08 Dec
Daily Market Commentary

Stocks Fall On Negative Economic Data

Tuesday 12.08.09

Market Commentary:

The major averages opened lower as the dollar strengthened for a fifth consecutive session. A slew of negative headlines were released on Tuesday which led many investors to question the ongoing economic recovery: German industrial production unexpectedly fell, several credit-rating companies highlighted the risk of huge government deficits, and Dubai World’s Nakheel PJSC said it lost $3.65 billion. Leadership among high-ranked growth stocks had dried up in recent weeks, so the expansion in new highs this week has been a welcome improvement. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Ratings Downgrades:

The major averages gapped down at the open after several well-known rating agencies downgraded several nation’s credit. Moody’s Investors Service said deteriorating public finances in the U.S. and U.K. may “test the Aaa boundaries.” They also said that the U.S. and U.K. have “resilient” Aaa ratings while Canada, Germany and France’s ratings are “resistant.” Fitch Ratings, another well-known rating agency, cut Greece down to a BBB+ which is the third-lowest investment grade. Meanwhile, Standard & Poor’s put Greece’s A- rating on “watch” for a possible downgrade.

Economic News:

Overseas, Japan’s government supported 7.2 trillion yen ($81 billion) stimulus package to help their economic recovery. In Europe, German industrial output slid -1.8% in October led by a drop in production of energy and investment goods. This was lower than the average estimate for a +1% percent gain, according a Bloomberg.com. Elsewhere, Nakheel, the Dubai World-owned property developer seeking to renegotiate its debt, said that it had a first-half loss of 13.4 billion dirhams ($3.65 billion) due to lower revenue. A spokesman for Dubai World, Nakheel’s parent, declined to comment on the write down.

U.S. Dollar & Commodities:

The weaker-than-expected economic news from Germany coupled with the multi billion dollar loss from Nakheel sent the US dollar higher and a host of dollar denominated assets lower. Crude oil slid for a fifth consecutive day and gold continued falling from its all-time high last Thursday.

Price & Volume:

The U.S. stock market remains resilient as it simply refuses to go down. Longstanding readers of this column know that we prefer to focus more on how the market reacts to the news than the news itself. That said, the bears had all the possible ammunition to send stocks plunging on Tuesday and the fact that they did not (or could not), speaks volumes. In addition, the market remains strong since it has barely “corrected” and continues consolidating its recent move just below resistance. Looking forward, the bulls deserve the bullish benefit of the doubt until one of the major averages trades, and closes, below its respective 50 day moving average line.

07 Dec
Daily Market Commentary

Stocks End Mixed As Volume Recedes

Monday 12.07.09

Market Commentary:

The stock market ended mixed on Monday after trading in a very tight range for most of the session. Volume, an important indicator of institutional sponsorship, was lower than Friday’s levels on both major exchanges which suggested large institutions were not aggressively selling stocks. Advancers led decliners by about a 10-to-9 ratio on the NYSE and were roughly even on the Nasdaq exchange. There were 29 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, less than the total of 45 issues that appeared on the prior session. Leadership among high-ranked growth stocks had dried up in recent weeks, so the expansion in new highs this week has been a welcome improvement. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Bernanke Speaks:

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04 Dec
Daily Market Commentary

Week In Review: Leaders Get Hit As Market Churns

Friday 12.04.09

Market Commentary:

Stocks ended the week higher as investors digested a slew of economic data. On Friday, stocks edged higher after the government released a stronger than expected jobs report. Volume, an important indicator of institutional sponsorship, was higher than Thursday’s levels on both major exchanges. The fact that the major averages closed in the lower half of their daily ranges on heavier volume could be interpreted as churning- which is not a healthy sign. Advancers led decliners by a 2-to-1 ratio on the NYSE and by well over a 2-to-1 ratio on the Nasdaq exchange. There were 45 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, one more than the total of 44 issues that appeared on the prior session. Leadership among high-ranked growth stocks had dried up in recent weeks, so the expansion in new highs this week has been a welcome improvement. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Mon-Friday’s Action:

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03 Dec
Daily Market Commentary

Stocks Negatively Reverse After Encountering Resistance

Thursday 12.03.09

Market Commentary:

The major averages negatively reversed (opened higher and closed lower) after a the European Central Bank (ECB) held rates steady and disappointing economic data was released. Volume, an important indicator of institutional sponsorship, was mixed compared to Wednesday’s levels; higher on the NYSE and lower on the Nasdaq exchange. As a result, the NYSE indexes marked a distribution day as they fell on higher volume but the Nasdaq avoided one since volume receded. Advancers led decliners by almost a 2-to-1 ratio on the NYSE and by over a 2-to-1 ratio on the Nasdaq exchange. There were 44 high-ranked companies from the CANSLIM.net Leaders List that made a new 52-week high and appeared on the CANSLIM.net BreakOuts Page, lower than the total of 46 issues that appeared on the prior session. Leadership among high-ranked growth stocks had dried up in recent weeks, so the expansion in new highs this week has been a welcome improvement. New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Jobs & The Economy

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02 Dec
Daily Market Commentary

Investors Digest Economic Data; Stocks End Mixed

Market Commentary: Wednesday 12.02.09

The major averages ended mixed but in the lower half of their intra day range as investors digested the latest round of economic data. Volume, an important indicator of institutional sponsorship, was lighter than Tuesday’s levels on both major exchanges which helped offset the weak close. Advancers led decliners by almost a 2-to-1 ratio on the NYSE and by a 17-to-11 ratio on the Nasdaq exchange. There were 46 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, one more than the total of 45 issues that appeared on the prior session. Leadership among high-ranked growth stocks had dried up in recent weeks, so the expansion in new highs was a welcome improvement.  New 52-week highs solidly outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Economic Data Mixed:

Before Wednesday’s opening bell futures fell after ADP Employer Services, the country’s largest private payrolls company,  said US employers slashed -169,000 jobs last month which topped the –150,000 expected by Wall Street. Investors use the ADP private report as a proxy for the government’s official jobs report which is slated to be released on Friday. Analysts expect that US employers slashed -100,000 jobs last month while the unemployment rate held steady at 10.2%.

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01 Dec
Daily Market Commentary

Dow Hits New 2009 Closing High As Dollar Falls

December 1, 2009

Tuesday’s Market Commentary:

Stocks rallied across the globe as the dollar fell and the Dubai World concerns eased. Volume was lighter than Monday’s levels as the major averages advanced. Advancers trumped decliners by almost a 4-to-1 ratio on the NYSE and by a 2-to-1 ratio on the Nasdaq exchange. There were 45 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, higher from the 13 issues that appeared on the prior session. New 52-week highs reported outnumbered new 52-week lows on the NYSE and on the Nasdaq exchange.

Dubai Fears Ease:

Stocks closed higher on the first trading day of the month as news spread that Dubai World entered talks to restructure nearly half its debt. Dubai World is trying to restructure $26 billion as its deadline for repayment approaches. Last week, news broke that Dubai World might default on its debt which rattled capital markets. However, the bulls quickly showed up and defended support as the initial fears subsided. Since the credit crisis began in 2007, the financial world has lost over $1.7 trillion. Therefore, if Dubai World defaults it will be the latest high profile default which will hurt investor’s psyche.

Economic Data:

Elsewhere, HSBC said its index, which measures China’s manufacturing, rose in November and echoed the Institute for Supply Management (ISM)’s U.S. manufacturing index. The ISM said that U.S. manufacturing rose in November for a fourth consecutive month which is a healthy data point for the global recovery. Chinese manufacturing experienced its largest increase in five years as the global economy continues to “recover.” Turning to the housing market, the National Association of Realtors said the number of contracts to buy previously owned homes in the U.S. unexpectedly rose +3.7% in October.

Gold Hits A New All-Time High As The Dollar Falls:

The weaker dollar sent stocks and a slew of commodities higher on Tuesday. Gold rallied for the 11th time in 12 sessions and hit a fresh all time high above $1,200 an ounce as investors continue buying the yellow metal. Gold stocks have benefited handsomely from gold’s impressive rise in recent months. Gold stocks continue to be a strong area of strength in this market. Other leadership can be found in Chinese stocks or large cap US technology names. Unfortunately, outside of those areas, leadership has largely dried up which continues to be the bane for this rally.

30 Nov
Daily Market Commentary

Buyers Emerge In Final Hour As Dubai Woes Ease

Mon November 30, 2009

Market Commentary:

The U.S. stock market closed higher on the first full trading session after the Dubai news broke late last week. On Friday stocks sold off as investors unloaded their positions ahead of the the weekend. Advancers led decliners by a 11-to-8 ratio on the NYSE and were about even on the Nasdaq exchange.  As expected, volume totals were heavier than Friday’s holiday-shortened trading session. New 52-week highs outnumbered new 52-week lows on the NYSE but trailed by a small margin on the Nasdaq exchange.

