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All better now. It’s a Christmas miracle, the plunge erased by market closure as if FDR had just been re-elected and taken the oath. The Dow is on everyone’s mind, so trading on December 26 has understandably stuck.

Stocks posted their best day in nearly a decade on Wednesday, with the Dow Jones Industrial Average notching its largest one-day point gain in history. Rallies in retail and energy shares led the gains, as Wall Street recovered the steep losses suffered in the previous session.

The sigh of relief is palpable all across the world. The BIS called the steep, worrisome liquidations up to now Yet More Bumps On The Path To Normal, and the rallies especially in stocks and oil have served to confirm the thesis. Just some minor, dare I say transitory discomfort on the road to paradise.

Is it though?

We have been watching eurodollar futures, well, forever but with even greater purpose and intent since mid-June. There is little the eurodollar curve won’t spill information about, and its inversion around then was a huge warning that whatever shook the global money network on May 29 was indeed nothing to just ignore.

Money curves are supposed to be upward sloping reflecting the risks of a healthy environment, including economic opportunity. For it to be distorted to the point of being upside down, that’s big. People have a hard time interpreting regular curves, so unhealthy ones are much more a mystery (thanks to Economics).

The specific contracts displaying eurodollar’s version of oil contango were those out several years, the 2020’s to 2021’s. For a time, the inversion extended into 2022. For the few who noticed, this didn’t seem too much to be concerned about; a far distant probability of some nonspecific hedging case. Surely the world can be fixed given two or three years.

…click on the above link to read the rest of the article…

El-Erian: 1000-Point Swings In The Dow Are The “New Reality”

December 30, 2018

El-Erian: 1000-Point Swings In The Dow Are The “New Reality”

While even some of the most dogged bulls are throwing in the towel on their optimistic forecasts for the US (see Goldman taking the axe to its 2019 GDP forecast noted earlier), there are those who steadfastly believe that 2019 will be a solid year for the US economy, and that no recession is still in sight.

One among them is Allianz chief economic advisor Mohamed El-Erian, who dismissed concerns that the US is facing a recession in the coming year, saying in an interview on Fox News Sunday that the economy is likely to continue growing at 2.5-3%.

“[A recession] is certainly not becoming a reality. You need either a major policy mistake or a massive market accident to push us into recession. But we will slowdown unless we build on the pro-growth policies.”

On the same day that he penned a Bloomberg op-ed, explaining why “life is getting harder for central banks” in which he concluded that “whichever way you look at it central banks will be exposed to more criticism from politicians, market participants and analysts” – and rightfully so, after all it was the central banks that engaged in the biggest can-kicking experiment in history by injecting $16 trillion in liquidity and the time to pay the piper is fast approaching, El-Erian said that “Trump’s frequent criticism of Fed policy is unusual” (in fact, as Goldman observed earlier it is not at all unusual and that “it is far from unprecedented on a longer-term comparison”), adding that the independence of the central bank is important to economic security (at this point we could go into a tangent how only career economists believe the Fed is “independent”, especially from commercial bank pressure but we won’t).

…click on the above link to read the rest of the article…

Which Side Are You On?

December 30, 2018

Which Side Are You On?

You had to love the narrative that the financial media put over about the 1000-plus point zoom in the DJIA on Wednesday: that pension funds were “rebalancing” their portfolios. It dredged up the image of a drowning man at the bottom of the deep blue sea with an anchor in one hand and an anvil in the other, switching hands.

Thursday’s last minute 900-point turnaround was another marvelous stunt to behold. Somebody gave the drowned man a pair of swim fins to kick himself furiously to the surface for a gulp of air. The truth, of course, is that pension funds are sunk, however you balance their investment loads while they’re underwater. They over-bought stocks out of sheer desperation during ten years of near-ZIRP bond yields, and started rotating back into bonds as they crept above the ZIRP handle, and now with bond yields retreating, they’re loading up again on still-overpriced stocks that pretend to be “bargains.” Everybody knows that this will not end well for pension funds. Glug Glug.

