5 Ways to Avoid Financial STDs (Substantially Tremendous Debt)

In today's world, it's easy to fall into the trap of Substantially Tremendous Debt (STD). Many people are living paycheck to paycheck and struggling to make ends meet. It's important to take control of your finances and avoid getting into debt in the first place. In this article, we'll discuss five ways to avoid financial STDs and live a financially healthy life.

1. Create a Budget and Stick to It

Creating a budget is the first step towards financial stability. Start by tracking your expenses and income for a month. Write down everything you spend money on, from your rent and utilities to your morning coffee. Once you have a clear idea of where your money is going, you can create a budget that aligns with your income.

Make sure you allocate funds for all your essential expenses first, such as rent, food, and utilities. Then, allocate money towards your financial goals, such as paying off debt, saving for retirement, or building an emergency fund. Finally, allocate funds for your discretionary spending, such as entertainment or dining out.

Once you have created your budget, stick to it as closely as possible. If you overspend in one category, adjust your spending in another to compensate.

1. Save for Emergencies

Unexpected expenses can happen at any time, and they can quickly derail your financial stability. That's why it's crucial to have an emergency fund. Set aside at least three to six months of living expenses in a separate account to cover unexpected costs, such as medical bills, car repairs, or job loss.

Start by setting a realistic savings goal and contributing a small amount each month. Consider automating your savings by setting up a direct deposit from your paycheck or using a savings app to round up your purchases and save the spare change.

1. Avoid Credit Card Debt

Credit cards can be a convenient way to make purchases, but they can also lead to substantial debt if not used responsibly. Avoid using credit cards to finance your lifestyle, such as buying clothes or dining out. Instead, use credit cards for essential purchases, such as groceries or gas, and pay off the balance in full each month.

If you already have credit card debt, prioritize paying it off as soon as possible. Consider consolidating your debt into a low-interest loan or using a balance transfer card with a 0% interest rate to save money on interest charges.

1. Live Below Your Means

Living below your means means spending less than you earn. It's a simple concept, but it can be challenging to implement. Start by cutting back on your discretionary spending, such as dining out or shopping. Look for ways to save money, such as cooking at home, carpooling, or shopping at discount stores.

You can also find ways to increase your income, such as taking on a side hustle or negotiating a raise at work. The more you can increase your income and decrease your spending, the easier it will be to live below your means and avoid financial STDs.

1. Invest in Your Future

Investing in your future means making smart financial decisions today that will pay off in the long run. Start by contributing to your employer's retirement plan, such as a 401(k) or 403(b), and consider opening an Individual Retirement Account (IRA) to save even more for retirement.

You can also invest in yourself by furthering your education or learning new skills that will increase your earning potential. Look for opportunities to network and build relationships with other professionals in your field to increase your career opportunities.

In conclusion, avoiding financial STDs requires discipline, patience, and a long-term mindset. By creating a budget, saving for emergencies, avoiding credit card debt, living below your means, and investing in your future, you can take control of your finances and live a financially healthy life

Monday Morning Musings

Markets are back in rally mode this morning after Friday's selloff that closed near its lows.  The one saving grace from Friday was that volume levels ran low, which means there wasn't as much conviction behind the selloff.

There was some positive economic news this morning when the Empire Manuf. index came in at 7.84.  That's a pretty big jump from last months reading of -1.4.  It was also well above expectations.  Also, the June NAHB Housing Index rose to 52 from 44, which was also well above estimates.

Of course, the big news this week is the FOMC meeting.  It's big because traders are hoping the Fed chairmen will give more of a glimpse into when they might start "tapering" their asset purchases.  I really don't think he will change his tune that much.  I also don't think they will do much more than tinker with the size of purchases between now and 2014 when Bernanke's term ends.

Asian markets were mixed overnight.  Japan spiked +2.7% higher after reports suggested that the BoJ's REIT purchases will exceed previous targets.  China's markets were lower after Fitch warned that China's credit bubble is 'unprecendented in modern history'.  And the Bank of India left rates unchanged at 7.25%.

Europe's markets are mostly higher today.  Italy reported a trade surplus of 1.91 billion Euros, but this was below expectations.  Germany's Merkel said she would serve a full third term if re-elected in the fall.

Commodities are lower again today.  Oil prices are slightly weak near $98.15 and gold prices are lower to $1383.  Copper and silver prices are lower as well.

The 10-year yield is trying to hold support at it's short-term 20-day moving average around 2.13%.

And the VIX is lower on today's rally, but still holding above that 15 level at 16.77.

Trading comment: Last week's action was pretty constructive, with rallies coming on strong volume and selloffs coming on lighter volume.  The outlook for our thesis of another push higher in stocks into quarter end remains intact.  Bears will probably try to knock the market down this week with the FOMC meeting and all, but if they are unsuccessful we wouldn't be surprised to see more performance chasing by portfolio managers.  More growth stocks appear to be breaking out or nearing breakouts, which is also a good sign for investors.

The media has it backwards: It's not the gold bull that's coming to an end, it's the stock bull

I’ll start off today with the stock market. As most of you probably remember my thesis for months now has been that this parabolic move in stocks would eventually start to stagnate, roll over, and probably at some point crash. As that process plays out I’m looking for liquidity to begin leaking into the undervalued commodity markets. Basically the exact same progression that happened at the 2007 top.

I think that process began with the high-volume reversal on May 22. As you can see in the chart below, after that event the character of the market changed. Before that, every move out of a daily cycle low began powerfully. The initial thrust created momentum with follow-through.

 

When stocks came out of their most recent daily cycle low, no momentum was generated. Stocks immediately retraced the initial thrust. That was followed by another powerful rally as the dip buyers again tried to push the market higher. But as we saw on Friday it also had no follow-through. While it’s always possible that Bernanke can throw enough money at the market to break it out of this range, and retest or make marginal new highs, I think the odds are better that we have started the stagnation/rollover process that I have been expecting.

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Bond Yields Beginning To Ease

Markets were slightly higher near the open but have since faded into negative territory.  Yesterday's action was very positive.  The market gained strength all day and finished with what we call an outside reversal.  That means the low yesterday was lower than the previous day, but then the rally carried the indexes to a higher high than the previous day as well.  So the range expanded on both sides but finished at the highs.

One positive today is the action in the 10-year yield.  After hitting 2.25% on Tuesday, yields continue to ease back.  The 10-yr yield today is at 2.10%.  This should give some breathing room to bond funds that have been hit hard in recent weeks.

Some of this morning's softness is being attributed to the Univ. of Mich consumer sentiment reading falling to 82.7 in June from 84.5 last month.  But last month's reading was very high and anything around these levels is indicative of positive consumer sentiment.  So I am not worried there.

May industrial production was unchanged and capacity utilization actually fell to 77.6% from 77.8%.  Capacity utilization probably needs to rise before we start to worry about more inflation.

Asian markets were higher overnight.  Japan bounced back +1.9% amid reports the govt is expected to implement a corporate tax cut.  There are also rumors the Peoples Bank of China may cut interest rates over the weekend.  I find this one less plausible given its property bubble.

Commodities are trading higher with crude prices nearing $98 and gold prices higher to $1388.  Folks must be surprised to read on the cover of the Wall St. Journal yesterday that oil and gas production in the US is hitting record levels but at the same time oil prices are hitting $98 and look like they could get to $100.  Frustrating.

The volatility index reversed sharply lower yesterday which is another positive.  This morning it touched 16 before bouncing to 16.65 currently.  We are still watching for a potential move below the 15 level.

Trading comment: Yesterday's action was very positive and lends itself to our thesis that we could see another push higher in the markets as we move into quarter end and portfolio managers look to get more fully invested.  There could also be some performance chasing if and when.  But we also need to watch the SPX 1687 level that marked the highs at the end of May.  If the market is unable to break above those levels that could set things up for a deeper pullback as we enter the summer.

Is Japan In A Bear Market Already?

The markets were roughly flat at the open and have since pushed slightly into positive territory.  If you're like me and you check the futures before you go to be each night, you are probably breathing a sigh of relief given how negative things looked last night.

Asian markets slid across the board, led by a -6.4% plunge in Japan.  The volatility in Japan has been severe, and the Nikkei is now down 20% from its recent peak.  Technically that qualifies as a new bear market.  But I think it needs to be put in perspective.  The Nikkei was up over 50% in just the last 6 months since the BoJ announced its new quantitative easing program.  That program isn't over, so I suspect the Nikkei will find its footing at some point.

In economic news, May retail sales rose 0.6%, which was better than expected.  Ex-autos, retail sales were up 0.3% implying solid auto sales as well.  Weekly jobless claims also came in lower than last weeks tally.

China was also lower overnight to the tune of -2.7% after reopening following a 3-day holiday.  The World Bank lowered its growth forecast of China for 2013 from 8.4% to 7.7%.  But I'm not sure how good the World Bank has been with its forecasts.

In Europe, the ECB put out its monthly bulletin which singled out Italy for failing to control its deficits.  Peripheral bond yields in Europe have been on the rise, but hopefully the ECB has tools in place to prevent another flare up like we saw last year.

Commodities are lower today despite dollar weakness.  Oil prices are lower near $95.60 and gold prices are down to $1382.  Copper prices are weak today also.

The 10-year yield is easing back to 2.18% so far.  This positive move lower in bond yields seems to be trumping a stronger Yen today (at least so far).  Traders are worried that a rising yen will unwind the carry trade in Japan and hurt stocks.

The volatility index closed at 18.60 yesterday which was its 2nd highest close this year.  But today it is down -6% to 17.40.  We continue to watch the 15 level for an all-clear sign that the market might be ready to rally again and test its recent highs.  The longer we continue to hover with the VIX above 15 the higher the chance that the market breaks below recent support.

Trading comment: Traders are watching the S&P 500 1598 level for support.  That is the level the SPX hit last week.  It is usually not a great sign to see the market retest support levels that quickly.  The SPX came within 10 points of that level this morning.  But the market can do anything at any time and we are still leaning towards the scenario that favors the market making another push higher into quarter end.  If this were not to occur and the SPX broke back below both its 50-day and recent support levels it would likely indicate the summer correction  we said could be on the horizon may unfold sooner rather than later.  So for now the market looks okay, but watch SPX 1598 if and when.

STOCKS IN DANGEROUS TERRITORY

As I alluded to in my previous report both stocks and gold are due to mean revert. Short-term the stock market is getting significantly oversold and if we get a down day tomorrow I would expect some kind of bounce off of the 1600 level. If that bounce fails and we break below last Thursday's low it should confirm that stocks have begun an intermediate degree correction.

Since I think there is significant risk that the cyclical bull market that started in 2009 is now topping I would take a break of the $1600 level as confirmation that an intermediate level decline has begun.

Based on how artificially far the Fed has driven this rally, this should be a quite significant decline, possibly even filling the gap from January 2.

If one has retirement funds invested in the general stock market I think after four years and a 153% gain it's probably time to say "close enough" and exit this Frankenstein monster of a market that the Fed has created.

Back On Yen Watch

Markets in the US opened on a higher note, but have since faded back into negative territory.  Lately, strength in the Japanese Yen has been associated with weakness in stocks.  Today the yen started out lower but has reversed higher.  So it appears for the time being we are back in that mode where we have to watch the yen (FXY) to gauge stock sentiment.

There hasn't been any economic news today.  In M&A, Cooper Tire (CTB) is up 40% after it agreed to be acquired by Apollo Tyres for $35 per share.

Asian markets were lower overnight.  China and Hong Kong markets were closed for the Dragon Boat Festival.  In a surprise move, the Bank of Indonesia hiked rates 25 basis points to 4.25%.  S. Korea's unemployment rate ticked up to 3.2%.  And Australia's consumer sentiment rose to 4.7% from -7.0% in the prior reading.

In Europe, markets are mostly lower.  The German high court continues its debate on the constitutionality of the ECB's Outright Monetary Transaction (OMT) program.  Also, Eurozone industrial production rose 0.4% last month, above expectations.

The dollar is roughly flat today but commodities are mostly higher.  Gold prices are up to $1385.  Oil prices are higher near $95.85.  And silver and copper prices are up as well.

The 10-year yield is barely higher at 2.20%.  And the recent selloff in stocks this morning has pushed the volatility index +2.5% higher to 17.50.  We have seen larger intraday swings in the stock market as long as the VIX has been above the 15 level.

Trading comment: The market looks like it needs to find its footing soon to keep this uptrend intact.  There are some red flags on the horizon in the form of a stronger Yen, rising bond yields, and deteriorating credit conditions in emerging markets.  Look at the emerging market bond etf (EMB) for an example of a plunge.  CDS prices on emerging markets have also been rising sharply lately.  So there are some emerging strains in the financial system.  While we are still looking for another push higher for stocks into quarter end, we are mindful of the potential for a summer correction as well.  As such, we are being less aggressive about buying the dips here.

TUESDAY INTERVIEW

Tuesday interview with Al Korelin.

Continued Volatility From Rising Bond Yields

Global markets began to selloff overnight after the Bank of Japan concluded its latest policy meeting with no new changes announced.  That was a disappointment to some investors who hoped the central bank would take steps to address bond market volatility or increase its ETF program.

So Asian markets were generally lower overnight.  China was closed again for a holiday. 

Most European markets are also lower as yields in countries like Spain and Italy are on the rise.  The sharp rise in rates over the last month has added to volatility in financial markets. 

There wasn't much market moving news in the US, so trading here took its cue from overseas markets and started out weak.  The Dow was down -150 points in early trading but has since climbed back all the way to positive.  That's quite a turnaround so far, but its still very early in the trading session.  As we have said many times, it's how the market closes that matters most.

Part of the reason for the snapback is that though the yield in the 10-year Treasury rose to 2.26% this morning, it has since given back most of that rise.  It currently is hovering near 2.22%.

Commodities are mostly lower today despite weakness in the dollar.  Oil prices are down near $94.65 and gold prices have fallen back to $1374.

The volatility index couldn't get under 15 yesterday, and today is back above the 16 level.

Trading comment: No change to our recent stance.  We continue to think that although we are having some near-term volatility that the stock market will rally into quarter end as portfolio managers continue to address being underinvested.  Yesterday some stats came out that hedge funds and small investors are as heavily invested in equities as they have been since 2007.  Although that could be a slight negative, we still don't see the type of extreme bullish sentiment that has market prior market tops.

Monday Morning Musings

Stocks in the US were higher after the open but so far are struggling to stay positive in early trading.  This isn't all that surprising after Friday's outsized rally, which was on the back of Thursday's big reversal.  The S&P has quickly bounced from testing the 1600 level to nearing 1650 this morning.

On a positive note, Standard & Poor's has raised the US debt rating outlook to Stable from Negative, saying that some of the downside risks have receded.  Bond yields are slightly higher despite the news, with the 10-year yield trading at 2.20%.

A couple consumer staples stocks that are higher today are McDonald's (MCD) after reporting solid global same-store sales and B&G Foods (BGS) which announced the acquisition of the company that makes Pirate's Booty (kids reference).

The St. Louis Fed President made comments today that the still low rate of inflation could justify the Fed's aggressive monetary policy stance. 

Asian markets were mostly higher overnight, led by a sharp snapback rally in Japan (+4.9%).  Consumer confidence in Japan hit its highest level since 2007.  China was closed for a holiday, but the Chinese ETFs are lower today after several economic datapoints showed slower growth in China.

The dollar is higher today, and commodities are mixed.  Gold prices are slightly higher while oil prices are a bit lower near $95.50.  Gold is back below the $1400 level ($1383).

The volatility index is sitting just above that 15.0 level that we have been watching as a barometer for investor sentiment.  If it can get back below the 15 level we would not be surprised to see the market rally back to recent highs.  But a move higher in the VIX could mean more consolidation is needed first.

Trading comment: We used the weakness last week to add to stocks.  Our recent worry that investor sentiment would become too complacent seems not to have happened as some of the investor surveys we follow show that bearish sentiment quickly spiked higher last week.  Some of our indicators are showing the highest levels of bearishness so far this year.  High bearish sentiment is okay at this juncture because it keeps the wall of worry high and as the old saying goes "bull markets love to scale the wall of worry".

KAM Advisors has long positions in BGS and MCD

Top 5 Bad Financial Habits to Break

... Do you or someone you know have any bad financial habits? I do …
  

Most of us have one … or two … or several bad financial habits. From experience, my bad financial habits resulted in some very expensive mistakes. It’s ok! As long as bad financial habits are broken or at least controlled, they will have minimal effect on your financial success. The first step is identifying your bad financial habits.
  
Here are the top 5 bad financial habits to avoid that keep people from getting a positive grip on their finances.
 
Impulse shopping.  Impulse shopping happens unexpectedly sometimes. Think of shopping like alcohol. It should be done “responsibly” and can become addictive, if not careful. Make shopping a planned activity with a list or a budgeted amount.  Unplanned or impulse shopping may sabotage your spending plan / budget.  Also for large ticket items, give yourself 24 to 48 hours to shop for a better deal or to figure out if you really want it and can afford it. You’ll be glad you waited.
   
Retail therapy.  Retail therapy may help you to feel good for a moment but they buyer’s remorse is painful. When you are emotionally down, distraught or highly emotional, avoid shopping or making any large purchases.  The more emotional we are, the less financially objective we become.  Do something that doesn’t cost anything or very little, like go for a walk, spend time with family or friends, etc. Your bank account will thank you when you start to feel better.
  
Overdraft protection.  Overdraft or “Courtesy Pay” is so convenient! However, overdraft protection (a financial oxymoron in my opinion) is relatively designed to allow you to overspend. It allows or approved checks or charges to go through even when you do not have enough in your account for a Fee.  A fee of $27 up to $35 is charged to your account for every overdraft, even if the amount runs $1 or $5 over the amount you have in your account. Generally it is like a very short-term line of credit with a ridiculously high effective interest rate. Now was that cup of coffee really worth $40? Besides, we spend more when we use debit cards. Use cash instead.
  
Savings tampering.  Savings is money set aside for a specific purpose like emergency, down payment of a house or car, school, etc. Avoid using savings for something that is outside of its purpose. The best way to do this is to establish a savings account that is not easily accessible with a certain amount directly deposited every pay period. Savings accounts are supposed to grow, not be chiseled away. 
  
Financial promiscuity. Financial Promiscuity is when multiple credit cards are used for small purchases when cash should be used.  Avoid using credit to purchase that "value meal" or anything less than $50.  This will ensure that Financial STDs (Substantially Tremendous Debt) will not be slowly acquired.
  
By acknowledging our bad financial habits, we can focus on stopping and changing them. Some bad financial habits may be more challenging to quit than others, but it can be done.  Contact a financial coach to help with ideas and techniques of replacing bad financial habits with good financial habits to help you reach your financial goals faster.
 
 
Financially True, 
  

Tarra Jackson ... Making Money Sexy

A New Twist On The Goldilocks Economy

Markets are nicely higher this morning after investors cheered this morning's jobs report.  Nonfarm payrolls rose 175,000 in May vs. expectations for 159,000.  The unemployment rate ticked up a touch to 7.6%.

In a normal recovery, 175k new jobs would not be enough to get excited about.  It certainly doesn't paint a picture of a robust economy, which used to be able to add 300-400k jobs per month.  But this is anything but a "normal" recovery.  Investors today are more worried about the Fed taking their foot off the gas and tapering back their bond purchases.

