Sell Off on Light Volume

Just a quick note: despite all the red on your screens, the selling
seems to be on rather modest volume. That suggests more of a buyers
strike than a heavy distribution day. Both the advance/decline line and the
up/down volume are modestly lower — not particularly nasty — also.

Remember that most of the European Bourses are closed for Easter Monday (I believe some are closed tomorrow also).

On a somewhat related note, on Cody Willard’s blog,
he discusses the futility of trying to game the Fed on a day to day
basis. That’s an excellent point — not only for the Fed, but for most
economic data. The broader economy is marvelously complex, and its
oscillations and cycles unfold over periods of quarters and years —
not day-to-day.

Unfortunately, us humans have a hard time operating on longer time
scales. Days and weeks are easy; years and decades are almost
impossible . . .

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What's been said:

Discussions found on the web:
  1. Bynocerus commented on Apr 17

    I’ve harped on how crappy the internals were in the market during the run ups, so now I feel compelled to agree with Barry on today’s markdown. Pretty much the only truly ugly thing is how much the new lows have expanded.

    I’m not a buyer today, but if we get some weakness ahead of earnings tomorrow I will start laying the longs on thick.

  2. Mark commented on Apr 17

    Well, this really should have been a Do-Nothing Day until tomorrow’s reports came out and the European bourses were back in full swing and it nearly turned into a three figure rout so take what you wish from that. As days go, yeah, it wasn’t particularly bad. It was just a continuation of the trend in place: down. I wouldn’t bother to put any lipstick on this pig. No one said it was The Apocalypse.

  3. Barry Ritholtz commented on Apr 17

    BTW, here’s the economic data flow for the week:

    MON April 17
    8:30 NY Fed Manufacturing Index

    TUE April 18
    7:45 ICSC-UBS Store Sales
    8:30 Housing Starts
    8:30 Producer Price Index
    2:00 FOMC Minutes

    WED April 19
    7:00 MBA Purchase Applications
    8:30 Consumer Price Index
    10:30 EIA Petrol Status

    THU April 20
    8:30 Jobless Claims
    10:00 Leading Indicators
    10:30 EIA Natural Gas Report
    4:30 Money Supply

  4. Alaskan_Pete commented on Apr 17

    The surprising thing, to me anyway, was the NFPS came in at almost $90B. I was looking for a decrease, and damn not even.

    The 52 L/H is still weak, but yeah internals were only moderately bearish. I was surprised.

    doesn’t matter much from this corner, only holding coal, buillon, O&G, and cash.

  5. B commented on Apr 17

    New lows are highly misleading….sort of. Anecdotally, more than half of the new lows I have looked over the past week are interest rate sensitive convertibles, preferreds or other stocks which are really bonds in disguise and are highly correlated to long bonds. Remember, Paul Desmond mentioned on here alot of “goofy” stocks trade on the NYSE and it means you cannot accept things at face value. Well, that isn’t what he said exactly, but that is what he was implying. That is why the NYSE is hard to guage using the Hindenburg Omen as someone has mentioned on here. Funny, but the weakest stocks seem to be dividend yielding stocks which just so happen to be the best performers long term. The dividend yield on the overall market is horrendously pathetic versus the historical mean. With a 20% jump in long term rates over the last few months, that is not to be unexpected.

    The Naz new low list is not that bad. 40, 50, 60, etc. So far, this looks like nothing more than a consolidation. But, I would say 1.8 billion shares isn’t really light volume IMO. It ain’t heavy but…….Some sectors are extremely oversold and should get a bounce soon……..If long rates can consolidate or drop a little. They cratered EOD. Maybe on Turnaround Tuesday? One thing that really concerns me is a daily sentiment indicator I follow. Friday, it had the most bullish reading in over a year. ie, The market historically rallies. Uhh….NOT!

    What concerns me is all of these dumbasses who are now commodity experts that keep jamming up metals and oil. It has sh*t to do with end user demand and everything to do with investment dollars. ie, Liquidity seeking high returns. They look at their global demand bubble and conclude this is goldilocks. Well, sure it is, until the Chinese, Russians, Brazilians, Indians and the other 70% of the world’s population cannot afford to pay this anymore. The majority of the world can’t digest these high costs as comparatively rich Americans can. Plus developing countries are disproportionately crushed with these high hard asset costs with primitive economies. Looks like they are going to jam this stuff until something breaks. Likely demand or likely their investments when the Fed wins. Too many stupid dollars chasing hard assets.

  6. vfoster commented on Apr 17

    “The broader economy is marvelously complex, and its oscillations and cycles unfold over periods of quarters and years — not day-to-day.”

    Hey BR – that’s why they call it the “Big Picture”

    by the way, speaking of big picture:
    today the S&P 500 closed below where it closed at the end of the first week of the year – 1/6/06 at 1285.45 (mkt was up 3% in week 1)… it’s a stealth bear market

    plus the long gold/short equity trade has continued to work well (even in the best performing Russell 2k). the Dow/Gold ratio has gone from 40 to 18 in 6 years, on its way to 10 and possibly 5.

    B – i agree with you on the funds chasing commodities and definitely think it’s liquidity driven as opposed to demand driven (it’s demand for the contracts not demand for the real asset), but if the Fed stops raising rates those investors could be rewarded.. bottom line is there is still a lot of liquidity out there and the Fed has more work to do.. you can’t short the commodities until Bernanke proves he will throw on the brakes.. he has yet to do so and those funds are calling his bluff.

  7. GRL commented on Apr 17

    That is why the NYSE is hard to guage using the Hindenburg Omen as someone has mentioned on here.

    Please explain again why “the NYSE is hard to guage using the Hindenburg Omen,” i.e., why, this time it’s different.

  8. Alaskan_Pete commented on Apr 17

    Look at copper inventories B. Hard to make a case that there is no end user demand aspect to it, I mean it’s not like the hedgies are taking delivery.

    Given the bloated state of the US Clowbuck, better to track commodity prices in multiple currencies and as ratios to gold, oil, etc before you start writing off the price escalartion to speculative bubble dynamics.

  9. B commented on Apr 17

    I wouldn’t short these either. When the Naz was a bubble in 1999, one would have been crazy to short into 2000.

    I hear Cramer talking about hard assets right now on his show. So, all of these third world countries are building like crazy. But the output demand is limited to mostly the US and old line economies growing very slowly. So, everyone wants to build out this capacity to supply us. What the hell happens when we’ve consumed all we can? When supply outstrips demand by factors? Are their own economies going to consume all that they are making? Oh yea. This weekend on CSPAN i saw where China’s economy is 75% exports. Same for Brazil, Russia, India, Vietnam, Cambodia, Argentina and on and on and on and on and on? It’s all one big house of cards building out a demand glut to supply the US of A.

    How long will it last? Who knows. Heck, copper may go to $500 an ounce. But, you better be fast money recommending these DEEP cyclicals at this stage of the economic cycle.

  10. B commented on Apr 17

    I have data showing manufacturers are returning copper stocks and China is unloading their copper stocks as well.

  11. Alaskan_Pete commented on Apr 17

    GRL, the previous poster explained why…namely there are alot of convertibles/preferreds etc trading on the NYSE that are interest rate sensitive (they are essentially bonds masquerading as equities). Utilities and other high yielding issues (well, historically high anyway, not exactly growth industries) become less attractive as rates rise. Why assume the risk when you can get the same return via t-notes and so forth.

  12. Alaskan_Pete commented on Apr 17

    So B, we should expect to see a significant build in London? I assume your data is proprietary, but with China surprising on the upside (10.2% anyone?) I’ll believe it when I see warehouse inventories building.

  13. todd commented on Apr 17

    You guys just aren’t bearish enough for me this afternoon. Today’s action on gold was a big red flag. People are selling all kinds of paper (stocks/bonds/dollars) and putting their money in hard assets.

