Mixed Messages In Today's Headlines

Meanwhile, stocks are hitting fresh all-time record highs.

Holiday shopping is weak this year, but that doesn't appear to have dampened Wall St.'s euphoric love of stocks.

And mortgage loan applications just sunk to a 13-year low, with refinance loan applications hitting a 5-year nadir.

But on the other hand, durable goods orders showed a healthy increase:

But there is a dark side to this news! The government used that old tool that we have all come to love -- those "seasonal adjustments" -- to inflate the durable goods figures! Furthermore, Durables Goods ex-transports was DOWN by -0.5% instead of rising by 1.2%.

Consumer Sentiment Is Up, Even As Consumer SAVINGS Slides

Bubble Acceleration Noted

This is the monthly chart of the current S&P 500 stock index. This is literally a textbook case of what a bubble looks like. There are many characteristics of a bubble, and I literally can't think of a single one that this current market circumstance does NOT manifest. 

Note in this chart the light blue line, which represents the 8-period EXPONENTIAL moving average. Take note also that as stocks accelerate higher and higher, faster and faster, they are leaving even this "exponential" acceleration far behind. Despite that stocks are already valued at excessive levels from a historical perspective, investors are willing to pay even MORE for them. Is that rational behavior?
Last week, Dr. John Hussman did analysis on his website that indicated that corporate earnings are now beginning to stagnate and are likely over coming quarters to collapse back to more historically normal levels that would be about 40% below today's levels. But even still, speculators are paying even higher prices for stocks, driving valuations beyond even these historical levels. Stocks are, after all, the price an investor pays for a stream of earnings extending into the future. If an investor pays too much for them, then their YIELD on those earnings will be poor. Dr. Hussman has calculated that at earnings levels of the past few months, an investor's yield for the next ten years, based upon historical patterns, will likely be near ZERO. Here is what Dr. Hussman said today about the current bubble market:
"Regardless of last week’s slight tapering of the Federal Reserve’s policy of quantitative easing, speculators appear intent on completing the same bubble pattern that has attended a score of previous financial bubbles in equity markets, commodities, and other assets throughout history and across the globe." (emphasis mine)
Something else that is noteworthy in the above chart:
In the past, even in this overbullish market, stocks have traded between the light blue line (the exponential moving average), and the upper Bollinger Band, which represents, from a statistical perspective, TWO standard deviations outside the norm. In the past few months, stocks haven't even dropped back to the light blue line. Stocks barely made it half way back to that level. This bubble is accelerating even faster to stratospheric levels, only guaranteeing that when reality finally can no longer be denied, this house of cards will also follow historical patterns of what a popping bubble looks like.
As further evidence of how overbought this market is, note also that the last time stocks even closed below the blue line was in mid-2012 -- a year and a half ago! Stocks have barely even looked back since then! And this, despite already stratospheric price levels!

OVERNIGHT
This chart following shows the acceleration of stocks during the overnight sessions in Asia and Europe.

This shows the Dow futures over the past few hours. Stocks are already 57 points higher than last Friday's close. This stock market bubble is advancing at an accelerating pace. 

Stocks Continue Record-Setting Climb

Friday's relatively strong GDP reading sent stocks to new record highs, and Sunday evening, stocks set still another record.

Screw Lew: Treasury Secretary Jack Lew's Signature

Screw Lew! (To the censors, NO, that is NOT mature content!)

What an amazing resemblance. Can you distinguish between them?

Or is it screw LOOSE? Why would he do that? Is he trying to make a mockery of our fiat currency, which will be worthless any day now?

Stocks Close Higher By a Hair

...and all this, despite weaker data today! Just bubbly!

So despite the quadruple whammy today of bad economic news (housing starts DOWN, claims for new unemployment benefits UP, Caterpillar sales collapse, Philly Fed survey DOWN), Wall St traders want us to believe that stocks are worth MORE today than yesterday. They want us to believe that we are more prosperous than ever before in history! Are we living in an alternate universe now? Because I sure don't see it!

