• Shareholders of Microsoft (MSFT) and Google (GOOG) will learn it tonight. Both missed.

PowerShares QQQ (QQQ), my favored ETF short, is getting schmeissed after hours. I am sticking to my roadmap on the short side.

Liquidity is an essential part of the investment mosaic, but the picture of the economy and that of corporate profits usually trumps liquidity -- especially at such market heights.

Thanks so much for reading my Diary today.

Enjoy your evening, and God bless Uncle Vinnie.

• There has been universal optimism and self-confidence regarding the outlook for  Google's (GOOG) shares in both the business media and in the analytical community.

We shall see.

• Nothing meaningful in the way of market imbalances on the close.

• Back in the red.

All of The Five Horsemen on the Nasdaq -- Netflix (NFLX), Amazon (AMZN), Google (GOOG), Priceline (PCLN) and Tesla (TSLA) -- are back in the red now.

• Since the low in June, we've rallied for 18 days (including today).

Of those 18, using the SPY, 11 have NOT been down on the day at ANY time.

I don't mean closed down, I mean were EVER down.

In a normal bull, stocks ebb and flow, but tend to close well, such that you get a preponderance of UP days.

This is remarkable.

SPDR S&P 500 (SPY)

View Chart »View in New Window »

• In response to a bunch of emails I would not chase Altisource Residential (RESI) here.

(Note: I wouldn't sell it either!)

• More from real estate maven Mark Hanson:

DataQuick just reported that "June" sales were down 7.5% MoM and 9.4% YoY....we have not seen a double-threat in many months. In fact, house sales never fall from May to June. This correlates very well with our CA MLS surveys.

What's most alarming about this is that "June" existing sales are actually from "contracts and price decisions" made in April and May when rates were at HISTORIC LOWS. This tells me the market -- underpinned by investors and "distressed supply" -- was already exhausted before the "surge".  Historic, artificially low rates for so long filled so much pent-up demand, sucked so much forward, and caused institutional investors to buy so much blindly that years of housing market activity was shoved through the eye of a needle.

From DataQuick this morning:

A total of 7,897 new and resale houses and condos were sold in the Bay Area in June. That was down 7.5 percent from 8,541 the month before, and down 9.4 percent from 8,721 for June a year ago. A May-to-June decline is atypical for the season. Sales usually increase between those two months ¿ by 4.1 percent, on average. Since 1988, when DataQuick's statistics begin, June sales have varied from 7,118 in 1993 to 15,735 in 2004. Last month's sales were 20.9 percent below the June average of 9,993 sales.

This supports my call for significant misses in next weeks' Existing AND New Home Sales reports.  It's also very menacing for July (and beyond) sales AND PRICES, as the rate "surge" gets factored into the market.

What this is all pointing to...the housing market was getting ready for an 'exhaustion break' -- I call it a "stimulus hangover" -- in the action after 18 months of the most incredible, direct stimulus in history being shoved down its' throat for so long.  Unfortunately, at the exact time the market was beginning a 'hangover phase' the mortgage market and rates blew up.  And surging rates have the power to turn a hangover into something much more pronounced.

• I wrote this earlier: 

"Don't give up, don't ever give up. There were some very emotional moments last night in the ESPY awards program. The show truly had some shining moments. Particularly poignant was the story about the Hoyt family, as well as Robin Roberts' journey."

I am pissed off at myself for missing the rally in the stock market over the last few months.

And I am mad at myself for disappointing a number of subscribers as my strategy has been poor.

I have been in the growth-slowing camp (which occurred) but it coincided with the valuations-growing camp (something I didn't expect). I was of the wrong-footed view that a policy dependent domestic economy deserved lower price-to-earnings multiples. 

But it is very important to compartmentalize one's emotions by detaching yourself somewhat from your mistakes, taking a deep breath and by recognizing the game is long.

Otherwise you will NEVER succeed.

It helps  to have a perspective on life. I sure know this after beating cancer late last year.