The financial press and their red-headed step-siblings in the regular news media seem to think that getting rid of Mr. Trump will power the perpetual bull market into an Elon Musk nirvana of Martian vacations, hyperloops, and another chapter of US world domination — with Wonder Woman running the Joint Chiefs of Staff, spearheading an army of eunuchs. The New York Timesmade yet another pitch for impeachment today (Friday) in an editorial by the revered swamp fossil Elizabeth Drew, 83, who laid out everything but a credible case against the Golden Golem of Greatness. The newspaper makes itself more ridiculous each day in its furious gyno-narcissistic hysteria.

…click on the above link to read the rest of the article…

DataTrek: “Healthy” Markets Don’t Rally 1,086 Points On The Dow

December 27, 2018

DataTrek: “Healthy” Markets Don’t Rally 1,086 Points On The Dow

Even with Wednesday’s rally, December’s 11-13% declines (S&P 500, Russell 2000) for US stocks couldn’t have come at a worse time for markets. First, there is the psychological damage of seeing such a swoon in what is a typically good month for domestic equities. Then there is the magnitude of the decline, erasing solid YTD gains in just a few weeks and making 2018 the first down year for US stocks since the Financial Crisis a decade ago.

One underappreciated problem, however, (unless you happen to manage taxable portfolios) is how money managers and investment advisors had to respond to this sudden reversal of fortune. Put yourself into their shoes for a moment:

In a few days your clients will see a year-end statement with declining bond, stock, and commodity asset prices. Pretty much nothing worked this year… That will sting, but after a decade of gains that is a manageable issue.
But… Say you sold some large winners earlier this year as stocks began to roll over, perhaps the large cap Tech names that everyone from hedge funds to retail investors over-weighted until recently. Those were good sales, to be sure, but in a taxable account they create a future liability and your clients will have to cut a large check to the US Treasury in April 2019.
To minimize the tax bill from those capital gains, you need to sell some losers to offset those winners. Clients understand market-to-market losses; they can be less forgiving, however, of out-of-pocket tax payments when there is no wealth effect of rising asset prices to soften the blow. Until September, those paper gains were there. Now, they aren’t.

Here is the real-world market impact of that problem.

…click on the above link to read the rest of the article…

Stock Market Crash of 1987

October 19, 2018

The first contemporary global financial crisis unfolded in the autumn of 1987 on a day known infamously as “Black Monday.”¹ A chain reaction of market distress sent global stock exchanges plummeting in a matter of hours. In the United States, the Dow Jones Industrial Average (DJIA) dropped 22.6 percent in a single trading session, a loss that remains the largest one-day stock market decline in history.² At the time, it also marked the sharpest market downturn in the United States since the Great Depression.

The Black Monday events served to underscore the concept of “globalization,” which was still quite new at the time, by demonstrating the unprecedented extent to which financial markets worldwide had become intertwined and technologically interconnected. Black Monday led to a number of noteworthy reforms, including exchanges developing provisions to pause trading temporarily in the event of rapid market sell-offs. In addition, the Federal Reserve’s response set a precedent for the central bank’s use of “liquidity” to stem financial crises.³

Events Leading Up to the Crash

Stock markets raced upward during the first half of 1987. By late August, the DJIA had gained 44 percent in a matter of seven months, stoking concerns of an asset bubble.⁴ In mid-October, a storm cloud of news reports undermined investor confidence and led to additional volatility in markets. The federal government disclosed a larger-than-expected trade deficit and the dollar fell in value. The markets began to unravel, foreshadowing the record losses that would develop a week later. Beginning on October 14, a number of markets began incurring large daily losses.

…click on the above link to read the rest of the article…

Dow Plunges 600, Global Markets Tank After China Retaliates In All-Out Trade War

April 4, 2018

Dow Plunges 600, Global Markets Tank After China Retaliates In All-Out Trade War

So much for yesterday’s Amazon bounce.

