Yesterday the market was rallying on perceptions that progress was being made on the fiscal cliff. Then Harry Reid came on tv and said the sides are still far apart. That caused a market swoon right away. This morning the markets opened very weak but then Boehner spoke with more comments about being flexible on tax rates and the market rallied a quick 100 points.
That is a huge amount of volatility on just political rhetoric. But I don't think it is going away in the short-term. I expect a lot more back and forth and political posturing that will continue to sway market sentiment in short bursts. But we have yet to see any concrete progress other than words.
My guess is as time goes on the swings in the market will be less pronounced, but it does seem like we are going to continue to see the market rally on fiscal cliff hopes and decline on worries that nothing will actually get done before the deadline. I am on record as saying that I think the best case will be a couple of items get addressed before 12/31 but the majority of the Bush tax cuts simply get extended until 2013 to kick the can down the road and give Congress more time.
Asian markets were lower overnight on concerns about US fiscal cliff. China fell to a 46-month low. A Japanese PM candidate suggested the country should employ unlimited money printing. But at least someone is Asia is seeing a pickup in economic growth-- the Philippines saw Q3 GDP surge +7.1%, above estimates.
Europes markets are also lower this morning. Spanish retail sales fell -9.7%. And Eurozone private loans decreased 0.7%.
In corporate news, Costco (COST) is higher after reporting good same-store sales and declaring a special cash dividend of $7.00. Analysts expect more companies with excess cash on their balance sheets to also declare special dividends.
Commodities are taking it on the chin today. Gold prices fell close to the $1700 level and have started to bounce a bit. And oil prices fell below the $86 level before but are also off their earlier lows. Copper and silver prices are lower as well.
Trading comment: We mentioned the SPX in neutral territory between its key 50-day and 200-day averages. This morning's selloff took the SPX down within 1 point of its 200-day support-- which is close enough for govt work. Right on cue, buyers stepped in and the market began to bounce (aided by Boehner's comments). But it supports the notion we laid out earlier this week that the 200-day could come into play if the market pulled back. It's hard to forecast market direction short-term when so much sentiment is being swayed by political commentary, but that is the reality of things for the next few weeks.
28 Kasım 2012 Çarşamba
27 Kasım 2012 Salı
Do Stocks Have More Gas Left In The Tank?
The market is mixed to lower in early trading, with the first early dip attracting buyers. Yesterday the S&P 500 was down as much as 12 points but rallied back late in the day to close down only 3 points. That's not too much of a give back following the outsized gains from Thanksgiving week. The question is do stocks have any gas left in the tank?
If the market was in a more bearish mode, we would have seen a bigger pullback already from last week's gains. But the action so far looks more like consolidation. If this can continue then it would normally point to another push to the upside for stocks. Stay tuned.
In economic news, the latest consumer confidence reading for November came in at 73.7, up from 72.2 last month. The Housing Price Index for September increased 1.1%. And the Case-Shiller home price index rose by 3.0%. Also, durable goods were unchanged for October, but rose +1.5% ex-transportation. Both of these were better than expected.
In corporate news, ConAgra (CAG) will acquire Ralcorp (RAH) for $90 per share, a 28% premium to yesterday's closing price.
Asian markets were mostly higher overnight on new out of Europe. But China failed to rally and fell -1.3% below the 2000 level for the Shanghai Index. That marks the lowest levels seen in that index since January 2009.
Europe's markets are higher this morning after the EU and IMF were able to agree on Greece. Greece will receive 34.4 billion euros in December, and its debt-to-gdp is targeted to fall to 120% by 2020.
Commodities are mostly lower as the dollar index gains for a second day. Oil prices have eased back to $87.16 and gold prices are lower near $1744. Copper and silver prices are lower also.
The 10-year yield is lower to 1.65%. And the volatility index remains below its 50-day average near the 15.25 level.
Trading comment: The S&P 500 is still kind of in neutral territory between its 50-day and 200-day averages. The more sideways consolidation it can muster the greater the likelihood of another push to the upside. But for our balanced accounts we would be looking to trim equity exposures a bit more on a push towards the SPX 1420 level. We still think that the uncertainty surrounding fiscal cliff progress coupled with a slowdown in economic growth and corporate profits is likely to weigh on stocks in the intermediate-term and want to reflect this concern in our asset allocations.
