“Mamma said there’d be days like this….there’d be days like this my mamma said…”
And so it goes….the mkt rolled over yesterday….shaving some 225 pts off the Dow (15,112) -..leaving this classic benchmark well below its 50 DMA of 15,280. The S&P also suffered a bit – down some 24 pts ending the day at 1661 – just slightly higher than its 50 DMA of 1656. Why the surprise? It’s not like we got hit out of left field…how long have we been discussing weakening and disconnected US macro data points, the threat of a Fed Taper, higher interest rates, mixed earnings (at best) and mkt action based on artificial stimulation….. Come on……..
More disappointing earnings from Wal-Mart, Cisco, and even Nordstrom’s….Just like Macy’s did on Wednesday….Wal-Mart cut its estimates for annual revenue growth – essentially calling for ZERO revenue growth – sending out the S.O.S signal – SHOPPERS ARE SPENDING LESS. The message could not be clearer…..concerning the 150 mil+ Wal-Mart shoppers….
On the other side of the coin – the Gov’t reported that initial jobless claims fell to their lowest level since 2007 – suggesting an improving job mkt – which then causes more speculation of the Fed taper….(loss of all that artificial stimulation) causes bond prices to fall and yields to rise….10 yr treasury now yielding some 2.75% – the highest since July 2011. Higher rates in a fragile recovery might serve to choke off any recovery…so the jury is still out…..but the mkt is re-pricing based on all this conflicting data. The mkt is in fact making a decision – something that the Fed does not seem able to do….
Again – I will point out that the gov’t macro reports do not support each other….Yesterday we learned that Ind Prod dropped to 0% vs. the 0.2% read in June. So – get this…..The ISM (Institute for Supply Management) report told us that production increased to their highest levels since May 2004…while gaining the most in one month since June ’09. If that is the case – HOW CAN THE INDUSTRIAL PROD REPORT SHOW A DECREASE? Within this report we saw manufacturing production decline 0.1% and vehicle production fall by 1.7%….HELLO???? Something stinks……in addition both the Philly Fed and the Empire state Manf reports showed declines vs. expectations….another DISCONNECT…… Remember – if you fudge the numbers – you MUST carry that fudge across all of the excel spreadsheets….(accounting 101).
Gold has become the beneficiary of investor money again…..as money comes out of bonds over fear of tightening/tapering – and investors wait for further equity declines..the money needs to go somewhere…..and investors seem to be comfortable with Gold…..as it has rebounded nicely off the June 27th low of $1145/oz….to end the day yesterday at $1361/oz and increase of some 18% in 6 weeks. Not so shabby……
And the idea that the FED will taper – caused a rally in the $ index….as well as crude oil…..now up 16% off its June lows…..but there are clearly some other reasons that oil is moving higher…. Geo-political unrest continues to be the main driver of oil prices – Events in Egypt causing re-newed global concerns for the world community – (Never mind the continued slaughter of innocents in Syria.)
Back here at home – yesterday’ action will cause some re-newed analysis….we broke some key tech levels….1680 then 1670 and then tested (intraday) the 50 DMA at 1656. For now – it seems that the buyers are making somewhat of a stand at that level…..but beware – the DOW broke down and thru its 50 DMA so this pullback may not be completed….Yesterdays pullback caused momentum to shift into negative mode….at least for now….but I would be slow to “break the glass and pull the fire alarm”. The broader trend line from the lows of November have not been violated – the S&P would have to breach 1624 for that to happen -( a 5% correction).
I do think that the FED is deliberately leaving the conversation cloudy…causing traders to lighten the load….and take some of the air out of the mkt….If it plays out the way that so many strategists have called for – sunnier skies are ahead.
This morning futures are +5 at 1660….macro data today includes – Housing Starts exp to be 900k and building permits exp to be 945k…..Non Farm Productivity is also due out and the exp is +0.6%. A bounce today would not be a surprise at all….but another test of 1655 ish should not be ruled out -and if that does not hold then the November uptrend line at 1624 would be the broader support. ….any attempt to rally back to the 1675 level will be met with selling – as this was the level that presented a lot of resistance on the way up. It is Friday in the summer….but the tech break yesterday will cause large asset managers who have been waiting for some kind of a pullback to put some of that money to work…The question is – will the sellers continue to be the aggressor?
Take good care.
Grilled Lobster in Herb Butter
Summer is coming to an end…..so while the sand is still warm under your toes and the ocean water delightful……go for the Grilled lobster tails. You will need – lobster tails, olive oil, herb butter*, fresh lemons, s&p. Preheat the grill to med high -
*Herb butter – make a puree of minced garlic and shallots and mix into the softened butter.
Take the tail and slice open – pull the meat out somewhat – not completely removing from the shell. (Shell remains part of the presentation) – rinse and pat dry……Mix a bit of olive oil, herb butter, lemon juice and S&P in a bowl. Brush the mixture onto the meat of the tail. Place on grill – meat side down and cook for about 1 1/2 mins – turn and cook for another min or so. Remove from grill.
The lobster should still be somewhat pink (not cooked). In a sauté pan – melt some more of the herbed butter and add about 1/4 c of water (you can use a dry white wine if you prefer – I like the water as the herbed butter offers enough flavor) – add chopped Italian parsley……….Bathe the lobster in the melted butter sauce – keeping the heat on med low….. spoon the sauce over the meat for about another 3 or 4 mins… Place on warmed dish with a couple of spoonfuls of the butter sauce dripped on it. Serve this with corn of the cob and roasted potatoes.