BIG Week My Friends, Huge Week

Equities start the day higher as the great S&P 2,500 has been breached!  Does 2,500 mean anything to you and your future stock market plans?  Nope, but it sure is fun to type that.  In between trying to fix a dryer vent (I hate that slinky silver hose thing with a passion) and raking leaves I popped on to $TWTR to see if I could find any hot takes on the stock market.  After wading thru 2.5mm tweets on Trump and why the NFC stinks I found this gem from @jlyonfundmgmt.   Do me a favor, actually do me two favors, click that link and look at the chart then email a friend and tell them how much you love the Baird evening recap (shameless).  You’re back?  What you just saw is exactly the kind of thing that makes me excited about the future.   An equal weighted index of the top 150 stocks worldwide is on the verge of a breakout.   Not only a breakout but a DECADE long breakout.   As every student of the market knows, the real move happens after the range dies so if you are optimistic about the state of the world that chart should help you sleep well at night.  BIG week my friends, huge week.   The Fed meets on Wednesday and all the hipster Fintwit people are expecting them to talk balance sheet reduction.  Oooo, fancy term for selling some of this 4 trillion in bonds they are sitting on but I guess we have to take it seriously.  “Extraordinary monetary policy” has been with us for years and no one knows what’s going to happen when they reverse course so stay tuned to find out.  Wow…a full on stock market breakout in Mid-September after everyone expected some kind of “seasonal weakness” and positioned themselves thus.  You know what that’s a recipe for right?   THIIISSSSSSSSSSSS

After the open we got a burst of buying out of the gates but it fizzled thru lunch.  That chasing I mentioned was definitely in full effect but there wasn’t enough firepower to launch us into orbit.  Speaking of orbit, did you see who $NOC bought today?   OA.   Now you may not know much about OA (I didn’t) but the company name is just AWESOME.   Orbital Attack.   BOOOM.   How in God’s name did I not own a something with that cool of a name?  If anyone knows of a company named Artillery Barrage or Subsurface Warfare can you let me know the ticker symbol please?  So yea, Northrop Grumman bought Orbital Attack for $9.2B and if they change the name I’ll write a sternly worded letter to Wesley Bush.  If these guys aren’t working on a Death Star then I’m going to be disappointed in humanity.  Other winners included SSNI, CF, NVDA (someone apparently launched this one into orbit), MU, and HBAN.  Losers were UBNT (Citron called it a fraud), MAT (apparently if Toys R Us goes out of business that’s bad for toymakers…who knew), CMG, DISCA, and FOX.   Honestly, you’d have thought it would be busier given we were making new highs most of the morning but it wasn’t.  It felt dead.  I guess that can happen in front of a Fed meeting but it shocked me that it was so quiet.  Euphoric thrust higher?  Nope.   By lunch we were treading water up 0.2% wondering what these people are thinking.

There was a selloff around 2pm ET which was probably some dope firing a big sell program into a quiet market.   Will they ever learn?  When you do stuff like that it just invites dip buying into the close (this is all such toppy talk isn’t it?  Even I can see it).   By the time the bell rang we landed on 2,504 up 0.17%.  Not bad…but not exactly the gangbusters follow thru I would’ve liked to see.   Tailwinds right now are improving sentiment about some kind of tax deal and another round of solid corporate earnings.  Headwinds are the Fed and valuations but those take time to play out so let’s not get worked up.  Hey…you know what markets like to do all the time?   Trend.  Guess what?  We’re still solidly in an uptrend.  Final score:  Dow +29bps, S&P500 +15pbs, Nasdaq +10bps, Rus2k +65bps (nice outperform here) 

Volume was actually low.  Our desk was better to buy.  Buying in Energy and Media.   Selling in REITs and Tech.   Shorting in Tech.  News Highlights:

We’ll end tonight with a Wisconsin related link!   Well, this happened at the BYU-Wisconsin game so that’s close enough right?

https://www.youtube.com/watch?v=k0DzsvaQCM4

Have a good night

This Business Will Get Out of Control.

Equities start the day lower because big bad Kim Jong dumb is fueling up his toy rockets again. Sigh…another 0.25% lopped off futures because a guy who likes playing with fire found more matches. I’ll tell you what…this business will get out of control…it will get out of control and we’ll be lucky to live thru it (I’ve been waiting forever to use this link, man I love that movie). @stockcats put out this wonderful spinning chart showing what we keep going thru so hopefully that cycle gets broken one day. CPI came out this morning and it was a touch hot, 1.9% YoY vs expectation of 1.8%. Inflation ex shelter, food, and energy is near a life time low though so I guess if you don’t own a home, eat, or use any energy you definitely don’t care about inflation (h/t @boes_). The odds of a hike in Dec jumped to 42% but I’m in the camp that the Fed is about to use its balance sheet as a primary tool for monetary policy so meh. New highs yesterday!! Boom! Who has two thumbs and loves new highs à this guy. @RyanDetrick pointed out that the S&P is up 5 months in a row and “going back in history a five-month win streak is one of the more bullish signals for longer-term returns. A year later it was higher 23 out of the previous 24 times and higher 13.2% on average”. In other words markets trend...crazy right? Ok, let’s see if another stupid, stupid, stupid pre market selloff due to another potential missile launch did any permanent damage to the rally. Hey, guess what, he’s gonna do this for a long time. He’s been doing it for a long time. Why does it matter so much to the market now and not then? 

After the open we rallied for the entire first half of the day because, like I’ve said a bunch of times on $TWTR, people are still overreacting to headlines. The problem is, we get these blips where it makes sense to fade the crowd but the blips don’t last very long. We hit unchanged just after 11am ET where we jumped right into our vol crushing compactor that happens every single day. VIX at 10.7? no no no, we can’t have that, 10.30 makes sense. Crude…we haven’t talked about Crude in a while…remember when crude fell every single day like a retail stock? Not anymore, Crude hit $50 like it was nothing and I can’t wait for all the bears from $40 to flip and tell us why $75 feels right. Winners were mostly energy names like CHK, RRC, EQT, and FTI but Utes like SO, ETR, and D got in on the action. DIS appears caught in a mouse trap, falling another 1% today after Moonves of CBS gave them a verbal smackdown. I love this quote:  "We think there is a place in the market for straight clips and scores," he said. "I'm a sports fan, but when I turn on ESPN, I see people yelling at each other." Actually, you know what I really hate?  How hard it is to navigate ESPN.COM. I don’t need auto-played highlights of Grambling vs Acorn St while I’m trying to find the freaking Cubs score. Enough of these insanely complex websites PLEASE. There weren’t a ton of losers worth making fun of to be honest but TIF fell 5% after Qatar sold a stake and EFX fell another 3% because “stairs up, elevator down” is a thing from time to time. By lunch we sat on unchanged but well off the morning lows. 

The rest of the day was as exciting as a dry Arby’s sandwich and we closed at 2,496 down 0.09%. Not much to take away here other than the fact that headline reading algos are alive and well. A decent amount of economic data tomorrow so hopefully that’s enough to hit 2,500 on the S&P. Oh and if you’re looking for a LOCK OF THE WEEK Cincy is gonna CRUSH Houston tonight. Who dey!!  Final Score:  Dow +22bps, S&P500 -9bps, Nasdaq -48bps, Rus2k -13bps.

 

News Highlights:

 

I have 2 final links tonight because I couldn’t decide between them.

The first comes from my guy Elon Musk showing all the failures it takes for mankind to advance. Yea, let’s bet against our Thomas Edison because “wow, he really burns cash” So he’s trying to make rockets that land and cars that don’t destroy the environment yet people who sit in fancy offices want to fade all that? Sigh.

 

The second is one of the best tennis serves I’ve ever seen! Love how he sold it too. 

 

Have a good night

Look, the Soup is Made, the Bread is Toasted, the Butter is Soft.

Equities start the day higher as the Bull market ROARS on. Tell you what, this thing is hotter than Sergio Dip and a fresh Taylor Swift track combined!! 2,488…up 11.1% YTD and a gazillion percent since someone at Lehman decided to lend $100mm to a postal worker in Cape Canaveral so he could buy 42 beachfront estates. You know what the craziest part of the past 10 months is? That it came with zero help out of Washington. You know where the 10yr yield was days after the election? 2.15. You know where it is now? 2.15. Tell them what they’ve won Jonny!! YESSSS….You’ve won a roundtrip ticket to “it doesn’t matter who won the election because the US is vibrant economy with a sound rule of law and endless innovation driven by some of the smartest people on the planet” land. You’ll enjoy an 11% gain on your stock holdings because you managed to tune out all the noise and focus on what matters: the economy and corporate earnings. Imagine if we actually got tax reform or healthcare reform or an infrastructure bill…..we’d have money coming out of the wazoo!! Ok, let’s serious it up for a second: The BAML fund manager survey came out this morning and it showed managers are underweight US equities by the most in 10 years. Cash levels are high, taking out protection is at a 14 month high (I mean who doesn’t love protection), and it appears the most crowded trade is now “long bitcoin” (I hate you all for ruining my lottery ticket). Look, these aren’t the kind of things you see at a bubble top (maybe bitcoin but we need another recap to tackle that) so I’m gonna need someone to show me where all the exuberance is because I can’t find it. The number of S&P stocks that made a new 52wk high is expanding again and you know the Fed is gonna go on pause in the wake of recent events. Look, the soup is made, the bread is toasted, the butter is soft, is there anyone here who doesn’t think this is a great set up for a rally into year end? All of a sudden I want bread for dinner too.

After the open there were so many things going on I’m not sure I have the space to address it all! First off there was some kind of big shindig in NY where people who are experts of a different version of the world told us that the future is scary, bitcoin might be a bubble, maybe you should own Gold, and stocks are really “pricey here”. I don’t know, are the people who crushed it in the 2000-2010 era the only ones we can turn to for thoughts about the future? Maybe they were visionaries back then and now we need to find a new group? AAPL held their big product update in that fancy spaceship they built and FINALLY introduced a watch I have to own. No longer will you need to take your clunky iPhone with you to use it, no no my friends now you’ll pay ATT or VZ $10 a month to make phones calls like Dick Tracy. Holy cow, I bet I just alienated everyone under the age of 35. Dick Tracy….Lord….does anyone even know who that is anymore? By the way, how often am I going to have to charge this thing? Every 20 minutes? Honey, I have no idea what time it is, I was playing League of Legends on my watch and it died (just brought it right back to alienate everyone OVER 35.  Look how versatile I am). They also introduced a new iPhone that unlocks by using facial recognition so I guess Tim Cook spent a bunch of time in Braavos lately. Wait, isn’t this supposed to be a market recap?   We spent most of the session following thru on yesterday’s gorgeous breakout and by lunch we sat on 2,493, up 0.2%.  Winners GPS, RRC, PRGO, CTL, and LB.  Losers ANTM, MCD, FE, ES, and PSA (all kinds of utils looked awful).

The rest of the day was spent bouncing around and a close at the highs….boom….2,496 up 0.34%.  So look, we need to talk about follow thru because this is a bull market and once new highs are made you tend to see this happen (h/t Holty). We traded sideways from the middle of July all the way to early September, a long boring grind with no volume and stupid reasons to sell. The top of that range (2,480) will now be support and I’d expect we’d test it at least once or twice this week. If we hold that retest then giddyup because you know the floodgates of buying will open. +11.4% YTD….are you still overthinking it?  Final Score:  Dow +28bps, S&P500 +34bps, Nasdaq +34bps, Rus2k +61bps.

News Highlights:

 

We’ll end tonight with something I honestly can’t figure out. I don’t get how this happened at all and I have an MBA (maybe that’s the problem)

 

https://www.youtube.com/watch?v=SLOc1WLEGrk

 

Have a good night

Remember the Quiet Moments, Embrace Every Second because Only Time has Value.

Equities start the day lower as September comes rumbling in. Oh and guess what, I wore white to work today, BOOM come at me bro. I for one will miss summer, there’s no better season than one filled with sun, freshly mowed grassed, endless vacations, the sounds of children playing, and an ice cream cone at 8 o’clock surrounded by family and friends. There’s a line in Les Miserables that I’ve featured in recaps for years on end and if you think I’m not pulling it out again you’ve lost your mind: “The summers Die one by one, how soon they fly on and on”. I can feel the lament of Jean Val Jean as he sings to a sleeping boy, I can feel the passage of time as my children race towards college. Remember the quiet moments, embrace every second because only time has value. Nothing else is even remotely close, not even the bitcoin I own. Anyway, what should we take away from price action in August? @Mark_Dow put out an awesome tweet and I think it has relevance for the past 30 days (as well as a longer time frame). “The dominant error in professional investing is over-forecasting corrections and then chasing bull markets from a position of weakness" Take a look at price action in August and then come back here for a 2c take on what happened. That selloff was primarily driven by “nuclear war fears” and “the market is a bubble” and “wow, look at what Trump tweeted now”. Yet by Friday September 1st all of those losses were erased. Poof, gone. Once again those who were caught leaning the wrong way i.e. bearish in a primary uptrend were forced to capitulate that view and chase the market back to all-time highs. The story has been the same for years now and @Mark_Dow is right, that error (along with maybe hubris about forecasting) is causing way too many unforced errors. The bull market will end when it ends, there’s no reason to try and out think it. Have a plan and stick to it, there is literally no other rational option.

After the open someone started playing that R.E.M song and the market puked like it was having a 21st birthday. Down 1% in a straight line with things like Irma, North Korea, DACA repeal, Purdue almost winning, that horrible new Taylor Swift song, and the return of Pumpkin Spice lattes being blamed (they suck). September is the worst month for stocks historically but I’m not sure anyone expected to lose 1% on the first Monday. That being said, there’s only been four down 1% days in 2017 so I’m not sure the fifth is a real cause for a panic (there were 14 of them in the first two months of 2016). UTX is buying COL for $22.75B making it the largest M&A event in 2017. I’ll put that in the “good for overall risk sentiment” category. We are nowhere near peak M&A (as a % of GDP it’s actually below average right now) so it’s not a top signal just yet. Winners were few and far between but STX, TRIP, HAL, UAA, and WMT were among them. Losers were plentiful including the entire insurance sector (in front of this new hurricane) as well as RCL, QCOM, VIAB, and CMG. By lunch the market continued to trade as ugly as we’ve seen all year and if we’re gonna price nukes flying around the Korean peninsula 1% feels about right (this is irony, I hope it you can feel it dripping off the page. There isn’t going to be Nuclear War).

We spent the rest of the day being treated like this and by the time the bell rang we gave up a whole 0.75% of our YTD gains. I mean we still have 9.8% to play with but come on, let’s not ruin a good one day panic with trivial details. Apparently everyone was grumpy coming back from vacation because I couldn’t discern one valid reason why the market acted so poorly. I get that global tensions are high and the debt ceiling seems real and we may suffer another devastating natural disaster….actually those are all valid reasons to be grumpy, carry on.  Final Score:  Dow -106bps, S&P500 -75bps, Nasdaq -93bps, Rus2k -98bps.

 

News Highlights:

 

Tonight we’ll end on an awesome mashup. People are awesome plus Fails?? Game meet change!!

https://www.youtube.com/watch?v=Xhy-fu-Mq7M

 

Have a good night

Slowest Week of the Year Drags On

Equities start the day lower as the slowest week of the year drags on. So I showed up today in my #BananaRepublic shirt and #Dockers khakis and #KennethCole loafers to entertain you fine people with market related tidbits and pop culture references but I’ll admit, it’s a struggle right now. We had a nice day yesterday but that felt more like an oversold bounce than anything meaningful. The market remains in an uptrend so let’s not treat every 2% selloff like it’s some kind of game changer (MS put out a report yesterday saying “the correction may be over”. Since when is a 2% move a correction?). Volumes have been, shall we say, anemic this week. Both Monday and Tuesday produced 5.3B share days in a year where the avg session chunks out 6.6B so yes, everyone is still at the beach. Last night Trump threatened a government shutdown unless we build that wall he’s been talking so much about but I have news for you (and it isn’t fake): cooler heads always prevail.  Remember that whole “debt ceiling” fiasco from a few years ago? Yea, that one was a fantastic buying opportunity. Look….politics is a whole lotta bluster that ends with normal decisions being made. I’m fairly certain a government shutdown over a fence isn’t the end of the Bull Market, just like nuclear war wasn’t and Ebola wasn’t and the election last year wasn’t. It’s noisy right now, like when your kid decides to play Despacito for the 856th time, tune it out or ban them from Spotify like I did. Anyway, let’s move on to the next section so I can make fun of retail stocks.

After the open we all looked around for a concrete reason why the mkt was trading lower but couldn’t find anything that made sense. New home sales weak? Sure, but that’s not enough. Political jawboning? Sure, but that changes by the minute. Industrials weak?  Sure, but they have been for a while now. Random market movement based on historical trends and near term projections about earnings and economic data mixed with ever changing sentiment? Sure, but how boring is that?  A’int nobody got time for that nonsense. Ok, why was the market lower then?  Because we bounced so hard yesterday. There, that’s it. Up 1% on low volume invites people to sell and hit SBUX for a sweet cream cold brew (my God they are so good). Consumer Discretionary was the weakest sector but water is wet and the sky is blue. LOW fell 4% after earnings while AAP and AZO continued to break down (see what I did there?). CMG joined the misery falling 2.5% to $297. Boy…when burrito stocks fall they fall hard huh? There was one bright spot in retail land, AEO rose 7% after reporting earnings so I guess teens are still shopping somewhere right? So yea, we spent most of the first half trading lower with most people blaming the usual suspects. By the way, this is likely my last recap ever because I’ll be cashing a $700mm check tomorrow morning. What’s the first thing I’d buy with the money? This.

The rest of the day was aimless price action and a close at 2,444, down 34bps. Let’s see what all the central bankers of the world have to say tomorrow because they very well may put a definitive end to the “easy money” era.  I can actually see them standing there in front of those gorgeous mountains, bathed in a crimson pink sunset reading off a press release that says: “nah nah nah nah…nah nah nah nah…hey hey hey…good bye” 

Final Score:  Dow -40bps, S&P500 -35bps, Nasdaq -30bps, Rus2k -13bps

News Highlights: 

Hey who wants a Fail video?  I do, you do, we all do!

https://www.youtube.com/watch?v=6woHH33gptg

Have a good night

 

Hey, Bonnie Tyler, If You’re Reading This You Gotsa Get PAID Pronto Tonto.

Equities start the day lower on Eclipse Day! Hey, Bonnie Tyler, if you’re reading this you gotsa get PAID pronto tonto. You have about 12 hours of day light to cash in on what is arguably the best 80s video ever created (don’t @ me) so start singing right now. Oh and is there a more relevant line for our current state of affairs than “We're living in a powder keg and giving off sparks”? Who knew that song would foretell the year of our Lord 2017, I sure didn’t. There was no crazy news overnight, or at least nothing that affected the market all that much, so we sat down to a flat market and endless eclipse coverage. Speaking of the market, apparently short interest is at a 10 year low so maybe euphoria is the new hotness. My partner in London Ross Y points out that yea, it’s probably easier to make money on the short side when short interest is super low but that doesn’t make for a good sell signal. He also mentioned the fact that cash levels are high (per the last BAML mgr survey) and there are a record number of investors who think equity markets are overvalued. What’s the conclusion then? None, but that’s the thing with markets, you’ll never get clarity so all you can is have a plan and stick to it just like everyone else. So I was thinking for this eclipse thing that I’d do those glasses where you hold your hands upside down, I’ll let you know how that works out for me in tomorrow thrilling recap titled “Michael goes to the Optometrist”. Did you watch that video I linked?  It’s so good, that ending with the dude singing brings me to tears every time. Laughter that is.

 

After the open, I kid you not, Solar stocks were lower. TSLA fell 3.5% because MY GOD THEIR REVENUES ARE GOING TO GET HIT. TAN, the solar ETF, fell 2.5%. Take that “efficient market hypothesis” you piece of garbage. That was it though, that was the sum total of market activity. The first half of today was as boring as watching an eclipse on TV. Volumes were down 15% across the board as a lack of macro data, earnings, and Fed speak crushed anyone’s interest in this goat rodeo. In fact I’m still writing this section because I need to fill space before the big finish. Winners were FCX, NEM, JCI, O, and RHT.  Losers FL (again), ULTA, UAA, NKE, my God do I have to write these names every single time I do a recap? Ok, from now on just assume retailers were the worst performing stocks so we can talk about other sectors. Hey look energy stocks were down too because Crude fell 2%. How can solar AND crude stocks fall on an eclipse day, make up your mind please. By lunch we were sitting squarely on unchanged as a shadow slowly crept across the North American continent. I went out, looked at a crescent, went back in. Seeing an eclipse is a bucket list event, like zip lining or seeing the Grand Canyon or passing out in an English Pub after drinking really gross warm beer. Wait, where I was I going with this?

