17 Jan
Daily Market Commentary

Stocks Close Below Record Highs

SPX- New base is formingSTOCK MARKET COMMENTARY:
FRIDAY, JANUARY 17, 2013

The S&P 500 ended the week higher and came within a few points of turning positive for the year. The market continues acting very well as it continues consolidating its very strong year-end rally. Remember the bullish fundamental backdrop is still in place for stocks. There bulls are looking for two possible scenarios to occur: 1. The economy grows organically or 2. The Fed continues or increases QE to help the economy grow. Both scenarios are bullish for stocks in the near term. The biggest concern is what happens when the law of diminishing returns kicks in and all the Fed printing doesn’t help Main St or Wall St? My answer is to align ourselves with what is actually happening and if and when that occurs- we’ll cross that bridge when we get there. Until then, Main St and Wall St are responding very well to QE. As we have mentioned several times since late 2012, we are in a very strong bull market and pullbacks should be bought, not sold. In the short term, the market is clearly extended and due for a another short term shallow pullback. Meanwhile, the intermediate and long term outlook remain very bullish as the major averages and a slew of leading stocks continue to act very well.

MONDAY-WEDNESDAY’S ACTION: Bulls Defend Support

Stocks experienced their largest decline in two months on Monday as fear spread regarding Q4 earnings. The selling was short-lived as the bulls showed up and defended support near prior chart highs. The S&P 500’s high in November was 1813 and Monday’s low was 1815- not a mistake. Several large M&A news was announced. Suntory Holdings said it would acquire Beam (BEAM), the maker of Jim Beam and other bourbons, for $14B. Charter (CHTR) made a bid to acquire Time Warner Cable (TWC) but TWC rejected the bid. Google (GOOG) said it would acquire Nest Labs for $3.2B.

Stocks opened higher on Tuesday after JPM and WFC reported Q4 results. Both stocks closed higher for the week which is a strong sign of buying demand. Gamestop (GME) plunged nearly 20% after reporting their numbers. Economic data was light- retail sales rose 0.2% in December which beat estimates for an unchanged reading.  Stocks rallied on Wednesday, helping the benchmark S&P 500 briefly turn positive for the year. The S&P 500 encountered resistance near prior chart highs and pulled back slightly to close just below 1850. At this point, the S&P 500 is building a new base between 1850 and 1813. One should expect this sideways action to continue until either support (1813) or resistance (1850) is breached. Separately, shares of Bank of America (BAC) gapped up after the bank beat numbers.

THURSDAY & FRIDAY’S ACTION: Stocks Almost Turn Positive in 2014

Stocks were quiet on Thursday but continued trading near their 2014 highs as sellers remained at bay. This is exactly the healthy action one wants to see in a bull market. Shares of Best Buy (BBY) gapped down a whopping -30% after the company announced disappointing Q4 results. Goldman Sachs (GS) beat expectations but Citigroup (C) missed. Overall financials have fared well this earnings season which bodes well for Main Street. Economic data was mixed. Weekly jobless claims slid while the cost of living rose by 0.3% last month. The National Association of Home Builders said home builder confidence fell this month after spiking in December. Finally, the Philadelphia Fed’s manufacturing index rose to 9.4 in January from a revised 6.4 in December. Stocks ended mixed on Friday and just below 2013’s highs which is bullish.

MARKET OUTLOOK: BULLS ARE IN CONTROL

As we have been saying all year, the market is very strong in all three time-frames: short, intermediate, and long. The last pullback was shallow in size (%decline) and scope (days/weeks, not months). As always, keep your losses small and never argue with the tape.