    And let me vent for a second: I’m tired of the “world instablity” excuse for gold action. When Russia had multiple nuclear tipped missles a button push away from raining down on the US, I would have bought that explanation. Iran a few years away from figuring out the bomb is not a reason to buy gold. That’s foolish.

    Gold is signaling something BIG… what will it be?

    BTW- I think Kudlow has eyes for Cody. A little bit of a man-crush in the works there. LOL!

  14. b commented on Apr 17

    First off, I’m suspect of manufactured numbers out of China. That includes the information that they are dumping copper in the market. But, I take it in the same grain as their GDP. Somewhat useless but anecdotally interesting.

    I would say if you are waiting on inventories to show up, you’ll be too late if you are a late term investor. Commercials just went short the copper futures market. Plus, demand appears to be abating in the extended stocks. (Equities) I have a highly complex widget that measures stock demand and Phelps Dodge is on a sell are an all time high. That is highly unusual. Now, that may actually reverse but…..And remember, China’s economy is centrally planned. They’ll keep building regardless of whether people can afford it or end user demand is there. I posted something on here a few months ago that Chinese investors were committing suicide because their building bubble was collapsing. So, how will the dirt poor Chinese consumer react to pricing that is through the roof? It doesn’t effect the government, they have to keep the economy growing at over 8% just to keep job growth neutral.

    I would be very, very leery after this kind of run. Copper is up, what, 40% this year? 40%! In three months! It’s up 500% since the start of this run? People lose their senses and forget about econ 101: price elasticity. Especially in poor economies.

  15. vfoster commented on Apr 17

    i think it all boils down to the Fed. they have two choices: stop at 5% or continue to hike. tomorrow we will get the minutes from march. who knows what they will say… Bernanke has been pretty shady thus far with so much on the line and i think its because he doesn’t know what to do.
    to me the action in the dollar will be key. do they interpret that he could continue past 5%? probably rallies with stocks, gold and oil getting hit. if they indicate that they will pause i think the dollar will weaken and stocks will rally. the key will be whether the 10YR yield, gold and oil rise on the dollar weakness. can stocks handle a higher 10YR note yield? i doubt it…
    the recent price action has set up this scenario for Bernanke and if he fails in this first test it could be a problem for the global markets.

  16. Mark commented on Apr 17


    Lowry’s model accounts for all the “weird” varieties that now populate the NYSE. But his Selling Pressure reached a yearly high last week as did Buying Pressure reaching a yearly low. The only thing that has P. Desmond not calling this a top is that new highs are higher than AVERAGE at tops. Not that the number of new highs say it’s NOT a top, but that if it was, this one would have historically higher number of new highs. I think I said that correctly.

  17. rob hone commented on Apr 17

    I show crude print at 72.30 after hours. Not good. Went through 70 without a blink. long spy puts.

  18. todd commented on Apr 18

    Bernanke has no choice but to raise rates, but would prefer to talk down the market. Don’t look for another “we’re almost done.” The Fed has already said they don’t care if housing cools, and I believe they will pause only after commodities break.

    BTW- Here in the energy capital of the world, Houston TX, we had rolling blackouts today due to “extreme electricity demand” with high temps. It’s THE MIDDLE OF APRIL! Raise your hand if you thing your electricity rates are going up.

    /hand raised

  19. Rusty commented on Apr 18

    I think at least a part of the commodities pricing calculus is the prospect of future supply crunches. The oil futures market is obviously the most sensitive to this, and it can almost be read as an informal proxy for that “Terror Stock Market” idea that flamed out a few years ago. The price of oil, which is influencing the prices of so many other commodities, is reflecting a growing belief in the market/world that Iran’s oil production will be negatively affected in the near/medium term.

    So while the demand side of copper or gold or oil may look puzzling, it’s mostly about the anticipated supply side of the equation.