If you need a reality hit in an effort to put life's journey back into perspective, just watch this video, which was screened last night at the ESPYs on the Hoyt family from Boston. 

If you don't cry you are not human.

And here is Robin Roberts' acceptance of the Arthur Ashe Award last evening.

Keep your perspective.

• Midday market musings from Sir Arthur Cashin, everyone's favorite market observer:

IBM is about 35 points of the rally. Initial Claims had muted impact from questions on seasonal adjustment (auto retool shutdowns). Philly Fed was a booster rocket. Bernanke no impact so far.

Run rate slows after Europe closes -- projects to a final of 640/720 million.

• QQQs go red.

 I have thought this was the most vulnerable ETF.

• Here is an e-mail I received this morning from one of my favorite subscribers:

U wonder why most r frustrated...right now Obama giving speech on on how obamacare is helping reduce costs and will benefit most...yet my blue cross was just raised another 20% a yr starting aug 1.. Blue cross said it is BC of obamacare and most don't pay .

Bernanke at the same time talking about economy ... printed over 1 trillion for a .5% GDP and part time employment at all time high?

Really .... politician BS.

My physician says new health care laws a nightmare.

And housing, really? It is lack of supply. Americans' expenses going higher..getting less benefits and flat income for 20yrs....it all makes no sense...

If more than half the US is on govt benefits then it is tough to get a revolt....

Frustrating Dougie..

• Taking some of my position off.

Chimera Investment (CIM), as I thought a few days ago, has now climbed over $3 a share and I am taking some of my position off.

The reason is several fold.

Firstly, interest rates are going back up as the Fed is beginning to lose control of the fixed income market. 

Secondly, as I have noted previously, in the yield category I prefer Altisource Residential (RESI) (its share price,  business mix, safety of yield and interesting tie in with Ocwen (OCN)/Altisource Portfolio (ASPS)).

• Housekeeping items.

I have covered my Home Depot (HD) short for a small gain and my Lowe's (LOW) short for a small loss.

• Pimco's Gross on Twitter:

"Stock mkt volume just 60% of 2011 levels. Investors don't trust fast computers, fast money, doctored earnings estimates that 'beat.'"

• Action is perplexing.

Stocks ripping, bond yields climbing and crude oil making a move towards $110 a barrell.

Go figure!

• In terms of institutional trading flows, most desks I speak to have been better to the buy since the opening.

As S&P cash took out the old May intraday highs, bidding from emerging market equities improved (for the second day in the row).

The Russell Index continues to outshine the others and, ahead of the S&P options expiration tomorrow, many think the Street is short gamma at 1700, which could extend the early move.

I just don't know.

• Housekeeping items.

I haven't got time for the pain and I have covered positions in Danaher (DHR), Schwab (SCHW) and Yahoo! (YHOO).

Sacrifices to the short gods and losses in all three.

• Both cities point to better manufacturing outlook.

Following the better-than-expected July New York manufacturing survey released a few days ago, the Philly region also saw activity better than forecast.

The Philly survey came in at 19.8, well above expectations of 8.0, up from 12.5 in June and the best since March 2011. Most of the internal components improved from June.

While new orders fell to 10.2 from 16.6, it comes well off -7.9 in May. Backlogs remained negative at -1.8, but that is up six points from June. Shipments rose by 10 points and the employment component went positive for the first time in four months at 7.7 vs. -5.4 in June. The average workweek also improved. Inventories continued to decline, falling 15 pts m/m. Likely due to rising energy prices, prices paid remained elevated at 21.50, though down 1 point from June. Prices received receded, but after jumping in the month prior. Also of note, the overall business activity six-month outlook rose to 44.9 from 33.7, the best since March 2011.

Bottom line, after basically flat lining from March through June as seen with the national ISM figures, the New York and Philly regions are pointing to a better manufacturing outlook in July. This could be due to some reversion to the mean after what will likely be a soft Q2 and also signs that Europe, while not improving, has stopped getting worse, for now.

