After an historic run from what appeared to be the start of a bear market on October 4 (during which, the S&P has tacked on nearly 17% while the DJIA added 14.8% and the NASDAQ popped 17.1%) the natural question on this Halloween day is: Will the markets become frightful again anytime soon? Although a pullback to test the recent breakout area would be natural, many market participants are suggesting that the bulls will control the game from now until the end of the year.
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SUMMARY:
- To the flat line as market nurses its party hangover.
- Supposed reemergence of European worries blamed for stock stall.
- Spending posts a solid increase but incomes again stagnant.
- Michigan sentiment rides market bounce higher.
- Weak earnings outlooks versus strong outlooks: which is right?
- A breakout test likely a good buy thanks to seasonal trends and fund buying.
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SUMMARY:
- Once more a convergence of positives along with some technical issues jumps stocks higher.
- Done deal? EU appears to have a definitive agreement to solve a debt crisis with more debt.
- Q3 GDP at 2.5% tops expectations.
- Jobless claims remain just over 400K.
- Pending home sales fall for third month: everything appears better but the housing market.
- Recent market leaders are not the recent leaders.
- Indices are now above the next resistance with some room to run once more.
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One of the most interesting parts of this business is that the game is constantly changing. One minute it’s all about earnings and the next, well, it’s about the global economy, or Mother Nature’s fury, departed dictators, inflation, the Fed, oil, or even the debt levels of little countries in Europe. But that’s what keeps it fun, right?
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SUMMARY:
- Market remains just as volatile as last week, but again the buyers return, preserve the breakout, and drive stocks back up after an early decline.
- Durable goods orders solid ex-transportation.
- New home sales rise 5.7% in September thanks to prices hitting 12 month lows.
- What the heck is driving stocks?
- Now the breakout is tested we see if it can extend the move.
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To those who have grown accustomed to entering trades at light speed in reaction to the latest headline, there is a chance that the game may become a bit less exciting in the near future. Yes, it is true that the uber-fast money crowd did enjoy another round trip of up-one-minute, down-the-next action on Wednesday as there was a fair amount of trepidation in front of the EU’s much anticipated ‘comprehensive plan’ yesterday. But now that the details of the plan have started to trickle out and there doesn’t seem to be any major disappointments (other than the timing of the release of the details), it might be enough to put an end to the extreme volatility we’ve been treated to for that past three months. Well, maybe for a while, anyway.
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SUMMARY:
- Stocks were due a test at some point and decided to take it Tuesday and perhaps a bit more.
- Off again EU meeting casts doubts on the likelihood of the ‘real deal’ or a deal of substance.
- Earnings are very good and very disappointing.
- Case/Shiller up month over month again and slows its decline, but authors say it is all the same thing.
- Consumer Confidence reaches atrocious levels as retailers report great earnings and solid guidance.
- Richmond PMI logs another negative month.
- Indices testing the breakout in one move and now looking for a reason to resume the upside break. After hours earnings are bitter and sweet . .
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As we’ve discussed over the last week, I’m of the mind that despite the fact that earnings season is now running at full tilt and the economic data continues to come in on both sides of the fence, “the plan” is really all that matters right now. And yes, given that this market is stricken with a severe case of ADHD, there is a decent chance that traders will move on to something else within moments after EU leaders release the details of the Greek writedowns, the bank recapitalizations, and the makeup of the new and improved EFSF. But for now, it’s all about the plan.
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SUMMARY:
- Good news from many sources helps stocks continue their break.
- SP500, DJ30 hold their Friday resistance breaks, forcing shorts to cover some more.
- Success begets challenges as indices, fresh off the breakout, deal with next resistance.
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At lunchtime on October 4th, the general consensus was that Europe was doomed, the U.S. was heading back into recession, and China had sent its economy crashing through the windshield by slamming on the brakes too darned hard. To put it mildly, hope was in short supply. In all honesty, it felt like we were watching the global economy’s funeral procession pass by in slow motion. But just about the time everyone became convinced that we were on our way to another Great Recession, somebody somewhere called the whole thing off.
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The good news is that both the DJIA and the S&P 500 broke out of their respective trading ranges on Friday in convincing fashion. The bad news is that it may not mean much as ‘breakouts’ have tended to turn into ‘fakeouts’ on a regular basis in the current up-one-minute, down-the-next environment. And with the deadline fast approaching for the leaders of the EU to (a) come up with and (b) agree on the much-anticipated ‘comprehensive plan’ to fight the sovereign debt crisis, we will undoubtedly see more reactionary movements as each headline from across the pond hits the tape over the next three days.
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SUMMARY:
- After fighting off the negatives all week and holding the top of the range, SP500, DJ30 join NASDAQ with a breakout move.
- EU ‘intensified negotiations’ help fan a Friday rally.
- Earnings overall solid Friday, adding to the upside push.
- Dollar hits post-WWII low versus yen.
- Market defies the negatives and moves into the next range of resistance.
- Rally to a new high? Don’t expect it, but will take what the market is giving out.
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Good morning and welcome back to the guessing game. In case you’re a new contestant, this is a game in which investors of all shapes and sizes, professionals of varying experience levels, and a host of folks playing at home will place their bets and attempt to guess which way the markets will move in the next three minutes. Are we ready to play? Alrightythen… let’s get started!
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SUMMARY:
- This is Wednesday, market was up Tuesday, so it must be a down day as the indices cannot get away from the top of the range.
- Market performs decently until the news pendulum swings negative on Europe, US outlook.
- Oil imports fall to a 15 year low. And the economy is heating up?
- CPI doesn’t show the same heat as the PPI.
- Housing starts jump 15% but for the less impactful apartment market.
- A heck of a fight at the top of the range.
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A good bit of the rationale behind the stock market’s most recent run for the roses from the low of October 4th has been based on the idea that European leaders were finally going to get ahead of the curve and create a ‘comprehensive plan’ to deal with the debt crisis that now threatens the health of the global economy. However, that premise now appears to be in question as the clock continues to tick on deadline for the EU’s plan of attack.
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SUMMARY:
- News moves the market lower, news moves it back up. Next news is . . .
- EU wears on markets fearing a France downgrade, but then it bounces the markets on another story of a bailout deal.
- Rebound off early selling puts indices right back up to last week’s highs.
- PPI getting quite warm.
- Money poured into US assets during the most recent throes of the European crisis.
- Nice rebound has the indices still looking upside as more earnings are released: AAPL or INTC controls the Wednesday action?
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There was an abundance of stories for traders to focus on during Tuesday’s session. Let’s see; you had China’s GDP report showing that growth had slowed, some high profile earnings reports, Germany’s ZEW report that suggested a recession is on the way, the Moody’s warning that France’s credit rating may be at risk in the future, the hotter-than-expected PPI report, the NAHB Homebuilder report, and a host of headlines out of Europe relating to what leaders may or may not do before Sunday’s deadline.
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SUMMARY:
- Germany rains on the ‘dreams’ of a quick European solution, and that rained on the stock market rally.
- Indices were ready to test, get a reason to do so as they await more earnings.
- M&A tries to excite the market but bank earnings don’t help.
- NY PMI remains weak: Manufacturing still points to a weaker economy even as other economic reports bounce.
- Testing last week’s move: SP500 fade from top of range versus NASDAQ testing its breakout.
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Part of the problem with trying to interpret the technical movements of the market these days is everybody in the game looks at charts and even the most sophisticated technical indicators can be found free on the web. You want live quotes with fancy moving averages and a host of other indicators? No problem; click, click, click and you’ve got the chart in front of you. Thus, as with anything that becomes too popular, the value of many tried and true indicators has been lessened over the years and some indicators just don’t work at all anymore.
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It is safe to say that the bulls have been on a roll lately. A quick glance at my weekly charts shows that the DJIA put in its second best week of the year on a closing basis last week. In addition, over the past nine trading days, the DJIA has tacked on +9.3%, the S&P is up +11.4%, the NASDAQ has popped up +14.2%, and the S&P Smallcap index has soared over +16.3%. These returns are even more impressive if you start from the low point of October 4th, the day in which “the great save” began.
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SUMMARY:
- No quit in the rally as more fuel fuels more gains.
- SP500 that much closer to the top of its range as NASDAQ makes the break.
- September retail sales top expectations but remember, sales are based on prices and inflation is a factor in prices.
- Business inventories tick higher but they are not building as some say.
- Michigan Sentiment hits a 30 year low as income expectations hit all-time lows.
- Europe, China CPI’s are hot.
- The real leading indicators: Manufacturing led us out of the recession, gave the early indication of a new economic slowdown, and after it bounced and other indicators followed, it is now leading lower again.
- Stocks are driving higher into earnings. Now with the indices up two weeks and at the top of the range will earnings drive stocks higher from here?
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SUMMARY:
- Stocks start soft, continuing the Wednesday late decline, but NASDAQ leads back upside by the close.
- Jobless claims ‘fall’ thanks to revisions higher from the prior week.
