OVERVIEW: Take away… Some nice gains 4 of 5 days this week with new highs on the COMP, R2K (marginally intraday) SPX, Transports, Gold, and Silver -- but in one fell swoop all of the weeks the gains were taken away. Friday’s sell off was of the broad variety and it came at the expense of a stronger than anticipated jobs report which in turn lent itself to a strengthening U$D and Treasury Yields. I still get a kick out of the talking heads who continue to 2nd guess what the Fed’s next move will be every time a piece of data comes across the wires. On another note, if we were to take a look at the program trade status we would see that the retail investor (or trader as it were) are at the mercy of the institutions. For a snapshot of what I am talking about go to #msg-10591111 and what you will see is the 8-wks average for NYSE Program Trade at 60.6%. Think about that for a minute, 60%+ of all NYSE trade over the last couple months has been instituted by robot traders. While all we are really talking about are clustered PC networks programmed with various algorithms, I like to call them robots (it sounds so futuristic 8^). A scary and all too real feature of the markets though and what makes this scenario even more contentious is a Fed who directly supports the propping of markets it is simultaneously trying to quell. Think about it, liquidity pump (prop markets) and rising rates (slow growth), could we have anything more counterintuitive? And at what point do the institutions cash in their chips? Only the robots know for sure… So to round out the week; COMP 2339, R2k 756, SPX 1295, DJIA 11120, Trans 4690, Oil 67.4, Gold 589, Silver 12, CRB 337, U$D 89.5 and TYX breaks the 5% yield barrier. Treasury yields continue to climb across the board as the yield curve has once again flattened out. The 2yrs@4.88%, 5yrs@4.90%, 10yrs@4.97%, 20yrs@5.20% and 30yrs@5.05%. The Yield Curve can be viewed at #msg-10468331 …
The CoT data shows open interest has taken a dip on the SPX, flat on the DJIA and in an up-trend on the NDX. Commercial Shorts have continued to lighten up on the NDX, remained steady on the DJIA and have picked up on the SPX. Gold open interest has climbed as well as Commercial Shorts, but Commercial Shorts and Large Spec Longs remain in a stand off. Oil open interest is heading up strong with a small Commercial Short position being established. You can go here to view the CoT data graphs #msg-9171642 -- As detailed by AMG Data Services, excluding ETF activity Equity funds reported net cash inflows totaling $1.206B in the week ended April 5 with 92% ($1.107B) going to funds investing in Non-domestic securities. Excluding ETF activity, International Equity funds reported net cash inflows of $842M to all Developed and Emerging regions except Latin America (-$2M). The largest Equity ETF inflows were $474M to the iShares MSCI EAFE Index fund and $451M to the SPDR Trust Series 1 fund. The largest Equity ETF outflows were -$434M from the iShares DJ US Real Estate Index fund and -$270M from the MidCap SPDR fund. Money Market funds reported net cash inflows totaling $2.514 B. The full report can be viewed at #msg-10591070
ECONOMIC #’s:
Auto/Truck Sales – Mar = Uptick at DCX, more sales declines at GM, F #msg-10498655
ISM Index – Mar = 55.2 vs 56.7 w/expectations of 57.7 #msg-10498780
ISM Services – Mar = 60.5 vs 60.1 w/expectations of 59.0 #msg-10541871
Construction Spending – Feb = 0.8% vs 0.4% w/expectations of 0.5% #msg-10498729
MBA Mortgage Applications for 3/31 increased 7.2% with applications for mortgages to buy homes jumped 8.4%and refinancing applications were up 5.3% #msg-10542051
Oil Inventories – 3/31 as reported by the DoE and API Crude = DoE +2.1M bbls / API +4.2M bbls Gas = DoE -4.4M bbls / API +439K bbls Dist = DoE -2.6M bbls / API -1.7M bbls #msg-10542005
Initial Jobless Claims – 4/1 = 299K vs 304K w/expectations of 305K #msg-10558239
Hourly Earnings – Mar = 38 vs 38 w/expectations of 38 Average Workweek – Mar = 0.2% vs 0.4% w/expectations of 0.3% Nonfarm Payrolls – Mar = 211K vs 225K w/expectations of 190K Unemployment Rate – Mar = 4.7% vs 4.8% w/expectations of 4.8% #msg-10574905
Wholesale Inventories – Feb = 0.8% vs 0.2% w/expectations of 0.5% #msg-10579459
Consumer Credit – Feb = $3.3B vs $3.9B w/expectations of $3.0B #msg-10590965
Challenger, Gray & Christmas – Job cuts fell 25% compared with March of 2005 #msg-10558484
Retail Sales – Retailers See Tepid Sales for the month of March US chain store sales fall in last week of March– ICSC/UBS and Johnson Redbook #msg-10558134
It was a bad week for the powers that be... This week alone we saw Tom DeLay resign under indictment, a Homeland Security official arrested for allegedly being a pedophile, John Snow resignation/replacement rumors circulating, the Immigration Bill collapses on Capitol Hill and the President himself authorized the leak of classified information about a CIA operative during a time of war. If that weren’t enough - the President, Vice President and Congresses job ratings all fall to there lowest levels to date. We now have a Congress in disarray, Republicans fighting amongst themselves and trying to desperately distance themselves from the President in an attempt to save their own hide before the upcoming midterm elections. It is really a sight to see when rats scatter. I think it is safe to say this administration is currently in self-destruct mode. When you make it a habit to lie, cheat and deceive it is only a matter of time before the truth comes out, this was bound to happen sooner or later.
