GE-Dip-Buying-Panic Sends Dow To 'Most Overbought' In 62 Years, Yield Curve Collapse Continues

Always...

 

As Bloomberg summarizes, the dollar rose, Treasuries sank and all three broad stock indexes are heading for a record close on bets a budget compromise will bring Washington closer to agreeing on Trump’s promise of tax reform. The dollar touched a three-month high and 10-year Treasury yields approached 2.4% while the Canadian dollar tumbled after inflation and retail sales missed estimates. Some clarity on a budget resolution, a good quarter of earnings and the anticipation of an announcement of the next Fed chair has led to market confidence. One stock clearly bucked the earnings trend; GE posted results before the bell, missing analysts’ estimates significantly and slashing its profit forecast. The stock erased losses after falling 7% in premarket trading.

So - GE did this...

GE now 1% above yesterday's close after abysmal earnings, cutting guidance by 30% and “horrible cash flow”

And The Dow did this...

 

Which pushes it to the most overbought (based on RSI) since July 1955...

 

The Dow has not been near 'oversold' since Jan 2015...

 

Another perfect week (5 up days) for the S&P 500 (making 4 in 2017, compared to 1 in 2016, 2 in '14, 2 in '13, 2 in '12, and 2 in '11)

 

VIX ended back below 10 (after briefly spiking above 11.6 yesterday)...

 

and then this happened right at the close...

 

Homebuilders soared today... due to fun-durr-mentals...

 

Bank stocks underperformed today - but still have a long way top go to catch down to the crash in the yield curve..

 

Uglyish week for FANG stocks and AAPL ended red...

 

TSLA Tanked Today...

 

Following last night's budget vote, tax-hope picked up again from recent lows...

 

Yields are higher on the day (and week) with the short-end continuing to underperform...

 

The yield curve continued to collapse this week - lowest weekly close for 5s30s since Nov 2007

 

Copper/Gold is at its highest in 3 years suggesting bond yields have a lot further to rise...

 

The Dollar Index soared today after last night's budget vote - this is the best day for the dollar in 9 months... after bouncing perfectly off the unchanged for the week level...

The Dollar is up 5 of the 6 weeks - highest weekly close in 3 months

 

Yen and Loonie (retail sales weakness) were the biggest losers this week sending the green back higher...

 

Dollar strength weighed on precious metals with copper best on the week and WTI managing to limp into the green for the week today...

 

Finally, Bitcoin soared today (on Zimbabwe panic) above $6000 for the first time ever...

 

Now bigger than Goldman Sachs...

 

So who is right?

 

 

Comments

jamesmmu Fri, 10/20/2017 - 16:09 Permalink

Something I failed to understand. Yes, market never drop now. IN this market, how traders make money? How can the house giving away so much money to retail investors?for traders, normally, they buy at $10/sh, and sell at 11 and buy it again when it lower. but market is straight up, just buy once and sell at the end of day, thats it. why buy and sell so many times. at this point, whats the point wallst still hiring traders?for retail investors, they just need to buy everything at once, thats it, and take profit when need the money. Why trade? and the stock market keep giving away free money?in a casino, house always win, now the gamblers are winning, and cash out every day, and day after the day.the house loses? how is possible for house to keep gamblers winning? will stock bubble dry up the liqudity just keeping the bubble alive?ppl can just bet all the money on call option and sell next day and profit millions. but how is possible for this to continue, they probably need millions more fresh money in the market just to keep DOW in green. right? if I have 300k, I will buy all the options and then cash out in next few days and turn it too 400k, but who will be buying 400k worth of shares when I take profit? friday which is today is option expiration day, they will repeat by buying all call options. will market handle the selling when they cash out the call option and sell those millions of shares? alot of ppl will probably all in today because they think they will profit 100% in next option expiration. FYI, the call options allow the owner to purchase the shares at price from previous weeks or month, and sell it today and you will profit the different. if the house decide to make a turnaround in the market, how many ppl will lose their lifesaving when the market just drop a little bit over the next few weeeks?about buybacks, companies spend more money buying less shares everyday, will it affect its earning/share ratio? hope someone can explain these. thanks

