Daily Investment Interpretations

March 10, 2011

2011-3-10 (Thursday Night): In the end, the markets closed below their resistance levels, but they went not gently into that good night. The NASDAQ Composite fell 50.7 points (-1.84%) to 2,701.02. The Dow plummeted 228.48 points (-1.87%) to 11,984.61, while the S&P 500 dropped 24.91 points (-1.89%) to close at: 1,295.11. Oil ended the day a little lower, at $102.58 a barrel, while Gold ended at $1,411. The VIX rose 1.66 points to close at 21.68.
    I wondered last night what piece of news was lowering market futures. Apparently, it was a wake-up call about U. S treasury bonds issued by Bill Gross, the co-CEO of PIMCO. PIMCO is the 800-pound gorilla in the bond world, with over one trillion dollars under management: A Not-So Subtle Tip: Sell Gov't Bond Funds Now. Mr. Gross presents three pie charts in his latest monthly investment newsletter. The first pie chart shows a breakout of the traditional buyers of U. S. Treasuries... about 40% to U. S. customers, 50% to foreign customers, and 10% to the Federal Reserve. The second chart shows the current buyers of Treasuries... 30% foreign and 70% Federal Reserve. The third chart asks who will buy U. S. Treasuries after June, when the Fed terminates its Quantitative Easing II bond purchases? Mr. Gross' conclusion is that interest rates may have to rise substantially to attract more buyers and fund the deficit once the Fed curtails its bond-buying program. And that could derail the recovery.
    In addition to the threat to the economic recovery, stun bombs and guns were used against Saudi protestors today: Brace for $200 oil if unrest spreads in Saudi Arabia.  
    In The retreat of the bulls , Mark Hulbert notes that investors have become quite a bit more cautious over the past twelve days. 
    Bull market should see third anniversary  
    Technical Talk: The Battle For 1300 Is On
    Market futures are a bit higher tonight.   
2011-3-10 (Thursday Afternoon): Richard Meiers at TopStock Portfolios is warning that it's probably too early to short the markets just yet: Mid-Day Market Update: Sell Signals Piling Up, But....

(Thursday Morning):
 It's possible that this might be the final dip, the "capitulation of the bulls" when everyone sells their best stocks, followed by a rapid climb: Happy Anniversary, but the charts don't look that way. The Underground Trader observes that today is "rollover" day for the S&P e-minis futures contracts.
    In the meantime, oil has slid below $101, and is falling toward $100 a barrel, catching the oil traders by their futures contracts. The price of oil certainly isn't driving the markets lower. There has been some slightly bad news: Recovery fears slam Street, but nothing that wouldn't normally be shrugged off: Quick Comments: A Change In Market Tone?, The Underground Trader: What's going On With Futures?. The Underground Trader suggests that this sell-off might have to do with the announcement by PIMCO's Bill Gross that he has dumped all U. S. Treasury bonds.
    In this kind of random walk, the best move to make is probably none at all... to wait until the dust settles before making a move.