If the market was in a more bearish mode, we would have seen a bigger pullback already from last week's gains. But the action so far looks more like consolidation. If this can continue then it would normally point to another push to the upside for stocks. Stay tuned.
In economic news, the latest consumer confidence reading for November came in at 73.7, up from 72.2 last month. The Housing Price Index for September increased 1.1%. And the Case-Shiller home price index rose by 3.0%. Also, durable goods were unchanged for October, but rose +1.5% ex-transportation. Both of these were better than expected.
In corporate news, ConAgra (CAG) will acquire Ralcorp (RAH) for $90 per share, a 28% premium to yesterday's closing price.
Asian markets were mostly higher overnight on new out of Europe. But China failed to rally and fell -1.3% below the 2000 level for the Shanghai Index. That marks the lowest levels seen in that index since January 2009.
Europe's markets are higher this morning after the EU and IMF were able to agree on Greece. Greece will receive 34.4 billion euros in December, and its debt-to-gdp is targeted to fall to 120% by 2020.
Commodities are mostly lower as the dollar index gains for a second day. Oil prices have eased back to $87.16 and gold prices are lower near $1744. Copper and silver prices are lower also.
The 10-year yield is lower to 1.65%. And the volatility index remains below its 50-day average near the 15.25 level.
Trading comment: The S&P 500 is still kind of in neutral territory between its 50-day and 200-day averages. The more sideways consolidation it can muster the greater the likelihood of another push to the upside. But for our balanced accounts we would be looking to trim equity exposures a bit more on a push towards the SPX 1420 level. We still think that the uncertainty surrounding fiscal cliff progress coupled with a slowdown in economic growth and corporate profits is likely to weigh on stocks in the intermediate-term and want to reflect this concern in our asset allocations.
26 Kasım 2012 Pazartesi
Monday Morning Musings
After one of the best weeks for the market last week, stocks are pulling back in early trade this morning. The market had become quite oversold coming into last week, so a bounce was not unexpected. But now that we have seen a big bouce, we will have to see if more profit taking sets in or if buyers will look to add more stocks into month end which occurs this week.
There is not much market moving economic news this morning. In corporate news, AAPL is bouncing after a Citi upgrade and a $675 price target. Facebook (FB) is also spiking +8% after receiving a pair of upgrades and bullish comments about its upcoming quarter.
On the downside, DreamWorks (DWA) is down -5% after "Rise of the Guardians" disappointed with $32.4 million in box office sales this weekend. That's too bad. I took my kids to see it yesteday and we all liked it.
Retail stocks are mostly lower this weekend on mixed sentiment over Black Friday sales. Utilities are bucking the early weakness and boucing after the drubbing the sector has experienced since Superstorm Sandy.
Asian markets were mixed to lower overnight as traders remained cautious ahead of another EU finance ministers meeting in Brussels today. Morgan Stanley put a note out that it expects China's GDP to grow 8.2% in 2013.
Europe is lower this morning amid chatter that finance ministers are considering a haircut for Greek bondholders that could reduce the country's debt-to-GDP ratio to 70% by 2015, down from 120%. Seems like a big haircut that might be hard to push through.
Commodities are lower as the dollar index remains in positive territory. Oil prices are pulling back to $87.67 and gold prices are a tad lower near $1749. Silver and copper prices are also slightly lower.
The 10-year yield is down to 1.64%. It was unable to break above its 50-day resistance near 1.70% last week.
The volatility index is 4% higher this morning to 15.77, still a relatively lower absolute level.
Trading comment: The S&P 500 is now right in the middle of the range between its overhead 50-day and its 200-day support. We sold half of our trading ETFs last week, and will likely exit the rest today. If the bulls are ready to do more buying into month end this week, then I could see the SPX testing the underside of its 50-day near 1425. But if this selling continues and it looks like traders are reducing equity exposure again then we could be back at the 200-day in a hurry. The 200-day currently sits near 1383. I think another test of the 200-day could set up a bounce but at SPX 1400 right now I think the market is in neutral territory.
