Archive - Dec 30, 2014

Q: Are orders entered for the purpose of igniting momentum in the market prohibited by The Rules?

This conduct may be deemed to violate the Rules if it is determined the intent was to disrupt the orderly conduct of trading or the fair execution of transactions, if the conduct was reckless, or if the conduct distorted the integrity of the determination of settlement prices. Further, this activity may violate the Rules. if the momentum igniting orders were intended to be canceled before execution, or if the orders were intended to mislead others. If the conduct was intended to create artificially high or low prices, this may also constitute a violation of the Rules

The Santa Claus rally, coined by The Stock Trader’s Almanac, is the performance of the S&P500 in the “last 5 trading days of the year AND the first two of the New Year." That means this year it is the performance from the close on 12/23. This morning's USDJPY-driven (home-prices helped) weakness has sent the Dow and S&P 500 into the red - extinguishing (for now) the gift that Santa left...

Having missed expectations by the most since June 2010 in November, The Conference Board's measure of Consumer Confidence missed once again. The previous dip was revised higher (because 'revisions' is exactly what makes sense in a confidence survey) from 88.7 to 91.0 but the current level printed 92.6 against expectations of 93.9. This is the 3rd miss of the last 4 months (as stocks hit record highs and gas prices collapse?). Employment "not so plentiful" rose to its worst level in a year, employment expectations going forward dropped as did income growth expectations.

Narrative, we have a problem. What is billed day after day as 'unequivocally good' is entirely not good for Alaska (oh and Texas and Pennsylvania and...) as with oil prices dropping, AP reports Alaska Gov. Bill Walker has halted new spending on six high-profile projects, pending further review. With oil taxes and royalties expected to represent nearly 90% of Alaska's unrestricted general fund revenue this year, officials warned, "the state's fiscal situation demands a critical look."

Case-Shiller's 20-city home price index dropped 0.1% MoM in October (on an unadjusted basis) - the second monthly drop in a row and biggest drop since the Polar Vortex. Year-over-year, home prices rose 4.5% - the weakest growth since October 2012. While this modestly beat expectations (+4.5% vs +4.4% exp.), it is the 11th month in a row of growth deceleration. Also of note: the Top 20 Composite index is now down for the second month in a row, dropping to 173.36. The question now is whether the downside momentum will pick up.

Let's ask Reuters shall we?

USDJPY has tumbled overnight back below 119.50, dragging stocks (equity futures now at session lows) and Treasury yields with it. But it appears the Gold/Yen trade that is reacting most significantly as a huge volume flushes through futures markets spiking Gold back above $1200...

There could be some (nasty) side effects...

First it was, with "absolute certainly", North Korea. Then, out of the blue, an even more ridiculous theory emerged about the origin of the Sony hackers: Russia. Now, we finally get the truth, and as it turns out it was neither of the abovementioned sovereign actors who had nothing better to do than to hack movie scripts and racist emails: it was Sony's own disgruntled worker who was the source of the hack. According to Politico, FBI agents investigating the Sony Pictures hack were briefed Monday by a security firm that says its research points to laid-off Sony staff, not North Korea, as the perpetrator."

• U.S. agency gives quiet nod to light oil exports (Reuters)
• China’s Stocks Fall to Pare Biggest Monthly Advance Since 2007 (BBG)
• The Cartel: How BP Used a Secret Chat Room for Insider Tips (BBG)
• BRICs Busted as Stocks Diverge Most on Record on Outlook (BBG)
• Petrobras deadline prompts some bondholders to push for default (Reuters)
• AirAsia Captain at His Happiest When Flying, Family Says (BBG)
• UK housing crisis: brick stocks hit record low (Telegraph)

Greece may be on the verge of a Grexit, crude may be taking out all key technical support levels, and US stocks will still close higher. But let the USDJPY slide and watch as the levitation ends with a bang. And tumble overnight is precisely what the USDJPY did, pushing not only the Nikkei lower by 1.6% but also leading to what is shaping up to be an unrecord, also known as red, open in the S&P - this surely calls for a "Markets in Turmoil" flashing siren on the 9th floor of the New York Fed.

The mystery of the disappearance of Malaysian flight MH-370 may remain forever, but at least the families of the 162 victims of AirAsia Flight QZ8501 will get some closure when a few hours ago, Indonesian rescuers pulled wreckage and bodies from the sea off the coast of Borneo on Tuesday.  While the plane has yet to be found, and the possibility of finding survivors is slim, the Indonesian navy said some 40 bodies had been recovered as dusk fell.