Market News

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In Sunday night’s 60 Minutes interview about his new book on high-frequency trading—Flash Boys—author Michael Lewis got right to the point. After a brief lead-in reminding us that despite the strongest bull market in years, American stock ownership is at a record low, reporter Steve Kroft asked Lewis for the headline: “Stock market’s rigged,” Lewis said nonchalantly. By whom? “A combination of stock exchanges, big Wall Street banks, and high-frequency traders.”

Michael Lewis's Flash Boys Spurs High-Frequency Traders' Response - Businessweek

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It may seem counterintuitive to classify the latest market rally as painful but for everyone sitting on the sidelines in cash it must have hurt to watch the tape tick higher. This “pain trade” goes back to legendary trader Jesse Livermore who posited that markets will move in whatever direction hurts the largest amount of people.

The Pain Trade: Experts watch rally from the sidelines | Breakout - Yahoo Finance

After a limp start for equity markets in 2014, investment bank Goldman Sachs has revealed it is bullish for the second quarter, predicting global growth to pick up and shares to follow suit.

Goldman Sachs: It's showtime for global growth

Asset bubbles are notoriously difficult to identify as they are happening. Often times, they only become clear in hindsight. Having said that, Goldman Sachs' David Kostin offers an interesting stock market chart in his team's new US Quarterly Chartbook. It shows the sector composition of the S&P 500 by market cap since 1974. As you can see, sector bubbles manifest when they suddenly explode as a percentage of the S&P 500.

CHART: Bubbles Within The S&P 500 - Business Insider

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"It's a surprise how violent the selloff in some of these momentum stocks is. They have had an enormous run up, and you can come up with all kinds of things as reasons. But my sense is if you need to sell something to pay the big capital gains from last year ... they might be good candidates to sell," said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.

U.S. momentum stocks sell off for 2nd day; Nasdaq down 2 pct - Yahoo Finance

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After their worst week in several years, high-flying stocks that defied gravity throughout 2013 look like they're in for more punishment. The reason: Despite the plunge, they still look overvalued.

Momentum names may see more pain - Yahoo Finance

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But some signs suggest that this pullback — or another one sometime soon — could get much more severe. Why? Three basic reasons: 

1. Stocks are still very expensive
2. Corporate profit margins are at record highs
3. The Fed is now tightening

Stock Market Crash - Business Insider

By the way, in case some of your bullish friends have convinced you that Professor Shiller's P/E analysis is flawed, check out the chart below. It's from fund manager John Hussman. It shows six valuation measures in addition to the Shiller P/E that have been highly predictive of future returns over the past century.

Stock Market Crash - Business Insider

Today's profit margins are the highest in history, by a mile. Note that, in every previous instance in which profit margins have reached extreme levels — high and low — they have subsequently reverted to (or beyond) the mean.

Stock Market Crash - Business Insider

Whaley explained the VIX is simply a measure of the volatility in the market, which is largely based on investor fear and uncertainty. However, all of the ETFs currently based on the VIX are correlated to the trading of futures indices, which slowly lose value over time as they are reset daily. Whaley noted that some VIX-based ETFs have lost 99% of their value since their inception, and certainly don't trade along with the VIX as novice investors would expect. That's why he's been working with AccuShares to offer a new ETF, one that is based on the VIX and behaves as investors would expect.

Page 2 - Jim Cramer's 'Mad Money' Recap: Blame China, Greece for the Meltdown - TheStreet

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Let's dispense with all form. Here it is.

1. Something is very wrong with the market when we get strong news out of the economy and interest rates plummet. That's a fear of an unknown unknown. What's the point of buying when there is something lurking?
2. When interest rates plummet, the banks plummet, particularly now that the short rates aren't going higher. Banks are the linchpin of all big rallies, and we have lost them.
3. There is no price where the insiders won't sell these extended techs with no dividends or earnings.
4. We have had a big run from the bottom, almost a triple, so it has to be out of gas and extended. It was just high-multiple stocks. Now it is every stock.
5. We've seen this movie before in 2000. In fact, it was this week to the week that we were really beginning to thrash with the really awful dot-coms -- the equivalent to what has come public like FireEye (FEYE) and Splunk (SPLK) -- crashing daily and the insiders still selling no matter what the case.
6. Japan's a disaster.
7. China's a disaster.
8. The world's being kept afloat by central bank fiddling.
9. The initial public offering flow doesn't stop.
10. Earnings will be terrible.

