The Morning Look

Stock Market Overview: 

Futures are down before Friday’s open as the market pauses to digest last week’s strong rally. In the last week, the benchmark S&P 500 soared over 120 points or over 6.6%. That is not “normal” bull market action and moves of that size typically occur during bear market rallies. Gary has done a fantastic job of navigating this difficult market for you as he called the top perfectly for you in the latter half of 2015 for stocks and called the short term low last Thursday on 2.11.16.

Gary’s Thoughts: Already getting mushy!

Economic Data:

  • Loretta Mester Speaks 8:00 AM ET
  • Consumer Price Index 8:30 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET

Highlights Of The Day:

    • Wal-Mart Is Still Outshined by Amazon Despite Spending Billions
      Gary’s Thoughts: World is a changing.
    • Citigroup Plans Argentina, Brazil Retail-Banking Exit
      Gary’s Thoughts: For a good reason!

The Closing Look

Over the past week, the benchmark S&P 500 vaulted ~120 points or +6.6%! That is a huge move by any normal measure. In “normal” (non/Central Bank printing money days), a 10% gain for the entire year was considered “normal.” Clearly, a +6.6% rally in a 4 trading days is considered very strong and the market is over due to pullback to digest that move.

Gary’s Thoughts: Gold…gold…and more gold…and not thrilled with glamour growth nor financials. Hmmm!

We are not baffled! Your policies are nuts!

Bank of Japan Baffled by Negative Reaction to Negative-Rate Policy

Gov. Haruhiko Kuroda criticized by lawmakers who charge the policy victimizes consumers and sends a message of despair

TOKYO—A clash Thursday between Japan’s central-bank chief and lawmakers highlighted the downside of negative interest rates: They are making the Japanese public feel negative.
Bank of Japan Gov. Haruhiko Kuroda, who announced the nation’s first move into minus rates three weeks ago, found himself dodging a concerted attack in Parliament from lawmakers who charged the policy was victimizing consumers and sending a message of despair.
Even a ruling-party member, Masahiro Ishida, called the policy hard to grasp. “It could have the opposite effect of confusing the market,” he said.
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The criticism has come as a surprise to central-bank officials who thought their efforts to spark lending and higher growth would gain more public support. “Those who understand this policy are criticizing us, and those who do not are also criticizing us,” said one official this week.
It is a symptom of a global problem. The more central banks move into unconventional policies, the harder it becomes to get their message across. That is a particular problem when the policies are supposed to work in part by inspiring confidence.
Under its new rules, which took effect Tuesday, the Bank of Japan started imposing an interest rate of minus 0.1% on some deposits held by commercial banks, meaning the banks have to pay to store their money.
The goal was to bring down interest rates generally, including long-term rates charged for home loans. The central bank hoped to augment its existing easy-money policy, which has pumped ¥80 trillion ($700.8 billion) of cash annually into the economy by purchasing government bonds.
Shortly after the move, global markets swooned and the yen, seen as a haven in times of trouble, rose against the dollar, threatening the profits of Japanese exporters.
This week, markets have stabilized, but the central bank is struggling with a different and equally hard-to-control force: public opinion.
Although negative interest rates have existed for some time in Europe, the idea was unfamiliar to most Japanese when it burst onto the front pages late last month. Initial accounts focused on what could happen to bank deposit rates. That is a sensitive issue in a society where wages have barely risen since the 1990s and one in three citizens receives pension income.
“Deposit one million yen and earn annual interest of ¥10,” said the headline of an online article Tuesday by Japan’s biggest daily newspaper, the Yomiuri Shimbun, telling savers with nearly $10,000 in the bank that they could expect less than a dime in interest.
In Parliament on Thursday, opposition lawmaker Shinkun Haku squared off with the Bank of Japan’s Gov. Kuroda on whether commercial banks would effectively introduce negative rates by hitting consumers with fees in excess of the tiny amount of interest paid.
“Can you deny that banks will put an additional burden on average depositors?” said Mr. Haku. “If you can’t deny it, don’t. It’s a yes or no.”
Mr. Kuroda said he didn’t want to speculate about fees, but “there’s no chance that deposit interest rates will turn negative.”
He said negative interest rates had helped spur lending in Europe with few harmful effects. “Europe has much larger minus interest than the Bank of Japan, and I haven’t heard of minus interest rates being applied to individual depositors there,” he said.
One small Swiss bank charges minus 0.125% on deposits.
Mr. Kuroda’s responses merely inspired further attacks from the opposition, which has been looking with little success for an issue with which to dent Prime Minister Shinzo Abe’s popularity.
Opposition lawmaker Motoyuki Odachi accused Mr. Kuroda of sounding like a World War II propaganda broadcast, and a Communist Party lawmaker, Akira Koike, said negative interest rates were bad public relations. “You have sent a message to the people that they had better watch out because Japan’s economy is in trouble,” Mr. Koike said.
From the Bank of Japan’s perspective, consumers are losing almost nothing because bank accounts have paid barely any interest for years, and some people could gain by getting a cheaper loan to buy a house or car. That angle, officials say, has been underreported.
Some analysts said Mr. Kuroda’s favorite tactic of surprising financial markets may have backfired. There had been little public discussion of negative interest rates before the decision, in part because Mr. Kuroda repeatedly told parliament that he wasn’t considering the idea.
His sudden reversal left politicians ill-equipped to explain the move. Economy Minister Nobuteru Ishihara, asked about it this week, said, “I’d like you to give me a little more time for analysis.”
Izuru Kato, chief economist at market-research firm Totan Research Co., said the commotion was unlikely to last long. Germans showed a similar reaction in 2014 when the European Central Bank adopted a negative-rate policy but regained their composure once it became clear that their bank deposits wouldn’t fall in value, at least in nominal terms, he said.
Still, Mr. Kato said the Bank of Japan should have expected a backlash. He said it was natural for consumers—particularly pensioners—to become anxious in the face of a monetary policy they had never heard of.
Write to Takashi Nakamichi at takashi.nakamichi@wsj.com

