The Closing Look

Stocks rallied on Thursday after the latest round of mostly disappointing economic data was released. The big miss came from retail sales, they fell -0.3% last month, missing estimates for an unchanged reading. Elsewhere, Jobless Claims came in at 260k, lower than the Street’s estimate for 265k. The Producer Price Index (PPI) came in flat which was slightly lower than the Street’s estimate for  again of 0.1%. This suggests inflation still remains at bay. Industrial Production came in at -0.4%, missing estimates for a decline of -0.2%. The Empire State Manufacturing Survey slid to -1.99, missing estimates for -1.00. The Current Account was -$119.9B, slightly better than the $122.8B forecast. On a more positive note, the Philly Fed Business Outlook Survey jumped to 12.8, beating estimates for 2.0.

Gary’s Thoughts: Weaker numbers=rally. Fed will not hike and probably market moving back up on this. The bigger story is Apple and its positive influence again. Not only a big cog in the wheel for the NASDAQ 100 and NASDAQ but helps technology overall. Semis strong because of the suppliers. Good day. Areas hit hardest recently and oversold better today.

The Closing Look

Stocks ended mixed on Wednesday as oil prices fell another 3%. Economic data was relatively light. Import prices fell -0.2% last month and economist’s were expecting a decline of -0.1%. Over the past year, import prices slid -2.2%, which was the smallest decline since October 2014. In other news, shares of Apple Inc. (AAPL) broke out and hit a fresh 2016 high after optimism spread regarding the new iPhone.

Gary’s Thoughts: Mixed is the word. But possibly some reverse churning. We did want to say as we do our scans, lots of near term damage done. We’ll see if it turns into longer term. Casino gaming also showing up on screen as emerging.

5 Things You May Not Know

5 Things you may not know:

Today is the eight year anniversary of Lehman Brothers filing for Chapter 11 bankruptcy protection in what still is the largest bankruptcy filing in US history. It is said that this default started the maniacal Bernanke’s and then the rest of the world’s dive into the depths of easy money, easier money and yet to see, easiest money world. Despite the thousands of times that central banks have teased escaping from this assinine policy, they refuse to stop and in fact, have only come up with more and more easy money stupidity. By estimate, since Lehman, central banks have cut rates more than 670 times. And yes, this does not include printing of money, buying up markets and all that crap. But there is no bubble.

Mexico is building a wall…ON ITS SOUTHERN BORDER. No really. They are. And guess who is helping pay for it. Yup…President Obama is now a racist as he is helping keep Central Americans out of Mexico as we are sending about $75 million of equipment and training for the wall. Don’t you love people. Of course, this is not a headline nor is it being reported in the U.S.

Ford is moving all small car production to Mexico. So far, crickets from the UAW. Politics anyone?

The NY AG who dislikes Donald Trump and who backs Hillary Clinton is now opening an investigation on Trumps foundation…just 55 days before the election but media doesn’t think this is political and the AG says nothing here to see. This same NY AG has no interest in the Clinton Foundation.

Apple’s pre-orders much much much better than expected. Apple stock just broke above mid-level range as the Samsung issue helps out also.

The Morning Look

Market Update:

Stock futures are a little higher ahead of Thursday’s open as investors digest a volatile week on Wall Street.

Gary’s Thoughts: Futures up a wee bit. Apple gets numbers raised as the stock is back in favor for the first time in since summer of 15…but still decently below old highs. Again, short term damage done but not sure more than this. Worst areas recently interest rate sensitive areas like utilities, real estate.

Economic Data:

  • Weekly Bill Settlement
  • Jobless Claims 8:30 AM ET
  • PPI-FD 8:30 AM ET
  • Retail Sales 8:30 AM ET
  • Philadelphia Fed Business Outlook Survey 8:30 AM ET
  • Empire State Mfg Survey 8:30 AM ET
  • Current Account 8:30 AM ET
  • Industrial Production 9:15 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • Business Inventories 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET

Highlights:

  • Ben Bernanke: ‘Premature’ to count out negative rates
    Gary’s Thoughts: We had better not comment on this.
  • Pimco Accuses Bill Gross of Leaking Confidential Bonus Records
    Gary’s Thoughts: The earth will not shake over this.

