Stocks have been down ten of the last eleven sessions. According to Bespoke, the NYSE Advance/Decline line is now at one of the most oversold levels seen since 1990. The talking heads on T.V. told us yesterday that the NASDAQ is now officially in “correction” territory. The S&P has fallen 6.6% since April 2nd. And the global equity markets have reportedly lost $3 trillion in value since the beginning of May. All thanks to Greece – a country whose GDP is barely larger than that of Houston, Texas.
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SUMMARY:
- Stocks wanted to bounce, futures were up as Europe escaped an official recession label, but Greece said it had to have a new election . . .
- Afternoon recovery goes into withdrawal, Greece style.
- SP500, DJ30 tap old support, fall away, but NASDAQ is holding on.
- Dollar was down and gold was up. Then the new norm returned.
- April retail sales fall short of expectations, slowest since December.
- New York PMI beats handily but expectations drop sharply.
- FBI opening an inquiry on JPM? President ‘knows his stuff’ because he knows JPM is one of the best run banks? We sound like Russia.
- It is up to NASDAQ to hold the line but not a lot of confidence it can go it alone.
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SUMMARY:
- Surprisingly no Greece deal materializes over the weekend, and more of the same from Italy and Spain while Germany throws in a twist.
- SP500 undercuts support, rebounds . . . then gives it up.
- Dollar continues its rally, commodities continue their fall.
- Many leaders hold up well as the indices get mushy with support.
- JPM enough already: People invested because of good people, good people made bad decisions, investors lost money. That is how it works.
- Sentiment: CNBC acts if the stock market is dead. Jimmy Rogers thinks so as money continues to flow out of equities.
- Outlook shifts more negative given the action at support.
- Tuesday brings hard US data and a new potential Greek crisis.
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SUMMARY:
- JPM, JWN stumble, but the market does not fall.
- Still holding support, not getting the big selloff, not getting a big reversal, just holding over support.
- Dollar notches 10 straight gains against the euro.
- Utilities leading the market in a rather defensive turn.
- Michigan still feeling good over the warm weather.
- Market starts the week still in position to roll in the range: it comes down to us (as in the U.S.) versus the rest of the world.
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SUMMARY:
- New Greece ruler austerity stance, weak US retail results undermine stocks early.
- A week of downside takes the indices to the bottom of the range and an intraday reversal suggests a rebound is starting.
- A day when hard news was notably absent.
- Other financial markets react sharply to continued worldwide economic signals.
- Now the markets have hit the apparent range bottom we look for a rebound . . . inside the range of course.
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Greetings from Kilkenney, Ireland. For me at least, the weekend elections, as well as yesterday’s market action, raise more questions than answers. While the bulls will argue that yesterday’s impressive rebound in the U.S. indices means that the buyers are resilient at the present time and that we’ve seen the lows for this corrective phase, frankly I’m not so sure this is the case.
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SUMMARY:
- Market tries to rebound over some the European election results, overcomes early weakness, finishes flat.
- A modest rebound holds where it needs to, but no power from any leading stocks.
- Other markets continue to act as if there is real trouble ahead.
- India GDP now falling, presents a new, or at least now discussed, concern.
- Some more interesting jobs report statistics.
- Trading volumes still well off historical levels.
- Not much of a bounce, could simply be a continuation to the downside, but NASDAQ has an interesting ABCD pattern setting up as the other indices hold that support.
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SUMMARY:
- Unemployment rate decline touted but most see through it, and most importantly, the stock market doesn’t buy it.
- Stocks run from the jobs report, end up right back where the bounce started two weeks back.
- Dollar surges despite weak jobs report, but bonds, oil, and gold act as you would expect.
- Jobs just don’t add up, even to 115K non-farm jobs.
- The jobs market is, yes, different this time because the US is different.
- Is this as good as it gets in terms of the recovery?
- Austerity doesn’t work? How about Keynesian economics?
- The indices are back to where the bounce started. Unless a recession is coming the indices should hold above the 2011 highs.
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SUMMARY:
- Good news? Bad news? Just what is going on?
- Stocks tried to bounce early but failed horribly.
- Pretty stiff losses as the market split grows a bit wider.