06 Dec
Daily Market Commentary

Almost 9 In A Row; Stocks Snap 8-Week Win Streak

SPX- almost 9 in a row 12.9.13STOCK MARKET COMMENTARY:
FRIDAY, NOVEMBER 06, 2013

The SPX and DJIA snapped their 8-week win streak but ended in the upper half of the range (which is a healthy sign). As we have mentioned several times recently, in the short-term the market is extended and a light volume pullback would do wonders to restore the health of this rally. We wrote last week that “The market negatively reversed (opened higher and closer) on Friday which could signal the start of a short term pullback.” which is exactly what happened.  So far, these pullbacks are lasting a matter of days, not weeks or months- which illustrates how strong the bulls are right now. The intermediate and long term outlook remain very bullish as the major averages and a slew of leading stocks continue to act very well. As we have mentioned several times this year, we are in a very strong bull market and pullbacks should be bought, not sold. Every pullback this year has been shallow in both size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year bull market remains easy money from global central banks. We know that the easy money is here to stay (for now). Therefore, barring some unforeseen massive decline, this bull market is alive a well. Eventually the music will end, but as a market practitioner, our only job is to align ourselves with what is actually happening, not what someone thinks will happen. Trade accordingly.
MONDAY-WEDNESDAY’S ACTION: Stocks Slide On Taper Woes
Stocks fell on Monday after the latest data showed Black-Friday traffic rose, but actual sales fell. Over the weekend, Jeff Bezos, founder of Amazon.com (AMZN), said the company is testing a new same-day delivery system via drones. UPS followed on Tuesday and said they are testing a similar strategy. The ISM manufacturing index rose to 57.3 in November which easily beat estimates for 55.
Stocks fell on Tuesday for the third straight day but curbed their loses towards the close. Tesla Motors (TSLA) surged 16% after ta German probe into recent fires involving its Model S sedan did not show any manufacturer-related defects and Morgan Stanley (MS) said TSLA is their top choice in the American auto sector. Shares of Apple, Inc. (AAPL) soared after China Mobile (CHL) said it began taking pre-orders for the iPhone. Until now, China Mobile has not officially sold the iPhone and they are rumored to have over 200 million subscribers- or nearly the size of the entire US adult population. This obviously could be huge new market for AAPL.
The SPX and DJIA fell for the fourth straight day but ended off their intra-day lows as investors digested a slew of economic data. Before the open, ADP, the country’s largest private payrolls company, said US employers added 215k new jobs last month, topping estimates for a gain of 173k. Separately, the US trade deficit narrowed to $40.6 billion in October vis expectations of $40B. The Commerce Department said new homes ales soared 25.4% in October which was the highest level in years. The ISM service index slid to 53.9 in November from 55.4 in October. Finally, the Fed’s Beige Book, which measure economic activity around the country, found expansion in the manufacturing and housing sectors, but hiring was modestly up or little changed.
THURSDAY & FRIDAY’S ACTION: Jobs Report Sparks – Strong Rally
Stocks slid for a fifth straight day on Thursday as fear spread that the Fed will taper sooner than initially expected. Investors digested a slew of economic data which on average topped estimates. GDP rose by +3.6% last quarter which easily topped the Street’s estimate for a gain of +2.8%. Separately, the Labor Department said weekly unemployment claims fell by 23k to 298k last week. Separately, U.S. factory orders fell -0.9% in October. GDP and weekly jobless claims below 300k were the two big headlines for the day. Stocks surged on Friday after the always fun jobs report was released. Before Friday’s open, the Labor Department said employers added 203k new jobs in November while the unemployment rate slid to 7%, matching the Fed’s target. Stocks opened sharply higher on the news because the report was not strong enough for the Fed to decisively taper in December. Separately, inflation, the Fed’s second target, remains way below 2% which is why we do not think the Fed will taper 1 week before Christmas.
MARKET OUTLOOK: Bulls Continue To Fight
The market is very strong and, in the short-term, remains very extended. The market will pullback and it is just a matter of when, not if. As always, keep your losses small and never argue with the tape.

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15 Nov
Daily Market Commentary

Melt Up Continues; 6th Straight Weekly Gain On Wall Street

SPX- Meltup Continues 11.18.13STOCK MARKET COMMENTARY:
FRIDAY, NOVEMBER 15, 2013

Stocks rallied for a sixth consecutive week as the major averages continue to march higher. As we have mentioned several times recently, in the short-term the market is extended and a light volume pullback would do wonders to restore the health of this rally. The fact that the market simply refuses to pullback is very bullish. The intermediate and long term outlook remains bullish as the major averages and a slew of leading stocks continue to act very well. As we have mentioned several times this year, we are in a very strong bull market and pullbacks should be bought, not sold. Every pullback this year has been shallow in both size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year bull market remains easy money from global central banks. We know that the easy money is here to stay (for now). Therefore, barring some unforeseen massive decline, this bull market is alive a well. Eventually the music will end, but as a market practitioner, our only job is to align ourselves with what is actually happening, not what someone thinks will happen. That said, weakness should be bought until intermediate and longer-term technical levels are broken.

MONDAY-WEDNESDAY’S ACTION: Market Is Strong

Stocks rallied on Monday helping the Dow Jones Industrial Average notch another record close. The bond market was closed in observance of Veteran’s Day. Amazon.com (AMZN) made headlines when the company said it inked a deal with the US Postal Service to deliver packages on Sunday. The news came ahead of the holiday shopping season. A separate report showed that online shopping is expected to grow several fold over the next few years.

On Tuesday, stocks fell as fear spread that the Fed may taper QE at their December meeting. We do not think they will taper in 2013 for a few reasons. First, neither of the Fed’s targets have been met: 1. Unemployment rate drops below 7% and (not or) 2. Inflation rises to 2%. Furthermore, an argument could be made that deflation is more of a concern right now than inflation. Another reason is that Janet Yellen is expected to take over in January and she is a big proponent of QE. So, from our point of view, the likelihood that the Fed tapers in December is not very high. Finally, the Fed knows that the Q4 shopping season is very important for the economy and we do not think they will go out of their way to hurt sentiment or hurt this anemic recovery.
Stocks opened lower on Wednesday but closed higher as investors turned bullish ahead of Janet Yellen’s testimony on Thursday. By the close, the S&P 500 and the DJIA jumped to fresh record highs as optimism spread Yellen will be dovish and support QE well into 2014. The fact that the market refuses to fall clearly illustrates how strong this market is right now.

