Just as I expected the stock market is back knocking on the door to new highs. My expectation was for the Fed to do nothing. The ECB I really had no idea. But I was looking for a couple of days of mild selling following the Fed statement and then a resumption of the intermediate trend.
I said last week when the bears started calling for a new bear market that it was too early in the daily cycle for stocks to top.
Mark another victory for cycles :)
3 Ağustos 2012 Cuma
2 Ağustos 2012 Perşembe
ECB Offers No New Solutions, Reiterates Commitment
The markets are mixed in early trading, and it has been a wild ride already. In case you weren't watching the pre-markets let me tell you what happened. I woke up at 5:30 to watch the ECB announcement. Immediately after the ECB press release the Dow futures spike +100 points. But as more comments came out and Draghi began to speak, they quickly reversed and pretty soon were in negative territory. When I got to the office and the market opened, the Dow was down a pretty quick 100 points. That's a 200 point reversal from the pre-market highs.
And an equally big reversal happened in Europe. Europe's markets were higher ahead of the ECB announcement, but quickly moved to losses when investors didn't hear any big new policy announcements from the ECB. Spain has moved to a -2.7% loss on the day and Italy is down -3.0% as those markets head into the close.
So what was the big disappointment? First off, remember we have been saying that the market has been rallying on hopes of some new monetary easing from both the Fed and the ECB and that it was likely we could see a 'buy the rumor - sell the news' type reaction after the central bank announcements. Yesterday the Fed gave little new information and mostly reiterated its recent stance that has already been communicated to investors.
This morning the ECB mostly followed suit. The ECB kept interest rates unchanged at 0.75% and didn't offer any really new policy measures. He reiterated that countries need to go to the EFSF for assistance before the ECB can step in to help, but that once countries have done that the ECB could buy sovereign bonds directly in the market. He said they will look at non-conventional measures, but also didn't give any encouragement about the ESM getting a banking license anytime soon. He also said that the euro is "irreversible", so that talk about a breakup is misguided. (But that is what we would expect him to say)
The euro is also lower following the ECB news and the dollar index is higher. That is pressuring most commodities. Oil prices are under $88 and gold prices have broken back below $1600. Silver and copper prices are also lower.
Stocks rising on earnings: K, OMX, FSLR, GMCR, YELP, TWC
Stocks falling on earnings: ANF, UPL, PH
The 10-year yield is lower to 1.47%, failing to hold above the 1.50% level. And despite the early losses, the VIX is lower again to 18.15 (-4.2%).
Trading comment: The markets are down for a 4th straight day so far, but there are signs of encouragement. Lots of growth stocks on my screen are green, and the Nasdaq has pulled into positive territory as of this post. Tomorrow is the big monthly jobs report, which always has elevated volatility surrounding it. I'm not expecting a strong jobs number, but I don't think most people are. The ADP report was stronger than expected this week, but it isn't always the best leading indicator. In a nutshell, while I could see a short-term oversold bounce at any time, I think the lack of new initiatives by the Fed and the ECB will likely take the steam out of the sail of the markets that have been rallying in anticipation of hope. So I want to remain conservatively positioned for now.
And an equally big reversal happened in Europe. Europe's markets were higher ahead of the ECB announcement, but quickly moved to losses when investors didn't hear any big new policy announcements from the ECB. Spain has moved to a -2.7% loss on the day and Italy is down -3.0% as those markets head into the close.
So what was the big disappointment? First off, remember we have been saying that the market has been rallying on hopes of some new monetary easing from both the Fed and the ECB and that it was likely we could see a 'buy the rumor - sell the news' type reaction after the central bank announcements. Yesterday the Fed gave little new information and mostly reiterated its recent stance that has already been communicated to investors.