Just before 4AM EDT, a Bloomberg headline hit which has not only unleashed a furious global selling wave, sending the S&P lower by nearly 2% and the Dow 600 lower, but may have changed the course of history: that’s when China announced it was striking back in the ever faster and more furious trade war between the US and China:

CHINA PLANS RECIPROCAL TARIFFS ON $50B U.S. GOODS

While we detailed the response earlier, for those who missed it, China announced it would launch reciprocal tariffs on 106 US products worth $50bln in bilateral trade, setting a new tariff rate of 25% on soybean, autos and chemicals. While the Chinese response was expected, the inclusion of soybeans was not, and will likely infuriate Navarro/Trump and lead to another round of US tariffs. China Ministry of Commerce also said it would adjust tariffs on ethylene glycol and diethylene glycol sold by firms including Dow Chemical (DOW), Ineos and BASF (BAS GY) among others.

And in an ominous warning that more is coming, China said that while its door to the US remains open for negotiations, if the US wants to keep fighting, China will hold onto the last, according to the Chinese Vice Commerce Minister.

The result was a freefall in both S&P futures, which were down nearly 50 points from Tuesday’s close…

… but also in the Dow Jones, which plunged as much as 600 points…

… and, of course, Emerging Markets, with the MSCI EM stock index heading for its lowest close in two months with EM currencies a sea of red across the board.

And speaking of sea of red, this is what global cash markets and futures look like right now.

…click on the above link to read the rest of the article…

MARKET MELTDOWN CONTINUES: Gold & Silver Prices Begin To Disconnect

April 3, 2018

MARKET MELTDOWN CONTINUES: Gold & Silver Prices Begin To Disconnect

As the BLOOD continues to run on Wall Street, gold and silver were the few assets trading in the green today. As I have mentioned in past articles and interviews, investors need to get used to this sort of trading activity. Even though the Dow Jones Index ended off its lows of the day, it shed another 458 points while the Nasdaq declined 190 points and the S&P fell 60.

As the broader markets sold off, the gold price increased $15 while silver jumped by $0.25. However, if we look at these markets during their peak of trading, the contrast is even more remarkable:

At the lows of the day, the Dow Jones Index fell 730 points or 3%, while the S&P 500 fell 3.2% and the Nasdaq declined by 3.8%. Also, as I expected, the oil price fell along with the broader markets by dropping 2.7%. If individuals believe the oil price will continue towards $100, due to supply and demand fundamentals put forth by some energy analysts, you may want to consider one of the largest Commercial Net Short positions in history. Currently, the Commercial Net Short position is 738,000 contacts. When the oil price was trading at a low of $30 at the beginning of 2016, the Commercial Net Short position was only 180,000 contracts.

Furthermore, if we agree that supply and demand forces are impacting the oil price to a certain degree, does anyone truly believe oil demand won’t fall when the stock market drops by 50+%??? I forecast that as market meltdown continues, the oil price will decline as oil demand falls faster than supply.

Now, when the markets were at their lows today, gold at its peak was up $20 while silver increased by $0.44. Of course, this type of trading activity won’t happen all the time, and we could see a selloff in all assets some days.

…click on the above link to read the rest of the article…

The Stock Market Falls Another 724 Points! What In The World Is Happening On Wall Street?

March 23, 2018

The Stock Market Falls Another 724 Points! What In The World Is Happening On Wall Street?

We just witnessed the 5th largest single day stock market crash in U.S. history. On Thursday the Dow Jones Industrial Average plunged 724 points, and many believe that this is just the beginning of another huge wave down for stock prices. After this latest dramatic decline, the Dow is now down 3.1 percent so far in 2018, and overall it is down 9.99 percent from the all-time high in January. A 10 percent decline is officially considered to be “correction” territory, and that means that we are just about there.