- Jobless claims much better than expected (though still revised worse the prior week) & ISM much better than expected while everything else stinks. Prepping for some sleight of hand on the jobs report?
- April Same Store Sales missing big. Holy cow, could it truly be that consumers spent forward given the warmer weather?
- ISM Services post a hefty miss. No big deal; just the largest part of the economy.
- Challenger job cuts jump 11% after an 8.8% decline.
- Jobs report Friday: if it is bad it hurts, if it is good it helps temporarily but as with the ISM, will anyone believe a good number?
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The recent correction in the stock market has been attributed largely to returning concerns about the state of the European sovereign debt crisis as well as a general softening of the economic data here in the U.S. While just about every report to hit the tape in the first quarter was better than expected, since then, it appears that the economic momentum has begun to fade. And in short, this put a fairly large dent in the BTE theme. As a result, some of the exuberance was removed from stock prices.
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My digital calendar informed me this morning that the month of May has officially arrived. And according to Wall Street’s folklore, this means that it may be time to do something other than invest in the stock market for a while. But to be honest, I’ve never put much credence in the old saw, “Sell in May and go away” as stocks have only fallen during the May-October period 11 of the 32 years I’ve been in this business. But, I will have to admit that it’s been a profitable strategy of late and as such, I thought I’d dig into the data to see whether I should just extend my stay in Europe until after Halloween.
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SUMMARY:
- Stocks fade after four upside sessions, handling some mixed economic data, trying to consolidate last week’s gains.
- Indices open flat, range-trade in the red all session.
- Spain joins the UK in recession as Canada posts a surprise contraction in its economy.
- March Inflation adjusted income turns positive finally though spending fades.
- Chicago PMI misses while Dallas flips negative, both sporting disappointing internals. Will the national ISM follow them this time?
- Thus far a very decent pullback as stocks digest the early season earnings bounce. A hold over the mid-April peak sets up a run at the prior highs.
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Five days ago, the bears seemed to have everything going their way. After one of the best first quarter performances in years, the stock market was overbought, sentiment had become too upbeat (or at the very least, traders had become more than a little complacent), and hedge fund managers were falling all over themselves trying to play catch up with their benchmarks (aka the S&P 500). Thus, as I wrote on March 28th, it was time to prepare for some sort of a correction, pullback, or sloppy period.
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SUMMARY:
- Investors focus on consumption, sentiment, and Amazon versus GDP and Spanish downgrades.
- Stocks post fourth straight gain as the indices continue their therapy.
- Approaching the prior highs the indices look better but maybe not good enough.
- GDP misses expectations even though weather driven consumption tops expectations.
- Michigan Sentiment finally tops expectations.
- Spain downgraded to a couple of steps above junk as unemployment hits a staggering 24.4%.
- Google now sued by the DOJ. AAPL, GOOG . . . who next? Shades of MSFT yet again.
- End of month Monday, turn of new month may keep the money coming in for now but the indices then have to deal with the recent highs.
- Jobs report may put the move on hold: last time we were at these levels was, of course, the April jobs report and stocks sold afterward.
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As you may know, my Daily State of the Markets report is dedicated to identifying the drivers of the market action. The vast majority of the time, this is a fairly easy task as the reasons behind a move are usually pretty straightforward (well, eventually anyway). But then there are days like Thursday. You see there are times when it isn’t so much about what happens in the stock market game, but rather how it happens that matters.
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SUMMARY:
- AAPL does not participate but stocks extend Tuesday’s and Wednesday’s rally nonetheless.
- Indices improve their position further, but just as 1-2-3 pullbacks set up new upside runs, a 3-day bounce can set up new downside.
- Other markets still look worried about some other event to come. US is relatively stronger but the neighborhood value is falling.
- Jobless claims follow the same script: revisions higher so they can ‘decline’ yet again.
- Pending home sales rise 4.1% in March, prompting calls of a housing bottom. They are just contracts people. Now go and try to find a loan.
- Moves tend to come in threes. After hours there is competing news: AMZN earnings versus Spain downgrade. Can AMZN breathe an extra day’s life into this move?