LINK:

http://www.wsj.com/articles/bank-of-japan-baffled-by-negative-reaction-to-negative-rate-policy-1455791343

The Morning Look

Stock Market Overview: 

Futures are up before Thursday’s open as the market continues to bounce from deeply oversold levels. In the last 4 trading days, the benchmark S&P 500 has soared over 120 points or over 6.5%. That is not “normal” bull market action and moves of that size typically occur during bear market rallies. Gary has done a fantastic job of navigating this difficult market for you as he called the top perfectly for you in the latter half of 2015 for stocks and called the short term low last Thursday on 2.11.16.

Gary’s Thoughts: We are open to anything. Maybe THE low is in and we build stairsteps on the upside once we end this initial “jolt’ off the lows. Or maybe this is another of those “bear market rallies are sharp, quick, get people talking, make you feel good, suck you in…only to bury you soon after. All we know is we felt “A” low last week and will not alter until market shows distribution again. There is still a clear lack of leadership measure by new yearly highs and great growth names coming on. Hopefully, this gets built on. We would rather have bull markets than bear markets.

Economic Data:

  • Jobless Claims 8:30 AM ET
  • Philadelphia Fed Business Outlook Survey 8:30 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • Leading Indicators 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • EIA Petroleum Status Report 11:00 AM ET
  • John Williams Speaks 3:30 PM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply

Highlights Of The Day:

    • Fed Minutes showed policy makers are concerned with global market turmoil and are still “data dependent”
      Gary’s Thoughts: As we have stated, they are more interested in rigging markets than anything else as it is the bad markets that drop the curtains on what is really happening.
    • Oil jumps 6% on Wednesday after Iran said they want to stabilize the oil market
      Gary’s Thoughts: Overdue…!
    • AmEx Overhauls Management in $1 Billion Cost-Cutting Effort
      Gary’s Thoughts: Needs new management.

The Closing Look

Stock Market Commentary:

U.S. stocks continued their 3-day rally as the market continues to bounce from deeply oversold levels. It is important to note that new leadership still remains virtually non-existent and the market continues to be led higher by beaten down areas such as Materials ($XLB) and the Transports ($IYT). The Fed released the minutes of their last meeting at 2pm EST and, as expected, the minutes reiterated the Fed’s recent “data dependent” stance but seems Ms. Yellen, all of a sudden is worried.

Gary’s Thoughts: Well…we thought and told you a low was being put in last Thursday but wow. Just tells you how bad things got.

The Morning Look

Stock Market Overview: 

Futures are up on Wednesday after the market rallied on Tuesday. U.S. Stocks were closed on Monday for president’s day. The market is trying to bounce from deeply oversold levels. Oil prices hit the mid 20’s last week and are now bouncing. Gary called the top perfectly for you in the latter half of 2015 for stocks, helping you sidestep this year’s brutal sell off.

Gary’s Thoughts: And we also called a short term low this past Thursday. Please remember, bear market rallies are sharp, quick, make you feel good, get everyone feeling better, suck you in and bury you soon after. Maybe we have seen THE low. Let’s get some evidence.

Economic Data:

  • Empire State Mfg Survey 8:30 AM ET
  • Patrick Harker Speaks 9:00 AM ET
  • Housing Market Index 10:00 AM ET
  • Treasury International Capital 4:00 PM ET
  • Eric Rosengren Speaks 7:30 PM ET

Highlights Of The Day:

    • Shares rallied on Monday after Mr. Draghi reiterated that the ECB is ready to act in March
      Gary’s Thoughts: Never ends!
    • China’s Bad Loans Rise to Highest in a Decade as Economy Slows
      Gary’s Thoughts: All is well. Bad loans are a good thing! (sarcasm)

The Closing Look

Stock Market Commentary:

