Huge Sugar Rally After Five Weeks of Losses

It will be interesting to see if there is any follow-through, since this was just a short-covering rally! This was truly a parabolic move. Parabolic up, parabolic down!

ICE raw sugar futures surged to post their largest daily
gain since November on a short-covering rally, while cocoa
futures sank under pressure from technical weakness and
expectations of ample supplies. 
    July raw sugar on ICE Futures U.S. jumped 0.54 cents,
or 3.2 percent, to settle at 16.78 cents per lb in
technically-driven dealings after prices sank to 16.17 cents on
Thursday, the lowest level for the front month since July 2010.
    It was the front month's steepest one-day gain in seven
months, pushing sugar to a weekly gain of about 2 percent after
five weeks of losses.

Stocks Waffle, Close Near Day's Lows

Dow down 106.

Inflation surged today, mostly due to energy costs.
US Industrial Production weakens. 
Detroit defaulted on its debt today.
Crude oil hit the highest price in months.
Eurozone stocks now down four consecutive weeks.
US Treasuries owned by foreigners plunged in April.

Stocks Rally 325 Points from Bottom

Modestly good retail sales, but certainly not worthy of this kind of rally.

Stocks Rally From -100+ to +100+

Stocks market rallying today (Dow up 111 so far) on news that retail sales was pretty good. But if that's true, why is credit card usage DECLINING? If consumer confidence is as strong as they want us to believe, then why aren't people using their credit cards? Something is wrong with that picture!

Does this data sound like a robust economy:
The growth of U.S. retail spending (excluding autos) slowed from an annual average pace of 8 percent in 2011 to 5.1 percent in 2012. In the first five months of 2013, U.S. retail sales have been growing at an annual average pace of just 3.5 percent. What does that trend tell us?

After Attempt to Rally, Stocks Collapse

New Twist: Stocks Up Sharply Overnight, Go Negative in Day Session

The Europeans were rejoicing at more central bank interventions overnight, and Wall St is worried that Fed "tapering" will suppress stocks. Dow down 80.

Euphoria Is Back!

Stocks up 170 points in anticipation of more Fed easy money.

Euphoria! It's baaa-aaaack!

Stocks Rise On Mixed Data

Unemployment rate stayed the same at 7.6%.
175,000 jobs created -- modestly better than expected.
Manufacturing jobs contracted 3 consecutive months. Not good!
April jobs revised DOWN. Not good!

But stocks are higher. Wall St traders trade headlines, not fundamentals.

The bubble builds:

Interestingly, John Hussman said this earlier this week in his market commentary:
"...the most severe market losses on record have been accompanied by aggressive /Fed/ easing. Without question, quantitative easing has been very effective in suppressing spikes in risk premiums in recent years. More recently, it has been effective in removing any perception that stocks have risk and creating the impression that easy money is enough to override every possible economic or financial concern. But that is where perception has moved beyond reality. There is no evidence in the historical record for such optimism...It is superstition to believe that monetary easing is a panacea. Investors who recognize (actually, simply remember) this now are likely to fare better than those who are forced to relearn it later.

Needless to say, all of this will be summarily ignored by speculators who have been rewarded by the strategy of following the Fed in a mature, overvalued, overbought, overbullish, unfinished half-cycle that recently hit new highs."


"… the last two 50% market declines – both the 2001-2002 plunge and the 2008-2009 plunge – occurred in environments of aggressive, persistent Federal Reserve easing."

John Hussman, PhD

Morning Headlnes for June 7th

What a bizarre scenario when Wall St sees bad news as good for stocks, and a good jobs report would be perceived as BAD for stocks:

And stocks are holding onto yesterday's gains despite this morose news that Germany's economy is showing greater weakness.

Dow Up 80 On This News

The bubble mentality persists!

Stocks Down Again

The Fed appears to be trying to pop the bond and stock bubbles by talking us off the ledge, without doing any harm to the broader economy. I have my doubts, but will be waiting to see the impact. Dow was down another 100 points a few minutes ago.

My hunch is that this will only cause the economy to revert back to its downward path. As interest rates rise, it will hurt consumers, corporate profits, and especially the housing sector. It won't take long to manifest itself, most likely by the end of the summer.

Dow Plunges 217 Points

Wow! This was an even bigger drop than last Friday's 209-point plunge!

Is It a Crash Yet?

I Love Bubbles

Wages Decline for Americans

Trade War

Trade wars were a major contributor to the depth of the Great Depression. This is point that historians of all political persuasions agreed upon.

Stocks Start Out Lower

ADP Shows only 135,000 jobs created.
Wages declined 4.3% in May.
And Wall St is betting big on risky CDOs.