• All five trading lower.

The Five Horsemen of the Nasdaq -- Netflix (NFLX), Amazon (AMZN), Google (GOOG), Priceline (PCLN) and Tesla (TSLA) -- are all trading lower today.

Lets keep an eye on these OTC-leading stocks today.

• Slow growth, who cares?

It is remarkable to me that the market is totally unconcerned about slowing economic growth.

Adding insult to injury, the price of crude oil just hit $108 a barrel.

Watching with disbelief and awe as record highs are made.

• Growth forecast cut?

I am hearing that Morgan Stanley cut its Real GDP forecast for 2Q 2013 to +0.3%.

• Ss over Ns.

• Expanding this short.

I am expanding my QQQshort at $75.60 now.

• Never send to know for whom the bell tolls.

Markets continue ignore the negatives and accentuate the positives. But that doesn't mean that we should ignore them and not be informed and ready to react. 

Here are more ursine morning musings by Southwest Securities Sir Mark J. Grant:

There is a line in the sand. The date is September 22, 2013. It is a hard date. There is no, "on this hand or on that hand" about this date. It is etched in stone. It is the date of the German elections.

"Today is only one day in all the days that will ever be. But what will happen in all the other days that ever come can depend on what you do today." -- Ernest Hemingway, For Whom the Bell Tolls

Nothing bad is going to happen in Europe before this date. Nothing is going to be allowed to upset Ms. Merkel's chance of winning the election. If more money is required; it will be found. If numbers need to be reallocated or data smoothed then both will take place. Everything will be calm and the outlook positive prior to September 22 and then, as soon as the celebrating is over, life will change.

Every problem that has been swept under the rug, every predicament that has been locked in the drawer, every pickle that has been kept in the tightly locked jar and every issue that has been placed on the shelf will come spinning out like the opening of Pandora's Box. Spain will be regarded once again with angst, Italy will bubble like marinara sauce on the stove, Cyprus will be placed again on the front burner, Portugal will cause tremors and the broken plates of Greece will no longer be ignored. The shards will cut.

It is going to be a mess.

Hard data confirms this thesis whether you look at one country in Southern Europe or another. All bad and going to worse. Rotten fruit decomposing in the Mediterranean sun. Unemployment up, GDP down and debt on the rise. It will be, "whatever it takes" prior to September 22 and then, "what must be done" after this date. The status quo cannot continue and it won't. Lives will change.

"Nicey-nice" will revert to the German position of "Verboten." The talk will get much tougher. The actions of Germany will belie the words. A cold wind from the north will blow across the Continent as Germany defines the law for the rest of Europe. Any spirit of cooperation or any pretense of Germany respectfully listening to the cries of anguish emanating from the troubled nations will become an iron fist around their throats as Germany asserts its control over the Union that is Europe.

"Europe has become like an old 'lady of the evening' in a bar. We can toast to her. We can have a drink with her but it would be a mistake to go upstairs with her."  -- The Wizard

• Break in!

Story going round that Dell (DELL) doesn't have enough votes to pass Michael Dell's takeover proposal and the shares are trading lower.

• Initial jobless claims totaled 334k, 11k less than expected.

This comes after the jump to 358k last week (revised from 360k), which was likely influenced by the July 4 holiday, school closings and the timing of auto plant shutdowns during the summer.

The four-week average is now 346k vs. 351k last week and 346k the week prior. Continuing claims, delayed by one week, rose 91k after a 70k gain in the week prior. Extended benefits, delayed by two weeks, fell by 24k after falling by 7k the week before.

Bottom line, even with the distortions as stated over the past few weeks, claims are still averaging near the lowest since early '08. This reduced pace of firings is leading to an improved, but still ordinary pace of hiring.

• Adding to it.

I just added small to my expanding SPDR S&P (SPY) short at $168.11.

• Lets take a peek at overnight and early morning price action in some of the major asset classes.

