Hammer Time

The chart's legit
Either work hard
Or you might as well quit
--MC Hammer

Been a long time since we've segn this kind of volatility--defined as big intra- and inter-day moves. Yesterday's 'inverted hammer' candlestick turned out to be prescient, as today the bears dropped the hammer on the bulls.

Relentless selling in the afternoon found markets closing on the lows with ~4% losses. Dow was down over 1000 pts once again.

As noted earlier, intuitive place for bulls to make a stand is the 200 day at SPX 2500ish--which is now only a percent or so lower.

Hard not to think of the end-of-week tremors that have preceded some of the largest market bloodbaths in the following week.

no positions

Correlated Decline

I'm sick and tired of you setting me up
Yeah, setting me up
Just to knock-a knock-a knock-a me down
--Bruce Springsteen

Many investors expect stock and bond prices to move in opposite directions. In the present environment in particular, many believe that there will be a 'flight to safety' toward bonds if stocks sell off.

That may be true in the very near term, but there is an argument that, over time, stock and bond prices are positively correlated. After all, there have been secular bull markets in both stocks and bonds over the past three decades.

Is it possible that we could see the opposite? Stocks and bonds in correlated decline as interest rates refuse to be managed by bureaucrats any more and climb higher? Are we seeing early signs of such now?

no positions

Pleasant Dreams

Only shadows ahead barely clearing the roof
Get to know the feeling of liberation and release
--Crowded House

After probes lower, higher, and lower yesterday morning, bulls decided to take charge and stampede higher by a couple of percent. The rally is continuing this am and has currently retraced over half of Monday's losses.

Investors, conditioned to expect the rare downdraft over the past couple of years to be short-lived, seemed to be breathing a collective sigh of relief once more.

Not sure the dream will end as pleasantly this time.

no positions

Downtown?

Just listen to the music of the traffic in the city
Linger on the sidewalk where the neon signs are pretty
How can you lose?
--Petula Clark

Overnight futes were deeply red. Dow was down another 700 at one point last nite. After subsequent gyration, domestic mkts opened about 1% lower. Then came the requisite bounce which took them green.

That has since stalled and markets have begun rolling over. Best guess (which is worth next to nothing, of course) is that if bulls can't rally 'em right around here then we're headed downtown.

The bears, having been scorched so many times in these situations over the past few years, are likely to be tentative in their actions. They'll particularly be on the lookout for policy maker signals that investors backs are still protected.

Absent that, the 200 day moving average below at 2550ish seems an intuitive level for the bulls to make a solid stand.

no positions

C Words

"This is it! I'm telling you this is it!"
--John Tuld (Margin Call)

Domestic markets were splattered today. The SPX was down about 4%.

The Dow closed over 1000 pts lower and was down 1500 intraday. That's the first time the Dow has lost 1000+ in a session.

Carnage continued after hours, with major indexes quickly approaching their 200 day moving averages--a level that seemed so far away just a short time ago. Nikkei futes have been indicated about 8% lower.

This bring to mind two c-words. Crash and contagion. They are not unrelated.

no positions

Ron Paul's FISA Take

Drawn into the stream
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

Adding to our commentary yesterday, Ron Paul notes three lessons learned from the FISA memo. One is that the memo (and I would suggest the blow back from intelligence agency officials and their minions in the aftermath of the memo's release) demonstrate the veracity of the Deep State that does not want the election of a presidential candidate who campaigned on better relationship with Russia and on rethinking NATO to threaten its existence.

A second is that the memo demonstrates that neither Republicans or Democrats generally care about surveillance abuse on American targets. The FISA abuses detailed in the memo were known long before the memo's release--and long before the FISA expansion was re-authorized by Congress. Echoing Judge Nap, Dr Paul argues that the committee did not want the American people to see how corrupt the surveillance system really is lest they begin to call their representatives and demand that they allow the FISA amendment to expire. He observes that the lead author of the memo, Republican Devin Nunes, was one of the most vocal proponents of FISA expansion during the recent re-authorization debate.

Finally, hawks on both sides of the aisle have used claims of Russian meddling in the election to build animosity toward Russia among average Americans. As Paul sees it, the primary goal of this exercise is to keep the $1 trillion military gravy train rolling down the tracks toward a new Cold War with Russia.

