Wow, what a market!
Not the actual daily market but that pre-market continues to be the BEST place to invest as we're now (8am) up 70 points from yesterday's 2:30 low. 2:30 is the traditional beginning of the "stick save" phase of the day's trading and the expectations of low-volume market shenanigans kept us on the sidelines yesterday although we were shorting the S&P futures at 1,125 early on but that was pretty obvious as you can see from this Fibozachi chart and we were done with that trade at 1,122 – not trying to be heroes.
I was pointing out to members yesterday afternoon that, as impressive as this little holiday rally may seem, it's very lame compared to last year's 1,500-point run (20%) from Thanksgiving (11/21) through January 2nd with a nice 600-point move between Dec 24th and Jan 2nd. This is a very low-volume spike up – the kind of pride that often comes before the fall:
What is it we're all excited about? On November 20th the Dow was at 10,318 and now we're at 10,550, up a whopping 2.2% over the same period. What's up with that? I thought things were FANTASTIC this year, I thought on-line sales signaled the second coming, I thought the consumer is back and demand for commodities is through the roof and we're going to be hiring people again and our credit problems are solved and the banks are all solvent (other than the 150 that were seized, of course) and that rates were going to stay at zero forever and the government was going to spend Trillions on infrastructure with borrowed money that we'll never have to pay back so we'll all be rich, rich, RICH!
Is that not true? Well, to be fair, if we pull way back to November 2nd, we were way down at 9,500 so we could say we're having a 1,000-point rally (10%) since then. There – doesn't that make you feel better? We first broke 10,400 on Nov 16th and we've hovered pretty much between 10,300 and 10,500 since then until Christmas Eve, when Santa popped us through the top and yesterday we raced up to just under 10,500 at the close and this morning, the futures are pointing to 10,580 – a level we haven't seen since the beginning of October last year, when we were in the first 1/3 of a 3,000-point drop. Ah, good times!
Global markets have already made a spectacular 85% turnaround in growth rate and we are pretty much at the halfway point back to the tops we enjoyed in late 2007 with global markets closing back in on that $50,000,000,000,000 mark. It takes roughly a 10 cent inflow of cash to move the markets up a dollar so, to get back to $62Tn from here ($46Tn) ALL we need to do is coax another $1.6Tn off the sidelines. Is there $1.6Tn on the sidelines? I don't think that matters as GS and the Fed manufactured far more than that this year between discount window borrowing and high-frequency trading – they've built this house of straw up in record time – let's just hope there aren't any big, bad wolves out there looking to knock it down…
The Hang Seng ran into a roof of bricks today at 21,500 while the Nikkei flatlined just under 10,650, waiting for the US markets to confirm a breakout before they test their own highs for the year. The high for the Hang Seng was 23,000 this year but it's understandable that Hong Kong is tentative as the mainland Shanghai Composite is still struggling to retake 400. The FTSE is making new highs for the year at 5,400 and the DAX is coasting along above the 6,000 mark so this is our race to lose this week as the rest of the World looks ready to rumble.
7,285 is the magic number on the NYSE. That's the only thing holding the US markets down this week. Cynics might say that that's because it's a broad index and can't be manipulated like the Dow and Nasdaq can but I like to say it's just waiting to be sure and, at 7,261 yesterday – it shouldn't take much to pop us over this morning.
We've got good news on Retail Sales from the ICSC (up 2.3% from last year) and from Redbook (up 1.9%) and Case-Shiller indicates housing is "only" 7.3% worse than last year vs. -7.7% expected although there is no improvement from last month, I doubt anyone will care – or at least not anyone who has any control of the markets as "THEY" are determined to finish this year off with a bang and we are just lucky to be able to sit back and watch.
With a global terror alert and Billions of people scheduled to be gathered together in very exact places at the stoke of midnight on Thursday – you'll forgive me if I'm not in the mood to go long into the holiday – even if we do break our levels. But, if we hold up here next week, when the volume comes back – THEN I'll be impressed.
Be careful out there!
