SUMMARY:
- Market indecisive, once giving up a gain then recovering it as pre-quarter end shuffling continues.
- Choppy but holding the range.
- Jobless claims fall below 400K. First since April 1.
- Q2 Final GDP at 1.3%. Better but at this stage of a ‘recovery,’ pathetic.
- Pending home sales down but not as bad as it has been.
- China stock market at a 14 month low as market speaks of a recession that has started.
- Quarter ends Friday so likely not going to get a clear picture of market. As long as the range holds, however, treat it as a . . . trading range.
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As I have mentioned a time or twenty, I have a compulsive need to understand the driving forces behind big(ish) moves in the stock market. Nine times out of ten it is fairly easy to connect the dots and identify the catalyst for a meaningful move. But then there are days like Thursday when one is left scratching their head. And while it would be easy to pass off yesterday’s 300+ point move on the Dow from high to low and then its 190 point move up in the last hour as just more of the same market volatility we’ve seen lately, that simply doesn’t cut it in my book.
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SUMMARY:
- Banking too much on Europe? Sharp reversal below the August trendlines.
- Durable Goods Orders in August weak as expected, but business investment rebounds.
- Insurance premiums rise 9% this year as Obama’s nationalized healthcare model shows its impact.
- Going to the Supreme Court: Obama looking for the Court to throw out the healthcare bill for him?
- AMD warns after hours. Another chip company with troubles, and that won’t help the stock market.
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Without a headline, a story, an event, or even a rumor, it is often difficult to determine the real driver of a significant move in the markets. And in short, that’s exactly what we had to deal with Wednesday afternoon. Stocks opened higher on well, come to think of it, the reasons for the early morning advance weren’t really that clear. But with Finland voting Kyllä (that’s yes in Finnish) to the EFSF vote and the end of the quarter growing near, traders didn’t need much of a reason to continue the 3-day joyride to the upside.
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During normal times, if indeed there ever are such times in the stock market, it is often difficult to make sense of the market’s wiggles and giggles. One day the market can be up and the next down. Moves can start – and stop – on a dime or sometimes a single headline. But such is life in the game that is played out daily at the corner of Broad and Wall. Nobody ever said this business was easy!
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SUMMARY:
- Hope of a US-style European bank bailout renews the rally.
- Technology, chips lag the rebound on some specific company stories, e.g. AAPL.
- Gold continues its selloff.
- Berkshire to buy back some shares. Doesn’t sound Buffett is that bullish on US companies.
- New Home Sales hit a 6 month low, but that was as expected so all must be okay.
- China economic worries rise.
- Stocks make fourth bounce attempt in 8 weeks.
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Given that this stock market likes to go in one direction for several days straight and then reverse on a dime and go the other way, I guess we should have expected to see the indices embark on yet another joyride to the upside on Monday. Stocks soared back into the middle of the trading range (trip #4, perhaps?) yesterday on the back of the idea that an all-new Euro-TARP was about to become the hit of the fashion season. In short, traders expressed confidence that there might be a plan in the works that could actually be the ultimate game-changer for the bulls.
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SUMMARY:
- Stocks finish a down week with a modest recovery, bounced by prospects G20 might intervene on Europe’s behalf.
- Gold and commodities continue their dive
- Is the market different now than in times past? Yes and no.
- A cathartic selloff and reversal is a possibility, but why would one occur now?
- Indices still at support, so regardless of our biases, be ready to take what the market gives.
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SUMMARY:
- Market’s initial reaction to the Fed’s characterization of ‘serious risks’ facing the US economy is its second reaction as well.
- A plethora of bad news hammers stocks, other markets.
- Stocks and commodities are now selling together.
- Jobless claims lower, but 423K new people hit the unemployment rolls last week
- China, Germany, France sport lower PMI, the latter showing contraction.
- SP500, DJ30 undercut August lows but recover to hold on the close.
- Market may have overshot downside near term, and rumors of weekend intervention may bring out some short covering Friday.
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With the S&P 500 now down -17.6% from its April 29th high, EAFE about -27% off its high, the emerging markets index sporting a fall of -30%, and the EU having dropped -36% from its high-water mark this year, it is safe to say that the current market is something more than your run-of-the-mill corrective phase. And yet I continue to hear people treating it as such.
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SUMMARY:
- Fed leaves market ‘twisting’ in the wind. $400B facility gets an inauspicious start.
- ‘Significant’ downside risks, from here and overseas, push Fed to act despite President’s stimulus plans, and that suggests things are indeed as bad as many feared.
