The Closing Look

Stocks drifted lower but were relatively quiet on Friday as investors digested a strong weekly gain. Overnight, China said its economy grew by +6.7% in the first quarter of 2016, which came in just below China’s goal of 7%. Oil prices slid ahead of Sunday’s OPEC meeting in Doha about a possible output freeze.

Gary’s Thoughts: Paint dring day. Nothing wrong with that. We will have our award winning technical report on the market over the weekend. Do not miss us on Fox News’ Bulls and Bears at 10 et Saturday morning. Have a great one.

The Morning Look

Stock Market Overview: 

Futures are relatively quiet ahead of Thursday’s open as investors add to Tuesday and Wednesday’s strong rally.

Gary’s Thoughts: We repeat from last night: JP Morgan…earnings down 14%, revs down 2%…remember what we told you about everyone already knowing and reporting earnings will be bad. We must also add Steve Wynn just bought more stock…73,000 shares. This after we reported to you his massive buying in January and February. A CEO averaging up is normally a good sign. Rest of market has now edged above resistance we outlined for you. Let’s hope it holds as we continue into earning’s season. WFC and JPM are down a smidge this morning on their numbers.

Economic Data:

  • Consumer Price Index 8:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • Dennis Lockhart Speaks 10:00 AM ET
  • Jerome Powell Speaks 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 Of The Day:

    • Peabody’s Death Throes Threaten Beaten Down Coal and Oil/Gas Companies
      Gary’s Thoughts: Obama got the job done. He said he would put coal companies out of business and he did it.

The Closing Look

Stocks rallied nicely on Wednesday helping the Dow Jones Industrial Average and benchmark S&P 500 jump above resistance of their latest range. Before the open, JP Morgan (JPM) reported earnings that beat greatly reduced estimates. Peabody Energy (BTU) filed for bankruptcy protection in the wake of a huge crash in coal prices. Overnight, China said exports beat estimates which bodes well for the global economy. Oil prices were quiet as the US dollar rallied. Saudi oil minister, Ali al-Naimi, said he will not cut production. This came one day after inter-fax said a production freeze would likely occur. In the U.S., retail sales fell -0.3%, missing estimates for a gain of +0.1% which strengthened the case for more easy money from the Fed.

Gary’s Thoughts: JP Morgan…earnings down 14%, revs down 2%…remember what we told you about everyone already knowing and reporting earnings will be bad. We must also add Steve Wynn just bought more stock…73,000 shares. This after we reported to you his massive buying in January and February. A CEO averaging up is normally a good sign. Rest of market has now edged above resistance we outlined for you. Let’s hope it holds as we continue into earning’s season.

The Closing Look

Stocks ended higher on Tuesday, led by a big rally in a slew of energy stocks. Oil prices soared over 4% after news broke that OPEC was closer to freezing production. Gold, silver, oil and steel stocks have soared in recent weeks after pausing to digest the strong rally from the Feb low. Overnight, Italy created a $5.7B fund to buy bank stocks. Italian banks are sitting on €360 billion euros of bad loans. This is part of a new plan from Prime Minister Matteo Renzi to boost their lackluster economy. In other news, the IMF cut its 2017 global growth forecast to 3.5% from 3.6%. In the U.S., more misdirection came from the Fed. Federal Reserve Bank of Philadelphia President Patrick Harker said it may be prudent for Fed officials to wait for more evidence inflation before they raise rates again. Then Fed’s Kaplan Said “Fed Likely to Move in the `Not-Too-Distant Future.” This has been a common occurrence since last month’s Fed meeting.
Gary’s Thoughts: Oils breaking out. Major indices tight. Won’t take much to move them out of range to the upside as we head into earnings.

The Morning Look

Stock Market Overview: 

Futures are hugher ahead of Wednesday’s open as investors add to Tuesday’s strong rally. Oil prices surged to a four month high on Tuesday as the U.S. dollar is trading just above a 9-month low.

Gary’s Thoughts: Strong Asia…strong Europe…gapping up here. Potential to move out of the 4 week range markets have been in.

Economic Data:

  • MBA Mortgage Applications 7:00 AM ET
  • Retail Sales 8:30 AM ET
  • PPI-FD 8:30 AM ET
  • Business Inventories 10:00 AM ET
  • Atlanta Fed Business Inflation Expectations 10:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • 10-Yr Note Auction 1:00 PM ET
  • Beige Book 2:00 PM ET

Highlights Of The Day:

  • Oil surges to 4-month highs on rumors of production freeze
    Gary’s Thoughts: Oil stocks move above range.
  • Bill Gross Says China Growing 6% Is Among ‘Investor Delusions’
    Gary’s Thoughts: We were there. It is not 6%!

WE KNOW…EARNINGS WILL BE BAD!

What about the other side about all the supposed bad earnings reports to come out?

We felt it necessary to write to you about something we are reading about every day…and in numerous articles. That is all the talk about the bad earnings that will be reported in the weeks ahead for the past quarter.

First off, let us say we think all this talk about poor earnings are correct. We have walked through a ton of guidance and frankly, it does not look too good. Even taking into account the normal “beat the number” game, the numbers still look anemic. But we think it important to mention what we perceive to be potentially the most important part of the earning’s equation and that is:  EVERYONE ALREADY KNOWS EARNINGS WILL BE CRAPPY. EVERYONE IS ALREADY REPORTING EARNINGS WILL BE CRAPPY. And maybe, just maybe, we can go back to the tried and true…when everyone already knows something and when everyone is already reporting something, it is already in the market….potentially!