S&P futures +1, Nikkei+ (approaching 15,000 and 5.5% below highs), China's Shanghai Index -, European markets mixed, euro -, crude flat, gold +2 and the 10-Year U.S. Note stands at 2.48%.

Worth noting:

• Trading was choppy on Wednesday. (I made an (infrequent) Ludicris Forecast that the market would reverse lower and for a nanosecond I thought I would be right. Stocks firmed near the close, again).
• I modestly added to my short book yesterday. As I stated previously, my trigger finger is itchy to add more significantly, but at least through yesterday stocks remained resilient.
• Though the bull market in complacency continues to stretch out in 2013, I am steadfast in my view that we are topping for the year. 
• Of the three major Index ETFs, QQQ seems the most vulnerable.
• After the close, earnings reports at the major players (IBM (IBM), eBay (EBAY), American Express (AXP) and Intel (INTC)) were mixed. IBM missed (again, guide up a function of lower tax rate and other non-operating items) on top line, eBay reported in line but guided lower, AXP missed by a nickel/share and INTC missed on the top line and guided sales lower).
• Words used in the earnings reports and conference calls at AXP and INTC to describe the economy  included "worrisome" and "uneven."
• Bernanke's first day of testimony was the highlight of the day. I will have more later this morning on my interpretation of his remarks, but for now I will stick with my view that there's little discussion regarding the fact that QE is not working. As I mentioned, taken to the extreme the growing (and perverse logic) is that if the Fed does more QE it is a market positive because it is an economic negative.
• Bernanke's statement that QE has been more beneficial to Main Street than Wall Street was Ludicris too.
• WSJ's Hilsenrath on monetary policy.
• On the economic front housing data was weak and I continue to look for a pause in the recovery in the residential  real estate markets that began 2 ½ years ago.
• The Beige book points to moderate and measured expansion.
• More bad stuff out of eurozone. The Spanish banking industry's bad loans ratio rose to 11.2% from 10.9% in May. Italy is heading for an even more severe economic downturn than previously forecast and will contract by 1.9% in 2013.
• CNBC's Delivering Alpha conference was value added.  News was made in PepsiCo (PEP), Caterpillar (CAT) and many other names. Carl Icahn was a highlight in his straight forward and no nonsense musings. Lee's picks.
• The Open Championship at Muirfield started this morning. My pick? Phil Mickelson.

In the press:

• ESPYs: Don't give up, don't ever give up. There were some very emotional moments last night in the ESPY awards program. The show truly had some shining moments. Particularly poignant was the story about the Hoyt family, as well as Robin Roberts' journey.
• WSJ: Central banking needs rethinking.
• Washington Post: The breakdown in higher productivity and improving wages.
• Zero Hedge; Bank of America marks to unicorn.
• Bloomberg: More on Bank of America's mortgage writedowns.
• Knowledge@Wharton: Will Microsoft's reorganization pay off?
• Politico: Marco Rubio stumbles.
• Project Syndicate: How many recessions in Europe?
• WSJ: Big labor wakes up to Obamacare.

Economic Data and Other Catalysts Today

• G20 Fin min/CB deputy meeting. Jul 18-19.
• U.S. initial jobless claims (8:30amET) (345kE)
• U.S. Philadelphia Fed for Jul (10amET) (8.0E)
• Leading economic indicators (+0.3Q%)
• Bernanke semiannual testimony to Senate. Text 8:30 amET. Q&A 10amET. 
• DELL shareholder meeting. 
• German Finance Minister Wolfgang Schaeuble will visit Athens.
• Earnings before the open: Akzo Nobel, AN, Anglo American, APH, BAX, BBT, BLK, BX, Carrefour, CHKP, CY, DGX, DHR, DOV, ERIC, FCS, FITB, HBAN, JCI, KEY, MS, NOK, NUE, PPG, SAP, SHW, SON, SWY, SYK, TSM, UNH, UNP, VZ
• Earnings after the close: AMD, CE, CMG, COF, CYN, FWRD, GOOG, HUBG, ISRG, MSFT, SWKS.