- August Existing Home Sales rise 7.7% as inventories fall.
- Layaway comes back into style.
- Indices turn down in what looks to be more than a test as improving stocks are no longer improving.
- Once again it looks as if SOX holds the key to the market moves.
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I will have to admit that while the vast majority of my portfolios continue to be positioned fairly defensively, the market’s reaction to the Fed announcement took me by surprise. You see, up until about 2:20 pm eastern the market had been trading fairly well recently. I had even gone so far as to suggest to colleagues this week that the dip buyers looked to be getting bold and that the market “felt” like it wanted to go higher. However, the release of the FOMC statement may have changed that as it was clearly not received well.
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SUMMARY:
- Stocks continue the rally but then reverse in the afternoon as tech leadership falters.
- Indices still in position to move, but some breakdowns in a broad swath of stocks are worrisome.
- Freight levels fall off after a solid start to 2011.
- Housing starts fall 5% to a 3 month low.
- French banks getting the freeze out. Same as the would be borrowers here in the US.
- Indices can still move, but if the stocks trying to set up for leadership moves falter, the indices are vulnerable.
- ORCL, ADBE try to rally the tech troops.
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As a self-proclaimed amateur economist, I don’t claim to know the inner workings of the Fed’s policies, programs, and facilities. However, as someone with a Ph.D. from Wall Street’s School of Hard Knocks, I do feel like I have a decent understanding of the Fed’s goals and objectives. As anyone who has studied economics knows, the Fed has what is called a dual mandate. This means that Mr. Bernanke and his cohorts have two jobs: (a) Full employment and (b) Stable Prices (meaning a steady rate of inflation).
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Although the focus of traders’ attention is currently split between the goings on in the Eurozone and the expectations for Ben Bernanke’s cavalry to ride to the rescue tomorrow, a glance at the calendar reveals that the quarterly earnings parade is scheduled to start rolling again in a little over three weeks. So, while we are waiting on the results of “the call” (Greece’s two-day feel-good session with the EU/ECB/IMF – aka the “Troika”), we thought we’d turn our attention from the macro outlook to micro.
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Short-term trends come and go during bull markets, bear markets, and everything in between. However, it is important to remember that the really big money is made in this business during what we like to call the “important trends.” So, with the markets having moved sideways for the past month and a half, the key issue facing traders is the direction of the next “important trend.” But in order to get this question right, one has to be able to answer another: Can we escape?
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SUMMARY:
- A week of gains on less worry about Europe, but its troubles are not just ending.
- Michigan Sentiment tops expectations but it is still at recession levels.
- Note to Geithner: our politics are not terrible and don’t ever take sides with anyone against the family again, ever.
- A bit of a pause after the week’s gains would do the rally well.
- Anticipating more upside, but be ready, just in case.
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SUMMARY:
- Liquidity over reality: Central banks unite to provide European banks access to dollars the market won’t lend them and of course financial markets like liquidity.
- ECB action the equivalent of Fed Quantitative Easing, at least as far as markets are concerned?
- Central Bank action does not mean Europe’s problems are over. No, it only underscores how bad things are in Europe.
- Investors overlook more weak US data, rally stocks for fourth straight session.
- Jobless claims spike again.
- CPI jumps on food prices.
- New York, Philly manufacturing negative again.
- Air cargo declines sharply, pointing to another economic slowdown ahead.
- Four days to the upside, expiration as well. Expecting more upside, but likely a pause first.
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By now, you surely know that just before the open on Thursday, the Federal Reserve, ECB, Bank of England, Bank of Japan, and Swiss National Bank joined together in providing U.S. dollar loans to Europe’s commercial banks. In response, the euro rose, the dollar sank, and stocks soared for a fourth straight session. And with stocks now up +6.4% since their lows of Monday morning, the key question that has to be asked is if this is the type of game changer that the markets have been looking for or just another Euro-style band-aid?
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SUMMARY:
- Stocks advance for third session though the close is a bit disquieting.
- Europe adds to the upside again thanks to some Geithner comments, though the news shows it is dancing on the edge.
- ‘Political dysfunction’ is the root of the world’s troubles? Give me a break.
- Retail Sales less than expected, July revised down.
- PPI slows, a welcome respite.
- Bears become more numerous than Bulls. The rare crossover.
- NASDAQ hits its August high and gives back 40% of its gain. After three upside days the market is likely to get a bit of a test from the sellers.