Buyers Emerge In The Final Hour As Dubai Woes Ease

Stocks spent most of the session in the red but buyers showed up in the final hour which helped the major averages close higher on the day. Monday was the first full trading session since the Dubai news spread late last week and it was encouraging to see the major averages rally as concerns continue to ease regarding the possible default of Dubai World. Dubai World said that it is currently engaged in “constructive” initial talks with its lenders to restructure about $26 billion of debt. At this point, the world is beginning to accept the notion that Dubai World is an isolated incident and it will most likely be bailed out by one of its wealthy neighbors. Since no one knows for sure exactly how much debt is at stake, most investors believe that the total debt is under $100 billion (highest estimates). If that is the case, it is only a “blip” on the world’s economic radar. More importantly, if Dubai is bailed out then it will become a moot issue.

U.S. Dollar Falls:

The U.S. dollar fell on Monday which helped stocks and a slew of commodities. The Chinese government reiterated its stance regarding its stimulus package after India announced its economy grew at a very healthy rate of +7.9%, which topped estimates. The National Retail Federation released a report that showed that holiday traffic was up from the same period last year but the average shopper spent $343.31 in stores and online over the Thanksgiving holiday weekend, less than the $372.57 spent last year.  The group reaffirmed its forecast for a -1% decline in spending for this holiday season.

24 Nov
Daily Market Commentary

Stocks Fall As Investors Digest A Slew Of Economic Data

Market Commentary

Stocks closed lower as investors digested a slew of economic data. Volume, a critical component of institutional demand, was mixed compared to Monday’s levels; higher on the Nasdaq and lower on the NYSE. The higher volume on the Nasdaq marked a distribution day for that exchange but the lower volume on the NYSE helped those indexes avoided that fate. Decliners led advancers by over a 21-to-17 ratio on the NYSE and by over a 16-to-11 ratio on the Nasdaq exchange. There were 12 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, higher from the 41 issues that appeared on the prior session. In terms of new leadership, it was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and Nasdaq exchange.

Banks Under Pressure-Again

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23 Nov
Daily Market Commentary

Strong Start Fizzles In PM

Market Commentary:

The major averages opened sharply higher as the US dollar plunged after the latest round of stronger-than-expected housing data was released. Volume, a critical component of institutional demand, was lower than Friday’s levels on the NYSE and on the Nasdaq exchange which was expected since a series of options expired on Friday. Advancers trumped decliners by over a 3-to-1 ratio on the NYSE and by over a 2-to-1 ratio on the Nasdaq exchange. There were 41 high-ranked companies from the CANSLIM.net Leaders List making a new 52-week high and appearing on the CANSLIM.net BreakOuts Page, higher from the 12 issues that appeared on the prior session. In terms of new leadership, it was encouraging to see new 52-week highs outnumber new 52-week lows on the NYSE and Nasdaq exchange.

Healthy Housing Data Lifts Stocks

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20 Nov
Daily Market Commentary

Stocks Negatively Reverse; Dow Ends Slightly Higher

Week In Review:

The major averages rallied during the first half of the week but the bears showed up in the latter half and erased the gains and sent stocks lower. The Nasdaq, NYSE composite, S&P 500 and small cap Russell 2000 index negatively reversed (open higher and close lower) for the week which is an ominous sign. A negative reversal is a subtle sign that a change in trend may be upon us.

Monday:

Stocks enjoyed healthy gains on Monday which helped send the benchmark S&P 500 index above near term resistance (1100) and to fresh 2009 highs! The US dollar fell after Asian government’s pledged to standby their economic stimulus packages. The 21-member Asia-Pacific Economic Cooperation group, which currently comprises over half of the global economy (approximately +54%), announced that they will maintain their massive economic stimulus packages well into 2010. The greenback fell to a fresh 15-month low which sent a host of dollar denominated assets higher: mainly stocks and commodities!
Turning to the economic front, the US government said retail sales grew +1.4% in October. Several of the country’s largest credit card issuers rallied after reporting charge backs (i.e. bad loans) fell for a six straight month. Elsewhere, Federal Reserve Chairman Ben Bernanke gave a speech to the Economic Club in New York and said economic “headwinds” remain in the economy. He also said that, “Significant economic challenges remain” He went on to say, “The flow of credit remains constrained, economic activity weak and unemployment much too high. Future setbacks are possible.” He also noted that we are in a much better place in Q4 2009 then where we in the same period last year.