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Fool me once, shame on you. But fool me twice… Well, that’s the stuff that trading ranges are made of. As I’ve mentioned a time or twenty over the past couple of weeks, I’m of the mind that the stock market is stuck in a consolidation phase. And unless the bulls can get their act together in a big way, I’d also be willing to bet that this sloppy period of back-and-forth action may continue for a while.
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A good chunk of first quarter’s joyride to the upside was attributed to the performance of a little company named Apple (AAPL). What is now the world’s largest company had what has come to be known as an outsized impact on many of the stock market indices, causing one analyst to dub the U.S. stock market the N.B.A. market – Nothing But Apple (as in nothing but AAPL was needed in a portfolio).
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SUMMARY:
- Reports of AAPL’s death have been greatly exaggerated.
- Stocks mixed awaiting AAPL earnings with NYSE up, NASDAQ down.
- Uncertainty is the problem? Isn’t it the CERTAINTY of certain policies that is stifling business?
- The Good: New Home Sales, European bond auctions have subscribers, Richmond Fed jumps.
- The not so good: Consumer Confidence misses, Case/Shiller still weak, China tire demand slows, G-10 Macro data turns negative.
- AAPL earnings set to lead a Wednesday bounce
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There are times when the phrase “market logic” is clearly an oxymoron. Such is the case when stocks rally furiously after bad economic news based on the idea that the negative data means more economic hand-holding from the Federal Reserve. And yet there are other times when the drivers behind the stock market’s moves are blatantly obvious and easy to understand. Lately we’ve seen a little of both as hopes for more Global QE have certainly driven stock prices at times this year and then on days like yesterday, it was pretty darn easy to understand what was going on.
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SUMMARY:
- Nothing positive for US stocks to start the week as China and Europe show weak manufacturing, US earnings disappoint, and WMT accused of bribes.
- Large cap indices gap through the 50 day EMA, but cut the losses. Now the test of the break lower is next.
- In the midst of a lot of world financial problems, AAPL, CMG make important tests.
- Earnings mixed after hours but perhaps TXN can provide NASDAQ a spark yet again. Perhaps.
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With yet another session spent inside the current tight little trading range on Friday, it is clear that the consolidation phase continues. The primary driver of the current phase appears to be an oldie-but-a-goodie: uncertainty. In short, traders are uncertain about what comes next on any number of fronts including earnings growth (earnings are only expected to be up 1% this quarter), inflation (which, for those of you keeping score at home, is currently above the Fed’s target zone on a year-over-year basis), Europe (Spain and Italy are getting all the attention these days), China (is 8% enough?), the economy here at home (a slowdown of the BTE theme appears to be happening) and the calendar (can “sell in May and go away” work yet again?).
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SUMMARY:
- A bit more expiration volume as indices close mixed on the day, mixed on the week.
- Large cap indices still holding the 50 day EMA, still in decent shape. Of course small caps and semiconductors are still in not so decent shape.
- AAPL effect? Large cap, big name leaders testing and weighing on the markets, but other stocks look solid as the big leaders make very normal tests of very strong runs.
- First week of earnings sees 85% of S&P reporting beating estimates.
- Headlines say German business sentiment helping the euro versus the dollar while the ongoing EU sovereign debt crisis said to help US bond markets. All the while European bond yields and CDS rates climb.
- French elections and their impact on France. A preview of the US?
- A fall from the highs then two weeks of lateral movement. The next move should be close to showing itself.
- Market still looks heavy as some leaders fade, but many quality stocks still on the move.
- AAPL earnings and an FOMC meeting could provide the market the information it needs, of course on top of Europe’s troubles, French elections, earnings, economic data . . .
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SUMMARY:
- Volatility shows it is still present as indices reverse from early gains.
- Earnings results, initial reaction to Spanish bond auction push early gains, but the economic data and reconsidering those European auctions sweep stocks lower.
- Large cap indices still holding the 50 day EMA versus volatility and an intraday reversal on volume.
- Newest and most important wrinkle: the return of intraday reversals on top of day to day volatility.
- Jobless claims jump to 386K. Some financial outlets finally realizing the data has no clothes.
- ‘Successful’ Spanish bond auction later viewed as not so successful.
- March Existing Home Sales drop when expected to rise. The ‘experts’ need to realize hope and change was just a slogan and not an economic strategy, or at least not one that works.
