The Morning Look

Stock Market Overview:

U.S. stock futures are relatively up nicely in the premarket as the world continues to wait for the Fed meeting and the post-meeting press conference. Stocks bounced nicely on Monday and Tuesday off of deeply oversold conditions. Irrespective of what the Fed does today, for us, the most important thing to watch is how markets react to the news and where stocks close.

Gary’s Thoughts: See our report coming out in a few minutes!  

Economic Data:

  • MBA Mortgage Applications 7:00 AM ET
  • Housing Starts 8:30 AM ET
  • Industrial Production 9:15 AM ET
  • PMI Manufacturing Index Flash  9:45 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • FOMC Meeting Announcement 2:00pm ET
  • FOMC Forecasts 2:00 PM ET
  • Fed Chair Press Conference 2:30 PM ET

Gary’s Thoughts: All about the fed.

Highlights Of The Day:

  • Earnings: Oracle ($ORCL) will post quarterly results after the market closes Wednesday, along with other companies including FedEx ($FDX) and Pier 1 Imports ($PIR).
    Gary’s Thoughts: Fedex more important!
  • People will be analyzing last night’s Republican Debate
    Gary’s Thoughts: No changes. If anything, Trump solidifies regardless of some quite suspect thoughts.
  • Oil prices continue to slide.
    Gary’s Thoughts: $1.75…$1.70…
  • The government (Congress) is putting pressure on Valeant ($VRX) over pricing and Philidor
    Gary’s Thoughts: Government puts pressure on everything we do.

The Closing Look

Stock Market Commentary:
Stocks enjoyed nice gains on Tuesday as oil bounced from deeply oversold levels. However, once again, sellers showed up and sent stocks drifting lower into the close. Several leading stocks closed near their lows for the day which is not a healthy sign. The key going forward is to see how stocks close tomorrow after the Fed meeting and then, more importantly, where they close on Friday (on a weekly basis). So far, the bulls need to see more upside before the damage from last week is repaired. 
Gary’s Thoughts:  We constantly look for light at the end of the tunnel for the average stock. As of the close today and as we have to deal with the maniacs at the fed tomorrow…nothing doing just yet. Lots more tomorrow after the earth shattering fed event is over.!

And The Meeting Begins!

The 2 day Fed meeting begins today. Yippee! They will be playing Galaga, Space Invaders, Centipede, Ms. Pacman and then sit around the table looking at each other. Tomorrow we get the earth shattering, over-the-top, can’t wait for, please tell us…all important decision on whether to have Dominos or Papa Johns. (sarcasm)

You can see how tired we are of these people.

Futures are up off of yesterday’s reversal from oversold conditions. But more names have been damaged. That said, see you tomorrow.

The Morning Look

Stock Market Overview:

U.S. stock futures and oil prices are up nicely in the premarket as markets attempt to bounce from oversold levels. Stocks fell hard last week and  bounced on Monday. This came off of a weak morning leading one to believe there is going to be upside testing into the Fed. Keep in mind, last week, we saw a few days where stocks opened higher but sellers showed up and stocks closed near the lows of the day. Later today, the Fed will begin its last two-day meeting of 2015. Most market pundits believe the Fed will raise rates by a quarter point. That said, they have been telling us that all year long. There always seems to be a new reason to kick the can down the road and not raise rates. We’ll see if this time is different.

Gary’s Thoughts:  This morning’s open fits with last night’s thoughts and that upside testing after a reversal is normal. Just keep in mind, more damage has been done but…and we mean but…anything is possible with central banks at the ready with unlimited supplies of conjured up money.  

Economic Data:

  • Two-Day The FOMC Meeting Begins
  • Consumer Price Index will be released at 8:30AM EST
  • Empire State Manufacturing Survey will be released at 8:30 AM EST
  • Redbook will be released at 8:55 AM EST
  • Housing Market Index will be released at 10 AM EST

Gary’s Thoughts:

Highlights Of The Day:

  • US Dollar fell to a seven week low ahead of the Fed  meeting
    Gary’s Thoughts: See us after the meeting on this. 
  • Moody’s, the popular credit agency, lowered its forecast for 2016 Brent crude oil, the international benchmark, to $43 from $53 per barrel and for West Texas Intermediate (WTI) crude, the North American benchmark, to $40 from $48 per barrel. Rating agencies have a lousy history and missed nearly the entire 2008-2009 housing and credit crisis. However, Wall Street likes to pay attention to them.
    Gary’s Thoughts: Thanks for this bit of trivia AFTER it happens.