Stocks Slide Even on Tuesday

Dow is down 123 thus far. It doesn't look like today is going to be another stock pump Tuesday. It will be the first down Tuesday in 21 weeks!

Cotton Limit Up; Coffee, Cocoa Up Following Downtrends

* Rally ends 9-day losing streak, rises almost 4 pct
    * Synthetic prices pointing higher
    * Bulls points to tighter supplies

    NEW YORK, June 3 (Reuters) - ICE cotton staged its biggest
one-day gain in over seven months and settled limit up on Monday
as speculative investors piled back in to buy after prices sank
to four-month lows at the end of last week.
    Bringing an end to a nine-day losing streak, prices jumped
2.5 cents per lb in the final 90 minutes of trading as
speculators piled back in betting on tighter U.S. supplies with
just two months until the end of the 2012/13 season.
    Traders saw no obvious trigger for the sudden surge late in
the morning, but Ron Lawson, a partner at commodity investment
firm LOGIC Advisors, said the market had finally woken up to the
bullish factors that he expects to support prices.
    "You had nine days down and it ran out of selling. The U.S.
is sold out. Australia is sold out. China's been buying. The
only cotton left is certified stock," he said. 
    The most-active July cotton contract on ICE Futures U.S.
 rose 3 cents, or 3.8 percent, to settle at 82.36 cents
per lb, its daily limit price. That was its best one-day
performance since October.

Stocks Higher Following ISM Disappointment

"More importantly, this was the worst ISM headline print since June 2009, the first sub-50 print since November 2012, while the New Orders of 48.8, was the worst since July 2012."
 
Not exactly what I would call "soaring", but the Dow is up 60 points, while the S&P is flat. It appears Wall St is already shrugging off not only last Friday's revelation from an internal Fed report indicating their concern that they have created stock and bond market(s) bubbles, but today's latest bad news also. That alone is classic bubble behavior!

I am currently reading Didier Sornett's erudite and esoteric book, Why Stock Markets Crash. I had to acquire it via an interlibrary loan from a university library.

How Do You Spell C-R-A-S-H?!

You don't! You just show a picture instead! Down down 209 points today!

Consumers Confident, But Tapped Out

Stocks: Bad News Is Good News As GDP Revised Downward

But stocks leaped higher on this news!

Stocks Decline, Interest Rates Rise

Bernanke's Bubble! Bernanke's Folly!

Bubble, bubble, toil and trouble...!

Bubble Building the Bernanke Way

Lumber Prices Suggest Housing Recovery Is An Illusion

If housing has recovered, then why is the demand for lumber so soft?

Jobless Claims Leap Most In Six Weeks

...but stocks leap higher also.

U Mich consumer confidence beat expectations significantly.

"We See Bubbles Everywhere!"

"We see bubbles everywhere, and that is not to be dramatic and not to suggest they will pop immediately. I just suggested in the bond market with a bubble in treasuries and bubble in narrow credit spreads and high-yield prices, that perhaps there is a significant distortion there. Having said that, it suggests that as long as the FED and Bank of Japan and other Central Banks keep writing checks and do not withdraw, then the bubble can be supported as in blowing bubbles. They are blowing bubbles. When that stops there will be repercussions...
 And today from Bill Gross, on why QE is not working as intended, and why the Fed's channels are not only clogged but never worked as intended in the past four years: 
"Does it mean it is a good thing that capitalism should thrive under this quantitative easing posture on the part of central banks that distorts markets and this court's capitalism and promotes a zombie corporations and lowers net interest margins and destroys business model? All of that is the negative aspects of quantitative easing. Can we live with? I do not think this will be with us for a long time."
Isn't it interesting that when a hedge fund manager said two days ago that he thought stocks looked good, the market exploded higher 125 points. But today, when billionaire investor, bond guru, and PIMCO CEO Bill Gross explicitly says that they are seeing "bubbles everywhere", and especially in stocks, he is ignored and the stock market is flat! This is a textbook case of a stock market bubble as explained in the book Why Stock Markets Crash, a very arcane book by Didier Sornette!

More Morose Economic News

Dreadful Divergence Between Macro Data and Stock Market

THIS IS WHAT A BUBBLE LOOKS LIKE! 
This chart shows on a single graph the direction of the stock market coupled with the direction of the economic indicators over the past few months. In finance parlance, we call this a "divergence". It's what happens when the real economy and stocks part ways. Eventually, one or the other must turn and recouple with the other. Any bets on which one it will be? 
It's a pretty safe bet that eventually, the stock market will drop sharply to correlate with the economic data. That's what usually happens! But Wall St, with so much Fed money in its pockets, is betting than the economy will soon turn higher again, despite the horrific economic data. To them, the Fed's power is godlike in its effectiveness. 
 This chart is from Bloomberg News.