KAM Advisors has long positions in AAPL, FB
There is not much market moving economic news this morning. In corporate news, AAPL is bouncing after a Citi upgrade and a $675 price target. Facebook (FB) is also spiking +8% after receiving a pair of upgrades and bullish comments about its upcoming quarter.
On the downside, DreamWorks (DWA) is down -5% after "Rise of the Guardians" disappointed with $32.4 million in box office sales this weekend. That's too bad. I took my kids to see it yesteday and we all liked it.
Retail stocks are mostly lower this weekend on mixed sentiment over Black Friday sales. Utilities are bucking the early weakness and boucing after the drubbing the sector has experienced since Superstorm Sandy.
Asian markets were mixed to lower overnight as traders remained cautious ahead of another EU finance ministers meeting in Brussels today. Morgan Stanley put a note out that it expects China's GDP to grow 8.2% in 2013.
Europe is lower this morning amid chatter that finance ministers are considering a haircut for Greek bondholders that could reduce the country's debt-to-GDP ratio to 70% by 2015, down from 120%. Seems like a big haircut that might be hard to push through.
Commodities are lower as the dollar index remains in positive territory. Oil prices are pulling back to $87.67 and gold prices are a tad lower near $1749. Silver and copper prices are also slightly lower.
The 10-year yield is down to 1.64%. It was unable to break above its 50-day resistance near 1.70% last week.
The volatility index is 4% higher this morning to 15.77, still a relatively lower absolute level.
Trading comment: The S&P 500 is now right in the middle of the range between its overhead 50-day and its 200-day support. We sold half of our trading ETFs last week, and will likely exit the rest today. If the bulls are ready to do more buying into month end this week, then I could see the SPX testing the underside of its 50-day near 1425. But if this selling continues and it looks like traders are reducing equity exposure again then we could be back at the 200-day in a hurry. The 200-day currently sits near 1383. I think another test of the 200-day could set up a bounce but at SPX 1400 right now I think the market is in neutral territory.
KAM Advisors has long positions in AAPL, FB
24 Kasım 2012 Cumartesi
BIG MOVES COMING IN DECEMBER, JANUARY & FEBRUARY
Well how was that for the start of a new intermediate cycle? While many analysts were calling for continued losses or even a market crash I repeatedly warned traders that an intermediate degree bottom was coming and that markets routinely rally violently out of those bottoms often generating 5-8% gains in the first 12 to 15 days. This particular intermediate bottom has already gained 5% in the first five days.
Like I've been saying all along, I think the market will easily make new highs in the next two or three months, possibly even significant new highs, or a test of the 2007 top as QE3 starts to work it's magic.
That being said stocks and gold are now due for a short-term breather. Why is that you ask, if all markets have just formed major intermediate cycle lows? The reason has to do with the daily dollar cycle. Friday marked the 24th day in the current daily cycle. That cycle generally runs about 18-28 days trough to trough. At 24 days the cycle is well into the timing band for a bottom and bounce.
That bounce should force stocks into a short-term correction, or sideways consolidation, and gold into its next daily cycle low.
However don't be fooled by any short-term corrective move as stocks and gold have all clearly formed major intermediate bottoms. There are always corrective moves along the way, nothing goes straight up, but intermediate cycles don't usually form a final top until sometime around week 12-15. As last week was only week 1 of a new intermediate cycle, we probably don't need to look for a final top until sometime in February, or early March.
Coincidentally, that is when the dollar is due to form its yearly cycle low. A yearly cycle bottom is the most severe cyclical decline other than a three year cycle low (the next one of those isn't due until mid 2014). I think we can safely assume that QE3 is going to complete the head and shoulders topping pattern for this particular three year cycle, and just like I said months ago the dollar topped back in the summer when the CRB index formed its final three year cycle low.
The dollar should now head generally lower over the next year and a half with brief bear market rallies similar to what we just experienced. This will drive an inflationary phase that should drive all asset prices higher into mid-2013, and commodities into a super spike in mid-2014 (this is when I expect gold to reach its next C-wave top at roughly $4000).