  • Electronic Cars Continue To Be Released: Porsche announced it will sell an electric sports car. Porsche is the latest car manufacturer to jump on the electric car craze.
    Gary’s Thoughts: The shape of things to come. 
  • The Fifth Republican debate begins tonight in Las Vegas
    Gary’s Thoughts: Yippee. The way the national media is reporting, one might just get rid of every candidate except Trump as 99.9% lf their coverage is on “The Donald!”

The Closing Look

Stock Market Commentary:
Stocks vacillated between positive and negative territory all morning but closed higher as the market tried to bounce after last week’s steep decline. Oil prices opened lower but turned higher as this market tries to bounce from deeply oversold levels. The benchmark S&P 500 also turned higher after briefly falling below the psychologically important level of 2,000 intraday. It was the first time the S&P 500 broke below 2000 since mid-October.
Gary’s Thoughts: Reversal day to the upside as a few indices undercut but finished above support. This should lead to some upside testing but don’t blink as markets were all over the map. And of course, Wednesday’s Fed day. Enough said! 


We continue to believe we are in the process of a big topping out process of the central banks- induced bull market that started in 09. We believe once again that central banks have created bubbles all over the place and that ultimately there will be heck to pay. We just don’t know when heck shows up but we can surely stay one step ahead of it or in lockstep.

For months and months, we pointed out to you the deterioration in the markets. For months and months, many stocks and many sectors went by the wayside. For months and months, commodities continued to lead down. As the market narrowed, eventually, the major averages would follow suit. That occurred in August as markets melted down. On October 2, we told you we thought a good low was put in. 2 weeks ago, we started telling you how narrow the market rally off of October 2 became leading us to think it was acting again just like it did before the market was whacked in August. This also led us to compare all this action to 1972-73, 1999-00 and 2007-08. Narrow rallies are bearish. Simple as that.

As we have explained to you on many occasions, bull market tops usually take time. The big money distributes stock slowly but surely. As the average stock and sector tops out, the big money finds a narrower and narrower area to park money in. Finally, under the weight of all the damage, anything that has held up, tumbles. It is at that point the masses figure out how weak markets are. It is at that point the indices finally make it known that the markets have big problems. The only difference is that the characters and the amount of time changes. In the 2007 top, it was financials that led down. This time, it is the commodities.

After the commodities, Transports topped (Nov 14), Utilities and real estate (Jan 2015), small caps vs large caps (early in the year),  new highs vs new lows (Jan 2015), China bubble (May 15), advance/declines(early summer), Retail (June 15), Semis (June 15), Biotechs (July 15)…the list goes on and on.
Putting it all together, only about 25% of all stocks remain in shape. This number never got higher than 40-45% during the narrow rally. This is not the type of action that leads to long lasting rallies. In fact, it is just the opposite. On top of that, recently, when a couple of major indices were just off of recent highs, amazingly there were over 500 new yearly lows. We do not think we have ever seen such a negative divergence like this. To make matters worse, the amount of sectors in good shape could not get counted on two hands. Again, another huge negative divergence. This takes us to last week’s nausea. All major indices are now back below the 50 and 200 day average. The small and mid-cap indices are a lot worse. We also have to make note that the Transports have broken the September lows even though Oil has plunged. And Yellen wants to raise rates into that?

Shorter-term, markets are now beyond oversold but it is actually a negative how oversold things have become. Just keep in mind, vicious bounces can happen any time but that will not change the big picture.

At the very least, you should continue to avoid all the areas that are bearish and now start paying attention to the major indices and their further support levels. We will also be watching what we have been calling the new nifty 50ish  names that everybody has been flocking to. When they go, get the fork…and this week, sellers finally showed up. For those names, watch Amazon at $622, Google at $734, Facebook at $100 (sitting right on the 50 day here), and Netflix at $113 (the 50 day average). For the major indices, watch Dow 17,210 and then 16, 887, S&P 1990 and Nasdaq 4908 and then 4836. A break below all these levels…say good night.We now have to deal with the egomaniacs at the Fed who will continue to want to be front and center and continue to want to control markets. We still do not believe they are going to raise rates but it really does not matter. If they do, it would be  meaningless as going from 0-1/4% TO 1/4% changes nothing.The only thing we would have to say is that after all these years that we actually had some economic growth, they would actually be raising rates into crashing commodities, suspect Chinese economic numbers and the transportation index that continues to swoon even though oil prices continue to go lower. We think markets are in trouble no matter what.