So today's luke warm jobs report fits into a new sort of Goldilocks scenario where it isn't so hot that the Fed feels pressure to stop its QE program, but it also isn't so bad that it looks like the economy is weakening.

Also, the unemployment rate ticked up to 7.6%.  The Fed has said they want to see it near 6.5% before they think about raising rates.  Given that so many people have dropped out of the labor force, we could see some of those folks re-enter as the economy strengthens.  That would lengthen the time it might take for the unemployment rate to get down to 6.5%.  Adding 175k jobs a month just isn't going to cut it.  And youth unemployment remains extremely high.

Most folks are talking about the end of this year for the Fed to begin tapering its bond purchases, but not until mid-2014 before they curtail the program altogether.  And that assumes that the economy continues to improve.

Asian markets were mostly lower overnight.  Japan was down as much as -3.0% before a notable spike from the lows that was attributed to a large ETF purchase by the Bank of Japan.  Japan's finance minister also said pension funds would be allowed to diversify away from bonds. 

European markets are higher today.  Germany's Bundesbank lowered its GDP outlooks for 2013 and 2014, with next year's growth projections coming down to 1.5% from 1.9%.

The 10-year yield is moving higher today on the jobs data to 2.14% so far.  Last week's highs were around 2.21%. 

The volatility index is plunging today, down -7.5% to 15.35.  We have been highlighting that 15 level and if we get a couple of closes back below 15 that would increase the probability that the recent pullback is over.

Trading comment: We said that as the S&P 500 came down to its 50-day average and tested the 1600-1605 level we wanted to be buyers.  So far that has worked out well, as the SPX bottomed right at 1600 yesterday and rallied into the close.  Today it is up another 1% nearing the 1640 level.  We could see some resistance at the 1645 level where the overhead 20-day average resides.  But its still early in the day, and we would also like to see a strong close today as opposed to the market fading into the close.

MAJOR BREAKDOWN IN THE DOLLAR

Major break in the dollar index today is signalling 15-20 weeks  of declines ahead. This should be the fuel to drive gold back to test the old highs by early this fall.

Moneyless Tribe Update

I'm still in Connecticut, hitching west starting this Saturday - getting a late start.  I have to be in Billings, Montana by June 20th to meet a British film crew there, hopefully hooking up with a moneyless friend or two on the way.  

I'm feeling very grateful to my friends, Michael, Sarika, and baby Satya, for hosting me in Vermont, and to my friends, Gordon, Kay, and baby Mazzie, for hosting me in Connecticut.

Now it's to the Rainbow Gathering (inshallah) to launch the moneyless tribe.

(The exact location of the Gathering in Montana is not yet determined, probably not until the middle of this month).   

I'm likely not going to have much computer time for a while, so this'll be the last post for maybe some time.  

Posting about the Moneyless Tribe

I posted about the moneyless tribe in the Fellowship for Intentional Community (ic.org) website, copying it here:

http://reach.ic.org/postings/index.php?pageID=2

Community Forming Suelo Posted On 5/29/2013, Last Updated On 5/30/2013

A wandering moneyless tribe! Sharing in community my experience living without money for 12 years. To be launched at the 2013 Montana Rainbow Gathering. We are accepting folks willing to give up all money, and also looking for communities we can be of free service to on our migratory path and to network with.
Two-fold mission:
1) Practice gift economy by not having, accepting, or using money, freely giving and receiving, offering free services to individuals, towns, organic farms, intentional communities, churches, ashrams, monasteries along its migratory path.
2) Raise awareness by activist example, (eg, challenging concepts of private property and returning stolen lands to native people’s stewardship, reducing stress on the environment and ending dependence on corporate trade and exploitation of "third world" populations).
Prerequisite to join us: give up all money to your name, not taking or using it, to fully grasp the meaning of walking by faith (courage).
It is to run by consensus, to be ecumenical, to practice and bring to light the forgotten principles of the world's spiritual traditions (giving up possessions, doing for the sake of doing rather than for future reward).

Email Address: freemeansnomoney@gmail.com  
Web Address: https://sites.google.com/site/livingwithoutmoney/
 
-------------------------------

Other Miscellaneous Details about the Tribe

Since it is to run on consensus, all ideas here may be subject to change, depending on what our group wants.  

I envision us networking with intentional communities, organic farms, churches, ashrams, monasteries, towns and cities, etc., that welcome us, allowing us the gift of providing our free services (in whatever field).

Migrating to intentional communities can provide a kind of bloodline connecting communities across the land, instilling gift economy, keeping us open-minded to different ways of living, and also provide the option of scoping out communities for settling down to members who find they're no longer up for the migratory life.   

As we gain momentum, I envision more and more churches and regular house-holders in cities and towns offering us places to stay in churches, in private yards, in houses, in community centers, in support of us providing services in their communities. 

In the pay-it-forward system, others can donate food or items they already have on hand (not going out and buying things for us), as well as us collecting excess food at closing time of stores, restaurants, schools, etc., food that would otherwise be thrown out.  

Any services and items we provide are to be freely given, and all services and items we receive are to be freely given, already at hand, not bought or sold.

Beware of Pie-in-the-Sky Dewy Eyes

To anybody thinking about joining, a walking tribe will be very vigorous and unpredictable (though we can accept rides as an exception).  It's not for everybody. 
 
Group dynamics are difficult in modern culture not accustomed to community.  Modern human community muscles are atrophied, needing to be exercised and developed.  Conflicts and heavy disagreements are bound to arise among us.  

When circumstances get physically difficult and uncomfortable, which is guaranteed, we often find undesirable behaviors arise in ourselves we weren't aware of, and this can give rise to conflict with each other.  If we face this, not running away, with a spirit of patience, tolerance, open mindedness, and utter respect for each other, this will be our opportunity for self development, opportunities to become shining lights and sources of great power.  

But if we find our disagreements become too great, and we feel we must depart, we must also forgive ourselves.  There may be divisions, meaning our organism is then ready to divide into two new communities, each with differing, valid viewpoints.  All life divides and reproduces.  This is natural.

Activism

As I've mentioned in previous posts, something in the fore-front of my mind has been our culture's abuse of indigenous peoples, and our need to bring restitution and healing.  

Previously I spoke of one of the missions of our tribe being a walk of repentance, to call for our culture and our nation as a whole to repent and make restitution for what it has done to indigenous peoples, not only in the US, but all over the world.  