 

The rest of the day was me listening to my co workers say “I think my eyes hurt” and the market settling in on 2,428, up 11bps. So…did you miss the eclipse because of clouds or because you were stuck in a meeting talking about EV/EVITDA? Here’s the next one in the US, you only have to wait 2 more Summer Olympics (if you want to see totality in Wisconsin you have to wait until 2099. Congrats, I’ll be dead).  If you’re looking for catalyst this week you’ll have to wait until Janet and Mario shred Corbet’s Couloir on Thursday because that’s about all we got. Slow week? You betcha. Hey, did you catch that Javelin toss by the Nights King last night? That dude has himself a dragon now and you know that wall is coming down next week. And you know that dagger Arya gave to Sansa is ending up in Littlefinger at some point. It’s ON!!  Final Score:  Dow +13bps, S&P500 +11bps, Nasdaq -5bps, Rus2k -7bps.  

Volume was super low. Our desk was better to buy. Buying in Energy and Retail. Selling in Retail and Tech. Shorting in Financials. 

News Highlights:

We’ll end tonight with 3 links of people being stupid (plus a bonus link)!

Stupid playing Golf

Stupid on a Tower

Stupid in a Store

 

Our bonus link is the coolest flyby ever! I love the Blue Angels.

 

Have a good night

What Do You Think is Harder Right Now, Working for the White House or Being a Retail Analyst?

Equities start the day lower after I disband my home council. My son kept pushing for more video games, my wife was demanding new landscaping, and my daughter wanted endless gift cards to Justice (whatever that is) so I decided it was in our nation’s best interests to dissolve it. Hoo boy you can’t read the news nowadays without some kind of political tilt can you? I get it, things are volatile right now, but you know who doesn’t seem to care? Mr. Market. So I wonder….why is that? Why doesn’t the market read the NYTimes or Foxnews and get on FB and start raging like literally every single person I know?  Well my friends watch me tiptoe thru a minefield here. First I think it doesn’t care because markets generally like gridlock. The less interference we get from Washington the better. I mean MIFID 2 came from a bunch of bureaucrats and look what that did. Ugh. Now I’m sure the market would lovingly embrace a corporate tax cut or further de-regulation but in the absence of that “no new stuff” is fine. Second you have to realize that Presidents get far too much credit and far too much blame for what goes on in the economy. The U.S. is an $18 trillion dollar beast, you really think a President has any levers to control that? Please. Lastly we have to remember that the economy and earnings are all that really matter to investors, not statues and marches. As long as those remain good and sentiment about the future doesn’t get decimated then the bull market remains intact even in the face of endless headlines that will be forgotten in mere days. Look, I love this country and I’m always optimistic about her future, you should be too. Don’t get depressed over endless media coverage of a TINY SLIVER of our nation’s history, take solace in the fact that guys like Elon Musk, Jeff Bezos, Tim Cook, and Bob Iger go to work every day to make the world a better place to live in. Those guys are on my team, I’ll back them any day of the week and twice on Friday.

 

After the open it was down and to the right because apparently everyone was concerned about the employment status of Gary Cohn. Imagine your job was SO IMPORTANT that a whiff of you leaving knocked half a percent off the S&P500. That kind of stuff blows my mind. I mean if someone thought I was about to leave Baird the stock would probably triple. I drink a LOT of coffee here so I’m sure margins would soar (oh man I’m done, nice knowing you all). So yea, the market sold off because it thought Cohn might be abandoning ship (turns out he’s not) and macro data wasn’t good enough to counter act that (weekly claims beat, philly fed inline). One of the biggest losers was a retail stock! Can you believe that? What do you think is harder right now, working for the White House or being a Retail Analyst? LB fell 3.5% to its lowest level since 2012 after reporting earnings last night. I don’t know what to say any more about retail, this stock was at $94 in Jan 2016 (we rate neutral). BGG also got crushed falling 13% after reporting earnings. Wait….wait…..are people buying lawn mowers and lingerie on AMZN now? Stop the world I want off. Other losers were NTAP, CTL, ADP, and AAL. There were actually a few retail stocks among the biggest GAINERS like AAP, TSCO, COH, and GPS but go ahead and pull up charts of those and let’s chat about pyrrhic victories. By lunch we were grinding lower, down 1%, as the market just seemed fed up with Washington DC.       

 

The rest of the day was nothing but downside as the market showed us what red numbers really mean. 2,430, down 1.5%, driven by nothing but frustration and antipathy. Of all indices the Rus2k looked the worst as it broke its 200 day to the downside and tech got absolutely smashed because people use it as a source of funds. I guess all those “where is the volatility” articles may need to be rewritten? Yikes, what an ugly day my friends.That being said, Robin Wigglesworth (what an awesome name) of the FT pointed out that, on average, $SPX falls >1% about 36 times a year. Today is the FOURTH such fall of 2017. FOURTH. Doesn’t strike me as panic time just yet. Final score:  Dow -124bps, S&P500 -154bps, Nasdaq -194bps, Rus2k -178bps.

 

Volume was high.  Our desk was better to buy. Buying in Software and Industrials. Selling in Cmdtys and Airlines. Shorting in Materials.

 News Highlights:

Tonight we are going to forgo the comedy because I think a little inspiration is in order. Tonight’s will come from a young Khazak boy who refused to give up. I think there’s a metaphor in here for all of us.

https://www.youtube.com/watch?v=qWU2M0fQwxw

 

Have a good night

I Go On A Couple August Vacations And This Is What Happens?

Equites start the day higher as more and more people climb out of their bunker. Look, I may not be level headed all the time, I’m prone to making dumb decisions like eating Taco Bell at 11pm and choosing trading as my career instead of coding, but anyone who sold stocks because they were worried about Nuclear War has gone off the deep end. There isn’t going to be Nuclear War, there will never be Nuclear War, the principle of M.A.D will always be a thing. Nuclear weapons exist as a deterrent against being attacked that is their main use in our world. Right now I’m putting “War with North Korea because Trump said some mean words” right next to “Ebola” as the dumbest bricks in the Wall of Worry. Now I’m angry. I go on a couple August vacations and this is what happens? Come on now, we’ve seen lots of dumb reasons to sell, don’t get caught up in them. Here, you want a reason to sell something how about these? 1) weekly jobless claims put in a wide bottom and start rising 2) auto sales fall off a cliff   3) the yield curve inverts 4) Batman opens a hedge fund, plays super loud heavy metal music at his desk while buying protection on garbage level loans with a AAA rating on them  and 5)  the stocks you currently own sell consumer related things in a mall with a Sbarro’s and a bunch of angsty teens. Any of those is a reason to sell. Man I’m angry. You know what’s making me even angrier? The fact that Big Ben won’t BONG for the next 4 years. Hold on a second…hold on…..the Luftwaffe and Buzz bombs couldn’t stop the best clock in the world from reminding everyone that England will NEVER back down in the face of evil however a bunch of dudes cleaning it with Windex are silencing her song? Now I’m super angry. Oh and it takes 4 years to fix a CLOCK? Are you joking me? And you wanna be my Brexit salesman? Come on man, London is the best city in the world bar none. Get it together people (and open more Taco Bell’s there please).

After the open most of the action was centered on retail names and since I love poking fun at retail names this should be a fun section. All of the following happened on a day where Retail Sales rose at the fastest pace this year. DKS fell 23% because I guess you can buy golf balls and basketballs online? They blamed weak “hunting sales” but I don’t know….that dog won’t hunt. HD fell 2.5% because literally everyone owns it. I’m not sure how “sky high” expectations were but Chuck Yeager probably couldn’t meet them. AAP dumped 20% because, I don’t know, let’s be lazy and assume people are buying bumpers and oil filters on AMZN now. COH fell 15%, UAA fell 3%, FL fell 4%, ULTA fell 4%, BURL fell 3%, and AMZN was flat. Thursday Aug 15, 2017, brought you to by “Amazon continues to destroy all retail stocks” incorporated. Am I going to be buying landscape materials on AMZN one day? Like say I need 2 tons of rocks and 5 cu yards of mulch, will that be free shipping or what? Winners were SYF, RRC, RCL, CMG, and WYNN. I wish there was a good story to tell among those names but there wasn’t, WYNN was higher because “china worries are overdone” I mean how boring is that? By lunch the market was sitting on unchanged and I was wondering how much money I could make on Craigslist selling Eclipse glasses. You know every single one of your friends will forget them and have unlimited demand on Aug 21 so little Madison and Grayson can see the show. Don’t steal my idea.

The rest of the day was a whole lotta sideways as August continues to limp along (today was the 3rd lowest volume day of the year). Look, earnings were good and economic data is improving, you can put me in the camp of “grind higher till year end” because you know that’s the likely path here. Whether it is Nuclear War or Ebola or Trump or any of these reasons to sell the market ignores them in favor of punishing dis-believers. We see it time and again, a random event or random headline is believed to be the straw that broke the camel’s back when in fact it gets summarily ignored about 24 hrs later. There will be a time to sell, there will be a top in the Bull market, it just won’t be announced and we won’t know what it was until months later.  Stay the course, stay in the game, root for the Bears to beat the Packers. Final score:  Dow +3bps, S&P500 -5bps, Nasdaq -11bps, Rus2k -80bps   

Volume was really low. Our desk was evenly matched. Buying in Tech and Energy. Selling in Financials and Power Equipment. Shorting in Consumer. 

 News Highlights:

 We’ll end tonight with people being awesome because let’s face it, with the news cycle the way it is we already have enough Fail to go around.

 https://www.youtube.com/watch?v=J-XVeut09Zw

Have a good night.

How Fast is This Summer Going By?

Equities start the day higher as Fall begins! Did I just ruin your day? Maybe, maybe not. Actually getting this email probably ruined your day so don’t hate on me more. Just yesterday I was crushing hot dogs and cold beer on the 4th of July and now it’s freaking August? What? When August hits a couple things come to mind 1) Football is imminent. Which means the Bears are about to get pounded by the Packers. Sigh. 2) Summer is winding down, have back in school kids. HAHA. 3) Earnings are in full swing. Doing good too. 4) people start to call for “seasonal weakness”  and 5) everyone wonders why it’s so quiet. Same story every…single….year. Oh trading is slow in August?  Please tell me more Nostradamus. 600+ companies report today and tomorrow so if you are looking for analyst reports at midnight with quotes like “we are cautiously optimistic” this is your week baby. Speaking of earnings things are still going great so Bears really don’t have much to hold on to other than CAPE and Valuations and “Long in the tooth” and other ways to say “I missed the whole thing so now I have to scare everyone else.” AAPL reported last night and the company appears to be well on their way to Dr. Evil type billions in the bank. I mean at this point if they hadn’t returned cash to shareholders via dividends they’d have nearly half a TRILLION sitting in checking accounts in Dublin and that random tiny office in Nevada. Does anyone think AAPL won’t have a $1 trillion market cap one day? Seems inevitable. Anyway, am I still bullish? Heck yea I am, so is Josh Brown and I agree with everything he says in this link. Are there concerns, worries, various indicators and charts to fret over? Yes, always, there will always be things to wring your hands about but you can’t miss out on years like this (+10%) because you’re scared of your shadow. What’s my favorite random stat right now? This one: the low of 2017 is the first trading day of the year. Let that sink in.  

 

 

After the open, AAPL’s 5% gain should’ve driven every single index to new highs but it didn’t and that’s ok. The DJIA hit 22,000 for the first time ever so all the people playing at home got excited however the Nasdaq and S&P both sold off most of the session. Why you ask? Let me tell you since that’s the reason you came to this fine recap. Because it’s August and no one is paying attention right now. Look, the Nasdaq is up something crazy like 17% YTD, there’s going to be random August days where it goes down for no reason because a bunch of computers hit the sell button.  Apple should’ve ripped it higher but the other FANG stocks flirted with red the entire morning and that was enough to counteract Tim Cook’s magnificent quarter. Let’s talk some other names shall we? AMC fell 24% because apparently all the movies this summer suck. Wait, how can that be, Wonder Woman was amazing and Dunkirk blew me away. Maybe people aren’t buying the $9 sodas anymore? Other losers were COHR, UIS, RRC, and CAH. Winners were the aforementioned AAPL along with ILMN, FMC, HUM, LOPE, and GRMN. By lunch we were back near unchanged because a few buy programs kicked in. August 2nd…looks like I picked the wrong day to write a recap. Did you see that #HipsterShowerThoughts was trending on TWTR today?  Some of the funniest tweets I’ve seen in a long time, make sure you go check it out.  Here are two that cracked me up while I watched the market go nowhere:  “I wish my glasses didn’t steam up in the shower” and “Is this Mango conditioner locally sourced?” So good.

 

 

The rest of the day was sideways on unchanged but a close in positive territory so the good guys did win out by the end! Ok so yea, it’s August, we can’t really take price action seriously when half the world is on a beach or in the Hamptons. There are a few things going against us right now that make me somewhat nervous about the next 30-45 days. 1)  The chart of transports looks like death. As my friend Helene Meisler says “ignore Transports at your own peril. 2)  Sentiment is frothy. Most of the popular metrics show way too much bullishness. 3)  There have been literally no significant pullbacks in 2017. Come on, is that really gonna last until Dec 31? and 4)  Cash allocations are at some of the lowest levels since 2000. Now you guys know me, I’m not an alarmist or a bear or a top caller or any of that nonsense. I think earnings will continue to grow and that the bull market has gas left in its tank. But August can be dicey because not a lot of people are paying attention so tread carefully. Hey, what are the odds Danerys attacks that gold Jaime and his boys stole from Highgarden? She better or else the dat Iron Bank is gonna switch sides pronto tonto.   Final Score:  Dow +23bps, S&P500 +4bps, Nasdaq FLAT, Rus2k -108bps

 

 

 

Volume was average.  Our desk was better to buy.  Buying in Retail and Energy.   Selling in Retail and Energy.  Shorting in REITs.  News Highlights:

 

 

 

 

 

 

For our end link we’ll look at the longest pedestrian suspension bridge in the world. Which just so happen to be the biggest “nope” in the history of “nopes”. I mean I love Switzerland but dem swissys are crazy.

 

 

https://www.youtube.com/watch?v=r8iuwWHduKQ

 

 

Have a good night

Remember When I Said the Market Doesn’t Care About Washignton DC? Well it Doesn’t.

Equities start the day lower on AMZN Prime Day! Great, maybe they’ll have Water Bottles on sale, we only have about 485 of those in our home. Not only is it “Pity your UPS Driver for the next week” day but it’s also 7-11 so you can wander on down to your local convenience store and get a free slurpee while you read this recap. Cherry or Coke? So many hard choices in life. With so much going on in the world what should we talk about? Yellen? Yep she speaks tomorrow so keep your ears open for hawkish tones. Earnings? Banks on Friday then a whole bunch of them for the next few weeks, pity the junior analyst eating Taco Bell at 11pm while trying to figure out tax rates. Washington DC? Nope, that ain’t happening here, I honestly don’t care because the market doesn’t either. Quiet Trading?  Bloomberg has that covered today with this crazy quote:  “As a salesman or trader, it does get to the stage where you go, ‘Christ, what am I going to do for the rest of the day?’” said Chris Wheeler, a bank analyst at Atlantic Equities. “I don’t think anyone is going to be that keen to be on the desk when it’s so quiet. The danger is people get quite bored.”Why are things so slow? Passive, summer, algos, robo-advisors, take your pick, the explanations are vast and numerous. Quite frankly all we have to talk about is that the market keeps on keeping on. Earnings growth plus an economy that is still chugging along plus consumer confidence plus a robust job market are what’s keeping the market grinding higher. It’s not the Fed or Donald Trump or some magic Plunge Protection Team, it’s an economy that remains the envy of the World and one that generates a ton of global demand. Did you see Transports break out the other day? Does that make you bearish? Have you seen Housing and Airlines? Tech and Financials? Have you seen the chart of an EQUAL weighted S&P500? All of them are near their highs (the equal wtd one is my favorite to show the “it’s only a few stocks” haters). Me bearish? Only in Jan 2016 when I made my worst call ever. ugh, flog me now.

After the open a political clown show broke out. Remember when I said the market doesn’t care about Washignton DC? Well it doesn’t, but it will react to intraday news dumps like this one. Sigh. Just make it stop, please, I can’t take the nonstop scandal circuit. We sold off 50bps from the highs because Donald Trump Jr and his Russia emails spilled onto the dock like that kid in Jaws. Here’s what I want you to remember about the market and political drama. It’s fleeting, fleeting like a pink sky on a warm July night. It cares about this stuff only tangentially but in the end the stock market reflects the cash flows of US corporations times a multiple linked to the economy. As far as I know Trump or Bush or Eisenhower or Madison didn’t pull all those levers like it was a giant video game. So let’s talk stocks shall we? MS, the lead underwriter on SNAP, downgraded the stock to neutral and basically said “we were wrong”. Things that make you go hmmmm? Red Apron was down another 7% as somebody from Northcoast slapped a $2 PT on it. Yikes. Say what you want about “disruptors” but not all of them are wildly successful out of the gates. KORS, ULTA, and UA were all down because they sell things in stores.  Meet the new boss, same as the old boss. Winners were mostly energy related and when’s the last time you heard that sentence? I can’t even recall to be honest, maybe when movies started being shown in color? By lunch we had recovered most of the “someone with Trump in their name did something crazy” selloff to sit at 2,422, down 20bps. Did you get an echo yet? No? Go get one for crying out loud they are amazing.

The rest of the day was a slow grind back to unchanged and a close in limbo. Look, for as much attention as this gets from the news media our market has shown time and again it doesn’t care about Russia or emails or anything else Swamp related. Will it react negatively to random headlines when they hit our Bloombergs?  Sure, but like economic data and Fed statements it’s not the initial move that matters it’s the CLOSE and we closed like it never happened. Let’s see what Yellen has to say tomorrow about balance sheets and Fed policy because it’s all we got until the banks report on Friday.   In the meantime enjoy your summer night and don’t buy any of this junk from Amazon!  

Final Score:  Dow flat.  S&P500 -8bps, Nasdaq +27bps, Rus2k +33bps.

 

News Highlights:

 

 

 

 

 

 

We’ll end tonight with a pretty hairy motorcycle accident. Does this guy grind his face against the pavement for like a full 5 seconds?

 https://youtu.be/uNwQK_HIHRU

 

Have a good night

We are Watching a Room Full of Sleeping Cats Lounging Around a Rocking Chair.

Equities start the day higher as everyone “re rotates” after they rotated because everyone else was rotating. Remember last week when I mentioned the stock ALGN? The San Jose based manufacturer of these dental things you wear to pretty up your smile? Recall that everyone was dumping the stock because “up big YTD” went out of style for a hot minute. Guess what? The stock is nearly back to where it was before the great dump and if you don’t sit back and laugh you are missing the best parts of human psychology. A random machine woke up one day and decided to take profits which caused other people to take profits which caused media outlets to wonder what’s wrong with the market which caused other stocks to go down which caused the naysayers to say “see I told you so” which caused a couple day dislocation which caused smart people to say “what is this nonsense, I’m buying”. The one thing that has been persistent thru this entire bull run is an elevated level of skittishness. The best analogy I can think of is this: we are watching a room full of sleeping cats lounging around a rocking chair. The MOMENT that rocking chair moves the cats freak out and dart around the room. Then the chair returns to its original position and all the cats go back to dreaming of killing humans and puking up hairballs on new furniture (god I hate cats). This is nothing like bull markets of the past, euphoria about stocks is a millimeter deep and any event that looks suspicious sends people running for cover. Josh Brown talked about it here and I couldn’t agree more. Quants rule the world right now and when their machines do something there is no story behind it. It’s just a machine making a machine decision. One of these hiccups will be the final straw but we’ll never know it until it’s too late. Until then let’s celebrate all the stuff going on around us and make a bit of money while we can. AMZN and WFM? Brilliant, God I love it. Let’s chat on that one later.

