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Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Money Daily has been providing business and financial market news, views, and coverage on a nearly continuous basis since 2006. Complete archives are available at moneydaily.blogspot.com.
Friday, October 8, 2021, 8:15 am ET
There's an inescapable quality to reality that should not be misinterpreted for something other than the truth, but that's exactly what the financiers of Wall Street and Fleet Street and Davos and elsewhere and the politicians running governments around the world are trying to do.
They are attempting to confound the public with a false narrative that all is well when just by looking around with open eyes says it is not. The signs are everywhere. Installed politicians instead of elected ones. Migrants crossing open borders into developed nations, debt piled as high as banks' tallest skyscrapers and beyond, stores closed and boarded up, prices rising, crisis on top of crisis.
The world has been flung into what amounts to feudalistic totalitarianism over the past 18 months, and the elite bankers, politicians, and media superstars are all fine with that, acting as though having to show papers to have a meal at a restaurant is somehow wholesome and normal.
People are being denied medical treatment if they are unvaccinated against the Wuhan Flu, which has accounted for the deaths of almost nobody under the age of 50 without underlying health issues, and now the captured medical community wants to "immunize" five-year-olds and are telling pregnant women that it's essential to take the jab or multiple jabs when the actual science suggests that the vaccine may cause stillbirths and miscarriages.
As recently as March of this year, Pfizer, Moderna, and the FDA are silent on these findings, even though the WHO recommends that pregnant women should NOT get vaccinated. Dr. Fauci pushes the vaccines. Facebook bans any talk of negative response to vaccines. YouTube tells you to shut up. They are trying to distort reality, and, to some degree, they've been successful, but the truth still leaks out.
The funny thing about reality is that eventually nobody can deny it for what it really is. Bankers can't make fiat money as good as gold, $3.5 trillion does not cost "nothing" as the brain-dead resident of the White House suggests. Somebody pays; usually, it's working people.
The IRS wants to scrutinize all bank transactions exceeding $600, in case somebody might be cheating on paying their "fiar share." Democrats want to hire 85,000 new IRS agents. They supposedly will be looking into everybody's paychecks every week and every senior's social security check every month. It's amazingly banal, overbearing, and downright stupid.
So, what does any of this have to do with the jobs report, stocks, bonds, and cryptos? Everything, because everything coming out of the mouths of mainstream media reporters, politicians, bankers, Fed officials (who got caught insider trading but will not be charged with anything), and their lackeys at the various government agencies and reporting bureaus is a lie. All of it. Constantly. They feed it to the masses daily. Lie after lie after lie. You can rest assured that whatever they tell you, the opposite is likely true and real, so, when the Bureau of Labor Statistics (BLS) reports today that 580,000 or 737,000 or 201,000 jobs were created in September, it's an estimate, and therefore subject to interpretation and misinformation. The BLS can make that number anything they please, and they usually do and then they revise it a month later.
Money Daily isn't going to report the headline number because it's simply designed to push whatever flavor of economic nonsense they're fronting today and it is nothing more than a huge blaring noise.
But, that was quite a rally Thursday, wasn't it? Not really. Even after Mitch McConnell bailed out the Democrats - to the dismay of many members of his own party - the Dow remains below its 50-day moving average and still in a bear market. 2/5ths of the gains on Thursday were shaved off before the close on all of the major indices. At the end of the day, the S&P 500 and NASDAQ finished well below their 50-day moving averages and are still under pressure.
Let's go, Brandon!
At the Close, Thursday, October 7, 2021:
Thursday, October 7, 2021, 8:38 am ET
Yesterday's post mentioned that the day's trading could be a "red-letter event" and it was... for the bulls in the "buy the dip" camp.
Seldom, if ever are the lows of the day put in within the first hour of trading, but that's exactly what happened Wednesday. Shortly after 10:00 am ET the Dow was down 457 points, the S&P was lower by 54, and the NASDAQ was off 171 points. Everything looked right for a major selloff.