This morning the ECB mostly followed suit. The ECB kept interest rates unchanged at 0.75% and didn't offer any really new policy measures. He reiterated that countries need to go to the EFSF for assistance before the ECB can step in to help, but that once countries have done that the ECB could buy sovereign bonds directly in the market. He said they will look at non-conventional measures, but also didn't give any encouragement about the ESM getting a banking license anytime soon. He also said that the euro is "irreversible", so that talk about a breakup is misguided. (But that is what we would expect him to say)
The euro is also lower following the ECB news and the dollar index is higher. That is pressuring most commodities. Oil prices are under $88 and gold prices have broken back below $1600. Silver and copper prices are also lower.
Stocks rising on earnings: K, OMX, FSLR, GMCR, YELP, TWC
Stocks falling on earnings: ANF, UPL, PH
The 10-year yield is lower to 1.47%, failing to hold above the 1.50% level. And despite the early losses, the VIX is lower again to 18.15 (-4.2%).
Trading comment: The markets are down for a 4th straight day so far, but there are signs of encouragement. Lots of growth stocks on my screen are green, and the Nasdaq has pulled into positive territory as of this post. Tomorrow is the big monthly jobs report, which always has elevated volatility surrounding it. I'm not expecting a strong jobs number, but I don't think most people are. The ADP report was stronger than expected this week, but it isn't always the best leading indicator. In a nutshell, while I could see a short-term oversold bounce at any time, I think the lack of new initiatives by the Fed and the ECB will likely take the steam out of the sail of the markets that have been rallying in anticipation of hope. So I want to remain conservatively positioned for now.
1 Ağustos 2012 Çarşamba
Manufacturing Surveys Show Slowing Economies
The markets are slightly higher this morning on a better than expected ADP report and ahead of the FOMC announcement later. The ADP employment report showed the private sector added 163,000 jobs in July, which is well above the 125k consensus expectations.
As for the July ISM Manufacturing index, it came in at 49.8 which is little changed from last month's 49.7 reading. This is the second month in a row of a sub-50 reading which is the line of demarcation between expansion and contraction.
Speaking of manufacturing readings, the PMI figures in Europe are mostly lower as well. The eurozone's PMI is at 44.0, the UK fell to 45.4, Germany was lowered to 43.0, and France was revised down to 43.4. So growth remains slow in Europe as these PMI readings point to further contraction.
Asian markets were mixed overnight. China's official PMI reading was in-line at 50.1 in July, but the HSBC private estimate came in at 49.3, up from 48.2 in June. This and the expectation that China will provide more stimulus to their economy helped Shanghai rally overnight.
Stocks rising on earnings: ALL, SIMG, PZZA, CMCSA, GRMN, AGN, SSYS, CTRX
Stocks falling on earnings: MA, ENR, HOG, ICE
The 10-year yield is bouncing back above the 1.50% level. And the VIX is slightly lower to 18.67.
The dollar index is roughly flat, and commodities are mixed. Oil prices are higher to $88.85 while gold prices are lower near $1601. Silver and copper prices are lower also.
Trading comment: I doubt that the Fed announces any new QE measures today. I think it is more likely that they repeat the mantra that they stand ready to act. And if the data continues to weaken, then maybe they take action in September. But I would prefer to see them keep some powder dry for if the economy really hits the wall around 'fiscal cliff' time. The bigger market moving news could be the ECB meeting this week. They need to announce some new measures or risk another spike in peripheral bond yields in Spain and Italy.
KAM Advisors has long positions in CTRX
As for the July ISM Manufacturing index, it came in at 49.8 which is little changed from last month's 49.7 reading. This is the second month in a row of a sub-50 reading which is the line of demarcation between expansion and contraction.
Speaking of manufacturing readings, the PMI figures in Europe are mostly lower as well. The eurozone's PMI is at 44.0, the UK fell to 45.4, Germany was lowered to 43.0, and France was revised down to 43.4. So growth remains slow in Europe as these PMI readings point to further contraction.
Asian markets were mixed overnight. China's official PMI reading was in-line at 50.1 in July, but the HSBC private estimate came in at 49.3, up from 48.2 in June. This and the expectation that China will provide more stimulus to their economy helped Shanghai rally overnight.