So why are stock prices falling so much? Well, USA Today is blaming the potential for a trade war with China, the latest Facebook scandal and “the impact of rising interest rates on the economy”…

U.S. stocks sold off sharply Thursday, with the Dow tumbling more than 700 points amid growing fears of a trade fight between the U.S. and its trading partners after President Trump said he will impose billions of dollars in tariffs on Chinese imports.

The heavy selling on Wall Street was exacerbated by continued weakness in shares of Facebook as well as concerns about the impact of rising interest rates on the economy.

Of course the possibility of a trade war between the two largest economies on the planet is certainly the greatest concern that the markets are grappling with at the moment. According to Ian Winer, any sign of retaliation by China “will really spook people”…

“A global trade war, whether it’s real or perceived, is what’s weighing on the market,” said Ian Winer, head of equities at Wedbush Securities. “There’s this huge uncertainty now. If China decides to get tough on agriculture or anything else, that will really spook people.”

Trump announced tariffs on about $50 billion worth of Chinese imports on Thursday afternoon. It’s not clear which products will be hit, but the action is aimed at curbing China’s troubling theft of US intellectual property.

And we can be quite sure that China will retaliate.

…click on the above link to read the rest of the article…

The Dow Jones Industrial Average Falls Another 420 Points As Investors Panic About A Potential Trade War

March 2, 2018

The Dow Jones Industrial Average Falls Another 420 Points As Investors Panic About A Potential Trade War

Many had been hoping that the financial shaking on Wall Street that we witnessed in February would subside in March, but so far that is definitely not the case. On Thursday, the Dow fell another 420 points as investors fretted about the potential for a trade war. Over the past month, we have seen many days when stock prices have been way down and other days when stock prices have been way up. This is precisely the sort of wild volatility that we would expect to see if a major financial crisis was brewing, and the truth is that our financial system is far more vulnerable today than it was back in 2008.

Many Americans have assumed that the U.S. economy must be in great shape since the stock market has just kept going up for the past several years. But the reality of the matter is that stock prices are no longer connected to economic reality whatsoever. The U.S. economy has not grown by 3 percent or more in 12 years, but stock prices have been shooting into the stratosphere thanks to relentless central bank intervention.

But what goes up must eventually come down, and on Thursday we witnessed another stunning decline…

The Dow Jones industrial average closed 420.22 points lower at 24,608.98 after rising more than 150 points earlier in the day. The 30-stock index fell as much as 586 points.

The S&P 500 declined 1.4 percent to end at 2,677.67 — erasing its year-to-date gains — with industrials as the worst-performing sector. It also briefly broke below its 100-day moving average, a key technical level. The Nasdaq composite fell 1.3 percent to 7,180.56 and dipped below its 50-day moving average.

So why did this happen?

Well, the mainstream media is placing the blame for Thursday’s decline on Trump’s new tariffs…

…click on the above link to read the rest of the article…

“Bloodbath” – Dow Crashes Over 1000 Points, Enters Correction

February 8, 2018

“Bloodbath” – Dow Crashes Over 1000 Points, Enters Correction

Dow crashed over 1000 points today….

All 2018 gains are gone…

Time for “Markets In Turmoil” special…

Markets “turmoiled” again today as Treasury yields spiked on a weak auction and the implications of a budget deal that means more supply is coming. This spooked stocks once again and XIV, the Inverse ETF, tumbled at the open – after ramping stocks delusionally into the open. As stocks got monkey-hammered again, so bonds were bid and ended with a relatively small rise in rates as plunges in Risk-Parity funds likely prompted forced delevering in stocks and bonds. Perhaps most notably, credit spreads started to snap wider and rate volatility spiked as equity market contagion spreads.

Investors have swung from “extreme greed” to extreme fear” in a record few days…

…click on the above link to read the rest of the article…

Steve Keen: “Why Did It Take So Long For This Crash To Happen?”

February 7, 2018

Steve Keen: “Why Did It Take So Long For This Crash To Happen?”