Obviously, it didn't happen. Instead, for about the next 30 minutes, all of the major indices went vertical, though not all the way to positive territory, spending the rest of the morning and into the afternoon bouncing around in the red.
Just after 1:00 pm ET, Senate Minority Leader Mitch McConnell settled the matter for markets when he announced a potential deal with the Democrats to extend the debt ceiling. In plain terms, he caved, as he always does.
McConnell's offer is for a short-term fix, into December, which means if the Democrats bite, they'll have to revisit the issue again in a couple of months, giving the political snakes in Washington another chance to put on a show, trade stock options and make more millions. It's a big show and, having inside knowledge, they all benefit.
In any case, the condition that evolved over the course of Wednesday's trading session is not an isolated case. Some of the biggest rallies occur during bear markets. That's a fact. What moved stocks right at 10:00 am was the ISM non-manufacturing survey for September, which showed a tiny gain - from 61.7 to 61.9 - month over month, but the figure was far ahead of "expectations," which were calling for a decline to 60. Added on top of ADP's bullish private payroll data released earlier in the morning, showing 568,000 jobs created in September, the ISM report was enough to send a strong buy signal.
Even though the reading was only slightly positive, the fact that it was far ahead of what everyone was expecting (and trading upon) was good enough to send stocks soaring. McConnell's gift was a welcome cherry on top, as the debt ceiling has been a major concern over the past few weeks.
The idea that small news items can move markets in big ways is an issue for any trader in a bear market, but especially for those who are short, expecting the market to continue lower. Nothing moves in a straight line on Wall Street. There are just too many moving parts and too many players for stocks to go straight up or straight down, which is why the best traders use straddles, short stops, and other trading tricks that keep them leveraged against sudden moves in either direction.
It's also why traders at Merrill Lynch, Goldman Sachs and the other major brokerages have such a huge advantage over retail traders. Their arsenal of tools and technology and access to inside information puts them ahead of the pack. You can be assured that none of them were caught wrong-footed yesterday, or, if so, not for long. The gravy train was deep.
All that in consideration, stocks haven't escaped from the bear market trend. There could just as easily be a quick move to the downside on Thursday or Friday, mostly dependent on Friday's September non-farm payroll report due out an hour prior to the opening bell. The Democrats could trip and fall over McConnell's offer, call it a trap and reset the dangerous debt default clock.
However, it does appear that stocks may be about to break out to the upside. The Dow Jones Transportation Average, being the key indicator, added another 85.75 points to close at 14,547.49, putting the index at -8.76% from the May 7 high of 15,943.30. That's technically NOT in correction and continued gains could put an end to the bear market.
If that happens, one might think, "boy, that was a really short bear market," and one would be correct in that assumption. For the Transports, it's been five months in the making, but for the Dow and other averages, it's been just one month. But, consider this: the bear market crash in February and March of 2020 began (using the Dow Industrials) on February 12, when the Dow struck a new all-time high. A 10% correction was confirmed on February 27, and it took less than a month for stocks to bottom out, on March 23. By June 6, the Dow was out of correction territory, down less than 10%, and it broke to a new high on November 10.
The S&P did the entire round trip, top to bottom and back to the top in just under six months, February 19 to August 18, 2020, proving that bear markets are often short-lived.
So, if stocks remain under pressure much longer, the bear market will extend. But, if the Dow Transports get beyond 14,900 and stay there - and the other indices follow - then it's back to a bull regime.
Another indicator to watch is how the banking stocks (C, BAC, JPM, WFC, GS) react in relation to the S&P index. If they are trailing it (up less than the index, or down more than the index), then bears are in control. If the banking sector leads, it's a win for the bulls.
Ann hour to the opening bell, US stock futures are soaring, setting up for a huge rally which, if it maintains, is likely to stretch through Friday no matter if non-farm payroll data is good or bad.
The Fed is firmly in control of markets through its financial institution proxies.
