That Was The Week That Was- 4th Week May

Last Week This…

Plus This Equals = OUCH!

Wednesday was painful- sort of. Not only were  words from the Chairman that left traders confused as to when the Fed would start slowing down its liquidity drive but bad data from China caused Japanese markets to dive over 7% on Thursday. This was their biggest drop since March, 2011. The US markets gave up 80 points on the Dow and had their first losing week in a month.

The Ben Bernanke Made it Clear that Congress and the Administration were no friends of the economic recovery. ‘Fiscal policy at the federal levels has significantly become more restrictive.’ He went on and said to the Joint Economic Committee, ‘High rates of unemployment and under-employment are extraordinarily costly. Not only do they impose hardships on the affected individuals and their families, they also damage the productive potential of the economy.’ ….has anyone heard or seen of a jobs package or discussion come out of Washington anytime in the last eight years? Hello? 

More as the week wears… on by the by…

Economic Bad News Has Been Swept Under the Carpet as investors look six months ahead and find things look peachy. Or, as some analysts think that the rally was simply an expansion of the P/E ratio. Although there are murmurings of distrust from those that still remember those heady days of 2000 and then the dot com crash and the the euphoria prior to the real estate banking collapse of 2008. Goldman Sachs has upped their closing year-end number for the S&P 500 to 1700, a full 5% from closing number of last Tuesday. Yahoo has spent over $1 billion on a blog site called Tumblr. The folks at Tumblr have cleaned up their act where a good percentage of blogging was adult minded. Still this is a youngster’s hip site ( I mean those 25-35 and not your Disney kiddies). I suspect getting granny and gramps to visit as they do Facebook may be difficult. Tumblr has made a few bucks but nothing to justify the price tag paid by the visionaries at Yahoo, according to critics. Ya’ll have to ask if someone couldn’t have bought it at a cheaper price or created something comparable from scratch at a less expensive cost?  The ink isn’t in the pen for the Tumblr deal when Marissa Mayer is off to the races bidding on HULU the video streaming service. This is another company that has had trouble defining itself in the marketplace but has some cool toys.

Gold and Silver seem to have lost their luster. Now metal Bulls are looking and buying Palladium. Investors can buy it through an ETF ticker PALL.

TUESDAY MARKETS WAVERED UNTIL THE NEWS THAT JAMIE DIMOND GOT THE CONFIDENCE OF THE THE BOARD TO WEAR BOTH HATS AT JPM, THEN STEADIED AND MOVED HIGHER.

Speaking of which- should we be paying attention to the metal’s market? Peter Bankoff is trading on technical's and reports that Gold trend is bearish and he’s betting the price will fall under $1,000. It’s got another $400 or to go…

Markets Cannot Be Wrong. It Doesn’t Make Any Difference if You Can’t Make Sense Out of Them. Thomas H. Kee, Jr. Reports the Disconnect Between Reality and Investment.

• Materials have had –15.3% earnings ytd but the material ETF NAR.EXB is up 10%.
• Consumer Staples have had –4% EPS but consumer staples ETF NAR-XLP is up 20%,
• Telecom has had –14.7% EPS but telecom ETF NAR.IYZ is up13%.
• Energy has had a  -5.2% contraction but the energy ETF NAR.XLE is up 15%.

OK- here’s some news that should shout ‘slow-down’ more than anything else: Wal-Mart, Target and Sears all missed their earnings estimates.

It Could Have Been Worse Thursday as markets ended up falling only a bit but during the day were off a lot. Japan’s markets were off 1,000 points but bargain hunters cut the losses.

Confusing Us Ever More is The Following…The two charts show a recovery but also yields fall showing slow growth.

 

That was the crash, dummy, writes George Acs. George has been waiting for a correction for the last eight weeks. (It’s like the kid digging through a roomful of horse poop saying there has to be a pony in here somewhere.)  Then came the Key Reversal Day last week, that was the day when the market reached new highs and then suddenly reversed to go even lower than the previous day’s low. The theory is the greater the range of movement and trading volume the more reliable of an indicator of a reversal. It all came together with Japan getting hit for a 7% loss but we’re still in the game and it seems that was the correction we were waiting for.’ Stranger and stranger, Georgie.

 

Mitch Zacks suggests that we are approaching a Spring Slowdown. He also expects QE3 to continue into the middle of 2014 with no rate hikes until a year later- 2015. Inflation should be contained and end up in 2013 at 1.3%, 1.6% in 2014 and 1.8% in 2015 ( we know they’re guessing at Zacks about inflation but we’re letting them play the what-if.)

Alan Brochstein Blogs, ‘Why This Long-Time Bull is Moving To The Sidelines.’

He provides the above chart illustrating the S&P 500 last week. The green and red squares are the daily performance of the S&P the green line is the 10 day Simple Moving Average (SMA) and the red is the 50 day SMA. His argument is that the S&P opened lower both Thursday and Friday of last week and traded up during the day but was unable to close positive either day. The 10 year Treasury also hit above 2% for the first time in 2 months with a sharp downturn in the Japanese markets. He thinks, ‘ at best, a 50% retracement from November would put the S&P 500 around 1515. A 2011-style move would put us below year-end close of 1426-1350. ‘

  Pick your poison. A slowdown? A mere blip on the field of an equity bull run? Or, a full blown summer correction?

Maybe I should have reported Chuck Jaffe’s Commentary a bit early but he’s cool to close. The Jaffe writes that maybe The Chairman Bernanke is daring us mere mortals to buy stocks at this particular junction. Paraphrasing you have to wonder if The Chairman is that devious in signaling an end to QE3 and seeing how the markets react? Will Mom and Pop, sitting on cash under the mattress finally come out and join the party? Will the institutions cut and run? The markets are trading at all time highs and there doesn’t seem to be more money to be made at these levels, says Jaffe. How the markets react to The Fed’s trial balloon of the tapering to QE3 could be what it was all about last week. Yes, I watched the markets fall and then crawl back to a positive on Friday even as I and everyone in the room knew there was little money to be made and why were people throwing dollars in when they too knew that.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

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