There, I made it. It's very easy to stand by. In fact, it's so easy that, perhaps, it's too easy, too obvious.

Jim Cramer: The Bear Case in 10 Easy Lessons - TheStreet

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The SPDR S&P 500 (ARCA:SPY) ETF fell 1.19% over the past week, as of Thursday's close. After briefly rebounding from its 50-day moving average, the index dropped back below it towards its lower trend line and S1 support at 180.24. Traders should watch for a rebound from the 50-day moving average or a move down to the lower trend line over the coming weeks. Looking at technical indicators, the RSI appears oversold at 43.19 but the MACD remains in a bearish downtrend.

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“In 1990, Tokyo’s total land value accounts for 63.3pc of US GDP, while Hong Kong reached 66.3pc in 1997. Now, the total land value in Beijing is 61.6pc of US GDP, a dangerous level,” said Mr Mao.

Chinese anatomy of a property boom on its last legs – Telegraph Blogs

Mr Mao said China’s house production per 1,000 head of population reached 35 in 2011. The figure is below 12 in most developed economies “even when the housing market is hot; no country has a figure of greater than 14”.

Chinese anatomy of a property boom on its last legs – Telegraph Blogs

Land sales and property taxes provided 39pc of the Chinese government’s total tax revenue last year, higher than in Ireland when such “fair-weather” taxes during the boom masked the rot in public finances. There is a huge problem in all this. The International Monetary Fund says China is running a budget deficit of 10pc of GDP once the land sales are stripped out, and has “considerably less” fiscal leeway than assumed.

Chinese anatomy of a property boom on its last legs – Telegraph Blogs

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The SPDR S&P 500 (ARCA:SPY) ETF rose 1.07% higher, as of Thursday’s closing price. After moving above its pivot point at 186.44, the index trades between its R1 resistance at 191.57 and S1 support at 183.18. Traders should watch for a move above R1 resistance to R2 resistance at 194.83 or a move below S1 support to S2 support at 178.05. Looking at technical indicators, RSI appears slightly overbought at 57.71, while MACD remains bullish after a crossover on April 21st. SEE: The Time To Focus On Value ETFs Is Now

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One look at our trading range screen of the 30 largest country ETFs tells you that world markets have gotten extended recently.  As shown below, 22 of the 30 countries highlighted are now overbought (more than one standard deviation above their 50-days), and more than a handful are at extreme levels (more than two standard deviations above their 50-days).  Some of the most overbought countries include China (FXI), France (EWQ), India (PIN), Japan (EWJ), Spain (EWP), and the US (SPY).  Of the ETFs listed, India (PIN) is up the most so far this year with a gain of 24.17%.

Bespoke Investment Group - Think BIG - The World is Overbought

Low stock trading volume and volatility are messing with investors’ heads, fogging their view of the stock market. One analyst thinks these doldrums could turn out to be the new norm.

VIX at 2007 low is like sensory deprivation for stocks - Market Snapshot - MarketWatch

For the past five years, those who take a cautious stance on investing have paid close attention to a measure variously known as the “Cylically-Adjusted Price-to-Earnings Ratio” (or CAPE) or the “Shiller PE,” after Yale finance professor Robert Shiller. Using data going back to 1880, this measure has argued that U.S. stocks are becoming dangerously expensive by historic standards. But the strategy team at investment bank SG Securities is arguing that this conclusion may not be correct.

Why stock market bears may be making a big mistake - Brett Arends's ROI - MarketWatch

The Japanese government on Monday raised its economic growth reading for the first quarter, saying that capital spending was sharply higher than initially thought. Gross domestic product increased at an annualized rate of 6.7% in the January to March period from the previous quarter, the Cabinet Office said, revising its initial estimate of a 5.9% expansion. The result, adjusted for price changes, marked the sixth straight quarterly expansion.

Japan GDP revised higher on capital-spending surge - MarketWatch

We’re at one of those rare moments in market history when even the pundits are running out of things to say. The S&P500 (^GSPC) is at all-time highs. Momentum names are on-fire. The economic data is fine and all is right in the world.

Pundits baffled as market soars past target highs | Breakout - Yahoo Finance

According to Ari Wald, head of technical analysis at Oppenheimer & Co., there may be some near- and intermediate-term downside, though he doesn't recommend trying to time corrections. Instead, he sees five reasons to have a bullish long-term view on the S&P 500

We are about to enter the greatest bull market in 85 years | Talking Numbers - Yahoo Finance