Was yesterday a weird day in the stock market to you? The news was fairly poor, but after the overnight trading in Europe which was down, the stock market went up and up and up, and ended flat. Which all goes to prove when we are in an up-trend, news (unless extremely unexpected) does not drive the market in the way expected.
Today the GDP report came in, and it is below expectation. This is being explained away as not really bad, and that the data is stale. The "bad" part is being explained as temporary factors including weather. Actually the data was not bad enough to forecast a correction in a very strong up-trend.
What I suspect is the case here, is the global economy is struggling, and the US economy is facing headwinds. The liquidity push by the ECB and Federal Reserve are keeping the global economy from sinking, but they are going to have to "bail" faster.
Today weekly jobless claims will be released. It was released at 5:30 AM PDT, and it was bad. However, it is also being explained away as positive. Bloomberg reports: "But the 4-week average of 343,000 is still more than 10,000 below February's trend which is a positive signal for the labor market. Unlike initial claims, continuing claims came down in the latest week, 27,000 lower to a new recovery low of 3.050 million with the 4-week average 6,000 lower to 3.073 million which is also a recovery low. The unemployment rate for insured workers is holding at a recovery low of 2.4 percent."
So, there you have it for the morning... Bad news, but not so bad the market will correct from that news. If the market corrects, it will be news from Europe I expect.
========= Currencies and comments later ==========
Bacteria in the Intestines May Help Tip the Bathroom Scale
http://www.nytimes.com/2013/03/28/health/studies-focus-on-gut-bacteria-in-weight-loss.html?nl=todaysheadlines&emc=edit_th_20130328&_r=0 Interesting article.Minor Change to Routine
Doing something a little different today. What is it? I'm watching how the news affects the market, and reporting real time -- 'cause it is interesing.
OK, we have several economic reports out this morning, and they are all negative (but being explained away as not too bad). The market is going higher albiet very slowly. (Review yesterday, and the news was negative - but explained away -- and the market made no major effort to go down from the opening.)
Let me take an example of something that is mind-boggling.
The February Chicago PMI just hit the lowest point since September 2009. It tumbled from 56.8 to 52.4 in a stunning reversal (since we've all be shown manufacturing is improving in the US). This is far below expectations. New Orders tanked from 60.2 (an average by the way) to 53.0. Inventories contracted as well, and the USA would be talking about recession normally.
From the report, there is no housing recovery in the Chicago Fed district either. The recovery in housing seems to be coming from the South -- which is unusual (except in Florida - which is leading at the moment).
Chicago is an important report equaling or exceeding Philadelphia's report. The two reports in diverging.
As of 8:46 AM PDT, the market has digested this awful news, and is moving substantially higher with no indication (at least temporarily) that any of the negative news will have a corrective affect on the DOW or the S&P.
8:21 The markets continue to climb. Folks, any of us who think about business and investing must throw out everything we've learned about free markets over our life times. Where countries who do not have QE eternity, the free market is acting as normal (Sweden, Norway, Switzerland). Where the Central Bankers have control of QE, the market is not free to find its levels, and fundamentals of any kind are not what is driving pricing.
Since the beginning of the year, the materials sector is indicating that the only important factor for Materials is China. Technology is also really bad, and the technology sector over the past 30 years has been the leader of indicating how the economy will go.
Today, the Russel 2000 (mid size) is lagging badly. This is not usual. The S&P 500 participation (buying and selling) has weakened since January. As the S&P moves up, fewer stocks comprising the index are moving up.
Now just a brief side note into the stock market's inconsistent signals so far. Keep in mind the most important thing is price, but as you will see from the sectors listed above, the DOW price and the sectors are not in alignment. (If you assume according to DOW Theory the DOW Jones average reflects manufacturing (which arguably, it no longer does reflect manufacturing) then one would conclude Manufacturing is healthy, and as all the Economic data from the USA government (including the Federal Reserve) manufacturing is not healthy -- read today's Chicago PMI report for example.
Dow Jones Bullish Percent Index: This is a DOW jones market breadth indicator that shows the number of stocks on buy signals. Abe Cohen created the index using the NYSE. He used point-and-figure charting. That is good because there is no ambiguity with P&F -- you know when to hold and you know when to fold. If the chart is in an "X" column, it is buy signal, and if in a "O" column it is a sell signal. Since this is a % chart, it will not go above 100 or below 0.
As you might have guessed, NASDAQ is not nearly as bullish as DOW. This is only a minor indication that not all is as normal as the NASDAQ often (almost always in since the '90s) leads the bull market.
The following chart, however, provides more dissidence.
And what is the point? The traders and investors are still unsure, and the European situation is keeping the investors guessing about the short term direction of the market.
The market is unsure, and except for very long term investment, an investor should be very cautious about buying anything,. Having said that, I have to admit that the market (overall) rarely gives clear-cut signals, and buying-low and selling-high is the best strategy. Of course, I have not been trained (or observed) anyone who could do that consistently - except Mr. Buffet of course.