Quadruple Whammy of Bad Economic News...

...even as stocks closed at new all-time record highs yesterday. Something is wrong with this picture! A great reset is coming! Stocks are barely in the red.
Here are the headlines this morning.

It's The Taper... That Isn't!

It's a "non-taper" taper! 

Fed reveals that it will ease off it's debt monetization by $10 billion/month, but will continue low interest rates indefinitely. In some ways, this is even more dovish that previous statements were. Wall St is thrilled! The bubble builds!

• *FED TAPERS QE TO $75 BLN MONTHLY PACE, STARTING IN JANUARY
• *FED SAYS `FURTHER MEASURED STEPS' POSSIBLE ON TAPERING
• *FED: EXCEPTIONALLY LOW RATES UNTIL JOBLESS FALLS WELL PAST 6.5%

Market Snapshot -- In Holding Pattern for Fed Decision

This image from Yahoo Finance provides a good summary of today's market action on the eve of another Fed monetary policy statement tomorrow.

Here's the same perspective from Fox Business:

Best Political Cartoon In a Long Time

Nat Gas Futures Plunge On Better Weather

Nat gas is today's big mover.

from Business Recorder:
"NEW YORK: U.S. natural gas futures slid more than 2 percent in early trading on Monday on forecasts for reduced heating demand this week and on profit-taking after prices reached seven-month highs last week.
"'Natural gas futures are receding this morning on a combination of a round of profit-taking selling motivated by what looks like a moderating weather pattern working its way across the country over the next week or so,' Energy Management Institute partner Dominick Chirichella said in a report."

Technical Bounce, China Worrisome, Europe Hopeful!

China is causing worry!
Seeking Alpha explains today's strange market behavior:

"...the sell-off in S&P futures came on the heels of disappointing China Manufacturing data. Almost in lock step, whether it was a nervous trader or a more concerted effort, and in conjunction with the tensions on the Street about the FOMC meeting, they reacted harshly to that China data.
"Conversely, Europe had positive news on the same front, and that is what allowed futures to recover, but the same major concern still exists. The FOMC is clearly front and center, concerns about tapering are on everyone's mind, and analysis al have an opinion. Some think turmoil could lie ahead before the year's end, but I prefer to pay attention to one simple thing, the technicals.
"The near and midterm technicals told me to expect the bounce we are getting today, but the longer term technicals tell me that the major markets, the S&P 500 (SPY), Dow Jones Industrial Average (DIA), NASDAQ (QQQ), and Russell 2000 (IWM), have not yet tested longer term support."

And their assessment going forward:
"Therefore, even with this nice bounce, our combined analysis warns us that it can be short lived, and the market can turn lower and officially test longer term support levels. Our rules tell us to short near resistance levels and buy near support levels. That is therefore what we intend to do as this year comes to an end."

Where Are Stocks "Beaten Down"?

BEATEN DOWN?
This shows the stock market today, with a tiny little red "candlestick" showing the month of December at the top right. I have highlighted it with a yellow arrow. It would be hard to see it at all if I didn't. Does that look "beaten down" to you? That tiny little red mark, if I had left all the technical indicators on the chart (I removed them so that this "beaten down" red mark could be seen more easily), would be close to the upper Bollinger Band, which indicates two statistical standard deviations outside of normal market activity.

I'm still struggling to find that "beaten down" part on this chart.

 So when the media tell you that stocks were "beaten down", show them this chart and ask them WHERE the "beaten down" part is.

It IS true that until today, stocks had closed lower 9 of the past 12 days. But the losses were relatively small, as evidenced by this chart, while the few days in the green showed much higher gains. One of those 3 "up" days had a gain of 200 points. That is another sign of the bubbly overbullishness of this market.

