The Closing Look

Stocks fell on Tuesday as global selling continued on sluggish global economic growth. Japanese and European stock markets fell after the IMF warned of a global economic slowdown. Overnight, India’s Central Bank joined the easy money party and lowered its key interest rate to 6.5%, from 6.75%. Meanwhile, Australia’s Central Bank held rates stead. In the U.S. the PMI Service index rose to 51.3, higher than the prior reading of 49.7 and just above the boom/bust level of 50. The ISM service index came in at 54.5, beating estimates for 54.

Gary’s Thoughts: Icky day! Massive overhead resistance. Overbought. Bears turned into bulls. We shall see. We said on radio yesterday to watch closely here. Not thrilled with action in Financials. Not thrilled with Asian and European markets aas they are now waaaaay underperforming U.S. markets. Something to watch. Just keep in mind, we are 99.9% sure Yellen going to lower rates back to 0% and then print again. Just a matter of when!

The Morning Look

Stock Market Overview: 

Futures are lower ahead of Tuesday’s open as investors pause to digest the recent and very strong 7-week rally.

Gary’s Thoughts:   Japan and Asia markets rolling over. European markets look the same. This is not an opinion. Pay heed. 

Economic Data:

  • Trade Balance (8:30): -$46.3 bn expected
  • Markit US Services PMI (9:45)
  • Markit US Composite PMI (9:45)
  • ISM Non-Manuf. (10:00): 54.1 expected

Highlights Of The Day:

  • Tesla’s Model 3 Gets 250k Pre-Orders
    Gary’s Thoughts: And then they lower numbers.
  • Alaska Air Agrees to Buy Virgin America
    Gary’s Thoughts: Good move but passengers screwed even more.

The Closing Look

Stocks fell on Monday as markets paused to digest the very strong rally we have seen over the past 8 weeks. Commodities dragged stocks lower even though the US dollar also fell. Alaska Air ($ALK) said it plans to acquire Virgin America (VA) in a deal valued at $4 billion. Groupon (GRPN) rallied after the company said Comcast will invest $250 million. Comcast will work with Groupon on potential strategic partnership opportunities. In Europe, unemployment fell to 10.3% in February which was the lowest level since 2011. The IMF said a Greek deal is far off which weighed on investor confidence.

Gary’s Thoughts: Mushy but no biggie yet. Just beware foreign markets suspect!

Back from China!

We are back from China. We will have our thoughts on China and the economy later in the week but first:

Earnings growth does not matter. Sales growth does not matter. GDP does not matter. Debt, we mean massive debt does not matter. Leverage, we mean massive leverage does not matter. Communist presidential candidates do not matter. Crooked presidential candidates do not matter. A presidential candidate who changes moronic stances every hour does not matter. All that matters is back to all that has mattered over the past several years and that is the maneuvers of a select few maniacal central bankers around the globe. We have already written to you on numerous occasions about what they have done. 0% interest rates going on a decade now with negative interest rates are becoming something of the new norm. It’s no longer the printing of trillions. It is the printing of tens of trillions. No number is too high! The fact is and it is our contention the only thing that matters to the select few is markets holding up or going up. Here is the latest money quote from Janet Yellen. That’s all you need to know that the next move is back to zero and the next move after that is QE4. Remember these people say and do nothing by accident. It is all planned out. It is all coordinated and it is all in concert. The fact is only a quarter point hike here in the US was getting world markets melting down thus they have come to the conclusion they have to roll it back or else. And the quote:

“Even if the federal funds rate were to return to near zero, the FOMC would still have considerable scope to provide additional accommodation. In particular, we could use the approaches that we and other central banks successfully employed in the wake of the financial crisis to put additional downward pressure on long-term interest rates and so support the economy–specifically, forward guidance about the future path of the federal funds rate and increases in the size or duration of our holdings of long-term securities. While these tools may entail some risks and costs that do not apply to the federal funds rate, we used them effectively to strengthen the recovery from the Great Recession, and we would do so again if needed.”