For long positions that you are going to hold, it is a good idea to take out insurance (as I've been stating for days). (Of course, my money manager disagrees with me, and I pay him/her lots of money to keep building my wealth. But I'm learning quickly -- with your feedback - when and how to buy insurance while creating income.)
Wow... That was entertaining (for me), and I hope you will find it helpful in some way.
Currencies next.
Well, I wrote a lot about currencies, and the blogger editor quit working. I lost it, and I don't feel like re-creating all the research.
Basically, today is a Risk-On day -- moving away from US $$$ to other currencies.
SPAIN:
Bloomberg has an interesting article on SPAIN... http://www.businessweek.com/news/2013-03-27/spain-revises-up-2012-deficit-as-eurostat-requests-data-changes
“The Spanish government said its 2012 budget deficit will be bigger than first estimated after the European Union requested changes in how tax claims are computed. The budget shortfall excluding aid to the banking sector was 6.98 percent of gross domestic product last year, more than the 6.74 percent predicted on Feb. 28, Deputy Budget Minister Marta Fernandez Curras told reporters in Madrid today. That compares with 8.96 percent in 2011.” And “Spain is seeking an extension from other euro-region governments to reorder its public finances as Prime Minister Mariano Rajoy says output may shrink more in 2013 than the 0.5 percent he initially predicted. That’s a third of the contraction forecast by the International Monetary Fund. Spain is due to submit budget plans through 2014 to the European"
We can fully expect lots more trouble in Europe, but the real S(FIGS)pain will hit the fan when France admits it is in trouble, and once again socialism will prove that propping up failed business and countries with debt will not work.
IT and Computer Security
Since this is my blog, and since I'm interested in sharing whatever little I know, I will share with you my work in and reading in IT Security.
The big news for now is the Denial of Service Attack in Europe on Spamhaus. For those who don't know that what DDoS is, it is an attempt to flood servers with so much data they cannot do anything,.
The attack on Spamhaus was different if for no other reason that it sent 300 Gigabits per second attack against DNS (Domain Name System) of Spamhaus and its service providers. That volume has never been seen before, but in the future (now that it has been accomplished) we will see larger attacks.
- DNS is used to resolve the names you type in your address space in your browser. Your DNS server (at your ISP (or internally if you service yourself) automatically finds the address for that name. What is a DNS server? It is any computer registered to join a Domain Name System, and it runs special purpose networking software that features a public IP address and contains a database of network names and addresses of other Internet hosts.
This attack is supposedly in retaliation for Spamhaus' blacklisting CyberBunker; although CyberBunker has not claimed responsibility. http://www.nytimes.com/2013/03/27/technology/internet/online-dispute-becomes-internet-snarling-attack.html?_r=1&hp=&adxnnl=1&adxnnlx=1364392112-VH+zSYqVHIgt8sBJ/Y1V3g&
This is a big threat to the Internet if these kind of attacks cannot be thwarted. As far as I can determine from Alkami's report is that the attackers exploited improperly configured or default-state DNS services (DNS resolvers). Then this was not a standard botnet attack. DNS servers run on large high-speed Internet connections, and they are connected via of communication protocols. Security experts estimate there are likely 21 million of these servers on the net. (You and I can guarantee your organization or your ISP has one of them.)
CloudFlare was hired by Spamhaus to deflect the attack. CloudFlare has stated all the attack traffic was generated from DNS amplification. On March 18, 2013 the first of these attacks knocked Spamhaus offline. No one really knows how it got started, but some experts suggest that it started with a few servers running on networks that allow source IP address spoofing. http://en.wikipedia.org/wiki/DNS_spoofing
CloudFlare rerouted that data, but something very sophisticated then happened. The attackers turned their sights on CloudFlare and targeted bandwidth providers used by CloudFlare and ultimately several regional Internet Exchanges connected to CloudFlare.
This is not the "Armageddon" of the Internet, but it is a bad thing because it shows how vulnerable the Internet is to large amounts of data being thrown at it at the base infrastructure (DNS in this case).
Folks, there are people out there that believe it is their right to retaliate (instead of cleaning up). Anyone who gets in their way must be punished. That of course, means the whole population of the Internet is threatened when under these type of attacks.
What is also unique about this attack is security experts know who started and who is repsonsible. Not only that the individual(s) bragged about it louder than normal. In the past, law enforcement has been unable to arrest or prosecute such individuals.
Will this affect you? It already has if you lived in Europe. It is coming to North America soon. Think how much business is now run on the Internet. I've already talked about small business that use their point-of-sale systems which require the Internet. Think about all those businesses coming to a halt while their service providers try to correct the problem.
The perpetrators need to be caught, arrested, prosecuted and have their trial on the Internet every day (like the OJ Simpson fiasco).
What are your thoughts?
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