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Replies to post #144075 on SPDR S&P 500 (SPY)
07/28/15 5:42 PM
Nike climbs premarket after earnings
U.S. stock futures pointed to a third straight session of gains on Wednesday, with a raft of fresh economic data ahead that may provide some momentum as markets wind down the holiday-shortened week.
Futures for the Dow Jones Industrial Average rose 39 points, or 0.2%, to 17,396, while those for the S&P 500 index gained 2.60 points, or 0.1%, to 2,038.50. Futures for the Nasdaq 100 index added 10 points, or 0.2%, to 4,601.
The small gains come on the back of an upbeat session on Tuesday (www.marketwatch.com/story/us-stock-futures-drop-in-choppy-trade-ahead-of-gdp-data-2015-12-22), when investors largely brushed off weak economic data. Trading was choppy, however, with volumes light in the run-up to Christmas Day on Friday.
Economic data: There will be lots of economic readings for investors to assess on Wednesday. At 8:30 a.m. Eastern Time, personal income and consumer spending data for November come out, forecast to rise 0.2% and 0.3% respectively, according to economists polled by MarketWatch.
At the same time, a reading on core inflation in November is due, expected to tick higher to 0.1%. A report on durable-goods orders also comes at 8:30 a.m. Eastern, with orders forecast to have slipped 1.1% in November.
"Durable goods orders have been sluggish through much of the year, particularly when the extremely volatile aviation component is excluded, though this should hardly be a major surprise when one considers that close to 40% of orders in recent years have been related directly or indirectly to the energy and primary resource sector," said Marc Ostwald, strategist at ADM Investor Services, in a note.
At 10 a.m. Eastern, the consumer sentiment report for December is on tap. Forecasts are for an improvement to 92, up from 91.8 in the preliminary reading.
New home sales data for November are due at the same time. Existing home sales data out on Tuesday showed resales plunged 10.5% in November (http://www.marketwatch.com/story/19-month-low-for-home-resales-reflects-some-unusual-factors-2015-12-22) to the slowest pace in nearly two years.
Movers & shakers: Shares of Nike Inc. (NKE) rose 2.6% in premarket action after the sportswear retailer late Tuesday reported a rise in revenue and profit (http://www.marketwatch.com/story/nikes-profit-and-revenue-climb-2015-12-23).
Shares of Celgene Corp. (CELG) climbed 6.2% ahead of the bell after the biotech company late Tuesday said it reached a settlement in a long-running patent dispute over its flagship blood-cancer drug Revlimid.
Oil futures and energy stocks could move around 1 p.m. Eastern Time, when rig-count data from Baker Hughes hits.
Other markets:Oil continued to recover (http://www.marketwatch.com/story/crude-prices-strengthen-on-us-export-hopes-2015-12-23), with crude rising 0.9% to $36.45 a barrel. The Organization of the Petroleum Exporting Countries said in its closely watched annual World Oil Outlook (http://www.wsj.com/articles/opec-report-suggests-oil-price-rebound-supply-cut-1450864802) it expects the price of its basket of crudes to rise to $70 a barrel in 2020 and $95 a barrel in 2040.
Asia markets closed mostly higher, while European stocks also were strong in the early going.
Gold and silver declined, while the dollar inched higher (http://www.marketwatch.com/story/dollar-ekes-out-gain-in-holiday-thinned-trade-2015-12-23) against most other major currencies.
(END) Dow Jones Newswires
December 23, 2015 06:08 ET (11:08 GMT)
Here is the reason why Berg believes you can invest in the market today, go to sleep, wake up thirty years later and have made no money...
"Well, it is not unheard of in history. As you know there was a bear market in bonds lasting maybe forty years that began in the mid-40's and ended in 1980. We've had a twenty, twenty five year bear market in Japan going back to 1989. We're the most overvalued market in history, there's more leverage throughout the world than there's ever been in history, central banks have lost all their ammunition, basically because there is so much credit outstanding throughout the world. It's not unheard of to have a long-term bear market. There will be a lot of money to be made both on the downside and the upside within the bear market."
Another week, and another quiet exodus by the "smart money" clients of Bank of America (hedge funds, institutionals and private money), who collective sold $218 million in stocks, the 17th consecutive week of selling completely oblivious of a market that "wants to go higher" according to Bob Pisani, and as BofA notes, "continuing the longest uninterrupted selling streak in our data history (since '08)."