 

After the open that un-rotation continued (is there an uglier word than that?  Maybe grexit I guess) as both Financials AND Tech rallied. In fact about 30 minutes into the session we made a new all-time high and never looked back. You know what makes me laugh about this whole “Trump rally” as if that was ever a thing? The fact that absolutely nothing has happened in Washington DC and yet here we are at 2,450 on $SPX. Tax reform?  Nope.  Infrastructure bill? Zip. Health Care reform? Please. Is the current administration “business friendly”? Sure, and maybe that’s worth something in the near term but all those big fat “game changers” are stuck on the sidelines. So what’s the rub? What’s the lesson gleaned from all this? That you should never let politics affect your investment decisions. Ever. The economy and earnings are what matters not lofty promises and “transformational candidates”. What a joke. Winners PKI, NAVI, BIIB, AMD, and MU. Losers EQT, TRIP, KIM, RRC, and REG.  Ok AMZN for WFM here’s my two cents. I think it’s awesome that tech companies are tired of waiting for retail / vision-less companies  to figure themselves out. AMZN, TSLA, companies like these aren’t content with status quo. Musk isn’t going to sit around and let the world stagnate, that dude wants to send people to Mars and change the face of driving forever. Bezos is about to transform a quality brand into the next generation of grocery stores. How about free instant delivery from your AMZN wand? How about distribution centers all over the country? How about a bunch of new Prime pickup spots? The list goes on and on.  The best article I’ve read on the deal is here, don’t miss out. “unlike Whole Foods Amazon has no desire to be a grocer, and contrary to conventional wisdom the company is not even a retailer. At its core Amazon is a services provider enabled — and protected — by scale.  Indeed, to the extent Waterloo is a valid analogy, Amazon is much more akin to the British Empire, and there is now one less obstacle to sitting astride all aspects of the economy.”

 

The final hour saw another fresh high and a close in record territory! I mean you’d think it was party hats and ‘79 Dom but trading floors look like this nowadays. Oh well, no complaints here, we be shrugging our shoulders while the world gets richer. We are still solidly in a “don’t fight the tape” world and brick by brick the Wall of Worry heads towards the sky. Fed rate hikes? Yep. Vicious rotation? Yep. Ebola? Yep. Debt Ceiling fights? Yep. I could go on and on but you get my point. This will end when it ends and not before. Yogi Berra? Nope, Michael Antonelli circa 2017. Final Score:  Dow 

 

News Highlights:

We’re gonna skip these and head straight to the big finish.

Tonight I have an awesome end video that gives you “Instructions for life”. I thought it was witty, funny, made some great points, and is well worth 5 minutes of your time (especially the Whisky one). Now look, there’s a few swear words in here so if you are easily offended by the random F bomb in a comedic setting feel free to click this link and ponder the beauty of France. Ooooohhhh. Ahhhhhh. I don’t know, I’m not sure I can be friends with someone who doesn’t laugh at the random F bomb.

Looks Like the Pundits Never Change!

Equities start the day lower as everyone starts complaining that Tech stocks are only up 25% YTD.  You know what I love about market comments?  Other than the non-stop flip flopping? The irony…the sweet sweet irony.   For the longest time everyone was concerned that “the market is being led higher by only a few stocks, FAANG in particular”.  Never mind that an equal weighted S&P500 just made a new all-time high (shhh, no one likes facts that contradict a good story). Highly popular growth tech stocks got smoked on Friday and now people are worried about the market being….a bubble?  Wait…….wait….tech stocks go up and “the rally is fake” and when they go down something must be wrong and we should be freakin? Looks like the pundits never change!  Anyway, put me in the camp that believes a tech rotation is healthy, that we need some of these big chunky gains to be spread around on other sectors like consumer or banks or industrials.  Amazon, Google, Netflix, Apple, all of these are amazing companies. They are literally mapping the future before our very eyes.  These companies are so firmly entrenched in their position that they are practically immune from competition.   But what they are not immune from is the fickle nature of flip floppy investors.  “Profit taking” is one of the lamest stock market phrases ever but in this case it might just be what’s going on.  When someone big decides that 35% in 6 months is enough for them they sell in SIZE and that drives a few others to join the party.  It’s not scary, it’s not the end of the world, it’s just Skynet profit taking.  Let’s see how the rest of the week plays out before we say Tech is dead in the water. 

 

After the open, Friday’s “if it’s up, puke it” market came back in spades.  Selling, selling, and even more selling.  If it was up big on the year it was getting shellacked.  Look at ALGN for crying out loud.  They make those invisible dental things you wear so you can have a smile like Tom Cruise.  Why was it getting punched in the teeth?   Because it was up 56% YTD.  That’s it.  I mean the thing is even being added to the S&P500 for crying out loud.  The SOX got thrown in the hamper, FAANG was defanged, and Health Care took a shot in the keister.  What were the big winners?  Energy for one, I guess the sector can go up.  Under Armour rallied!  Under Armour!  A  Consumer name!  Hallelujah.  Rotation….it’s not just for State Fairs anymore!  So why has this rotation been so vicious?  Algos and Systematic strategies my friends, computers make a decision and we all watch the carnage play out.   Who can’t wait for a low touch / algo drive / trader-less world?   Yea me neither, even though its steamrolling in that direction. Anyway, the “sell winners buy losers” trade ran out of steam around lunch and we worked our way back to unchanged. Would it last?  Stay tuned to this bat channel to find out (RIP Adam West). 

 

 

Well, it kinda did and kinda didn’t. Tech wasn’t a complete disaster but it was soft again. Nasdaq finished down 52bps and the S&P finished down 10bps. Look, sometimes diamonds sink and trash floats, it happens, it’s the kind of thing you see when portfolios are churned and someone wants to re balance.  In the end I’m ok with all of this, no longer will we have to read about FAANG being the entire stock market (it’s not) or that tech looks like the 2000 bubble (it’s not).  We have been so lulled to sleep by the lack of volatility that a giant re-balance trade feels like Armageddon.  It’s not so chill, open a Rose and enjoy the start of summer. The shares crash…hopes are dashed…people forget.   Wise words from a legendary band.   Final Score:  Dow -17bps, S&P500 -10bps, Nasdaq -52bps, Rus2k -17bps

 

 

Volume was large and in charge. Our desk was better to buy. Buying in Tech and Industrials. Selling in Financials and Retail. Shorting in REITs and Financials. News Highlights:

 

 

 

 

 

We’ll end on a palm sweating video tonight.  I think this guy barely missed the rocks last time he jumped…check this one out.

 

 

https://www.youtube.com/watch?v=hf-GR4nG4Gg

 

 

 

Have a good night

 

I got fired by President Trump?

Equities start the day low…wait…what’s that?  I got fired by President Trump?   Come on, why would he fire some insignificant blogger who lives in the coldest city in the United States.  I mean yea, sure, I miss a VWAP every now and then but there’s no better block trader than me, he must value that?   Oh it was COMEY and not me?   Thank God, I have some kind of Baird event tonight and was hoping to impress everyone with my brand new JCP shoes, whew that’s a relief.  Other than “it was slow today because people love Vanguard” you can pretty much assume you’ll hear the phrase “strange thing happened in the Trump administration” a lot over the next few years.  If you are making any broad based investment decisions based on tweets or personnel changes in Washington DC I’d suggest you take up gardening or macrame instead.   Earnings are winding down and they were good, don’t let anyone tell you otherwise.  Top line growth of nearly 9% and bottom line growth of 15%.   It’s about darn time too, we need the denominator to start carrying its weight around here.  I mean we can’t always rely on the numerator, the numerator eventually gets tired of its downstairs neighbor slacking off and decides to jumps out the window to show him who’s boss.   Ok, let’s move onto the next paragraph where I regale you with tales from Disney and why video gaming might be a very lucrative career for your child.  Investment Banking or Video Game programmer?   Tough choice to be honest.  One is full of boring spreadsheets, pitch decks, DCF analysis, soul crushing hours, and people taking credit for you work while you shower at a gas station and head back to the office.  The other has Mario.   (nuttin but love for my junior banker posse.  Hollaaa at me while you drink your 15th red bull)

After the open we spent a little time below unchanged and a ton of time sitting on unchanged.  So yea, exactly the same price action we’ve seen for weeks now.   The only economic data point was Import Price Index but if I were to waste any time on that you’d tell me to remove you from the recap.  Disney fell 2.5% after earnings and if I had to give you one guess why I’m pretty sure you’d come up with it.  ESPN!   Yay!  That’s a fresh reason to sell the world’s premiere media conglomerate right?  I can’t wait for the next 15 quarterly reports so someone else can say “wow, ESPN is really shrinking.”   Iger is a hall of fame CEO, I guarantee his team is working on an OTT version of ESPN and when that happens we’ll never have to deal with the bundle ever again.  EA ripped 13% after earnings.   Video Games…so hot right now.  In fact anything remotely “gamey” had a great day (NVDA, ATVI, AMZN, TTWO, AMD).  Why?  Because the amount of money spent by gamers on gaming type things is..…well…absurd.   They’ll spend $50 on a game then they’ll spend countless more buying “horse armor” and “swords of soul stealing” that probably have 1000% margins on them.  “DLC”…you’ve probably never heard of it but game companies sure have.  Other winners were primarily energy related because oil had its first up day in about a year.  Losers were PCLN, NWSA, PWR, VIAB, AGN, FOSL, and anyone trying to avoid political commentary.  FOSL…when’s the last time you saw a FOSL watch?   For me it was when I was shopping in Chess King for another bottle of Drakkar Noir ( I just alienated my entire millennial readership).

The back 9 saw a new high…by 0.25 pts.   Comical.   I don’t know, individual stocks seem to be moving but in aggregate we are going nowhere fast.  What exactly is the next catalyst?  I woulda said “tax reform” but what are the odds that happens anytime soon?  0 or 0?  I’ll go with 0.  Maybe the kick comes from abroad?  Further strength in Europe and Asia?  It’s their turn to lead this goat rodeo, the US has been outperforming the globe for years (see my news highlights) so maybe we give them a chance.  Anyway, today’s lesson is that being a nerd might actually be a better path to wealth than being an athlete.  If your son or daughter say to you “I wanna be a Youtuber or a Video Gamer” don’t dismiss it.  Those two are growing way faster than the number of professional baseball or soccer players.  Final Score:  Dow -16bps, S&P500 +11bps, Nasdaq +14bps, Rus2k +56bps.

Volume was average.  Our desk was better to buy.  Buying in REITs and Retail.  Selling in Media and Health Care.  Shorting in Publishing.   News Highlights:

We’ll end tonight with a simple .gif file.   Ladies and Gentleman the future winner of the Darwin Award right here:

http://i.imgur.com/Lr6KLb0.gifv

Can't Stop This Market

Equities start the day higher as you CANT STOP THIS MARKET, YOU CAN ONLY HOPE TO CONTAIN IT. Actually, come to think of it, the market seems contained on almost a daily basis. We made new highs yesterday on a .09 move. Yep, you heard me, .09 points.  2399.38 vs a close on Friday of 2399.29. Wow, can you feel the thunder? Can you imagine what the market is going to look like in 10 years when half the world is sitting in Index Funds? “Today the S&P500 moved 0.1% in its largest daily move in months. Traders were heard to be shocked it actually opened for trading and didn’t know what to do when three buy orders came in. In other news President Dwayne Johnson dedicated the USS Jabroni in a ceremony held at Newport News Shipyard in Virginia”. Volatility is low, yes, we get it. Does that mean anything? Barry says no and I kinda agree with him. There just aren’t a lot of catalysts right now so the market is going sideways. Boo hoo, it happens, even roller coasters have boring parts. But while the overall market seems stuck in the mud there are COUNTLESS stocks having incredible years. Apple is up 33%. Apple. The world’s largest stock is up 33%, the kind of return you see when a Mid cap industrial name that barely anyone knows about happens to have a great year.  An $800B mkt cap stock that literally everyone knows everything about is up 33%. In fact, 40% of $SPX returns this year have come from just 8 stocks. Have you heard of any of these? AAPL, FB, AMZN, MSFT, GOOG(L), PM, HD, and V. Blows my mind. I mean aren’t we supposed to bet against consensus? Do you know what the best performing style is YTD? “High Analyst Rating”. i.e. the stocks that have the most buy ratings on them. I mean when does that ever happen? Now I guess. 

After the open the S&P spent a whole 99 minutes above unchanged but apparently the siren song was too great and by 11:18am ET we were right back home with momma, unch, flat, nowhere. The Nasdaq don’t fall for this nonsense though, it was up nicely on the back of MAR, AAL, TSLA, and AAPL. Wayfair…what do we know about Wayfair? (Baird rates neutral) I ordered two $220 Adirondack chairs made out of that “manufactured wood” stuff last month so I guess I’m responsible for its 20% gain today. Actually they reported earnings, upped guidance and 38% of the float is short so yea, it’s probably that and not me. How do we feel about “manufactured wood”? I’m torn, obviously it’s cheaper than real wood but there’s something off about it. I guess you get what you pay for. Losers were SEE, TGNA, IFF, TDG, and XRAY. Hey you know what else is a huge winner that people said was going to zero? Bitcoin. Bitcoin is clocking in at $1,700 per byte or block or coin whatever people call them. I actually own one….can you believe that? I bought it on a whim back in 2013 so if you need to find me in 20 years I’ll be on my boat titled “Who Knew” docked at a harbor in Naples. By lunch we were going nowhere fast with all the normal trends of my life persisting: sideways SPX, grinding higher NDX, plummeting VIX, and little to no…actually forget it.

The last half of the day saw a gigantic 30bps selloff in which people questioned the very nature of stocks and why we hold them. 30bps…it was like that Armageddon movie without Bruce Willis. Unfortunately the market rallied in the last 15 minutes so I can’t make this molehill any bigger.   So yea, sitting just shy of new all time highs with the VIX stubbornly low. Take a look at this chart from Gluskin and remember that when the VIX is this low, returns are usually muted going forward.  Do we need some kind of selloff to break out of this sideways funk? Absolutely. Will we get it? Sure, but not a human on the planet knows when. Until then we keep on keeping on because there’s more to life than staring at sideways stock indices.  

Final Score:  Dow -17bps, S&P500 -10bps, Nasdaq +29bps, Rus2k +2bps. 

News Highlights:

Well I found us a fail link tonight because when you google “worst wall flip ever” this video comes up.  Seriously that guy was bad.

https://www.youtube.com/watch?v=38W4Cx8geBg

Have a good night

 

Boredom Continues

Equities start the day lower as boredom continueeessss. You’d think, given we are deep in the heart of Tex..umm earnings…that the market would be swinging around more than it has. If I told you the last 6 sessions have seen the tightest range since 1994 would that surprise you? Of course it wouldn’t, you are a savvy investor with your finger on the pulse of market trends. Speaking of trends, it turns out that Vanguard took in $25B in April which is the most EVER for that month. They are at $145B YTD and on track to take in near half a trillion in 2017. Whoa, I’d say we need to buy Valley Forge real estate but I think the culture there is very subdued. Imagine if Hamptons based Hedge funds had brought in $145B YTD….they’d be popping ’75 Mouton like it was Lacroix. Anyway, why are we shocked that markets are super quiet lately? The more passive takes in the less markets should move right? I mean if half the world was sitting in an index fund, and it fell intraday, would it make a sound? You know what else occurs to me?  Retail is absolutely piling into this thing.  Those Vanguard flows aren’t hedge fund money or sovereign wealth fund money, its mom and pop and brother and sister investing in the market. I don’t wanna hear anymore of this “cash on the sidelines” BS because BILLIONS is going into IceJuice (you like that symmetry?) Hey you know what we get to talk about today? Stocks  Man I love talking about stocks. AAPL, ETSY, WTW, GRPN, TWLO, let’s get to it because I can’t contain my sarcasm any longer.

After the open we got a few economic data points but no one wants to talk about the 48th month  of mid 50s ISM Services or the 69th month of ADP jobs at 175k, no no no, they wanna talk about ETSY (Baird doesn’t cover). I mean when you sell dream catchers and custom clay pots to as many hipsters as you can find you got yourself a public company. The stock fell 8.5% today after earnings so maybe neon colored yarn is in short supply or oujia board lunch boxes aren’t selling all that great who knows. Other losers included TWLO (-25%), AKAM (-15%), and GRPN (-14%). When’s the last time someone pointed out a GRPN to you? Honestly I can’t even remember, must’ve been that 10% off Charmin toilet paper from 8 years ago. Winners included STRP (+22%, the buyout story that never ends), FEYE (+13%), and WTW (+8%). Why was WTW up? Yep you guessed it, Oprah. Just rename the company at this point….unreal….literally the only reason cited anymore is Oprah. AAPL reported last night and things seem fine. We could talk about their cash pile but at this point I’ve run out of creative ways to describe it. I mean sure, they probably have more cash than the woman who made Fidget Spinners but IT’S HER TIME TO CASH IN (quickly lady….quickly). We fell thru the morning as commodities quivered but by lunch we were smack dab in the middle of that boring range again, 2,383, down 0.3%. You know what occurred to me the other day? I’ve never met a single person who worked at any of the following companies: GOOGL, FB, AMZN, TSLA, AAPL, or NFLX. Now yea, I get it, I live in the Midwest, but I do travel a fair bit.  I have a decent sized network having attended Chicago GSB and living in big cities thru most of my 20s and early 30s. I’ve never once met anyone that worked at those companies even randomly in a bar or on an airplane or drinking Mai tai’s on a beach. Seems weird.

The rest of the day was a vol crushing sideways grind back to unchanged. We even had a FED DECISION and nothing happened. I mean at this point we are saving massive market movements for index rebalancing and Ebola breakouts. Now look, usually I would save this kind of thing for my news highlights but you HAVE to read this oral history of Austin Powers because it was a seminal movie in comedy history. The market went nowhere today, it hasn’t gone anywhere for days and days, stop worrying about useless intraday market movement and go read a genius at work. 

Final Score:  Dow +3bps, S&P500 -14bps, Nasdaq -37bps, Rus2k -60bps.   

News Highlights:

We’ll end with another ping pongin link! These have taken over from surfing as my favorite “sports” related links.  Shots are ridiculous. 

https://www.youtube.com/watch?v=TSngI2VfHAU&feature=youtu.be&t=3s

Have a good night

 

Where in the World has Michael Antonelli Gone?

Equities start the day higher as May descends upon us! May… the fifth month of the year… does anyone else feel like their life is in hyperdrive? Mine sure is, my 11 yr. old son is taller than my wife now. Oh the humanity. Here’s a question for you: Where in the world has Michael Antonelli gone? Well my friends, the story is long and boring so we’ll just stick to the long part. I spent April travelling the globe for both personal and professional enrichment. Managed to circle the planet on an airplane spreading the gospel of Bull and Baird while learning that “let’s go out for Schooners” is a thing in Australia. That’s gotta be the best way to say “let’s get a beer” right? Nothing is even close. I even spent a long weekend on the Exuma islands in search of millennial glory at this thing called Fyre Festival. If you ever wanted to see despair on the face of a rich 23 year old that was the place to be. I mean we aren’t talking “my soy half pump two shot chai latte was cold” despair we’re talking “I spent $5k to be with Instagram models and all I got was a lousy cheese sandwich despair.” Actually I wasn’t there but it was my favorite story over the past week so do me a favor and read that first article I linked. But we’re back and the market is sitting at all-time highs because 1) earnings are fine, 2) everyone still thinks the market is expensive (probably the top comment I heard on my travels), 3) economic data is fine, 4) Europe/Asia is looking a LOT better, 5) breadth is fine, and 6) people are a lot more realistic about what Trump can do. Sell in May and go away? Please, is there anything more tired than that phrase? Maybe me but I lay it all out there for Baird! Ok let’s get into it because all of Europe was closed and I have plenty of time for you!

After the open we had a relatively quiet morning that featured a few macro data points. ISM Manufacturing printed 54.8, same as it ever was, Markit Manufacturing PMI hit 52.8, same as it ever was, and core PCE rose 1.6%, same as it ever was. You know all these people saying “well we need macro to improve for the stock market to go higher”… have they seen the last 7 years? You know what the average ISM Manufacturing has been since 2010? 53.7. But what about GDP Mike, don’t we need 3-4% growth to get the stock market higher? Hahahah, no. Everyone waiting for the “perfect economy” has missed generational alpha, don’t get caught thinking the US is going to switch into some magical high gear. Ok movers and shakers time: TWTR rose 6% because their new growth may come from Bloomberg, TSLA ripped the shorts for another 2.5% because that’s how stocks act when a ton of people are off sides, and AMZN hit a new 52wk high of $954 because Bezos is a genius. So, I know it’s been a while since I wrote but do retail stocks still go down every day? Hmmm, let’s look at the top 10 losers in the S&P today shall we? BBBY -3%, ORLY -2.6%, VFC 2.6%. 3 of the 10? Improvement!! Around lunch time a quote from Trump hit the news wires where he told someone that he is “considering breaking up Wall St Banks”. Oh is that right? You want to roll back a bunch of Dodd Frank, have two ex GS partners in Cohn and Mnuchin on staff, yet you are considering breaking up big banks? What? Can we just stay on message here for a day or two? The ball is on the tee my man, just hit it into the outfield please. By lunch we were sitting just shy of new ATH in the S&P, 2,394, up 0.4%. 

