The Morning Look

Stock Market Overview: 

Futures are down ahead of Wednesday’s open as the market continues digest it’s strong rally off the Feb 11th, near term low. During that time, the benchmark S&P 500 soared nearly 7% which is not an insignificant sum. Remember, moves of that size typically happen during bear, not bull, markets.

 

Gary’s Thoughts: Another gap this morning but this time to the downside. If you don’t believe in our teachings, you had better check where most major indices stopped dead in their tracks…at or near the declining 50 day average. It is not uncanny…it is how things work in a bear market.

Economic Data: 

  • MBA Mortgage Applications 7:00 AM ET
  • Jeffrey Lacker Speaks 8:00 AM ET
  • PMI Services Flash 9:45 AM ET
  • New Home Sales 10:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • Rob Kaplan Speaks 1:15 PM ET
  • James Bullard Speaks 6:30 PM ET

Highlights Of The Day:

  • Saudi Arabia Won’t Cut Crude Output, Reaffirms Freeze Accord
    Gary’s Thoughts: Cut your nose to…

The Closing Look

Stocks fell on Tuesday after the major indices rallied right into their declining 50 day moving average lines on Monday. This is a logical area of resistance and as we have mentioned a logical area for the market to encounter some trouble. Oil prices fell hard on Tuesday after Saudi Arabia said they do not plan on cutting production anytime soon.

Gary’s Thoughts:  Watch them financials…continue to act awful. Market has no chance if the head lower.

The Closing Look

Stocks rallied on on Monday as the market added to last week’s gain. The Dow Jones Industrial Average traded above the middle of it’s double bottom pattern and the next level of resistance to watch is the declining 50 day moving average line (16,654). European and Asian equity markets also rallied on Monday after oil prices jumped 6%.

Gary’s Thoughts: Two words…BEYOND OVERBOUGHT….right at the 50 day for many of the indices. Our call for a low on Feb 11 and 12th in no way thought we would get this kind of move up…then again, you know what we say about bear market rallies. This time?

Short note on another gap to the upside!

Another gap to the upside this morning and lots of questions. Let us repeat our thoughts.

We are now in rally mode of unknown price and time. We came to this conclusion because of the “sold
out” action we again saw on Feb 11-12.

We have seen these rallies before. All have failed miserably. Will this rally also fail? We will again answer the same way. Our best guess is that this bear market has not breathed its last breath but that thought does not enter the equation right now. All we care about is that we are in rally mode until we aren’t. Remember, bear market rallies typically last 4-10 weeks.

The next question we are asked: Is it possible we have seen THE lows? We know we have said this on numerous occasions but it bears repeating. When you have central banks around the globe not only with the 0% interest rates, not only with negative interest rates, not only with the printing of trillions of dollars but with the admittance they are actually buying up stock markets with an unlimited amount of conjured up money, we cannot take anything off the table. Eight fedheads speak this week. Yes…that’s 8!

We are in “rally”mode until markets say otherwise. Otherwise means distribution days and severe selling. We cannot predict when that occurs but will know when it does occur. Keep in mind, there remains a clear lack of leadership but everything is coming off the lows right now…and yes, that includes the energy complex. Stay tuned and don’t blink!

Gary Kaltbaum

Bear market rally works off time and price!

February 22,2016
By Gary Kaltbaum
garyk.com
@GaryKaltbaum
Fox News Business Contributor
The good news is that the bearish markets are doing their job of rinsing out some of the froth and speculation that occurs in the latter part of bull markets. Firstly, the IPO business as well as the secondary business has all but dried up. Towards the end of bull markets, an assinine amount of both come to market and typically at ridiculously high prices. (over 200 biotech companies recently came public with NO SALES ) Secondly, private equity valuations are now careening south. This is longer term good news as things head towards their norm. We suspect there is more to go.
Our last call on the market was that we thought a low was again being put in on Thursday, February 11 and Friday, February 12. So far, so good. Whenever we call for a low, we use the same language and that is: “we have no clue as to how far or how long a rally will last.” But we will know when it starts to peter out. Previous lows we have called in this bear market were on October 2 of last year (that rally lasted for about five weeks) and the low we called  on January 20 which lasted all of 10 days. This latest low came with the same markings as the others..nauseating drops, a big dose of bearishness and a good reversal! On top of that, we noticed another subtlety that new yearly lows were much higher on January 20th than when the low was hit on February 11…a positive divergence. Keep in mind, we will let the market do our bidding but everything we are seeing is telling us that eventually, recent lows will be broken.

There are still plenty of issues this market has namely only about 20% of all stocks are in good shape, which remains a horrid number. On top of that, we cannot even count on two hands the amount of sectors in good shape. To make matters worse, world markets remain in a huge downtrend (though they are rallying along with our market). Lastly, except for the most defensive of areas, there remains a clear lack of big leadership. Those areas that continue to stand out are food, beverages, tobacco, household products, utilities and reits. We don’t need to tell you that this leadership is continuing to forecast economic trouble ahead. (We are already seeing it in many numbers!) On top of that, gold and gold stocks have emerged in a big way and think this area has made a major turn after a few years of a bear market. We would suggest looking at the gold area on pullbacks.

We do believe there is more time and price for this rally but will stand ready if distribution shows up again. Bear market rallies are a normal part of bear markets. There is a simple way of knowing if we are going higher because a set-up for going higher is there. Watch these levels on a short term basis:S&P 500 1931…DOW 16,512….Russell 2000 at 1017…NASDAQ 4548.  The NASDAQ lags right now because of the same things that helped out so much in 2015 are now doing the opposite. To add one more area that needs to be watched…the XLF (S&P FINANCIAL SECTOR ETF) needs to get above 21.20. A move above all these levels continues the counter-trend rally! Conversely, a break of recent lows will lead to a lot more nausea and will again invite another round of big money selling.

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.