“The Sea Was Angry That Day, My Friends”

 “The Sea Was Angry That Day, My Friends”

 Like An Old Man Trying To  Send Back Soup At A Deli”   

-George Costanza-                        

By Gary Kaltbaum-December 13,2015
Fox News Business Contributor

We wrote a lot of this report in mid-September but updated it to today. It all remains appropriate as we are now seeing some of the outcomes of one-sided trades brought on by assinine monetary policy. It is self-explanatory.

We usually like to keep our reports short and pithy but felt this a good time to hit you with both bazookas. The following is a fair compilation of our thoughts both past and present.
Starting in early 07, we started to get worried as to why the markets were treating financials so poorly. Throughout the year, we noted that when markets went up, the important financials sat. When the market went down, the important financials led down. And that was the start of us calling the market topping process. Little did we know at the time what the financials had in store for us. We used our normal terminology.

Markets are getting narrower and narrower.
Financials continue to lead down.
Fewer and fewer stocks and fewer and fewer sectors are leading.
This is starting to look like a classic market topping process.

And then this:

Semiconductors topped out. July/Aug 2007
Retail topped out. July/Aug 2007
Financials continue to lead market down. Late 07
Dow and S&P top out Oct 07
Apple tops out first day of 08

And the bear was on. Again, little did we know what the financial companies had done. The markets figured it out early but never in our wildest could we imagine that these geniuses took one asset class and leveraged  it up so much…some up to 30x. We know what happened to them next.

But there was a bigger issue during all this:

(July, 2005) “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

(March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

(May 17, 2007) “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.  The vast majority of mortgages, including even subprime mortgages, continue to perform well.  Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

(January 10, 2008) “The Federal Reserve is not currently forecasting a recession.”

These were not Ben Bernanke’s only quotes. For almost two years, this man said markets were fine, economy was fine, housing was fine, subprime was fine. In other words, the man who had control of the financial system did not have a clue what was sitting right in front of him. The man who enabled it, watched it, oversaw it, had no idea about it, who should have been fired immediately for it…not only kept his job but was looked to to come up with the solution when everything crashed. What was the solution? Take exactly what he did to enable the housing bubble and crash…and hulk it up. Not only did Mr. Bubble go easy, but he embarked on a policy that even the biggest of monetary doves could not fathom. 0% interest rates started. Savers were screwed. There were no more riskless income investments. Savers who were used to getting a few percent on their money markets now got the middle finger. And to where did this interest accrue? Yes…the same people that were a huge part of the cause of the problem, namely the big banks and the lenders. Yes, Mr. Bubble gave a Christmas, Hannukah, Easter, Groundhog and every other holiday gift to these people by taking it away from the saver. But Mr. Bubble said not to worry because the savers would make it up in a better economy.

But Big Ben had more things up his sleeves. Little did we know. This leads us to this other Bernanke quote. Look at the date!:

(November 21, 2002) “The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”