- Philly Fed misses expectations. At least it was still positive . . . overall.
- Expiration Friday will come and go but the key for us is how the large cap indices hold the 50 day EMA and those leaders that keep setting up and moving up.
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Although I run the risk of restating the obvious, it appears to me that the current market has gotten more than a little sloppy lately. Thus, unless one of our two teams can really get something going in the near term, the current consolidation phase is likely to continue. You see with earnings season just getting underway and a great deal of uncertainty remaining with regard to the situation in Europe, it may be tough for the bulls to make a concerted push higher. And yet at the same time, our furry friends in the bear camp don’t seem to be able to do much with their opportunities of late. Thus, unless something changes right quick, the consolidation will remain in play.
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“Buy! No, Sell! No wait, did I say sell? I meant Buy! Yea, that’s right, Buy! Unless… Well… Ok… No, let’s Buy…. Yea, that’s my final answer! But wait… Maybe I should…”
While it sound’s idiotic, this is the type of indecision that appears to have overwhelmed traders (oops, I mean the computers) of late. One minute Europe’s woes are back, contagion is spreading, the global banking industry is toast, China is going to bring down the world, and Apple (AAPL) is crashing. But the next – Wheee! – It’s all good, buy em!
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After defying the naysayers, a great deal of logic, as well as gravity for the past four and one-half months, the coolest company in the world has had a rough go of it over the last week. After hitting a high of $644 on April 10th, shares of Apple (AAPL) have done a pretty decent swan dive impression as the stock closed yesterday at $580.13, a cool $64 (or just about 10%) off the top – all in a matter of five trading days. But after completing a +57% run in 2012 alone, I guess a quick little dance to the downside was to be expected.
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After four months of watching the bulls march merrily higher on a daily basis, with nary a bout of volatility to be found, suddenly we’re back to what is beginning to feel like the bad old days of 2011. A market that had no memory from one day to the next. A market that gave the word volatility new meaning. And a market where investors were forced to watch any and all headlines from countries they’d only visited (or dreamed of visiting) on vacation as well as securities they’d never heard of before. (Come on, admit it; did you really watch European debt spreads against the bund before last summer?)
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SUMMARY:
- Two-day bounce falters and stocks fade leaving some indices at support, others grasping.
- China GDP rumor a complete miss as GDP misses expectations.
- Internals continuing to match prices in their day to day volatility.
- CPI continues to advance, eating up real earnings.
- Bank earnings lavished with praise but who couldn’t make money borrowing for 0% for a guaranteed 3% or better?
- Michigan Sentiment falls on energy concerns, but expectations are still quite good.
- The mixed Friday finish (in terms of support) hold out some upside possibilities, and earnings could rally stocks, but if not, the indices certainly look heavy.
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In yesterday morning’s meandering missive, I opined that it might be an appropriate time for the bulls as well as the fast-money traders to take a break. Exhibit A in my thesis was the fact that the market tends to pause for a few months after new bull markets reach the six-month mark. And since the recent top in the S&P 500 on April 2nd also just happened to correspond with the new bull’s six-month birthday, it seemed reasonable to assume that we just might be entering a “sloppy period.”
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It seems that the only folks left in the stock market game these days are professional traders. Gone are the soccer moms that decided to take up day-trading in the late 1990′s. Gone are the guys that decided to quit their jobs and trade futures in their pajamas. Also gone are the millions of Americans who used to dabble in the stock market trading Apple (AAPL), Microsoft (MSFT), Oracle (ORCL) or Google (GOOG) at lunch and then spending their weekends pouring over Barron’s and plotting their next purchases. No, the two brutal bear markets seen in this secular cycle coupled with the insane volatility of the past two years has pushed the public to the sidelines.
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Although I utilize models and disciplined systems coupled with trading rules in my approach to managing the market, I do think it helps to understand what is happening in the market and why – if for no other reason than it helps you implement your signals at times. In fact, I believe that oftentimes the “why” is much more important than the “what” when it comes to staying in tune with Ms. Market’s moods.
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SUMMARY:
- So much for the logical path: SP500 breaks back into its range, leaving NASDAQ to hold the line.
- Once again Europe is an issue. Must be as the market is lower.