Of course, we now sit and watch the numbers but for us, the reaction is what counts most. We would also like to mention another potential positive and that is the dollar. The dollar was a heavy weight on earnings and sales for many companies but in the past 3 months, the dollar has swooned. So again, maybe just maybe, companies will guide better as the effects of a strong dollar wear off.

So there!

We love Italy. We do not love their central bankers!

Italian officials and bank executives have agreed to create a €5 billion ($5.7 billion) fund to help lenders that are in quite the trouble. Only one problem…there is about €360 billion of bad loans. There is a lot more where this came from in many other countries. Remember what we have told you, places like Greece were not fixed. All the maniacs did were write a bigger credit card to pay for the previous credit cards. All the maniacs did were to make the kicked can even bigger as “down the road” will be much worse than need be. And remember, we are the doofusses with $19 trillion of debt. But don’t worry!

The Closing Look

Stocks opened higher but ended near their lows as seller showed up in the afternoon. Before the open, rumor spread that central banks and governments should begin buying bank stocks to boost the market. Meanwhile, the US dollar fell to a fresh 9-month low which sent gold, silver and several other commodities higher. In other news, Goldman Sachs ($GS) will pay $5 billion to settle federal and state probes from before the financial crisis. The Justice Department settled with GS regarding the sale of mortgage-backed securities.

Gary’s Thoughts: Another day of gapping up only to sell off. Normally, we would be very negative on that but with central banks and governments now targeting stocks???????

Gold…gold…gold…gold stocks are leading.

Goldman produced product…sold that product…and then shorted it at the same time! Enough said!

Concerted effort to boost financial stocks.

We wrote to you this morning about Italy talking about using their money (debt) to buy up their beleaguered bank stocks. We once wrote to you years ago and asked sarcastically “why don’t central banks just buy up the whole f—ing S&P? Well…now comes this:

By Nishant Kumar
(Bloomberg) — Central bank policy makers in Europe and
Japan may have to authorize the purchase of shares in lenders if
they want to boost economic growth, according to Man Group Plc
President Luke Ellis.
“What’s happening with the banks is causing the weakness in
economies, not the other way round,” Ellis said in a Bloomberg
Television interview Monday. “The starting point is the pressure
on the banks.”
Negative interest-rate policies being pursued by the
European Central Bank and the Bank of Japan are triggering
concern that policy makers are leaning too much on extraordinary
monetary policies in their attempts to fuel economic growth. The
BoJ surprised markets by adopting negative rates in January,
more than a year and a half after the ECB became the first major
institution of its kind to venture below zero.
“At some point, they will probably all end up buying shares
in banks to try to support them,” said Ellis, adding that
negative rates are “awful” for Japanese banks because they are
pressuring earnings.
Man Group, the world’s largest listed hedge-fund firm,
managed $78.7 billion at the end of 2015.

WHERE THE HELL IS THIS GOING TO END? THE MASSIVE MARKET DISTORTIONS CONTINUE!

GOVERNMENT RUN MARKETS

“GOVERNMENTS GETTING DEEPER INTO THE MARKETS”
April 11,2016

We do not make this stuff up! The first two paragraphs are from this morning:

Italian Treasury and central bank officials will meet with executives of major banks, including UniCredit
SpA and Intesa Sanpaolo SpA, on Monday to discuss the creation of a fund that would buy bank shares and help the institutions tackle non-performing loans, according to people with knowledge
of the talks.

In the latest revelation of just how far China, and its central bank, are willing to go to prop up its ailing local stock market, on Thursday the official Shanghai Securities News reported that China’s foreign exchange regulator has bought mainland stocks worth over 27 billion yuan ($4.18 billion) via three low-profile investment firms it controls.

So…

With a bunch of countries going deeper into negative rates, with a bunch of countries continuing to print money as well as add to the printing of money and recently, Janet Yellen’s money 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.”

In case you did not know, this quote (which was under-reported) specifically states the potential for not only going back to 0% rates, but the potential for more printing of money. 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 having world markets melting down thus they have come to the conclusion they have to roll it back or else. Notice the word “economy” in bold. Replace the word “economy” with the word “market!”

Earnings growth does not matter. Sales growth does not matter. GDP does not matter. (expected GDP this quarter is expected to be around a big fat 0%) 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 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.

We hear Obama is meeting with Yellen today. We suspect the prez will give her big hugs and kisses for keeping rates at 0% and all the coordinated printing of money as it has propped things up while masking the underlying problems and enabled this “debt president” to increase debt over $8 trillion while in office.

As we come into this week, a few thoughts:

The not so good:

Big and small financials are still acting poorly and are a drag on the markets.

Retail stocks are rolling over badly.

Small caps continue to woefully underperform large caps.

Europe and Asia (especially Japan) continue to underperform the U.S. by a wide margin.

The good:

Our markets refuse to pull back in a meaningful fashion.

Gold stocks are breaking out…leading the metal, which is usually a bullish occurrence.

Biotechs may have bottomed for now. They have been a huge drag on the Nasdaq.

Energy-related issues continue to hold their recent moves off the lows…but plenty of work left to do. Other commodity areas like steel also continue to have the bid. The same for commodity countries as we had told you in recent weeks that everything that led down for 18 months had turned the corner.

Most of the talk is about how bad earnings are going to be. When everyone is talking about something, it is usually already in the market. We’ll know starting next week.

Other areas that remain stronger are Food, drugs, beverages, alcohol, household products, reits, utilities.

Gary Kaltbaum