Look what happened as markets were being hit. Credit and the access to credit and debt was drying up. It is this access to credit and debt that keeps the game going. If not for this access to this credit and debt, all hell breaks loose. You don’t believe us? Then just ask yourself the question why do they have to continue to ratchet up the easy money? What possible reason is there to go to 20 trillion, 25 trillion, 30 trillion of printed money? It should be obvious that no number is too high as the bar keeps being raised. We continue to believe that at the end of this road, the longer and higher the easy money continues, the bigger the meltdown is going to be. As we have always told you, we have no idea from what point or how long it lasts or how bad it is going to be, we just know by precedent, it is going to end badly. All those trillions and we grow 1% here…maybe!

 

The good news is we are technicians first and the market continues to improve. In fact, we were somewhat amazed by Friday’s action in that Japan’s market is rolling over, European markets look like they’re rolling over and we opened up badly but the boys would have none of it. Markets reversed here and nicely.

A lot of not much!

Greetings from Hong Kong…on the way to Shanghai today. Will have a complete report on China this coming weekend.

Was up overnight watching and the best way to describe the action is a lot of not much. A lot of sitting, a lot of back and forth, a few things not so well, a few things act well. But a glance at new yearly highs find the same…utilities, reits, food, beverage and stuff like that. Sure…a smattering of other things but just a smattering.

We told you over the weekend that end of quarter is usually bought up or held up. Right now…held up. But this contracted volatility could lead to higher prices once done but there will need to be a lot more improvement as plenty still not working. Contracted volatility usually does not last too long but on occasion it has.

 

Greetings from Hong Kong

Greetings. It is Monday morning here in Hong Kong where I got a bout of food poisoning past couple of days. Let’s just say…no fun. Feeling much better this morning after sleeping 12 hours straight. Have a few thoughts this morning on things I am seeing.

Japan announces they will add even more stimulus. More? The latest and not making this up…just handing out money in the way of vouchers. Money you can save. Vouchers would have to be spent. So government goes more into debt so others can spend. Sure…that will work in the end.

Trump vs Cruz? WTF! Wrestlemania is this coming Sunday. How about a good old fashioned Texas Bullrope match made popular by the man I used to watch every Wednesday at Miami Beach Convention Center back in the 70s…the American Dream Dusty Rhodes! Frankly, I am not sure what we are watching when it comes to Republican presidential politics. It looks like Trump will win the nomination but who knows what they try to pull at the convention. And I guess…TRUMP IS TRUMP!

The Belgium attacks: What do you expect? It really seems governments only put the hammer down AFTER something happens. We say prayers and wish them well. We pray that leaders figure out there is only one way to stop vicious animals.

We have also received many emails asking us to comment on President Obama’s reaction…dancing the Tango, going to baseball games and all that crap. All of the emails were livid that the President would not stop his schedule and were doubly livid about the optics of dancing. We won’t quibble but have to ask…is anyone surprised? There are no “Katrina” moments for this President. You remember “Katrina!” The media (on purpose) turned it into a moment to use against Bush for the rest of his whole presidency. They would never do that with Obama. They may complain for a day…but it is immediately dropped. Thus, this President can and does do what he wants. This President would not even go to France when attacks occurred there even though just about every other head of state was there. The president’s answer to all this is that he will not let terrorism stop his schedule. We will let you decide.

After my 12 hours of sleep,  found out the Communist beat the crook handily in a few states but that doesn’t matter…does it? The crook will be the nominee. Nevertheless, Trump versus the crook will be huuuuge for ratings! And don’t ask me why I call her “the crook!” If you have to ask, you have not done your homework!

As far as markets, one little audible from us. Last Wednesday, we thought that day was going to mark a decent top. Thursday’s early action was less than thrilling. But Thursday’s pre-holiday close was darn good. The most important areas right now are commodities and industrial-types. It is these areas that are leading the market. They reversed up. As long as they continue to hold, market should be ok. On top of that, this week is end of quarter. End of quarter and end of month window dressing is illegal so it does not happen. (BAZINGA!) Otherwise, we are still into the meat of resistance with a massive amount of stimulus being produced to directly keep markets from dropping. Earnings just around the corner.

As far as the oft-mentioned Gold, still think we have a near-term high put in off of the distribution we told you about at the highs.

Enjoy your week. Heading to Shanghai tomorrow.