The Closing Look

Stocks fell hard on Tuesday, giving back Monday’s rally, alongside other so-called “risk-on” markets. Oil prices plunged after the The International Energy Agency (IEA) reduced their outlook for oil in 2017. The IEA said the global economy is slowing down due to lackluster demand and supply remains very strong. That is a perfect recipe for lower prices. The IEA said the oil market will remain oversupplied for the first half of 2017. Stocks were smacked on Friday, rebounded on Monday, and fell hard on Tuesday. Clearly, the market environment has changed.

Gary’s Thoughts: All we know is that the 18 month base breakout on major indices are now close to being violated in a meaningful fashion. Currently, most are just below breakout levels. But as of this second, leave no doubt, a bunch of technical damage is being done. This in itself does not mean party over but it gives pause that 8 weeks of range was broken. On radio today, we stated 250 up tomorrow…of course, sarcasm. Lastly, since we believe Yellen only watches markets, this drop takes any chance of a hike off the table.

The Morning Look

Market Update:

Stock futures are a little higher ahead of Wednesday’s open as investors digest a volatile three day’s on Wall Street.

Gary’s Thoughts: About .3% higher this morning. Another body blow yesterday.

Economic Data:

  • Bank Reserve Settlement
  • Market Focus
  • MBA Mortgage Applications 7:00 AM ET
  • Import and Export Prices 8:30 AM ET
  • EIA Petroleum Status Report 10:30 AM ET

Highlights:

  • IEA Slashes Outlook For Oil Prices In 2017
    Gary’s Thoughts: After the drop!
  • Elliott’s Singer Says Sell Long-Term Bonds, Sees Inflation Risk
    Gary’s Thoughts: We don’t know about selling. We would not be buying. No value, all risk!

The Closing Look

Stocks opened lower and closed higher after buyers showed up after a few Fed heads came out on Monday and hinted at a slightly dovish stance. The big news came from Fed’s Brainard after she said it would be prudent to wait for a while before raising rates. She made the case that the “data” does not support another rate hike just yet. Separately, two other Fed heads also came out and back-peddled helping stocks rally after Friday’s steep sell-off. 

Gary’s Thoughts: 2 fedheads refute 2 fedheads from Friday. There’s no stinkin rate hike! Market gets back about 60% of Friday’s drop…but….

The Morning Look

Market Update:

Stock futures are down big ahead of Tuesday’s open as investors digest a volatile two day’s on Wall Street.

Gary’s Thoughts: But…futures down decently. Volatility is back and the mantra “don’t blink” is back. Central bank-controlled markets.

Economic Data:

  • NFIB Small Business Optimism Index 6:00 AM ET
  • Redbook 8:55 AM ET
  • 4-Week Bill Auction 11:30 AM ET
  • Treasury Budget 2:00 PM ET

Highlights:

  • Fed’s Brainard Says Prudence Warranted as Hiking Rates Poses Risks
    Gary’s Thoughts: Insanity rules.
  • Dimon: Americans Don’t Fully Appreciate Hand We’re Dealt
    Gary’s Thoughts: If he is talking about this country, we agree!

The Morning Look

Market Update:

Stock futures are down big ahead of Monday’s open as Friday’s strong sell-off continues.

Gary’s Thoughts: Amazingly, after one big down day, Fedhead Lockhart already out trying to roll back potential for a rate hike. Leave no doubt that these buzzards are watching and reacting to one thing and one thing only…markets. They know they cannot have markets drop.

 

Economic Data:

  • Dennis Lockhart Speaks 8:00 AM ET
  • Neel Kashkari Speaks 1:00 PM ET
  • Lael Brainard Speaks 1:00 PM ET
  • 3-Yr Note Auction 1:00 PM ET
  • 10-Yr Note Auction 1:00 PM ET

Highlights:

  • Hillary is being treated for pneumonia
    Gary’s Thoughts: That’s today’s excuse. Don’t blink!
  • North Korea slams sanctions for latest nuclear test as ‘laughable’
    Gary’s Thoughts: Who?
  • TRUMP: Janet Yellen should be ‘ashamed’ of what she’s doing to the country: Gary’s Thoughts: It’s not Yellen. It’s Bernanke who started this nonsense though Yellen was a party to it.

OOOPSY GOES THE MARKET

“OOOPSY!”