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Long-time readers know that I tend to look at the bright side where the stock market is concerned. This began in 1994, when I was dubbed “Dr. Doom” at the office. After getting stuck in a “dark place” for far too long, I learned the hard way that it doesn’t pay to bet against the U.S. for any length of time – without a darn good reason, of course. And while I do concur that the European debt mess is not another “Lehman moment” and even has a fair chance at being resolved without becoming a total disaster, I thought the media’s explanation for yesterday’s rally was laughable.
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SUMMARY:
- Stocks put aside Europe for another day, add to the Monday reversal.
- BNP, Soc-Gen say ‘nothing wrong with our banks.’ The equivalent of a vote of confidence for a beleaguered coach?
- Germany’s Merkel: no “uncontrolled insolvency” for Greece. Okay, but a ‘controlled insolvency’ is still insolvency, right?
- Oil pushing back against resistance.
- Dollar, bonds take a breather after some impressive runs.
- Short term pattern looking for those June lows, but longer term leaves the upside questionable.
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From a big picture perspective, there are really only two things that you need to worry about these days: Europe and the U.S. economy. Sure, there are lots of little side stories here and there, but if you had just come back from a long vacation, these are the only two things that you would want to focus on. I know, I know, this is really simple stuff. So, before you hit the delete button, let me get straight to the point. You see, if you are a buyer of stocks at current levels (and you don’t plan on selling them in the next 25 minutes), I’m of the mind that you are making a bet that the U.S. economy is not going to go into recession.
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SUMMARY:
- European story start stocks downside, but they hold the recent up trendline and recover positive on . . . a European story.
- M&A again fails to spark overall market interest.
- Potential China investment in Italy helps stocks recover.
- NABE lowers its growth expectations for US 2011.
- Obama sends his bill to the Hill, using tax hikes to pay for it.
- Leaders still look more defensive, but once again other sectors are trying to set up and make the upside breaks.
- Indices hold their recent uptrends thanks to the late recovery.
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For the bears, Monday started off with such promise. In the pre-market, European bourses were down better than -3%, Hong Kong was down -4.2%, and banks in France were being crushed – again. There was a report out of Greece that the poster child for the PIGIS only had enough cash to last through the end of the month. There was the report out of Germany that said an “orderly insolvency” for Greece shouldn’t be ruled out. There was yet another official denial from Greece’s PM that the country won’t default. There was a report about a big hole in some of Europe’s bank balance sheets. And there was disappointment that the G-7 could only muster a handful of paragraphs pledging some sort of support in the future. (more…)
Although the mutual fund managers (aka the long-only crowd) that frequent the airwaves continue to yammer on about the wonderful valuations that are available in the market (yes fans, falling prices do indeed improve the “P” in P/E ratios) and that earnings continue to be strong (the question, of course, is for how long?), it would appear that this market continues to be all about the macro environment these days. Or more specifically, the question of how the heck earnings are going to continue to grow in a world where GDP growth has ground to a halt and the global banking system remains at risk of default(s) by a handful of sovereigns.
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SUMMARY:
- More problems ‘over there’ again undercut US stocks as German ECB chief economist quits amid speculation Greece defaults soon.
- Half a stimulus that did nothing is still nothing as far as financial markets are concerned.
- Things are not all roses for the big companies: TXN outlook disappoints while BAC to lay off tens of thousands.
- Terror threat increase adds to pre-weekend damper.
- The campaign plan has started: Geithner states effectiveness of Obama ‘stimulus’ bill “depends upon Congress.”
- Indices still in their recent uptrend despite falling 5 of 6 sessions.
- Potential leaders still holding onto and building their patterns.
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SUMMARY:
- Stocks recover from a weak open, but cannot recover from a Bernanke that delivered nothing new.
- Europe gives, Europe takes away.
- OECD cuts US and Japan growth forecast as New York Times says double dip chances climb to 50/50
- Bernanke repeats Jackson Hole, dutifully passing ahead of Obama’s ‘major’ address tonight.
- Major address that covers little new ground, misses the point in how we create economic growth in the US.
- Down for the day but indices still in good position to move higher in this third relief bounce.
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From my perch, it seems that there are two key assumptions being made by the bull camp at the present time. First, the glass-is-half-full crowd appears to be assuming that this market is experiencing a case of déjà vu all over again. And second, just like last year, there is the idea that this too shall pass.
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SUMMARY:
- Tuesday reversal continues through Wednesday as Europe clams down, for the day.