For the first time in history, yesterday saw VXX (the VIX ETF) traded more volume than the most-traded stock in the S&P 500. With speculative positioning at record shorts (extreme levered long stocks) and volume soaring beyond Aug 2015's previous record, we suspect this will not end well...
Foreign USTreasury Bond dumping continues, and even accelerates. China and the Saudis are selling USTreasurys in a near panic. Foreign central banks liquidated a record $375 billion in USGovt debt in the last 12 months. An American disaster lies in the making from debt saturation, debt overload, and debt dumping. It is all denied by the Washington mouthpieces and the Wall Street handlers, as they lie. The USGovt debt default is within view, dead ahead.
Cognitive dissonance is a psychological term to describe a situation where perception and reality are out of sync.
It’s similar to what most people refer to as “denial.” The patient sees things one way, but the reality is different. Of course, it’s just a matter of time before reality prevails and the patient is jolted back to reality. This process can be fast or slow, easy or painful, but the important thing to bear in mind is reality always wins.
Something like cognitive dissonance is going on in markets right now. Markets have been temporarily euphoric over Trump’s tax, regulatory and spending policies. Those policies are important to business and credit cycles and economic growth.
The perception is that happy days are here again. The new Trump administration is expected to pour trillions of dollars of stimulus spending and tax cuts into the economy. Immediately after the Nov. 8 election, investors took a quick look at Trump’s policies and decided they liked what they saw.
Trump wants lower taxes, less regulation and higher infrastructure spending. Corporate profits and consumer spending benefit from lower taxes. Banks and pharmaceutical companies benefit from less regulation. Construction firms and defense contractors benefit from infrastructure spending. There seemed to be something for everyone, and the stock market took off like a Roman candle.
And indeed, the major stock indexes hit one record closing after another. The Dow topped 20,000 this week before pulling back. The dollar has been trading near a 14-year high, although it’s slipped in recent days. Gold was moving mostly sideways until it broke out again over the past few days.
Bank stocks went vertical in expectations of wider net interest margins (from Fed rate hikes) and less regulation (from Dodd-Frank reform). Happy days, indeed.
Reality is another matter. I’ve been warning my readers lately that the Trump trade is levitating in thin air and is ready for a fall. Now that reality could be beginning to sink in.
It’s far from clear how much of the Trump economic agenda will see the light of day. Congress wants to offset tax cuts in one area with tax increases in another so they are “revenue neutral.” That takes away the stimulus. Less regulation for banks won’t help the economy if bankers lead us into another financial meltdown like 2008.
Infrastructure spending will increase the debt-to-GDP ratio past the already high level of 105%, putting the U.S. closer to a sovereign debt crisis like Greece. As I wrote Tuesday, many believe a 60% debt-to-GDP ratio retards growth. That’s the standard the ECB uses for members of the Eurozone. Scholars Ken Rogoff and Carmen Reinhart put the figure at 90%.
Again, the U.S. debt-to-GDP ratio is currently at 105%, as stated, and heading higher. Under any standard, the U.S. is at the point where more debt produces less growth rather than more. This is one more reason why the Trump infrastructure spending plan will not produce the hoped for growth. And if infrastructure is funded privately, you’ll need tools and user fees to pay the bondholders, which is just another form of tax increase.
There’s almost no way Trump’s policies can supply the stimulus the market is pricing in. The Dow Jones index peaked on Jan. 26, 2017, one day after cracking the mythical 20,000 mark. It’s now trading around 19,900. The downhill trend may continue and get steeper soon.
Productivity has stalled out in recent months. Economists are not sure why. It could be due to lack of investment by business, or that workers are not being trained in useful skills, or that everyone is spending too much time on social media. Whatever the cause, productivity is flat.
Fourth-quarter GDP came in at 1.9%, below expectations — the final chapter on the worst year of U.S. growth since 2011 when the economy was still healing from the global financial crisis. The strong dollar is a major headwind to growth, along with flat labor force participation and weak productivity growth.
Growth in a major economy is simply the sum of increases in the labor force plus increases in productivity. Think about it. How many people are working and what is the output per worker? That’s it; that’s all there is. The reality is that the workforce is not growing.
Labor force participation is near 40-year lows and is expected to decline further for demographic reasons. Birthrates have never been this low since the Great Depression. The U.S. used to get a labor force lift from immigration, but that might dry up because of Trump’s policies. We’ll have to wait and see.