The rest of the day saw us get REALLY close to those Mar highs but a late day selloff put us back under the ceiling once again. So, so, so close my friends, let’s my hope my triumphant return to blogging doesn’t jinx us. I for one think this market still have upside left in it. Why? Because we haven’t seen the euphoric phase and far too many people I talk to are waiting for a pullback. Trump is gonna Trump and economic data is what it is so don’t think those two are upside drivers. Good ole fashioned earnings growth will help, asset allocation will help, sentiment will help, and optimism about our future will help. S&P 2,400?   Feels like it will be in the rear view mirror soon. Final Score:  Dow -13bps, S&P500 +17bps, Nasdaq +73bps, Rus2k +50bps.     

Volume was low, half the world was closed. Our desk was better to buy. Buying in Financials and REITs. Selling in Industrials and Health Care. Shorting in Industrials. News Highlights:

Anyone ever done that thumb trick to a kid? Of course you have, everyone does it, makes you feel like a God. This guy though… next level.

https://www.youtube.com/watch?v=pyxpxxW8VBo&feature=youtu.be

Have a good night.

Let’s Keep Going Shall We?

Equities start the day lower as spring finally springs. We got some decent weather coming up, the NCAA tournament is in full effect, Purdue is in the Sweet 16 (as is Wisconsin), and things are generally looking up across the globe so people be like this right now. Let’s keep going shall we? Home sales are still red hot, the UK is going to Brexit that thing, and my WEI screen is still celebrating St Patrick’s day. MMMMM, that’s what I’m talking about people. So look, there’s always one question I ask myself when I sit down to write a recap (no, not how can I get Trump to retweet my links): which way would the market have to move to cause the most pain to the most people? If you know the answer to that question then you have a good feel for sentiment / positioning and that’s what moves us in the very short term. So… dear friends… which way is it? Up or Down? Well, kids, I actually think it’s down. We have a fair amount of people locked into this market thinking Trump and good economic data and TINA and all that jazz (great song). A quick 5% selloff would send shivers thru the market and probably force weak kneed bulls to scurry for the sidelines. A 5-10% selloff would also panic a lot of people who didn’t buy anything until after the election so that’s where I think the most pain lies. But that’s ok! Clearing out dead wood is healthy for a bull market, we could slide in April and May with no serious technical damage. 2,250 will be massive support (we spent two full months there) and the fact that TONS of people are calling for a correction should keep it shallow and mild. Once we get that reset then we have a legit chance to re-test the highs on the heels of a big tax cut? Don’t sleep on that as a catalyst, stock markets love a good tax cut. Anyway, the most pain is probably lower so don’t be caught off guard by a little spring weakness. It happens, people go outside stop looking at their screen and wonder why the heck they chose to live in a  cold weather city (that is apparently good at Basketball, go WI and Purdue).

After the open it was a tiny dip and a whoooooole lotta nothing. I mean if you like 4 handle intraday ranges than do I have a recap for you! Most of the morning was spent watching this congressional hearing that nearly put me to sleep and if this is what the next 4 years has in store for us I’m going to cancel cable. Here’s the problem: as you know, half of the rally is economic facing and the other half is “new shiny administration” facing. If one half of that starts getting bogged down in political quicksand and witch hunts I can tell you what the market reaction will be… not positive. Once that new car smell wears off you do kinda still need the car to function. Ok winners and losers time. Winners: people who like to watch paint dry and grass grow along with ESPR, FEYE, CAT, and AMD. Losers: action junkies, specifically people who have a GoPro and never use it because they thought taking ski videos would be cool (me) along with KSS, M, JWN, and GPS holy cow I’m just changing this section to “retail.” Winners and Retail, that’s how we’re doing this from now on. By lunch the market was nowhere, 2,376, up 1 whole point.

The rest of the day was weak, not “I drank 38 glasses of wine” weak but certainly “I just swam 200 yards without stopping” weak. The market feels exhausted, there’s no other way to describe it. It’s entirely possible we are going thru some kind of time correction but we won’t know until it’s in the rear view mirror. Price action just seems wonky right now, little rallies aren’t turning into big rallies but they also aren’t turning into meaningful downside. It’s almost as if everyone is sitting in passive... hey what were we talking about? Oh yea, this tape feels tired. What does the prescription for a rally look like? Probably something on taxes and another jolt of ridiculously good economic data. I’ll tell you what it doesn’t look like… endless congressional hearings. Final Score:  Dow -4bps, S&P500 -20bps, Nasdaq +1bps, Rus2k -52bps.   

Volume was really low. Our desk was better to buy. Buying in Health Care and Homes. Selling in Banks and Insurance. Shorting in Internet. News Highlights:

Ok we reached the end of another ski year. Did you get out and make some turns? I hope you did, make sure you get your kids on skis it’s an amazing family sport. Anyway, let’s watch a few idiots try and ski over water because it’s awesome.

https://vimeo.com/209149502

Have a good night.

Jobs Jobs Jobs!!

Equities start the day higher on jobs jobs jobs!!   Who wants two recaps in a row?  This guy.  The fine people from ADP, who reside in Roseland New Jersey, home of the 95 minute NYC commute (just spitballing here it’s probably higher), released their latest employment change and it came in at 298k.   Booom, what a screamer, all the USA does is win baby.  That’s the most hires in 3 years led by a surge in construction and manufacturing, otherwise known as “goods producing industries”, which showed a gain of 106k hard hat and hammer nailing peeps.  That’s a record going back to 2002 in case you were wondering.   Hey, let’s get real for a second, what do you think is the biggest risk to the market right now?  Auto Sales?  Home Prices?   Rates?  A random  tweet from the Big guy?   Nope, none of those, it’s a boom….an unsustainable boom.   Global growth has picked up dramatically, every region of the world is showing improving data right now.  Europe looks like they finally turned a corner and Asia is always ready to rock and roll.  So what’s the bigger risk?  A random recession that comes out of nowhere because we haven’t had one in a while or a continued surge that eventually gets euphoric, sucks everyone in, and creates the cycle top?  Riddle me that Batman.  Oh but the market is expensive Mike….waaahhh…CAPE and Forward P/E….waaahhh.   Stop it.   You know what really sucks as a sell signal?  Valuation.   Yes the market is expensive, yes your expectations for future returns should probably be lower, but using “the market is expensive” as a bail out mechanism would’ve kept you out of so many past bull markets that people would be firing you right and left.  We need to start talking about the boom, and as odd as this sounds how the boom may be the thing that eventually marks the top.   I mean have you even seen what sectors are leading right now?  Fins, Industrials, Tech.  Does that sound late cycle to you?

After the open we got a bit of a pop but most of the morning was a nonsense sideways grind.   My boy Tepper was the tube this morning and still seemed like he had an appetite for equities.  Take a look thru his comments here and watch a few of those videos.   .  Retail!!!  Have we talked Retail in a while?   Yes?  Well here comes some more.  URBN fell 2.5% and the CEO is out talking all kinds of bubbles bursting.   “The U.S. market is oversaturated with retail space and far too much of that space is occupied by stores selling apparel,” he said. “Retail square feet per capita in the United States is more than six times that of Europe or Japan. And this doesn’t count digital commerce.”  Thanks AMZN.  EXPR took the elevator down -10% to new all-time lows and UAA still hasn’t found a bottom as it lost another 2%.  However most of today’s pain was in the Energy space as Crude fell to the all impt $50 level after a really terrible inventory number.  Of all the things we don’t want to see Energy falling back into the gutter has to be right next to a White House swimsuit competition.   Winners were PPG, TRIP, LEN, ADSK, and HRB which ripped 14%.   HRB?  Are you kidding me…is it really that easy?    “Oh hey it’s tax season, maybe people are walking into their local H&R Block and doing their taxes, buy me some stock”.  Efficient markets people.  Sigh.  By lunch the market was going nowhere but oil was falling faster than ESPN subscribers.

The rest of the day was more downside caused by everyone trading Energy.  I’m going to blame my energy trader and all the rest on them on the Street because they stepped on my big “we might be headed for a boom” theory.  Though, to be fair, this 3 days selloff has removed a grand total of 1.5% from the market.  Yep, the Great Correction of March 2017 sure is scary.  Wait, no it isn’t, this might be the least scared I’ve ever seen sellers.   Look at the VIX, it hasn’t touched 12 even in the face of a 3 day selloff.   Anyway, if my thoughts about global growth are correct (I hope they are) we are going to have to see more demand for oil and days like today probably can’t happen all that much (Crude down 5%).  By the way, if you didn’t re-fi your mortgage in the past few years the regret is about to get real.  The kind of regret Jake Lloyd has for starring in Episode 1 and Steven Speilberg has for making Indiana Jones and the Kingdom of the stupid Lost Crystal.  Final Score:  Dow -33bps, S&P500 -23bps, Nasdaq +6bps, Rus2k -64bps.  

Volume was high.  Our desk was better to sell.  Buying in Tech and Industrials.  Selling in Financials and Retail.  Shorting in Food.  News Highlights:

We’ll end tonight with something I want to try this summer.   I mean I don’t own a boat, people who own boats like setting money on fire, but I’d like to attempt this with my next door neighbor.

https://www.youtube.com/watch?v=9ACzTCOz4e4&feature=youtu.be

Let’s See What Happened On This Fine Taco Tuesday

Equities start the day lower as SNAP breaks the market.  Actually SNAP didn’t break the market but the fact that it puked up a ton of gains yesterday makes my narrative easier.   Hey, you know what won’t signal the market top?  An IPO of a company specializing in dog face filters and a UI so byzantine that no one over the age of 21 can figure it out (I think they actually cited this as a competitive strength).  SNAP good or bad?  Don’t care, not one bit.  Wanna know the sum total of my Snapchat usage?  Zero minutes but my 9yr old loves to use it while we wait for mediocre casual food at the mall CPK.     Where was I going with this….oh yea….while SNAP isn’t THE top that doesn’t mean SNAP’s debut won’t signal a NEAR term market top.  A lot of hype goes into stuff like this and it can get the wrong people excited about something they don’t understand.  Imagine you read all about the company over the weekend and bought some on Monday’s open because your idiot friend mentioned it in passing.  By the time the bell rang you lost 12% which can dampen your enthusiasm for the broader market.  We’re coasting on buy fumes right now and any change in sentiment will be magnified tremendously.   Imagine if Trump starting using Snapchat from Mar a Lago…how awesome would that be?  Is every future President going to have to have a massive social media presence going forward?   I’m guessing yes, there probably isn’t a voter under the age of 26 that watches TV or reads a newspaper anymore.  Ok, let’s see what happened on this fine taco Tuesday.

After the open SNAP lost another 10% bringing its two day losses to a grand total of 25% (from Monday’s high).   You know what’s really bad at pricing things?  Stock Markets.  Ironic huh?  $28 on Monday and $21 on Tuesday with absolutely zero news / mgmt. comments / anything.  Sure, makes sense.  No economic data and very little earnings so we are going to have to craft some magic here.  NMBL got bought by HPE for $1B, apparently flash storage is all the rage.  WFT jumped 13% after hiring a new CEO.   Interesting company this WFT, still has a 12% short interest and is only just now breaking a 1yr sideways trend. Things that make you go “hmmmm”.  Speaking of texas tea, guess what’s starting to contribute to earnings again?  Energy stocks, check out this chart courtesy of @pragcap to feel good about the turn.   Other winners included PSTG (NMBL sympathy), PIR (wicker so hot right now), and LGIH (all about those new homes down south).  Losers were SNAP, DKS (they are retail after all), THO, and P (so many places for music now).  By lunch the market continued to act weak trading around 2,369 down 0.2%.   I wonder…..do you think this guy wears any other pants?   Like is that his goto outfit for strolling down the street?  Oh well, at least his shirt isn’t button down, that’s a real fashion disaster. 

The rest of the day was, well, just more downside.   Random selling here and there for no other reason than we’re up 84% since the election.  We closed at 2,368 down 30bps but I’ll tell you what, we’ve gotten so used to late day rallies that 30bps feels like 100.   I guess the market wants to re test that 2,350 area because that’s where we churned before the SOTU speech.  Where is real support?  Way way further lower, likely right around 2,300.   NFP is Friday and about the only thing that could de rail a March hike would be 10k jobs and a drop in wages.  96% chance of a hike as of the close…96%....roughly my body fat levels.   Final Score:  Dow -14bps, S&P500 -29bps, Nasdaq -26bps, Rus2k -69bps. 

Volume was average.  Our desk was better for sale.  Buying in Tech and Energy.   Selling in Software and Staples.   Shorting in REITs.  News Highlights:

Tonight we’re going to end with a bike video.   Not your normal “spin around do fancy bike tricks” thing but a guy who rides his bike on the edge of a dam.   Like the very edge.

https://www.youtube.com/watch?v=dLRBNjUJlH0

We Are In The Swoon Of All Swoons

Equities start the day so much higher I can’t even begin to describe how higher.   Bigly higher.    Like the kinda higher you see in a Damn Yankees song and on the campus of UC Boulder on April 20th.   Now we’ve gotten use to new highs lately, they come often and with little fanfare but today felt different.  Last night we got Trump’s first SOTU speech and from the market’s reaction it looks like everyone was positioned to fade him.  “Long on talk, short on action” has been a theme bandied about lately and Bears have clung to it like a piece of fresh salmon.   Everyone wants to sell the top and say “words don’t take stocks higher, actions do” but hold on a second, what they don’t realize is that we are still in the Honeymoon phase.  You’ve been there, you know what it’s like.  In the honeymoon phase you look past the stray nose hair or random gas attack because you are SO IN LOVE.  Honey, I don’t care that you leave your underwear on the TV you are my soul mate!!   Look, let me be frank here, the notion of an “over the top more pro business than John Rockefeller” White House has the market swooning and that swoon is far from complete.  We are in the swoon of all swoons because it’s been awhile since we felt the swoon (I never get to use that word in a recap, stuff it).  You wanna know what could REALLY rip this thing?   Hot economic data.  Can you imagine what would happen if ISMs started printing in the 60s and unemployment kept dropping?   Swoon.  So while you sit there and say “but nothing has really happened” I want you to remember that markets discount the future not the present.   Oh did I mention that the Fed is STILL in easy mode?   We haven’t even hit 1% Fed Funds.    Oh my….

After the open we hit 21k on the DJIA within seconds!   According to the good people at LPL Financial the DJIA traveled from 20k to 21k in just 24 sessions, tying the record from 1999 for fastest 1,000 pt gain!  What a country, America, I love it!   So what was really moving and shaking today?  Looking at financials you woulda thought Trump called for the creation of a CDO agency to revitalize housing loans (highest level for the sector since 2007).  In fact all the risky sectors were off to the races as the market jumped 1% in the first 30 minutes.  Hey, people, can we stop talking about “no 1% moves” now thanks.  MCD was halted most of the day as they gave an investor presentation.  You know what they are kicking around doing?  Delivery.  Cue the ray of light from heaven because I am SO on board.  Sunday morning after a long night I can dial up a Mcmuffin with cheese delivered straight to my pillow?   Yes please, someone link me the app asap (how do they not have pick up a la SBUX yet?   Should I apply for head of mobile strategy or what).   LOW was back near its all-time highs because home improvement can’t stop won’t stop, WTW surged because Oprah (literally the only reason anyone ever cites on this name), and SCHW had a nice day because they cut commissions (if only it were that easy..).   Losers were few and far between but most of them were down because they occupy buildings, pay rent, and try to sell things to people thru actual stores:  BBY, ROST, AEO, URBN, and GPS dominated the list.  Yikes.  By lunch SpaceX was firmly in charge with the S&P up 1.3% to 2,396.        

We closed at 2,395 up 1.3% and no amount of creative writing can describe what we saw today.  Offers were paper thin and stocks got chased all day (more new highs in SPX than any other day since Dec 2014 h/t Bespoke).   This kind of price action can only mean one thing:  people were leaning in the wrong direction and got caught.   Does it continue higher?  Probably, imagine you didn’t get involved today and we open higher tomorrow….your patience won’t last long.  Anyway, I want to end tonight with this thought from Michael Batnick because it’s everything you need to know about markets and how to approach them:  “In the 23 months from December 2014 to October 2016, the S&P 500 gained 2.8%. In the last 4 months it added 11.2%”.    Who…I mean WHO…could possibly time something like that?  If you are trying jump in and out of this thing you are doing it wrong.  Have a consistent plan and stick to it.  Period.  What if you got cute and decided Trump was going to be bad for the market?  You lost out on an incredible run, incredible.  11% in 4 months is boffo amazing spectacular.  Don’t let silly things (politics is tops on this list) get in the way of making money, stay focused and shun the noise.  And if you hear music playing and your daughter is near you dance with her.  Always dance.   Final score:  Dow +145bps, S&P500 +136bps, Nasdaq +135bps, Rus2k +194bps.  

News Highlights:

We’re gonna skip to the big finish because everyone is too excited to read links

So I love Dumb and Dumber.  Great movie, a true classic.  I think I found the perfect people to act in another terrible sequel

https://www.youtube.com/watch?v=LZdD8gyy7bQ&feature=youtu.be

Have a good night.

Make No Mistake, The Rally Isn’t Fake

Equities start the day higher as I’m about to jinx this whole thing! Look, I’m a fairly optimistic guy, barring my horrible bear market call in Jan 2016 I’ve been solidly bullish for a while now. I mean what’s not to like? Let’s do a quick round up shall we? It’s 62 degrees in the upper Midwest, I mean I was skiing in Michigan in a t-shirt. What planet am I on? European PMIs are soaring like Eddie the Eagle proving that the global growth story is still intact. The S&P is up 5% just 7 weeks into the year because stocks literally go up every day. Guys like Warren Buffett are poking around for companies to buy (in this case Unilever) which is always a good sign. Philly Fed put up a stupid print last week because apparently Pat’s and Geno’s are killing it (this bodes well for GDP too). Unemployment is low, wages are rising, housing prices are firm, and monetary policy is STILL accommodative. But but but Mike… what about valuation? Isn’t the market super expensive right now? Sure, as of now it’s trading around 17x forward (above its 20 year avg), but you know the last time it was trading at these levels? 2004. You know how far it rallied before topping out back then? Another 43%. Wow, what a buy that would’ve been! Let’s break it down: as I see it the current rally is composed of two parts. 1)  Actual economic / earnings growth. World economies are #growing and so are earnings (5% top line and 4.5% bottom line). That’s real and indisputable. 2)  Our new administration and what it “might do.” This part is harder to quantify and subject to the biggest “sell the news” risk. What our new government can do to regulations / taxes / stimulus is up in the air but the market is acting like they can do a lot. Here is where “disappointment” may set in and where I think the most risk lies right now. But make no mistake, the rally isn’t fake, a large part of it is real and could continue for longer than you or I think. 

After the open it was up and to the right for the 58th straight day. Seriously, people be quoting all kinds of things like RSI, MACD, PSI, LBS, Oscillators, and QED but this puppy is going to run until the final person piles in. What does it feel like to be a short right now? This. Will that change one day? Sure, but we’ll never see it coming. What should we be looking for? I’d argue the first sign of weakness will be a huge late day selloff where it feels like the last person has finally jumped in the pool. We got a couple flash PMIs from Markit today which showed mid 50s in both services and manufacturing so meet the new boss, same as the old boss. Ok, what do we got for movers today? Looks like QSR is going to acquire PLKI for around $1.8B. Popeyes Chicken and Biscuits? Place is heaven on earth, get the red beans and rice and thank me later. EXAS rose 16% so it looks like more people are taking a… actually forget it. Other winners included SJM, MDLZ, SNI, and WMT. Losers were FCX, RRC, TSN, and KHC. Can we circle back to KHC thing again for a minute? Should we be worried that Buffett walked from that deal? I have zero insight into why the deal fell apart but it sounds like Buffett just picked up stakes and left. Maybe it got too expensive? Should we worry if Buffett is starting to think things are too expensive? Have you ever seen anyone change their mind about something this fast? By lunch the market sat on 2,360 up 0.3%. 2,360… jeeez… we broke 2,300 on Feb 9… 

The rest of the day was another new high and a close at 2,365 up 0.6%. Whew, if you blink or spend 2 hours out of this market you miss a fresh record. But… while we all marvel at the indices here in the US there are others abroad who are quietly making significant moves. The Euro Stoxx may only be up 1.5% YTD but the chart looks like a corner has been turned. Brazil is up 14% (in dollar terms), UK is up 1.8%, Germany is up 4%, Hang Seng is up 9%, and Japan is up 1.5%. This isn’t just about us, the world may be finally waking from its slumber. Did I just print the top by saying that? It’s entirely possible but I did tell you the Packers would beat the Cowboys and the Pats would win the Super Bowl so that should count for something? Right? Anyone? Final Score:  Dow +58bps, S&P500 +60bps, Nasdaq +47bps, Rus2k +75bps.