As originally written at RT, outspoken Aussie economist Steve Keen points out that everyone who’s asking “why did the stock market crash Monday?” is asking the wrong question; the real question, Keen exclaims, is “why did it take so long for this crash to happen?”

The crash itself was significant – Donald Trump’s favorite index, the Dow Jones Industrial (DJIA) fell 4.6 percent in one day. This is about four times the standard range of the index – and so according to conventional economics, it should almost never happen.

Of course, mainstream economists are wildly wrong about this, as they have been about almost everything else for some time now. In fact, a four percent fall in the market is unusual, but far from rare: there are well over 100 days in the last century that the Dow Jones tumbled by this much.

Crashes this big tend to happen when the market is massively overvalued, and on that front this crash is no different.

It’s like a long-overdue earthquake. Though everyone from Donald Trump down (or should that be “up”?) had regarded Monday’s level and the previous day’s tranquillity as normal, these were in fact the truly unprecedented events. In particular, the ratio of stock prices to corporate earnings is almost higher than it has ever been.

More To Come?

There is only one time that it’s been higher: during the DotCom Bubble, when Robert Shiller’s “cyclically adjusted price to earnings” ratio hit the all-time record of 44 to one. That means that the average price of a share on the S&P500 was 44 times the average earnings per share over the previous 10 years (Shiller uses this long time-lag to minimize the effect of Ponzi Scheme firms like Enron).

…click on the above link to read the rest of the article…

-1,175 Points! We Just Witnessed The Largest One Day Stock Market Crash Ever

February 6, 2018

-1,175 Points! We Just Witnessed The Largest One Day Stock Market Crash Ever

The mainstream media seems so surprised that the stock market is crashing, but the truth is that it isn’t a surprise at all. In fact, this crash is way, way overdue. If the Dow Jones industrial average fell another 10,000 points, stock prices would still be overvalued. I have been warning and warning and warning that this would happen, because stock valuations always return to their long-term averages eventually. On Monday, the Dow was down a staggering 1,175 points, which was the largest single day decline that we have ever seen by a very wide margin. In fact, it shattered the old record by nearly 400 points.

Shortly after 3 PM, all hell broke loose on Wall Street. The Dow dropped by more than 800 points in just 10 minutes. At one point on Monday, the Dow was down nearly 1,600 points, but a brief rally cut those losses roughly in half. However, the rally did not last long and stock prices collapsed hard as the market closed. At this moment, the Dow is already down more than 2,200 points from the peak of the market, and we are not too far from officially entering “correction” territory.

Once stocks start falling, it can trigger a massive rush for the exits, and that is what happened on Monday. In particular, investors started to panic once the Dow broke through the 50-day moving average…

“As soon as we broke the 50-day moving average … we saw volatility spike,” said Jeff Kilburg, CEO of KKM Financial. “It’s just been downhill from there.”

Other waves of selling were triggered once the 25,000 and 24,000 barriers on the Dow were breached. In order to protect against losing too much money, many investors have stop losses set at psychologically-important levels. The following comes from MarketWatch…

…click on the above link to read the rest of the article…

-666 Points: We Just Witnessed The 6th Largest Single Day Stock Market Decline In U.S. History

February 5, 2018

-666 Points: We Just Witnessed The 6th Largest Single Day Stock Market Decline In U.S. History

On Friday, the Dow Jones Industrial Average fell 666 points (665.75 points to be precise), and many are pointing out that this was the 6th largest single day crash that we have ever seen. This decline happened on the 33rd day of the year, and it was the worst day for the stock market by far since President Trump entered the White House. I have been repeatedly warning that we are way overdue for a stock market crash, and many are concerned that we may be on the precipice of another great financial crisis. We shall see what happens on Monday, because that will set the tone for the rest of the week. If we see another huge decline early Monday morning, that could easily set off full-blown panic selling on Wall Street.

Rising interest rates appear to have been the trigger for the enormous market drop on Friday. The following comes from the New York Post…

“We all know that many bull markets have ended by the Federal Reserve as they raise the rates to the point of slowing the economy down perhaps too much,” Quincy Krosby, chief market strategist at Prudential Financial, told The Post.