Tuesday:

On Tuesday, stocks opened lower but closed higher even as the dollar rallied. Inflation concerns eased after the government released a weaker than expected producer price index (PPI). The headline reading increased +0.3% last month after sliding -0.6% in September. October’s reading was lower than the Street’s estimate of a +0.5% rebound. However, the “big” news in the report was that the core rate, which excludes food and energy, unexpectedly fell -0.6%, following a -0.1% decline in September.
A separate report showed that the country’s manufacturing sector continued to grow, albeit at a very slow rate. At 1:00pm EST, the National Association of Home Builders released their housing market index which was unchanged at 17 in November.

Wednesday:

The bears showed up on Wednesday and spent the rest of the week sending stocks lower. A slew of economic data was released which led many to question the health of this recovery. The Labor Department released a stronger-than-expected consumer price index (CPI) which ignited inflationary concerns. Headline CPI rose +0.3% which was higher than the Street’s forecast for a +0.2% gain.  Core CPI, which excludes food and energy, was unchanged from last month’s reading of a +0.2% gain. However, core prices also topped the Street’s estimate for a +0.1% gain and is the component of the report that the Federal Reserve tends to focus on. The uptick in consumer prices sparked concern that companies will have little room to raise prices this holiday season (which curbs earnings) due to the fact that unemployment is at a 26-year high of +10.2% and wages fell -5.2% in September from the same period last year.
The Commerce Department released a separate report which showed that housing starts unexpectedly tanked last month. Housing starts (a.k.a registrations for new construction for residential housing units), slid -10.6% in October which was well below estimates. Permits for new construction slid -28.9% from the same period last year which led many to question the sustainability of the housing recovery.

Thursday:

On Thursday, stocks got smacked as the dollar continued to rally after the Labor Department said jobless claims (a.k.a the number of Americans filing claims for unemployment benefits) was unchanged at a 10-month low. Stocks also got hit after a report was released that showed mortgage delinquencies surged. So far, since the financial crisis began in 2007, writedowns (a.k.a losses) of mortgage-backed debt has surpassed $1.7 trillion at some of the world’s largest financial firms. The spike in mortgage delinquencies was due to a 26-year high in unemployment and a down tick in wages.
The Mortgage Bankers Association said that out of every six home loans insured by the Federal Housing Administration there is at least one late payment and +3.32% of those loans were in foreclosure last quarter. This was the highest reading for both measures in at least 30 years and bodes poorly for the troubled housing market. Elsewhere, the Organization for Economic Cooperation and Development (OECD) doubled its growth forecast for industrialized nations in 2010 to +1.9%. However, the group said that record debt levels may burden future growth. Separately, the Federal Reserve Bank of Philadelphia released its general economic index which topped estimates and suggests a slight improvement in that region.

Friday:

On Friday, European Central Bank (ECB) President, Jean-Claude Trichet signaled that the ECB will begin curbing its efforts to aid ailing banks. Those of you who have read this commentary over the past 5 years know that we like to analyze the news, yet we pay a lot more attention on how the market reacts to the news. That said, the market has reacted and continues to react rather well to the latest round of economic and earnings data. The vast majority of third quarter earnings are now behind us and the major averages remain perched just under fresh 2009 highs! Barring some unforeseen event, earnings were down for the average company in the S&P 500 for the ninth straight quarter but managed to exceed the average estimate, which is one reason why the markets have reacted so well to earnings. That coupled with the notion that the “worst is behind us” explains the market’s collective “take” on Q3 earnings. In addition, economic data, although not impressive, has improved markedly from this time last year which suggests the global government stimulus packages are working.
The benchmark S&P 500 has surged a whopping +64% from its 12-year low in March as global GDP has rebounded. The two primary concerns regarding this rally is the dearth of high quality leadership triggering technical buy signals and that volume has waned in recent weeks as the market rallied. Most liquid leaders are still holding up well which bodes well for this rally. The universe of high ranked stocks remains very thin which is exactly how this market has performed since the lows in March.

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