Volume was average. Our desk was better to sell. Buying in Software and Retail. Selling in Financials and Telecom. Shorting in Financials. News Highlights: 

We’ll end tonight on an awesome prank. You know this is the highlight of this guy’s life, he’ll be telling this story every few months until he dies.

https://vid.me/fNx5

Big Data

Equities start the day lower because the AFC team won the Super bowl.  Actually stop, the Super bowl indicator is dumb and if you use it around me I’m blocking your email.   Since nothing happened over night allow me to go on a rant about “big data”.   Look, there’s a lot of variables in life and we humans are subject to the whims of fate on a minute by minute basis.  In recent years all sorts of people like Nate Silver and professors at really expensive schools and Vox.com (to name a few) have done their best to build models that try and predict outcomes on a probabilistic basis.  They write long fancy articles based on regressions and give us the “odds of X to happen” but you know what?  They can be wrong and often are.  Brexit was a longshot, Trump was a longshot, the Patriots to start the second half were a long shot.   In fact I was told that the Falcons had a “99% chance to win” somewhere in the middle of the 3rd.  ENOUGH.  ENOUGH ALREADY.   NO MORE.   Stop telling me that something has an XYZ% chance to happen and expect me to take that as valuable data.  Elections, Sporting Events, Markets, heck even LIFE doesn’t follow a bell curve, the “odds of something happening” can change in a microsecond so can we stop pretending that mathematical models are the holy grail in a sea of uncertainty?  If I built a model that tried to predict where the S&P500 would be in the next twelve months based on a regression of 74 variables would you invest your money on it?  Of course not, in the end it’s just a really fancy guess.  So from this day forward I want you to remember that super complex models of the world whether they be focused on elections or sporting events or markets are still, even though they sound smart, just guesses, nothing more.  By the way, what was up with the Avocado commercial?   Are we not eating enough avocados in the US because I’m certainly doing my part.  Do I need to start double dipping to help out?

After the open we got a thoroughly boring first half which, much like last night’s first two quarters, nearly put everyone to sleep.   Should the day after the Super Bowl be a national holiday?  I’m torn on this, on the one hand I’d love another day off but I’m not sure any country gives its citizens a free day based on an athletic event.  To be honest I’d rather have St Paddy’s Day off and I’m not even Irish.  No economic data to speak of and only 10 companies reported so let’s see what we can find in this dumpster.   HAS was one of the big winners, up 14%, after sales of their board games wowed the world.  How did I not see this one coming, the first time I played “Pie Face” I could’ve written an entire recap on it.  Total home run.  That and they make Disney Princess toys now and anyone with a daughter knows where I’m going here.  A doll that’s impossible to take out of the package and comes with 14 items the size of a staple that I’ll eventually step on?  Get out.  Other winners were COG, MNK, FAST, TDB, and HBI.   Losers were LH, NWL, XYL, TSN, and IP.   By lunch a small selloff had us sitting at 2,291, down 0.3%.  Guess what, we closed at 2,297 on Friday, 6 pts isn’t a “selloff” it’s noise.

We caught a small rally in the afternoon and when the bell rang we settled on 2,292, down 4 whole S&P points.   Blah, another forgettable Monday mired in a very tiny range.  Instead of opining about the fact that the market doesn’t move anymore let’s finish up with a sports thought.  How lucky are we to be alive right now?  In fact how lucky are you if your age is 30+?   You got to see the greatest basketball player ever, you got to see the greatest hockey player ever, you got to see the greatest QB ever, you got to see the greatest NFL coach ever, and you got to see the 2nd greatest golfer ever  (come at me).   These have been salad days for sports fans, count your blessings because life has treated you kindly.  By the way, I told you last Monday the Pats would win.  Boooom!  Final Score:   Dow -9bps, S&P500 -21bps, Nasdaq -6bps, Rus2k -81bps.

Volume was below avg.  Our desk was better to buy.  Buying in Retail, Industrials, and REITs.  Selling in Solar and Drugs.  Shorting in Media.  News Highlights:

My analysis shows this guy a 9% chance of hitting this shot.  Time to make plans for when he misses…

https://www.youtube.com/watch?v=2pqhnLMC1DI&feature=youtu.be

Have a good night.

Markets Don’t “Root” For A Political Outcome

Equities start the day lower as sentiment exits stage left. Now look, there’s a few rules the market abides by on a day to day basis. Little things that all investors, fund managers, analysts, day traders, and bankers have to remember as they navigate this crazy world (notice how I put bankers last…BOOM). When you see people buying Yachts, giant homes in the Hamptons, and commercials on TV talking about “money coming out of the wazoo” then it’s fairly certain a market top is imminent. On the flip side when you see people rioting on TV or protesting in the streets or blocking major thoroughfares because they are displeased with the general state of things the market will likely take on a more muted tone. Sentiment is a fantastic indicator but you have to remember it swings both ways. Oh and markets don’t “root” for a political outcome, a political party, or a certain person for President. What they want is a friendly business environment, a strong rule of law, innovation, accounting transparency, and general stability. The kind of atmosphere where businesses grow, people work, economies expand, and life is good. We have all of those in the U.S., it’s what makes our country so great, but from time to time the apple cart gets upset and markets double double toil and trouble for a bit. Futures down 50bps at the open because we had some rumblings over the weekend? Fine, whatever, that’s ok, it’s not the end of the world. In fact I’d argue we need a few days of weakness because sentiment is still way too frothy. Don’t sweat the turbulence when you fly and don’t sweat the turbulence when you invest. The time to get nervous is when the wing falls off…

After the open it was a whole lot of this which, honestly, we haven’t seen in a long time. The S&P fell 1% within the first hour and stayed there all the way thru lunch. You know the last time the market fell 1% intraday? November 1st…..can you believe that? Let’s talk individual names though because we can have a lot fun. FIT lost 16% after reporting horrendous earnings (we rate Neutral) and I have to wonder… do people still wear these things? I get that you can have some kind of battle with your friends on who “walks the most” but honestly, I’d whip you no sweat. TPX dropped 28% after losing contracts to sell its foam filled wonders in Mattress Firm. Does your town have as many mattress shops as mine? I swear there’s one every other block selling the same things. In fact there’s probably more mattresses than craft beers at this point… stop already. What else? Sears fell 7% because Sears, RAD lopped off 17% because their receipts are using up the entire paper supply of the West Coast, and UAL gave back 3.5% because they downgraded me to Premier Silver. Mr Antonelli would like another glass of plastic wine with your middle row seat next to the lavatory? Thanks for flying with us. Winners were AMG, ADS, NEM, GPS, and WHR, none of which had very interesting news. Oh you increased your stock buyback and beat margins by 14bps? How exciting. By lunch we were trending sideways on the lows, 2,272, down 1%.

The last hour of the day saw a small rally and a close at 2,280 down 60bps. 60 bps, 0.6%, 13 S&P points, that’s it. Basically the whole point of my first paragraph was to remind you that times they are changing but you know what? They are always changing. You can’t time the market (read my news highlights for why) so stick to your long term plan and ride out the bumpy waves. Even with today’s selloff the market is up 1.8% MTD, that’s not a bad return at all. If I had to be completely honest with you guys I’m almost rooting for a selloff. I want to see the late arrivers and weak kneed bulls take one on the chin so we can start grinding higher once they bail and say “see, I told you so.” Stay tuned later this week when we talk about why the Patriots are going to win and why you should serve chili rubbed steak tacos with chimichurri at your party. Mmmmmm. Final Score:  Dow -61bps, S&P500 -60bps, Nasdaq -83bps, Rus2k -134bps.       

Volume was average. Our desk was better to sell. Buying in Consumer, Tech, and Materials. Selling in Packaging and Health Care. Shorting in Financials. News Highlights:

Ok look, the final video tonight is not for the faint of heart. It is filled with intense pain and suffering, so if you don’t want to watch a bunch of skateboarders eating their teeth for lunch don’t watch. Ouch.

https://www.youtube.com/watch?v=-wqwaIh2tYE&app=desktop

Have a good night.

New Highs Are Back Baby

Equities start the day higher as we finally, FINALLY have something to talk about.  Remember when the market went sideways for 29 trading days?  I do, it was the lamest thing since Crystal Pepsi.   I would spend hours and hours trying to come up with a funny way to talk about “sideways” before giving up and deleting the miserable recap I wrote.   New highs are back baby, we have some farm fresh price action to talk about.  Yesterday’s breakout put to bed the notion that we might be at a top so now you’re wondering “should I be excited about this move higher or no?”  Yes, the answer is most definitely yes.  What are some of the things we like to see at new highs?  Breadth is one and it’s most definitely on our side.  65% of NYSE stocks are above their 200 day MAVG, the S&P500 cumulative A/D line just made a new high, the MSCI All Country ex US just made a new high, and the NYSE composite index (all common stocks listed in NYSE) also made a new high.  This isn’t just the FANG stocks taking the market higher.  What about volume?  The perma bears always say “there’s no volume, this is all fake news”.  Well, overall volume traded continues to be right down the middle of the fairway, 6.3-6.5B shares a day.  Sectors?  The top performing ones are all of the “risk on” type, fan favorite such as Materials, Tech, and Cons Disc are leading the pack.   Earnings what about those?  Aren’t those supposed to be important?  Yep, and they are growing for the 2nd straight quarter since Q1 2015.  With 105 companies in the S&P on the tape top line is up 2.3% and bottom line is up 5.2%.   There’s a little something for everyone here people so don’t overthink this.   Don’t waste your time looking for negativity when the trend seems SO in place.  You can waste your time fighting the market or you can call up your good friends at Baird and let us give you a few good ideas.   Dow 20k?   Sure, why not, this is a great country with a vibrant economy and endless innovation.   Don’t sleep on the future laid out before you.

After the open we got 20k plus more!  Plenty of new all-time highs from names such as CMCSA, BA, CSX, DE,  ITW, GOOG, ADBE, and MA.   Look at that cross section we have Media, Tech, Industrials, Software, Finance, just anything and everything.   Rising tide --à boats.   Hey, remember when I talked about markets correcting via time instead of price?  It’s now clear that the past month reset the bar and yesterday’s breakout is likely just the start of the next leg higher.  Fight it all you want but I’ve talked to plenty of people who’ve said “I have the wrong portfolio right now, I never expected this post-election bounce to continue”.   Speaking of never expected when’s the last time you looked at IBM? (street has 8 buys 18 holds  3 sells on it)   Do people even talk about IBM anymore?  In the realm of “things you never hear” I bet you could put “IBM is my top idea” next to “boy I wish I used more soy sauce.”  Heck my dad worked there for 30+ years and even he doesn’t mention the place.   Yet it grinds and grinds and grinds (just breaking a 4 year downtrend) because it’s a great American company and those don’t go quietly into that good night.  Losers were few and far between but the biggest one’s were TXT, CA, FCX, STT, and APH.   By lunch the S&P was just shy of 2,300 which also happens to be the year end price target for about 6 strategists.   Crazy.

The rest of the day was up and to the right and when that big old bell rang nearly every major index was trading at a new all-time high.  I swear…if there was a theme for late 2016 / early 2017 it would have to be “would you look at that, never thought that would happen” because you could use it on about 100 things right now  (stocks, markets, politics, sports, deep fried chicken chalupas at T Bell).  So look, when a brand new President starts calling in the CEO’s of major corporations and telling them “we are going to help you as much as we can” I mean…. that’s the kind of environment that’s good for stocks right?  Talk about “don’t fight City Hall”?  Does that just seem way too obvious?  Could I possibly have used more question marks in today’s recap?  Final Score:  Dow +78bps, S&P500 +80bps, Nasdaq +99bps, Rus2k +97bps.      

Volume was good.  Our desk was better to buy.  Buying in Industrials and REITs.  Selling in Tech and Software.  Shorting in Consumer.  News Highlights:

We haven’t ended on a skiing video yet so let’s do that today!   Pro tip:  When you ski out of bounds you might die.   I’ll take the groomers and a beer at Garfinkles thanks.

https://www.youtube.com/watch?v=cKPhqtuZvfI

Have a good night

Equities Start The Day Nowhere

Equities start the day nowhere as this continues.   Look, I’ve run out of ways to describe sideways price action, my creativity has been tapped by the month long doldrums so instead of boring you with another analogy let’s discuss WHY the market is going nowhere.  In the very short term markets are dominated by emotions, sentiment, random tweets, stupid seasonal indicators, and whichever way the wind is blowing.   Of those sentiment is the easiest to talk about because we get weekly surveys about what people think.   Newsletter writers, Asset Managers, Individual Investors, Dennis Gartman, all of these are good guideposts to what the market is thinking in the very, very short term (some of them are AMAZING fades).   Every Wednesday we get the Investors Intelligence poll which is “a reflection of the recommendations of over 130 independent stock market newsletter editors”.   So….now that we’ve done a whole lot of word-smithing what did they report this morning?   “Bullish Sentiment increased to 60.6% from 58.6%, the highest level in 18 months.  Bearish sentiment decreased to 17.3% from 18.3%, the lowest reading since Aug 2015”.   Hmmm, that seems important to me.  At this point you know where I’m going but the reason the market is stuck here is that everyone is all bulled up right now.   Trump, earnings, de regulation, lower taxes, better growth abroad, gamma, vega, delta, theta, whatever the reasons to be bullish are they are priced in, well known to the world.  Markets correct these kind of conditions thru either time or price and right now it’s doing it thru time.   Given where sentiment readings are we could have a lot more boring ahead my friends (absent a price correction).  Hey, did you follow my NFL picks last weekend?  I know a few of you laughed at them but I went 3 for 4!  How about them apples?  Stay tuned later this week when I Iet you know what Super bowl you will be witnessing.

After the open the market was listless and uninspired.  In fact, if I had to sum up the first half of the day I’d point to any number of sewing circles in retirement homes or basket weaving classes at local community colleges to give you a good idea of how it felt.   Retail, have we talked retail in a while?  Yes?  Well we’re doing it again.  TGT pre announced and fell 5.8%.  Target people, a place EVERYONE I KNOW GOES TO.  Toilet paper, socks, shampoo, I mean the majority of my peers shop there and even they are struggling?   Oh the humanity.  Nordstroms got an upgrade today from the good people at Credit Suisse and the stock FELL.   Fell….after an upgrade.   Other losers in that space were M, UA, DLTR, DG, JCP, KSS the usual suspects.  I wonder….when does this trade get over its skis?  I mean it eventually has to right?  Energy stocks went straight down until they didn’t you’re telling me retail stocks won’t ever bounce?   Winners were URI, NUE, SWK, VIAB, and FAST.  Remember FAST?   They who spoke of the great Industrial Recession of 2015?   Yea the stock is at a 52wk high, how fast did that cycle turn!  By lunch nearly every index was trading unchanged.   Come on, this is getting a bit ridiculous don’t you think?  Someone tell Trump the S&P500 spoke badly of him, make volatility great again!

We got a massive rally in the afternoon, I’m talking rocket ship straight up to close at 2,271!  That’s 4 whole S&P points my friends, start lighting your cigars with $100 bills because Santa Claus showed up a month late!   So yea, the market is a little over loved and there just isn’t anything to get excited about.  This is like eating peanut butter and jelly for a month straight.  Sure, it’s a good sandwich made from strong component parts but eventually you get sick of it and want something new.  Can I get some turkey maybe?   Chicken salad and avocado?  So much stale information right now…ugh.  Final Score:  Dow -11bps, S&P500 +18bps, Nasdaq +31bps, Rus2k +46bps.   

Volume was low.  Our desk was better to sell.   Buying in Industrials and Energy.  Selling in pretty much everything.  Shorting in Tech.  News Highlights:

So apparently Portland got some snow, big whoop.  You’d think it was the first time humans have ever seen the stuff by the way my parents were talking (they live in Tigard).  Anyway, I’m a sucker for city skiing videos so let’s visit Rip City shall we?

https://www.youtube.com/watch?v=ISdyxsQUmPY&feature=youtu.be

Have a good night.

Steady As She Goes - That’s The Game Plan

Equities start the day lower as we continue to wait… just wait for earnings. Speaking of earnings, when’s the last time we looked at what the good people from @Factset had to say? No one better so let’s drive this bus over to their website and see what Q4 2016 has in store for us. “For Q4 2016, the estimated earnings growth rate for the S&P 500 is 3.0%.” Ok, that’s not too bad, two consecutive quarters of earnings growth would be very welcome. Revenues have only just inflected positive too so top line is also going in the right direction (h/t Yarrow). Ok how about valuation? “The forward 12-month P/E ratio for the S&P 500 is 17.1. This P/E ratio is above the 5-year average (15.1) and the 10-year average (14.4).” That’s a bit high, sure, but it’s not insane. In the last two bull markets the S&P500 had ~120% and ~65% upside from current valuations so 17x isn’t some kind of screaming sell. What are expectations for 2017 though; don’t we care more about that than some dumb Q4 thing? “For all of 2017, analysts are projecting earnings growth of 11.5% and revenue growth of 5.9%.” Ok, now we’re cooking with gas here people, that kind of growth can easily extend our bull market run a bit longer. All in all I think earnings will continue to be supportive of the market, I mean we just went thru a multi quarter earnings CONTRACTION and that didn’t dent it so why get all worked up now? Steady as she goes that’s the game plan and we’re sticking to it. Speaking of game plans, are you ready for my can’t miss NFL playoff picks? Seahawks, Patriots, Stillers, Packers. How about a can’t miss NFL snack? Right here baby, I got your back

After the open it was downside followed by more downside. Europe had a red day and we’ve failed so many times around 2,280 that the market just needed a reset. Speaking of downside, did you see this story on bond market positioning? Little blurb for you here: “That's how analysts are reading the most recent report of trader commitments, which shows investors are making record bets on higher yields. In the first week of the year, futures positioning for U.S. Treasuries was at an all-time high of 1.2 million ten-year Treasury contract equivalents, according to Macro Risk Advisors head derivatives strategist Pravit Chintawongnavich.” Ok, day 1 market lesson: when the entire world is short bonds they are not going to fall. I mean I guess they could but we all know the crowd usually isn’t right. Same with financials, which was the worst performing sector today (partly because yields fell), everyone is long these things thinking it’s nothing but smooth sailing going forward but you gotta be careful about positioning in the near term! Ok… who went thru Trump Tower today because that should tell us who the winners were. Randall Stephenson of ATT? The stock rose 1%? Makes sense. Hey, if you are a pharma exec why don’t you take quick trip up the elevator, promise jobs and a factory in Michigan or Alabama or Wyoming, and walk out to a stock up 5%... I mean is this so hard? Other winners were TIF (maybe all those execs are stopping at the store next to Trump Tower?), ABC, LLY, and DISCA. Losers were CINF, HES, FCX, PNC, and MU. By lunch the market was heading back towards unchanged because no one could really figure out why we were down. 

The back half brought a bit more upside and a close at 2,270, down only 20bps. Not bad considering we were down 1% early in the morning. At this point we haven’t gone anywhere in a month so if you came here expecting some kind of “new highs” thing you’re gonna be waiting a bit longer. I mean if you were waiting for Q4 earnings and a Presidential inauguration where the guy might mention your stock in front of 2 million people you might wait a week before making a decision too! Final score: Dow -32bps, S&P500 -21bps, Nasdaq -29bps, Rus2k -89bps. 

Volume was a bit lower than average. Our desk was evenly matched. Buying in Retail and Energy. Selling in Retail and Insurance. Shorting in REITs. News Highlights:

Tonight we’ll end with what I consider some kind of ESP / miracle / next level thinking. How did this guy possibly answer correctly? Come on.

https://www.youtube.com/watch?v=uzEWPpPLCds&feature=youtu.be

Have a good night.

The Great Stall Continues

Equities start the day nowhere as the Great Stall continues. Some ups, some downs, some lefts, some rights, a whole lot of back and forth yet we haven’t traded outside of a 1% intraday range in 16 sessions. Earnings start soon so that’s something, Trump gets inaugurated soon so that’s something (imagine the Tweetstorm), YHOO gets a new name soon so that’s something (albeit as dumb a name as I’ve ever heard), the Packers will lose soon so that’s something, and finally we might get Dow 20k soon so that’s something (that no one should really care about so I’m not sure why I brought it up. Meh). Hey let’s talk volume shall we? Volume is the lifeblood of an institutional equity business so obviously we’d like to take a look at trends from time to time. Luckily the good people at KCG produced this lovely chart so take a look then come back! My initial reaction is wow, I guess the death of “stock trading” might be a little pre-mature. All we hear about is ETF this and passive that so to see the average shares traded in a single day RISING is obviously a welcome sign. What people forget is that the argument really isn’t about “passive vs active” it’s about fees so anyone telling you that active management is “going away” is just flat wrong. Per share volume has been rising for 3 years now, that’s not something you’d expect if the world was going all ETF / Index fund. So stock traders of the world rejoice, it looks like the secular low in “shares per day” was made in 2013. Altaba…are you freaking kidding me? That might be worse than Mondelez to be honest. Apparently it’s a combination of “alternate” and “Alibaba”….sigh. How about Baba Oreilly or Babtastic? What consulting firm crammed full of people from Kellogg came up with this one? (yea I went there)  GSB GSB GSB.

After the open we got a  nice rally led by Financials, Health Care, and Industrials. Have you seen the Airline index lately? Take a look at this gorgeous looking thing, I mean who knew airlines could actually look this good! I guess that’s what happens when you charge $20 for a bag and serve those horrible blueberry cookie things for breakfast. Hey, what do you know about the NFIB Small Business Index? Nothing? Nice, neither do I, but LOOK AT THIS JUMP my friends, this is usually the kind of thing you see after a stock trading 400x earnings beats but in this case it’s how optimistic Bob the breadmaker and Sally the sewing shop girl are. How can you not be excited when small business is this jacked up? The 28 million small businesses in America account for 54% of all U.S. Sales and provide 55% of all jobs. Take that Bezos. Winners were SRPT, ILMN, W, CMG, and FCX. Losers WMB, ENDP, WDFC, VTR, CF, and the Alabama Crimson Tide. Who can stay up until midnight watching two southern football teams play for the title? Was there anyone north of the mason Dixon line watching at midnight EDT? Kick that thing off at 5pm ET on January 1 please.  By lunch we were going nowhere fast.

Which is exactly where we ended…nowhere! 2,268.91, up a whopping 0.01 PTS, which doesn’t even show up on percentages. Wow, can you feel the excitement pulsing thru the market? Its electric…boogie woogie woogie (you’ll sing it all day). Bring on earnings so we can see if the bull case makes sense (an acceleration of eps that was kicked off last quarter). Hey….you ready for my lock of the week? Packers baby, CANT LOSE WONT LOSE IMPOSSIBLE TO LOSE. 

Final Score:  Dow -16bps, S&P500 flat, Nasdaq +36bps, Rus2k +99bps.  

News Highlights:

Tonight we’ll end with our first Fail video of the year!   Let there be plenty more!

https://www.youtube.com/watch?v=0iHL8UbhYQI#t=0m12s

Have a good night.

 

It’s Hard to Go Higher When Everyone is Wearing Horns

Equities start the day lower as sentiment continues to cap the upside. II had their data out yesterday and it showed 60% bulls, ouch. AAII had their sentiment data out this morning and it continues to hover just shy of 50% bulls, ouch. So yea, it’s hard to go higher when everyone is wearing horns. Let’s switch gears for a second shall we? Last night we heard from two of your favorite mall destinations Kohl’s and Macys (Baird rates KSS neutral, no coverage on M). Now Kohl’s is a local favorite of mine, a good old fashioned department store founded in Wisconsin by Maxwell Kohl (was originally a supermarket!) and Macy’s is one of my favorite destinations in New York because, I don’t know, the windows I guess. Anyway, they both said business sucks and honestly does that surprise you at all?  

“Alexa, what were department stores?” 

“Well Michael, they were a relic of another era where people ate in things called food courts and shopped in places like Spencer Gifts or The Limited but my company came along and made them obsolete. Would you like to hear Pentatonix again?” 

(god no, please make it stop)   

Both stocks were down double digits overnight because retail continues to be hard… very hard. Look, these companies are going to struggle for a long time but they aren’t zeroes. America is WAY overserved by retail square footage (23.5 sq ft per person in the US, next closest is Canada at 16.4 eh) so the store closings will continue until this whole bricks and mortar retail finally makes sense. But… I mean… Sears is still here. Sears. Still open. Still selling stuff. The life cycle of these things is LOOOOONNNGGG so don’t think AMZN is going to be the only place to buy cologne and makeup next year. It’s easy to say “well everyone will just buy their stuff online” but these companies aren’t going down without a fight so don’t get ahead of yourself. Food courts… I mean how antiquated do those things look right now? Really terrible Chinese plus a Sbarro and an Orange Julius? That used to be a thing?

After the open we got a bit of sideways, a bit of lower, and then even more sideways. Weekly claims still look golden and ISM services came out at 57.2 so if you have “Recession 2017” in the office pool you are going to lose. Speaking of losing, bond bears have been struggling lately and their plight continued today. 2.37% on the 10yr, down from 2.60 in the middle of Dec, and if you think betting on retail going to 0 is hard imagine betting on a 4% 10yr (Byron Wien did, check this 2017 Surprises right here. I agree with 1, 3, 7, and 10). Ok let’s talk big brother! MAT gained 5.5% today because they showed off “Aristotle” at CES. Aristotle you say? Nope, not the guy you ignored in college philosophy, this thing, which apparently takes over parenting for you so you can spend more time watching NFLX or surfing on your iPad. Hey Mattel, can you invent something to take my kids to swim meets or soccer games or at least something to shut up that parent who thinks his kid is going play for Liverpool because he scored two goals at age 4? Thanks, love ya. Other winners included ALXN, NEM, O, DVH, and AMZN. Losers were, you guessed it, anything with 4 walls containing items for sale such as bedding, cosmetics, appliances, handbags, and fashion. M -13%, KSS -19%, JWN -7%, LB -7%, the list is long and distinguished. By lunch the market was off the lows but still down 0.1% to 2,267. Dow 20k? Maybe someday my friends… someday.

By the time the bell rang we managed to climb all the way back to unchanged. Some ups, some downs, and even more sideways. Feels like a summer market even though its -2 outside! I will say I’m fairly impressed with how well this thing is hanging in there, especially given where sentiment is, I mean it has every reason to sell off and punish those who came late to the party but it stubbornly refuses to do so. Tomorrow is the last jobs report of 2016. No matter what your view on the market or politics is you have to be impressed with the number of jobs we’ve added over the past 6 years. There hasn’t been a negative monthly payroll number since 2010! USA USA USA. 

Final Score: Dow -21bps, S&P500 -8bps, Nasdaq +20bps, Rus2k -115bps.   

Volume was high. Our desk was better to buy. Buying in Financials and Retail. Selling in Energy and Staples. Shorting in Energy. News Highlights:

We’ll end tonight with one of the best videos I’ve seen in a long time. Watch the whole thing, take 2 minutes out of your busy life to note the differences between what people view as their “goal in life.” Really cool stuff if you listen thru the ages.

http://tinyurl.com/jz8uygb

Have a good night.

A fresh start….what more can you ask for?

Equities start the day higher as the untapped potential of a new year is upon you! A fresh start….what more can you ask for as you sit down at your desk on January 3rd? Before you lay two paths, the first is filled with bad habits and pessimism and too many donuts and bagels. The second contains exercise and optimism and writing more recaps and eating egg whites instead of cheese (egg whites suck, come on, just eat the whole darn thing). Choose wisely my friends because it’s nearly impossible to backtrack. So what should we take away from 2016? What’s the best “market related lesson” we can learn? Well, I’ve thought long and hard about this and the best thing I can come up with is: market predictions are stupid and you should never, ever listen to them. Honestly what’s the point of saying “well if X happens and Y happens then your stocks should do well?” If I gave you ALL OF THE FOLLOWING on January 1, 2016  1) Brexit  2) Donald Trump  3)  Deutsche Bank quivering 4) rates rising 5) a 12% selloff in the first month of the year 6) no Santa Claus rally 7) oil back above $50 8) Dollar at a 13yr high and 9)  Mariah Carey blowing up her live career would you have said “yea I’m thinking +10% sounds about right for the S&P.” No….freaking…chance. There is no reason to have a “year-end price target” on any index on the planet…none…period. The best we can do is look at the situation surrounding us and say “do I feel comfortable owning equities or not” and to me the answer is still yes. I will begin to squirm when unemployment makes its cycle low. I’ll fidget when auto sales turn over. I’ll jump out of my seat when the yield curve inverts. We just aren’t there yet, none of those things have happened. Do me a favor, head over to this link to find the questions you should be asking yourself right now. If you have a view on those you will have a framework to approaching investing in 2017, if not you are at the whims of fate.

After the open it looked like we might take a shot at Dow 20k but then everyone realized nothing is going on and we sold off. Seriously nothing is going on right now, there is no coherent thesis yet so we are basically coasting on last year’s fumes. Up 1% overnight because Europe had a few good data points? That’s not gonna cut it pal, we need some good old fashioned American meat and potatoes before chasing 23x earnings. XRX was the big winner today rising 16% after a few analyst upgrades. Do me a favor, ask a millennial what XRX makes and get back to me, I’d love to know what they say. Other winners were CTL, MPC, ENDP, and FIT. Speaking of FIT, have you seen the inside of a gym lately? You’d think they were holding Black Friday sales on TV’s or something, I mean come on people just because it’s Jan 3 doesn’t mean you have to wait in a 10 minute line for the salad bar and do the “spin” thing. Set some realistic goals like walking for 30 minutes or drinking more French Press coffee (literally the best way). Losers were mostly energy names as Crude fell $2 and Utilities as the “yield unwind” appears to be never ending. By lunch our cafeteria had run out of Romaine AND iceberg while the market sat on 2,247 up 0.4%.

We got a small rally in the afternoon when it was announced that the close had $1.2B worth of stock to buy so remember all that “pensions need to rebalance out of stocks and into bonds to start the month” thing? Yea…something else that was completely wrong. So let’s wrap up with a quick thought on consensus. I still hold to the notion that this bull market has room to run so what do all the big wig macro guys think? Well, a group of 15 strategists expect the S&P500 to finish the year at 2,356, a gain of 5%, the least optimistic they have been since 2005.  Now you know what I think about “year-end targets” but what intrigues me is that the bulk of Wall St thinks the upside is limited.  Yea…about consensus thinking….. 

Final Score:  Dow +60bps, S&P500 +85bps, Nasdaq +85bps, Rus2k +62bps.    

News Highlights:

Tonight we are going to end with a true American hero, who just so happens to be 2. Imagine how much this kid is going to show this video to his brother later in life.   Parents….bolt your kid stuff to the wall!!

https://www.youtube.com/watch?v=EtsrIpeMIkE 

Have a good night.



The start….not the end….this is the first inning people.

Equities start the day lower as USD continues its audition for the next Space X launch. 101.5 DXY? I’m about to kick off a “BullandBaird travels Europe a la the Griswolds” to show off my greenbacks in town squares. Is that a $20 bill you have?  Why yes, yes it is, bring me your finest cheese and wine pronto tonto. What a week this has been right? We’ve seen Financials and Industrials act like someone just invented the wheel and the checking account while Staples and Utilities have been puked up like 12 shots of Fireball mixed with Taco Bell. Now this may or may not be the start of the “Great Rotation” (bonds to stocks) but it is absolutely is the start of a Yellen to Trump Rotation (low vol / yield to risk on). The start….not the end….this is the first inning people. I’ve never been more excited to sit at a Trading desk than I have been the past few weeks. The opportunities right now are vast and deep, like my waistline. If you run money you must be absolutely salivating  at the chance to turn in your plate of veggies for one filled with prime rib and mashed potatoes. No longer do you have to hide in a FANG stock or buy a Utility at 23x PE, now you can look thru the Defense sector or the Banking sector or the Industrial sector for names that have been lost in time. Wait…what’s that….you are swamped by the crazy array of choices and need some help? Well my friend I just so happen to know of a place that does amazing Equity Research and employs the grayest 43 year old on the planet who loves to write about markets (my birthday is next week, send Xboxes). This is the time people, don’t sleep on what’s happening around you. There is change afoot…don’t get caught thinking about the past…. start thinking about your bright future! (here’s your moment of Zen too)

After the open it felt like market interest hit a brick wall. Friday, before a holiday week, after a huge surge in volume, I guess it was to be expected. Most of the morning was spent trolling the lows with weakness centered on Health Care, Utilities, and Staples (been so all week). Hey let’s talk fund flows for a second shall we?  In the week ending November 16 Lipper reported that equity funds saw inflows of $23.6B.  23B…with a B!! Cue up Dr Evil because that’s finger worthy. That’s the biggest inflow in nearly two years and the third largest on record. So Great Rotation right? Lock it down its happening? Maybe…maybe….it’s still too early to tell but this is the best chance I’ve seen in a long time. Money chases performance, it is thus and ever shall be so we need equity funds to start knocking the cover off the ball. Losers today were GPS -16% (Gap is still around?), UA -4% (literally can’t get out of its own way), FSLR -6% (great innovation tough business?), and ANF -13% (why so much cologne in the store? practically need a scuba mask to walk around). By lunch we had given up 0.2% on the S&P but we sat just 7 pts shy of the all-time record. Who else is excited for Turkey and Stuffing? I literally can’t wait. If you need a good gravy recipe hit up your boy, my wife makes one that will literally blow your mind. Full on turkey drippings, heavy cream, thick, viscous brown gold.  Oh my Homer Simpson mmmmmmmm.

The rest of the day brought us no relief from the horrible, savage, 5 point selloff and we closed at 2,182, down 23 bps. The Russell though….the muscle in the Russell is up 11 straight days…longest streak since 2003. Am I supposed to be bearish with the Russell breaking out? With Financials finally performing? With Industrials and Transports performing? With everyone in bonds funds? With interest rates at decade lows? With the Cubs winning the World Series? With a pro-business party sweeping U.S elections? With crude oil hovering around $50? With earnings finally growing again? With Sentiment nowhere near frothy? Should I continue here? Whoever made my 401k great again I thank you from the bottom of my heart, the last week and half has been magic. 

Final Score:  Dow -19bps, S&P500 -24bps, Nasdaq -23bps, Rus2k +47bps.

News Highlights:

We’ll end tonight with what I think is the perfect video for a Friday recap.  A bit of basketball mixed with a bit of rhythm.   Feelsgoodman.

https://www.youtube.com/watch?v=hqMZ9etBjeE&feature=youtu.be

Have a good night.

The Future Belongs to Optimists

Equities start the day higher as Trump-o-Mania continues to ripple thru stock markets. Look, I need to apologize, I’ve spent the entire week at Baird’s fabulous Industrial Conference in the great city of Chicago so I couldn’t be here to regale you with inane commentary about a crazy election. Our conference though…I mean… it’s amazing. Tremendous. Terrific. We don’t even need to make conferences great again because our team puts on a heck of a show. Clients, Companies, Baird employees, Senior managers, it’s all tremendous. If I can manage to write this entire recap in Trump-speak I’ll be very, very, very happy with myself. So if you’ve been following me thru the years you know I don’t talk about politics. There’s ZERO good that can come out of it so I leave it to pundits and people who like making other people angry. Seriously, when you talk politics here are your two potential outcomes: 1) you preach to the choir or 2) you p*ss someone off. THAT’S IT. NO OTHER OUTCOMES. So I avoid it. If you want daily political commentary hit up Google. Anyway, Donald J Trump will be our next President and you know what? Life goes on. If Clinton won I’d feel the same way. Why? Because America is a vibrant, electric, industrious nation. We have a strong rule of law, incredible innovation, hardworking citizens, and the world’s largest economic engine. Trump, Clinton, Obama, Bush, take your pick but you know what? We push forward, we thrive, we do our best to take care of our family and our friends. You know what changed here at Baird after the election? Nothing. My fantastic, amazing, tremendous, very, very, very intelligent coworkers went on providing clients with the best service possible. PWM group? Awesome. Research? Top notch. Sales and Trading? World Class. Banking? Exemplary (they know WACC inside and out, trust me). Senior Managers? Unparalled (it’s nearly bonus time). Elections come and go, Democrats and Republicans come and go, Economic cycles come and go, do me a favor and approach the future with optimism not with despair. Bob Iger expanded Fantasyland in the absolute depths of the financial crisis. As the world crumbled around him he put in another Dumbo ride for crying out loud. The future belongs to optimists, join us here at Baird being one. 

After the open it was nothing but tremendous rotation. I mean the best rotation you’ve ever seen, we NEED this rotation I’m telling you. Financials act like they just invented the checking account. Utilities act like they send poisonous gas into your bedroom. Industrials act like WW2 just ended. Staples act like Oreos kill cats. Literally everything has been upended and the market is aflutter with activity. It just blows my mind how fast things have changed since Tuesday night. One event steepened the yield curve faster than the world’s most powerful central bank EVER could. Nearly all of the big shot macro wonks are bulled up now talking about GDP surges and shovel ready. I’m telling you… “Fiscal Stimulus” is the new “lower for longer” when it comes to price action. It’s like the market just got a triple shot espresso after it finished a Red Bull. I’m excited my friends… can you tell? Opportunity abounds, don’t sit on the sidelines right now. Ok you already know the winners and losers, no need to rehash that plot point. What about tech though? The Nasdaq fell sharply this morning…what’s up there? Well, it’s more of that rotate into the “Trump sectors” we just spoke about. Tech has been the only place to get Alpha this year so it is incredibly over owned. You know what’s under owned? That’s right Johnny, Financials. Here is a chart where I normalized SPX, QQQ, and XLF to the open on Tuesday. Banks take off, SPX glides higher, and Tech starts to get hit. This one might have legs we’ll have to see. Anyway, by lunch SPX was up 34bps, Nasdaq was down 68bps, and Trump was on TV with Obama. 2016… I mean what can you say about this year? Oh yea… CUBS WIN. CUBS WIN.

The rest of the day brought nothing new to our Trumped up stock market and we closed at 2,167, up 0.2%. So the question is this: does the market continue its massive internal upheaval or is this all just a giant “hope” trade? Hard one to answer my friends, I guess I’m 50/50 on whether it continues or not. If Trump or any of his advisors came out and told us that infrastructure spending was #1 or 2 on their list then yea, it will continue. If we don’t hear anything for a while then the market will be prone to reverting back to its old defensive mode. So I guess it all depends on what Trump says… and we better get used to hearing that for the next 4 years am I right? Let me end by saying I love you all, whether you live in America or Europe or Asia or the Middle East or Australia or Mars or whatever this is all one great big goat rodeo, embrace your fellow man or woman and let’s get to work towards securing a bright future for our kids and their kids and thank God I won’t be alive for that because I never wanna change another diaper in my life. Can I get an amen? AMEN. Final Score:  Dow +118bps, S&P500 +20bps, Nasdaq -81ps, Rus2k +157bps. 10yr yield 2.14!!! Wow.

Volume was off the charts. Our desk was WAY better to buy. Buying in Financials and Financials and Industrials. Selling in Consumer and Tech. Shorting in index ETFs. News Highlights:

It’s been a long week… we’re skipping to the big finish.

Tonight we have a bunch of fun loving Frenchman who don’t care about the election. All they care about is surfing over a 5000 foot ravine. Yikes.

https://www.youtube.com/watch?v=3xZ4rd93JrM&feature=share

Have a good night.

Absolutely Insane Things are Happening Right Now...

Equities start the day lower as hell freezes over. Think about all the absolutely insane things that are happening right now 1) The Cubs are going to play the Indians in Game 7 of the World Series. Two fan bases who haven’t seen a championship since D-Day are going to play in front of 40 million people. I wanna buy FOX just for the cash they are gonna rake in tonight. By the way, how painful is the loss going to be for whichever team loses. If it’s the Cubs prepare for me to hate on the World. 2) Some dude with really crazy hair and a penchant for saying YUGE is closing the gap on his rival for President of the United States. Has the market priced in a Trump victory at all? No, but it’s certainly changing its expectations as we speak.  3) The S&P500 is on a 6 day losing streak and the cumulative losses are 1.8%. That’s almost hilarious if you think about it. 6 days of trading lower and the peak to trough is less than when Brexit happened. 4) SBUX came out with a hideous green cup that celebrates “Unity” and managed to drive a wedge thru its customer base. Look, Schultz, this is easy, pumpkin spice lattes from Oct 1 to Nov 1, red cups from Nov 2 to Dec 31, laugh all the way to the bank. McDonalds doesn’t do red shamrock shakes, don’t tinker with perfection.  5) The Fed is about to tee up a rate hike and no one is talking about it.  Stay tuned for some 1c analysis of the Fed decision later in this email.  6) Earnings are nearly over and both top and bottom line have positive growth rates yet no one is talking about it and 7) This guy. I mean wow (other than the man bun. sigh)

After the open we experienced a normal Fed day. Mornings consist of asking the question “what if they hike” while the market goes absolutely nowhere. Then, as we approach the actual decision, we start to ask “what if they NEVER hike” all while the market goes absolutely nowhere. Oil, we need to talk oil because my energy trader bugs me endlessly about it. Crude had the biggest build in 34 years, something nutty like a 4 standard deviation move (my favorite “sound super smart” stat) which hammered the commodity for 3%. Something something imports (jumped 2 mil barrels a day to 9 mil) even though we produce a ton of this stuff domestically?  Oil markets….make as much sense as delta hedging knockout options right? Ok enough of this Texas Tea thing we need to talk about why the market keeps selling off.   Most people think it’s the election and oil and interest rates and sentiment and while yes, it is a combination of all of those, I think this selloff is being magnified by liquidity issues. A fair number of people have flat out stepped to the sidelines in front of the Fed and the election so when you look at price action you need to do it thru a lens of suspicion. Anyway, let’s see what the Fed had to say.

