This week we found out that the market has very little go-go juice left or that it really just doesn't care anymore about surprise central bank stimulative measures now that the big player, the US is gone and the other big player up to now, Japan, is seeing its central bank openly question the wisdom of continuing with asset purchases. Just today BOJ board member, Takahide Kiuchi, who is one of 4 on the board who voted against Kuroda's additional easing from last year said today that the risks of more QE now outweigh the benefits and that the easing steps are unsustainable. This is the second very public opposition of additional QE in Japan.
As usual, the half-life of anything Draghi done is now a day, even when launching QE, of course there are just about as many questions as answers as to how it is logistically possible with not enough net issuance for the ECB to even monetize.
Also weighing heavy, despite the Greek "Deal" reached last month, the Greek government struggled to make an IMF loan payment of #310 mn Euros today, raiding pension funds. The situation is so bad that the politicians are proposing hiring 2 month workers to pose as tourists with cameras and recording equipment to catch tax cheats or at least to scare everyone in to not knowing how might be listening or watching. However in the mean time after scraping under the sofa cushions to make this $310mn IMF payment, it has $350 mn due march 16th and again March 20th. The consequences of which Tspiras said were grave and the EU's responsibility, so the Greek Tragedy is far, far from over.
This morning's jobs report is the last one that will be issued before the F_O_M_C meets on March 17th and 18th and suddenly everyone who has been saying a rate hike won't occur this year has changed their tune to "It's likely the F_O_M_C removes language at the March meeting" allowing them to hike rates in June.
As for the market this week, the SPX saw it's worst day since January 5th and this simple indicator of percentage gains will show you why I'm not a fan of chasing assets and rather getting in at the emotionally "difficult" areas.
Note the clear divergence in price percentage gains by the day, it's an interesting indication on its own, but really shows you the diminishing returns and higher risk level taken by chasing.
Remember a break below the range is typically what a failed breakout (head fake move) does and it creates extra momentum on the bull trap set above the range as amazingly from my sentiment reports, the bulls are still wildly bullish, EXACTLY what I was talking about last night and how this time is different than the September highs that led to the trendline break and the October lows.
On a weekly basis here's the performance of the major averages...hint, all were red on the week and month,
In addition as mentioned, Transports have not confirmed for 2015 and Dr. Copper is already way out of sync with the market and the newer Dr.Lumber saw horrendous performance, down for almost 2 trading weeks now, again, not confirming or rather diverging just like HY Credit.
The averages' performance YTD isn't much better...
On the time axis you can see our base and divergence as well as the larger returns that could have been made, after a certain point though, we are not only seeing a change in character, we are seeing an increase in the risk:reward ratio.
Treasury yields flew this week, 20-25 bps except for 2 years which hit 11bps for the week and they were up 10-13 bps on the day after the good news is bad news jobs report. This was actually the worst week for bonds since September 2013, which is why I have said I am not so sure about the long term prospects for bonds now unlike last year when we had beautiful charts. I still expect that short term yields will start to dump.
Commodities as we have been watching as a leading indicator again also sold off on the week, our oil scenario is still the working theory and there are some reasons I have found for gold to rally even without a rise in inflation so we'll be watching those carefully.
As for the Dominant Price/Volume Relationship, the Russell 2000 didn't have one. The NASDAQ was alone with 64 stocks at Close Down/Volume Down, which is what I call, "Carry on" as in there's no near term bias to interfere with the current trend.
The Dow and S&P were a bit different and more in line with our early forecast for the week ahead, early strength as both came in at Close Down/Volume Up, which is sometimes seen at an initial sharp break, but more often than not, it's a 1-day oversold condition that sees the following day close green. There were 22 Dow 30 stocks and 275 SPX-500 stocks.
All nine S&P Sectors were red on the day with financials seeing the best performance at a loss of -.86% and Utilities lagging at a loss of -3.02%.
As for the weekly performance, all S&P sectors are red on a 5 day and a 10-day basis, ALL.
This is certainly a short term oversold condition, but again, when a market is breaking down, it can sometimes be difficult to tell just how oversold is oversold.
As for the 238 Morningstar groups we track, a mind numbingly low number, only 19 of 238 closed green today, the rest were red, again another short term oversold condition in line with the assumptions of the Week ahead post for early next week. Amazingly on a 5 day basis, only36 of 238 were green, IN OTHER WORDS TODAY DID SOME MAJOR DAMAGE.
AS FOR BREADTH INDICATORS, ALL THE ONES I MENTIONED, THE MCO, ABI, CVI, ZBT ALL DECLINED TODAY, BUT MOST SPECTACULARLY, THE PERCENTAGE OF NYSE STOCKS ABOVE THEIR 40-DAY MOVING AVERAGE THAT HASN'T MOVED FOR 22 DAYS, DROPPED FROM 64% TO 49% TODAY, LESS THAN HALF OF THE NYSE IS ABOVE ITS OWN 40-DAY MOVING AVERAGE.
That will do it for tonight, enjoy your weekend and check for a Sunday night update as I'll check futures as always.
Enjoy!
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