I'm envisioning us starting with the Lakotas, going to lands, such as the Black Hills, legally belonging to the Lakota tribe by US treaty (Fort Laramie Treaties of 1851 and 1868), as well as by Supreme Court decision in 1980 (United States v. Sioux Nation of Indians).  More details on that later.  

But our primary mission is to live by example (the best activism), and in so doing, challenge our culture's ideas of private property and commerce, also reminding our churches of their ancient values (from the very beginning) of living simply, basic sharing ("holding all things in common"), and doing for the sake of doing, not for the sake of profit.  Only then can we understand abundant life.  These are the principles of all the world's religions I've looked into.  Few are challenging our religions to hold to their own most basic principles.  But this isn't going to happen without huge opposition and risk.  

This is about more than returning stolen lands to the Lakota people, but this is a great place to start, a very tangible, concrete object lesson.

Final Warning

This could all be very crazy ideas.  Life is a big crap game, especially in this lifestyle.  Nobody knows the future.  But the miracle of life came about in this great crap game, which I call the mind of God.  And the roll of the dice is what makes it fun, and magical.

Whatever your hand finds to do, 
do it with your might; 
for there is no work or device or knowledge or wisdom in the grave where you are going.
I returned and saw under the sun 
That the race is not to the swift, 
Nor the battle to the strong, 
Nor bread to the wise, 
Nor riches to people of understanding, 
Nor favor to people of skill; 
But time and chance happen to them all. 
(Ecclesiastes 9:10-11)


To them all!

Is That The Pullback Everyone Was Looking For?

For months as the stock market rose folks said they liked the market but wanted to wait for a pullback to buy.  Of course, the market never really paused to give them a good buying opportunity.  But now we are getting a 5% pullback from the highs.  So my question is: are you buying now?

Often times when the correction finally comes, those folks looking to buy get cold feet.  But the Dow, S&P 500 and S&P midcap 400 are all at their 50-day averages.  This looks like a good spot to put some money to work and yesterday we were buyers on the weakness. 

There isn't much in the way of market moving news this morning.  Initial jobless claims totaled 346,000 which was below last week's tally.

Asian markets were lower across the board, with continued high volatility in Japan.

European markets are higher today after the ECB meeting.  The ECB held rates steady at 0.5%.  ECB President Draghi said once again the central bank is 'technically ready' for negative deposit rates.  The Bank of England also left its rates and purchase program unchained.

Elsewhere, French unemployment rose to 10.8% from 10.5%, while Greek unemployment rose to a record 26.8%.

Among the sector ETFs, financials are leading the early action and utilities are bouncing from their recent drubbing.  Tech stocks are lagging so far.

The dollar is lower today and commodities are mixed to higher.  Oil prices are back above $95 and gold prices continue to struggle to stay above the $1400 level.  Copper prices are lower today.

The 10-year yield is slightly lower to 2.09%.  And the VIX is a tough higher near 17.60, highlighting expectations for market volatility to remain elevated in the near-term.

Trading comment: We were better buyers into yesterday's weakness, and would continue to buy on weakness.  We said we had been hoping for a 5% pullback in the market and now that it is upon us we want to stick to the plan.  We still expect another push higher into quarter end, although the markets could need some further consolidation to setup a new base.

INTERVIEW

Interview with Al Korelin

Watching The 50-day Averages

The S&P 500 continues to pullback this morning.  We have been saying for the past week that we could see a pullback that takes the SPX to its 50-day average.  Today that seems more of a reality as the SPX currently tests 1616 while its 50-day average sits near 1605.

The S&P mid-cap index already tested its respective 50-day this morning, while the Nasdaq remains well above its 50-day for now.  Not every index tests these moving averages at the same time, and we tend to put more weight on the SPX since it is a big institutional benchmark.

In economic news, the ADP employment report showed the private sector added 135,000 jobs in May but that was below the 157k that was expected.  Also, the May ISM Services index came in at 53.7, which was ahead of April's reading of 53.1.

Separately, Q1 productivity data was revised to show a 0.5% increase from 0.7% first reported.  And unit labor costs were revised sharply lower to show a -4.3% decrease.  No signs of inflation here.

Asian markets were lower again overnight, led down by Japan which slid -3.8% after PM Abe revealed the third stage of his growth plan which didn't contain anything new to embolden investors.  Australia's GDP rose 0.6%, which was below expectations.

European markets are also lower today after disappointing economic data.  Eurozone GDP in Q1 was unchanged at -0.2%.  But the Services PMI fell to 47.2 from 47.5.  And retail sales declined -0.5%.  Several peripheral European services PMIs were also weak.  IMF Director Lagarde said the global economy could be headed for a bit of a soft patch due to slowing momentum in some emerging markets.

Commodities are mostly higher as the dollar index is down today.  Oil prices are at $94.05 while gold prices are back above the $1400 level that has been a struggle.  Silver and copper prices are higher as well.

The 10-year yield is lower today to 2.09%.  And the volatility index is 7% higher to 17.50.  This would be a 1-month high for the VIX if we closed here, but we could see the VIX fade if the market firms later in the day.

Trading comment: As the SPX approaches its 50-day, we want to look to add to equities and bolster our allocations away from some fixed income that was sold during the quarter.  Rather than bottom fish in stocks that have been hit the hardest, our strategy prefers to focus on what's holding up and poised to lead the market higher should we get our envisioned push higher into quarter end.  Financials have been one area that remains attractive,

Bull Market Thinking Interview

Interview with Tekoa Da Silva

Volatility Picking Up From Day to Day

If you aren't sure what is meant when you hear the talking heads speak of increasing volatility, just look at the intraday swings from yesterday.  The market opened higher in the morning, then reversed fairly hard into negative territory before firming and closing the day with solid gains.  Those intraday swings have been absent from the market for most of the year.

The volatility index is slightly higher today near 16.50.  We have been using the 15 level as our indicator for when volatility is picking up (above 15) and when it is quieting down (below 15).  So for the short-term we are continuing to look for increasing daily swings and staying a bit more defensive as a result.

There wasn't much in the way of market moving economic or corporate news this morning.

Asian markets were mixed overnight.  Japan bounced back +2.1% but China was lower by -1.2%.  The Reserve Bank of Australia held its key interest rate unchanged at 2.75% but left the door open to more rate cuts due to the tame inflation outlook.

European markets are showing modest gains.  The EC will propose a single bank oversight mechanism which will be funded through bank contributions.

The dollar is higher this morning, and weighing on commodities.  Oil prices are weaker near $92.50 and gold prices are back below the $1400 level ($1393).