THURSDAY & FRIDAY’S ACTION: Yellen Supports Meltup

Stocks rallied on Thursday as Janet Yellen spent the morning testifying on Capitol Hill.  In case you missed nearly three exciting hours of Dr. Yellen’s testimony – It can be best summed up in two words: Melt Up. The Q&A went something like this: Q: Blah, Blah Blah, A: Meltup. Q: Blah, Blah Blah, A: Meltup. Q: Blah, Blah Blah, A: Meltup. so on and so forth. It is now abundantly clear that Yellen is just as/if not more dovish (supports QE),than Bernanke. From our point of view, the market remains very strong and it would be foolish to argue with this tape. Separately, it may be possible that housing stocks are trying to bottom if the Fed is able to keep rates low. Take a look at: XHB, TOL, DHI, LEN, to name a few. Economic data was light, weekly jobless claims slid by 2k to 339k which bodes well for the jobs market. Stocks continued to Meltup on Friday helping the S&P 500 enjoy its 6th straight weekly gain. NY manufacturing missed estimates which supports the argument for the Fed to continue QE for the foreseeable future.

MARKET OUTLOOK: SPX Approaches 1800

The market is very strong and, in the short-term, is getting more and more extended by the day. We will monitor the health of the market to see if this turns into another short term pullback or something more substantial. Remember, we focus more on how stocks react to the news than the news itself. So far, the action has been very healthy which bodes well for this very strong bull market. Please note that our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.

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08 Nov
Daily Market Commentary

5th Weekly Gain on Wall Street

SPX- 3 weeks tight patternSTOCK MARKET COMMENTARY:
FRIDAY, NOVEMBER 08, 2013

Stocks rallied for a fifth consecutive week as the major averages continue to march higher. As we have mentioned several times recently, in the short-term the market is a little extended and a light volume pullback would do wonders to restore the health of this rally. The fact that the market simply refuses to pullback is a bullish sign. The S&P 500 has formed a bullish 3-weeks tight pattern (best viewed on a weekly chart) and a move higher would suggest higher prices will follow. The intermediate and long term outlook remains bullish as the major averages and a slew of leading stocks continue to act very well. As we have mentioned several times this year, we are in a very strong bull market and pullbacks should be bought, not sold. Every pullback this year has been shallow in both size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year bull market remains easy money from global central banks. We know that the easy money is here to stay (for now). Therefore, barring some unforeseen massive decline, this bull market is alive a well. Eventually the music will end, but as a market practitioner, our only job is to align ourselves with what is actually happening, not what someone thinks will happen. That said, weakness should be bought until intermediate and longer-term technical levels are broken.

MONDAY-WEDNESDAY’S ACTION: Market Refuses To Fall

Stocks rallied on Monday led higher by small cap stocks. Due to the government shutdown, the Census Bureau released factory orders reports for August and September at the same time. The report rose by +1.7% in September after declining -0.1% in August. July factory orders were revised down from -2.4% to -2.8%.

Stocks opened lower on Tuesday but closed near their highs as investors digested a slew of earnings data. AOL, KORS, and CVS all traded higher after reporting earnings. Economic headlines were somewhat promising with the ISM service index rising to 55.4 in October from 54.4 in September.  After Tuesday’s close, Tesla Motors (TSLA) gapped down after reporting earnings. Ahead of earnings, the stock was up over 400% YTD and after the gap down, TSLA is still up over 300%. The violence of this decline suggests, at least in the near term, the air maybe let out of the bag and this stock may continue to fall before going higher again. NFLX, GMCR, CMG are some recent examples of high flying stocks that suffered brutal pullbacks before turning higher again.
Stocks rallied on Wednesday after a few Fed officials reiterated their stance for more QE. According to Thomson Reuters, over 400 companies in the S&P 500 have reported earnings, nearly 70% beat Wall Street’s expectations which is better than the long-term average of 63%. The data shows only 53.3% beat revenue forecasts which is below the 61% average since 2002. Economic data was mixed. The Conference Board’s Index of Leading Indicators rose +0.7% for a second consecutive month in September, beating estimates for a gain of 0.6%. The reading might have been somewhat thrown off by the government shutdown. The weekly MBA Mortgage Index slid -7.0% to follow last week’s increase of 6.4%. Separately, October Challenger Job Cuts fell by -4.2% after a strong 19.1% jump in September.

