The S&P downgrade of Greece and Portugal’s debt ratings whacked U.S. equities yesterday.

Lowry’s notes that the major market averages experienced their worst decline since Feb. 4th, with yesterday qualifying as a 90% Downside Day on the NYSE (94.5% of total Up/Down Volume).

The decline brought both indices to a test near term support.

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SPX DrawDowns Since Prior High


Chart courtesy of Bianco Research

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SPX Still in Up Channel


Chart courtesy of Fusion Analytics

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

28 Responses to “S&P500 Market Update”

  1. Mr.E. says:

    Time for leverage – and market liquidity – to decrease on risk reduction.

  2. MarketSavant says:

    Investor Psychology Illustrated. I put us at point 4.5

    http://www.marketfolly.com/2009/04/investor-psychology-illustrated.html

  3. ewmayer says:

    Not the PTB, HFT algos and hordes of dip-buyers would ever allow anything as shocking as 2 whole *days* in a row of DJIA down-ness. At this point, that would require the whole world to be burning, both metaphorically and literally.

    I’m starting to wonder whether the “Greenspan put” has now morphed into a public policy end in itself … the pols haven’t fixed a single one of the big issues that brought us the crisis (except for partially recapitalizing the insolvent TBTFs at taxpayer expense and thereby encouraging yet another bout of insane risk-taking by the now-even-bigger too-bigs), but they can point to “look, the markets are up, baby, up!” as a sign of progress in their propagandistic “recovery narrative”. Added talking points here include repeatedly injecting “the recovery” – note the confident-sound “the” in there, repeat it enough times and 90% of folks will stop questioning it.

    And I suspect the dems (not because of their party affiliation, but merely by the fact that they are currently the one of our two bank-owned political parties currently in power) – knowing that since main street is deep down not yet feeling much of “the recovery”, it’s likely to punish the party-in-power come the Fall midterm elections – realize that their best hope to put a nice spin on all their “accomplishments” is to have the market stay buoyant at least until the November elections. “Dow 36.000 by November, bitches!” election-vote-buying, as it were.

    I know Barry dislikes market-conspiracy-theories, but there was nothing mythical about Greenie’s commitment to using the powers of the Fed (both the traditional ones and several useful new ones he helped invent) to prop the markets. There is no reason to believe Bernanke’s playbook here is any different – if anything, his market-pumping is much more extensive and multi-pronged. Like the saying goes, the biggest conspiracies are always the ones going on in plain sight.

    Like many bearish recovery skeptics, I got nothing about buoyant markets if that buoyancy is in some way based in economic fundamentals … but it’s been quite a while since that`s been the case. This all fits very well with my observation that over the last several decades, what has happened in the U.S. is the creation of a “hollow economy” – instead of having a broad base of jobs with a solid middle-class productive-jobs component in the center of the wage-distribution graph, we have an ever-increasing bipolarization at the extremes: At the high end we find (in roughly ascending wage order) government, public-safety and high-tech/engineering jobs, skilled professionals (e.g. doctors, architects, attorneys) and FIRE-economy (finance, insurance, real estate) jobs. at the low end we find unskilled services jobs, ranging from burger-flippers and Wal-Mart cashiers to e.g. dental assistants.

    Now think about those two poles … the only jobs categories in there that actually *produce* anything are the high-tech/engineering ones. No disrespect to doctors and dental hygienists, but in a macroeconomic sense they are also service-sector professions, which must be counterbalanced by genuinely productive jobs in order to have a sustainable economic model. The once-vast productive middle – the domestic auto and manufacturing industry jobs – has been gutted, and each successive “recovery” has shown the productive middle getting sparser. The only productive-middle sector which was growing in the past decade was the part related to housing and commercial-real-estate construction, and most of that growth was strictly due to the RE bubble, so now that sector has been eviscerated, as well.

    Long story short, to reflect the middle-class wage impoverishment of this “new economy”, U.S. GDP needs to contract somewhere on the order of 10-20% in order to get back into whack with actual productive activity. This is of course the harsh mathematical truth the politicians and Ponzi financiers have been doing everything in their power – and many things beyond, in the legal sense – to obfuscate and evade. Mustn’t let the hoi polloi know just how long-term-screwed they are – that could affect our bonuses, dontchaknow.

