StreetSmartPost

Tuesday, June 17, 9:25 a.m.

The bulls see the economy gaining strength as home prices surge and employment grows, while the Fed continues to have the market’s back with stimulus it will keep in place until 2014, and then taper back slowly only after the economy has reached the point it can clearly stand on its own.

The bulls point to how resilient the market is even with the recent talk of the Fed possibly tapering back on its stimulus sooner than previously thought.

The bears see the economy and markets living dangerously, like drug addicts dependent on periodic injections of stimulants by the Fed, with markets shaken at even a hint that their fixes may be tapered back.

The bears point to how markets outside the U.S. have had a quite different reaction to the new uncertainties introduced by Fed Chairman Bernanke’s warnings on May 22, and believe they have it right.

The bulls are convinced Bernanke will set things right again in his press conference tomorrow afternoon, by assuring markets that QE will remain in place for some time to come.

The bears also expect Chairman Bernanke to soften his warning that if the Fed sees improvement in the economy it “could in the next few meetings take a step down in our pace of purchases”, providing assurances it will remain in place because the economy is not yet close to being able to stand on its own.

But they wonder how he can back-track on his other statement in the same testimony before Congress that, “Fiscal policy at the federal level has become significantly more restrictive. . . . . . In particular the expiration of the payroll tax -cut rate, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of sequestration, and the declines in defense spending; and are expected, collectively, to exert a substantial drag on the economy this year. . . . The Federal Reserve’s monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.”

Short-term market patterns.

Last week was the week before the quarter’s quadruple-witching expirations week, and they tend to be negative.

This week is the week of the expirations (on Friday) and they tend to be positive.

Next week is the week after the expirations and they tend to be negative.

Continuing volatility?

To read my weekend newspaper column click here:  What If The Secular Bear Market Is Not Over- 

Subscribers to Street Smart Report: The new issue of the newsletter will be available this afternoon (a day early) in your secure area of the Street Smart Report website.

Yesterday in the U.S. Market.

Considerable intraday volatility. The Dow was up as much as 190 points by early afternoon but then sold off sharply and was up only 50 points late in the afternoon, looking like another negative downside reversal day in the making. But buy-programs came in late in the day to close it up 109 points, only 80 points off its intraday high. Volume was average at 0.7 billion shares traded on the NYSE.

The Dow closed up 109 points, or 0.7%. The S&P 500 closed up 0.8%. The NYSE Composite closed up 0.8%. The Nasdaq closed up 0.8%. The Nasdaq 100 closed up 0.9%. The Russell 2000 closed up 0.7%. The DJ Transportation Avg. closed down 0.2%. The DJ Utilities Avg closed up 0.5%.

Gold closed down $5 an ounce to $1,383.

Oil closed down $.08 at $97.77 a barrel.

The U.S. dollar etf UUP closed down 0.2%.

The U.S. Treasury bond etf TLT closed down 0.5%.

Yesterday in European Markets.

European markets closed well off early highs but still quite positive yesterday.

The Europe Dow closed up 0.9%. Among individual countries, the London FTSE closed up 0.4%. The German DAX closed up 1.1%. France’s CAC closed up 1.5%. Belgium closed up 0.9%. Greece closed down 1.3%. Italy closed up 0.3%. The Netherlands closed up 0.8%. Norway closed up 0.8%. Portugal closed up 1.3%. Spain closed up 0.8%. Switzerland closed up 1.2%. Russia closed up 2.0%.

Asian Markets closed mixed last night.

The DJ Asia-Pacific Index closed down 0.4%.

Among individual markets:

Australia closed down 0.2%. China closed up 0.1%. Hong Kong closed unchanged. India closed down 0.5%. Indonesia closed up 1.4%. Japan closed down 0.2%. Malaysia closed up 0.2%. New Zealand closed up 0.3%. S. Korea closed up 0.9%. Singapore closed up 1.5%. Taiwan closed up 0.2%. Thailand plunged 3.0%.

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To obtain access please click on the ‘Subscribe’ link. It will take you to an information page on subscribing to Street Smart Report, a subscription to which includes access to the premium content area of this Street Smart Post blog.

In the premium content area this morning: The U.S. stock market, gold, and bonds, signals and analysis of each.

Saturday, June 15, 11:15 a.m.

The following chart is courtesy of Jeff Grundlach, founder and CEO of DoubleLine funds ($55 billion under management).

It shows how closely the S&P 500 has tracked with the increases and decreases in the Fed’s balance sheet since 2009 as it has let QE programs expire, and then rushed in with new QE bond and mortgage-related buying programs (QE2, QE3, QE-Infinity) when the economy and stock market stumbled. 

It does indicate the risk to the economy and market when the Fed eventually begins to dial back on its bond-buying, and then as it will eventually have to, actually reverses to selling the assets off its balance sheet.

It also indicates why the Fed will be very reluctant to move beyond just talking about it to actually taking action, and why as I have been saying I believe that will not be seen until early 2014 (after Bernanke has been replaced by the next Fed Chair, probably Janet Yellen).

