With continued volatility in global markets, today one of the greats in the business sent King World News a powerful piece showing that warnings are exposing cracks in the system. He also discussed what is happening in the metals and currency markets.
By Bill Fleckenstein President Of Fleckenstein Capital
April 14 (King World News) – Overnight markets were of no consequence, as everything that pertained to our stock market occurred here. The macro and company specific news was mostly disappointing and it seemed to matter, at least to some degree, for today.
Warnings Exposing Cracks In The System
In the big company department, J.P. Morgan was successful at beat-the-number, though Wells Fargo wasn't, and Johnson & Johnson had to reduce revenue expectations due to the strong dollar. The bigger corporate news, however, may have been the pre-announcement by Norfolk Southern (and perhaps Zillow), which contained lower revenue expectations for 2015 than 2014. It is hard to imagine that sort of development from an economically sensitive company such as NSC in a genuinely strong economy.
From a macro standpoint, retail sales for March were less than expected. I think a lot of people had hoped to see a really strong number now that the weather was "better." At any rate, the collective weight of that saw the indices lower through midday, led by the Nasdaq, which dropped about 0.5%. That dip was bought and while the Nasdaq remained negative (with 30 minutes to go when I had to leave), the Dow/S&P got back to positive territory, as though (once again) nothing had happened. (A great example of that was Zillow, which rallied back to nearly unchanged from an initial 10% loss.)
Has The Dollar Seen Its Best Days?
Away from stocks, green paper was weaker in the wake of the retail sales number. If I were trading the currencies — which I am not — I would be tempted to be short the dollar with a stop at 100, or long the euro with a stop at 105. I'm not doing anything about that just yet because there is so much noise in the markets thanks to algorithms and a certain degree of illiquidity. I just wanted to note that it is entirely possible that the dollar has seen its best day, even though nearly everyone is bullish.
What About Gold, Silver And Oil?
Fixed income ignored the weakness in the dollar and apparently responded to the economic data, as it was higher (especially the long end). Oil gained 3%. The metals were weaker by about 1% prior to the retail sales data, but reversed after that to get near unchanged, but then declined again to lose about 0.5%. ***To subscribe to Bill Fleckenstein's fascinating Daily Thoughts CLICK HERE.
***ALSO JUST RELEASED: Is The Price Of Gold Really Headed Above $18,000? CLICK HERE.
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