U.S. stocks rallied on Tuesday as traders returned from a long weekend. Wall Street was closed on Monday but stock futures were higher alongside other international equity markets. Stocks continued to bounce on Tuesday from deeply oversold levels. International stocks were higher after the latest round of bullish central bank rhetoric was announced. Mario Draghi, head of the European Central Bank (ECB), said he is ”ready to do its part” to make “the euro area more resilient.” That is his way of saying the ECB is ready to pump more money into the system (increase QE) next month if conditions worsen. Separately, China’s Central Bank wants to spend more money to stimulate their economy and they central bank is considering changing the rules (once again) to help “encourage” bank lending. Bad loans in China surged to the highest level in a decade but the central bank wants more lending to stimulate markets. The Yuan surged on Monday and enjoyed its largest single day gain in over 10 years. In the U.S. a few regional Fed presidents spoke and said largely reiterated the recent stance that the Fed remains data dependent. Oil prices were higher on Monday but fell on Tuesday after OPEC decided to hold production steady. The Street was looking for OPEC to cut production and the fact that oil didn’t cut sent oil prices plunging over 8% from its intra-day on Tuesday.Oil has only had 2 “up” days all month and remains in a steep bear market. In economic news, the U.S. Empire Manufacturing Index contracted for a seventh straight month and missed estimates. The Empire Manufacturing index fell to 16.64, missing estimates for -10. In other news, home builder sentiment fell to 58 in February, missing estimates for 61.

Gary’s Thoughts: Everything headed south but markets headed up past 2 days. Enjoy while it lasts.

Short notes from our day off!

February 15, 2016
Greetings from our Monday day off. Frankly, how about every other Monday being a day off?
We can be brief with our weekend report today because of what we said to you last Thursday afternoon and Friday morning.

Simply put, we think Thursdays late bounce combined with Friday’s action gave us another near-term low akin to what we saw and what we told you about on October 2, 2015 and on January 20, 2016. The rally that came out of the early October low lasted for almost 5 weeks before the market started to top out again. It then took several weeks of topping out to slam the markets again. The low of January 20 only lasted about 10 trading days before the dark side showed up again. Normal bear market rallies last anywhere from 4-10 weeks. So far, rallies have been anemic but suggest to you that one of these rallies will be stronger.

As usual, we will let everybody else tell you what this means. Frankly, we have no idea how long this lasts or how far it goes. We will just be ready when distribution shows up again. Just remember the rules of bear markets that we have mentioned to you. Mainly, the masses will believe the bear market is over and let out a big sigh of relief just because the market is rallying. And yes we do see this as another bear market rally. If anything changes, we will let you know. Expect everything that wasn’t working to rally and everything that was (Gold) to pull back.
We also wanted to touch upon one other thought. We read a WSJ blurb that said that there is a debate over whether there is trouble with the global economy or whether the financial markets are just sickly.
May we suggest it is never as bad as the bears will tell you and never as good as the bulls will proclaim. Just know there is a lot of serious issues out there including massive debt and deficits, waning economic growth, downright recessions (check out numbers out of Japan) and a clear lack of control and knowledge from the central bank geniuses! (Just go watch Ms. Janet and some of her answers!)

The Morning Look

Stock Market Overview: 

Stock futures are up after Thursday’s steep decline. The market remains deeply oversold in the short term. Oil prices hit the mid 20’s this week and that does not help investor confidence. Gary called the top perfectly for you in the latter half of 2015 for stocks, helping you sidestep this year’s brutal sell off.

Gary’s Thoughts: And the counter-trend rally/bounce begins. We told you yesterday afternoon that markets felt sold out and were ready…and as usual, we now get a gap to the upside. Expect counter trend moves in the worst areas including oil. We have no clue how far it carries or how long it lasts. The last near term low we called was January 20th. That move lasted less than 3 weeks and was quite anemic. This time? We shall see!

 

Economic Data:

  • Retail Sales 8:30 AM ET
  • Import and Export Prices 8:30 AM ET
  • Rob Kaplan Speaks 9:45 AM ET
  • Business Inventories 10:00 AM ET
  • Consumer Sentiment 10:00 AM ET
  • William Dudley Speaks 10:00 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET

Highlights Of The Day:

    • Oil Plunges To Lowest Level in Over 12 Years
      Gary’s Thoughts: That was yesterday. Rally time! 
    • Einstein Was Right: Gravity Ripples Across the Universe as Waves
      Gary’s Thoughts: Say what! 
    • Stocks Trying To Bounce From Deeply Oversold Levels
      Gary’s Thoughts: Stocks do go up!

The Closing Look

Stock Market Commentary:

Before Thursday’s open, futures and most global markets, were down big as another wave of selling hit stocks. Overnight, Sweden’s Central Bank surprised markets and cut its main repo rate further into negative territory. Sweden lowered its rate to negative -0.5%, from -0.35%. Crude oil fell to $26/barrel and gold soared to a fresh 1 year high. At one point, the Dow Fell over 400 Points and the S&P 500 briefly undercut Jan 20, 2016’s low of 1812 before buyers showed up and defended stocks. In the afternoon, news spread from OPEC that they may be near a deal to cut production which helped oil prices spike higher. Needless to say, stocks are deeply oversold and way overdue to bounce at this point.

Gary’s Thoughts: Our serious over-the-top, imbecilic guess…probably got another decent divergence today that leads to the upside. How much? Don’t know! How far? Don’t know! But any bounce/rally will not change the big picture. It would just give the markets and investors some relief!