• It's a Martha Reeves market today.

"Just one more thing"

-- Lt. Columbo

If yesterday was a Fed cat bounce, today is the Martha Reeves market!

• Thanks so much for reading my diary today.

I want to finish up on two research projects, so I am going to sign off early in order to deliver at least one (or maybe both) tomorrow morning.

Thanks so much for reading my diary today.

With the benefit of hindsight, Wednesday's advance was a Fed cat bounce.

• At $85.74.

I have sold out of my PowerShares QQQ (QQQ) long rental for a $0.20 gain just now at $85.74.

• Sorry about my tardy Kass Katch.

What else could I write

I don't have the right

What else should I be

All apologies

-- Nirvana (2014 Rock and Roll Hall of Fame inductees tonight), "All Apologies"

I apologize that my new Kass Katch is not yet out, multitasking today.

At the latest, it will be delivered by tomorrow morning.

• I took a small long rental in QQQs at $85.50 just now.

Maintaining a close stop at $85.40.

• We have seen the day's lows.

With S&P futures down 30 handles and the Nasdaq down by 95 handles, I am going to go out on the limb and say we have seen the day's lows now.

• Here are his comments.

Here is The Lindsey Group's Peter Boockvar's view of the Treasury auction:

Even with a yield at the lowest level since July 2013, the 30 yr note auction was pretty good following the very mixed 10 yr yesterday and uneventful 3 yr on Tuesday. The yield of 3.525% was about in line with the when issued and the bid to cover of 2.52 was above the previous 12 month average of 2.38. Direct and indirect bidders took a total of 61.2% of the auction, above the recent average of 56%. The already trading 30 yr yield at 3.52% is down by 11 bps just in the past week. Bottom line, the rally in the longer end of the curve lately is telling a message of still ordinary economic growth, not the acceleration that many are estimating. I will AGAIN bring this back to the process of ending QE in that Treasuries also rallied after QE1 and QE2 ended as the equity markets rolled over which in turn impacted the economy and was followed by another round of monetary stimulus. The Fed has created a construct where the equity market has driven the economic bus (via wealth effect, etc...) so while the macro conditions in the US don't point to a threat of economic slowing, an equity market selloff can be just the concern for growth that the US Treasury market is sniffing out.

• Apparently.

Everybody knows that the dice are loaded

Everybody rolls with their fingers crossed

Everybody knows that the war is over

Everybody knows the good guys lost

Everybody knows the fight was fixed

The poor stay poor, the rich get rich

That's how it goes

Everybody knows

-- Leonard Cohen, "Everybody Knows"

It is amazing to me that nearly every talking head in the business media has an explanation for every market move (up and down) -- particularly after the fact.

Why can't some be honest in dealing with a market without memory from day to day and just say, "I don't know!"

• Here are his musings at midday.

Midday musings from Sir Arthur Cashin:

As noted in today's Comments (and on CNBC), Wall Street folklore maintains that the Thursday before Option Expiration week has a very high profile of volatility (with a nearly 70% bias to the down side).

Nasdaq has given up all of Wednesday's gains and then some.  Breaking 4100 (Comp) brought extra selling.  The 4050 level needs to hold, or risk a potential acceleration.

Plunge in 10 year yield is borderline phenomenal.  There are some aspects of a flight to safety ¿ 10 year; gold; plunge in techs and small cap.  The missing piece would be the dollar, which should be rocketing if this were safety.

Run rate at 12:15 projects to NYSE final volume of 745/825.

• I am back short.

This week I returned to my Tesla (TSLA) short.

It has now broken through the support at $208.

• At $33.70.

General Motors (GM) is down $2 in the last four trading days.

I added today at $33.70.

• Covered the balance at $86.50.

I just covered the balance of my PowerShares QQQ (QQQ) short at $86.50.

• Have I mentioned that Mr. Market has no memory from day to day?

• At $86.70.

I covered half of my PowerShares QQQ (QQQ) short at $86.70, bringing me back to market-neutral.

• Kass Katch coming up.

A new Kass Katch is coming up today -- for sure.

It's a long.

• It's QQQ.

My largest short is PowerShares QQQ (QQQ).

• Mindless trading during an irrelevant seasonal period.

I received several emails inquiring about Bon-Ton Stores (BONT) weakness yesterday in a strong tape.

I checked around.

My response?

Mindless trading during an irrelevant seasonal period. 

• Namely, jobless claims and import prices.