Stocks rising on earnings: ALL, SIMG, PZZA, CMCSA, GRMN, AGN, SSYS, CTRX
Stocks falling on earnings: MA, ENR, HOG, ICE
The 10-year yield is bouncing back above the 1.50% level. And the VIX is slightly lower to 18.67.
The dollar index is roughly flat, and commodities are mixed. Oil prices are higher to $88.85 while gold prices are lower near $1601. Silver and copper prices are lower also.
Trading comment: I doubt that the Fed announces any new QE measures today. I think it is more likely that they repeat the mantra that they stand ready to act. And if the data continues to weaken, then maybe they take action in September. But I would prefer to see them keep some powder dry for if the economy really hits the wall around 'fiscal cliff' time. The bigger market moving news could be the ECB meeting this week. They need to announce some new measures or risk another spike in peripheral bond yields in Spain and Italy.
KAM Advisors has long positions in CTRX
31 Temmuz 2012 Salı
Germany Pours Cold Water On ESM
The markets are mixed in early trading, with the Nasdaq up a little and the S&P a tad lower. Overnight action in Asia was mixed despite reports coming out that the Chinese authorities are considering further monetary easing as inflation cools.
In Europe, the euro got a boost from French President Hollande defending the euro. However subsequent reports indicated that the Bundesbank poured cold water on some of the ideas such as the ESM getting a bank license and said that monetary policy should focus on price stability.
German retail sales grew +2.9%, while Spanish retail sales contracted by -5.2%. Eurozone unemployment remained at 11.2%.
In US economic news, consumer confidence rose to 65.9 vs. 62.7 last month. And the Chicago PMI also rose to 53.7 vs. 52.9 last month.
Stocks rising on earnings: IPGP, CRUS, PFE, LQDT, CRS, AMG, X, VLO, CMI
Stocks falling on earnings: STX, BP, COH, ADM, ALLT, ECL
The 10-year yield is back down below the 1.50% level to 1.47%. And the VIX is slightly higher to 18.35.
Trading comment: This is a tough juncture here ahead of both the Fed and the ECB meetings this week. The market is already anticipating either more quantitative easing or some measures by the ECB to address the debt issues with Spain, Greece, etc. That sets up the market for some potential disappointment, or at least a sell on the news reaction. As such, we are maintaining our defensive posture in portfolios at this juncture.
In Europe, the euro got a boost from French President Hollande defending the euro. However subsequent reports indicated that the Bundesbank poured cold water on some of the ideas such as the ESM getting a bank license and said that monetary policy should focus on price stability.
German retail sales grew +2.9%, while Spanish retail sales contracted by -5.2%. Eurozone unemployment remained at 11.2%.
In US economic news, consumer confidence rose to 65.9 vs. 62.7 last month. And the Chicago PMI also rose to 53.7 vs. 52.9 last month.
Stocks rising on earnings: IPGP, CRUS, PFE, LQDT, CRS, AMG, X, VLO, CMI
Stocks falling on earnings: STX, BP, COH, ADM, ALLT, ECL
The 10-year yield is back down below the 1.50% level to 1.47%. And the VIX is slightly higher to 18.35.
Trading comment: This is a tough juncture here ahead of both the Fed and the ECB meetings this week. The market is already anticipating either more quantitative easing or some measures by the ECB to address the debt issues with Spain, Greece, etc. That sets up the market for some potential disappointment, or at least a sell on the news reaction. As such, we are maintaining our defensive posture in portfolios at this juncture.
30 Temmuz 2012 Pazartesi
Monday Morning Musings
The markets are trading slightly higher in early trading following last week's nice gains. The S&P 500 finished 1.7% higher last week for its third straight weekly gain. Equity markets are obviously pricing in the possibility of further central bank action ahead of this week's meetings at the Fed, the ECB, and the Bank of England.
Asian markets were mostly higher overnight, but China was lower for a 4th straight session and the Shanghai Composite is now at its lowest levels since March 2009. That's not a very good sign for the China bulls.
Europe was also higher this morning led by Spain and Italy, which would be the two biggest beneficiaries of any actions taken by the ECB.
