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This Friday is going to be a session for active short-term traders, and it will likely be unpleasant for investors.

Something broke in markets on Thursday. There are a few things that worry me about the latest bout of risk aversion. This is in context that I’ve been an unrelenting stocks bull since the December Fed meeting…

But now I’m uneasy…

The Thursday selloff confused people.

Initially, many blamed the comments from Fed’s Kashkari about there potentially being no US rate cuts this year.

However, a quick look at a few charts shows that (a) yields fell rather than climbed, so his hawkish lines did not impact, and (b) equities started selling off before his headlines.

It’s never a good sign when people struggle to identify why stocks have a relatively large swoon.

If an asset is weak without an obvious catalyst, it suggests that it can really get destroyed if a genuine risk materializes.

For good order, the weakness in E-minis coincided with the oil price rise that in turn followed the Netanyahu headlines.

We have key US data this morning at a time of vulnerability for the market in terms of the Fed narrative.

We’ve run a long way on the idea of the Fed being dovish despite a strong US economy.

We’re getting closer to the point where we must acknowledge that either the Fed won’t be easing soon, OR the economy is in more trouble than we thought.

It means that we’re in the unusual-in-recent-times setup where a big surprise in either direction could hurt stocks today.

(For clarity and consistency, I would only see this as a multi-week consolidation/retrenchment and not some long-term bearish turning point).

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

Oil Surges Over $90, Stocks Tumble After Israel Puts Embassies Around World On Maximum Alert

April 4, 2024

Oil Surges Over $90, Stocks Tumble After Israel Puts Embassies Around World On Maximum Alert

At this point Israel’s ties with key Gulf countries like the UAE are near breaking point, after only a few short years ago diplomatic normalization was hailed through Trump’s Abraham accords. But international and Israeli press reports are confirming the UAE has announced it is halting all coordination on humanitarian aid with Israel.

Further, as Israeli media reports: “The United Arab Emirates (UAE) has announced a suspension of diplomatic coordination with Israel in the wake of the death of seven World Central Kitchen humanitarian workers in Gaza.” Simultaneously, Israel is busy putting its embassies across the world on high security alert due to the “heightened Iranian response threat” in wake of Monday’s Israeli attack on the Iranian embassy in Damascus. All of this served to send Brent soaring in the last two hours, with Brent spiking above $90 for the first time since October….

… and sending stocks tumbling to session lows.

With Iran vowing that its retaliation is coming at any moment, Israel’s military is scrambling for readiness, with the latest measure being to pause all home leave for all combat troops.

“The IDF is at war and the issue of the deployment of forces is constantly reviewed as needed,” the Israeli military said.

President Biden is meanwhile is said to be “pissed” with PM Netanyahu over the killing of seven World Central Kitchen aid workers in Gaza, though Israel acknowledged that it was a “grave mistake”.

So far this sounds like more mere empty words of “concern” – a talking point that’s been on repeat from the White House even as its Gaza policy continues slowly fracturing the Democratic base – but Biden is said to have pressed Bibi for “an immediate ceasefire”.

The call readout further said ceasefire is needed to “protect innocent civilians” in Gaza and improve the humanitarian situation. Axios writes that Biden gave his Israeli counterpart an “ultimatum” as the US president “emphasized that the strikes on humanitarian workers and the overall humanitarian situation are unacceptable.”

Insanity: Celebrating Rate Cuts At A Shiller PE Of 31x

December 3, 2023

Insanity: Celebrating Rate Cuts At A Shiller PE Of 31x

Last week ended the way all weeks have been ending: with the stock market raging higher based on future expectations of rate cuts that (1) have not happened yet (2) probably won’t happen until next year, unless a market crash happens first and (3) won’t make their way through the economy for another 18 to 24 months.

But nonetheless, the S&P is looking to finish the year nearing astronomical 20% gains, something that I would have thought to have been impossible with rates raging higher over the last 2 years. But, then again, remember as I wrote in September — rate cuts are usually the signal for the market to crash — not rate hikes: Fed Rate Cuts Should Scare The Shit Out Of You

Is that something I wish I had understood better heading into the last few years? Absolutely. Have I taken an ass whooping betting on volatility and being mostly net short? Absolutely. Does that mean I’m going to be deadass wrong again in 2024?