- Mortgage defaults spike in Q3 after a steady decline.
- China exports rise a mere 17%.
- Shipping remains lethargic as KSS hiring 40K apparently not preceding a big order binge.
- Early earnings are disappointing, then comes GOOG.
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Although all the major indices remain in the red on the year, it is important to recognize that the stock market has spent the vast majority of 2011 moving sideways. Stocks came into 2011 riding the QE2 rally that quickly gave way to concerns about triple-tragedy in Japan, the unrest in the Middle East, Europe, etc. And while the markets did make a new high in April, the indices then worked sideways right up until August. And then following a lightning-fast dive of -18%, the markets have been moving sideways for the past two months. Thus, except for the early rally during Jan-Feb and the 11-day dance to the downside in late-July, 2011 has been a sideways affair.
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SUMMARY:
- Same stories push stocks higher for more than a week of gains as EU production rises and Slovakia manages to ‘pass the bill!’, though not the President’s.
- Another day, a little closer to the top of the range, then a late drop.
- FOMC sees ‘considerable uncertainty’ US growth will increase.
- China copper inventories greater than estimated. Cooper on a rebound but a rebound going nowhere.
- The indices are back to the top of the range, showing good momentum, apparently anticipating good economic results. Now we see if stocks remain range-bound or try a breakout.
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Although details of plans to finally come up with a solution are few and far between, it does appear that EU leaders are finally getting to the crux of the problem. In short, the powers-that-be look to be coming to grips with the idea that there WILL be defaults on sovereign debt and they will start in Greece. As such, leaders are no longer trying to figure out ways to keep Greece from defaulting and are instead busying themselves with the issue of how best to avert a banking crisis.
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SUMMARY:
- Market sluggish after big Monday upside, no new catalysts.
- SP500 taps 1200, NASDAQ ready to bump the top of the range.
- NFIB small business survey says confidence is up and some herald the ‘turnaround.’ It is up, but scraping off a 13 month low.
- Slovakia fails to approve the new EU bailout fund, but after changes are made it will pass.
- Alcoa lowered its guidance and still misses on earnings. While that may be normal for AA, there could be more real surprises ahead for the bulls.
- Stocks have run up to earnings, closing in on the top of the range. Will earnings provide the next reason to rally or reason to take the gain?
- Some say the bottom is now in and indeed there is room to rally further, but longer term patterns are not comforting.
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I’m of the opinion that there are two key points that are important to recognize about the current market. First, the volume relationship during the recent joyride to the upside has been exceptionally bad. Second, this market seems like it just wants to go higher due to the fact that all news is good news at the present time. And while both of these points can turn on a dime, both cause me to scratch my head a little.
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SUMMARY:
- Europe does not allow any rest for the market, and stocks post nice price gains yet again.
- France and Germany vow to support banking recapitalization and give themselves three weeks to come up with a solution.
- Sentiment indicators remain extreme as surging short interest shows.
- ‘No recession for US’ say the headlines. Oh I feel better.
- Indices head to the upper reaches of the range, driven by negative sentiment, not volume.
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The leaders of the Eurozone (meaning France’s Nicolas Sarkozy and Germany’s Angela Merkel) have spent a great deal of time recently talking about the idea of restoring confidence in the banks of the region, the Euro as a currency, and the powers-that-be of the EU. In my humble opinion, this is exactly what the announcement over the weekend by “Team Merkozy” was intended to do – restore confidence. And so far at least, the markets are buying it.
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SUMMARY:
- Jobs report revs up stocks . . . for a few minutes.
- Jobs report headline is better but the return of striking workers, rising overall unemployed, and the failure to keep up with population growth stall the stock advance.
- Stocks rally then give it back, but no collapse.
- Spending bill raises taxes but not just on those with million dollar annual salaries.
- Europe still a problem as Fitch cuts Spain and Italy.
- Consumer Credit falls the most in 16 months. Looking for a holiday season savior.
- Some solid leaders look spent as others, e.g. chips, try to step in and yet others form nice bottoms.
- Bullish advisors fall below 35%.
- Market in the in between zone: will it test and continue or roll?
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SUMMARY:
- ECB helps stocks rally for third session.
- No rate cuts on the Continent, but emergency loans, covered bonds, and perhaps some more liquidity measures to come. Whatever.
- Jobless claims back over 400K, barely.
- Same Store Sales clock in much stronger than expected. Better get those trucks warmed up to move the holiday, er, Christmas merchandise.
