 75% have exceeded analyst expectations - that's above the long-term average of about 66%.
Friday's McClellan Oscillator (favorite overbought / oversold'ness indicator) was a neutral minus 85. Investor sentiment remains decidedly Bearish. The key S&P 500 (SPX) channel low trend-line of f the December / March channel broke, but recent "price" support has held (so far). The Economy and the Jobs picture stinks and that will now bring more sellers into the market until stocks get a bit cheaper. (and they are already cheap by historical standard) That would bring the McClellan Oscillator down into the Oversold to the minus 200 or 300 region where a decent push higher will occur. Likely we now selloff to lower lows. Elections in Euroland could tweak the Indexes too as France looks to go more left than they already are. Many French with bucks want to leave for greener pastures. Also more than 25% of Jews in France want to leave says a poll. Link here for the story.
** On May 6, 2010 in a period of 10 minutes the Dow plunge more than 700 points its largest ever one-day fall in points wiping out $1 trillion in equity.
From Jan. 1 through April 30, 2010, investors had put $668 million into stock funds. By the end of 2010, they had withdrawn about $96 billion. In 2011, there were $135 billion in outflows. This year, there have been more than $15 billion in outflows. So $246 billion got spooked by the - A. Flash Crash and B. High-frequency trading that front runs every trade you make. No wonder volume is off so dramatically in the markets. And the SEC twiddles....
A new book due out next month is called Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street are Destroying Investor Confidence and Your Portfolio) will be a must read for students of the market. Also ck out Sundays NY Post article by John Byrne; http://www.nypost.com/p/news/business/trading_isn_nyse_qQRukxDeMCY8fTpwDuttXO
*** Crude stockpiles have climbed to the highest level in 21-years and domestic crude output reached its highest crest since November 1999. Gasoline demand has fallen for 58 straight weeks and continues to post clear declines year-over-year.
Imprint this one in your head:
The USA has more than two million miles of pipelines that safely deliver trillions of cubic feet of natural gas and hundreds of billions of tons of liquid petroleum products each year. The Keystone XL Pipeline would carry oil only 1,700 miles from the Athabasca oil sands in Alberta, Canada to refineries near the Gulf of Mexico in Texas. The enviro Wackos are hanging this up despite the total blarney Obama spews about being for it... Is Government now our enemy? Looks like it...
The S&P 500 (SPX) closed Friday at 1369.10.
Short term 'price' support in the (SPX) is at 1377
Longer out it's at 1367 and 1358.
Let's again remember that the pivot point Breakout that occurred on March 16 was also at1369.
The 200-day moving average support is at (SPX) 1276
Declining tops resistance is at 1389
50-day moving average resistance is at 1386.
Short term 'price' resistance is at Thursdays high of (SPX) 1372.
Move. Stiffer resistance is at the recently posted cycle highs of 1393then 1422 established on 4/2/2012.
EuroLand Bond Yields remain well off highs, but have backed off last week's highs.
Greek 10-year yields 19.88%
Italy 10-year (gross) bond yield - 5.41% - off from highs of 7.26% on 11-24.
Spanish 10-year (generic) bond yield - 5.69% - off from highs of 6.7% on 11/24.
Friday's key indicators and metrics:
· McClellan Oscillator is Neutral at minus 84
· Natural Gas (Globex) 2.279
· Copper - 3.7210
· The Treasury 10-year yield 1.88%
· The 30-year Treasury is at 3.07%
· VIX - 19.16
· CBOE Put / Call Volume Ratio - 1.07
· 3-month $ LIBOR at 0.466
· Crude oil (NYMEX) $98.49
· Brent Crude $113.18
· Silver (COMEX) 30.432
· Gold (COMEX) $1645.2
· Euro - 1.3089
· US Dollar Index - 79.59
· Aussie Dollar - 1.0140
· Japanese Yen 12525
· Swiss Franc - 1.0901
· Canadian Dollar - 1.0038
* This week's Bullish Investor Sentiment is really not applicable as it doesn't take into account Friday's horrible Jobs news. Recall tho that cycle highs were established 7-weeks ago.
(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)
· The Market Vane (Market Letter Survey) rose to 63% from 58% the prior week. It ticked Bullish cycle highs of 69% seven-weeks ago. In 2007 it ticked high of the cycle at 75% BULLISH.
· Consensus Index BULLISH investor sentiment fell another tick to 66% from cycle highs of 78% seven-weeks ago. In September 2011 the Index registered cycle lows of 28%.
· The AAII Investor Survey of BEARISHNESS swooned to 28.5% from 37.4% the prior week. It was 41.6% four weeks ago. On August 4th 2011 it posted cycle highs of 49.9% in Bearishness. Late December 2010 it was only 16% Bearish.
· The American Association of Individual Investors [AAII] Investor Sentiment Survey of BULLISHNESS rose to 35.4% from the cycle lows of 27.6% the prior week. It was 42.4% just six-weeks ago. For perspective January 2011 it ticked its highs in Bullishness at 63.3%. It posted absolute lows of the cycle at 25.3% in September 2011.
· The Citigroup "Panic / Euphoria" Model slipped again to a plus 0.03 from last week's 0.08%. Eleven-weeks ago it registered cycle highs of a plus 0.31 - a level not seen in 11-months, yet the model remains in mid-range in the Neutral zone.
The BARRON's Confidence Index posted a 68.5 from 68.3 the previous week. Just over two-months ago the index posted cycle lows of 66.9. One year ago it was 79.4.
The Confidence Index is the premier measure of how the bond markets trillions (total global is around $91 trillion and USA is 39% of that) are allocated: (The bond market is twice the size of the stock market.)
The Index is the High-grade bond index divided by intermediate-grade index. A decline in latter vs. former - generally indicates rising confidence, pointing to higher stocks.
For my Best Ideas for 2012 please send an e-mail request to: Dr.Faessel@onthemar.com