And away we went. Big Ben started QE1 (Quantitative easing). He did not dare call it money printing. To be clear, we were against it from the start. We did not like anyone interfering with markets the way he was about to embark. After all, they don’t call it Ponzi for nothing. But something happened. There was supposed to be a time limit on the printing. Remember the escape plan? QE1 came to a close. When that occurred, markets dropped over 10% and quickly. But don’t worry. Big Ben just started QE2 to fix things up. But when QE2 ended in 2011, markets dropped about 15% in just over a month. But the mad scientist was not done. He embarked on something called Operation Twist (we still don’t know what the hell that was) and then the mother of all money printing in QE3. It was basically unlimited and almost everlasting. To the tune of over a gargantuan $1 trillion/year, $85 billion/month (hey,it’s just conjured up money), Ben printed away. And just like the first few times, markets loved it. In fact, Big Ben no longer hid the fact he thought higher markets (rigged and manipulated or not) were a good thing. In speeches, he stated by keeping interest rates low, people would have no choice but to enter markets. This would cause markets to go up…making people feel wealthy. People feeling more wealthy would lead to more spending. More spending would lead to more hiring. More hiring would lead to a glorious economy…and all will be well.What could go wrong? Unfortunately, a lot. As we have stated, when all is said and done, at the end of the road, markets that have been rigged and manipulated with massive amounts of conjured up bucks, which enabled speculation and greed beyond recognition, WILL ALWAYS EVENTUALLY REVERT BACK TO THE MEAN! We just don’t know from what point. But in the meantime, it has been our contention that every data point, every asset price, every economic statistic (fake or real), real estate, stocks, bonds, corporates, municipals, art, beany babies…you name it, have been working off of rigged and manipulated interest rates which caused the speculation…which causes more speculation…which causes more greed…which causes more leverage…which causes more debt…which causes ridiculous price and yield on all kinds of bonds, especially the riskiest…which causes 500 square foot shacks in San Francisco to cost $350,000…which causes 200 Biotechs with NO SALES to be able to come public…which causes companies that would come up with an app with no sales to get billions of dollars in market cap in the private equity market…which causes the massive margin (all-time record) ..which causes everyone to feel comfy…which causes everyone to think nothing could ever go wrong…which causes assinine stock buybacks off of debt…which causes too many bad mergers…which causes certain strategists to give out outrageous predictions on the markets…because as we have titled many times…NOTHING IS EVER WRONG UNTIL MARKETS SAY SO! Unfortunately markets are saying so and the usual suspects are denying it, saying everything is A-OK, buy the dip, fundamentals are great, think long term, it is cheap, it is an over-reaction and all that crap.

We would actually give Janet Yellen some credit for the Fed ending QE3 late last year, but she was a party to all of it in the beginning. This end of QE3 led to last October 2014 market break. We saw and wrote about the topping process in the weeks leading to the drop but then the lemmings showed up. In a concerted effort, as  QE3 ended, Europe and Japan ramped up their own massive QE and China announced its own easing…stanching the bleeding in markets and turning them back up. But at around the same time…the  market’s internals topped leading to the long, drawn out topping process.

This brings us to today.

We are told that it is a lock that the Fed will raise rates this coming week. Haven’t we been told that every month this year? We have told you forever that the Fed would never raise rates unless markets forced them to.  To this day, they have not let us down but anything is possible. We would just find it interesting that if they did raise rates now, it would be raising rates into deteriorating markets, crashing commodities, tumbling transports and a whole load of data telling us the economies here and everywhere else are heading the wrong way. We are still not so sure a fed rate hike will occur but keep in mind, if they did, it would be going from 0-1/4% to 1/4%…and we promise you that it will be one and done. Which now leads us into junk bonds as we started telling you over 2 years ago that the biggest bubble was in the bond market…specifically junk. Junk bonds are not crashing. They are normalizing. In other words,  REVERTING BACK TO THE MEAN! We have told you that eventually, things would get back to the norms. You just cannot have bonds that should yield 9% yielding 4%. You just cannot have bonds that should yield 5%, yielding 2%. Eventually, something has to give and that’s price. On top of that, you are also seeing another outcome of assinine Fed policy and that is the one-sided trade. When rates are zero, it forces the screwed saver to buy into what should be riskless income investments into very risky income investments…junk bonds. When the masses are forced into that one trade, it becomes over-owned and overpriced until the tide turns. The tide has turned as you are actually seeing funds unable to get out as the one-sided trade on the buy side has now become the one-sided trade on the sell side.

The big money knows the world is massively debt laden. The big money knows economic growth (as good or bad as it is) is based on rigged and manipulated policy. The big money knows valuations are up there. The big money is  voting with both hands and not just here but around the globe.  Commodities continue to crash, transports are a horror show even with oil prices plunging, the average stock is in a bear market, most sectors are bearish, new lows swamp new highs and that’s just the start as now the major indices are again joining the downside…even in December.

No matter what, we will pay attention to the markets first but we remain worried that people who have always been wrong (the Fed), now have to be “data dependent” before making their moves. Were they not supposed to be the smartest people in the room? There is one heck of a chance that the recent major top, the recent vicious drop, the narrower and narrower rally  and now this past week’s ugly is another big topping process with major indices now playing catch-up. With leverage and debt in the system much larger now than in 08 (enabled again by the Fed)…YOU FILL IN THE BLANK! Market report up next!