THURSDAY & FRIDAY’S ACTION:  STOCKS STAY POSITIVE FOR THE WEEK

Stocks fell hard on Thursday after the much anticipated Twitter (TWTR) IPO started trading.  Before the bell, the ECB surprised the Street when they cut rates to stimulate their economy. This sent the Euro plunging and stock futures soaring. Shortly thereafter, US GDP beat estimates which strengthens the case for the Fed to taper QE. This caused a slew of growth stocks and all the major averages to fall in heavy trade. Interestingly, the drop was very short-lived (for now) as buyers showed up on Friday after the jobs report topped estimates. The Labor Department said US employers added 204k new jobs in October, easily beating estimates for a gain of 120k. Stocks edged higher, helping the S&P 500 close higher for the 5th straight week after US consumer confidence missed estimates ahead of the holiday shopping season.

MARKET OUTLOOK: SPX STAYS POSITIVE FOR THE WEEK

The market is very strong and at this point it is simply pausing to digest its recent and robust rally. We will monitor the health of the market to see if this turns into another short term pullback or something more substantial. Remember, we focus more on how stocks react to the news than the news itself. So far, the action has been very healthy which bodes well for this very strong bull market. Please note that our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.

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01 Nov
Daily Market Commentary

4th Weekly Gain On Wall Street

SPX 11.01.13 4th Consecutive Weekly Gain on Wall StreetSTOCK MARKET COMMENTARY:
FRIDAY, November 01, 2013

Stocks rallied for a fourth consecutive week as the major averages continue to march higher. As we have mentioned several times recently, in the short-term the market is a little extended and a light volume pullback would do wonders to restore the health of this rally. The intermediate and long term outlook remains bullish as the major averages and a slew of leading stocks continue to act very well. As we have mentioned several times this year, we are in a very strong bull market and pullbacks should be bought, not sold. Every pullback this year has been shallow in both size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year bull market remains easy money from global central banks. We know that the easy money is here to stay (for now). Therefore, barring some unforeseen massive decline, this bull market is alive a well. Eventually the music will end, but as a market practitioner, our only job is to align ourselves with what is actually happening, not what someone thinks will happen. That said, weakness should be bought until intermediate and longer-term technical levels are broken.

MONDAY-WEDNESDAY’S ACTION: Buy The Rumor, Sell The (Fed) News

Stocks ended mixed on Monday as investors waited for a slew of data to be released this week. So far, around half of the companies in the S&P 500 have reported results. Nearly 70% posted stronger-than-expected earnings and 54% posted stronger-than-expected revenue. The market’s reaction has been very strong as the major averages continue to march higher.  After the bell, Apple reported earnings but the stock fell on Tuesday after the company said gross margins for the current quarter were below estimates.

Stocks enjoyed healthy gains on Tuesday, helping the DJIA jump to a fresh record high. In the middle of the day, IBM reported a large share buy back which helped the price weighted average hit a new record high. The Nasdaq suffered another technical glitch which disturbed data flow for nearly an hour. Economic data was mixed. Retail sales slid in September, which missed estimates for a small gain. The S&P/Case Shiller index showed that prices for single family homes rose in August. Meanwhile, inflation concerns continued to ease after the produce price index (PPI) unexpectedly slid in September for its first decline since April.
Stocks fell on Wednesday after the Fed concluded its two day meeting and decided to not taper QE. In a classic case of buy the rumor, sell the news, the market sold off and fell from record highs after the Fed meeting. Before the open, ADP, the country’s largest private payrolls company said, US employers added 130k new jobs in October, missing estimates for 150k. The consumer price index (CPI) rose 0.2% in September which gives the Fed the green light to continue printing money. After the bell, Facebook (FB), Starbucks (SBUX), and Visa reported their quarterly results.

THURSDAY & FRIDAY’S ACTION:  Stocks Stay Positive For The Week

Stocks fell on Thursday but ended higher on Friday as investors digested a busy week for earnings and economic data. Stocks are now falling on stronger-than-expected economic data. The underlying notion is that stronger-than-expected economic data will force the Fed to taper sooner than expected. Manufacturing surged to a 2.5 year high which bodes well for main street. Separately, a shooting incident broke out in LAX and was thankfully contained within the hour.

MARKET OUTLOOK: SPX Stays Positive For The Week

The market is very strong and at this point it is simply pausing to digest its recent and robust rally. We will monitor the health of this pullback to see if this turns into another short term pullback or something more substantial. Remember, we focus more on how stocks react to the news than the news itself. So far, the action has been very healthy which bodes well for this very strong bull market. Please note that our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.