The 10-year yield is slightly higher at 2.14%. The 10-yr has been consolidating around this 2.15% level for the last week.  If it breaks above these levels, next resistance doesn't really come into play until 2.40%.  We are not saying this is in the cards, but the bond market could experience more volatility on any breakout.

Trading comment: The S&P 500 has been making a short series of lower highs and lower lows since the May 22nd peak reversal.  We still expect another push higher into quarter end so we are buyers on dips.  As for our old friend AAPL, it has been acting okay, but a convincing move above $460 looks needed to embolden the bulls again.  Hopefully the company is in there putting their buyback to work.

KAM Advisors has long positions in AAPL

Kay's Guest Post

I'm in Heber, Connecticut, staying with my friends, Gordon, Kay, & their baby Mazzie.

I'm looking to hitch-hike soon to the Rainbow Gathering in Montana.  
I placed a post for the moneyless tribe (to be launched at the Gathering) in the Fellowship for Intentional Communities website, for those who want to join the tribe or want to network with us.  I hope to post more details about it just before I hit the road.

Meanwhile, I'm publishing my friend Kay's guest post here, at her request.  Kay is married to Gordon, my friend who made the short film, "Moneyless in Moab" back in 2006.  Kay is also the person who set me up to do a presentation at the Unitarian Church in Manchester last Friday, May 31st (I feel very good how the presentation went.  I also realized afterward that May 31st is the anniversary of when I drove the car off the cliff in 1991.  Kind of eerie, but showing wonderful redemption).  

Thanks, Kay, amiga mia:

Kay's Guest Post 

This is a guest post blog-a separate entry that Daniel is allowing rather than a comment that will get lost. I am currently Daniel’s host, and I am also his friend.

Seeing the comments that are made on his blog—the insightful, the supportive, the critical and the repetitive (seriously folks, read his FAQ before making the same tired jabs and comments over and over)—I wanted to offer my perspective, and give some answers to the person that is Daniel * in his relations with others.*

He is a solitary guy in that his path is his own, and his ambitions and lifestyle are for very few. I live in a house, have a job, a partner, a baby, bills—the same things all of you do. But what I believe ends up ‘missing’ from the virtual Daniel is that he is a very real, very warm human being. He uses his blog to make a point, but those who know him as a person know that this is only one side of him. Just like all of you who make comments (that are sometimes so hurtful and angry!) that show only one facet of who you are, this blog is only one side of him. When we are with him, we never discuss his writings. His philosophies are wound around dialogue that is engaging and thoughtful. He is delightfully sarcastic, witty, and humorous.

My partner has known Daniel for over twenty years, before he gave up money. Did they remain friends after that? What kind of friend abandons another when they are faced with a human who has made great changes that make them feel better (and note, you trolls- HURT NO ONE?) Most of us have long-term friendships with people who become religious, give up drinking, change sexual orientation, get divorced, or other life changes that make us make mental adjustments of the person we knew, and know now. For these two friends, it was met with barely a shrug of the shoulder, and they moved on from that point, with the main change being that it was now harder to keep in contact.

I met Daniel seven years ago, as we flew out to Moab to see him. I was self-admittedly both curious and apprehensive. One very real question I had, which seems absurd now was, would he want to hug? Would he smell? How would I do it without touching his grungy clothes, or hands? That was my lesson... that to be without money does not mean to be without pride, or hygiene, or morals, or standards. And I took to him very quickly. As many do. Whether these people are his friends as a result of their support in his cause, or in complete oblivion to it, Daniel has a lot of friends. People like him. Enough to host him at their houses. Enough to trust them with their houses and pets as a sitter. Enough to give him rides. For some of you, I wonder—if you took a cross country trip, would you have enough friends who would help you out? Would your presence be welcome in their homes for more than a day? How about a week? Would you offer to cook meals, or stack two cords of wood, or forage and find food to help your hosts? Do you have the grace to know when to give a family their space, or when it is time to move on?

And this is the point I want to make. It is easy to judge someone from the other side of a computer screen. It is just as easy to type comments and hit send without understanding the social side of Daniel that is free from judgment, dogma, or worry. Yes, he’s taking up space in on our couch. Yes, he’s consuming our food, and using our internet connection to post his philosophies that you are taking the time (from your oh-so-busy lives) to read. But you know what? We’re alright with that. The trade off we get in the camaraderie, travel stories, intelligent discussion and laughs is well worth whatever money we are ‘spending’ on him, and we give it freely.

Monday Morning Musings

I was out of the office Friday but did notice the market end the week with a thud.  The high volume reversal reveals some institutional selling was behind it.  This morning the market tried to muster some strength at the open but has since faded back into negative territory.

The May ISM index didn't help matters after it showed that the index fell to 49.0 last month from 50.7 the previous month.  The 50 level marks the line between expansion and contraction, so a reading below 50 means the manufacturing sector contracted last month.

The manufacturing index is an important economic indicator, and if this Friday's jobs report doesn't show any renewed strength I think that will put an end to the Fed QE tapering argument that has been making the rounds lately.

Asian markets were down across the board overnight.  Selling was heaviest in Japan (-3.7%).  China was down the least (-0.1%) after its manuf. PMI improved to 50.8 from 50.6 the previous month.

Europe is mixed today.  The Eurozone PMI improved to 48.3 from 47.8.  Several other PMI readings improved as well, but most still remain below the important 50 level.  ECB Pres. Draghi said tha the region's bank supervisory mechanism will become effective this month.  And Spain's PM said the country's unemployment figures due out this week will be "encouraging".

The dollar index is lower today, and that is helping boost commodities.  Oil prices are higher above $93, gold prices are back above the $1400 level to $1413.  Silver and copper prices are higher today also.

The 10-year yield is roughly flat near 2.16%.  The sharp rise in the 10-year yield lately has wreaked havoc in interest-sensitive investments.  Prices in things like preferred stocks and closed-end bond funds plummeted last week.  Skittish investors likely panicked during the action, which made matters worse.  But we have seen this sort of thing play out many times before.  And in this yield-starved world, we think it is likely investors will gravitate back into these investments once the dust settles.  Current Treasury yields are still far away from offering any real competition.

The volatility index is also spiking higher, today up 7% to 17.50.  We said last week that when the VIX is above the 15 level you can expect volatility to show up in daily trading.  That is what we saw Friday, and again today with the markets reversing early gains and moving sharply lower.  So we want to remain defensive in these environments.  The all-clear signal would be when the VIX closes comfortably below the 15 level again.