If you’d like to see a number of other interesting charts on U.S. and global economies and markets that you’re not likely to see elsewhere, click on this link to an article by Mamta Dagkar on Business Insiders this morning http://www.businessinsider.com/david-rosenberg-global-concerns-charts-2013-6 . I suggest once you get to the article that you click on the ‘View as one page’ option.

Fed will blow back next week against market fear Bernanke created.

Global markets outside of the U.S. have declined sharply since mid-May when Ben Bernanke told Congress that the Fed could begin to dial back its quantitative easing as soon as in coming months.

While Bernanke probably used the occasion to try to cool off overheating markets, he can’t afford to raise concerns among investors and consumers so much that the already stumbling economic recovery is jeopardized any further.

So the Fed’s statement after its June FOMC meeting next week, and particularly Bernanke’s press conference afterwards (Wednesday afternoon) is widely expected to be devoted to reassuring markets that he did not mean what he said.

He meant to say that dialing back QE would not be considered until the economy shows signs of being able to go it alone, and that’s not likely before at least early 2014.

He will certainly disappoint markets again if he does not back-track from his earlier warning.

But has damage already been done by taking some of the euphoria and confidence out of markets, and having investors looking at some of the conditions that have been created while they were focused entirely on the power of the Fed and its stimulus?

Other Voices.

Financial Times: “Storms over Japan and emerging markets; squalls in the U.S. and Europe. . . . . . Measures of market volatility are signaling some of the choppiest conditions since 2008. Higher volatility could prove as significant as actual falls in asset value, analysts warn. . . . . . Unless calm returns, unstable conditions could drive investors out of markets and undermine central banks’ global efforts to steer economies”.

The Economist: “The prospect of less quantitative easing in America has rocked currency and bond markets in the emerging world. . . . . In the past month 19 of 24 emerging-market currencies have fallen in value against the dollar. The trigger was a remark in May by the chairman of the Federal Reserve, Ben Bernanke, that the Fed’s purchases of bonds might soon tail off. . . . It seems a violent response to what was an offhand comment . Mr. Bernanke did not suggest an immediate change of policy. An increase by the Fed in short-term interest rates, currently near zero, may still be years away. . . . Even so, markets look ahead, and even the prospect of a tapering probably marks the start of a long grind upwards in rates.”

The Times of London: “The political deadlock in Washington has dented America’s growth prospects and threatens to derail the recovery in the world’s largest economy, the IMF said yesterday. The IMF criticized politicians for imposing harsh spending cuts that have significantly reduced growth prospects in the U.S.”

The Wall Street Journal, Jason Zweig: “If you are an investor and aren’t on the verge of retirement, your fondest wish should be another whiff of fear that will tip even more assets into the bargain bin. . .  Investors should welcome the falling prices that make assets cheaper.” 

To read my weekend newspaper column click here:  What If The Secular Bear Market Is Not Over-

Subscribers to Street Smart Report: In addition to the charts and recommendations in the subscribers’  ‘Premium Content’ area of this blog, the new issue of the newsletter will be out on Wednesday in the subscriber’s area of the Street Smart Report website.

Yesterday in the U.S. Market.

Another triple-digit day as day-to-day volatility continues. (Ten of last 14 days have been triple-digit moves in one direction or the other). Volume remained relatively light with 0.6 billion shares traded on the NYSE.

The Dow closed down 105 points, or 0.7%. The S&P 500 closed down 0.6%. The NYSE Composite closed down 0.7%. The Nasdaq closed down 0.6%. The Nasdaq 100 closed down 0.6%. The Russell 2000 closed down 0.8%. The DJ Transportation Avg. closed down 0.5%. The DJ Utilities Avg closed up 0.1%.

Gold closed up $9 an ounce to $1,389.

Oil closed up $1.11 to $97.80 a barrel.

The U.S. dollar etf UUP closed down 0.1%.

The U.S. Treasury bond etf TLT closed down 0.2%.

Asian markets closed up in their last session of the week.

The DJ Asia-Pacific Index closed up 0.9% Thursday night (Friday in Asia). But it wasn’t enough to offset another negative week.

Among individual Asian markets:

Australia closed up 1.9%. China closed up 0.6%. Hong Kong closed up 0.4%. India closed up 1.9%. Indonesia closed up 3.3%. Japan closed up 1.9%. Malaysia closed up 1.0%. New Zealand closed up 0.4%. South Korea closed up 0.4%. Singapore closed up 1.0%. Taiwan closed down 0.2%. Thailand closed up 4.4%.

Yesterday in European Markets.

European markets closed up fractionally yesterday but also not near enough to prevent another negative week.

The Europe Dow closed up 0.4%. Among individual countries; The London FTSE closed up 0.1%. The German DAX closed up 0.4%. France’s CAC closed up 0.2%. Belgium closed up 0.8%. Finland closed up 1.1%. Greece closed up 2.5%. Ireland closed up 1.1%. Italy closed up 0.2%. The Netherlands closed up 0.2%. Spain closed down 0.1%. Switzerland closed up 0.1%. Russia closed up 1.9%.