- President pushes his spending bill again, but is doing so under the same erroneous conclusion (and the same language) as his first much larger spending bill.
- Solyndra: Why government should not pick and choose who gets stimulus. If it has to stimulate, let the best rise to the top.
- Three days up into the jobs report. The bounce has momentum and we will see if it can sustain itself after the news, and before earnings.
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SUMMARY:
- Reversal rebound continues after a slow start.
- More European lethargy ignored as investors, for today, focus on what the EU MIGHT do about the debt crisis.
- ADP Jobs Survey doubles expectations
- Challenger Layoffs Index shows a 200% jump thanks to military layoffs.
- ISM Services hangs on above 50.
- Some say data shows there is no recession. Maybe not for everyone right NOW, but just wait.
- BAC takes flak for its $5 debit card fee: a textbook example of how taxes and regulatory costs are paid by consumers, not corporations.
- The bounce continues as it should given all of the extreme negatives, but be mindful of a stall nonetheless.
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It is often said that the stock market is driven by the emotions of fear, hope, and greed. Bear markets tend to begin when fear is prevalent and then accelerate as the bears get greedy. The market then bottoms when all those that wanted to sell shares have done so. The eventual lack of selling allows hope to develop that there may be brighter days ahead. This tends to convince those brave souls that still believe in value investing to enter the game. And then when the stock market becomes fun again, greed tends to take over to the upside. If you are envisioning a repeating sine wave in your head right about now, I’ve done my job.
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SUMMARY:
- This Tuesday the market got the additional downside and reversed.
- Same old stories and plenty of gloom send stocks down early.
- A gloomy Bernanke tells Congress the recovery is faltering and the Fed is ready to help if appropriate.
- Bernanke’s promise to add stimulus if needed hurt the dollar, just as he desires.
- Factory orders fall but business spending rises.
- New lows spike and then volume surges on the reversal.
- SP500 reverses, but NASDAQ, SP600 and even DJ30 look stronger for a continued bounce.
- A bounce looks likely, but with this economy it likely won’t be a game changer.
- Earnings are coming and could disappoint: a rally to the results and then a return to selling?
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With the game on the line and the clock winding down on a bruised and battered bull squad, the defensive unit was asked to get back out on the field and find some way to keep their ferocious counterparts from scoring yet again on Wednesday. To be sure, the bulls were tasked with a tough job. Their opponents appeared to have everything going for them on this day (there was Goldman’s cut in its global forecast, Dexia’s troubles, and the usual problems with Greece). The ball was in the red zone. And the seemingly better prepared bears were looking to put the game away with an arsenal of offensive weapons and a fresh set of downs.
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SUMMARY:
- Once again some modestly better US economic data cannot overcome all the other negatives, fails to help stocks.
- SP500, SP400, SP600, DJ20 Transports all undercut the August lows.
- Shrinking Greece economy means it will miss its deficit targets.
- German CDS rates soar as retail sales decline.
- US earnings to struggle as exports fall.
- Homes: no recovery until 2020.
- GS says recession risks are high and getting higher as ECRI says a recession is a done deal.
- Fed’s Fisher revises his growth calculations much lower.
- ISM rises, fighting off contraction, but it is still weak.
- With the undercut of the lows the question becomes a rebound that tests resistance and fails or a false breakdown that reverses for a rally.
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I don’t know about you, but I am growing weary of the non-stop comparisons of the current market to the 2008 edition. It seems that I can’t get through a single day without one guy or gal on T.V. assuring me in an unequivocal tone that “this is 2008 revisited” while the next so-called expert says (in an equally overconfident manner) that the market is “nothing like 2008.” So I ask you, what is the deal with the fixation on the 2008/09 debacle? Does anyone out there really think that a market event will repeat itself?
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SUMMARY:
- Market closes out quarter still unable to hold gains, but still . . . in the trading range.
- Economy in a modest data bounce with Chicago PMI the latest.
- Income and spending fade with incomes showing negative returns.
- Sentiment very negative: CNBC commentator says has not seen sentiment this bad in his memory.
- Obama’s Jimmy Carter ‘malaise’ moment? Says the US has ‘gotten a little soft.’
- At the bottom of the range to start the fourth quarter. Time to bounce? Into earnings?
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With a sea of red ink in the global stock markets this morning and the U.S. indices flirting with the lows of the now 7-week old trading range, there are several key questions facing investors. First and foremost is whether or not we’ve got a bear market on our hands. Next up is the question of if the current decline has sufficiently discounted a recession. And finally, after a miserable September, what can we look forward to for October and the fourth quarter?
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