Goldman Sachs on the claims and price data released this morning:

Initial jobless claims 300k for the week ended April 5 vs. median forecast 320k

Continuing jobless claims 2,776k for the week ended March 29 vs. median forecast 2,835k

Import prices +0.6% for March vs. median forecast +0.2%

MAIN POINTS:

1. Initial claims for jobless benefits fell 32k to 300k (vs. consensus 320k) in the week ended April 5, setting a new post-recession low at a level last seen in May 2007. The Labor Department said that no states estimated claims last week and that no special factors affected the data. The four-week average of initial claims fell to 316k. Continuing claims fell 62k to 2,776k in the week ended March 29 (vs. consensus 2,835k), the lowest level since January 2008.

2. March import prices rose 0.6% (vs. consensus +0.2%). Food and beverage import prices rose 3.7% month-on-month, the largest increase since 2011. In particular, fruit prices increased 14.0%, the largest gain on record for that series. By country, import prices for non-manufactured products from Mexico¿the largest source of fruit and vegetable imports for the US¿jumped 6.7%. Import prices from Canada rose 1.7%, which the report attributed to higher natural gas prices. Excluding food and fuels, import prices rose a more modest 0.2%. Over the past year, import prices declined 0.6%, while ex-food and fuel import prices fell 1.2%, representing a net drag on core consumer price inflation.

• Run, don't walk, to read The Wall Street Journal's upbeat story on mobile banking.

The Wall Street Journal featured an upbeat story on mobile banking this morning.

My play in the sector is Monitise (MONI.L/MONIF), as you all know!

• Here are his morning musings.

This morning's commentary from Sir Mark Grant:

On the last day of 2013 the yield on the long bond was 3.97% utilizing Bloomberg data. This was the day when I said to move into longer maturities and that yields would go down. This morning the yield on the long bond is 3.55% which is about an 11% gain in price.

Score!

Yesterday the Fed indicated that it may not cut off its funding as soon as thought by many. Equities rallied, bonds dropped and it is all because many market participants are missing the point. The missed point is that the Fed is going to use its money to lower yields. Fundamental economic analysis does not contain what is happening which is why so many people are missing the most salient of messages. The Fed is heading down a path of reducing yields because it has discovered that it can and because that is what the government of the United States wants done.

The government is the Master now and not the markets.

Lower yields mean less cost to borrow, less interest to be paid on Treasury and Agency debt, lower corporate borrowing costs which means more buybacks and is a rather overt attempt to sustain the equity markets. It also means that mortgage rates will decline buoying the Real Estate market and that corporate debt will contract against U.S. Treasuries as this greater amount of money in the system will mean that private investors have more money to buy bonds of all sorts.

While the long bond has moved most in price the 10 year Treasury has gained 14.5% since the end of last year. Given what has taken place in Europe, with Greece issuing new debt today at 4.95%, Europe is not done yet in lowering yields and neither are we in my opinion. The Central banks are pushing on markets with Europe utilizing a carry trade and verbal coercion with its banks while America just keeps heaping wood onto the fire directly.

This can be clearly seen in the 5 year segment of the market. Switzerland, Germany, Finland, Austria, Denmark, the Netherlands, Belgium, France, Czech, Slovakia, Ireland and Sweden are all commanding lower interest rates in this sector than the United States. Italy and Spain are paying just fractions more. This is not a matter of economics because those are not sustained but of governmental intervention that is driving the yields lower and, in my opinion, they will continue to do so as a matter of the benefit to the State.

Then in the mortgage, corporate and municipal markets we are also seeing, as a matter of my observation, not just contraction but far fewer bonds available in the marketplace. Availability is drying up as the forward calendar lessens due to the length of time that the central banks are first correcting the 2008/2009 debacle and then continuing along for the good of the governments. This is especially true in taxable municipal bonds as the offerings and size dwindles. Relative value is always a work in progress but any real value has all but disappeared when considering credit risk at this point. In fact many higher rated credits are now trading through Treasuries as the demand exceeds the supply and risk is tossed out with the bathwater.

The only area that I find attractive now is the bonds of the gold miners. They are obiously out of favor given their yields and present a real opportunity in the medium and long end. The gold market has been manipulated in my opinion for a variety of reasons but the demand for physical gold has run along unabated and will continue to do so which will, I believe, drive the price back up eventually. You also have any sort of catastrophe and a downdraft in economies working in your favor. In gold miner bonds you can get yields of 6.00% and 7.00% for investment grade credits and I think they will experience significant contraction as gold, I think, will pick up in price again. It is what you find peeking under the rocks that often benefits your portfolio the most.

Just keep peeking and hope that it is not attached to China because they are running into some significant difficulties. Keep peeking in America because the Chinese peeking may be followed by the second course aptly named the peeking duck.

• I see plenty of risks ahead and even a few bubbles.

Run, don't walk, to read Jim "El Capitan" Cramer's excellent opening missive, "Conquering Our Fear of the Past."