  20. B commented on Apr 18

    I think it was Todd who posted on here about risk premium and how historically we’ve seen much worse global uncertainty yet commodities never responded as they are now. I have to totally agree. This concern about supply disruption or commodity shortages is pretty darn shady IMO.

    I saw an interview with the Nigerian Oil Minister. It was very interesting. He talked about the price of oil. He was puzzled about the price of oil……..really not. He talked about oil supplies, Iran, the chance of disruption, his country’s turmoil, etc, etc, etc. He basically said there is no way Iran could disrupt global oil and that oil was being driven off of pure emotion right now. I think rational people would agree. Just as rational people would agree we aren’t going to nuke Iran. Or, for that matter do anything militarily. Bush would be crucified.

    This is all secret code for bullsh*t. The same BS TRADERS, and ONLY TRADERS, have been telling us since interest rates hit 1%. Never saw an oil exec worth his salt talk about Hubbert’s Peak. There is no freaking peak. We’ve used more oil since 1975 than we even knew existed in 1975. And, we still have more oil than was known to exist in 1975. Plus, we now find out Canada may have more oil than Saudi Arabia? And Venezuala has more oil than anyone other than Saudi Arabia? And the US has more oil in shale in just a few states than all three combined but it costs $35 to get out of the ground? And, Mexico just found the largest oil deposit in it’s history? Oil shortages, Hubbert’s Peak, no more oil, gasoline shortages, Katrina, Iran, Kuwait is running out of oil, terrorism, Russia might shut off their pipeline to Europe, China, India and on and on and on. What the hell is it? Would someone tell me? Oh, they would likely then come back with all of the above.

    How about this one. Oil and all hard asset prices INCLUDING REAL ESTATE are directly correlated to liquidity at a time when the stock market was the most overvalued in history and many hard assets were at their lowest in inflation adjusted terms in decades. So, where does all of those dollars go? In equities, which need time to revalue to long term historical averages comparative to alternative investments or hard assets driven by freeeee money out of Japan then out of the US with rates at inflation minus four percent? It just so happened oil started ratcheting up when the NYMEX showed an enormous amount of new interest by new players (read paper pushing contract buyers not actually producers and consumers of oil.) Professional money has made billions, if not hundreds of billions, sucking on the tit of this lie. Since when do we look to traders about the future of oil production, supply, demand, etc? Since we have a hard asset boom I guess. The reality is they don’t know sh*t about anything other than pushing around those contracts to make money. So listening to them on why oil is high is like listening to an alcoholic extol the virues of drinking. They are addicted to massive profits where the leverage is astronomical and the returns similarly so. Ditto with other commodities that have active futures markets.

    It’s funny that mostly American traders are going to kill the global economy in their drive for more and more greed as they drive up the costs of all assets to bubble territory thus forcing the Fed to fight them while relatively poor developing nations choke on hard asset prices. Remember, most of what you hear from supposed experts is pablum. The reality is hard assets exploded because of liquidity looking for a home. Not global supply and demand. I remember when I bought my first copper futures contract in the early 90s. Or should I say was bamboozled into doing so. Copper was sucking wind. They had strikes, mine outages, etc, etc, etc. But, it didn’t drive copper up 500%. In fact, I lost money because in spite of the uncertainty copper wouldn’t budge. Because liquidity was riding an equity market boom where rates went from 22% to 1%. Now rates are going from 1% to …… with a still richly valued equity market.

    I think this policy of telegraphing Fed behavior is a big, big mistake. It allows to big money to invest with more and more leverage with a fair amount of certainty that the Fed won’t drop a turd on their head. That means when we unwind, it will likely be because of a big freakin mess. Just like every other time in history. Is gold telling us inflation is on the horizon or that deflation is on the horizon? Gold, in addition to being an inflation hedge is also a good deflationary hedge. With assets on an unsustainable trajectory, the Fed might be fighting the wrong battle. Who knows.

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