By mid-2013 inflation will start to take its toll on the economy, and stocks will stagnate and begin an extended topping process as inflation continues to surge, similar to what happened in 2007/08.
I think we will experience the same phenomenon this time as QE3 eventually generates the same unexpected consequences and spikes commodity inflation.
Traders need to be prepared next week for some kind of corrective move. Understand this is not the beginning of another leg down, but a second chance to get positioned for what should be a very profitable intermediate degree rally over the next 2-3 months.
SMT premium newsletter. $10 one week trial.
Like I've been saying all along, I think the market will easily make new highs in the next two or three months, possibly even significant new highs, or a test of the 2007 top as QE3 starts to work it's magic.
That being said stocks and gold are now due for a short-term breather. Why is that you ask, if all markets have just formed major intermediate cycle lows? The reason has to do with the daily dollar cycle. Friday marked the 24th day in the current daily cycle. That cycle generally runs about 18-28 days trough to trough. At 24 days the cycle is well into the timing band for a bottom and bounce.
That bounce should force stocks into a short-term correction, or sideways consolidation, and gold into its next daily cycle low.
However don't be fooled by any short-term corrective move as stocks and gold have all clearly formed major intermediate bottoms. There are always corrective moves along the way, nothing goes straight up, but intermediate cycles don't usually form a final top until sometime around week 12-15. As last week was only week 1 of a new intermediate cycle, we probably don't need to look for a final top until sometime in February, or early March.
Coincidentally, that is when the dollar is due to form its yearly cycle low. A yearly cycle bottom is the most severe cyclical decline other than a three year cycle low (the next one of those isn't due until mid 2014). I think we can safely assume that QE3 is going to complete the head and shoulders topping pattern for this particular three year cycle, and just like I said months ago the dollar topped back in the summer when the CRB index formed its final three year cycle low.
The dollar should now head generally lower over the next year and a half with brief bear market rallies similar to what we just experienced. This will drive an inflationary phase that should drive all asset prices higher into mid-2013, and commodities into a super spike in mid-2014 (this is when I expect gold to reach its next C-wave top at roughly $4000).
By mid-2013 inflation will start to take its toll on the economy, and stocks will stagnate and begin an extended topping process as inflation continues to surge, similar to what happened in 2007/08.
I think we will experience the same phenomenon this time as QE3 eventually generates the same unexpected consequences and spikes commodity inflation.
Traders need to be prepared next week for some kind of corrective move. Understand this is not the beginning of another leg down, but a second chance to get positioned for what should be a very profitable intermediate degree rally over the next 2-3 months.
SMT premium newsletter. $10 one week trial.
21 Kasım 2012 Çarşamba
US Stocks Open Flat Despite Overnight Bounce in Asia
US stock markets are hovering near the flat line in early trading. There hasn't been too much news, and I would expect that trading today would be relatively light ahead of the Thanksgiving holiday. On Friday the market will only be open a half day.
In economic news, the Univ of Mich consumer sentiment survey for November slid to 82.7 from its preliminary reading of 84.9. The latest weekly jobless claims figures totaled 410,000 which is down from last week's total of 451,000.
Overnight Asian markets rallied despite some weak Japan trade figures. The latest traded data from Japan showed exports from Japan to China fell -11.6% and exports to Europe slumped -20.1%.
European markets are mixed to lower today after a bit of delay between the EU and IMF on agreeing to release the next tranche of aid to Greece.
In the Middle East, talks yesterday of a cease fire appear to be a bit premature as fighting continues. a bus bomb exploded in Tel Aviv this morning killing 21 people.
Commodities are mixed as the dollar is relatively flat. Oil prices are up a bit to $87.45 and gold prices are also a touch higher near $1725. Copper prices are more than 1% lower on the day.
The 10-year yield is up again to 1.68%. Its overhead 50-day resistance comes into play around 1.70%. And the VIX is down fractionally below the 15 level.
