quite a piece from lance lewis tonight. assuming this intervention happens, it will be interesting to see how long it holds. my guess is not very. there are too many dollars in the world. the fed is losing control
Dollar Keeps On Melting
dailymarketsummary.com
Asia was mixed overnight, although Japan managed to pick up a percent. Europe was up a hair this morning, and the US futures were up sharply on the back of INTC. That was all before the payrolls number though.
The November unemployment rate came in at 5.4 percent, and nonfarm payrolls were only 112,000, which was far below the consensus at 200,000. There were also some hefty downward revisions to the prior numbers. It was by no means a disaster, but it certainly once again reaffirms the underlying weakness of this “recovery”. The equity futures fell sharply from the morning's highs but never went red. Meanwhile, the dollar slipped a hair but really didn’t do much either, and gold rallied for about 5 minutes and then sold off a couple bucks. Meanwhile, the bond market exploded higher in the long end.
We opened a little higher in the S&Ps and quickly sprinted back up to the morning’s pre-payroll highs. After making a marginal new high, we had a flameout and slid all the way back to the morning’s lows, which of course held. After a small bounce, we slid lower once again and this time marginally took out the morning’s lows for a change. From there, we tried to recover once again like always, but a closing selloff took us out pretty much on the very worst levels of the session, which meant we were basically unchanged. Volume was extra beefy (1.6 bil on the NYSE and 2.4 bil on the NASDAQ). Breadth was nearly 2 to 1 positive on the NYSE but slightly negative on the NASDAQ.
INTC guided up its revenue midpoint about 5 percent from its already lowered guidance and added that inventory was down a couple hundred million dollars, which of course begs the question: is the reason that it’s down because of another write-down? Nudging up revenue by 5 percent from an already lowered level falls under the heading of a yawn in my book, but as we said yesterday, the market probably would have celebrated the news no matter what INTC said. In any event, INTC predictably exploded this morning and was up almost 10 percent on its highs. INTC gave a good chunk of that gain back as the day wore on, however, and ended on its very worst levels of the day (but was still up 5 percent).
The rest of the chips also exploded higher this morning, but likewise gave a good chunk of their gains back to only end up a percent or so when all was said and done at the close. The equips similarly exploded at the open and managed to hang onto their gains a little better, although they too ended near their lows for the day. The SOX ended on its lows for the day but still up over 1 percent.
The rest of tech was mixed. The Internet trash was a little soft for once, with most of the tier one names (like AMZN, YHOO, and EBAY) all ending down a touch on the day. The kinky names also couldn’t do a whole lot. TZOO fell 2 percent, and GOAM fell 3 percent.
Financials were mixed. The BKX fell nearly a percent, and the XBD rose half a percent. The derivative king fell a percent, BAC fell a hair, C fell a touch, and GE fell a touch. The mortgage lenders were mostly higher by 2 to 3 percent. LEND once again led the way with a 5 percent leap. FRE and FNM both rose a percent.
Retailers were mostly lower once again, with the RTH falling half a percent. Homebuilders were 2 to 3 percent higher across the board and appeared to be relieved by the rally in the long end of the bond market.
Crude oil fell 71 cents to $42.54 and another new low. The XOI and XNG both rose a percent, and the OSX rose 2 percent. The CRB rose a hair, and the CRX rose half a percent.
Gold rallied a couple dollars initially this morning on the payrolls data and then reversed into the negative column by about $2. As the euro continued to power high though, the metal recovered and spent the remainder of the session rallying to go out near its very best levels of the session, up $5.50 to a marginal new high at $457.80. The HUI once again rallied initially and then sank into the close to end up only a touch. You know the drill here. I believe the shares are telling us in no uncertain terms that the market doesn’t believe the current moves in the metal and the dollar will stick (probably because collectively “the market” knows foreign central banks will eventually intervene if the current rout in the dollar continues). It’s the only way to explain the current divergence between the shares and the metal, which is becoming more extreme every day.
Now, it could be that things are developing much faster in the bear market process than I think and that intervention fails to stick because there are so many dollar sellers. In other words, any bounce we get in the dollar (and correspondingly a pullback in gold) as a result of intervention will only be temporary ahead of some sort of dollar collapse, but if that’s the case, then we should see the gold shares hold up during an intervention pullback in the metal and then turn sharply higher thereafter. I don’t claim to know where exactly the dollar is going to try and rally, but the gold shares continue to tell us that it could come at any time.
For those that care, I didn’t add to my gold share shorts today, but I am still holding them. Strangely enough, being short the gold shares has been probably one of the few profitable short sales that there has been over the past few weeks, as everything else has pretty much melted up during the same period. It seems pretty strange given what has happened in the dollar and gold during that same timeframe, but it’s a fact.
Speaking of the US peso, the US dollar index fell a full percent to a new low at 80.92, which brings it to within about 3 points or so of a new 20 year low. That makes 11 straight weeks that the dollar has fallen now for those that are keeping score at home. The yen rose a percent to just shy of a new high, and the euro exploded over a percent to a new high of 1.3454 (spot). 1.35 has sort of been a line that the ECB has drawn in the sand, and the market appears set to test that line.
I had thought maybe there was a shot at the dollar turning against the G7 currencies today based on exhaustion, given the decline in the gold shares and the recent declines in some of the commodity currencies like the Aussie and Canadian, but that obviously didn’t happen.
It continues to be my belief that some sort of coordinated intervention is coming if the dollar continues to slide like this, and it’s going to be massive. I say it’s going to be massive, because if the intervention is not massive, it won’t work. And I think foreign central bankers are well aware of this fact. As to the day and the hour that it comes, I have no clue. But given this week’s greater technical damage in the gold shares, I tend to think it’s going to be quite soon. I should also add that Marc Faber is now calling for the dollar to rally. So, some people that are much smarter than I am are also anticipating a turn (at least short-term) in the US peso.
Treasuries rallied sharply in the long end off the weaker than expected payrolls data. The yield on the 10yr fell to 4.27%. The short end, however, didn’t move as much. So, the curve continues to flatten.
Today looked like more of the same in the stock market. Maybe we’re near some sort of short-term exhaustion point, but we have no clear signal of that yet. The benefit of the doubt continues to go to the bulls. For the moment, all eyes continue to be on the dollar, and the trends in stocks and foreign currencies continue to be highly correlated. |