At 2pm ET the Fed told us exactly what we already knew, they plan on hiking in Dec. “The case for a rate hike has continued to strengthen” was their words so ignore that at your own peril. You know who isn’t ignoring them?  Real Estate and Utility investors, those sectors continue to see significant weakness as they are undoubtedly loaded with far too many macro tourists. What inning do you think the “yield chase unwind” is in? 2nd? 3rd? Still early days there. Winners:  ABC / HSIC / ZTS / ANTM / KR.  Losers FTR / CERN / TGNA / PXD / EL / DNB. A few ups and downs in the afternoon but ultimately we closed at 2,097 which was the 7th straight day of stock market losses.  Ugh, not good at all.  Look, let’s be clear here, the market doesn’t “root” for a candidate.  It doesn’t want Trump to win or Clinton to win it’s just trying to discount the possible outcomes and right now they are as clear as a country river.   Near term volatility as the polls swing around is to be expected, it’s just part of the process, so put your stock market quotes on ignore and come back after the election.   Can I get a Go Cubs Go from the audience?  Pretty please?  Do you realize how big this baseball game is?   My heart can’t take it.  Actually….you know what?  Cleveland is guaranteed to win this.  I rarely make predictions but if you wanted a sure fire 100% cannot miss prediction it’s that Cleveland wins tonight.  They are just that good. Trust me, it’s over. Congrats Cleveland!! 

Final Score:  Dow -43bps, S&P500 -65bps, Nasdaq -93bps, Rus2k -131bps.         

News Highlights:

So you know those firework videos where someone screws up and sets them all off early?  I love them too.  Anyway, tonight we have a firework video where an entire shopping district of them go off early.  GO CUBS

https://www.youtube.com/watch?v=Rp9ntI3M7SY&feature=youtu.be

Have a good night

The Scariest Things Imaginable

Equities start the day slightly higher as the wondrous day of Halloween is upon us! This is the day Jack Skellington lives for even as he laments the crown upon his pumpkin head. In honor of the last great holiday untouched by corporate ads and fictitious shopping days let us talk amongst ourselves about the scariest things imaginable. The first thing that pops into my head is another year of this ridiculous election. Freddy Krueger ain’t got nothing on a team of lawyers dragging Trump V Clinton into 2017. If you want want to know what Put buyers dream of for Christmas that would be at the top of their list. What else…how about a milkshake of Almond Joy and Bit ‘o Honey? How do those two candies still exist, is there some coven of witches that use them to turn kids into tasty appetizers? What about earnings…ooooo scary…what if the earnings growth rate turns negative to end the season? That would be 6 straight quarters of negative growth and only the bulliest of bulls could ignore that (luckily @factset says we are on track to end that streak). How about asking Harry Redknapp for a ride home after the costume party? Can you think of anything more terrifying? I mean no one wants to be turned into a speed bump (if you’re American you’re gonna need to hit up GOOG for that one). But by far the scariest thing I can imagine is sitting at your desk this week needing the market to move to make money. Lemme get this straight: there’s a Fed meeting on Wednesday and a U.S. Presidential election next Tuesday. What’s the “range bound for a week” fund called? Can I get some kind of home equity line to invest in that? We closed at 2,126 last Friday…anyone wanna bet we don’t move +/- 1% this entire week? Ugh, can we shut down for some kind of “I saw a tumbleweed behind my desk” holiday? By the way, if you wanna know who won “best costume” it is undoubtedly @AilishOctigan. That is some scary stuff. (this guy wins worst)

After the open we got a whole lot of sideways tossed into our candy bucket. No rhyme or reason to price action at all and I don’t know if you’ve seen a chart of the S&P lately but I think it’s forming what market technician call a “dragon tooth” pattern. The 50 and the 200 day are approaching each other like Maverick and that Mig 28 so the market is about to either break out or break down. Chicago PMI came in at 50, which is about the number of strikeouts between Heyward and Baez, so we can’t exactly point to the windy city as a beacon of economic growth right now (come on Cubs…win one for the anton-ipper). Movers and shakers on this completely sideways pointless day? Mostly utilities as treasury yields dropped a bit, names like NRG, NI, AEP and LNT. Other winners:  BRCD, CNA, L, and DVA. Losers were ZBH, CTL, BHI, and all the energy names because crude fell over 4%. Remember a few months ago when crude would drop and the market would act like someone put a razor blade in its apple? Yea that’s not the case anymore, how quickly we forget about all those “worries.” By lunch we sat on 2,127 which was sharply unchanged.  

The last few hours saw a bit of downside but it was as shallow as a kiddie pool. We closed at 2,126 exactly where we were at lunch. BORING. Now as you know, from time to time I get hit with random life experiences that I try to craft into a market related story. Family, friends, pictures with Hillary Clinton, you know, the kind of stuff that happens in a normal everyday life. They can be cheesy, I know, but I’m trying to stand out in a sea of boring market commentary. Since it’s Halloween allow me to relate one story before you exit this page. My town did trick-or-treating yesterday (don’t ask) and as I prepared my two kids I thought of all the awesome times I’ve had with them over the years. My son, who is now 10, has dressed up in all kinds of costumes like a dog, a fireman, a superhero, and even the Phantom of the Opera. As we prepared to take our 2 hour stroll thru town my 8 year old daughter reached out and grabbed my hand excited to collect all kinds of tasty treats with her father. My son, on the other hand, ran into 3 of his friends and shot me a quick look that said “Dad, I’m off to have fun with the boys, I’ll see you later.” Like the leaves around me a gust of wind swept him out of view and all he left behind was a trail of my memories. A little dog in a wagon, a Batman chasing the Joker, a fireman with a big black hat, gone from my sight was the little boy I once walked with who couldn’t quite hold all his candy. Goodbye little boy, you’ll live forever in my heart. It goes fast my friends, really fast. If you have a child and they have Trick-or-Treat tonight savor every moment. Walk with them, hold their hand, dress up, laugh, eat some candy and then come back and tell me it wasn’t the best thing you’ve ever done. The market is going nowhere right now, embrace the joy that Halloween can bring. 

Final Score:  Dow -10bps, S&P500 -1bps, Nasdaq -2bps, Rus2k +2bps

Volume was average. Our desk was better to sell. Buying in Tech and Consumer. Selling in Energy and Industrials. Shorting in Energy. 

News Highlights: 

So yea, of course we are going to have Halloween fails as the final link tonight. What did you expect, some kind of lame list of “Best Horror Movies” to watch tonight?    

  1.  The Shining
  2.  Poltergeist
  3.  The Exorcist
  4.  Prince of Darkness
  5.  Scream 1

https://www.youtube.com/watch?v=CkZ_zXXaV9U

Have a good night.

Holy M&A Monday Batman

Equities start the day higher as companies in the U.S. go on a shopping spree! Holy M&A Monday Batman, did you see how many deals were just announced? First off the good people at AT&T are so enamored with Jon Snow that they just had to have Time Warner Inc. Look, I get it, you wanna know whether Snow fights his way to the Iron Throne, so do I, but you just paid $85.4B to find out early. I mean you couldn’t wait a few years like the rest of us? Management of Rockwell Collins, headquartered in the fantastic city of Cedar Rapids Iowa, woke up today ready to acquire B/E Aerospace because lie flat seats and toilet valves are the new killing it. $6.4B? Collins was ready to spend. A few states over lies the great company of TD Ameritrade and in their Omaha Nebraska headquarters they announced they would like to acquire Scottrade Financial services for $4B combining two of the largest online brokerages into one. Wait…consolidation in the Financial Services sector? No way. Three giant deals that tell me U.S. companies are out there ready to acquire to fuel their growth. Is that a sign of a market top? No, stop saying that. If I read one more person say “but..but…AOL and Time Warner was the top”  I’ll start blocking everyone. M&A can be a good sign not a bad sign. Would you rather these companies keep buying their own stock or hoarding cash? You can’t have it both ways! The United States has some of the most vibrant, successful, and innovative companies in the world. Our economy is doing fine and the market is not a bubble. There, I said it. Have at me. Did I mention I was at Game 6 on Saturday in Chicago? I'm going to go ahead and put that in my top 5 days of all time. Meeting my wife, having my two kids, getting hired at Baird (the most shameless thing I’ve ever written), and watching the Cubs win their first pennant since we dropped a nuclear bomb on Japan. Are you ready for the World Series? Do you want to see game 3 in Chicago on Friday? Standing room only is $2000.

After the open, to be honest, it seemed kinda dead. We traded sideways with a slightly negative bias and all the gains were pretty much locked in by the time we sat down. European PMIs were better than expected and futures jumped around 3am ET to the 2,146 level. But they sat right there for nearly the entire session. Why? Because the election is near and earnings are just ok and macro data is just ok and why would anyone make a move before November 8? Volumes in October are running unusually low and the only thing we could possibly blame that on is Trump and Clinton. 2,150 on the S&P500? Can’t imagine we go +/- 1% from there for the next two weeks. Other than deal stocks winners were NVDA, QRVO, SYMC, ADS, and KMX. Losers were CHK, DVA, KMB, RIG, and SWN (yea oil was lower). New ALL TIME highs from the following: FB   GOOG  ADBE   ATVI  PYPL  MA  MSFT. Those are some big companies to be making all-time highs in a market up 4% YTD right? Stock picking…not dead just yet!  I mean FB is up 27% YTD….27%!!  

The rest of the day was sideways, as it has been apt to be for a while now, and we closed at 2,151, up 47 bps. Volume? Clocked in just under 6B which is down a good chunk from the 2016 daily average. Again, I think the election is weighing on actual risk taking so lower volume doesn’t surprise me all that much. I remember volume dying in Europe before Brexit so the exact same thing is happening right now. I have to end with one final thought about the Cubs. Look, I’m not a lifelong fan so I won’t pretend that Saturday changed the course of my tortured existence. I grew up in CA, OR, and CT so it’s not like I was born on Clark and Addison. But I did live in Chicago from 1997 to 2007, met my wife, had my first kid, and went to school at U of C so the Cubs became my team. Why? Well, my parents moved me around so much I could never really dig into a franchise so falling in love with the Cubs was easy. To stand there and hear the roar that went up after the game ended was a soul filling moment. Years and years of frustration released in one giant cry of joy into a cool crisp night. It was a religious experience, like seeing the face of your brand new child, and it’s one I’ll never forget. Why? Because the happiness was pure, it was real, it wasn’t acquired in a store. So what’s my point? My point is never say no to an experience. Never say no to meeting someone and going somewhere that might change your life. If a buddy wants to meet you in Yosemite to take a hike go. If a client wants to meet you in a park just talk about life, go. If your wife says “let’s spend a weekend alone near a beach” go. That’s why we do what we do, not to buy dumb things like iPhones and cars. Experiences are everything in life, embrace them, don’t let a constant quest for a pile of money stand in the way of what really matters. Final Score: Dow  +43bps, S&P500 +47bps, Nasdaq +100bps, Rus2k +69bps.

Volume was low. Our desk was evenly matched. Buying in Health Care and REITs. Selling in Fiancials and Software. Shorting in Consumer. 

News Highlights:

I have two links to end on tonight and as always I’ll give you a choice based on how itchy you are to delete this email

The first is short

The second is long (but worth it)

Have a good night!

Highs, Lows, and Endless Boredom

Equities start the day lower as CUBS WIN…CUBS WIN. Alright my friends, prepare for a life story because I need to relate Cubs fandom to the stock market. I lived in Chicago in 2003, the last time the Cubs played in the NLCS. It was a glorious time:  no kids, a good job, still my in 20s, a condo near the L, and Wrigley Field was 3 blocks from my home. Cubs fever gripped the city as Prior, Wood, Sosa and Alou promised to end the curse. My wife and I trundled up to the ballfield for Game 6 on October 14, 2003. We drank Old Style, ate hot dogs, did a shot in the Cubby Bear, and prepped for a celebration of the Cubs first World Series appearance since the Ottoman empire broke up. Well…you all know what happened….Bartman decided he needed a souvenir and the rest is etched in Chicago sports history. Highs, Lows, and endless boredom…that’s what it’s like to be a Cubs fan and that’s what it’s like to sit here and watch this market. 99% of the time is boredom, a pitching duel that ends in a 1-0 score and all you want to do is go home and never watch baseball again. The rest of the time is split between enjoying late game heroics (last night) and despairing as a decades old curse rears its ugly head. What I want you to take away from this little chat is that 1) you should be rooting for the Cubs. Only someone who drinks vast amounts of hatorade while attending the Playa Hata’s Ball would want to see Chicago lose and 2) while big moves in the stock market make headlines most of the time nothing is happening, much like your average baseball game. Yesterday we fell 1.5% because AA whiffed and the Dollar keeps making new highs. But pay it no mind, it was not a Bartman incident, it was just another random selloff that happens from time to time. We will never know when the next bad event happens and we will never know when the next bear market begins so my lesson to you is this:  enjoy the ride, don’t stress too much, be prepared for all contingencies but realize that most of the time nothing is happening. Man….I can’t even tell you how bummed we were walking home after that game.

After the open nothing happened. I mean literally sideways all the way until the Fed minutes came out at 2pm ET. I swear I write on the absolute quietest days, what is wrong with me? 1.5% selloff on Tuesday and not a peep outta me. I suck. Reading the Fed minutes one thing is still painfully clear: there is no consensus at all about what to do in Nov or Dec. Some of them think it’s appropriate to hike soon and others prefer to wait for more convincing evidence about inflation. Smartest people on the planet and still no consensus….are you ready for more sideways markets because hoo boy. Guess what, they aren’t going to hike in November. I know I know, this is the first place you’ve heard that said so when you speak of me, speak well.  What about Dec? I’ll tell you what, after reading these here minutes it doesn’t feel any higher than 50/50. Winners were KR, BB,  LB, SWK, and CCI.  Losers HUM, ENDP, MOS, MYL, and REGN.   

The rest of the day brought nothing special at all and we closed at 2,139, up 12bps. Have we broken our sideways trend yet? Nope, but we are back near the lows of it. CSX reports and then we get the banks so if you’re looking for a menu of catalysts it’s pretty measly. Anyway thanks for tuning into my Cubs related blog for today. Feel free to stick around this week when we discuss such topics as “Candy Corn should be banned” and “why Pumpkin beer is dumb”.   

Final Score:  Dow +9bps, S&P500 +11bps, Nasdaq -15bps, Rus2k -3bps.

News Highlights:

Tonight I have one of those video that makes your stomach churn right before the end.   Is it just me or do you cringe right before he hits too?

https://www.youtube.com/watch?v=ezhQz1hdWMs

Have a good night

I Love My Country But Come on Man

Equities start the day higher as today is the day we celebrate the noted town of Columbus Ohio, home to the world famous Buckeyes. Didn’t stock markets used to take today off? Did I miss that whole era? Our bond brethren have it off so God speed you interest rate trading fools. Anyway, I spent a glorious October weekend raking leaves, picking pumpkins, and feeling constant embarrassment over the state of our Presidential election. Someone do me a favor and check the gravesite in Springfield IL to see if Lincoln is on his stomach. I had to tell my 8yr old daughter that there are a couple different names for cats and one of them isn’t exactly ready for Prime Time. Sigh, can this thing just be over please. I’d rather spend my day talking about German interest rate swaps or how to hedge gamma on a knockout option than hear another thing about our awful choices. What does the market think though? Does it prefer Clinton or Trump? That’s probably a really difficult question to answer and I have absolutely no insight that would be valuable to you but I do know this: markets love status quo. Anything that upends the apple cart or isn’t “priced in” (see Brexit) is usually bad for you and me. The market just wants to keep on keeping on and if that means Yellen doesn’t get fired on Nov 8 or the top end tax rate doesn’t rise to 80% then game on. There are 3 catalysts left for the year 1) earnings, which thankfully are upon us. 2) The Election, which thankfully isn’t far away and 3) the December Fed meeting, which thankfully happens during the holidays so maybe we’ll all be in a better mood. Ugh…I love my country but come on man…

After the open volume was nonexistent but we got a decent sized rally. Why you ask? Well my friends, oil managed to touch $51.50 a barrel and if there’s anything stocks love its high priced oil!! No macro data to speak of and earnings, while kicking off this week, still haven’t shown up yet. Twitter…let’s talk Twitter! The stock looked like this today because apparently they’ve been left at the altar. TWTR, what an amazing service, first to break any news in the world but apparently hard to monetize…who knew? I mean how hard can it be to sell a company that made Ken Bone and his Bobby Knight red sweater famous? Energy was obviously the big winner but CRM and MYL led the pack. CRM, because apparently people talked some sense into Benioff, and MYL because they cut a $465mm check to the government with a “oops my bad” card. Losers were BMY (bad drug data), DOV (bad guidance), Notre Dame (bad snapping), TWLO (bad price action after announcing a secondary), and the Cleveland Browns (bad everything / had to face an angry GOAT). By lunch we sat on 2,166, up 0.5%, which is square in the middle of the same range we’ve been in since JULY. That’s right my friends, welcome to your all passive world where the market goes nowhere for 4 months. 

Themarket slid lower the rest of the session because, let’s face it, “oil is higher” isn’t exactly the strongest kind of rally we see. 2,163 that’s where we closed…the same level we closed on July 14. Did you read that right? July 14. It’s October 10th. Now I’m still in the camp that we see green numbers by Dec 30 but if we close at 2,163 there’s going to be a lot of grumpy people returning their socks to Wal Mart. Come on earnings, don’t let us down! Final Score: Dow +49bps, S&P500 +46bps, Nasdaq +69bps, Rus2k +115bps.

Volume was REALLY LOW. Our desk was better to buy. Buying in Financials and Energy. Selling in REITS and Biotech. Shorting in Industrials. 

Nothing much on the news front (save for the Presidential nonsense) so let’s skip to the big finish.

I have an awesome Fail video tonight, promise me you’ll stick around until the lady in the car with the dog…. 

https://www.youtube.com/watch?v=hhjj6lSNS0Y

Have a good night.

This Has Been a Very Odd Year to Say the Least

Equities start the day lower as the great month of October begins. Who else is as excited for October as I am? Anyone? My favorite movie character of all time might be Jack Skellington (with Capt Jack a close 2nd) and there isn’t a single argument that makes sense as to why Halloween isn’t the best holiday of them all. Wanna know if someone is still a child at heart? If they still feel joy deep down in their world weary adult soul? Watch how the act on Halloween, will tell you everything you need to know. We are also starting the last quarter of the year and the last earnings season so the clock is ticking down on all those managers who might be underperforming. Take a look at this chart from Citi and ponder the following question: What will become of those cash balances should we grind higher into year end? I’ll tell you what I think, I think they’ll be spent faster than my kids allowance at Toys R Us. This has been a very odd year to say the least. The first month and half basically scared everyone out of the pool. It’s like Jaws showed up to a kids pool party and starting rag dolling 5 year olds like a dog’s chew toy. Once everyone was scared out they were hesitant to come back and the market did what it always does, punish them for not believing. Really that’s been the main theme of 2016 right? If you dare step out of the party the door will lock behind you and all you’ll hear is your friends doing Fireball shots while listening to Flo Rida. Hasn’t the angst seemed exceptionally large this year? Is it just me?

After the open the market acted fairly weak for what seemed like a ho-hum day. A bit of economic data in the morning was all we had to go on and while ISM Manufacturing was a small beat, the market acted petulant and fussy. Have you been keeping your eye on the DJ Transport Index? If you are a regular reader I know you have but the rest of you need to have this one on your screen. This index will LEAD any improvement in Manufacturing data and it sure looks like it wants to make a new high to meHenderson and Janus look like they are going to team up to create a new Superhero group, hopefully they get a 3 picture deal from Marvel. Who else feels like “asset manager consolidation” will be a popular term going forward, we sure do have a rapidly changing landscape don’t we? What else…Kim Kardashian got robbed in Paris and the entire thing smells fishy to me. Wait…so she was sitting in a giant hotel room…alone…and some random dude from the front desk walks a bunch of guys into her suite and says “have fun kids?” She has no security at all while sleeping alone abroad? Come on MAN. No camera footage? No panicked phone calls or texts to the world? Winners were CTSH, NWS, NFLX, NWSA, and CHK.  Losers  ASIX, RIG, TDC, CNC, and NEM. By lunch we were trading down half a percent in a fairly dull session. 

The rest of the day was meaningless grinding and we closed at 2,153 dow 0.30%. A no nothing go nowhere day where we talk about football, pumpkin carving, and what sector looks the best on charts (we ended up on Tech). There’s no real data tomorrow and earnings don’t meaningfully start until the middle of October so we could be set adrift on memory bliss for a while my friends. But have no fear I think we’re in good shape to round out the year. We might not be flying but we certainly aren’t dying. Stocks rise and stocks fall but at least we get to watch men chase a ball. You know what’s really hard? Trying to end a recap like a bard. 