In his commentary, Jim makes the case that Jamie Dimon's letter to JPMorgan Chase (JPM) shareholders should make investors consider taking on more risk, as the risks are in the rearview mirror.

Maybe so, but I see plenty of risks ahead and even a few bubbles.

As I recently wrote in "From the Generational Bottom to the Cyclical Top?":

In the main. I see three bubbles that exist today:

1. the IPO market;

2. the social media sector; and

3. the belief that the Fed's quantitative-easing policy is sufficient by itself to generate a self-sustaining domestic economic recovery.

And let's add one more bubble:

4. There is a bubble in credit.

As evidence:

• first Puerto Rico bonds now Greek bonds;
• Spanish and Italian yields converging with U.S. yields;
• investment grade spreads at +100; and
• high-yield spreads at +340 are within 100 of May 2007, but, more importantly, yields are 200 basis points lower than May 2007 because of where Treasuries are trading.

This is what happens when our central bank is run by a bunch of academics who have no clue about anything. I don't know if the next blow-up will be worse than 2008 because our banks are better capitalized and more liquid, but I do know that a lot of people are going to get their clocks cleaned.

Finally, I would also argue (in reaction to Jimmy's article) that after a near-doubling in the S&P 500, risk aversion may not be such a terrible thing now.

After all, as Warren Buffett wrote, "Price is what you pay, value is what you get."

• Here is his morning commentary.

The gospel according to Peter Boockvar:

The Shanghai index closed at a 7 week high and the Hang Seng was higher by 1.5% after Chinese officials said they will open up (subject to quotas) two way trade in each other's stock exchanges, importantly giving Hong Kong citizens access to the China A market and vice versa. This will help to arbitrage the differing valuations for the same company that trade on both exchanges and the extra trading volume it will bring resulted in a spike in the stocks of brokerage firms in the region. Premier Li said it will "further improve the opening and healthy development of capital markets in China and Hong Kong." The news allowed investors to shrug off another weak trade report in China that saw exports in March drop 6.6% y/o/y vs the estimate of up 4.8% and imports were down by 11.3% vs the estimate of up 3.9%. The caveat though with exports is the comparison was very tough as last year export figures were juiced by over invoicing with Hong Kong. For those expecting a big stimulus package out of China to deal with the current slowdown, you won't see it. Premier Li said today that they "won't adopt short term and strong stimulus policies in response to temporary fluctuations in the economy." The focus will be on more healthy, sustainable growth over the medium to long term.

Elsewhere in Asia, February Japanese machinery orders fell 8.8% m/o/m, 4 times more than expected and after opening up sharply, the Nikkei sold off the rest of the day to unchanged in response. The Aussie$ is rallying to near a 5 month high vs the US$ after Australia reported a better than expected March jobs figure as the country tries to transition away from its mining dependent business with China.

In Europe, with the news of Greece coming back to market for the first time in 4 years (with an interest rate possibly below 5%, give Draghi some ouzo as investors seem to be drinking a lot of it on this deal), their unemployment rate in January fell to 26.7% from 27.2%, the lowest since February '13. French IP was a touch weaker than expected in February. The BoE left policy unchanged as expected.

The US market selloff on Friday and Monday did impact the sentiment of the volatile individual investor as AAII said Bulls fell to 28.5 from 35.7 while Bears rose to 34.1 from 26.8, both at levels last seen two months ago. With regards to the US$, it's on the cusp of falling to the lowest in more than a year and gold is back above its 50, 100 and 200 moving averages for the first time since February. The gold market looks closer and closer to the end of its multi yr bear market and notwithstanding Fed tapering, real short rates will remain negative for many years to come according to the Fed.

• Yesterday's swift afternoon rise was not justified by the substance of the Fed minutes.

In my FOMC minutes postmortem yesterday afternoon, I suggested that the market's swift afternoon rise was not justified by the substance of the Fed minutes:

The March FOMC meeting minutes are being taken as dovish by the markets. Both stocks and bonds have rallied, while the U.S. dollar has weakened. The minutes, however, are not more dovish than the previous FOMC statement that was released on March 19.

Apparently, market participants are focusing on the commentary of some of the Fed officials who have said that the fed funds forecasts overstated the likely rise in rates. This, when combined with some references to China's slowing economic growth rate (which has constrained commodity prices), has produced what I view as an exaggerated response.

Since there is nothing new here from March 19, I am using this strength to reestablish short positions.

Stocks ramped (especially of a highly shorted kind, e.g., Facebook (FB)), though the credit markets diverged somewhat from equities (and still remained wider on the week). The short end was particularly firm as the yield curve steepened (but has only retraced half of the major flattening of the last few months).