Not necessarily.

After all, look at gold. As I’ve noted, gold is one of the very few names I’d consider ever being “all in”. And, as I have written about extensively, I find the setup for the precious metal heading into 2024 to be outstanding. I’ve been harping on this since the inception of this blog and it took until this week for gold to hit new all time highs: The Fed Can’t, And Won’t, Nail The Dismount

So let’s just hope it isn’t my analysis that’s wrong, but rather, just my timing.

Anyway I took the time this week to offer up my updated thoughts on Elon Musk and Tesla, after both Musk’s outburst at the DealBook conference and Tesla’s Cybertruck reveal. I explain my thoughts and continued stance on Tesla here: Elon Musk And Dark Forces

…click on the above link to read the rest…

Global Stocks, Futures Crash; Nasdaq In Bear Market, Oil Soars Above $105 On Russia Attack

February 24, 2022

Global Stocks, Futures Crash; Nasdaq In Bear Market, Oil Soars Above $105 On Russia Attack

U.S. stock index futures crashed along with global markets on Thursday as Russia’s assault on Ukraine sent investors fleeing risky assets, while the tech-heavy Nasdaq was set to open in a bear market. Contracts on the Nasdaq 100 were down 2.9% by 7 a.m. in New York, having dropped as much as 3.6% earlier and signaling that the underlying gauge was poised to fall 20% from its November record high for the first time since the pandemic; the S&P 500 was down 2.23% or 98 points to, 4,214, while Dow futures lost 2.3%. The flight to safety saw the 10-year Treasury yield tumble 14 basis points to under 1.9%. Gold hit the highest since September 2020, while the dollar also spiked higher.

The Nasdaq was set to open in a bear market, with NQ futures down more than 20% from its all time highs just two months ago…

… while the VIX spiked higher, and was last just around 37, up almost 10 points on the day.

Russian forces assaulted targets across Ukraine after Putin ordered an operation aimed at demilitarizing the country. Putin said Russia doesn’t plan to “occupy” its neighbor but that action was necessary after the U.S. and its allies crossed Russia’s “red line” by expanding the NATO alliance. Military vehicles breached into the Kyiv region that borders Belarus, Ukraine’s Border Guard Service said in a statement.

Western powers condemned the military incursion and vowed to step up penalties on Russia — President Joe Biden said the U.S. and its allies will impose “severe sanctions.” European leaders are planning sanctions that will target Russian banks. The government in Kyiv called it a “full-scale invasion” as it declared martial law and called for international support including harsher sanctions on Russia.

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

The Mayhem Below the Surface of the Stock Market Seeps to the Surface: Now it’s the Giants that Topple

January 24, 2022

The Mayhem Below the Surface of the Stock Market Seeps to the Surface: Now it’s the Giants that Topple

The market finally gets it: The Fed is going to tighten to get a handle on its massive inflation problem.

Since February last year, the hottest most hyped stocks, many of them recent IPOs and SPACS, have been taken out the back and brutalized, either one by one or jointly. The stocks that have by now crashed 60%, 70%, 80%, or even 90% from their highs include luminaries such as Zoom, Redfin, Zillow, Compass, Virgin Galactic, Palantir, Moderna, BioNTech, Peloton, Carvana, Vroom, Chewy, the EV SPAC & IPO gaggle Lordstown Motors, Nikola, Lucid, and Rivian, plus dozens of others. Some of these superheroes are tracked by the ARK Innovation Fund, which has crashed by 55% from its high last February.

This mayhem has been raging beneath the surface of the market since February last year, and in March, I mused, The Most Hyped Corners of the Stock Market Come Unglued. They have since then come unglued a whole lot more. But the surface itself remained relatively calm and the S&P 500 Index set a new high on January 3 this year because the biggest stocks kept gaining or at least didn’t lose their footing.