Trading comment: Volume picked up on Friday which meant more distribution.  While dip buyers could step in earlier, our best guess is that a senior index like the S&P 500 probably has a date in its future with its 50-day average (currently near 1600).  That lever will likely offer support, at least the first time around.  We still expect another push higher into quarter-end.  From there a lot will depend on how this current pullback effects investor sentiment.  If sentiment gets very defensive and pessimistic, that would be good.  But if sentiment remains too complacent then we could see a deeper summer correction.  But for now let's watch the indexes as they near their respective 50-day averages.

REGRESSION TO THE MEAN

There’s a reason why commercial traders are regression to the mean traders. In this business it is the one thing that you can absolutely bank on. It's like death and taxes, it never fails. All markets eventually return to the mean. An appropriate corollary to this rule is that the further an asset gets stretched above or below the mean the more violent the regression is, and the further it will move past the mean during the snapback.

You can see this clearly in the chart below.

 

Notice that during the bull market from 2002 -2007 the S&P never stretched extremely far above the 200 day moving average (well until the final euphoria phase in 2007). Consequently each intermediate correction halted at or slightly below the 200 day moving average.

This changed when the new cyclical bull market started in 2009. It changed because the markets were not allowed to trade naturally. They were warped by massive doses of quantitative easing. This caused markets to stretch much further above the 200 day moving average than would have occurred normally. The consequences of course were that when the corrections hit they unwound violently and moved much further below the 200 DMA than would have occurred naturally. 

This bull market is much more volatile than the previous one because the market is being driven by currency debasement instead of true economic expansion.

Now we are in a situation where the stock market has been stretched ridiculously far above the mean by QE 3 & 4. Trust me, Bernanke has not abolished the forces of regression to the mean. All he has done is guarantee that the regression is going to be many multiples more violent than it should have been.

When this house of cards topples over, I think there is a pretty good chance it’s going to be even more severe than what happened in 2011.

Also notice the red arrows marking major cyclical bull and bear market turning points. Notice the Fed warped the last cyclical bull market much higher and longer in duration than should have occurred naturally (he turned a 4 year cycle into a 6 1/2 year cycle). Consequently the forces of regression responded by triggering the second worst bear market in history. The current cyclical bull market, although not stretched as long in time, is extremely stretched in magnitude so the resulting bear market will almost certainly be exceptionally violent and protracted.

Mean regression rule: Without fail liquidity eventually finds it's way into undervalued assets. An appropriate corollary to that rule would be that liquidity will eventually find it's way out of overvalued assets. 

Unless Bernanke has found a way to break the natural law of regression to the mean (he hasn't) then at some point we are going to see liquidity flee the overvalued stock market. When it does it's going to look for undervalued assets to land on. Nothing is more undervalued in my opinion than commodities in general, and precious metals in particular. 

Regression to the mean doesn't just apply to assets stretched to the upside. It also acts to levitate extremely depressed assets, and the same rules apply. The further an asset is stretched below the mean the more violently the regression usually is once the selling exhausts. Considering that gold is now stretched about as far below the 200 day moving average as it was in 2008 the rally when it arrives should be every bit as powerful if not more so than we saw in 2009. 

In my opinion we now have the setup to drive either another C-wave as large or larger than the one out of the 2008 bottom, or this is the set up to drive the bubble phase of the bull market.

WITH AL KORELIN ON THE WEEKEND REPORT

INTERVIEW
Segment 6

Rising Yields Spook Investors

Bond yields started to spike yesterday, which took a little steam out of the stock market rally.  But today markets are sharply lower on what looks like continued fear about rising rates.  Bond yields rose in Asian markets as well as Europe as well.  And trading in closed end bond funds yesterday really showed the skittishness among investors.

Interest rate sensitive sectors are down the most.  Trading in some of the REITs is showing extreme volatility, while utilities are the weakest sector so far.  I think this is likely an overreaction, and when the dust settles yield-hungry investors and those with cash still on the sidelines will look to come in and buy beaten down REITs and utes.

Asian markets were mixed overnight.  The Bank of Thailand became the latest central bank to lower interest rates, cutting their key rate 25 basis points to 2.50%.  The IMF lowered its forecast for Chinese GDP growth to 7.75% from 8.00% in 2013 and cut the 2014 outlook to 7.75% from 8.20%.

European markets are also lower today, as sovereign bond yields are on the rise.  Germany's unemployment rate held steady at 6.9%.

The dollar is lower this morning but commodities are mixed.  Gold prices are higher near $1388 while oil prices are lower to $94.63.  Copper prices are lower as well.

The 10-year yield is higher to 2.14%.  It last touched these levels in early April, but next major resistance doesn't come into play until around the 2.40% level.

The volatility index is nearly 8% higher this morning, above the 15 level we have been watching to 15.65 currently.  A couple of closes above the 15 level would increase the chances of a further pullback in the stock market, while a reversal back below the 15 level would likely embolden the bulls to do more buying.

Trading comment: The S&P 500 has erased yesterday's gains but is still above the lows from last week.  The SPX touched 1635 last week, so that is a short-term level worth watching.  A break below those levels would be a rare lower low on the weekly chart, at least in recent months.  We are still looking for one last spurt higher by the market closer to the SPX 1700 level before quarter end, though the short-term timing is always difficult.  If that rally materializes, and if it brings out more bullish sentiment that would certainly increase the odds for a summer correction.  I think most strategists are only looking for a mild pullback, but as the herd is often wrong we would not be surprised to see something that rattles investors confidence a bit more.  But let's not put the cart before the horse.

Bullish Sentiment On The Rise

After a 3-day pause in the markets, stocks are back in rally mode this morning.  This isn't all that surprising given that this has been the pattern all year.  We used the weakness Thursday and Friday morning to do some buying for this reason.

In economic news, consumer confidence for May rose to 76.2, well above expectations and above the prior month's reading of 68.1.  Also, the Case-Shiller Home Price index rose 10.9% on top of the prior months 9.3% increase.

Asian markets were higher across the board overnight.  And European markets are also higher today.  An ECB board member said the possibility of further easing remains on the table despite the recent rate cut.

The dollar is higher today and commodities are mixed.  Oil is higher near $95.50 while gold prices are lower around $1377.

Bond yields are moving higher today with the 10-year yield spiking to 2.11%.  These levels mark the highest yields in over a year, since April 2012.

Trading comment: Bullish sentiment has been slow to rise, but is now getting to levels that raise a yellow flag for this market.  We could certainly still see investor sentiment grow more bullish in the near-term, but if that were to happen it would likely increase the odds of a more meaningful correction this summer.

