Friday, April 23, 2010

Morning Update/ Market Thread 4/23

Good Morning,

Equity futures are flat this morning, the dollar index is higher, bonds are lower, oil and gold are both slightly lower.

Yesterday’s action saw a large move lower with an even larger reversal to close slightly higher. The action over the past few days has produces a symmetrical triangle in the SPX which makes it appear that we have formed a sideways wave 4 formation that will most likely lead to a wave 5 higher. That triangle is outlined on the 30 day, 30 minute SPX chart below:

If that pattern is playing out, we may need to descend one more leg down into the triangle and then bounce back up – hey, just in time for a Monday ramp job?

Both the NDX and RUT made new highs yesterday, once again the market is not moving to new highs together, it is requiring the rotational trade to do so, the same type of action that was occurring all during late 2006 and most of 2007 prior to October of that year.

Spreads have continued to ramp for Greece and most of Europe, the Euro hit another new low overnight, evidently this was enough pressure to get Greece to capitulate and ask the IMF for loans, this is according to a Bloomberg report. If true, the people of Greece had better get busy and run their government out or they will be staring at a future owned and controlled by the central banks – a fate I certainly wouldn’t want to leave to my children.

The headline on Bloomberg says, “U.S. Durable-Goods Orders Excluding Transportation Jump by Most Since 2007.” Sounds terrific! Yet, when you go to look at the details you will find that durable goods orders for March FELL by 1.3% when the consensus was looking for a positive .4% increase. Not to worry, because when you remove aircraft orders from it (besides military hardware about the only thing we still know how to make), it was positive. This is the ridiculous type of reporting and hype that just seems to never stop. Here’s Econoday’s cheerleading:
Aircraft orders pulled down the headline number but otherwise, durable orders look great. New orders for durable goods in March dipped 1.3 percent after gaining a revised 1.1 percent in February. The headline number came in well below market forecasts for a 0.4 percent rise. Excluding the transportation component, however, new durables orders spiked 2.8 percent, following a revised 1.7 percent rebound in February. Transportation fell 12.9 percent in March with civilian aircraft leading the decline, decreasing a monthly 99.5 percent. Outside of transportation, gains were widespread.

On the upside were primary metals, up 3.5 percent; machinery, up 8.6 percent; electrical equipment, up 4.9 percent; and "other" durables, up 0.1 percent. In addition to transportation, fabricated metals decreased-by 1.2 percent.

Nondefense capital goods orders excluding aircraft gained another 4.0 percent in March, following a 2.1 increase the month before. Shipments for this category-and source data for equipment investment in GDP-rose 2.2 percent in February, following a 1.5 percent increase the month before.

Year-on-year, overall new orders for durable goods in March were up 11.9, compared to 11.4 percent in February. Excluding transportation, new durables orders improved to 13.5 percent from 8.5 percent in February.
The year over year figures are up, but not because of growth, it is because the previous March was a complete freeze that had fallen below the previous February.

This same type of easy year over year comparison has many people fooled into believing that earnings season has been terrific. Remember that a year ago in the first quarter our economy was frozen solid, nothing moved. So let’s say a company managed to earn a grand total of ten cents, if they now earn twenty cents then their profit rose by 100%! What’s important is the trailing price to earnings figures which are still far above historic norms – that means that stocks are expensive. Future and “operating” P/E’s are nothing more than a marketing tool, forget them – they are forecasts made by marketing people who may actually believe they are accountants or corporate executives – they are all marketing, you have seen time and again how accurate their forecasts are.

New home sales are released at 10 Eastern this morning.

Here’s a headline and article for you:

SEC staffers watched porn as economy crashed

(CNN) -- As the country was sinking into its worst financial crisis in more than 70 years, Security and Exchange Commission employees and contractors cruised porn sites and viewed sexually explicit pictures using government computers, according to an agency report obtained by CNN.

"During the past five years, the SEC OIG (Office of Inspector General) substantiated that 33 SEC employees and or contractors violated Commission rules and policies, as well as the government-wide Standards of Ethical Conduct, by viewing pornographic, sexually explicit or sexually suggestive images using government computer resources and official time," said a summary of the investigation by the inspector general's office.

More than half of the workers made between $99,000 and $223,000. All the cases took place over the past five years.

The inspector general's report includes specific examples of misuse by employees.

A regional office staff accountant tried to access pornographic Web sites nearly 1,800 times, using her SEC laptop during a two-week period. She also had about 600 pornographic images saved on the hard drive of her laptop.

Separately, a senior attorney at SEC headquarters admitted to downloading pornography up to eight hours a day, according to the investigation.

"In fact, this attorney downloaded so much pornography to his government computer that he exhausted the available space on the computer hard drive and downloaded pornography to CDs or DVDs that he accumulated in boxes in his office," the inspector general's report said.

"It is nothing short of disturbing that high-ranking officials within the SEC were spending more time looking at pornography than taking action to help stave off the events that brought our nation's economy to the brink of collapse," said Rep. Darrell Issa. The Republican is a ranking member of the House Committee on Oversight and Government Reform.

"This stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority," he said.

"Inexplicably, rather than exercise its existing regulatory enforcement authority, SEC officials were preoccupied with other distractions."

The investigation came to light on the same day President Obama gave a speech in lower Manhattan, calling for reform in the finance industry.

My, that’s an interesting one. Again the timing on this release certainly makes me go “hmmmm.”

All I can say is that the degeneration of morals and ethics across the entire spectrum is simply amazing, it is reminiscent of late stage Roman Empire.

Don Henley – The End of the Innocence: