Anyone who takes the study of the stock market seriously undoubtedly spends at least some of their time with sentiment indicators. For example, sentiment models and indicators account for 15% of our daily risk management work and 10% of our weekly work. So, while market sentiment is obviously not nearly as important as trend, momentum, breadth, or fundamental indicators, it is something to pay attention to – especially when the mood of the market reaches an extreme.
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SUMMARY:
- A great start, but even with CAT adding to AAPL and the FOMC decision, the market cannot hold the gain.
- DJ30 brushes the post-bear market high then reverses.
- Durable Goods Orders post another solid gain.
- Jobless claims up, but with the trend lower.
- Market indicates it is at its news saturation point and readies for a test.
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Anyone holding short-term interest-bearing investments over the past few years knows all too well that cash has been trash as far as trying to generate any kind of income or growth goes. With interest rates at historic lows, the incentive has been to borrow money as opposed to saving money in traditional vehicles such as savings accounts (do banks still offer such a thing?) and certificates of deposit. However in all fairness, the Fed has felt that trying to avoid a global depression probably outweighed the fact that savers and folks living off of interest-bearing investments have had a tough time lately.
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It is safe to say that investors of all shapes and sizes found 2011 to be a very frustrating year. It didn’t matter whether you employed a buy-and-hope approach or an active trading strategy; the bottom line is it was a rough ride. And although the action in 2012 appears to be diametrically opposed to that seen during the last six months of 2011, there is a certain contingency of investors that remain frustrated all the same.
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SUMMARY:
- Many bemoan a weak session, but the intraday action was constructive as investors and traders awaited AAPL’s earnings.
- Apple blows out earnings and tops guidance. Solid after hours response, but is it enough to push a new upside charge to resistance?
- For the first time in awhile an FOMC meeting has some meaning.
- Plenty of good patterns still in the market versus resistance ahead and the idea of just how much better can the news get after AAPL.
- Stick to the plan at this point as it has worked thus far.
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Although the stock market is overbought and due for a pullback, my current working thesis involves the idea that the market made a costume change on December 20th. Suddenly and without warning, the uber-violent environment in which intraday moves of 3% were common stopped. And then starting on December 21st, something that investors hadn’t seen in nine months returned to the corner of Broad and Wall – some sanity. Thus, it appears that the Dr. Jekyll and Mr. Hyde market that ran amuck for the better part of 2011 has morphed into a good old fashioned, non-news-induced, non-HFT, fund-buying-driven uptrend.
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Stocks finished with impressive gains last week and have now been higher in six of the last eight weeks. Don’t look now, but the DJIA is less than 100 points from last spring’s high water mark for the current bull cycle, which began on 3/9/09. The steady uptrend stands in stark contrast to the uber-violent, up-one-minute-down-the-next environment that had existed for the prior five months. And for those of you keeping score at home, the much-vaunted VIX has fallen 62% from its recent panic-induced highs. As such, the question of the day is if one can actually believe in the bull’s latest joyride to the upside.
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SUMMARY:
- GOOG has its impact but the flat close was not bad action all things considered.
- DJ30 leads as MSFT, IBM, INTC rally on earnings.
- Existing home sales up 5%, but still distressed and cash sales.
- Expecting some more upside then the test.
- Three options for the test to come.
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SUMMARY:
- No bad news from Europe, US earnings palatable, and stocks, well, just manage a gain.
- Big upside open cannot hold to the close. Of to lunch for that matter.
- Earnings focus on financials to start the week and they are mixed
- New York PMI shows manufacturing recovery continues.
- Stocks still in position, looking for more upside, looking for earnings to provide a catalyst.
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There seems to be some confusion about the idea of the U.S. “decoupling” from the European debt crisis. The bears argue that there is simply no way in this globally connected world, for the U.S. economy to effectively decouple from the rest of the world should a global recession rear its ugly head again. But on the other side of the aisle, the bulls contend that their counterparts are focusing on the wrong issue.
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SUMMARY:
- France spills the beans early on an S&P downgrade and the market takes its licks.
- Stocks sell but once again they recover off the lows with the low to high intraday action. If S&P action occurred a couple of months back we would be talking about Black Friday part 2.
- JPM disappoints but the reaction in the stock and financials is minimally negative.
- Michigan Sentiment posts a nice January bounce.
- Europe has its reasons for backing off its Iranian oil embargo plans. What are our reasons for not taking Canada’s oil, producing our own, creating thousands of jobs, giving people incomes to buy homes given low rates, and lowering the price of oil and gasoline?
- Earnings and economic data for the short week ahead, and still we see plenty of upside patterns that we will take advantage of if they show the moves.
- S&P downgrade portend an EU recovery? When S&P downgraded the US our economy rebounded.
- Quantitative Easing III likely on the way: it is an election year, Bernanke knows which side will preserve his job, and his henchmen are laying the groundwork.
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SUMMARY:
- U.S. economic data stumbles and stocks give up pre-market move then fight to hold gains.
- Jobless claims jump back to 399K.
- December retail sales show a late tail off in holiday shopping.
- Business inventories rise much less than expected as sales fall as well: the inventory build still remains elusive.
- Spain holds a decent bond auction, Draghi says the EU dodged a bullet.
- Grain supplies up, prices down, better for consumer.
- Home Depot to hire 70,000.
- Low to high intraday action continues the overall positive bias.
- Three-day weekend and earnings face the current rally.
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With the exception of the very first trading day of the year, each and every session in 2012 has continued to take on an eerily similar pattern. As I mentioned on Tuesday, it appears that the new trend is for traders to simply go opposite the direction indicated at the opening bell, regardless of what the futures market had been doing prior. Next, the bears make some menacing moves for about an hour and stocks react by doing their best imitation of water falling off a cliff. But just about the time the closing bell rings in Europe, the dip-buying bulls arrive and the indices proceed to march steadily higher for the next five hours.
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SUMMARY:
- Once again a good move is followed by . . . lethargy.
- Stocks recover from early declines, indicating the upside bias is still there, but the upside move remains slow going.
- MSFT the latest to join the list of those concerned about the quarter.
- Money is moving into the downtrodden as well as the favorites, and perhaps that can help this rally get a move on.
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Anyone who has read this column for any length of time knows that I don’t believe in making predictions about the stock market. No, I believe it is critical to check your ego at the door each morning and to spend your time paying attention to what “is” happening in the market as opposed to what you think ought to be happening. You see, I learned a long time ago that Ms. Market doesn’t give a hoot about what I think “should” be happening in her game or what “could” happen next. And it is for this reason that I do my darndest to avoid the use of the words “should”, “could”, or “would” in this business.
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SUMMARY:
- SP500 finally gets the right signals to make the upside break.
- Improvement in the US data was not enough: it took the appearance of a reversal in China to give the buyers the nod.
- French business confidence bounces along with industrial output.
- US short term auction yields record demand. ‘Stuff’ may be getting better, but investors still seek safety.
- A good day but not a great day.
- With the SP500 upside break the stage is set for the next phase of the rally, but given all the hype a bit of test may come first.
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Yesterday’s market headlines from the biggest of the big news websites read: “Stocks Finish at Five Month Highs,” “Stocks Notch Another Win,” and “Banks Lead Rally.” All of which would seem to indicate that the bulls are on a roll right now. And while I think our Market Wrap headline, “Bulls Breakout But Momentum Lacking” may have been a bit more accurate, a picture of the Wall Street bull did indeed adorn the article.
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SUMMARY:
- Creeping upside, still sluggish. Waiting on earnings for the next move?
- Short-term German bond yields turn negative as Europeans seek safety of German, US debt.
- Consumer Credit expands again as US consumer appears, repeat appears, to be on the comeback trail.
- US debt now matches US economic output.
- SOX is trying to provide backup for the other indices that remain in position to break higher, but just have yet to do it.
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For the fourth consecutive day, stocks followed a nearly identical pattern. In case you don’t pay attention to the tick-by-tick action of the major indices, stocks have tended to open higher recently only to be met, almost instantaneously, with a bout of selling. From there, things tend to settle for a bit before the next batch of sell programs are run. And then, just about the time things start to look and feel ugly (which is usually right around the time Europe closes), the S&P bottoms. After that, the days have belonged to the bulls as the buyers have then come in and helped the averages spend the majority of the day clawing their way back to breakeven (well, until the last-minute sell programs are run, that is).
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All eyes will likely be on the action across the Atlantic again today and likely the rest of the week, month, and perhaps quarter. Lest we forget, we have yet another purportedly “big meeting” with Team Merkozy today as the leaders of France and Germany are once again trying to figure out what to do about all the debt problems in the Eurozone and how to turn things around. However, I thought I’d take a timeout from the Eurozone death watch this morning and take a gander at something that used to matter to the stock market: earnings and valuation.
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SUMMARY:
- A solid jobs report reflects the economic improvement, but stocks did not buy into it, at least on Friday.
- Rare revisions to the unemployment rate, the simple are you employed or not survey, raises eyebrows and questions about data accuracy and perhaps explains the market’s lukewarm response.
- Dollar and bonds still acting as a safe haven for European funds.
- Stocks close the week with a flat session, unable to build upon the Tuesday, start of the year rally.
- Boat show indicator starts to turn positive but job cuts in 2012 are already high.
- Market still sports many levels of positive patterns supporting a continued move toward the prior highs.
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SUMMARY:
- Stocks still pensive even with some very solid, credible US economic data.
- Europe still a cloud cover over the US, but Friday’s jobs report likely had a bit to do with the sluggish action.
- Modest gains yes, but once again very constructive intraday action.
- Jobless claims beat expectations.
- ADP at 325K blows away the 180K anticipated.
- Same Store Sales rise 3.3% with some great beats AND some pretty surprising misses.
- Dollar, bonds start acting as they should with an improving US economy.
- Growth stocks quickly move into the lead Thursday.
- Jobs report could break this next move free and up into the last range before the post-bear market highs.
- Plenty of stocks still showing up and looking to pitch in to lead higher.
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I fully recognize that unless you are a member of the fast-money set, drawing meaning from something that has occurred only two consecutive times in the stock market can be dangerous. And while I have been publicly accused of being a little too optimistic in my morning missives of late (the shame!), I will have to say once again that the action so far this year hasn’t been half bad.
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SUMMARY:
- Stocks idle, a bit hung over after the new year surge.
- No major news, stocks quiet, so blame Europe.
- November Factory Orders up though miss expectations.
- Greenspan getting to the point, talks of a ‘brick wall of economic reality’ ahead for the US.
- Metals, energy, materials, financials, machinery and more. Leaders are there and likely will need to take over from retailers after Thursday’s Same Store Sales results.
- Earnings starting to show up as STX pre-releases positive results
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I’ll be honest; I was not a happy camper at about 8:30 am mountain time Wednesday morning. Stocks were reacting badly to a renewed stream of negatives from across the pond and frankly, it felt like the bad old days had returned. Deep down, I knew that we had enjoyed a respite from the news-driven nightmare during Santa’s visit to the corner of Broad and Wall last week. But it was still discouraging to see the market tick to fresh new lows after each and every miniscule bounce in the early going yesterday.
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Back before you needed to know the debt-to-GDP ratio and the corresponding level of interest rates in every European country, investors focused on such relatively mundane issues such as corporate profits, inflation, the direction of interest rates, and the state of the economy. But, as you are no doubt aware, these data points have largely taken a back seat over the past year as worry has become the watchword and just about any headline was a reason to run a sell program or three.
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Welcome back to the game. To say that 2011 was challenging for active managers (especially the second half) is likely the understatement of the year. Although active managers have outperformed the buy-and-hope crowd over the past twelve years by gi-normous amounts (lest we forget, the Lipper Growth Fund Index is down -28.44% from 12/31/1999 and the S&P 500 cash index is off -14.4% while even something as simple as a 15-month moving average produced gains of +103% over the same period), unfortunately 2011 was not a good year for anyone trying to actively manage the market’s ups and downs.
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SUMMARY:
- Lackluster session then late selling send SP500 negative for 2011.
- DJ30 and SP600 face new year trying to lead a continuation of the rally.
- Earnings can keep the upside move alive, then kill it as investors ask ‘is that all?’
- Predictions? Europe will remain an issue, North Korea and Iran are more trouble, no real US rally despite election year, more economic issues, blah blah, blah. Watch the market, be aware of history, and take what the market gives.
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I don’t know about you, but I really enjoy this time of year. Obviously the time with family is the highlight during the holidays. But I’m guessing you don’t need me to tell you that. So, what I’m really referring to here this morning is this is the time of year when you review your positions and plot your strategy for the coming year in the markets.
