Stocks Give up an Early Move

SUMMARY:
- Stocks give up an early move, but then recover to flat once again, preserving SP500′s best January in 14 years.
- Europe working on it, but there are the strong and the weak.
- US data continues on its recent weakening kick.
- Case/Shiller continues to fade.
- Chicago PMI still solid but misses expectations
- Consumer Confidence wanes, misses expectations by a significant margin.
- SP500, SP600 still have room to the upside, but still not expecting a breakout from this move.
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The Real Problem with the Current Bernanke Plan

I wrote last week that, in my humble opinion, the Fed’s intention to keep rates at “exceptionally low levels” for a length of time that surprised just about everyone, was aimed primarily at helping to build confidence in the American economy. Bernanke appears to have learned that when consumers are confident, they buy more stuff. And when more stuff gets bought, companies tend to hire more people. And when companies hire more people, everybody is happy.
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Stocks Sell but Again Come Back From the Lows

SUMMARY:
- Europe rears up, US spending trails off. Stocks sell but again come back from the lows.
- Portugal debt instruments not looking healthy, Greece-like debt restructuring attempt likely.
- US December spending data corroborates Friday GDP report
- Market taking a pause, sporting good intraday action, but no need to get in a hurry.
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Identifying Drivers of the Market Action

Investors dressed in fur these days have likely been both surprised and dismayed by the S&P 500′s recent 6-week joyride to the upside. For those keeping score at home, the venerable stock market index has now finished higher in 7 of the last 9 weeks. Since the most recent uptrend began on December 20th, the S&P 500 is up 9.2%. And since the crisis low of October 3rd, the market is up an impressive +19.75% as of Friday’s close. Not bad for a market where the sky was supposed to be falling!
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Dollar Struggles, Bonds Rally on Fed Action, Economic Data

SUMMARY:
- GDP tries to stymie the rally, but stocks recover in the afternoon.
- Still bumping the highs, still not breaking through.
- GDP at 2.8% is inflated by inventories adding almost 2 points to the total. This is recovery? Anyone could get this result by flooding the economy with dollars.
- GDP internals tell why Bernanke downplayed the economy Wednesday.
- Consumer Sentiment continues to improve thank goodness.
- Dollar struggles (where is the strong dollar mantra?), bonds rally on Fed action, economic data.
- Leaders rallied Friday but the market is not done selling as tops, even for near term tests, take a bit of time to form.
- Can make money but now our game plan has to change with the indices at the prior highs.
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Sentiment Indicators are a Bit Out of Whack

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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A Great Start but Market Cannot Hold the Gain

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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Fed Keeping Confidence Moving Higher

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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Stocks Continue to Rebound

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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Investors and Traders Wait on AAPL

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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Stocks are Now Overbought and Bumping into Resistance

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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Remember, the Market Looks Forward, Not Back

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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GOOG has its Impact but Stocks Performed Decently

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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Big Upside Open Cannot Hold to the Close

U.S. Stocks Advance While the Euro Falls

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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Stocks Sell But Once Again They Recover

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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Market Fights to Hold Gains

2012 Continues a Similar Pattern

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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Upside Move Remains Slow Going

What Do The Cycles Say?

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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Another Important Break

Is There a New Market Trend?

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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Creeping Upside, Still Sluggish

Waiting and Wondering What the Market Will Do Next

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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What Happened to Earnings and Valuation?

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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Stocks Unable to Build Upon the Start of the Year Rally

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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Buyers Enter on the Dips

Good and Bad Market Data Battling It Out

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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A Pause After the Initial Surge

Taking the Market One Day at a Time

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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Stating the Bulls Case

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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2012 Will Be About Being Flexible

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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