At the Close, Wednesday, October 6, 2021:
Wednesday, October 6, 2021, 8:44 am ET
Stocks had a reasonably good day on Tuesday. On the whole, they recovered most, or all, of Monday's losses. This seems to be a recurring pattern and is notoriously bearish.
The Dow and NYSE Composite did the best, but in the bigger picture, the indices that matter most, did not.
At the Close, Monday, October 4, 2021:
At the Close, Tuesday, October 5, 2021:
Among other things that did not happen on Tuesday were:
What the Dow Jones Transportation Average did do was outperform all other indices, rising by 251 points, or 1.77%. What's happening on the chart of the trannies is interesting and likely will replicate itself across all other indices. The 50-day and 200-day moving averages are converging. The 50 is heading South, the 200 North. When they cross paths, the 200-day rising above the 50-day, it's known as a death cross, a well-known signal that the bears are in control and it's time to get out of stocks.
The charts for all the other indices - the Dow Industrials being the most prominent - are beginning to trend in that direction. The 50-day moving averages are all beginning to point downwards, which is never a good sign. And the 200-day is coming up to meet its more youthful cousin. This normally indicates that a correction is dead ahead, if not something more severe.
Corrections are not to be feared. There was once a time on Wall Street when they were almost celebrated. In a healthy economy (ours is not) a 10-15 percent decline on the major averages clears the deck, so to say. Bad investments are punished, prices readjust to more sustainable levels and stocks can begin to rise from a more comfortable level.
Clearly, US and other major equity indices around the world are exceedingly pricey. Some even say they are in a bubble. Since the crash last February and March, stocks have gained significant ground, exceeded their prior highs and moved to extremes. The underlying economies around the world have not recovered to such an extent. Many small businesses closed; many people were supported by various stimulus programs from governments. Now, the free money spigot has been mostly shut off. All that's left is the monthly $120 billion handout from the Fed to the banks - the purchasing of treasuries and mortgage-backed securities - and the Fed appears intent to slow that gradually until it is gone.
Without fresh money, the value of equites will decline. Interest rates will rise as economic conditions tighten. What the Fed and the US government have done is impeded this natural cycle of events. They've disallowed failure by propping up everything so that the stock market stays at elevated levels or goes even higher, as has been the case. The general economy limps along on borrowed money and borrowed time. That is all coming to an end and the recent activity in both the stock and bond markets ae sending a clear signal of what's underway.
It's being done gradually so as to not alarm the general public. Nobody likes panic in the streets and the powers that be are doing their level best to prevent the worse from occurring, but, after a while, the market makes its own decision on where it's headed and neither the Federal Reserve, the federal government, or all the armies of the world will be able to stop it. It's a natural force and it will go its own way.
This adjustment to a lover level in stocks and higher interest rates for bonds has been apparent all through September and even as early as mid-to-late August, when the Dow Industrials began following the Transportation Average down the rabbit hole. As September turned to October, the condition became somewhat undeniable. Stocks had no catalyst from which to gain. The losses became more severe and longer-lasting. Volatility, which works both ways, has been evident in the sharp upswings and deep dives in the markets.
Currently, the major indices are in their deepest and longest decline since late Spring. The NASDAQ made new highs in late April, but then declined and didn't make another new high until mid-to-late June. It's last new high was just after Labor day, a month past, and it has lost roughly 1000 points since then. It would need to turn around abruptly in order to make new highs by early November and there's the possibility that it might, after falling into correction, begin to make progress, but there's a vast jungle ahead that will be difficult to navigate.
First, congress needs to come to a decision on the debt limit and the spending bills before it. That could happen at any time, but historically, congress waits until the very last minute, showcasing their dramatic skills at negotiating with a resolution just before the buzzer sounds. Since the politicians run on their own time and calendar, any resolution would likely come next week or even next weekend. The odds are good that they will pass a debt ceiling extension or suspension, but they will fail on their spending bills, which won't be resolved until late October or even into November.