Trading comment: The market bent a little yesterday but was able to bounce back into the close and end in positive territory. So far the pattern of consolidation after the strong 2-day rally looks normal. But I would like to see the market push through to some more upside soon to keep these rally hopes alive. I still feel like sentiment is fragile at this juncture and if the bulls don't keep their pedal on the gas this market could roll over again. Volume levels today and Friday should be light and hopefully the bears have left early for their holiday festivities.
In economic news, the Univ of Mich consumer sentiment survey for November slid to 82.7 from its preliminary reading of 84.9. The latest weekly jobless claims figures totaled 410,000 which is down from last week's total of 451,000.
Overnight Asian markets rallied despite some weak Japan trade figures. The latest traded data from Japan showed exports from Japan to China fell -11.6% and exports to Europe slumped -20.1%.
European markets are mixed to lower today after a bit of delay between the EU and IMF on agreeing to release the next tranche of aid to Greece.
In the Middle East, talks yesterday of a cease fire appear to be a bit premature as fighting continues. a bus bomb exploded in Tel Aviv this morning killing 21 people.
Commodities are mixed as the dollar is relatively flat. Oil prices are up a bit to $87.45 and gold prices are also a touch higher near $1725. Copper prices are more than 1% lower on the day.
The 10-year yield is up again to 1.68%. Its overhead 50-day resistance comes into play around 1.70%. And the VIX is down fractionally below the 15 level.
Trading comment: The market bent a little yesterday but was able to bounce back into the close and end in positive territory. So far the pattern of consolidation after the strong 2-day rally looks normal. But I would like to see the market push through to some more upside soon to keep these rally hopes alive. I still feel like sentiment is fragile at this juncture and if the bulls don't keep their pedal on the gas this market could roll over again. Volume levels today and Friday should be light and hopefully the bears have left early for their holiday festivities.
20 Kasım 2012 Salı
Are Stocks Catching Their Breath After Monday's Rally?
The markets are roughly flat in early trading following yesterday's solid rally. Stocks rallied both Friday and Monday, so its rational for them to take a breather. The question for investors is whether stocks are just catching their breath before another push to the upside or if the last 2 day rally was just a breather from the recent downtrend action? I think the markets still have some more upside, though I don't see us getting back to the highs of the year.
This morning both BBY and HPQ are making new lows after reporting disappointing earnings. BBY has lost all of its mojo that was surrounding the prospect of its founder taking the company private. And HPQ took a huge charge related to improprieties and misrepresentations from Autonomy which it bought.
In economic news, housing starts rose to 894,000 units in October from 863,000 last month.
Overnight Asian markets were mixed, although China slid 0.4% hitting a new 45-month low. That can't be a good sign. I'm surprised the media doesn't mention this more whenever they are talking about secular growth theme in China.
European markets are also mixed despite the Moody's downgrade of France. Moody's also mentioned the outlook for Italy's banking system remains negative. In Brussels, EU finance ministers have agreed in principle to unfreeze loans to Greece.
Commodities are mostly lower following a rise in the dollar today. Gold prices are near $1730. Oil prices are pulling back to $87.50, down almost $2 as news hits the wires about a ceasefire from Israel.
The 10-year yield is up to 1.65%. And the VIX is up fractionally to 15.38 after a big drop yesterday.
Trading comment: I still like the long side here for a trade. We added some long ETFs in trading accounts and haven't sold them yet. For our balanced accounts, we still want to stay defensive and reduce our equity exposures as we near year-end. So for longer-term investors we are using any further strength in the market to continue to rebalance portfolios with an eye toward the fiscal cliff uncertainty and a continued slow growth economy as we enter 2013.
This morning both BBY and HPQ are making new lows after reporting disappointing earnings. BBY has lost all of its mojo that was surrounding the prospect of its founder taking the company private. And HPQ took a huge charge related to improprieties and misrepresentations from Autonomy which it bought.
In economic news, housing starts rose to 894,000 units in October from 863,000 last month.
Overnight Asian markets were mixed, although China slid 0.4% hitting a new 45-month low. That can't be a good sign. I'm surprised the media doesn't mention this more whenever they are talking about secular growth theme in China.
European markets are also mixed despite the Moody's downgrade of France. Moody's also mentioned the outlook for Italy's banking system remains negative. In Brussels, EU finance ministers have agreed in principle to unfreeze loans to Greece.