In corporate news, Shaw Group (SHAW) is some 70% higher after CBI said it will buy the company for $46. Best Buy (BBY) is also higher after reports suggesting that the company's founder Richard Schulze will try to take the company private.
Stocks rising on earnings: BEN, HBC, CALM, CIT
Stocks falling on earnings: MCY, DBD, L, LUFK
The dollar index is higher today, but commodities are mostly higher. Oil prices are flat near $90, while gold is up a bit to $1618 and silver is up nicely. Corn futures rose to a new all-time high overnight as drought conditions continue to plague farmers.
The 10-year yield is easing back to 1.50% after a late week spike higher last week. And the volatility index (VIX) is 7.6% higher so far today back to the 18.0 level.
Trading comment: All of the major indexes are back above their 50-day averages with the S&P 500 at its highest levels since May. If the Fed or the ECB announces some form of further quantitative easing this week, it could boost stock prices more. For the Fed, I still think they are going to want to keep some powder dry and that they will likely reiterate that they "stand ready" to take steps if the economy continues to falter. For the ECB, they seem to be closer to doing something big, but I'm not sure they have Germany on board yet which is a critical factor. As such, if they just try to talk up a good game without any new policy measures it would not be surprising to see a buy the rumor sell the news type reaction with stocks pulling back later this week. We shall see.
Asian markets were mostly higher overnight, but China was lower for a 4th straight session and the Shanghai Composite is now at its lowest levels since March 2009. That's not a very good sign for the China bulls.
Europe was also higher this morning led by Spain and Italy, which would be the two biggest beneficiaries of any actions taken by the ECB.
In corporate news, Shaw Group (SHAW) is some 70% higher after CBI said it will buy the company for $46. Best Buy (BBY) is also higher after reports suggesting that the company's founder Richard Schulze will try to take the company private.
Stocks rising on earnings: BEN, HBC, CALM, CIT
Stocks falling on earnings: MCY, DBD, L, LUFK
The dollar index is higher today, but commodities are mostly higher. Oil prices are flat near $90, while gold is up a bit to $1618 and silver is up nicely. Corn futures rose to a new all-time high overnight as drought conditions continue to plague farmers.
The 10-year yield is easing back to 1.50% after a late week spike higher last week. And the volatility index (VIX) is 7.6% higher so far today back to the 18.0 level.
Trading comment: All of the major indexes are back above their 50-day averages with the S&P 500 at its highest levels since May. If the Fed or the ECB announces some form of further quantitative easing this week, it could boost stock prices more. For the Fed, I still think they are going to want to keep some powder dry and that they will likely reiterate that they "stand ready" to take steps if the economy continues to falter. For the ECB, they seem to be closer to doing something big, but I'm not sure they have Germany on board yet which is a critical factor. As such, if they just try to talk up a good game without any new policy measures it would not be surprising to see a buy the rumor sell the news type reaction with stocks pulling back later this week. We shall see.
27 Temmuz 2012 Cuma
Anticipating ECB Liquidity
The markets are higher again in early trading. Asian markets rose overnight following the rally in the U.S. yesterday and the comments from ECB President Draghi about doing whatever is necessary to save the euro. Some of that sentiment has been echoed in France by Hollande this morning.
Moreover, the French paper Le Monde wrote about the possibility of an asset purchase program by the ECB that would involve open market purchases of govt bonds in Italy and Spain. The goal would be to reduce their borrowing costs, but again this would just be a short-term solution and only prolongs the day of reckoning as these countries need to deal with debt levels, deficits, and slowing growth.
In economic news, the advance GDP reading for U.S. GDP for Q2 came in at +1.5%, which was better than the 1.2% that had been expected. But 1.5% is still a low growth rate for the economy.
Also, the Univ. of Mich consumer sentiment survey's final reading was adjusted slightly higher to 72.3 from 72.0 previously.
In earnings news, it has been another mixed back of reports with some high profile names taking it on the chin today. Starbucks (SBUX) and Facebook (FB) are the two biggest disappointments today, with both of their stocks down double digits this morning.