Global markets for the week.

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In the Premium Content area this morning. The U.S. stock market, gold, and bonds.

Next week’s Economic Reports:

Next week will be an average week for important economic reports that will include New Housing Starts, Existing Home Sales, the Phila Fed Index, the Fed’s announcement after its FOMC meeting, Chairman Bernanke’s press conference, etc. To see the full list and times click here, and look at the left side of the page it takes you to.

I’ll be back with the next blog post on Tuesday morning at 9:25 a.m.

To read my weekend newspaper column click here:  What If The Secular Bear Market Is Not Over-

Subscribers to Street Smart Report: In addition to the charts and recommendations in the subscribers’  ‘Premium Content’ area of this blog, the new issue of the newsletter will be out on Wednesday in the subscriber’s area of the Street Smart Report website.

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Thursday, June 13, 9:25 a.m.

Global markets outside of the U.S. have been in significant negative divergences with the U.S. market for most of the year, with their downturns accelerating even as the U.S. market climbed to successive new highs.

Even since topping out mid-May the U.S. market has remained resilient, only reluctantly pulling back 3 or 4%.

But finally, this week analysts are all over the global collapses as being something potentially important, as in can the U.S. stand up alone if global economies and markets are tanking seriously.

It seems to have taken the bursting of the bubble in the Japanese market to finally get the U.S. market to look beyond our borders.

And it shouldn’t be liking what it sees.

It’s not just the breaking of short-term support levels like 50-day moving averages that should be getting attention. 

But the potential damage to the intermediate-term outlook, with sell signals triggered on intermediate-term indicators some months ago, and important markets having broken beneath not only short-term 50-day moving averages, but also intermediate-term 20-week m.a.’s.

The collapses in the markets of the large economies like China, Japan, the eurozone, Brazil, Hong Kong, India, etc., are of enough concern.

But in the last two weeks the spread of the collapses to the emerging market countries (that were supposed to remain strong no matter what happened in developed countries) has become more obvious. 

As we have been pointing out since the beginning of the year, although widely touted by Wall Street as the place to be this year, the emerging markets were looking quite sick.

And in the last couple of weeks the head and shoulders top that was potentially forming has completed, with emerging markets plunging below the ‘neckline’ (the blue line), signaling more decline is likely.

It is a very important question for the U.S. market whether it can be expected to continue its resilience as more and more global markets collapse further, into bear markets.

This might be a good time to have another look at the studies of how global markets tend to move in tandem seasonally: Market’s Seasonal Patterns in Global Markets!

To read my weekend newspaper column click here:  Which Way For Gold From Here-

Subscribers to Street Smart Report: There is an important hotline from last evening and an in-depth ‘U.S. Market Signals and Recommendations Update’ in your secure area of the Street Smart Report website.

Yesterday in the U.S. Market.

A quite ugly day. The third significant downside reversal day in recent weeks. The Dow was up as much as 120 points in the early going and then reversed to the downside and closed down 126 points, closing just about on its low for the day. Volume was about average at 0.7 billion shares traded on the NYSE.

The Dow closed down 126 points, or 0.8%. The S&P 500 closed down 0.8%. The NYSE Composite closed down 0.7%. The Nasdaq closed down 1.1%. The Nasdaq 100 closed down 1.1%. The Russell 2000 closed down 0.9%. The DJ Transportation Avg. closed down 0.7%. The DJ Utilities Avg closed down 0.9%.

Gold closed up $10 an ounce to $1,392.

Oil closed down $.21 at $95.88 a barrel.

The U.S. dollar etf UUP closed down 0.1%.

The U.S. Treasury bond etf TLT closed down 1.4%.

Yesterday in European Markets.

European markets mostly closed down again yesterday.

The Europe Dow closed down 0.2%. Among individual countries, the London FTSE closed down 0.6%. German DAX closed down 1.0%. France’s CAC closed down 0.4%. Belgium closed down 0.4%. Italy closed down 1.6%. The Netherlands closed down 0.8%. Norway closed up 0.8%. Portugal closed down 0.1%. Spain closed up 0.4%. Switzerland closed down 0.2%. Russia closed down 0.4%.

Asian Markets closed down sharply again last night.

The DJ Asia-Pacific Index closed down 1.6%.

Among individual markets:

Australia closed down up 0.7%. China closed down 2.8%. Hong Kong closed down 2.2%. India closed down 1.1%. Indonesia closed down 1.9%. Japan plunged another 6.3%. Malaysia closed down 1.9%. New Zealand closed down 0.9%. S. Korea closed down 1.4%. Singapore closed down 0.7%. Taiwan closed down 2.0%. Thailand closed down 2.1%.

Subscribers Premium Content Area.

For Street Smart Report subscribers only, used to provide additional info to that provided in the newsletter, mid-week reports, and hotlines.

To obtain access please click on the ‘Subscribe’ link. It will take you to an information page on subscribing to Street Smart Report, a subscription to which includes access to the premium content area of this Street Smart Post blog.

In the premium content area this morning: The U.S. stock market, gold, and bonds, signals and analysis of each.