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26 Oct
Daily Market Commentary

3rd Straight Weekly Gain on Wall Street

SPX- Getting Extended 10.28.13STOCK MARKET COMMENTARY:
FRIDAY, OCTOBER 25, 2013

Stocks rallied for the third straight week as the bulls remain in control of this market. In the short-term the market is getting extended and a light volume pullback would do wonders to restore the health of this rally. As we have mentioned several times this year, we are in a very strong bull market and pullbacks should be bought, not sold. Every pullback this year has been shallow in both size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year bull market remains easy money from global central banks. We know that the easy money is here to stay (for now). Therefore, barring some unforeseen massive decline, this bull market is alive a well. Eventually the music will end, but as a market practitioner, our only job is to align ourselves with what is actually happening, not what someone thinks will happen. That said, weakness should be bought until intermediate and longer-term technical levels are broken.

MONDAY-WEDNESDAY’S ACTION: Stocks Extend Gains

Stocks ended mixed on Monday as the world waited for Tuesday’s jobs report to be released. The market traded in a tight range which was healthy after the prior two week’s healthy advance.Most of the economic data that was postponed due to the government shutdown came out in this week. Existing home sales in September slid 1.9% to an annual rate of 5.29 million units which missed the Street’s estimate and was the lowest level in nearly five months.. Underneath the surface the action was healthy as leading stocks continued to hold up rather well. After Monday’s close Netflix (NFLX) surged after smashing estimates. The stock gapped up on Tuesday but quickly fell over $50 in the first hour after the open.
Before Tuesday’s open, the Labor Department said US employers added 148k new jobs in September, missing estimates for a gain of 180k. Meanwhile, the unemployment rate slid to 7.2% which was the lowest level since November 2008. Stocks rallied and the US dollar fell because this suggests the Fed will not taper in 2013.. Meanwhile, construction spending rose 0.6% to an annual rate of $915.1 billion in August.
Stocks closed lower on Wednesday and snapped a 5-day win streak. Markets in Asia were hit after fear spread regarding China’s economy and their financial system. One of China’s largest banks, The Industrial and Commercial Bank of China (ICBC) wrote off #3.7 billion in bad debt for the first half of 2013. Separately, rumors spread that China’s central bank may look to tighten liquidity to combat inflation risks. The European Central Bank said they will begin a stress test for about 130 banks in November. The stress test is designed to see whether European banks are able to withstand another financial mess. Economic data in the US was mixed. Import prices rose 0.2% in September but that did not spark inflation fears.

THURSDAY & FRIDAY’S ACTION:  Bulls Are In Control

The bulls immediately showed up and quelled the bearish pressure and sent stocks higher on Thursday. The benchmark S&P 500 jumped and closed above 1750 after a flurry of mixed to stronger economic and earnings data was released. In China, HSBC’s flash PMI, which measures their manufacturing sector, rose and topped estimates largely due to new orders. In Europe, Markit’s flash PMI unexpectedly slowed in October. In the US, weekly jobless claims slid by 12k to a seasonally adjusted 350k, which missed estimates for 340k. The US trade deficit widened by a modest 0.4% to $38.9 billion in August as exports slid. After the bell, AMZN and MSFT gapped up after releasing their Q3 results. Stocks were quiet on Friday as investors digested the recent move.

MARKET OUTLOOK: SPX Tops 1750

The market is very strong and evidenced by the very impressive action we are seeing in the major averages after another relatively short pullback. Remember, we focus more on how stocks react to the news than the news itself. So far, the action has been very healthy which bodes well for this very strong bull market. Please note that our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.

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12 Oct
Daily Market Commentary

Stocks Positively Reverse & Close Above Resistance

SPX- Stocks break above short downward trendline in strong uptrend 10.14.13STOCK MARKET COMMENTARY:
Friday, October 12, 2013

The market positively reversed last week (opened lower and closed higher) after investors believed that a deal would get done in DC. So far this appears to be just another shallow pullback in size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year bull market remains easy money from global central banks. We now know that the easy money is here to stay (for now). Eventually the music will end, but as a market practitioner, our only job is to align ourselves with what is actually happening, not what someone thinks will happen. That said, weakness should be bought until intermediate and longer-term technical levels are broken. The market remains very news-driven which is an unfortunate reality right now.

MONDAY-WEDNESDAY’S ACTION: Gov’t Shutdown Drags On

Stocks fell on Monday after both sides of the isle made it clear on the Sunday talk shows that they still were not ready to make a deal. Republican House Speaker John Boehner made it clear that he did not have a majority to pass a bill to raise the $16.7 trillion borrowing limit without spending cut conditions attached. Speaking to ABC television over the weekend, he said the U.S. was on the path to a credit default. If the US defaults, this will be the first default in history. The latest projections show that for Q3, S&P 500 earnings are expected to grow by +3.12% vs the same Q in 2012.
Stocks fell hard on Tuesday as the nonsense in DC continued. A notable difference on Tuesday was that a slew of leading stocks got smacked. Up until Tuesday, the leaders acted very well while the rest of the market was under pressure. It will be very interesting to see how this plays out. Obama held a press conference and, as expected, blamed the GOP for not doing their job. Separately, Treasury Secretary Jack Lew said that the country may run out of money sooner than people expect which hurt confidence.
Stocks positively reversed on Wednesday (opened lower but closed higher), helping the market bounce from deeply oversold levels. Obama officially nominated Federal Reserve Vice Chair Janet Yellen to replace Ben Bernanke as the chairman of the Fed.  Yellen is believed to be more dovish on monetary policy than Bernanke (hard to believe, we know) which makes fans of QE very happy. The minutes from the Fed’s September meeting were released and showed the decision not to taper was a “relatively close call.” Obama made plans to talk with Republican lawmakers to help resolve the budget deadlock.