But now even the giants too are going over the cliff. Combined by market cap, the seven giants, Apple [AAPL], Amazon [AMZN], Meta [FB], Alphabet [GOOG], Microsoft [MSFT], Nvidia [NVDA], and Tesla [TSLA] peaked on January 3, and in the 13 trading days since then have plunged 13.4%. $1.6 trillion in paper wealth vanished (stock data via YCharts):

This is obviously still no big deal, a 13.4% decline, after this huge gigantic run-up. During the March 2020 crash, these giants plunged 28%. But it’s the first time since then that this unappetizing event has occurred.

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

Unstoppable Oil Could Be Nail In Coffin For Stocks

July 2, 2021

Unstoppable Oil Could Be Nail In Coffin For Stocks

Stock investors worried about inflation should pay close attention to the rising price of oil. It could be the final kick needed to derail the consumer-spending spree behind the U.S.’s surging growth. From groceries to housing materials to gasoline, life is getting expensive for the average American, even those lucky enough to hold on to their jobs through the pandemic.

Take food. In the last six months alone, the Bloomberg Agriculture Subindex has risen 20% — a margin not seen since 2010-2012. That was when the world’s supplies were roiled by a series of global weather events, including a severe U.S. drought and a massive Russian fire that destroyed some of the nation’s grain crop. Countries where bread is a staple, like Egypt and Tunisia, were hit badly. Geopolitical analysts say it helped set off the Arab Spring.

Not that anything so dramatic seems to be building up. But it’s worth realizing the real-world consequences of climbing raw material prices like we’re seeing right now.

Oil prices have returned to levels last seen in 2018 before the trade war with China began. In the first half of 2021, oil rose 45% on the heels of a gain of some 26% in the six months before. It’s now around $75 a barrel and strategists and trading houses are predicting it will hit $100. As much as it may help producers, it’s bad news for consumer-driven economies like the U.S.

That’s where it matters for stocks. Consumer spending is already moderating and the effects of the fiscal stimulus will likely roll off by September-end. Rising prices from groceries to gas will likely result in less spending and traveling. And that means less revenue — and likely earnings — for many segments of corporate America.

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

Rabobank: You Only See How Stable A System Really Is By Pushing It To Its Limits

February 12, 2021

Rabobank: You Only See How Stable A System Really Is By Pushing It To Its Limits

“Stonks” and “Burneds”

We are, it is now being widely decried, in the middle of a “stonk” bubble. The Financial Times(!) is carrying an article calling on the Federal Reserve to stop its easy money; and Bloomberg(!) has strategy advice that: “…your best bet has been to buy the biggest pile of steaming rubbish you can find on an income statement,” which overlaps with the pattern of behavior 18 months before the bursting of the 1999 tech bubble…before then concluding this is nonetheless the only thing fund managers can ‘rationally’ do.

Against that backdrop, regulators in D.C. are looking at the ‘Reddolution’ of earlier this month, where “stonks” of firms were being manipulated by the public to try to teach hedgefunds a lesson. They will no doubt harrumph on cue with all due seriousness –like those surrounding Governor Lepetomane in ‘Blazing Saddles’– without asking awkward questions about the roots of our stonking great problem that end up being redirected towards the Fed. This only underlines that they are far behind whatever remains of a curve.

There is recognition even in financial media that central banks are institutional “stonk”-bubble blowers. There is matching recognition that the solution for reflation lies with fiscal, not monetary policy (though many of the recent converts to this view apparently couldn’t see it as true until it was already happening – “Harrumph for the governor!”). Yes, we *are* likely to see a *major* short-term fiscal boost –in the US alone– with suggestions the White House’s stimulus package could be worth many thousands of dollars for the average US family – for a year. Then the old crunch comes back again unless US labor has magically gained power over global capital. How, exactly?

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

Stocks are falling after a fresh set of horrible data out of China reignited worries about the global economy

January 14, 2019

Stocks are falling after a fresh set of horrible data out of China reignited worries about the global economy

china shanghai stock exchange — Another day, another weak set of Chinese data.