- German courts given bailouts the nod as Greece and Italy take austerity ‘action.’
- Same story: some companies see improvement ahead, some see decline ahead.
- Fed Beige Book mixed bag but leaning more toward slowing than improving.
- Tax revenues at 14% of GDP show this is no recovery.
- Good start to third bounce attempt off the same support. Very interesting, but still just looking at this as a relief move to the June low.
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Sometimes it’s what isn’t said that really matters. For example, while there was an abundance of seemingly important headlines from all over the globe to sift through on Wednesday, the fact that the “R” word has been used less and less lately may have been the key to the bulls’ victory yesterday. To be sure, the nattering nabobs of negativity have had plenty to talk about over the past seven weeks. And in short, a weakening U.S. economy has adorned the top of the bears’ list of the macro worries for some time now.
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SUMMARY:
- Big early downside as stocks play catch-up to Europe, but a reversal almost brings NASDAQ back to positive.
- More great timing as Obama Administration sues banks ostensibly over mortgage crisis, but most believe it is simply an effort to break up the banks.
- ISM Services rises over July, topping expectations.
- The debate continues as to who is forecasting the right economic path, large corporations or the equity and debt markets?
- Intraday reversal suggests another near term upside attempt, but new lows on this selling are more likely before any new highs for the indices.
- Watch out for one day wonders.
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One of my absolute favorite Wall Street-isms is “Something that everyone knows isn’t worth knowing.” The idea here is that by the time the proverbial “everyone” is aware of something relating to the stock market, it usually means that “everyone” has already acted on the input in question. It is for this reason that the action in the stock will oftentimes defy logic.
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Although stocks have enjoyed a bit of a bounce from the emotional lows seen on August 8th, the S&P 500 closed Friday -13.2% below its July highs – and the futures market suggests that we could see some additional selling today. But the good news is that coming into this morning’s action; the S&P is up +4.8% from the bottom. As such, it would appear that stocks are in what is called a period of “price discovery” where prices move back and forth in search of the appropriate level for the current environment.
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SUMMARY:
- Zero jobs is not as bad as feared, but no ‘whew, it could have been worse’ rally.
- Average workweek falls in a very bad sign.
- Fed preparing for the worst: tells Citi to prepare a contingency plan.
- Fed’s rumored ‘Twist’ stimulus unable to spark any market upside as Fed seeks to push 10 year bond to 1.5%.
- White House scaling back Obama speech expectations leading one to wonder why so much fanfare in the beginning.
- Indices are heading to the recent lows but many quality stocks held up well Friday.
- Technical picture warning of more downside, but you cannot forget the Fed is out there, leaking its ‘Twist’ strategy Friday.
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SUMMARY:
- No new money on the new month as investors await the jobs report and the holiday weekend.
- Stocks try an early move, but buyers put the wallet up as stocks take another day off after a good run.
- US Economic data this week looks a bit better.
- European, Asian manufacturing continue in the doldrums
- Prospects for a ‘whew’ response to the jobs report improves given the market action and the poor expectations, but will even that amount to much more upside?
Ask yourself the following question: What is the worst macroeconomic environment for stock market investors? Yep, that’s right; an economy that is growing, but just barely, with little job creation and just enough inflation to keep the pain up. In short, this environment amounts to what has been termed a “grocession,” where the economy isn’t technically in a recession but really isn’t growing either. And then when you toss in a dash of inflation (you know, just enough to keep the inflation hawks on the Fed nervous), you’ve got a recipe for weak stock returns.
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SUMMARY:
- Indices push higher once more but find the upside harder to hold, closing off of resistance after an early test.
- ADP missed expectations but not horrendous as feared.
- Chicago PMI lower but tops expectations.
- Factory orders highest in four months
- Some better economic data, but investors still waiting on the ISM, Friday jobs report before committing again.
- Indices hit resistance, reverse modestly. Leading stocks do likewise. A couple of days rest after this bounce could work well for the upside if the jobs report is not as bad a feared.
- Back to an old theme: is bad economic data good for Fed and federal action or is bad news bad?
Although the volume has been uninspired of late, the technicians tell us that stocks have broken out of a double-bottom formation over the past two sessions and that the indices are now embarking on a new rally phase, which is likely to last a while. While the possibility of the dreaded “breakout fakeout” remains present, I will have to admit that the recent price action is in keeping with the waterfall decline script. And the good news is that if the market has indeed embarked on a new uptrend, this means the recent insanity has likely ended.
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