The Closing Look

Stocks were relatively quiet on Monday as the market paused to digest the very strong rally we have seen since the Feb 11th low. Apple unveiled a few new (lower priced) products which are aimed at capturing a broader audience. In other news, Starwood Hotels and Resorts ($HOT) accepted a higher offer from Marriott International Inc ($MAR). Economic data was less than stellar, existing home sales fell -7.1% to 5.08M, missing estimates for 5.3M. Overnight, the governor of the People’s Bank of China was cautious about corporate debt. China’s central bank warned that the ratio of corporate debt vs gross domestic product had become too high which may become a big problem in the near future.

Gary’s Thoughts:

It may seem like a quiet day in the market but for us, Mondays action is another constructive day. When the market is way overbought and market needs to pull back and when a market doesn’t pull back, it simply remains bullish.

On November 8, 2015, after a 13.3% rally for the S&P 500, we thought the market was getting in trouble again. We were right as it started another topping out process which led to another big drop. On a daily basis we look to see whether that process is starting again. As of this second, we are seeing nothing that resembles what we saw and what we started to see on November 8.

In fact, we are tending to see daily improvement  as more and more areas and more and more names turn the corner. Even the horrid biotech got a bid today as a couple names turned the corner!It was this turning of the corner that alerted us to tell you the market was ready to rally.

We do not care as to why. We only care about what is. But if you need to know why, look no further than the chart we posted at garyk.com as central banks again have gone into hyper drive. EASIER MONEY is working. But we do believe there will be diminishing returns so pay attention.

 

Gary from China on the markets…

MARKETS GO COAST TO COAST”
By Gary Kaltbaum
March 21,2016
Greetings from Beijing. Fascinating place. The Kaltbaum bucket list continues to get checked off.

Yesterday, we visited Tiananmen Square, the Temple of Heaven and the Forbidden City. Humongous, expansive and spectacular architecture come to mind. Today, we hit the Great Wall and Summer Palace. To be clear, the Great Wall is the most amazing place we have ever been to. We have no idea how they were able to accomplish such a gargantuan undertaking. Here are the facts from wikipedia:

The Great Wall stretches from Dandong in the east, to Lop Lake in the west, along an arc that roughly delineates the southern edge of Inner Mongolia. A comprehensive archaeological survey, using advanced technologies, has concluded that the Ming walls measure 8,850 km (5,500 mi).[4] This is made up of 6,259 km (3,889 mi) sections of actual wall, 359 km (223 mi) of trenches and 2,232 km (1,387 mi) of natural defensive barriers such as hills and rivers.[4] Another archaeological survey found that the entire wall with all of its branches measure out to be 21,196 km (13,171 mi).[5]
And now, back to the markets.

On February 11 and 12th, we thought and we told you that a low was being put in for the market.  When we see a low, our thought process is always the same. We never know how long a rally will last or how far it goes. We did believe that this rally could be better than some of the anemic rallies we had seen recently. But this has been a damn good rally, a rally that is persistent, a rally that sticks, a rally that confounds and a rally that is now driving the bears up a wall. This is the exact opposite of what we saw into the lows of February 11 and February 12. The most important part of the action has been the recent turning of the corner of all the areas that we had been bearish on for over 18 months. As we had told you, we thought that energy, oil and gas, steel, copper, aluminum, metals and mining, commodity countries, emerging markets and everything that led the market down for 18 months were now turning the corner. Once that occurred, they started leading the market up. Instead of the advanced/declines and the average stock doing so poorly, the advance/declines and the average stock lead. In other words, a drastic change in the market’s complexion. We are now seeing many other areas turning the corner.

Before we go further, it’s important to take a step back and understand how we look at markets. As technicians first, we care first and foremost at what the market is doing and not the opinions of pundits, either bullish or bearish. The fact is there were not many people more bearish then us before the low was put in. But we saw the market’s complexion change and like Gumby, we are flexible.

