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Fleck's Thoughts
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To Repeat: "Dislocations R Us"


Today's headline refers to the fact that, as I have noted often (for a variety of previously discussed reasons), I feel the market is very brittle, and I have believed there would be no real backdoor when it was time for stocks to decline. It has now become fairly commonplace that, when companies stumble, they get slaughtered, whereas in the past it would have been extremely unlikely to see a multitude of mega-cap companies all gapping in a meaningful way.

Drop and Give Us 50 One need look no further than Pacific Gas and Electric, which at one point was down about 30% today, making it about a 50% decline in three days (that is quite a lot for any company, let alone a big utility). Of course, that was something of an anomaly given it was a function of the fires in California, but there has been no shortage of companies of all stripes behaving in the same way. (I could also point out Goldman Sachs today, and the continued implosion of GE, as other examples of capital vaporization, to pick just two examples.)

Part of today's rout was triggered by a company called Lumentum Holdings (LITE), which fell 30% because its biggest customer had cancelled parts that were on order for this quarter. That customer happens to be Apple, and that fed into the decline in the latter's stock price, which itself was a couple-percent gap before turning into a 5% decline. That took the chip sector and a lot of other tech stocks with it.

The process of declines in a bear market is cumulative, whereby certain securities can hold up despite the news, then some incremental news comes along that's even less noteworthy and shouldn't have a huge impact, but in fact has a dramatic one. The bottom line is that Apple has finally given up the ghost, so the question now is at what rate will psychology start to shift -- about Apple and stocks in general. That will lead to rethinking regarding the ultimate efficacy of QE, since you can never fully unwind it, and then by extension what that means for the dollar and everything else.

All Forecasts Must Now Be in Lowercase I believe the change in psychology I've been looking for, which will bleed across a number of fronts, is beginning, at least for the stock market. It's not easy to say what the rate of change will be and how fast it will affect different markets. It's a little like a forest fire, in that it is hard to predict where it will go and how fast it will move. But the takeaway is that the stock market is in a very precarious position and it will soon be clear to everyone that is the case, and that a lot of the premises they've been working from are incorrect.

With that out of the way, turning to the action, through midday the Nasdaq had fallen 3% and the Dow/S&P 1.5%, with virtually everything red. In the afternoon, they all bounced a little, then rolled over and headed back to the lows, which is about where they were when I had to leave, shortly before the close.

Away from stocks, green paper was the flavor of the day, most particularly against the euro, where the Italians and the bureaucrats in Brussels are having a showdown over Italy's budget. All I can say is, stay tuned. Who knows what kind of rabbit they will pull out of their hat, assuming they're able to.

The bond market was able to bounce on the weakness, which may tell us that folks are getting a little bit nervous. Oil fell 0.5%, while silver and gold lost 0.75%. The miners were weaker as well.

Miner Mireā€¦To Be Continued? The premise that folks have built up to make bets against gold or avoid owning it, because they believed in the omniscience of the central banks is on borrowed time, but until it starts to change (which could literally happen at any time now), we will probably be stuck with gold mired as it has been.

Positions in stocks mentioned: long AAPL puts.