Interestingly, in his very arcane book (I had to borrow it from a university library, where only 3 other people had checked it out in 10 years), "Why Stock Markets Crash" by Swiss academic Didier Sornette, he mentions that one characteristic of a bubble is that the news media become cheerleaders for the bubble, buying into and promoting all the hype! They become tools in ramping the bubble even higher.

But ask yourself this: If the economy is doing so well, why has the Fed been using "unprecedented measures" (Bernanke's own term for all this QE) for FIVE YEARS? Why are we still on life support if the market is so strong? Does that make sense to you?

If these "unprecedented measures" are so effective, why are they still using them five years later? Does that really suggest that they have been INeffective instead? (In which case, if they DON'T work, it would be logical to eliminate them instead.)How much further will this bubble rise? I DON'T KNOW!

But we would be wise to be wary, because the classic pin prick of a bubble usually comes in the form of some news event that typically wouldn't be all that significant, but that causes an abrupt and precipitous loss of confidence that sends markets literally crashing.

If you look at market crashes, they tend to collapse much more rapidly than they rose. If they were rising at a 30 or 45 degree angle, then they tend to crash at a much sharper 75 degree angle.

All it takes is one small event that causes an abrupt awakening, and everyone runs for the exit doors at once. That is, in the words of Sornette, "why stock markets crash".

And by the way, the attitude held by investors that they will be the first ones to find an "exit" chair when the music stops playing, is another classic characteristic of a bubble. All the players on Wall St believe that THEY will be one of the fortunate few that gets out the emergency exit door when the trigger event occurs. That is what causes the mad and hysterical rush for the doors -- that one seat in the game of musical chairs -- when the music stops and the insane clamor for safety begins. And that is also why it is Main St investors (on Wall St they call them "retail investors) that get slaughtered and suffer the greatest losses when bubbles pop. Main St investors tend to hang on in the hopes that the market will turn around and redeem them, so they don't throw in the towel until well after their losses have produced staggering losses. And Wall St counts on continued buying by Main St to allow them (Wall St insiders) to get OUT the exit doors first. They depend on Main St continuing to hang on while they literally "take their money and run" for the exit doors.

Note also that in this poor little "beaten down" stock market chart, stocks have barely looked backward since mid-2012. There hasn't been a single month of downward market correction since May 2012. Even the few months that closed in the red were still part of a trend higher. So in the face of economic weakness, stocks have continued an unabated rally without looking back since then. Isn't that a classic description of a bubble?

Empire Fed Misses Expectations, But Stocks Leap Still Higher

This is a classic characteristic of a Fed-induced bubble. The Fed's own Empire State Index fell short of expectations, but stocks leaped higher on the news. Stocks left bad news in Asian markets in their tracks, and used some good news in Europe to leap higher still. Now, this news is sending stocks into the rafters in expectation that the Fed is less likely to reduce its debt monetization scheme on Wednesday. When all news is perceived as good news, and no news introduces thoughts of risk, then all news leads to higher prices. When all thought of proper pricing is discarded, and even the slightest dip sends investors scrambling to buy more, this is textbook bubble mentality! The Dow is up more than 130 points in just the first hour of trading!

Note the disparity divergence between this headline (above) and this one (below):

And here is the market reaction in the charts. Last night's sharp losses are already forgotten:

Bizarre: Stock Futures Erase All Losses, Leap Higher

Strange phenomenon, suggests how fragile and overbullish these market really are!

Stock Futures Plunge In Asian Trading

This occurred without much news. Someone wanted to exit in a hurry!

Indexes Closely Slightly Higher, Week Lower

Tanking Stocks

And volatility is spiking at the same time!

Dow down about 140 at this moment.

Is This What a Taper Tantrum Looks Like?

Dow down 100 points now! These are the most distorted markets I've seen!

Unconvinced by Budget Deal

Running for the exits before end of 2013

More taper rumors. Is this the beginning of another taper tantrum?

The beginning of a taper tantrum?