But as fundamentalists also, we do not believe anything has changed with all the negatives that are still out there. We can spend hours listing them. The short list is the trillions and trillions of debt that pervades the globe, the yearly deficits that pervades the globe, the government takeover of industry in so many countries including our own that pervades the globe, the government takeover of markets that pervades the globe, the assinine, assiten, asseleven monetary policy by central banks around the globe which is now including the ultimate in stupidity, that being negative interest rates. Remember, logic dictates when you rig interest rates, when you manipulate interest rates, you are now taking away the ability of investors to measure actual risk in the marketplace and longer term, this can and will only end badly. When all is said and done, there will come a time when the market shoots a certain finger back at these people. There is no doubt in our minds that that certain finger was being extended over the past couple years. There is also no doubt in our mind that the central bank geniuses recognized that so guess what they did? They ramped up the easy money even more then we have seen over the past 7-8 years. Negative rates? Why not go deeper into negative rates? Printing of money? Just keep printing more and for a longer period of time. And in this country, despite being told the economy is sound and the unemployment rate is 4.9%, Mrs. bubble decides to stop raising rates dead in its tracks after only a quarter point rate hike. The simple question is what exactly are these people scared of? We think we know.

EVERYTHING IS FINE AS LONG AS MARKETS COOPERATE

Everything is fine as long as markets cooperate. That is been our mantra since Bernanke decided to do the grand experiment back in 08. We don’t think Bernanke knows a lot but we think he did know that it was the markets that put Lehman, Bear Stearns, Merrill and the rest out of business so it was a must to get the markets going back up. Every time markets dropped, just add more steroids. Fast forward to the past month. What did central banks do? You got it! After 15 to $20 trillion of printed money, just print more. Negative rates? Go more negative. Markets have a down day? Just have government buy up the market. Just ease more. Defend the markets at all cost. These people don’t even pretend any more. In their speeches, they talk more about the markets than the economy. If they printed $15-20 trillion, why not $30-40 trillion? Why not negative 5% rates?

EARNINGS HAD BETTER START TO MOVE HIGHER

Earnings had better start to move higher. If earnings do not start to move higher, then all that is happening here is that markets that already have a high valuation will only have a higher valuation and at the end of the day, there will be a lot more pain. The one bit of good news for earnings is that all of the central bank moves are now starting to crush the dollar. A lower dollar typically means higher commodity prices. Higher commodity prices lifts an anchor off the markets (for now). On top of that, our multinationals benefit as the weak dollar helps out earnings and sales.

BACK TO TODAY’S MARKET

Markets remain very overbought but the fact that they can get this overbought is actually good news. We suspect a pullback could happen at any time but we could’ve said that a few days ago. This has been a persistent move as technically, a ton of stuff has turned the corner. Keep in mind most major indices are down for the year and many are where they were two years ago. But leave no doubt, the permabulls are now smiling while the permabears are again making excuses.

We suspect the next few weeks will tell the tale of this market. We suspect the massive resistance just ahead could stall things a wee bit but leave no doubt, the turning of the corner of so many areas is meaningful and until severe distribution shows up again, it is best to not fight what we are seeing. Just keep in mind, rampant bearishness has turned into rampant bullishness in just a little over a month.

We leave you with one important statistic. The last good rally off the lows occurred in late September 2015 and lasted about five weeks before topping out again. That gain was 13.3% for the S&P 500. This rally has moved 13.2%.

The Morning Look

Stock Market Overview: 

Futures are higher ahead of Friday’s open as investors digest a busy week of central bank meetings. The big take-away is that nearly every major central bank in the world remains committed to their easy money stance.

Gary’s Thoughts:  Bad news being bought! (CAT) Good news being bought big! (FDX) We will leave it at that as in a nutshell, it describes what we are seeing. Don’t argue. We will have our usual award winning weekend report Sunday. 

Economic Data:

  • William Dudley Speaks 9:00 AM ET
  • Consumer Sentiment 10:00 AM ET
  • Atlanta Fed Business Inflation Expectations 10:00 AM ET
  • Eric Rosengren Speaks 11:00 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET
  • James Bullard Speaks 3:00 PM ET

Highlights Of The Day:

  • Dow Industrial Average Turned Positive For 2016
    Gary’s Thoughts: Don’t blink!

The Closing Look

The Dow Jones Industrial Average and S&P 500 turned positive for the year as investors digested a slew of economic data. The biotechs continued to lag while the beaten down areas of the market continued to do well. The Transports ($IYT), Materials ($XLB), Gold ($GLD/$GDX), Silver ($SLV), Steel ($XLS), Emerging Markets ($EEM) all rallied sharply and hit fresh multi- month highs.

Gary’s Thoughts: And now industrials, conglomerates, rails and “stuff” start moving above resistance. Shorts drinking a lot of tequila!