Biotech stocks had their best day in almost a year (up 4%), and the VIX got slammed, experiencing the largest drop in four weeks (and down 12% Tuesday-Wednesday). The Nasdaq rose by nearly 2% (its best daily move in a month), moved above the 100-day moving average and is now in the black for 2014.

Gold and silver rallied, and the price of crude oil ramped up (to over $103.50 a barrel).

Bill King of The King Report appears to agree with me in his commentary this morning:

The FOMC Minutes of its March 18-19 meeting contained no surprises; but they show that the discord over QE and easy credit remains high. The stock market rallied because the usual suspects stridently highlighted the Fed doves' views; so the algos went into a buying frenzy.

Bulls and doves, particularly the one on Bubblevision, spun the Fed minutes as the Fed has warned the market that it 'misconstrued' the Fed's desire to hike rates.

Here is the passage that bulls and doves highlighted to support their view that the Fed was telling the market that it remains firmly dovish:

"A number of participants noted the overall upward shift since December in participants' projections of the federal funds rate included in the March SEP, with some expressing concern that this component of the SEP could be misconstrued as indicating a move by the Committee to a less accommodative reaction function. However, several participants noted that the increase in the median projection overstated the shift in the projections."

But the usual suspects, particularly media uber-dove shills, ignored this key passage in the Fed minutes.

"However, several participants mentioned trends that, if continued, could become a concern from the perspective of financial stability."

When the dovish headlines appeared, algos poured into stocks and SPMs without regard to the totality of the Fed minutes. Momentum traders followed suit. This is why operators use the media to spin news and events. The scheme produces headlines and stories that will drive stock prices higher without regard to the legitimacy of the headline or stories.

• Hilsenrath Analysis: Fed Worried About Misleading on Interest Rates at Policy Meeting
• BN: U.S. Stocks Rise as Fed Minutes Ease Rate Concerns...

The above headlines, typical of several headlines and explanations, are duplicitous because it omits the qualifier "a number of participants."

The Fed did not officially state that it is worried about "misleading on interest rates." Fed members did not unanimously or officially express this concern. "A number of participants" expressed that concern.

The usual suspects deceitfully propagandized what might be a minority view within the Fed as official Fed policy.

The media could have just as deceitfully published headlines and stories that proclaimed, 'Fed worried about financial stability due to its accommodative policies.'

If that had transpired before the dovish spin, stocks would have tanked on Algo and lemming selling.

The proof that the Fed minutes contain little news is the fact that the money market did NOT materially change its forecast for a mid-2015 rate hike ¿ and the Fed minutes acknowledged this.

On balance, U.S. financial conditions remained supportive of growth in economic activity and employment: The expected path of the federal funds rate was little changed...

The September Fed Funds future contract rallied only .35 bps to 99.535 for the day -- despite the frantic Algo and lemming buying!

The market went from a 50-50 chance of a rate hike in Q3 2015 to a 46.5% chance of a rate hike December 2016 Fed Funds rallied .065 to 98.21. As anyone that has been paying attention realizes, no one knows what will transpire in six months let alone 32 months from now.

Here's another passage that the usual suspects ignored: Members again judged that, if the economy continued to develop as anticipated, the Committee would likely reduce the pace of asset purchases in further measured steps at future meetings...

The Fed stated that QE tapering will continue and the pace might increase. Please recall that the last big equity rally occurred when the usual suspects proclaimed that the Fed would reduce its QE tapering pace or stop tapering QE altogether. It was a false declaration.

Bill Miller has recently said on CNBC that "the conditions for a bad market don't exist."

I respectfully disagree.

As I wrote in yesterday's opening missive, a change is in the air (despite yesterday's ramp):

I am more convinced than ever that the only certainty in the investment outlook for 2014 is the lack of certainty.  It is for this reason that I have suggested that most traders and investors have outsized cash positions and why I prefer trading opportunistically compared to a buy-and-hold strategy.

I am also convinced that 2014 will be a transition year during which investors begin to consider the potential adverse consequences of higher interest rates on economic growth and valuations.

The key issues for investors to consider are: how long rates can stay low; what it means that they are staying low; and what happens to equities if they start rising. If interest rates are a coiled spring that pops higher rather than one that slowly unwinds -- equity markets are unlikely to react calmly. Regardless, policy suppression of interest rates may be setting us up for much higher volatility across many assets classes.

The weakness in equities on Friday and Monday might be a hint that there is a change is in the air.

This morning S&P futures are about 5 handles lower, and Nasdaq futures are 10 handles lower at the get-go, reversing overnight strength.

Overnight, the China exports data were abysmal. 

I start the day about 5% net short (principally through yesterday's PowerShares QQQ (QQQ) short).