THURSDAY & FRIDAY’S ACTION:  Stocks Bounce

Stocks soared on Thursday after the ice broke between the Dems and the GOP. Investors quickly became optimistic that a deal would get done to end the budget gridlock.  House Speaker John Boehner said the GOP would offer a temporary increase in the debt ceiling in return for discussions with the Dems on other budget and deficit issues. The Obama administration said they are willing to look at the proposal to extend the debt ceiling but insist that lawmakers must end the government shutdown as well. The Dow soared 320 points on the news.

MARKET OUTLOOK: SPX Jumps Above Resistance

The market is bouncing after yet another relatively short pullback. Remember, we focus more on how stocks react to the news than the news itself. We will see what happens in D.C. and then look forward to earnings season. Please note that our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.

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04 Oct
Daily Market Commentary

Week In Review: Stocks Fall 1st Week of October

SPX- Closes On Resistance of Triangle Pattern 10.7.13STOCK MARKET COMMENTARY:
FRIDAY, October 04, 2013

The market fell last week but closed in the upper half of its range after the US government shutdown for the first time since 1996! The S&P 500 is fighting to stay above its respective 50 dma line but the DJIA broke below it. The Nasdaq Composite and the Small and Mid cap indices continue to outperform as they remain perched near their 2013 highs. So far this appears to be just another shallow pullback in size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year bull market remains easy money from global central banks. We now know that the easy money is here to stay (for now). Eventually the music will end, but as a market practitioner, our only job is to align ourselves with what is actually happening, not what someone thinks will happen. That said, weakness should be bought until intermediate and longer-term technical levels are broken. The market remains very news-driven and the latest headlines remain the always exciting drama in D.C. It is unfortunate that the US economy has to suffer while both sides of the aisle continue to embarrass themselves…again.

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MONDAY-WEDNESDAY’S ACTION: Gov’t Shutsdown

Stocks fell on Monday after it became clear that the government would be forced to shutdown at midnight. As expected, the geniuses in DC failed to reach a deal and the government shut down for first time since 1996. For the month, the Dow rallied 2.16 percent, the S&P 500 jumped 2.97 percent, and the Nasdaq soared 5.06 percent. For the third quarter, the Dow rose 1.48 percent, the S&P rallied 4.69 percent, and the Nasdaq vaulted 10.82 percent. Economic data was mixed. In the US, the ISM Chicago PMI rose to 55.7, topping estimates for 53. Overseas, China said its HSBC PMI fell to 50.2, significantly below the flash estimate for 51.2.
Stocks rallied on Tuesday helped by upbeat manufacturing data as investors looked past the first partial government shutdown since 1996. The White House ordered federal departments to execute shutdown plans, leaving 800k people without work or pay until a deal is reached. The ISM manufacturing index jumped to the highest level in 2.5 years, easily beating estimates. Auto sales in the US remained healthy in Q3 which bodes well for the economy. Construction spending was delayed because of the government shutdown. Meanwhile, billionaire investor Carl Icahn met with Apple’s CEO and pushed hard for a $150 billion buyback. They are scheduled to meet again in a few weeks.
Stocks fell on Wednesday as the VIX continued to ramp higher. The VIX is largely considered a fear index and rises when stocks fall or when fear is elevated. ADP said private employers added 166k new jobs last month, missing estimates for 180k new jobs. Earnings season is just around the corner. According to Reuters, companies issuing negative outlooks for Q3 outnumber positive ones by 5.2-to-1. This is the largest negative reading since the 6.3-to-1 ratio in the second quarter. The ECB held rates steady and Mario Draghi said, “We view this recovery as weak, as fragile, as uneven,” He also reiterated his previous commitment to keeping rates at present or lower levels for an extended period of time.

THURSDAY & FRIDAY’S ACTION:  Gov’t Is Closed

Stocks fell hard on Thursday after gunshots were fired outside the Capitol building and the government remained shutdown for the third day. The DJIA fell 180 points after Obama said he will not meet Republican demands in exchange for operating the government. After those comments, the President met with Congressional leaders but failed to resolve the budget deadlock. The Treasury said the US will exhaust its borrowing limit on October 17 unless Congress votes to raise the debt ceiling. If the US defaults, it will be the first default in US history! Weekly jobless claims rose by 1k to a seasonally adjusted 308k which missed estimates for 314k. Separately, growth in the service sector eased in September compared to August’s level. The ISM service index slid to 54.4, missing estimates for 57. Stocks were quiet on Friday as the world waited for a deal in DC. October’s jobs report was postponed because of the shutdown.

