As we get ready to head into 2015, today one of the legends in the business notes that we just witnessed something the world has never seen before. There is also a guest commentary which includes some mind-boggling information about the year ahead.
By Art Cashin Director of Floor Operations at UBS
December 29 (King World News) – “On this day (+1) in 1916, one of history's most celebrated but inept assassinations began. In the retelling of most assassinations we hear how the victims might have been spared if….! You know the drill – if the guy guarding Lincoln's box had not gone for a drink or if the Archduke Franz Ferdinand had not had his car forced up a side street, etc. etc.
But this assassination was more like Larry, Moe, and Curly plan the Normandy Invasion.
The proposed victim was a semi-literate preacher who passed himself off as a Russian monk. Pre-dating some TV preachers, in an age with no TV, he preached that you needed God's forgiveness. And, to give God a wide enough target, it is necessary that you sin a lot. So, many of his convocations turned into what we might secularly call today – drunkfests or orgies. (But, he said God does need a large target.) Critics of the preacher called him "The Mad Monk". He called himself "Rasputin".
Anyway, Rasputin hit pay-dirt when he appeared to cure the hemophiliac son of Czar Nicholas II. Viewing the cure as a miracle, the Czarina demanded that all decisions be cleared with the miracle-maker, Rasputin. That made him the most powerful man in Russia which did not sit well with the nobles. Thus, the assassination attempt.
On this night Prince Yussupov, the Czar's nephew-in-law, invited Rasputin over for some late-night cakes and wine. Yussupov and his pals loaded the cakes and wine with enough cyanide to kill a regiment of Cossacks. And just for insurance they put extra cyanide on the knives, forks, plates, and glasses. Then Yussupov sat down and made small talk with Rasputin. Over several hours Rasputin ate most of the cakes and drank all of the wine. Then he asked the prince if he had any more wine.
In a panic, Yussupov ran upstairs where the co-conspirators gave him a gun and told him to shoot Rasputin. He shot him in the back at close range. Rasputin tried to turn but fell backward. A doctor was called in and pronounced the monk dead, saying the bullet had pierced his heart. An hour later the conspirators returned to move the body.
In a scene straight out of a Stephen King movie, as Yussupov bent over the body, the monk opened one eye and grabbed the Prince by the throat and started to beat the hell out of him. The others freed the Prince and the conspirators fled, locking the door behind them. Rasputin kicked down the door and chased them onto the palace grounds. They turned and shot him twice knocking him to the ground. Then using iron bars they beat his head to a bloody pulp. They then tied his hands and feet, cut a hole in the ice and dumped him in the River Neva. When the body was found, it was noted that he had freed his feet and one hand and, if he hadn't drowned, he might have come back one more time.
Peasants believe Rasputin put a curse on Russia, which caused the revolution in 1918 and may have caused some recent problems (more wine, Mr. Putin?).
Mr. Putin's problems persisted Friday as oil and the ruble both had a tough day.
On The Seventh Day They Rested Not – While I was among the absent "on the Feast of Stephen", some members of the FoF were at work and stayed awake long enough to report as follows:
With many markets around the globe closed for post-Christmas holidays like Boxing Day, the volume was exceptionally light. In fact, it was the slowest full trading day of the year with the NYSE volume coming in below 450 million shares.
The bulls were in control from the very beginning and by 10:00, the Dow had moved above the 18,100 level.
That produced an instant, but mild, case of vertigo and the Dow slipped back to 18,075 area. They cruised horizontally around that level into early afternoon.
The bulls made another, rather half-hearted, attempt at a rally around 1:20 but they came up short of the morning's highs.
They shifted back into cruise control, only to try one more time as the final hour began, only to get stalled at the same level as the previous try.
That second stall and some indicated sellers in market on close orders produced a sharp fade in prices that had the Dow close at the low tick of the day.
Nevertheless, the Dow had a record closing high and was up for the seventh straight session.
Seasonals And Other Entrails – For weeks, we have been pounding the table on the positive seasonal influences that the market benefits from mid-December into yearend. We have also noted that historically, 2015 has some positive precedents.
In his weekend note, our good friend, and fellow trading veteran, Jim Brown over at Option Investor quoted another friend of mine, Jeff Hirsch, of the Stock Trader Almanac. Here's a bit of what Jim wrote:
Jeffery Hirsch of the Stock Trader's Almanac pointed out that seasonal trends are pretty bullish for 2015. It is a pre-presidential election year and the best year in the 4-year cycle. Since 1939 the third year is up an average of 16.0% for the Dow and 16.3% for the S&P. Since 1971 the Nasdaq has averaged a 30.9% gain in year three. It is also the fifth year of the decade and there has only been one losing year in the last 13 decades. Years ending in "5" average 28.3% gain for the Dow since 1885 with the S&P averaging 25.3% since 1935 and the Nasdaq averaging 25.6% since 1975. The best three quarters in the four year cycle are Q4 of year two and Q1-Q2 of year three which we are heading into next Friday.
We may need help from the seasonals, since the seven day run has left us somewhat overbought. Jim also points out that "the percentage of S&P stocks over their 50 day average is 84% and we typically peak in the 84-88% range. As another friend, Dennis Gartman might quote from "Death of a Salesman" – "Attention must be paid".
Consensus – In all of 2014, the S&P has not experienced three consecutive down days. That has never happened before – ever. These three days may be record setting but caution is in the air. Stick with the drill – stay wary, alert, and very, very nimble.
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