Stocks rising on earnings: AMZN, EXPE, MRK, AMGN, EDR, GILD, N, VSI, HMSY
Stocks falling on earnings: FB, SBUX, CSTR, NTGR, QLGC, NEM
The euro is bouncing for a third day, pushing the dollar lower. Commodities are also higher again with oil prices near $90 and gold prices up to $1618. Copper prices are also higher, while silver looks flat.
The 10-year yield is finally seeing a bounce. I'm not sure why 1.5% GDP is the spark, but the yield is rising above the 1.50% level today to 1.51% currently. This is still a pretty low absolute level, but at least we've bounced from the 1.40% floor the 10-yr had been sitting at.
As for the VIX, it is down another -4% today to around 16.80. I think the VIX can hang around these low levels while market participants are anticipating more QE from the Fed and the ECB. But I also believe the VIX will get back above 20 if we get an August pullback.
Trading comment: Color me surprised by all the strength in the market, but I think folks are bidding up stocks given all the chatter about more QE from the Fed and now the ECB talking about it also. Earnings season has been mostly a mixed back from where I sit. I don't think we are going to see estimates for the S&P 500 revised higher. And we know from past central bank interventions that it has the effect of boosting the market for a brief time, but eventually reality sets in and we are back to dealing with the underlying problems. So enjoy the lift, and take advantage of it if you are nimble. But long-term investors with a big picture focus don't need to chase here, imo. If the market continues higher, I would look to trim equity exposure a little more and stay conservative as we head into fall.
KAM Advisors has long positions in FB, SBUX, EDR
Moreover, the French paper Le Monde wrote about the possibility of an asset purchase program by the ECB that would involve open market purchases of govt bonds in Italy and Spain. The goal would be to reduce their borrowing costs, but again this would just be a short-term solution and only prolongs the day of reckoning as these countries need to deal with debt levels, deficits, and slowing growth.
In economic news, the advance GDP reading for U.S. GDP for Q2 came in at +1.5%, which was better than the 1.2% that had been expected. But 1.5% is still a low growth rate for the economy.
Also, the Univ. of Mich consumer sentiment survey's final reading was adjusted slightly higher to 72.3 from 72.0 previously.
In earnings news, it has been another mixed back of reports with some high profile names taking it on the chin today. Starbucks (SBUX) and Facebook (FB) are the two biggest disappointments today, with both of their stocks down double digits this morning.
Stocks rising on earnings: AMZN, EXPE, MRK, AMGN, EDR, GILD, N, VSI, HMSY
Stocks falling on earnings: FB, SBUX, CSTR, NTGR, QLGC, NEM
The euro is bouncing for a third day, pushing the dollar lower. Commodities are also higher again with oil prices near $90 and gold prices up to $1618. Copper prices are also higher, while silver looks flat.
The 10-year yield is finally seeing a bounce. I'm not sure why 1.5% GDP is the spark, but the yield is rising above the 1.50% level today to 1.51% currently. This is still a pretty low absolute level, but at least we've bounced from the 1.40% floor the 10-yr had been sitting at.
As for the VIX, it is down another -4% today to around 16.80. I think the VIX can hang around these low levels while market participants are anticipating more QE from the Fed and the ECB. But I also believe the VIX will get back above 20 if we get an August pullback.
Trading comment: Color me surprised by all the strength in the market, but I think folks are bidding up stocks given all the chatter about more QE from the Fed and now the ECB talking about it also. Earnings season has been mostly a mixed back from where I sit. I don't think we are going to see estimates for the S&P 500 revised higher. And we know from past central bank interventions that it has the effect of boosting the market for a brief time, but eventually reality sets in and we are back to dealing with the underlying problems. So enjoy the lift, and take advantage of it if you are nimble. But long-term investors with a big picture focus don't need to chase here, imo. If the market continues higher, I would look to trim equity exposure a little more and stay conservative as we head into fall.
