Morning Commentary From Art Cashin
Via UBS Financial Markets
Another Sleepwalk Below Key Resistance – The stock market again saw morning weakness reverse into mid-day sideways choppiness.
It also repeated the late day levitation that has been a hallmark of this two week rally. This time they closed near the highs setting up Expiration Day as a critical test of the resistance band that has capped the three month trading range.
The early weakness was based, in large part, on results announced by FedEx. The company had good results off-shore and expressed hopes for growth next year. But traders focused more on the slowness indicated by their domestic (U.S.) business. The action was so lethargic that up until the final hour, we were at a pace to be the slowest day of the year (circa 750 million in final volume).
Some larger than expected “market on close” orders made the difference, taking the final volume to just over 900 million shares.
The action was rather mixed. While the Dow and Nasdaq closed with gains, there were 500 more declines than advances. Rising volume and declining volume were basically equal.
Despite the mixed action of the last several sessions, the market remains at a key fulcrum point price-wise. The game is on the table. Will the bulls manage a breakout and seize the momentum? Or will resistance contain again, resulting in a sharp pullback? Today could be critical.
Cocktail Napkin Charting – As noted above, the market stands on the banks of the Rubicon. The technical picture is unusually complex.
There are various aspects that are normally associated with topping patterns. Yesterday, it was announced by the American Association of Individual Investors that the percentage of bullish investors had suddenly soared to 51%. That’s usually a big warning signal.
Also, on the shelf for the bears remain the series of Hindenburg Omens and the recent VIX sell signal.
The bulls are working on an inverse head and shoulders in the S&P. Interestingly, the “neckline” is very near the 1131/1133 level that marks the top of the three month trading range.
Thus, a move above that level could suggest a new up-leg in the S&P with a target count of about 1240.
That set-up leads traders to believe that a move up through that band might spark a frenzy of algorithmic short covering. That would certify the importance and validity of a breakout.
It’s Your Fault Not Mine – China posted a “Financial Stability Report” stating that swings in the U.S. dollar may threaten the global recovery.
Here’s a bit on their concerns from Bloomberg:
“When the dollar strengthens rapidly, global capital markets and prices on commodity markets are under pressure, leading to large market fluctuations and affecting the economies of some resource-producing nations,” the central bank said in the report. “On the other hand, the rapid depreciation in the dollar will cause increased commodity market prices and asset bubbles and affect financial and economic stability.”
While most of the chatter around the report deals with their comments on currency, we were intrigued by their view of
their own economy. Again, from Bloomberg:
In the domestic economy, a rebound in demand is not yet on a solid foundation and “latent” fiscal and financial risks exist, it said. Inflation expectations are rising, with the dollar, commodity prices and domestic adjustments in resource and energy costs adding to uncertainties, it said.
We Get Along Very Well – A friend passed along a chart marking the correlation between the price of copper and the S&P 500. It is rather astounding. It might also be a help for the bulls.
The two have diverged slightly in the last few weeks. Copper has rallied while the S&P has appeared to stall. The resolution would be either to have copper pull back or for the S&P to rally.
These kinds of correlations are showing up in many more asset classes. It suggests the strong influence of currencies and money flows. It also underscores the difficulty of achieving diversification in today’s environment. Too many things move in sync.
Consensus – This could be the make it or break it day for the rally. Watch the currencies. Stay very nimble.
Answer - The large dollop of logic we suggested was that the grapes had to come in lots of 10 in order for the total to be in dollars and not odd cents. So the possible number of grapes could only be 10, 20, 30, etc. for a maximum of 10 possibilities. You then knew you need some combination of melons and cantaloupes to provide correct number of items and correct amount to complement the grapes. Obviously that rules out any grape total below 50 or over 80. So with a little tinkering we
get 70 grapes, 19 cantaloupes and 11 melons.
Today’s Question - A) 118 (444) 326 B) 118 ( ) 382
Using the same principle that told you 444 belonged in the first bracket, what three digits belong in the empty bracket?
And the go-to history lesson:
AN ENCORE PRESENTATION
On this day in 1630, a Pilgrim court came down hard on one of the settlers. They ordered that he be put in the stocks, that his house be burned, that all his good be confiscated and that ultimately he be exiled. His name was Thomas Morton and they said he was a danger to society. He said (and later got an English court to agree) that they were just envious of his success.
For a while guys like Miles Standish and Winthrop and Endicott went prithee-ing about, Morton was cornering the fur trade with the Indians. The method he used became an American marketing standby - - one that in a less sensitive and not politically correct era was called "Booze & Broads."
Shortly after he arrived, he noticed that the Indians had already noted that the Pilgrims were not your basic laugh a minute guys - - and that attending one of their socials was as pleasant as having root-canal work.
So remembering the giddy youth of England, Morton picked a nice spot outside of town, put up a Maypole, broke out some jugs and invited some of town's young ladies to join him. (Wouldst thou with the "A" on thy apron followeth me?) Soon there was dancing, revelry and carryin' on. The Indians could see that this was a good deal more fun than watching some geezer polish the buckle on his hat. Soon they were flocking to Morton's Maypole and bringing furs as a gesture. Morton was getting richer by the day. So the Pilgrims raided Morton's "Ma-Re-Mount" (called Merry Mount in the court papers). That's when they shipped him off to England.
When he returned to America with a writ to have his goods restored, the good Pilgrim fathers slammed him into jail and wouldn't let him see anyone. They kept him there until he went mad and was safe to be released - - thus proving what Sister Herman Joseph said -- drinking and fooling around with girls will drive you crazy.
The market looked a little crazy yesterday but floated to a very respectable close.