By Gary Kaltbaum September 11,2016

Our overall central bank theme remains the same. For longer than we can count, we believe every asset price, every data point and every economic statistic is off of the easiest monetary policy in the history of time…and to the trillionth power. We believe central banks can never roll back their nonsense. We believe they are boxed in like mixed nuts. We believe they really have no clue as to what they have created. We believe it is a bunch of bs that they are only trying to get the economies moving. We believe there is much more leverage and debt in the system than there was in 2008. We believe this easy money has enabled debt to explode as companies keep going into more debt to buy back stock to prop up their ever lower EPS. We believe this easy money has given cover to another $9 trillion of taxpayer debt foisted upon an unwary American public by a president who promised the opposite.We believe the Fed is targeting one thing and one thing only…and that is markets. Every time markets have had trouble, these ex- tenured professors would just raise the bar or lower the bar on more printing, more easy money and lest we forget the outright buying up of markets. We believe they have distorted price and yield beyond recognition. We believe the saver has been screwed big time as the riskless income investment has been disintegrated.The fact is and as we have coined the term…everything is ok until markets say otherwise. Several times in the past, markets have said otherwise only to see central banks ramp up the easy money…which in turn, turned the markets back up. Just this year, when worldwide markets were in big trouble, Europe announced a measly trillion, Japan announced a measly trillion and China announced unlimited amounts. But if you back away for a second, even with the massive $2-3 trillion being printed every year right now, even with negative interest rates going more negative, even with most areas at 0% for years and even with central banks buying up markets, there have hardly been gains over the past 2 years and economies remain sluggish at best.. This calls into question whether we are finally into the “diminishing returns” period for markets. Time will tell.

Amazingly, depending on which abacus you are using, $20 trillion has been printed, 0% rates have been here for eight years and it is now the norm to have negative rates. We are shocked at what we are seeing in bond markets. Because of the massive interference in the free market, corporations have been able to float bonds with negative yields guaranteeing losses for investors. Savers have been forced into leveraged bond funds that will be obliterated when bond markets finally get pissed off at all the interference. Riskier bonds that used to yield 9% now yield 4%. Bonds that used to yield 5% now yield 1%. There has been a massive one-sided trade into higher dividend areas which is now being unwound. It is sheer insanity. Interest rates were always supposed to define risk in the markets. There is now no way to uncover that risk as yields cannot be trusted. We do believe one day that if they don’t stop, the market will eventually stop them.

And now we have the Fed again teasing a whopping 1/4 point hike like it is the end-all-be-all. Normally, it should not matter but when you have rigged things for so long, it is now of import. But notice…since this maniacal central bank stopped printing (at least that’s what they tell us), there has been only one hike. Yup…one hike in 22 months even though they have teased us several thousand times that a hike was coming, only to be told not yet. With the way markets are now starting to act, we give the Knicks a better chance of winning the NBA title than Yellen raising rates any time soon. But to be clear, if they do, just remember the last hike caused a 10% drop in worldwide markets. That’s how troublesome things may be underneath the surface. Think about it. A measly 1/4 point hike to a whopping 1/4 point was enough to do that kind of damage.

The blame for this recent drop is that the ECB decided to not add stimulus while another Fedhead teased a rate hike. So let’s get this straight…all that happened was the ECB stood pat for now even though they have promised more stimulus and a fedhead again said that maybe a rate hike is coming…and that’s it? We were amazed at this weekend’s headline: “RATE-RISE FEARS TRIP UP MARKETS!”

Nevertheless, our job as technicians extraordinaire is to not rationalize. It is to drown all that noise and just read the tape. As we have taught you, tops in markets are a process, not an event. In recent weeks, we have highlighted tops in utilties, reits, consumer staples, healthcare, commodities and gold/silver. The good news was that the semis stayed strong, a bunch of big cap growth names remained strong and major indices stayed tight near their highs. That has now changed.

For starters, the bond market looks like it has put in a top for now. Look no further as to why all the interest rate-sensitive areas are being whacked. On top of the areas already mentioned, housing and housing-related has topped for now. Industrials have topped for now. Leading growth names tucked their head in like frightened turtles. The Dow broke the 50 day handily. The NYSE broke the 50 day handily. The S&P broke the 50 day handily. All other major indices gave back in one day what it took weeks and weeks to achieve. Many Dow names have broke their chart patterns. Junk bonds look like they have put in a top for now. The Sox (semiconductors) rolled over badly. We say “for now” because when you are dealing with maniacs at central banks, anything is possible but we would not ignore what we are seeing.

Again, we give little chance of a fed rate hike…especially with markets now going on the defensive. Fundamentally, earnings and sales growth has been headed south at the same time valuations have been in the historically high end of range. But who the heck knows what the rest of the world decides to do. Easy money can actually get easier when these maniacs know no bounds. Just know that right now, defense looks like the best offense. If anything changes, we will let you know.