This Market Looks as Serene as a Duck, but There's Turmoil Underneath

Real Money Preview ^ | Jun 02, 2015 | Doug Kass

[expat_panama]

In my decades in the investment business, I've never seen a market with no inclination to decline in the face of numerous potential adverse outcomes and strong secular headwinds. (I recently highlighted 13 big-picture factors that could weigh on markets and the economy and markets in "Short in May and Go Away.")

As Jim "El Capitan" Cramer wrote in "Gulf Widens Between Haves and Have Nots": "The dichotomy between what is working and what isn't working has grown gigantically." The rotation within groups and sectors is fast and furious -- maybe the most vicious I've seen in my investment career.

Today the market is like the anecdote about a duck. It looks serene gliding across the pond, but underneath the surface it's furiously paddling. The market is like that: you look at the price chart of the S&P 500 (SPY) and it just keeps gliding higher, while underneath the surface there's massive turmoil.

Consider:

• New 52-week highs have been declining on every rally since February;
• S&P 500 stocks over their 200-day averages have shown lower highs on every rally since last September;
• Health care and technology are the only major sectors even close to maintaining breadth and momentum;
• Utilities peaked in January's last week and are now nearly 10% below that top;
• Energy stocks topped out in April 2014 and today are about 21% below that peak;
• Transports made their highs in November and last week broke major support levels, standing 17% below their highs.

This paddling of the market's feet under the water's surface is typically a sign of a maturing market, but there's nothing typical about today's market. A market without memory from day to day...

[expat_panama]

This morning's futures portend big stock gains today (+0.48%) with metals @ -0.62%.  Still traveling (btw, travel advisory: Air Canada is the pits) and it seems my hotel internet's down again.  Hope this gets posted...

[WayneS]

I don’t know...

I’ve seen some pretty agitated ducks in my day.

[A CA Guy]

This modern market is the only one in history I know of where the goverment prints cash to support over a third of the whole house of cards.

[kjam22]

Crude is up today 1.73% with a one year forecast of $70 per barrel.

[servantboy777]

I would pay particular attention to your investments leading up to the fall.

Went back and researched the major market corrections from the past....I mean the big ones, most all happened from late August to November.

[kjam22]

Went back and researched the major market corrections from the past....I mean the big ones, most all happened from late August to November.

You had to reasearch to know that?

[servantboy777]

Well yea...some folks are not as smart as others. Duh?

Google is yo friend.

[Leaning Right]

Went back and researched the major market corrections from the past....

Correct me if I'm wrong, but in all those cases weren't bonds paying more - much more - than they are today? My point is that unlike back then, today there is nowhere for investment money to go, except into stocks.

So in a way, past experience is not a guide here.

As an aside, I'm not following up on my own conclusions. Most of my investment money is not in stocks.

[L,TOWM]

That would be correct. There is simply no yield in the fixed income market, unless you want to go to non-dollar denominated off-shore debt. If that decision is made, then you have to be concerned with currency markets, in addition to your normal considerations with debt.

[painter]

Could you put me on it?

[abb]

Are you logged in?

[DaxtonBrown]

“I’m not following up on my own conclusions. Most of my investment money is not in stocks. “

I’m trading a small amount in stocks, mostly in bonds. Keeping powder dry for 40% correction.

[Leaning Right]

I’m trading a small amount in stocks, mostly in bonds. Keeping powder dry for 40% correction.

I'm with you there. But I don't think there will be a major correction until both of these things happen: interest rates rise AND some sort of "black swan" event occurs.

Your thoughts?

[AngelesCrestHighway]

The brick wall is there...in the fog

[servantboy777]

>>Most of my investment money is not in stocks.<<

Nor is mine.

There are millions that are not in tune with the possibility of major market corrections. This is precisely why TRILLIONS in private wealth vanished.

Not sure where it went, but one things for sure, it was a major transfer of wealth from the middle class to....???

[DaxtonBrown]

Not holding breath on rate increases. But I see flocks of black swans everywhere.

Manipulating the market like this is just pushing on a balloon, eventually it squeezes out and pops.

[expat_panama]

ok, so stock futures are crapola, but we had nice gains yesterday (all my troubles seem so faaar away).  This difficulty focusing due to being now on San Francisco California time is usually not a good thing while checking to see what's left of one's life savings, but Rule Number 1 of investing is "Have a Life".

[expat_panama]

Are you logged in?

iirc by the time u posted that I was roaring off to the airport, I'll be in absolute chaos for another week (and loving it) but I expect to get my life back and a return to 'normalcy' later.

[expat_panama]

my take is that market prices have been excessively rigid for a few months now and all this time every minute (incuding the one we’re in right now) it’s been “what’s happening next!!!!????”.