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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SUMMARY:
- Rather boring session is still constructive for more upside . . . if Europe comes through.
- Once again Europe gets things going upside, S&P tries to stall it, then more European news helps boost stocks again.
- Earnings outlooks continue to come in mixed as MMM meets, DRI misses.
- Christmas tree sales up but first week of December sees sales drop 2.6%.
- Leaders already moving laterally and consolidating the prior move while the indices are starting to do the same.
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The latest grand plan to save the Eurozone would have the 17 member states becoming an increasingly close knit family. Here’s my take on how the latest episode of “All in the Family” is likely to play out. And I’ll apologize in advance if you’ve seen this one before as this show has been in reruns for quite some time now.
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SUMMARY:
- Europe helps start a second week higher but Europe almost kills off the day’s rally as well.
- Italian austerity proposals spark no riots, heartening investors.
- Standard & Poor’s communication to the EU nations placing them all on negative watch gets leaked and the market gains leak as well.
- Online sales post a strong initial week.
- ISM Services miss but good enough to keep the expansion
- China Services PMI lower but as with the US, holds to the expansion.
- October Factory orders negative and September is revised to negative.
- Still bumping next resistance, but after a big move the past week a bit of testing is just fine.
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Of the time I commit each day to market analysis, the vast majority is spent attempting to identify and understand the drivers of the action on both a short- and longer-term basis. As I’ve said a time or twenty, if I can get a handle on “why” the market is doing what it is doing in the short-term, I shouldn’t get fooled by market moves over the long-term. And as anyone who has been around this game awhile will likely attest, avoiding big mistakes is really the key to longevity.
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One of the biggest keys to successful stock market investing is to understand your timeframe. In short, there are lots of ways to beat the market – but almost nothing works across all timeframes. Heck, my research shows that something as simple as a “golden cross” can be a very effective tool and will help you outperform the market over the long term. However, it is critical to recognize that strategies proven to be market beaters in the long term may make you look and feel like a fool in the short term. Thus, you’ve got to decide whether you are playing for the next 10 minutes, the day, week, month, quarter, year, or decade – and then understand what to expect from your system, strategy, and/or indicators.
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SUMMARY:
- Stocks initially rally on Europe, jobs report, but by session’s end the trade went flat.
- Jobs are slowly following the economic improvement higher.
- Jobs report appears better but more people left the workforce than found jobs.
- Near term the European bid is a positive, but some head and shoulders patterns are not pleasing for the upside longer term.
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SUMMARY:
- Some good news, some bad news, but stocks are just too tired to rally regardless.
- European bond auctions termed a success.
- China PMI contracts for the first time in three years.
- Jobless claims back over 400K.
- US PMI handily tops expectations.
- Same Store Sales good enough.
- The pattern this week is surge and rest. If the jobs report is pleasing Friday the market would be due another surge.
- Despite US improvement, Europe is still the gatekeeper.
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I was speaking with a colleague yesterday afternoon and was asked, “Are you doing anything differently in your portfolio systems these days about Europe? It seems that this thing could get solved soon. But, if they don’t get this mess straightened out in the near future, we may be in for big-time trouble.” The response that came out of my mouth was a combination of stuff I’d put in the “Duh” category and then, surprisingly, a rather concise and simple outlook. So, I thought I’d share.
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SUMMARY:
- A flailing Europe gets a first installment of aid as its banks receive a US-led lifeline.
- Stock markets that looked ready to roll over surge on the prospect of even more excess liquidity.
- China joins in as well, cutting reserve requirements for the first time in three years.
- ADP jobs report jumps over 200K.
- Chicago PMI surges back above 60.
- Easier swap and credit lines are likely just the first step in the new bailout, and that may keep the Wednesday bid under stocks.
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The good news is that the next EU Summit begins in just seven days. And this time, they tell us, they have a plan to fix the sovereign debt crisis once and for all. The bad news, of course, is that investors will have to play the waiting game for eight more days before anyone learns whether or not it is time to unleash the bazooka on those nasty bond vigilantes who keep driving up rates for the fine folks in Greece, Italy, Portugal, Spain, Ireland, etc.
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