Europe In Worst Recession Since WWII

from the WSJ:

But US stocks still close up 60, more than 185 points in two days.

So the bubble continues to build.

Weak Manufacturing, Empire Fed, PPI, But Stocks Hold Gains

U.S. factories cut back sharply on production in April, as automakers produced fewer cars and most other industries scaled back. The Federal Reserve said Wednesday that manufacturing output dropped 0.4 percent in April from March, the third drop in four months and the biggest since October.

The Empire Fed disappointed, the PPI missed expectations, and now, industrial production contracted, but stocks remain near all-time highs and are flat for the day. Insane market! Mirage market!

Markets Disconnect From Reality

Stocks hold gains from yesterday's new all-time record high despite the following news today:
1) US industrial production contracted last month
2) Empire Fed index missed expectations, went negative for first time since January
3) US Capacity utilization declined in April
4) Producer Prices declined in April due to weak demand
5) France slides into recession
6) Euro now has the longest-running recession in history
7) Europe's GDP declines at sharpest pace since 2009

But Wall St insiders are oblivious to news, reality! They're having a Pollyanna Party!
This looks more bubble-like every day! 

Eurozone Recession Drags

But stocks are barely lower! The bubble continues!

Bill Gross: High Price, High Risk, Low Return!

And I just call it a bubble!

TV Comment of Hedge Fund Manager Fuels 100-Pt Rally

This from the Wall St Journal website today:
"Financial and energy stocks led a day of broad gains for the major U.S. benchmarks, following bullish remarks from a prominent hedge-fund manager."

Prominent indeed! 

If this is so, then the perception of risk on Wall St is now so low that a bubble is a certainty! The only thing that is going to stop this insanity is for the Fed to formally announce that it will end QE and its support of the stock market on date certain. Otherwise, this bubble is going to cause even more tears! 

Is It Tuesday? It Must Be Stock Pump Day!

This is the stock market since March 1st.

And this is today's chart. It must be Tuesday!

There's not much news today. Just another stock market rally! Dow up nearly 100 points! The leap began right out of the gate as soon as the market opened.

S&P 500 Hits New Record High

...even as the Fed hints at an unwind this summer!

Fed's "Voice" Speaks of Unwind of Easy Money

...and just as the economy is worsening!

Fed to Begin Economic Balancing Act?

There appears to be a change in the wind! Over the weekend, Jon Hilsenrath, in his article in the Wall St Journal, indicated that the Federal Reserve is going to begin to reduce its creation of money to purchase US government bonds. Both stocks and bonds are lower as a result. And this is taking place just as both the US and global economies are showing signs of renewed weakness.

I wonder if the Fed is doing this solely as a superficial way of talking the stock market down from the edge of the cliff, without any real substance, as was Alan Greenspan's "irrational exuberance" remark. Why the Fed would do this now doesn't make much sense, unless they realize that they are creating greater risk by causing investors to ignore all risk. This is going to be a very perilous high wire act at the most difficult moment of the last four years.

And thus begins an economic balancing act, after Mr. Bernanke has effectively painted us into a corner! Good luck with that!

Rosenberg's Rules

Psychology... or Psychosis?

John Mauldin, quoting Nietze:

"To trace something unknown back to something known is alleviating, soothing, gratifying, and gives moreover a feeling of power.  Danger, disquiet, anxiety attend the unknown – the first instinct is to eliminate these distressing states.  First principle: any explanation is better than none…. The cause-creating drive is thus conditioned and excited by the feeling of fear…."  –Friedrich Nietzsche
"Any explanation is better than none." And the simpler, it seems in the investment game, the better. "The markets went up because oil went down," we are told. Then the next day the opposite relationship occurs. Then there is another reason for the movement of the markets. But we all intuitively know that things are far more complicated than that. As Nietzsche notes, dealing with the unknown can be disturbing, so we look for the simple explanation.

"Ah," we tell ourselves, "I know why that happened." With an explanation firmly in hand, we now feel we know something. And the behavioral psychologists note that this state actually releases chemicals in our brain that make us feel good. We literally become addicted to the simple explanation. The fact that what we "know" (the explanation for the unknowable) is irrelevant or even wrong is not important to the chemical release. And so we look for reasons.

That is why some people get so angry when you challenge their beliefs. You are literally taking away the source of their good feeling, like drugs from a junkie or a boyfriend from a teenage girl.