Morning Stock Market Report: Bernanke & Captain Chaos, Weak Open Ahead

This article was last updated on April 16, 2022

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Where is Captain Chaos When You Need Him? 
The Bernank disappointed the all too sugared up Wall Street crowd by failing to deliver clear signals about the next round of QE. But we knew that would happen. To announce something new when QE2 still has a few weeks to go wouldn’t make sense even for our crazy Central Bank. We have already known for a while that the Fed has no way out of its monetary mess and will eventually resort to clever tactics like yield caps with an implicit understanding that the Fed will embark on buying as much paper as possible to keep rates low (better known as the QE to infinity that many of us have been awaiting).
  
While at Bloomberg for nearly 20 years, I covered every FOMC meeting live and on the air with various former Fed officials along with a variety of brilliant thinkers and Fed watchers.  So after a while you learn the ways of these FOMC gatherings. They are keeping rates at near zero and pretending to take a wait and see attitude. The drama and aire of self importance of these meetings is not lost on its participants.
  
If I were a betting man, I’d place my money on a bet that the Fed knows the QE process must continue and for it to resume without much protest, the markets will need to undergo a little shock therapy in the form of times worrisome enough that it can only be the capped Ben Bernanke to the rescue with more easy money!
 
Hmmm… come to think of it, Ben Bernanke would be a perfect modern day Captain Chaos! 
  
I know that’s a sleight on the greatness of Dom DeLuise. Yesterday our Fed-head told us he wasn’t quite sure why the economy was weak, but said there would be a recovery without telling us how that is going to happen. Who knew the Fed could be so zany and entertaining. They need to use a sitcom laugh track during those little press get togethers. (lol). 
  
Liquidity Difficulties?

An astute reader involved in big fund management called me yesterday and asked if I had noticed anything unusual with LIBOR or EURIBOR. The two can be useful indicators of how liquidity is flowing. So far not much reaction to the Greek situation.
  
CNBC by way of the NY Times talks more about the real elephant in the room: derivatives that insure European debt.
  
What is of even greater interest is the SHIBOR from Shanghai. The 7 day rate has climbed by 100% in recent days. However, as reserve ratio requirements have been raised in China, this is likely only a reflection of that sort of stuff and the maturity of a load bills and security REPOs. Still, it’s always essential to keep a regular look at that part of the world. This near 400 bps rise is not an every day event.
  
China and a side note on coal
At the end of the day, China appears to be a big bubble that is going to pop. It will pop (could be nasty) then consolidate and then China only gets bigger (at least according to the script taken from the history of developing economic juggernauts). One sure sign that the Chinese economy is still operating on a good head of steam is power consumption data. It was up over 2% in the latest reporting week.
  
That leads me to coal. China and other places such as India, are huge coal consumers. I wrote about coal for the Schork Energy report for a number of months until being paid 20-cents per word could no longer be justified. I actually enjoyed reporting on the subject. Here are some more thoughts about the sector, which I see as a pretty good one: Guest Post: It’s Time To Invest In Coal http://is.gd/Qy7Myn via ZH.
  
  
Looking ahead to the Wall Street open….
The bulls are shocked, so shocked that the Fed is guiding the market into an interim period between QEs (though there are still limited POMO plans ahead in July). The bears? They’re shocked, so shocked, that they stupidly dumped like lemmings when the market touched the 150 day moving average on Tuesday. 1295 to 1302 (now at 1287) is a key
upward resistance area for the S&P. Should the market rally past this area on a surprise development (eg Gaddafi being picked off) why we could see a move to the 1320 that would only end up being a blow off move as seen after the bin Laden death. Downside support resides in the 1270 area, then1263, then 1250. Until the interim period ends between QEs, look for choppy trading.
  
Jobless claims up by a "surprise" 9k have also set the stage for early market weakness. I keep asking, who is "surprised" by the weaker data?  Oh yes, those economists who tow the Fed line (that’s most of them). The few renegades out there who look at things with regular glasses as opposed to using the rose/Fed colored glasses are few and far between and do not often get the mainstream public microphone.
  
A notable feature in the options market. Late dy volume in Vix calls picked up with especially heavy activity in the Jul 30 calls. An interesting bet to keep on the radar.
 
A disturbing story that’s going viral: Sunny Sheu: Murdered for Investigating NY Foreclosure Judge Joseph Golia? http://bit.ly/l9dla2. Stuff that can’t be made up.    
  
I leave you with this little bit of politics. Click Here. This is one of those ‘file away for future reference’ sort of stories… an interesting little tale about the FBI, its investigation of peace activists and ties of the Oval Office? Crazy stuff showing up in the Washington Post.

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