Commodities are mostly lower following a rise in the dollar today. Gold prices are near $1730. Oil prices are pulling back to $87.50, down almost $2 as news hits the wires about a ceasefire from Israel.
The 10-year yield is up to 1.65%. And the VIX is up fractionally to 15.38 after a big drop yesterday.
Trading comment: I still like the long side here for a trade. We added some long ETFs in trading accounts and haven't sold them yet. For our balanced accounts, we still want to stay defensive and reduce our equity exposures as we near year-end. So for longer-term investors we are using any further strength in the market to continue to rebalance portfolios with an eye toward the fiscal cliff uncertainty and a continued slow growth economy as we enter 2013.
19 Kasım 2012 Pazartesi
Monday Morning Musings
The markets are nicely higher in early trading, with the Dow up 150 points following strength on Friday's close and rallies in overseas markets last night and this morning.
Israel has said it may increase its assault on the Gaza strip, and that has oil rallying another $2 to $89. But that has not derailed the rally in stocks so far this morning. One thing that concerns me a bit is that I never like to see very strong opens as that leaves a lot of time during the trading session for sellers to emerge knock down the market. I prefer to see stocks rally into the close like they did on Friday.
In economic news we got some more positive housing data. Existing home sales for October rose to 4.79 million from 4.69 million last month. And the NAHB Housing index for November rose from 41 last month to 46 this month. Both readings were above consensus.
Overnight markets in Asia were higher. Japan led with a 1.4% gain and China lagged with 0.1% rise as news came out that China saw housing prices decline in 17 of 22 major cities last month.
European markets are also higher today despite a member of the ECB saying Greece will be unable to return to public markets in 2015-16 and will likely need more aid.
The dollar is lower today and helping to boost commodities. Oil is up past $89, aided by the escalating Israel conflict. Gold prices are higher to $1733. And silver and copper prices are higher as well.
The 10-year yield is higher to 1.61%. And the VIX is down -3.7% today back below its 50-day average to 15.80.
Trading comment: Last week I commented that the Nazz had been down 6 straight weeks and was overdue for a bounce. We started to add some QQQ on Friday to trading accounts and I was looking to add to it today but with the markets up as much as they are this morning I don't want to chase and overpay. If we get an intraday dip I will likely add some as I still think the markets could see further upside this week. The market is very short-term oversold and investor sentiment had recently become pretty bearish. So that should provide a backdrop for more than just a one-day bounce.
KAM Advisors has long positions in QQQ
Israel has said it may increase its assault on the Gaza strip, and that has oil rallying another $2 to $89. But that has not derailed the rally in stocks so far this morning. One thing that concerns me a bit is that I never like to see very strong opens as that leaves a lot of time during the trading session for sellers to emerge knock down the market. I prefer to see stocks rally into the close like they did on Friday.
In economic news we got some more positive housing data. Existing home sales for October rose to 4.79 million from 4.69 million last month. And the NAHB Housing index for November rose from 41 last month to 46 this month. Both readings were above consensus.
Overnight markets in Asia were higher. Japan led with a 1.4% gain and China lagged with 0.1% rise as news came out that China saw housing prices decline in 17 of 22 major cities last month.
European markets are also higher today despite a member of the ECB saying Greece will be unable to return to public markets in 2015-16 and will likely need more aid.
The dollar is lower today and helping to boost commodities. Oil is up past $89, aided by the escalating Israel conflict. Gold prices are higher to $1733. And silver and copper prices are higher as well.
The 10-year yield is higher to 1.61%. And the VIX is down -3.7% today back below its 50-day average to 15.80.
Trading comment: Last week I commented that the Nazz had been down 6 straight weeks and was overdue for a bounce. We started to add some QQQ on Friday to trading accounts and I was looking to add to it today but with the markets up as much as they are this morning I don't want to chase and overpay. If we get an intraday dip I will likely add some as I still think the markets could see further upside this week. The market is very short-term oversold and investor sentiment had recently become pretty bearish. So that should provide a backdrop for more than just a one-day bounce.
KAM Advisors has long positions in QQQ
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