MARKET OUTLOOK: SPX Defends 50 DMA Line

The market is pulling back and it will be important to see if the bulls can quell the bear’s efforts. Remember, we focus more on how stocks react to the news than the news itself. We will see what happens in D.C. and then look forward to earnings season. Please note that our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.

27 Sep
Daily Market Commentary

Stocks End Week Lower, But On Track To End Month & Quarter Higher

SPX- 9.30.13- long triangleSTOCK MARKET COMMENTARY:
FRIDAY, SEPTEMBER 27, 2013

The market fell last week but is on track to end the month and quarter in the black. The major averages are pulling back into their respective 50 dma lines and so far this is appears to be another shallow pullback in size (% decline) and scope (weeks, not months). The primary catalyst behind this 4.5 year bull market remains easy money from global central banks. We now know that the easy money is here to stay (for now). Eventually the music will end, but as a market practitioner, our only job is to align ourselves with what is actually happening, not what someone thinks will happen. That said, weakness should be bought until further weakness emerges. The market remains very news-driven and the latest headline remains the always exciting drama in D.C. That debate will be interesting as both sides of the aisle embarrass themselves…again.

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MONDAY-WEDNESDAY’S ACTION: Stocks Pullback

Stocks fell on Monday as investors turned their attention to the debt ceiling debate in D.C. The Dow Jones Industrial Average officially added its three newest members:Goldman Sachs (GS), Visa (V), and Nike (NKE) which replaced Alcoa (AA), Hewlett-Packard (HPQ) and Bank of America (BAC). New York Fed President William Dudley defended the Fed’s decision to not taper QE at their September meeting. Shares of Apple (AAPL) jumped 5% after the company announced a record 9M iPhone 5 sales which easily topped estimates. Elsewhere, BlackBerry surged after Fairfax Financial announced a $4.7B bid to acquire the company for $9/share. Overseas data was positive. Eurozone business activity grew faster than expected in September, thanks in part to strength from France and Germany.In China, the HSBC flash manufacturing PMI of small and medium size businesses hit a six month high of 51.2 in September.
On Tuesday, stocks ended mixed causing the S&P 500 to have its second 4-day losing streak of 2013. Meanwhile,the small cap Russell 2000 index jumped a new record high which bodes well for the major averages. Economic data was mixed. The S&P Case/Shiller index showed that home prices rose 0.6% in July and were up 12.4% vs the same period in 2012. That matched estimates and was the strongest annual increase since February 2006. Meanwhile, the consumer confidence index slid in September to 79.7 which just missed the Street’s estimate for 79.9. The Richmond Fed manufacturing index was 0 and missed the Street’s forecast for 10. The FHFA House Price Index topped estimates and rose 1% from last month and 8.8% from the same period in 2012. The Street expected a gain of 0.6% and 7.8%, respectively.
Stocks experienced their first 5-day losing streak of 2013 on Wednesday after several low-end retailers said sales may be weaker than expected. Wal-Mart (WMT) said it is cutting orders amid rising inventories heading into the holiday shopping season. Other big-box retailers including Target (TGT), Costco (CSCO), Dollar General (DG) and Dollar Tree (DLTR) fell on the news.  Separately, new home sales rose 7.9% in August to an annual rate of 421k units but held near their lowest levels for 2013. Weekly mortgage applications rose for a second week which bodes well for the housing market. Durable goods orders edged up 0.1% in August, topping estimates for a decline of -0.5%.

THURSDAY & FRIDAY’S ACTION: Stocks Pullback Into Their 50 DMA Line

Stocks edged higher, snapping the longest losing streak of the year after as investors digested the latest round of economic data. The government the US economy grew at a 2.5% annual rate in the second quarter which was a bit shy of the 2.7% estimate. Weekly jobless claims slid by 5k to 305k which was much lower than the 330k forecast. Pending home sales slid -1.6% in August to 107.7 which was the lowest level since April. Stocks fell on Friday as debt limit concerns remained unresolved. Consumer sentiment slid to 77.5 in September which missed estimates for 78 and was the lowest level in five months.

MARKET OUTLOOK: 50 DMA Line Is Support

The market is pulling back and it will be important to see if the bulls can defend the 50 DMA line. So far this year, every major potential crisis (headline risk) has passed without an issue. We will see what happens in D.C. and then look forward to earnings season. Please note that our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.