“It’s come on quickly and it caught the market off guard,”Krosby said.

The Dow sell-off brought it below the 26,000 plateau — to 25,520.96 — the biggest points drop since Dec. 1, 2008.

It is quite rare for the market to drop this much in a single day. The largest single daily decline was a 777 point drop in 2008, and overall the Dow has fallen by more than 600 points less than 10 times throughout history…

The index posted a loss of nearly 666 points, its sixth-worst decline ever on a points basis.

…click on the above link to read the rest of the article…

A Fly in the Economic Ointment?

January 25, 2018

A Fly in the Economic Ointment?

Global Growth Cap
Repeating History
Flying Blind at 20X
China Chills
Sonoma and San Diego

The holidays are fading from memory, and 2018 is off to a good start, economically speaking. Most of the forecasts I’ve read expect a good year – not a blockbuster year or a horrendous one, but a mild pickup that ought to satisfy investors. Even the bears seem less confident than usual.

The stock market is off to a rip-roaring start. For the first time ever, the Dow Jones Industrial Average has spent an entire quarter above its upper Bollinger band. That is, it’s more than two standard deviations above its 21-day moving average. You can click on the link for more detail. This might be a little technical for some of you, but it does demonstrate that there’s a great deal of exuberance in the market.

Tony Sagami

Further, Howard Silverblatt at S&P just came out with his forecasted earnings for 2018 (hat tip Ed Easterling for sending this to me). He revised 2017 earnings down by a few dollars to $110 as S&P analysts realized that companies are going to have to take write-downs for their deferred tax losses. But oh my is Howard positive about 2018. Look at this table straight from the S&P site. Focus on the reported earnings highlighted in yellow. Howard is expecting earnings to grow from $110 to $138 in 2018. That $28 jump in earnings represents about 25% earnings growth. If it actually materializes, the S&P 500 is going to be on a royal tear upwards.

Standard & Poors

The contrarian part of me wants to scream, “Aha! No one expects catastrophe, so that’s exactly what we’ll get.” While I don’t completely rule out anything, I’ve lived through several recessions and bear markets. This just doesn’t feel like another one.

…click on the above link to read the rest of the article…

WARNING: Markets Reaching Extreme Leverage

January 20, 2018

WARNING: Markets Reaching Extreme Leverage

As investors’ bullish sentiment moves up to euphoric levels, the markets are reaching extreme leverage. This is terrible news because a lot of people are going to lose one heck of a lot of money. According to CNN Money’s Fear & Greed Index, the market is now at the “extreme greed” level and if we go by Yardeni Research on “Investor Intelligence Bull-Bear Ratio,” it’s also is the highest ratio in 30 years.

But, of course… this time is different. I continue to receive emails and comments on my blog that the Fed will continue to prop up the markets. Unfortunately, there is only so much the Fed can do to rig the markets. Furthermore, the Fed can’t do much to mitigate investor insanity in record NYSE margin debt or the massive $2 trillion in the global short volatility trade.

The record NYSE margin debt suggests traders have racked up a record amount of margin debt (33% more since 2007) and the largest short volatility trade in history. By shorting volatility, investors are betting that it will continue to move lower. A falling volatility index suggests more calm and complacency in the markets.

So, the market will likely continue higher and higher, until it finally POPS. And when it does, watch out.

I’ve put together some charts showing the extreme amount of leverage in the markets. While this leverage may increase for a while, at some point the insanity will end in one hell of a market correction-crash.

The Commercial Banks Are Betting On Much Lower Oil Prices

As I mentioned in previous articles and my Youtube video, Coming Big Oil Price Drop & Market Crash, the Commercial banks have the highest net short positions in the oil market in over 20 years. In the video, I explained how the Commercial net short position in oil increased from 648,000 to 678,000 contracts in just one week.

…click on the above link to read the rest of the article…

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