On Friday, September non-farm payrolls will be reported. Estimates are all over the map, from as many as 700,000 new jobs to as few as 225,000. Just mintues ago, markets got what amounts to a hint, as ADP reported a gain of 568,000 jobs in the private sector, topping estimates. US equity futures rose off their lows on the news. Asian stocks were not so fortunate. South Korea was down 1.82 and the NIKKEI was down another 293 points or nearly one percent after falling more than 660 overnight Monday into Tuesday. European stocks remain under pressure, down between 1.4 and 1.8%.
Next, third quarter earnings begin to be revealed next week. They may be good enough to give markets a little buoyancy and if congress manages to finally move on the debt ceiling, stocks could gain significantly, possibly pulling above their 50-day moving averages and upward and onward, though there would still be the stumbling blocks of government spending legislation and funding for the government, which runs out December 3rd.
There are too many ifs and buts hovering around markets for a meaningful rally to be initiated, and, with less than an hour to go before the opening bell, today looks like it could be a red-letter event.
Tuesday, October 5, 2021, 8:30 am ET
Lately, we've all been hearing terms like "pre-pandemic," or "2019 levels," to describe the state of the 2021 economy, because, as just about anybody is aware, 2020 was pretty much a disaster for business, social life and just about any kind of activity outside of trading stocks or selling vaccines.
While the US and global economies struggle to get back on some semblance of level footing, there remain some significant stumbling blocks that have yet to be overarched. Supply chains have been broken and not repaired in many industries, inflation is running hot, the US congress and presidency continues to operate in much the same manner as before the virus crisis and bloodless coup (when it shouldn't be), and, apparently, the virus crisis isn't yet finished.
For those unfamiliar with a calendar, it's October, a month when bad things generally emerge to wreak havoc, especially on financial markets, and, if getting back to 2019 levels is important, then stocks are perfectly positioned for a large correction.
Why? Well, if everything is measured against 2019, stocks are a significant outlier. They've already gone well beyond their 2019 levels, by leaps and bounds. If we really want to get back to 2019, the major indices would be at much lower levels than they are currently.
Let's have a look at where the Dow, NASDAQ, and S&P were trading on October 4, 2019, February 12, 2020 (just before the crash), and yesterday.
Well, excuse our naivety. These indices should be much lower if the desire to return to pre-pandemic levels is so strong. From a very pedestrian perspective, one might easily conclude that the US and global economies are not in any better shape than they were in 2019. In fact, it's pretty obvious.
Inflation is higher, unemployment is higher, productivity is lower, many small businesses have closed or shut down, and, instead of a rambunctious, renegade president who preached "America First," we have a phony resident of 1600 Pennsylvania Avenue who allows easy passage across our borders from hundreds of thousands of illegal immigrants, preaches "wokeness", and botches just about everything he touches. It seems like the only things not returning to 2019 levels are stocks, food prices, and the cost of housing (and everything else). Oh, and competency in government.
There are terms to describe such inconsistencies. A few of them are fraud, currency debasement, wealth disparity, and a product that exudes from the hind quarters of a male cow. Please choose your lingo carefully, lest you get the Facebook treatment (shut down for a day) or Google blocks your transmission. Shhh, they're watching and listening.
Considering the current state of affairs, maybe the stock market and housing market (and food prices) are just taking a little longer to get there. After all, stocks have begun what looks like a correction that might turn into something even worse.
From their recent highs, the Dow has lost 4.62%, the NASDAQ is lower by 7.28%, and the S&P is down 5.22%. Well, it's a start, but, boy, is there ever a long way to go. Let's hope people come to their senses on Wall Street and get those persnickety stocks back to pre-pandemic levels of enjoyment.
Maybe then we can all take off those stupid masks, stop listening to people telling us we must get vaccinated, re-vaccinated and boosted, find an affordable apartment, and have a nice steak dinner that doesn't cost $60 a cut.