Here are some of the indicators nearing extreme levels:  The Investor's Intelligence survey is showing the spread between bulls and bears at +36% (55% bulls, 19% bears).  That is a 2-year high for this indicator.  The AAII individual investor survey spread is at +27%, which is the second highest reading this year and also near an 18-month high.  And last week the Market Vane survey showed bulls hit 70%.  That is the highest reading this entire bull market!  You have to go all the way back to 2007 to find another reading in the 70s.  So investor sentiment is no longer skeptical, and is now getting more complacent.

In the short-term, the CBOE put/call ratio topped 1.0 in each of the last 3 trading days.  So it's not surprising to see the market rally off that short bout of pessimism.  I think bullish sentiment can continue to build for awhile, possibly thru June into quarter.  But I continue to think it raises the odds for a summer correction.  Stay tuned--

STOCK BUBBLE: WAIT FOR IT TO POP

I'm going to start off today and show you what Fed policy has given us over the last decade and a half. What the Fed has accomplished has been one bubble after another.

We are obviously in the final euphoric parabolic phase of a third stock market bubble. When viewed with the benefit of the 200 day moving average as a mean regression line, it's glaringly obvious just how dangerous this market has become. As history has shown, anytime the market stretches too far above the mean the forces of gravity eventually collapse price back to and often considerably below the mean.

Yet despite thousands of years of evidence that parabolas are never sustainable, investors invariably get suckered into buying into these moves and get caught when they inevitably crash.

This I can say with 100% certainty, this parabolic move in stocks is going to crash, just like every other parabolic move in history. 

The smart investor will wait patiently on the sidelines and once the crash occurs the low risk trade will be to go long as the Fed will attempt to reflate the market. This is a virtually guaranteed strategy to make money, although very few people will have the patience to wait for the trade to develop.

The vast majority of traders will ignore the extremely risky environment, because his emotions make him think that he is getting left behind. He will buy into the parabola assuming that it will continue indefinitely (Does this sound familiar to the tech bubble and real estate bubble?). 

History however has shown that this is never the case, and buying any asset this stretched above the 200 day moving average always turns out to be a gamble as to whether or not you can exit ahead of the crash. If you miss time the exit, and most people do, you end up paying a heavy price for following the herd into a trade that you logically know is too risky.

Once the stock market parabola collapses then the Fed's endless money machine will generate another bubble in another asset class.

I strongly believe the next bubble will be in the precious metals market.

We interrupt usual blogging to inform you of a presentation I'm giving, for those of you in the area:

"Living Without Money"
7:00 to 9:00PM
Friday, May 31st
at Unitarian Universalist Society: East
153 Vernon Street West, 
Manchester, Connecticut

Phone	(860) 646-5151
Email	uuse153@sbcglobal.net
Website	http://uuse.org

Thanks to my friend Kay for initiating setting this up.  I'm staying with Kay, Gordon, and their little girl Mazzie right now.  
Then I'm heading west to the Rainbow Gathering in Montana, for the launch of the moneyless tribe, inshallah.

A Rare 3-Day Losing Streak?

The market is currently lower for a 3rd day in a row.  Normally that wouldn't be very surprising, but this year has been anything but normal.  Over the last 5 months of trading, there has only been one 3-day losing streak in the S&P 500.  Today could be the second occurrence, although its still early in the day.

The above doesn't hold too much significance, imo.  Rather it is just an interesting market anecdote.  The market had simply become too extended, trading at levels more than 6% above the 50-day average, which is rare.  So a pullback was in the cards and well overdue.  That said, we don't expect this pullback to be more than just a garden variety pause that relieves the overbought condition.  We expect underinvested portfolios managers to buy the dip going into quarter end.  If we are due for a larger correction, we would look to the summer timeframe to get more worried.

In economic news, April durable goods rose 3.3% after a -5.9% decline in March.  Ex-transportation, durable goods still rose 1.3%.

Asian markets were mixed overnight.  The BoJ governor said that they don't have a specific target for stocks or currency rates.  But reports out overnight suggest the BoJ was again providing liquidity to the Japanese bond market.

Europe is also trading mixed to lower today.  The second estimate of Germany's Q1 GDP held at 0.1%.  Not very good for the country that is supposed to be the glue of the Eurozone.

Commodities are lower again.  Gold prices are down near $1386, and silver and copper are lower as well.  Oil prices are weaker to $93.50 and ag prices are lower.

The 10-year yield is slightly below the 2.00% level.  And the volatility index is 4% higher today at 14.65 but still below the 15 level that we have been watching.

Trading comment: We are using this 3-day dip to continue to add to equities.  We trimmed more of our fixed income ETFs and have added to stocks such as ARCP, EOG, and URI this week.  Should the market continue lower next week we would look to do more of the same.  Our forecast is that the market will pause and consolidate here but will stage another advance into the quarter end timeframe.

KAM Advisors has long positions in ARCP, EOG, and URI

Is The Japanese Rally Over?

Markets are lower this morning on some panic selling overseas which weighed on stocks here in the US for a second day.  This overshadowed some positive economic data with jobless claims lower than expected and new homes sales for April coming in well above expectations.

Last night Japan saw a huge 7.3% plunge in the Nikkei.  The selling started after trading in the Japanese Govt bonds had to be halted.  The strengthening yen exacerbated the pressure and the Nikkei saw a drop of 1500 points from high to low.  It also probably didn't help that China's HSBC manufacturing index fell back into contraction (49.6) for the first time in seven months.  The Bank of Japan finally moved in and injected 2 trillion yen to calm markets.

Of course, Japan's stock market has enjoyed a huge rally since the BoJ announced its massive quantitative easing program there.  At some point you expect some profit taking, but this large decline shows what happens when stocks get extended and everyone tries to hit the sell button at the same time. 

Europe had some positive data in the form of higher than expected PMI manufacturing readings, but overall he region is still in contraction.  Spain auctioned off 3-year and 5-year debt at higher yields than its previous sale.

The dollar is surprisingly lower today and commodities are mixed.  Gold is higher near $1385 as is silver.  Copper prices are lower and oil prices are also weaker to $92.65.

The 10-year yield is above the 2.00% level after a big upside reversal yesterday following the Fed minutes. 

The volatility index hit the 15 level this morning for the first time in a month.  If it closes above 15, I would expect more selling.  But below that level is likely more of the same.

Trading comment: We already did some trading this morning, taking advantage of the dip for a second day.  So far this year, the S&P 500 has only had one 3-day losing streak.  That means the odds favor buying day 2 of the weakness, if only for a bounce.  That streak could be broken tomorrow, but we are taking advantage of a few stocks that have pulled back to attractive levels.  Some of the REITs had very sharp 2-day pullbacks also.