  4. ewmayer says:

    p.s.: Sorry about the long attention-span-demanding post … had to get it off my chest.

  5. cognos says:

    ewmayer — I am sorry, but your basic macro-economics are wrong.

    The drug development sector is FAR MORE valuable than most entire countries (e.g. Russia) commodity sectors. The simple fact is … little pills like Viagra or Liptor. Not only do they save or massively improve lives but they are very, very valuable. But they have 90-99% profit margins.

    Same thing is true for media — both Internet and Hollywood. How much does America make off music, movies, television, sports and magazines? Howabout Facebook, Google, Twitter, Amazon, Ebay? Watching many Chinese/Brazilian/Russian TV programs? You doing your internet searches on BIDU?

    Finance sector is similar. We kill there. The list goes on and on.

    The “manufacturing base has been hollowed out” arguments is just foolish and stupid. No substance there. I know globalization is hard on unionized factory workers and that the real-estate bubble bursting is hard on construction. Dont mis-construe that and start to think those things are “more real” or “more key” to our economy going forward. The opposite is true. Adjustments can be painful, have frictional costs, but the future is not about more factories and manufacturing. Actually… this is practically true globally. The key future is about inventions and innovations (always is!) and then about everyone globally getting wealthier — consumer products, healthcare, tech for the developing world.

  6. call me ahab says:

    ewmayer-

    good post- but where did you pull this statistic-

    “to reflect the middle-class wage impoverishment of this “new economy”, U.S. GDP needs to contract somewhere on the order of 10-20% in order to get back into whack with actual productive activity.”

    just wondering

  7. TakBak04 says:

    @ewmayer Says:

    Now think about those two poles … the only jobs categories in there that actually *produce* anything are the high-tech/engineering ones. No disrespect to doctors and dental hygienists, but in a macroeconomic sense they are also service-sector professions, which must be counterbalanced by genuinely productive jobs in order to have a sustainable economic model. The once-vast productive middle – the domestic auto and manufacturing industry jobs – has been gutted, and each successive “recovery” has shown the productive middle getting sparser. The only productive-middle sector which was growing in the past decade was the part related to housing and commercial-real-estate construction, and most of that growth was strictly due to the RE bubble, so now that sector has been eviscerated, as well.

    ———

    Think many of BR’s lurkers, would agree with your observations. What else can they do but try to keep things propped and patched , though? Plus, keeping the two wars going so that all the troops aren’t back here on unemployment.

    The toll financial deregulation and flawed trade policy has taken on our economy the last 30 years isn’t easily fixed. The models of the past seem broken and there don’t seem to be any new ideas on the horizon except the push for energy independence. Wind, solar, fuel cell technology, etc….will be a decade or more before making a difference in the kind of job growth we need. At times it does seem we have grim prospects ahead, unless something we can’t now forsee happens to turn up.

  8. call me ahab says:

    cognos says-

    “The “manufacturing base has been hollowed out” arguments is just foolish and stupid.”

    and he says-

    “The key future is about inventions and innovations (always is!) and then about everyone globally getting wealthier”

    so . . .still tinkering with that handy little key chain/golf divot tool that will revolutionize the world cognos?

    hahhahhahahahha- and speaking of tools . . . . .

  9. TakBak04 says:

    @Cognos says:

    cognos Says:
    April 28th, 2010 at 1:57 pm

    ewmayer — I am sorry, but your basic macro-economics are wrong.

    The drug development sector is FAR MORE valuable than most entire countries (e.g. Russia) commodity sectors. The simple fact is … little pills like Viagra or Liptor. Not only do they save or massively improve lives but they are very, very valuable. But they have 90-99% profit margins.

    Same thing is true for media — both Internet and Hollywood. How much does America make off music, movies, television, sports and magazines? Howabout Facebook, Google, Twitter, Amazon, Ebay? Watching many Chinese/Brazilian/Russian TV programs? You doing your internet searches on BIDU?

    Finance sector is similar. We kill there. The list goes on and on.

    ———

    Cognos….This post reveals more about you than you ever hoped for…… You are a JOKER! Always suspected but now you’ve ripped your mask off! lol’s.

  10. TakBak04 says:

    cognos Says:
    April 28th, 2010 at 1:57 pm

    ewmayer — I am sorry, but your basic macro-economics are wrong.