The Morning Look

Stock Market Overview:

U.S. stock futures are relatively quiet this morning which is normal after last week’s steep sell-off. Stocks fell hard last week with 75% of the market in poor shape and only 25% in good shape. Market pundits are waiting to see what will happen on Wednesday with the Fed meeting and post meeting press conference. More and more key areas are breaking down which emphasizes the importance of playing strong defense if the selling continues.

Gary’s Thoughts:  

After last week’s body blow to the market, things are now very oversold. But the fact that it could get this oversold tells you how bad the selling was. Rallies/bounces could happen at any time but that’s the trees. The big picture continues to come under more pressure.

Highlights Of The Day:

  • Energy Prices Continue To Implode: US oil prices drop below $35 a barrel & U.S. Natural Gas Falls to Lowest Level Since 2002
    Gary’s Thoughts: The bear market in commodities continues. Where it stops is anyone’s guess. In the past, wasn’t it a great thing when oil prices plunged?
  • Twitter has issued its first warning about a potential hack by government-backed groups, as cybersecurity remains a major concern for companies and states alike.
    Gary’s Thoughts: Shouldn’t our government be pissed off about this? Seems we do nothing about it.
  • The Wall Street Journal said activist investor, Daniel Loeb, called for Dow Chemical to remove its chief executive, Andrew Liveris
    Gary’s Thoughts: The merger may not happen…and is an outcome two companies with sales heading south.
  • Howard Stern Quit SiriusXM? Not for a ‘Loser’ Podcast – The satellite radio giant might lose $240 million a year in revenue if the King of All Media decides to leave. More here
    Gary’s Thoughts: Baba booey! Baba booey!

The Morning Look

Stock Market Overview:

Stocks futures are down sharply ahead of the latest round of economic data. Stocks have been under pressure all week and the sellers remain in control. Today is the last trading day of the week and it will be important to see where the market closes. Oil prices fell to the lowest level since 2008 which illustrates how weak the global economy is right now. The Federal Reserve is scheduled to meet on Wednesday, Dec 16 and investors believe they will raise rates by a quarter point. The Fed has been telling us all year that they are going to raise rates but when push comes to shove, they do nothing. We’ll see if anything changes next week. A defense stance is paramount right now.

Gary’s Thoughts: Markets remain sloppy in a month where markets are “supposed” to be positive. As far as the Fed, we will cross that rickety bridge when we get there. Just remember, even with this rally up off of early October lows, we have taken pains to tell you the rally has remained narrow and that eventually, there will be a comeuppance. Two weeks ago, we started to tell you that we were starting to see the signs we saw before the August “meltdown.” We will leave it at that. Expect a comprehensive report this weekend on where markets stand, our stance and our thoughts on next week’s egomanical Fed meeting. 

Economic Data is light today: Gary’s Thoughts: Nothing earthshaking!

  • The Producer Price Index – 8:30am EST
  • Retail Sales – 8:30am EST
  • Bloomberg Consumer Comfort Index at 9:45am -10:00am EST
  • Consumer Sentiment – 10:00am EST

Highlights Of The Day:

  • Dow, DuPont to merge in deal valued at $130B
    Gary’s Thoughts: Late stage merger of two companies with declining sales. Not sure if this deal gets done.
  • IEA Sees Oil Glut Lasting to Late 2016 as OPEC Keeps Pumping, Oil prices plunge to lowest level since 2008!
    Gary’s Thoughts: We won’t predict. We just know the glut remains and the bear market in energy remains.
  • Several executives continue to  “disappear” in China which leads many to question their detention system.
    Gary’s Thoughts: Call Mannix!
  • Heavy selling showing up in emerging market currencies today, including Turkey, Brazil, South Africa and Russia. The Russian ruble is at its lowest level since August. Remember Russia’s economy is very dependent on oil prices and the fact that oil prices continue to plunge hurts their economy and their currency.
    Gary’s Thoughts: This is nothing new. Just a continuation as commodity-based countries continue to implode.

Weak Action Continues

We will have our award winning, in-depth weekend report for you on Sunday, but in the meantime:
This is the place the major indices need to hold as the Dow, S&P and NASDAQ were defended at the 50 day average. The issue is that markets were much higher early in the day. Many growth leaders also sitting on support after pulling back. We suspect we will get a good answer on Fed day on whether the markets breaks down or hangs in there.