- Buffett Tax provides little revenue but Schumer says we ‘got to start somewhere.’
- ISM is quite decent overall, but the setup is worrisome.
- A good drop into earnings sets the stage for an initial bounce. After that . . .
- Alcoa actually posts a good report. Okay, what is the catch? Did hell just freeze over?
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We had an interesting discussion in the office yesterday about what is, has been, and will be driving the stock market. To my surprise, there was some lively discussion and differing opinions on what has been the impetus behind this year’s joyride to the upside. To me, this is an easy one as I’m of the mind that it’s been the better-than-expected economic data combined with the grossly underinvested positions of the hedgies driving stock prices higher for the past four months. And yet the topic of QE3 seemed to get a lot of attention in our impromptu strategy session.
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The stock market has been largely a one-way street for the better part of the last four months. As we’ve mentioned a time or two, the impetus for the surprisingly strong market performance has been the correspondingly surprising strong economic performance of the U.S. and economy. And because of the mostly better-than-expected economic data, traders have been able to brush aside the difficulties facing Europe and the less than inspiring economic data out of China.
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SUMMARY:
- Stocks bide some time ahead of trader-less Friday jobs report.
- France debt auction shows shades of Italy with higher rates and weak demand.
- Spanish 10 year bond revisits last fall’s spread with German bonds.
- Money fleeing Europe for the US once again and even US instruments are impacted.
- Jobless claims hit a 4 year low so the news outlets tell us without any asterisk just as the Department of Labor tells them.
- Same Store Sales feast again on the warm winter and early an Easter.
- Money fleeing US equity markets . . . still . . . as investors pull money and insiders sell.
- Indices bounce but they do not wipe away the Wednesday flops. This makes next week most interesting for the life of this part of the rally.
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I got a kick out of the reports from the popular financial press yesterday morning. It seemed all the news outlets were falling all over themselves trying to tie the market’s weakness to “disappointment” over the hawkish tone of the FOMC minutes. In short, everybody was suggesting that it was the lack of any hints about more Fed stimulus that was responsible for the triple-digit decline in the Dow futures. Never mind that interest rates and debt spreads were spiking in Spain or that the PM had said something about a bailout. Never mind that European bourses were down big. Nope, it was the idea of Bernanke pulling the punchbowl that was getting all the attention.
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It is little wonder that the individual investor is no longer in the stock market (well, except via their 401(k) plans of course) as there are times – such as yesterday afternoon – where the game makes absolutely no sense at all. As exhibit A, I submit the action in the major stock market indices immediately following the release of the minutes from the March 13th Fed meeting. In short, you need to understand a little something called market logic (an oxymoron I believe) in order to make sense of the action.
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SUMMARY:
- Stocks staggered by FOMC minutes, but manage to cut the losses, hold the 10 day EMA.
- Lots of news but nothing really mattered outside the FOMC minutes.
- A lot of jockeying, but the strong continued to be strong even after the Fed statement.
- Dollar and bond yields jump, gold slumps as the promise of easy money seems not so much a promise.
- Small business lending lowest since September.
- Factory Orders miss market slightly but still rise.
- President calls for Buffett taxes again, but just who is paying the taxes now?
- If the liquidity ends at this juncture, the outlook is not positive for stocks or the economy.
- Stocks are either going to surge through 2012 or tank soon according to the pundits. That is a good enough split to keep things going and we want to stick with the clear strength.
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The question I was asked most frequently yesterday was, can it continue? No, I’m not talking about the string of glorious, summer-like days with temperatures in the 80′s (btw, that streak was obliterated in Denver yesterday as shorts and t-shirts were replaced with underlayers, fleece, and white stuff falling out of the sky) or Lindsey Vonn’s dominance on the women’s world cup. No, everyone wanted to know if the bulls’ impressive start to the new year could be expected to continue ad infinitum.
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By now I’m sure you are aware of the fact that the S&P’s 12% gain in the first quarter was the best Q1 of any year since 1998. And by now I’m guessing that you are also well aware that just about everyone on the planet is looking for a pullback, a consolidation, a correction, or even a “sloppy” phase to set in. After all everybody knows trees don’t grow to the sky and as any bear will undoubtedly attest, that is exactly what appears to be happening at the present time.