Does it feel like 1999-2000 to you? It sure does to me, at least with respect to the markets. I see many red flags that remind me of that era and as with this administration, sooner or later self destruct mode will kick in, it is inevitable… Here are some of the reminiscent tell tale signs;
1) Indices hitting new highs 2) Bubbles, bubbles and more bubbles 3) Extremely high bullish sentiment 4) Bad news being completely ignored 5) M&A activity at all time highs 6) Exchanges going public (IPO) 7) Talk of moving to 24-hrs stock trading 8) Volume at all time highs 9) Humongous program trading 10) Massive liquidity inflows 11) Junk and OTC:BB stocks being bid up 12) Canary stocks being abandoned 13) Utilities in decline (breaking below 200MA) 14) Market trading infomercials everywhere 15) Rising interest rates 16) Stock picking contests are the rage 17) Media personalities influence market moves 18) Growth beginning to slow 19) Companies pushing for less transparency 20) Mutual Funds nearly all in
While we are all aware of the many imbalances facing the nation, a couple of things to keep an eye on going forward will be retail sales which has been slowing and lending or credit practices. These will give us a view into the spending psyche of average American’s, which at this point in time looks as if they are beginning to wane. Once the purse strings tighten it’s game over…
Keep Your Eye On The Bouncing Ball …
WHAT CAN WE EXPECT NOW?: Technicals are skewed, fundamentals are out the window, so what can we expect? I just assume take a wait and see attitude, but markets can remain irrational for an awfully long time especially within the confines of the framework we are working with. I think we can still go higher from here, but not so much for the following week. A lot has been accomplished by getting Tech involved, but it would not surprise me to see the markets take a break. So we are most likely going to see a pull back to flat-gyration week ahead across the majority of indices. I still feel as though last weeks update expresses my sentiment best: I wish I could be more specific in my outlook, but things are so out of whack that I do not want to give any overly definitive views. What I believe we will see is some intensely volatile times ahead, a lot of index rotation and stock/sector du’ jour activity. As mentioned many times over the last month or so we have so many divergences which appear to be spurned on by an overly liquefied Fed who in my opinion will continue to run the printing presses at full tilt boogie come hell or high water. Until such a time is reached that the Fed seems to change its attitude toward the speed bumps ahead, my feeling as outlined in the overview is that the Fed is on a mission. Obviously I do not have a crystal ball and the Fed could change course, but I will be approaching the markets and basing my trades and investments upon the current Fed attitude, geo-political risks and remain under the premise that the downside risk far outweighs the upside rewards with the caveat being the bottom could fall out of this thing at any time. It could be days, weeks, months, who knows? But I am gong to stay very cautious and if I trade it will be with extreme caution. Too many indicators are skewed and cannot be depended on to give a clear image of what is taking place within the markets due to the incredible amounts of artificial stimulus being used to prop ALL markets; financial, equity and otherwise. Also of note is a Bradley Turn on the 11th, which may or may not be of significance. As for the U$D, Gold and Oil, I do not expect to see any big moves in either direction although as you know world events could take precedence and shift these markets one way or another. With Treasury yields hitting the 5% plateau, we need to see how this is going to be digested by the markets going forward, but I see this favorable for Commodities. Oil stands the best chance of breaking out, although this appears to be a given with $70bbl in the crosshairs. Gold may consolidate a bit in here before taking $600 decisively and the U$D seems content on oscillating between mid 88 to mid 90’s.
Technically Speaking AAII sentiment as of 4/5 shows 47.67% Bullish, 23.26% Bearish and 29.07% Neutral… The VIX and VXN are 12 & 16 respectively with both indicators exhibiting an up-trend. The CBOE EPC Ratio ended the week at .58 and TPC ratio at .91. The RSI 5-Days are Neutral across the board on SPX, DJIA, R2k and COMP. The P/C ratios, VIX/VXN, Summation, McClellan, Highs/Lows, Advance/Decline, 200DMA stocks and Bullish %'s can all be viewed below along with the major indices…
Eyeballing an entry in the €uro to hold for the rest of the year…
Disclaimer: This disclosure is not a recommendation to buy, sell or do as I do. It is only to give my thoughts on current market conditions and attempt to identify trends and create a track record. I am not a day trader and invest mostly in funds or baskets of stocks, perform occasional swing trades and some scalps. Data presented may not be 100% accurate as I do make mistakes, so please perform your own due diligence.
Market Data 
Markets 
AI