    The drug development sector is FAR MORE valuable than most entire countries (e.g. Russia) commodity sectors. The simple fact is … little pills like Viagra or Liptor. Not only do they save or massively improve lives but they are very, very valuable. But they have 90-99% profit margins.

    Same thing is true for media — both Internet and Hollywood. How much does America make off music, movies, television, sports and magazines? Howabout Facebook, Google, Twitter, Amazon, Ebay? Watching many Chinese/Brazilian/Russian TV programs? You doing your internet searches on BIDU?

    Finance sector is similar. We kill there. The list goes on and on.

    ———

    Cognos….This post reveals more about you than you ever hoped for…… You have ripped your mask off!

  11. The Curmudgeon says:

    Yeah, we’ve got Viagra and Hollywood, making life immeasurably better for all of mankind. Seems a bit shallow at times for me, at least until the Viagra kicks in.

  12. wally says:

    “At the high end we find (in roughly ascending wage order) government, public-safety and high-tech/engineering jobs, skilled professionals (e.g. doctors, architects…”

    Sorry; I was with you until the word ‘architects’.

  13. wally says:

    ewmayer,
    To return to those ‘productive’ jobs would require decreases in efficiency. For one instance: one farm worker now probably does the work of 60 to 100 workers of 100 years ago, yet we have more production than ever. Similarly, mining, power generation, manufacturing and other industries turn out more than ever with fewer people. What isn’t mechanized is exported to countries earlier on the curve and who will have a similar issue in a few years.

  14. Brett Tibbitts says:

    What a complete farce.

    HOW is it possible that thoroughly discredited rating agencies’ downgrade of something that should have been completely obvious to everyone for months can have that much of an impact on a market? It must be overbought.

    HOW is it possible that we continue to elect senators who don’t have a clue about the financial markets and are willing to completely embarrass themselves in front of the entire country with inane questions that can’t differentiate between the supermarket and the stock market? We have a very uninformed electorate.

    HOW is it possible that Goldman Sachs could hire such high priced attorneys who did such a lousy job of preparing Goldman witnesses? Goldman is no where near as smart as people think it is.

  15. JustinTheSkeptic says:

    It is getting close to that time where the market finally tells the fed that they are blowing the old smoke up our collective asses. Low rates are not helping; soon the monster created will become worse than the cause for his creation. Bank on it! Pardon the pun. :-)

  16. call me ahab says:

    . . .so wally-

    what is the answer- less hours and shorter work weeks to adjust for productivity gains and to expand the trend towards low paying service jobs- because not everyone is cut out to be an engineer

  17. ewmayer says:

    @ahab: Regarding the where-did-I-get-my-numbers…

    Perhaps the easiest way to reckon this is to observe that the U.S. government is currently borrowing well over 10% of GDP just to keep GDP nominally positive … and even by their likely-much-too-optimistic estimates, this ration is not expected to dip much below 10% for the rest of the decade, absent some serious structural changes.

    More broadly, one can look at the disparity of credit growth over income growth for U.S. households over the preceding decade – bingo, also running at or above 10%, year over year. And note that that comes on top of already-deep-indebtedness at the start of biggest debt bubble in history, i.e. we need to contract ~10% just to get back to debt-no-longer-growing, and more than that to actually start paying down accumulated debt.

    Here`s an article by Karl Denninger which lays out the debt-expansion-substituting-for-real-growth case:

    http://market-ticker.denninger.net/archives/1411-Weekend-Chart-To-Ponder-Macro-Economics.html

    Here’s a 2006 warning article from the Daily Reckoning, which notes “private household indebtedness since 2000 has soared by 70%. This compares with an overall increase in real disposable personal income by 12%” … i.e. a roughly 10% disparity of credit growth over income growth over tht time span, on top of pre-existing (already high) household debt loads:

    http://dailyreckoning.com/us-recession/

    By way of amusing contrast, here`s an academic paper by an Australian economist (not to be confused with the categorical “Austrian economist”) from 2006 – note the same paper appears in multiple forms on the web – which notes a similar roughly-10% disparity of credit growth over income growth for Aussie households over the preceding decade, but then makes the “this time is different” argument to try to bolster that this sort of disparity is in fact long-term sustainable:

    http://findarticles.com/p/articles/mi_m0PAO/is_4_25/ai_n27074839/

    Well, we all know how that worked out.