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SUMMARY:
- Another upside though rather nondescript advance continues the recovery.
- Jobless claims continue to improve, hitting the lowest reading since April 2008
- Michigan Sentiment marks fourth straight gain on the final read.
- LEI down but tops expectations.
- Q3 GDP revision misses expectations.
- Payroll firms indicate small businesses still slow.
- Santa rally is producing the advance and it is nice, but keep a dose of reality.
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Although this market can turn on a dime (or in this case a headline or rumor), I will admit that the bulls deserve some credit after Wednesday’s effort. In short, with the holiday season underway and Tuesday’s big blast creating an overbought condition, short-term profits were ripe for the picking. So, after Oracle’s report stunk up the joint and traders began to “sell the news” that European banks had indeed borrowed a boatload of euros from the ECB, it wasn’t exactly surprising to see stocks take a hit yesterday morning.
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SUMMARY:
- Earnings and European bank borrowing rattle traders, but the market, most of it at least, recovers.
- European banks borrowing more than thought, following the US model.
- Mortgage applications fall but November existing home sales rise. Is the housing market really recovering?
- Volatility still reigns but stocks continue trying higher.
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SUMMARY:
- Range? What range? SP500 turns and rallies through the August high.
- Some modest improvements in Europe, better housing starts in the US, basically nothing really that great, but stocks surge to the upside.
- Broad rally bounces DJ30 and SP600 off the top of their range, sends SP500 out of its range. Now can or will NASDAQ and SOX follow.
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I was asked a very fair question yesterday morning right about the time the market opened. The caller, who is a financial advisor as well as a longtime friend, wanted to know why on earth stocks had opened up more than 180 points in the first couple of minutes (the first three minutes to be exact). He made a somewhat exasperated reference to the bear case that he thought was well entrenched and wanted to know what the heck was going on. My response was short and sweet, “That was yesterday’s news; today it’s all about the yields.”
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I have to give credit for this morning’s theme to my son, who has been working with me for five years now. About 10:00 am yesterday morning, he pinged me with the following: “So… we can’t go up because of the Europe mess (which seems to find a new way to disappoint each and every day) and we can’t go down because of the better-than-expected economic data here in the U.S. I guess we’re stuck in the middle then until something breaks.” To which, I replied, “Exactly!”
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There is little doubt that the stock market “feels” like it wants to go higher. And why not, we are entering a time of year that is traditionally filled with joy and good tidings (to the tune of about +1.8% on average on the S&P 500 from now until New Year’s eve), there is hope that 2012 will see better days (oh, and the prospect of hitting the “reset button” isn’t hurting anybody’s feelings right now), and then the economic data here in the U.S. has been nothing short of surprising. What’s not to like, right?
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SUMMARY:
- Another early rally is squandered as SP500, NASDAQ fail to break back out of the Eurozone range.
- US data, European bonds look better on the week but a Fitch ratings move Friday afternoon overrides the positives.
- Longer term patterns still pointing toward danger in 2012.
- SP500, NASDAQ still need to break out of the EZ (Eurozone), but many stocks look ready to support a breakout near term.
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Yesterday’s headlines certainly sounded encouraging: “Stocks gain on U.S. Economic Data.” At first blush, there are two positives in that headline. First, the “stocks gain” part is certainly welcome to anyone owning equities in their brokerage accounts, 401(k) plans, or mutual funds. And what’s this, “positive economic data?” Is that even allowed in this dour, the-world-is-coming-to-an-end environment? But hey, it certainly sounds like a good thing.
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SUMMARY:
- Solid US data tries to provide stocks a rally cause but the bid fades and the indices close basically flat.
- No negatives from Europe and even some good bond sales in Spain.
- Manufacturing data rises on optimism about the future.
- Jobless claims get serious, fall to 366K.
- Foreclosures fall to 3 year low.
- Production and Capacity are good enough.
- China markets still struggling.
- Expiration Friday likely not to appreciably change the lay of the land, but we could get some buys out of it.
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SUMMARY:
- Looming specter of Europe continues to weigh on US stocks, advance dollar and treasuries.
- Italian bond auction results in record yields as UK unemployment touches a 17 year high.