At the Close, Monday, October 4, 2021:
Sunday, October 3, 2021, 11:45 am ET
Friday's huge relief rally - based mostly on technically oversold conditions, short covering and massive stock buyback programs - may have given the bullish clan some reason for hope, but hope is about all they'll get and it's not an investment strategy, at least not a good one.
Even with the big move Friday, stocks had a terrible week, led by the NASDAQ, which suffered its biggest weekly loss since May, down 3.20%. While the other indices were down less on a percentage basis, they were all uniformly down for the third time in the last four weeks. As for the bearish stance of markets based upon Dow Theory, the Dow Transports finished Friday at 14,250.71, a gain of 248.29 (+1.77%), but still ended the week down 92.78 points (-0.65%), remaining in correction territory, though just barely, down 10.6% from its May 7, high (15,943.30).
While many in the bill camp are going to cling to the belief that stocks always go higher, their resolve has been tested throughout the month of September. Notably, the 30th (Thursday) was one of the larger setbacks for stocks on a day which would normally been a winner due to "window dressing" by funds wishing to own stocks in public favor. That was not the case. It seemed rather that fund managers were more interested in ditching losers than adding to or staking out new positions on Thursday. Friday saw the markets continue to plunge until late morning when the entire market turned around, headed higher and never looked back until the last half hour of trading, which was weak.
The major indices are still stuck between their 50-and-200-day moving averages. The Dow Industrials have traded in that range since right after Labor Day, spanning 17 straight sessions.
The coming week may be a dicey one for equities. Among the crosscurrents which may swing stocks in either direction are:
On top of those issues, there's the ongoing Covid and vaccination crisis, rampant inflation, and migrants streaming into the US across the border with Mexico.
After the coming week, the second full week of October brings earnings reports from the banks and airlines, though those may be overshadowed somewhat by some of the pressing matters listed above.
While none of it sounds very positive, Wall Street could determine that congressional inaction may be more desirable than more wildcat spending as the Dems have proposed along with higher taxes. It's the height of pretzle logic, but other minds may see the deadlock in congress as an impediment to growing the economy, even if that matters.
While stocks see-sawed their way through another distressful week, daily treasury yields followed suit, with the 10-year yield rising from 1.47% to as high as 1.55% by midweek, only to fall back to 1.48% on Friday, a move not.net of just one basis point. The 30-year bond yielded 1.99% to start the week, ramped as high as 2.08% and ended at 2.04%.
The short end of the curve saw increased activity, especially on the one-month note, with the yield gaining to 0.08, reflecting the possibility of a government default. With both houses of congress out of session this coming week, that yield should remain high and could expand further if sentiment on a default becomes more pronounced.
WTI crude oil ended the week at $75.74 a barrel, the highest price in seven years. Gas prices, which had been falling or stabilizing in recent weeks, shot higher, above a national average of $3.19 per gallon.
Cryptocurrencies ran wild late in the week, with Bitcoin leading the charge. After hitting a weekly low of $40,750 on Tuesday, Bitcoin advanced to $48,500 on Friday, the level at which it currently is holding steady.
Gold and silver were both slightly higher for the week, though still depressed from previous levels.
For the year, both metals are down. Gold ended 2020 at $1887.60 per troy ounce, a loss of 6.7% so far this year. Silver closed out last year at $26.49 and has slumped 15% this year.
Gold price 9/24: $1750.20
Silver price 9/24: $22.39
Here are the latest prices for common one ounce gold and silver items sold on eBay (numismatics excluded, shipping - often free - included):
Item: Low / High / Average / Median
The Single Ounce Silver Market Price Benchmark (SOSMPB) settled at $36.25, a decline of 57 cents from last week's price, $36.82.
China is exporting deflation, currently sitting in 70+ container ships moored off the California coast.
The USPS announced a second price hike this year on the most popular forms of shipping, taking effect today, October 3, just in time for the holidays. The service also planned to slow the mail during the holidays. Makes you wonder just whose side they're on.
At the Close, Friday, October 1, 2021:
For the Week:
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