A fresh set of troublingly poor data out of China has investors running for cover on Monday, with all major stock indexes around the world losing ground on the week’s first trading day.
Trade data showed that the value of Chinese imports and exports fell heavily in the year to December.
The news has pushed stocks around the world lower, with futures pointing to losses of as much as 0.9% for the Nasdaq when US markets open later Monday.
European and Asian shares have also dropped, with the market further hindered by thin liquidity in Asia as Japanese traders enjoy a public holiday.
Follow the latest stock moves at Markets Insider.

A fresh set of troublingly poor data out of China has investors running for cover on Monday, with all major stock indexes around the world losing ground on the week’s first trading day.

The value of Chinese imports and exports fell heavily in the year to December, adding to a lengthening list of evidence that all is not well in the world’s second largest economy.

According to China’s General Administration of Customs, the value of exports tumbled 7.6% from a year earlier in US dollar terms, coming in well below the median economist forecast offered to Reuters for an increase of 5%.

The year-on-year drop in imports and exports was the largest since the second half of 2016.

“Weaker than expected trade figures are immediately weighing on commodity and equity markets and associated currency baskets,” Stephen Innes, head of trading in the Asia Pacific region for OANDA said in an email. “Sorry, no frontloading in this data to hang one’s hat on!”

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

Plunge Protection Myths = Keynesian Economic Myths

January 5, 2019

Plunge Protection Myths = Keynesian Economic Myths

QUESTION: What about what China did by buying stocks a few years ago to stop the hang sang from dropping

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ANSWER: Do not confuse attempts to support a market from actually being able to do so. This is the same as Keynesian economics that government could prevent recessions. Larry Summers admitted the government cannot even forecast such events. Not only during the Great Depression did companies jump in to buy their shares during the crash to try to prevent the decline. Most of the companies that took that action actually failed for they bought the stock back trying to hold the price and lost needed cash reserves. They could not sell stock again nor could the borrow.

During the collapse of the Nikkei after 1989, companies held believing that the government would support the market. When they realized the government could not then the government encouraged us to bail out the Japanese corporations. We helped well over 300 public companies issuing a note to buy their portfolios at their cost with 10-year payouts and each note had to be approved by the Japanese government individually. If the governments were able to actually prevent declines, then they would. But nobody can do that for the size of the public at large far outweighs any institution, group of institutions, or banks.

People would rather believe in conspiracy theories than simply look at the reality. Attempts to manipulate markets ALWAYS fail because the majority is far greater than any minority. The trend is made by the MAJORITY. A panic sell-off like the Crash of 1987 took place BECAUSE there was not bid – not that there was a massive short position. Scare the MAJORITY and they then try to sell, you find no bid and that is how a flash crash unfolds. This is why outlawing short positions is destructive for the only person with the courage to try to catch a falling knife is the one who is taking profit – not initiating a long position.

Stock-Market Margin Debt Plunges Most Since Lehman Moment

November 22, 2018

Stock-Market Margin Debt Plunges Most Since Lehman Moment

It gets serious. Margin calls?

No one knows what the total leverage in the stock market is. But we know it’s huge and has surged in past years, based on the limited data we have, and from reports by various brokers about their “securities-based loans” (SBLs), and from individual fiascos when, for example, a $1.6 billion SBL to just one guy blows up. There are many ways to use leverage to fund stock holdings, including credit card loans, HELOCs, loans at the institutional level, loans by companies to its executives to buy the company’s shares, or the super-hot category of SBLs, where brokers lend to their clients. None of them are reported on an overall basis.

The only form of stock market leverage that is reported monthly is “margin debt” – the amount individual and institutional investors borrow from their brokers against their portfolios. Margin debt is subject to well-rehearsed margin calls. And apparently, they have kicked off.