- BRCM turns the tables and actually ups its Q4 guidance.
- SP500 joins NASDAQ and SOX in the stock ‘Eurozone’.
- SP500 10 points from support. A further test makes it four days down and a bounce for a key test of the range likely.
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I have been in the business of the markets since I graduated college in mid-1980 and I have been managing “other people’s money” since 1986. I have seen strategies, themes, fund types, and even asset classes come and go. But it wasn’t until this year that I had heard the phrase “risk on/risk off” used.
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SUMMARY:
- Indices bounce off the trading range, fade ahead of the FOMC decision, then get pretty ugly afterward.
- No Europe on the headlines but it sure appeared as if a European issue was in the background as dollar and bonds surge.
- November Retail sales disappointing, but some price drops are part of the decline.
- FOMC leaves everything status quo as should have been expected.
- SP500 and NASDAQ cracking the top of their ranges. DJ30, SP600 look just fine. SOX, however, is a problem.
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Long time readers know that I am a stout believer in the idea that there is usually a reason behind a good-sized market move. I’m not talking about 50 point swings in the Dow that can happen at any point of any day for little or no reason other than somebody clicking a button. No, I’m talking about a move of at least 1% or more (in either direction) within a short period of time – you know, something that gets your attention.
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SUMMARY:
- Second thoughts on the European deal, Moody’s downgrade threat, another chip warning (Intel), and more China slowing.
- After bouncing from the top of the prior range the indices are right back to test it again.
- Down on bad news yes, but once more the indices find and bounce, albeit modestly, off of that August to October range.
- Plenty of gloom and worry, a perfect cover for a bounce attempt.
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Let me get this straight. Stocks rallied early last week because traders assumed that the EU was going to create a fiscal compact. It was assumed (for good reason, by the way) that this compact would allow the ECB to start buying bonds with both hands. But then traders threw a temper-tantrum that reminded me of what it was like to have a two year-old again on Thursday after Super Mario said that the ECB wasn’t going to buy any more bonds right now. And then stocks rallied anyway on Friday on word that the EU leaders had agreed to a fiscal compact. Hmmm…
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With just fourteen trading days left in what is currently being called the “Nightmare on Wall Street” (lest we forget, reports from HFR show that hedge funds are having their second worst year on record and another report I saw over the weekend said that 3 out of 4 mutual fund managers are underperforming their benchmarks), the question of the day is: Do you believe?
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SUMMARY:
- Doesn’t take much of a European deal to satisfy investors and traders.
- A string of earnings warnings is worrisome, but not for stocks, at least not yet.
- China industrial output slows further.
- Michigan Sentiment approaching 70.
- Moody’s cuts the big French banks.
- Despite the negatives, Europe trumps and stocks rally nicely, pushing the indices up off an important support level.
- The bid returned on Friday. If it is still there Monday the prospects for a further upside push firm considerably
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Well, here we go again. It’s another month, it’s another Friday, and yes, we’ve got yet another make-or-break EU Summit meeting on our hands. To hear the EU leaders tell it, the meeting holds huge promise as this time – yes, this time – the powers-that-be have a plan to put an end to this sovereign debt crisis that is now more than 18 months old. This time, really? Haven’t we heard this a time or two (or, maybe four) times before? And yet, like moths drawn to a flame, investors continue to buy into the hype.
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SUMMARY:
- Stock market is putting in constructive sessions ahead of EU meeting.
- ECB providing an extended, 2 year loan facility, reports have G20 putting up $600B for IMF Europe fund. France promises a ‘powerful’ deal. Promises, promises.
- Germans less confident of a deal, S&P goes all in, putting EU itself and EU banks on negative credit watch.
- After 235 years we are told our system does not work.
- Many stocks working on new setups, but of course they are relying on some form of real deal from Europe.
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Let’s start this morning with a couple questions. First, are we having fun yet? And second, is this headline/rumor/HFT-driven, up-one-minute-down-the-next market environment ever going to end? As to the first question, if you are one of the multi-billion dollar banks or hedge funds that utilizes high-frequency-trading in your day-to-day operations, I’m guessing the answer is yes. But if not, well, the answer is likely a resounding no. And as for the second question, the answer is probably best found in another question: Will EU leaders find a solution before or after a major European bank fails?
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