GOP as FISA Facilitators

"I think that when statesmen forsake their own private conscience for the sake of their public duties, they lead their country by a short route to chaos."
--Sir Thomas More (A Man for All Seasons)

The aforementioned House Intelligence Committee memo was finally released on Friday. Despite comedic attempts by Democrats to portray it as illegal, obstructionist, misleading, much ado about nothing, etc, the memo brings to light abuses of the Foreign Intelligence Security Act (FISA) by the Dept of Justice and FBI w.r.t. the Trump 'Russian collusion' investigation. Whether officials in these agencies are brought up on charges remains to be seen.

Republicans are not innocent in this process, however. As Thomas Massie's question implies (and as Judge Nap previously observed), the fact that the GOP-led House Intelligence Committee delayed the memo's release until after the FISA expansion vote implicates them in preserving this statist institution.

My question: who made the decision to withhold evidence of FISA abuse until after Congress voted to renew FISA program?

— Thomas Massie (@RepThomasMassie) February 2, 2018

The fact is that it is the mere presence of the FISA institution that invites abuse. Anyone who has voted for it or supports it is complicit in the wrongdoing. FISA supporters include many Republicans.

The newly released memo outlines only one example. There are surely other instances of abuse that have yet to see the light of day. And such abuses will surely continue as long as FISA is on the books.

If Republicans are truly outraged at the improprieties sketched by the 'memo,' then they will reverse FISA legislation and toss it onto the scrap heap of history. Anything less implicates them in this and all other FISA abuse episodes.

Tremors

"I feel it."
--Jack Goddel (The China Syndrome)

The Dow was down over 650 pts yesterday, marking the largest single day decline in several years. Because the Dow has risen so much over the past few years, however, the absolute decline translates into a 2.5% relative loss--well within the systematic distribution of inter-day moves in the index.

Moreover, yesterday's decline broke thru only the near term-uptrend line. Longer term technical trends remain firmly intact.

Market participants would be foolish to dismiss the recent price action, however. It could be that higher rates are finally starting to weigh on investor psyches.

Today's tremor could be tomorrow's earthquake.

no positions

Ten Year Itch

Phil Connors: Do you ever have deja vu, Mrs Lancaster?
Mrs Lancaster: I don't think so, but I could check with the kitchen.
--Groundhog Day

Most important chart in my world continues to be the 10 yr yield chart. It blasted above 2.80% this morning.

Yes, stochastics et al suggest this particular move is getting toppy. Then again, stocks have made relentless multi-month move with stochastics twisting high all the while.

no positions

FISA Expansion and Abuse

"The government's been in bed with the entire telecommunications industry since the 1940s. They've infected everything. They get into your bank statements, computer files, email, listen to your phone calls...Every wire, every airwave. The more technology used, the easier it is for them to keep tabs on you. It's a brave new world out there. At least it'd better be."
--Brill (Enemy of the State)

Judge Nap offers current thoughts on happenings related to the Foreign Intelligence Surveillance Act (FISA). Several weeks back, the House Intelligence Committee drafted a memo summarizing results of its investigation into spying abuses by the NSA and FBI. The abuses purportedly sketched by the memo span the last year of the Obama administration and the first year of the Trump administration.

Since the memo's existence became known, calls have escalated for releasing the memo to the public so that the people can understand what the investigation and its findings entail. If what some members of Congress who have read the memo (but are sworn not to divulge its details while it remains confidential) say is true, then the findings will be quite revealing regarding the subversive activities emanating from the Deep State.

During the time that the House Intelligence Committee was sitting on its memo, Congress was putting the finishing touches on legislation that would expand FISA-related surveillance power of the federal government. After passing the House, the bill passed the Senate with no votes to spare and subsequently signed into law by President Trump.

Judge Nap contends that if the memo had been made public prior to the congressional vote, then there was no way that the 'FISA expansion' law would have passed the Senate. Further, he argues that members of the House Intelligence Committee are guilty of misconduct in office by concealing evidence of spying abuses by federal agencies while their congressional colleagues were debating and voting on the very issue of domestic spying.

The Judge also poses the question: Why would members of the House Intelligence Committee engage in such misconduct? His answer is that the intelligence community today exerts tremendous influence over elected officials. Because it possesses capacity to reveal politically charged information at its discretion, the NSA flexes its muscles in the face of government officials who are supposed to be the regulators. In reality, the NSA regulates the government officials.

Subsequent to the passage of the FISA expansion, Congress and the president have signaled their intent to release the memo. This has the intelligence community backpedaling. Several of them, including the Deputy Director of the FBI, have already hit the eject buttons.

If the memo made public and reads as advertised, the perhaps a critical number of eyes will be opened to the infringement on liberty being perpetrated by the feds.