In the ugliest stock-market October anyone can remember, margin debt plunged by $40.5 billion, FINRA (Financial Industry Regulatory Authority) reported this morning – the biggest plunge since November 2008, weeks after Lehman Brothers had filed for bankruptcy:

During the stock market boom since the Financial Crisis, this measure of margin debt has surged from high to high, reaching a peak in May 2018 of $669 billion, up 60% from the pre-Financial Crisis peak in July 2007, and up 117% since January 2012. Since the peak in May, margin debt has dropped by $62 billion (-9.2%). Note the $40.5-billion plunge in October:

In the two-decade scheme of things, the relationship between stock market surges and crashes and margin debt becomes obvious.

Back during the dot-com bubble, dot-com stocks, traded mostly on the Nasdaq, included what today are booming survivors like Amazon [AMZN], barely hangers-on like RealNetworks [RNWK], or goners like eToys.

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

Bank of America: Selling Will Continue, “Big Low” For Stocks Is Yet To Come

November 20, 2018

Bank of America: Selling Will Continue, “Big Low” For Stocks Is Yet To Come

Many economists and financial analysts have said that the economy isn’t doing as well as the talking heads on TV are proclaiming. And now, even the Bank of America says it’s time to prepare for an even lower stock market, as that hasn’t come yet.

The recent stock market slide may look bad, but it wasn’t bad enough to indicate that the damage has been completely done, according to Bank of America Merrill Lynch. That means it will only get worse as we have yet to hit “the big low.”

Even after a day when the Dow industrials lost 602 points and as the Nasdaq tech barometer remains in correction territory, indications of a bottom remain elusive, the bank said in its latest survey of professional investors. “We [Bank of America Merril Lynch] remain bearish, as investor positioning does not yet signal ‘The Big Low’ in asset markets,” Michael Hartnett, BofAML’s chief investment strategist, said in a statement.

The sharp decline that began in mid-October continues to chip away at the stock market and it’s causing some to put out warnings that we should be prepared for a crash. In such cases, Wall Street strategists look for signs that sellers are exhausted and the market has reached sufficiently low levels as to indicate a bottom. And the concerns are global.

According to NBC News, a net 44 percent of respondents see global growth decelerating over the next year, representing the worst outlook since November 2008. As part of that, a net 54 percent see China slowing down, which is the highest level of pessimism in two years. Global earnings growth expectations are at their lowest levels since June 2012.

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

Why I think the Ugly October in Stocks Is Just a Preamble

October 29, 2018

Why I think the Ugly October in Stocks Is Just a Preamble

Yet, the crybabies on Wall Street are already clamoring for the “Powell put.”

Let me just say right up front: The stock market did not “collapse.” It has experienced a sell-off that made some people’s ears ring, as sell-offs normally do, and October has been ugly so far, but it wasn’t a “collapse.”

This matters because the crybabies on Wall Street are already clamoring for the “Powell put.” But the folks at the Fed have been around, and they know what a routine sell-off looks like and what a crash looks like, and they’re glancing at these numbers, and they yawn. Because in the grander scheme of things, not much has happened yet. The next uptick lurks around the corner, powered by the dip buyers and massive corporate share-buybacks.

After the dotcom bubble, the Nasdaq plunged 78%. Wave after wave of dip buyers were rewarded with small goodies and then taken out the back and shot. Many companies disappeared entirely. That was an example of a collapse. That’s when the Fed got nervous.

Today there are only some segments that have gotten hit very hard, though it’s still no collapse, and we’ll get to a few of them.

The Dow was well-behaved. It fell about 3% for the entire week and is about flat year-to-date. Nothing special. The Dow is only 8.4% off its peak. And compared to a year ago, it’s still up 5.4%.

It’s not a crime for stocks to be flat year-to-date. Stocks might actually be down for the year, and they might be down for years. But people have forgotten, and younger people have never experienced it in their life, after a decade of blatant market manipulations by central banks that have created this centrally planned Everything Bubble that is now “gradually” deflating.

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

What’s the Real Meaning of the Stock Market Swoon?

October 29, 2018

What’s the Real Meaning of the Stock Market Swoon?

Nobody dares discuss it openly for fear of triggering a panic, but there aren’t enough lifeboats for everyone.