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SUMMARY:
- Nondescript end to a strong first quarter for the market.
- Window dressing never showed up. Maybe the funds have what they want already.
- Spending rises but incomes again are negative when inflation and taxes are considered. Economists have a special phrase for this: burning the candle at both ends.
- Chicago PMI misses but still over 60. The region is worried about a cost ‘tipping point,’ however.
- Gasoline? We don’t need no stinking gasoline? Michigan Sentiment just fine, easily beating expectations.
- Jeff Immelt to remain ‘neutral’ in the 2012 election campaign. A little late for that.
- April tends to be a good month. Here’s to looking for new money and not many earnings warnings.
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SUMMARY:
- Stocks sell again, wiping away the Monday Bernanke breakout. Then Europe closes and the indices roar back, again.
- Worries about Europe supposedly fuel stock weakness as confidence a bit lower, Spain plans austerity strikes.
- Oil struggles on rumors US, Europe ready to open SPRO spigots.
- Leaders trying to hold the line. Some are struggling, some are surging.
- Dear Mr. President: you are a smart man. Surely you know the difference between tax credits and subsidies. And if you want to help, cut the federal gasoline tax that is 3x the companies’ profits per gallon.
- Jobless claims surge but they are supposedly at 4 year lows. How? Government revisions to ‘more accurately’ reflect the market. Right. What about the disappearing workers?
- GDP third revision is the same.
- Poised to bounce again, but will they? Upside moves find it harder to hang on.
- The set up is there, but Friday is not the best day to start a sustainable rally.
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There has been an awful lot of discussion among investors lately regarding the disastrous results seen in some of the so-called volatility ETN’s such as the VXX and TVIX. As you are no doubt aware, many investors had purchased these ETN’s in an effort to hedge their portfolios against possible losses that might occur during what most felt was an inevitable market correction. However, instead of being a hedge, the ETN’s produced massive losses during a time when the volatility index or VIX actually advanced.
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By now, everybody knows that it was none other than Ben Bernanke that stoked the bulls’ fire on Monday. The Fed Chairman basically said that although the economy is improving (something the FOMC acknowledged at their last meeting), the country’s GDP is not growing fast enough to create the jobs needed to get the unemployment rate back down to more palatable levels. In short, Bernanke’s not satisfied and feels the Fed can do more.
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SUMMARY:
- Stocks rise after a 3-day pullback, ending ‘losing streak’ and keeping the same action in place, just don’t generate any pre-weekend excitement.
- Oil, gold jump ahead of a weekend as weekends now have to factor in rising geopolitical issues.
- There they go again: European bond yields screaming back up.
- KB Homes demand plunges, New Home Sales drop versus the expected rise, and large revisions to prior data are discouraging.
- Lots of data next week but watch for earnings warnings thanks to higher prices, tougher comps (remember FedEx).
- Market character has not changed so we look to play more emerging leaders while tending current leaders that may be losing the mojo.
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Like children feeling trapped in the backseat of a car, underinvested fund managers have apparently been asking the one question that parents universally dread, “Are we there yet?” (To the correction, that is.) Given that we haven’t seen a four-day decline in stocks for more than four months and have only seen one other three-day drop this year (and that one didn’t amount to much), I guess we can’t really blame those who get paid relative to their performance to the S&P 500 for getting a little fidgety while waiting for an opportunity to get in this market.
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It is fairly safe to say that nearly early every trader, chartist, and market analyst on the planet will agree that the stock market is extended and that the bulls are likely to take a break at some point in the near future. Call it a pullback, a consolidation, a correction, a “sloppy period” (this one’s my personal favorite), or whatever you’d like, but the bottom line is that most everyone is looking for the current joyride to the upside to pause soon.
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The news greeting investors on Tuesday morning clearly wasn’t good. There were problems in China, which in turn, meant problems for the global growth thesis. There were new worries about Greece (I know, how the heck is that possible?). There was a lot of chatter about Portugal becoming the next Greece and that EU leaders had best deal with this quickly before another round of debt restructuring begins. And with Shanghai, Hong Kong, and most of the European bourses down more than 1%, it looked like the bears might finally get back in the game yesterday.
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