D.r. Funk jamesmmu Fri, 10/20/2017 - 16:30 Permalink

jmmu Youre a stalwartHow stock-conspiracy is not as embedded an approach, or template, on zh as one would think, is odd. I recommend considering advancing your narratives slightly. You wouldn't believe, how many things fall into place. And affirmed over a long period of time.Generally as 1-way market you're describing? Yes. 1-way market since Nov 9 generally. 1-way market stretching and dislocating puts 'everyone' on 1 side of the boat

In reply to by jamesmmu

Keltner Channel Surf jamesmmu Fri, 10/20/2017 - 16:51 Permalink

Just as a mall store makes less money when traffic dwindles, trading profits (with the exception of certain option strategies) will always be reduced in periods of overnight gaps that go nowhere with low vol, which is why bank trading profits have been running ~25% below normal, with forecasts for more layoffs.  It’s safe to say that trading has never been more challenging, but is not impossible.At the same time, many professional traders start and end each day in cash, and wait patiently for entry points.  With most trades computer-generated by battling hordes of algos that automatically constrict their ping-ponging ranges when volume is pathetic, this task becomes more difficult.  It can mean a longer hold, and a grind, for hours to get tiny payoffs, but you take what’s available.  Traders don’t put their life savings into any trade, but carefully consider position-sizing based on specific asset risk, profit factors and other arcane calcs not worth detailing here.Options are often used for elaborate hedging/income strategies that are rolled forward, much of which isn’t necessarily a directional bet, as you assume, but part of complex, multi-part strategies; some, like selling straddles, profit if the range stays tight.Contrary to the popular narrative, no one entity is tasked with ‘keeping us green’, regular monthly 401(k) funds dribbling in are enough, especially with pathetic volume/liquidity, to keep going a bit higher, especially as the buy-side, which doesn’t yet believe the Fed, can’t yet move some allocations to bonds without missing their actuarial requirement (7% ?  8% ).  After being burned, they sit and wait, and wait, with the rest of us …

In reply to by jamesmmu

Jafo jamesmmu Fri, 10/20/2017 - 17:41 Permalink

If the US were a closed system then your doubts would be valid JMMU.  It is not a closed system.  There is big trouble looming in other parts of the world (European banking system and European government bonds) and the smart money does not want to be trapped when the inevitable SHTF moment arrives.  It is parking in the US and a lot of it is going into the Dow and the S&P.  Money flows will slow down and speed up with the changes of the perception of the crisis in Europe but it is unlikely that it will reverse until sanity in monetary policy returns to Europe.  You may think that the US has problems (and it does) but they are not as bad as elsewhere.  As they say, it is the best dog in the show.

In reply to by jamesmmu

D.r. Funk Fri, 10/20/2017 - 16:15 Permalink

The confluence around protected-power is now, at least, circling tighter. (Awans, Comey, Wasserman, Mueller Russia, C foundation, Assange 650, Hrc, Mueller-Comey-Hrc) The breach into that timeline, would be inflection pt. Inflection. point. The geopolitical ancillary-escalations have a role, in, that, game as well (Nkorea, Anti petrodollar, Isis, Faux coldwar) The inflection point would, most likely, be the breaking point because Destabilization, is most likely their countermove, to takedown (or takedown vulnerability going hot) as the game-of-chicken described by some of us. many months. agogoes live

D.r. Funk the late idi armin Fri, 10/20/2017 - 16:54 Permalink

Ive laid quite a lot of blame on the babyboomers, for quite awhile. Their greed. Their silence. Their heinous entitlement.allowed and created a tech bubbleallowed and created a housing bubblefollowing that great fucking legacy:Allowed A Debt and Equity bubbleThe failure to learn, at least from the 1st 2 boombusts, within only a 12 or so year period is infinitely damning. Their silence in perpetually rising equity levels as the ""wise elder generation"" is on record

In reply to by the late idi armin

buzzsaw99 Fri, 10/20/2017 - 16:21 Permalink

You fool! You fell victim to one of the classic blunders - the most famous of which is "never get involved in a land war in Asia" - but only slightly less well-known is this: "Never bet against chinese intervention when death is on the line"! Ha ha ha ha ha ha ha! Ha ha ha ha ha ha ha! Ha ha ha... [/vizzini]

Rebelrebel7 Fri, 10/20/2017 - 16:54 Permalink

You are all beautiful and unique snowflakes! Trophies for everyone, with a smiley face and a crown! Everyone wins all the time everytime, unless you are in the 99%.