KAM Advisors has long positions in FB, SBUX, EDR
26 Temmuz 2012 Perşembe
Draghi Gooses The Market
Asian markets were higher overnight, but trading was lackluster in Europe this morning before ECB President Draghi made heroic comments that really boosted the market. Draghi was quoted as saying the ECB "is ready to do whatever it takes to preserve the euro" and that sharing national sovereignty is still to come.
Those comments caused a sharp rally across global markets. The euro also got a big boost, as did commodities. Gold prices rallied to $1615, oil prices are higher near $89.85, and silver and copper prices are higher as well.
It is unclear what measures Draghi can come up with at this point, and the big issue is going to be how to get Germany to go along with many of the solutions that they have been opposed to. So it will be interesting to see how long his comments soothe the markets for. Some are also speculating that maybe the ECB will do some quantitative easing of its own, but in the long-run its hard to solve debt problems with more debt.
In economic news, durable goods orders rose 1.6%, boosted by aircraft demand. Ex-transportation durable goods fell -1.1%.
Earnings reports continue to come in fast and furious. This morning I am seeing more stocks rising on earnings than falling, but a few in-line earnings reports have been met with some outsized selling.
Stocks rising on earnings: ACOM, CAKE, TSCO, MMM, NOV, NEE, SHOO, UTX, S, WFM, XOM, V
Stocks falling on earnings: SRCL, GNC, POT, ZMH
The 10-year yield is also getting a small boost, up to 1.43%. The 1.40% level has held so far this week and I would like to see the 10-yr yield bounce higher. Call me old school, but these low levels don't incite much confidence in the outlook for the economy.
As for the VIX, it is down more than 5% this morning to around 18.25.
Trading comment: This feels like an oversold rally to me. The SPX would have to get above last week's 1380 highs for us to talk about the market rallying back to its old highs. I have said that I think markets will be choppy in the near-term, and today's rally fits that bill. The markets had been down pretty sharply over the last 3-4 days so they were ripe for a snapback. Let's see if the market can build on these gains over the next few days. The SPX held its test of its 50-day support this week. If that key support gives way in the near-term folks will be talking about retesting the June lows. Tough environment = stay defensive.
KAM Advisors has long positions in NEE, SRCL, V
Those comments caused a sharp rally across global markets. The euro also got a big boost, as did commodities. Gold prices rallied to $1615, oil prices are higher near $89.85, and silver and copper prices are higher as well.
It is unclear what measures Draghi can come up with at this point, and the big issue is going to be how to get Germany to go along with many of the solutions that they have been opposed to. So it will be interesting to see how long his comments soothe the markets for. Some are also speculating that maybe the ECB will do some quantitative easing of its own, but in the long-run its hard to solve debt problems with more debt.
In economic news, durable goods orders rose 1.6%, boosted by aircraft demand. Ex-transportation durable goods fell -1.1%.
Earnings reports continue to come in fast and furious. This morning I am seeing more stocks rising on earnings than falling, but a few in-line earnings reports have been met with some outsized selling.
Stocks rising on earnings: ACOM, CAKE, TSCO, MMM, NOV, NEE, SHOO, UTX, S, WFM, XOM, V
Stocks falling on earnings: SRCL, GNC, POT, ZMH
The 10-year yield is also getting a small boost, up to 1.43%. The 1.40% level has held so far this week and I would like to see the 10-yr yield bounce higher. Call me old school, but these low levels don't incite much confidence in the outlook for the economy.
As for the VIX, it is down more than 5% this morning to around 18.25.
Trading comment: This feels like an oversold rally to me. The SPX would have to get above last week's 1380 highs for us to talk about the market rallying back to its old highs. I have said that I think markets will be choppy in the near-term, and today's rally fits that bill. The markets had been down pretty sharply over the last 3-4 days so they were ripe for a snapback. Let's see if the market can build on these gains over the next few days. The SPX held its test of its 50-day support this week. If that key support gives way in the near-term folks will be talking about retesting the June lows. Tough environment = stay defensive.
KAM Advisors has long positions in NEE, SRCL, V
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