A flat labor force plus flat productivity equals a flat economy, or almost zero nominal growth. That’s reality.
How will this situation be resolved?
Either growth will rebound based on “animal spirits” and the Trump stimulus working better than expected or markets will collapse once they realize the growth is not coming. By “collapse,” I mean a violent stock market correction, a falling dollar and major rallies in bonds and gold. We expect the latter.
Financial crises are not mainly about the business cycle. They’re about investor psychology, sudden shocks and the instability of the financial system. Right now investors are skittish, numerous shocks are waiting to happen and the system is highly unstable due to overleverage and nontransparency.
Despite Trump’s best efforts and positive policies, a collapse could happen any day unless radical steps are taken to prevent it — such as breaking up big banks and banning derivatives. I’ve been warning about this for a while, but now mainstream economists see the danger too. Nobel Prize winner Robert Shiller, for example, sees a stock market crash coming that could be worse than 1929 or 2000. I hope he’s wrong.
The problem with a financial panic is that panicked investors don’t care if the president is a Democrat or a Republican; they just want their money back. The same dynamic applies to natural disasters like tsunamis and earthquakes.
Once the disaster starts, the dynamics have a life of their own and don’t care if the victims are liberals or conservatives. Everyone gets hurt just the same. I’m not hoping for it, but this is a lesson Trump may learn the hard way.
Above I said collapse means a violent stock market correction, a falling dollar and major rallies in bonds and gold. I expect the latter. The long-term trends favor gold if U.S. growth continues disappoint.
The strong dollar story can’t last, so it won’t. The Trump administration has clearly signaled that the day of the strong dollar is over. When you see a coordinated attack on the dollar from the White House, the Treasury and the Fed, you can bet the dollar will weaken. That means a higher dollar price for gold.
The dollar may get one last boost from a Fed rate hike in March, but after that, even the Fed will acknowledge that they got it wrong again and start another easing cycle with happy talk and forward guidance.
For now, investors should not stand in front of a moving train. Keep cash ready and be prepared to move into gold, bonds and the euro. In fact, it’s not too soon to leg into those positions now.
Instead of watching the tape or short-term trends, my advice is to stay focused on the long-term trends. That’s how you’ll make the most money and preserve wealth in adversity.
Regards,
Jim Rickards for The Daily Reckoning
For those wondering what unleashed today's ferocious post-Trump, post-hawkish Fed speeches rally, the reason may have nothing to do with optimism in the economy or another inflow of retail funds via ETFs, and everything to do with a buildup of bearish short positions ahead of Trump's speech last night.
According to an analysis by the Arora Report, flagged first by Market Watch, and substantiated by various Wall Street comments early in the morning, ahead of Trump's speech various "large players" were positioned bearishly, assuming that the market rally has been based on hope and that, and that unless the president gave details about plans for the economy, there would be a big selloff. The reasoning, broadly echoed by strategists until yesterday, is that by looking at past speeches of presidents before Congress, the details are almost never there. So it appeared a perfect setup to short sell. And, according to algorithms used by The Arora Report, major traders did just that, building up substantial short positions ahead of Trump's speech, as shown on the chart below.
However, just like after the Brexit vote, and after the Trump election, following Trump's speech, when the market did not fall, shorts were forced to cover their positions, sending prices soaring. The initial squeeze and its progression are shown on the chart. This forced-buying made futures run up prior to the 9:30 a.m. start of trading in New York. When the stock market “gapped up” at the open, computers and their algorithms took over and bought aggressively. That triggered other algorithms, exaggerating the move. It is this squeeze that was interpreted as a confirmation of how good Trump's speech was.
As MarketWatch cynically points out, talking heads on TV were quick to say that the stock market was rising because Trump was conciliatory in his speech and muses "what happened to those same talking heads’ pronouncements a day earlier that the market would fall if Trump failed to mention specifics of his economic plans?"
"What happened" is what we explained just prior to the open: "Wall Street Scrambles To Change The Trump Narrative Again."
So quantifying the move, according to the Arora algorithms, about three-quarters of the increase in stock prices today is from short squeezes. Traditionally, spikes resulting from short squeezes arising out of positioning from an overbought market tend to reverse themselves, the report notes, however over the past year, every single attempt to short the market into submission has resulted in even greater ramps higher.
"For that reason, as hard as it is, it is prudent to be patient and wait for pullbacks to buy stocks. There are reasons to be bullish. But, alas, the market is not likely to keep rising in a straight line."