    ————–

    @cognos: The fact that you see cheap viagra and lipitor as bases for “sustainable growth” reveals much of your grasp of economic fundamentals … or at least of that of your internet econo-troll avatar.

    —————

    @wally: Good point, but while all that cheap food might be of real economically productive use in (say) Africa, here in the U.S. it shows up mainly in the national obesity statistics – which is of course what need all of cognos’ oh-so-productive big-pharma sector for. Don’t get me wrong – helping keep people healthy can be an economically productive thing – but in our culture of excess, most of that pharma-related research and employment is in the service of products we either don’t need or which are designed to help mitigate the adverse effects of our own excesses.

  18. rootless_cosmopolitan says:

    cognos,

    little pills like Viagra or Liptor. Not only do they save or massively improve lives

    For the ones who are able to pay for it.

    Same thing is true for media — both Internet and Hollywood. How much does America make off music, movies, television, sports and magazines? Howabout Facebook, Google, Twitter, Amazon, Ebay?

    Who is “America” in your sentence? The owning and investing class in “America”? The majority of people living in “America” probably doesn’t make anything or only little from this.

    Finance sector is similar. We kill there.

    “We’? And who the f*** is “we” in this statement? You and your Wall Street buddies? The slip, “we kill there”, probably contains more truth than you intended to convey, I guess.

    The key future is about inventions and innovations (always is!) and then about everyone globally getting wealthier — consumer products, healthcare, tech for the developing world.

    In contrast to your rosy views, capitalism just doesn’t work in this way that everyone is getting wealthier. The reality is that a minority of owners and investors, receiving the major share of income from capital accumulation, is getting wealthier and wealthier, and the other side of the medallion is an increasing gap between the haves and the have-nots, both in the vertical within countries and in the horizontal between various regions of the world. The implication is that systemic contradictions, economic crises, and political and social instability will become more severe all over the world in the coming decades. More violence, more war, and more police state and less civil liberties to keep unrest and opposition to the social order in check.

  19. cognos says:

    Im sorry you guys are very strange and wrong.

    First, the value of viagra and lipitor is mocked. This understands so little. Study’s show that Lipitor and more generally “statins” are MORE VALUABLE than ALL OF HEARY SURGERY combined. That is -if we had the choice to fully stop either 1) heart surgery or 2) lipitor. We should pick #1 and stop all heart surgery. More lives would be extended longer. (AND — this is independent of costs / side effects).

    It really is a miracle drug. Some people say responsible for more life extension than almost anything… since the bare basics of germ theory, childhood immunizations, and antibiotics. And if you dont think Viagra is the same… ask a Urologist what impotent men would do before it (and what they would pay $$$ to have THAT done to them).

    Second, you guys seem to think “no one works” in a) media and technology; b) healthcare and drug companies; c) financial services. Again, the stupidity could not be thicker. We are not some country filled with disgruntled unemployed factory workers. They are a small minority. Its a 5-10% problem.

    Third, you somehow have a bias that we need LESS — drugs, media, financial services. And we need MORE of WHAT? Cars? Clothing? Houses? Toys? Why… I dont get it. I think we have plenty of those too.

    And Rootless — America exports #1 Technology #2 Financial Services. Do you realize the financial services sector pays about $500B per year in taxes? Think a bit. The entire world comes to the U.S. for financial services. (So yes, while hedge fund guys like me make a good living in finance… we pay alot of taxes. Thats good for you… We make alot of our money off european, asian, and middle eastern investors.)

    God. Do you guys just hate life? When you walk into a Whole Foods or that new Virgin Airways airport terminal? Or step into a modern car with beautiful interior, great ride, and 8 airbag safety. Or walk into a WalMart and see 1M products available for unbelieably great prices. Or turn on an iPad and start steaming a movie in 30 secs. Or look at the $1 menu at every fast food restaurant… Do you just think — “this world has gone to shit!”

    That’s wierd.

  20. rootless_cosmopolitan says:

    cognos,

    Please could you explain, which one of my actual statements you are trying to refute? I see here only a bunch of straw man arguments from you.