There’s no shortage of explanations on the whys and wherefores of the US stock market’s recent swoon / swan-dive / plummet. Here’s a few of the many credible explanations:

— the economy has reached peak earnings so there’s no fundamentals-driven upside left;

— bond yields are now high enough to dampen enthusiasm for inherently risky stocks;

— central banks curtailing / ending their quantitative easing programs have reduced liquidity in the financial system;

— US markets are catching up to the rest of the world’s market slump;

— the US market is overvalued by just about any measure;

— uncertainty about the mid-term election;

— corporations had to limit their stock buy-backs in the pre-earnings season blackout;

— smart money has been selling all year, and this finally overwhelmed dumb moneybuying the dips;

— low volatility begets high volatility;

— key technical supports were broken like toothpicks;

— the increasing probability that trade wars will actually start impacting corporate bottom lines;

— market punters peering into the future saw higher rates, and decided to dump stocks now rather than later;

— the market is discounting the coming recession;

— complicated currency / FX reserves dynamics, mostly involving China’s attempts to control its currency while propping up its domestic credit bubble and tightening the screws on capital flows.

Whew. Got all that?

My explanation is much more simple: the status quo is fragile, and everyone’s grip on the crumbling cliff-edge of “prosperity” is precarious–and we all sense it. The security we all took for granted is turning to sand as the system breaks down. Job security–you’re joking, right? Pension security–you take us for chumps? Sure, your bank account is guaranteed by the FDIC, but nobody’s guaranteeing your income, your purchasing power or the security of your grasp on the good life.

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

Global Bloodbath: World Stocks Puke Over $8 Trillion As US Markets Collapse

October 27, 2018

Global Bloodbath: World Stocks Puke Over $8 Trillion As US Markets Collapse

Aaaaaand, it’s gone!

Global capital markets are down five weeks in a row, losing just under $9 trillion – the biggest, fastest drop since Lehman… (around $8.2 trillion from global equity markets)

Chinese stocks managed to end the week green thanks to numerous National Team interventions…

European stocks ended the week red (down 4 of the last 5 weeks) to the lowest since Dec 2016… with DAX worst of all (worse than Italy)…

European banks were ugly led by Deutsche…

US Equity markets closed the week in the red for the year (but the rest of the world also continued to collapse)…

Buy the dip and sell the rip…all major US equity indices red on the week…

Another ugly open, immediate ramp fest and puke…

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

Chinese Verbal Intervention In The Market Fails As Stock Rout Accelerates

October 19, 2018

Chinese Verbal Intervention In The Market Fails As Stock Rout Accelerates

This morning, when we reported that the latest flood of margin calls, resulting from $600 billion in shares pledged as collateral for loans and representing a whopping 11% of China’s market cap, sent the Shanghai Composite tumbling 3% to the lowest level since November 2014, we noted that local government efforts to shore up confidence in smaller companies had, quite obviously, failed to boost sentiment… or stem the selling.

So, as many expected, just before Beijing announced the latest batch of stagflationary economic data including retail sales, industrial production and fixed asset investment, of which the most important was Q3 GDP which printed at 6.5%, the lowest level since Q1 2009, and missing consensus expectations even as inflation has continued to creep higher…

… the central bank delivered another round of massive verbal intervention, telling investors stocks are undervalued, the economy is sound, the central bank will use prudent, neutral monetary policy and keep reasonable, stable liquidity. Additionally, according to a Q&A statement with Governor Yi Gang posted on the PBOC website:

the PBOC will use monetary policy tools including MLF lending to support banks’ credit expansion
the PBOC to push forward bond financing by private cos.
the PBOC says recent stock market turmoil was caused by investors’ sentiment
the PBOC is studying measures to ease cos.’s financing difficulties
the PBOC to push forward bond financing by non-state firms; calls for private equity funds to support cos. with financing difficulties

In other words, the central bank’s “got this.”

And just to make sure the “all clear” message is heard loud and clear, also this morning the China Securities Regulatory Commission (CSRC) encouraged various funds backed by local government to help ease pressure on listed companies from share-pledge risks…

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

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