13 Sep
Daily Market Commentary

Stocks Are Getting Stronger

SPX- 3 bullish breakouts above downward trendline of large triangle, above 50dma line and above double bottom 9.16.13STOCK MARKET COMMENTARY:
FRIDAY, SEPTEMBER 13, 2013

The market is acting much better after another very brief pullback in both size (% decline) and scope (weeks, not months). Several of the external “fears” that plagued Wall Street since early August have eased. Last week Syria agreed to surrender its chemical weapons so that helped offset concern for an imminent attack.  The Fed meets next week so we’ll have to wait-and-see what happens with respect to tapering QE. Finally, a few steps have been taken by Congress to help prevent a government shutdown due to the impending debt limit We are watching very closely further deterioration because so far the first 8 months of 2013 are eerily similar to 1987.

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1987 VS 2013: A QUICK LOOK

It is important to note that Jan-Aug 2013 looks eerily similar to Jan-Aug of 1987. We are not there yet but something we are watching closely. Here are a few facts for your review: In 1987, the S&P 500 soared over 30% from Jan-Aug. So far, in 2013, it vaulted 20% during that period. In 1987, the S&P 500 topped out at the end of August then broke below its 50 DMA line in September. Then support was broken on Oct 14, 1987 when it took out its recent lows – just above 308 (& no that is not a typo!). Then it broke and closed below its 200 DMA line on October 15th. The following Monday was “Black Monday” where the S&P 500 lost an incredible -15% in one day! We are not sure how the rest of 2013 plays out but we will be on the look out for further weakness.

MONDAY-WEDNESDAY’S ACTION: Stocks Continue To Bounce

Stocks rallied on Monday, helping the tech-heavy Nasdaq composite and Nasdaq 100 (QQQ) jump to a fresh 2013 high. The benchmark S&P 500 index jumped above its 50 DMA line and the middle of its 7-week double bottom pattern, both bullish signs. Overnight China said its exports rose by 7.2% in August which topped estimates for a 6% gain. The stronger-than-expected data bodes well for the global economy. Separately, fear eased regarding the situation in Syria after Secretary of State John Kerry said a “resolution” would not be found on a battlefield. On the economic front, the Federal Reserve said US consumer credit growth rose at a 4.4% annual rate in July expanding by $10.4 billion, down from a 5% rate in June. This beat the Street’s estimate for $12.5 billion.
Stocks rallied on Tuesday after better than expected data was announced from China and fear eased for an imminent strike on Syria. Goldman Sachs (GS), Nike (NKE), and Visa (V) were added to the Dow Jones Industrial Average replacing Alcoa (AA), Bank of America (BAC), and Hewlett-Packard (HPQ). In China, Industrial output, retail sales, and fixed income investment all beat estimates which bodes well for the global economy.
Stocks ended mixed on Wednesday after Apple (AAPL) slid 5% on the heels of their latest product announcement. After the close, Billionaire investor, Carl Ichan, said he was buying more shares of Apple as prices fell and that this is his best idea right now. In other news, Syria accepted Russia’s proposal to hand over their chemical weapons to an international agency which helped easy geopolitical woes in that region. Mortgage applications slid last week as rates hit their highest level for the year. Separately, refinancing activity plunged to the lowest level in four years.

THURSDAY & FRIDAY’S ACTION: Stocks Digest The Recent Move

Stocks were quiet on Thursday as the market paused to digest the recent gain. The big news came from the political front after Vladimir Putin published an Op-Ed in the NY Times. The letter was a political slap in Obama’s face and one person on twitter said Putin is now doing donuts in the White House lawn. Speaking of Twitter, the company filed for an IPO sometime next year. Disney (DIS) helped the DJIA rally after it announced a $6-$8 billion share buyback. The yearlong back-and-fourth saga ended when Dell’s board agreed to Michael Dell’s plan to take the company private. Economic data was relatively light. The Labor Department said weekly jobless claims slid by 31k to a seasonally adjusted 292k but the data was thrown off by a “processing glitch.” An analyst from the Labor Department said the majority of the decline appeared to be because two states did not process all the claims they received last week. Elsewhere, export prices slid -0.5% in August falling for the sixth consecutive month.
Stocks rallied were quiet on Friday after the latest economic data was mixed to somewhat softer than expected which lowered the odds for the Fed to taper aggressively next week. We find it funny that one of Bernanke’s goals was to make the Fed more transparent, not less. Wednesday’s Fed meeting is the most anticipated Fed meeting this year because no one has a clue what is going to happen (so much for transparency). Retail sales only rose by 0.2% in August which missed estimates for a gain of 0.4%. The first reading for September consumer sentiment slid to 76.8, missing estimates for 82. The Producer price index (PPI) rose 0.3% in August, just above the 0.2% estimate.

MARKET OUTLOOK: 50 DMA LINE IS Support

The market looks much healthier now that all the major averages are back above their respective 50 DMA lines. Please note that our goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. As always, keep your losses small and never argue with the tape.

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