    Anyway, you are just delusional, if you believe that

    1. the stock market was a good indicator for the health of the economy

    2. the economy would be booming ahead from here

    3. consumer demand was not relevant for a boom of the US economy

    4. expansion of private credit was not relevant for a boom of the US economy

    5. exporting US financial services to the rest of the world made everyone in the world happier and wealthier

    6. what was good for you must be also good for everyone else and that the concerns of everyone in this world was mostly about iPads and Whole Foods.

    What do you think what the source of the income is from which the alleged $500 billion a year in taxes are being paid, like you claim? It’s from income of people living in United States or wealth transfered from other countries to the American financial industry. Someone has generated this wealth.

  21. Boots or Hearts says:

    “The entire world comes to the U.S. for financial services.”

    -Subject to change.

    Those in Financial services bragging about gains in the last 12 months should find a kindergarten playground tomorrow in which to dominate a game of dodgeball.

    Hope folks have enjoyed the rally by all means but really.

  22. cognos says:

    Rootless –

    I think each of my points directly refuted your actualy statements. Regarding Viagra and Lipitor you said, “for those who can afford it”. Without realizing that pills are VERY CHEAP compared to medical treatments (say 1/10th the cost) and then in 10-yrs (2011) they come off-patent and generic versions are 1/100th the cost. But AGAIN you said, “for those who can afford it”.

    I can go through each of your other points and my responses in turn. And yet… to you… I did not even try to refute your points. I just set-up “straw men”. Do you even know what that means?

  23. cognos says:

    Boots or Hearts –

    I exports high-quality financial services. My work produced positive performance in 2008 (and each year for 5 years). I am not worried about “bragging about gains”… if anything I am focused on the fact that recovery continues and sharing macro economic information and discussing conjecture that helps discern what lies ahead.

    I am trying to continue — bragging about predictions. Correct future market predictions.

    Its better than bragging about the obscure non-sense websites I can cite that show everything is about to collapse or the Fed is involved in some conspiracy with AIG and GS to deduct directly from your paycheck (seem like we have a few of those braggers here).

  24. rootless_cosmopolitan says:

    And we need MORE of WHAT? Cars? Clothing? Houses? Toys? Why… I dont get it. I think we have plenty of those too.

    Actually, yes, I think, “we” need more of it. For instance, housing, when I walk through Harlem, I see how much housing is still needed, particularly quality housing for people. Not just in the rest of world, hundreds of millions of people, also in the United States there are millions of people who can’t even get served all their basic needs.

  25. rootless_cosmopolitan says:

    cognos,

    I am trying to continue — bragging about predictions. Correct future market predictions.

    You always claim this. Your alleged correct predictions that you made in March last year. Please show us the posts where you made them.

  26. rootless_cosmopolitan says:

    cognos,

    I think each of my points directly refuted your actualy statements. Regarding Viagra and Lipitor you said, “for those who can afford it”. Without realizing that pills are VERY CHEAP compared to medical treatments (say 1/10th the cost) and then in 10-yrs (2011) they come off-patent and generic versions are 1/100th the cost. But AGAIN you said, “for those who can afford it”.

    Ten 100 mg Viagra pill cost about $40. Now, you explain to me, how people who don’t have enough money even for food, can and will afford this. Even more, when these people are some have-nots in other countries, considering the currency exchange rates to the dollar. That other medical treatments are even more expensive and even less affordable doesn’t invalidate what I said.

    And, yes, I know what a straw man argument is.

  27. rootless_cosmopolitan says:

    cognos,

    my first reply to this comment must have got lost.

    As for Viagra. The price for ten 100 mg pills is about $40. Someone who doesn’t even have enough money for food, can’t afford Viagra at the current prices. That other medical treatments are even more expensive doesn’t invalidate what I said.

    And, yes, I know what a straw man argument is.

  28. rootless_cosmopolitan says:

    cognos,

    my first reply to this comment must have got lost. The second one, too. They probably are hanging in the spam filter because of the key words.

    As for the V-pill. The price for ten pills is about forty bucks. Someone who doesn’t even have enough money for food, can’t afford V at the current prices. That other medical treatments are even more expensive doesn’t invalidate what I said.

    And, yes, I know what a straw man argument is.