Final Score:  Dow -30bps, S&P500 -33bps, Nasdaq -21bps, Rus2k -47bps.

Volume was awful. Our desk was better to buy. Buying in Energy and REITs. Selling in Media and Consumer. Shorting in Health Care. 

News Highlights:

Tonight I have an awesome GoPro video where a guy walks 1000 feet above certain death. Are we sick of these yet? Maybe… 

https://www.youtube.com/watch?v=PWmypzUI28Y&feature=youtu.be

Have a good night.

Why Does the Market Fear the Fed So Much?

Equities start the day higher as Fed day is upon us! Like 48 people outside Finance care about Fed day so while we think it’s this big exciting event the reality is much different. You know what the last 3 closes of the S&P were? 2,139/2,139/and 2,139. That’s right, if decimals don’t matter to you (and really who cares about decimals other than 3rd graders) then the S&P has effectively gone nowhere waiting for Janet. So I thought of a great way to talk about the market’s relationship with the Fed and all it took was a lightning storm to inspire me to write. I woke up this morning at the stupid hour of 5:30 am and walked into my Home Depot inspired bathroom to start a new day. Outside my window raged a massive thunder storm and I thought to myself “self…am you supposed to take a shower when lightning is arcing thru the sky like a fireworks display?” With much trepidation I stepped into my $3 per square foot tile shower hoping to survive so I could beat a random MSFT VWAP for my best customer (who also happens to love the right movies). Here’s the thing: my fear, while it felt real and made me stand to the side the whole time, was probably unfounded. What are the odds Zeus would choose today to strike me down while covered in Nivea body wash and singing “Everything’s Gonna Be Alright” by Bob Marley? Zero, or close to zero. Why does the market fear the Fed so much? What are the odds that a 25bps hike will cause the death of our bull market? Isn’t it close to zero? Ok maybe its slightly above zero but whatever, you get my point. Markets have been overreacting to the FOMC for far too long and its driving me crazy. Whatever they say today, or November or even in December let’s not lose our minds over it. Market storms come and go but our default setting should be one of optimism not worry. Anyway, hopefully that made sense so let’s move on.

After the open….wait…what’s that say….there’s no words there. To play us out? What does that mean play us out? No..screw it…WE’LL DO IT LIVE. ILL WRITE IT AND WE’LL DO IT LIVE. THIS PARAGRAPH SUCKS. The Fed decided to NOT RAISE RATES. Harambe may have hiked but the Fed did not. Here is the statement if you want to read all their fancy language but it boils down to this: they have reason to hike but a delay makes sense because I don’t know…elections and sluggishness abroad and EM countries and all the things they must worry about. The market proceeded to rip because certainty is what it likes and a December rate hike is the current certainty. I mean there is a meeting on Nov 2 but hahahah can you imagine them hiking 6 days before an election? The interesting part is 3 members dissented on “no hike” which, if I’m not mistaken, is the most dissenters in forever. Here was the cross asset reaction: Bonds rallied, Utilities rallied, Banks slightly higher, Gold rallied, and the Dollar fell. All very simple and tidy, all make sense too. Now…the BIG question…the million dollar question….what will we worry about going forward because December is a long way away. I guess the election? A Trump Presidency? Earnings? Starbucks running out of Pumpkin Spice? Candy Corn becoming popular? I guess a bit of everything  but earnings seems like the most reasonable one.   

We closed near the highs of the session and the Nasdaq composite actually did hit a new all-time high! Booyah! Who loves Fed days? This guy. Now we have to ask ourselves “why”…why did the market soar after the Fed held pat, wasn’t that what we expected? Sure, I guess. But they did bring their dot plot down slightly and you know what else, I think too many people panicked last week and sold the market. Guess what they will be forced to do now, that’s right, chase to get back in. 2,200 by the end of Sep? It’s a real possibility.  

Final Score:  Dow +90bps, S&P500 +109bps, Nasdaq +103bps, Rus2k +136bps.   

News Highlights:

We’ll end tonight with the most Russian video I’ve seen since Drago said “if he dies, he dies”.   I mean who makes music by shooting a gun at a target?

https://www.youtube.com/watch?v=NNFlAzVhSVw&feature=youtu.be

Have a good night.

Temper Tantrum No. 3..or is it No. 4?

Equities start the day higher as the baby finally goes to sleep. It’s been awhile since I had a newborn, 8 years to be precise, and while there are many things I miss about creating a new life, the little rascal crying is dead last on that list. Oh it's 2:45am and you want to eat? Great, how about a pop tart so I can go back to bed. The market spent most of last week crying and wailing and gnashing its teeth because the Fed might go from 0.50% to 0.75% in Fed Funds. Last week was basically Taper Tantrum ver 3 (maybe version 4 or 5, we have these a lot now) as expectations around Central Bank action went from “they are 100% hiking on Wednesday” to “maybe it’s like 75%” before finally ending on “it’s like 15%, why are we over reacting”. From a price action perspective you have to love the fact that we re-tested the 2,135 area, spent some time below it, and then put it once again in the rear view mirror. That area should represent significant support going forward and a clean break below it would be extremely troublesome. So what’s on tap this week, what should we be looking forward to? The Fed meets on Wednesday and I think they punt to December. Why hike a few months before an election when the data is still somewhat mixed? The Bears play Philly tonight and I guarantee they lose. Ugh the Bears, why hast thou forsaken me? Must I put all my faith in a baseball team that hasn’t won since the airplane was invented? Anyway, let’s see what happened on this fine Monday in fall.

After the open our baby must have had a bad serving of liquefied peas because we traded lower all the way thru lunch. Why? Well my friends, no reason I could find. Richard Fisher made a few comments but he isn’t even a Fed Governor anymore. The NAHB housing index beat expectations so it wasn’t about homes. Maybe the market just wants to tread water until Yellen and her posse make a decision? I guess that’s it for lack of a better reason. Hey REITs have their own GIC code finally, I guess that happens when you get nonstop inflows since 2010! Did you know this is the first reconstitution of the S&P since 1999 when Tech got its own independent sector? Crazy. GPRO gained 2.5% today after introducing the Karma drone. For $799 you too can take videos of your kids crashing down ski slopes that you paid $150 per person to be on. Oh and lunch is going to cost you $75. USA USA USA. What else? SRPT nearly doubled after getting U.S. approval for its drug to treat muscular dystrophy (our analyst Skorney Outperform on it) and BLOX rose 15% after agreeing to be acquired by private equity. Speakikng of blox, did anyone eat “knox blox” as a kid? Where did that term come from? Why weren’t they just called “jello blocks”? Losers were CHK, SRCL, WYNN, and MU.

We got a small rally in the afternoon but it didn’t amount to a hill of beans and by the time the bell rang we landed on 2,139, exactly unchanged. UNCHANGED… I appear to have a KNACK for writing when the market doesn’t move. I need to start writing more so I can capture these 1-2% moves in vivid Technicolor. Now before you move on, please read this fantastic article from Bloomberg because it hits on a lot of the views I currently hold. Here’s the teaser quote: “For all the talk of bubbles and markets inflated by easy money, investors show few signs of euphoria -- a posture that analysts say explains the shallowness of the last few selloffs”. That’s right, euphoria is in scarce supply right now.  

Final Score: Dow flat, S&P500 flat, Nasdaq -18bps, Rus2k +63bps.

Volume was below avg. Our desk was better to buy. Buying in Semis, Tech, and REITs. Selling in Drugs and Industrials. Shorting in Retail. 

News Highlights:

Tonight we are going to end with the best ping pong video this side of Forrest Gump. Gotta check this one out people, the tricks are real.

https://www.youtube.com/watch?v=wLu3k5UVIlA

Have a good night.

“No New Cowbell”

Equities start the day lower as this miserable range finally breaks! Actually no, no it hasn’t, but I wanted to write that to see what it felt like. Mmmm, feels good, like a toasted marshmallow milkshake. -0.01%, that was the move yesterday and it felt exactly like it sounds. I don’t know, I guess slow is the new black, there’s just no impetus to do anything. The ECB met this morning and Draghi said “no new cowbell” and that caused futures to dip pre-open. Is that a good reason to sell futures? No, but that never stopped anyone before. Fischer was hawkish in Jackson Hole and that knocked a few bps off the market so Draghi is no different. You know the scene in The Hunt for Red October when that sonar dude is trying to explain why the readings make no sense to the submarine captain? In the end he says his systems default to “looking for earthquakes” when it can’t figure out what it’s hearing (God I love this movie and I’m excited to work this reference in). You know what the market defaults to when there are zero catalysts out there? Obsessing over Central Banks. That’s the absolute baseline “what can I worry about today because I have to worry about something all the time”. So Draghi fails to introduce some kind of croissant backed mortgage facility that wouldn’t increase lending in Estonia anyway and futures in the US fall 7 points. Yea, that’s the world you invest in, isn’t it great? Hey NFL starts tonight! We should talk about that right? Here’s my super bowl prediction: Seattle vs Pittsburgh with PIT winning. I love the burgh!  

After the open Apple traded lower because I told you on Tuesday that it would (that video is amazing). So let me get this straight, you are introducing wireless headphones that, at $159 for a pair, will inevitably fall out of my ears and be lost to the same place all my socks go. Great…congrats on your new profit margins. We spent most of the morning trading lower for the reason I mentioned before so let’s take a look at a few other movers shall we? Energy names were the big winners, stuff like CHK, DO, MUR, APA, and MRO because oil was up 4%. Supplies FINALLY tumbled in a meaningful way (most since ’99) so the ole Texas Tea was brewing. The biggest loser was TSCO, which fell 17%. I guess tractors are in short supply (I feel like I’m on a roll today am I rite?). Let’s talk about Transports for a second because their relative strength has been epic. What are the naysayers and recessionistas going to say if this thing keeps grinding higher? And what about all this rotation? Wanna see a really crazy looking chart that actually tells a story? Check this one out my friends, they be selling Utilities, Telecom, Staples and buying Tech, Financials, and Industrials. There’s a healthy rotation going on even though the market is wandering like Finn thru the wastes of Jakku. I like it. By lunch we sat on 2,179, down 30bps, in another really aimless session. How about this tidbit from @conorsen today: “The total range on the S&P 500 since mid-July has been ~48 points. There were multiple days in January where it had a bigger range in 1 day”. 

The afternoon saw a small rally because unchanged is reunited and it feels so good (you’ll sing it all day). We closed at 2,181, down 20 bps as the world waits for the next Fed meeting. So I wanted to end on this chart by Michael Batnick that once again shows why “being out of consensus” is basically the only way to make money in the investing world. Or buy the company that makes AMZN boxes because D@MN. 

Final Score: Dow -26bps, S&P500 -23bps, Nasdaq -46bps, Rus2k -21bps.

Volume was a bit above avg. Our desk was better to buy. Buying in Industrials, Tech, and Health Care. Selling in Retail and REITs. Shorting in Biotech and Chemicals. 

News Highlights:

Not much today so let’s skip to the big finish.

Have a good night.

What a Summer

Equities start the day higher as summer finally, officially comes to an end! Hoo boy, what a summer that was right? Olympics, Brexit, Pokemon Go, really awful movies (Suicide squad bummed me out so much), and a market that went absolutely NOWHERE. I haven’t written in ages and you know why? Because literally nothing has happened. We haven’t had a 1% move in SPX since July 8. Yep, you read that right, July 8. That’s 60 calendar days of a market that looks like the Bonneville salt flats. Guess what? August was the slowest volume month in 2 years. 24 months baby. So is this all a big deal? Should we be concerned about the fact that the market has been abandoned for nearly two months? I don’t think so because 1) it was summer, no one was even around to care  2) pausing after a breakout can’t be considered poor price action, digesting a move higher is always welcome 3) plenty of people have been calling top 4) neutrality seems to reign (AAII neutrals is still near 40%) and 5) the longer it stays here (especially as year-end approaches) the higher the probability that towels will be thrown in. I don’t see this summer lull as a negative and I don’t think sentiment / positioning is bearish either. The story of 2016 has been “we are due for a pullback because valuations are stretched”. That’s all the bears have anymore, that’s the one thing you can say day or night and make people think “hmmm, he sounds pretty smart about this stuff, maybe he’s right”. As people filter back to their desks today they are going to see a market that is not overbought and not over believed, where do you think markets like that usually go in the near term?

After the open it felt like summer never ended! Volume continued to be challenged and “unchanged” continued to act like a magnet. ISM Services missed badly (51.4 vs 54.9) and that caused a pretty steep selloff in the first hour of the day. But apparently “bad news is good news” again because things like ISM services whiffing makes people think the Fed is less likely to hike (only 25% for Sep now). Crude was up then down then flat then up because oil traders are partying like its 2011. I swear we get a “we are thinking of cutting production / reducing investment / freezing output” rumour every other day now. It reminds me of the heady days of 2011 when a Belgian or Dutch Finance minister could move every single market by hinting at backstopping European debt (which they ended up doing anyway…sigh…what a buying oppty that was). Today was the last trading day for EMC! Say goodbye the once great storage company as they fold into DELL.   CPHD got an offer from DHR and promptly rallied 51%! The company that sounds like a bug name could be joining the good people at Danaher in Washington DC. Other winners:  SE, EOG, MNK, AES.  Losers CNC, CMI, HES, QRVO, and DISCA. By lunch we were heading higher because, like I said, we basically want all economic data to miss from now on (why do we always have to come back to this?)

The rest of the day was grinding on the highs and a close around 2,186. No new highs, no new lows, just more of the same sideways trend (albeit with a close on the highs…) Now this recap loves a good prediction, there’s nothing better than going out on a ledge for absolutely no gain and potentially looking like a total idiot to an unlimited people (or 300, whatever). AAPL is set to introduce their new iPhone tomorrow and it looks like they are going to remove the headphone jack completely. Prediction: The unbridled outrage when the mass public finds out about it will make their decision to change the charging port look like a home run in comparison.  I for one think it’s the most anti-consumer thing the company has ever / will ever do.   It bums me out to no end because 1)  we don’t need the phone to be thinner.  Stop it.   2) Bluetooth headphones have a delay when you watch videos and generally suck  3)  no one wants a dongle.  I’m pre releasing my misery surrounding this event, ugh. Where hast thou magic gone Harry?  

Final Score:  Dow +25bps, S&P500 +30bps, Nasdaq +50bps, Rus2k +12bps.

News Highlights:

Tonight we’ll end with one of my all-time favorite kinds of videos:  People walking a slack line 2,000 feet above the ground.  

https://www.youtube.com/watch?v=ZIO8Xac7VyA#t=1m10s

Have a good night

The Month of Endless Vacations Grinds On

Equities start the day lower as the month of endless vacations grinds on. August, I mean what can we say about August other than “recipient is out of office” should be the motto? Got a big distribution list to fire off your amazing commentary to? Save it for September. Hey, at least we have this Olympics right? Nothing better than Gold medal Badminton and Archery to pass the time. So here we sit, with the market treading water on new all-time highs, waiting for the other shoe to drop. I mean it has to right? What’s going to be the big catalyst that causes the market to finally sell off from these fake, central bank induced sky high levels (channeling my best Zero Hedge there). China? Sure why not, China is always a good fear. Centrally planned economy with a pegged currency prone to wild swings in GDP, basically the boogeyman. Fed rate hikes? Definitely, Yellen is probably out to submarine your fancy stock returns. Valuations? I love me some Shiller PE / Price to Sales / CAPE worries, those are some of the best. Fund Flows? Don’t get me started, all that cash leaving mutual funds has to be the top. Actually wait…none of those are the catalyst that will mark the top. You know what will be? A recession. That will be the top and no one will be able to time it at all. I mean I thought we were about to enter one earlier this year and look how that turned out for me. Now there will be clues to look for like a yield curve inverting or a substantial drop in vehicle sale or a turn in the job market but it won’t be obvious at all. Look, Bull markets don’t die of old age and they don’t end on “valuations” so please ignore naysayers and those calling “top” every time the S&P ticks higher. Enjoy the dog days of August because the Summers die one by one, how soon they fly on and on. 

After the open we actually saw the market grind lower for the first time in days. Why? Because nothing goes up in a straight line my friends, you need the occasional pullback to keep things fresh and exciting. Hey let’s talk HAIN for a second shall we? One of the biggest losers today was Hain Celestial, which fell 26% after delaying their annual earnings report due to “accounting issues”. Ouch. Anyway, besides having an awesome name HAIN is the proud owner of many healthy / exciting brands one of which is Blueprint Cleanse. Anyone ever done one of these? I have, I mean there’s nothing like spending $200 to drink liquid grass clippings and cayenne infused lemonade for 3 days all in the hopes of “cleansing impurities in your system”. What do people do to “cleanse” their systems that DON’T have access to cold pressed vegetative juice mixes? Shhh, let’s not talk about that. Maybe they just grind up their own lawns and drink it, who knows. I will say their Cashew Milk is all world good but at $12 for 16 fl oz’s these guys have pitched a tent in crazy town. OK, what else moved today? DKS +7%, GK +17%, FTNT +6%, VRSN -7%, TJX -6%, and ATVI -5%.  Housing Starts beat and CPI was roughly inline so not much from the macro front to guide the boat. By lunch we sat on 2,183, down 30bps, as the market simply took a breather from all this “new highs” nonsense. Anyone miss swimming as much as I do? Track and field sucks. Go back to Mykonos Euripedes the discus thrower.

The rest of the day saw even more downside and we closed at 2,178, a loss of half a percent. Should we be worried? I don’t think so, frankly I’d love to see the market retest the 2,135 breakout area just to finally put the past behind us. Anyway, let’s take a quick look at a chart shall we (courtesy of @ukarlewitz)? Now if you want a reason to believe “it’s different this time” then this might be Exhibit 1. Households just aren’t levering up like they did in the past to buy stupid useless stuff they don’t need (like juice cleanses). Maybe the lessons of fight club have finally sunk in? Anyway, that chart should make you feel good, if and when we do enter the next recession households will be in way better shape to survive it. 

Final Score: Dow -45bps, S&P500 -55bps, Nasdaq -66bps, Rus2k -86bps.  

Volume was low. Our desk was better for sale. Buying in Energy and Tech. Selling in Semis and Retail. Shorting in Machinery. 

News Highlights:

Tonight we’ll end on amazing goals from one of the best Olympic sports there is…Team handball!  (thanks JR).   First one best one.

http://tinyurl.com/zfxpxju

Have a good night.

The Market Continues to Embrace its Favorite Blanket

Equities start the day lower as the market continues to embrace its favorite blanket. Blanket you say? Yep, that’s right. The more I think about yesterday’s price action the clearer that analogy becomes. We had basically gone 12 straight sessions without a meaningful move in either direction and when it finally came it was lower. Now when markets go lower people look around for an excuse, it’s just human nature. But as they looked around they couldn’t find anything new, anything fresh and exciting, so they (it’s always they) defaulted to their favorite old blanket: Global Growth concerns. Ahhhh yes, the old “I’m worried that the world is slowing so I’m going to sell Starbucks and Disney and Intel and hold my money close to the vest”. The problem with that is 1) It’s August, no one is around, relax 2) There will never be a time when consensus is happy with global growth. I mean ever, and 3) Markets are prone to random price movements, let’s not assign a reason every time the S&P falls half a percent. When you hear that the market is worried about “Growth” or “European Banks” or “Oil” or “Earnings” do me a favor and remind yourself that it always will be and that these are not new concerns. Heck, the IMF lowers their growth forecasts every few weeks, I mean at this point Lagarde and her crew of Princeton economists should just set it to -10% so they can raise it every now and then. Check back in if we crack 2,135, otherwise let’s enjoy watching sailors carve through 3 inches of human waste and the majesty that is table tennis (you gotta watch table tennis during the Olympics, these people are Forest Gump good).

After the open it was nothing but sideways for the first half of the day. Looks like I picked a pretty crappy time to write back to back recaps huh? Oil was up 3% after DoE inventory data, Banks didn’t fall apart, Europe closed mixed, and Bonds caught a small bid. Does any of that matter at all? Not really, but I needed to fill space. The S&P traded between 2,156 and 2,161 for hours and hours so let’s talk individual names shall we? WMT fell half a percent after it was said they may be in talks to buy JET.COM. Anyone use this site? I’ve heard about it in the news but never tried it, apparently they sell stuff cheaply which, I guess, is a good thing. Is WMT trying to buy a junior AMZN? I’ll leave that up to the pundits to decide but.. I mean…Jet’s whole deal is “everyday low prices and fast free delivery to your door” so yea. What else? QRVO fell 10% because their name reminds me of a Peruvian appetizer, VRSK must have risk because it lost 5%, KATE lopped off 18% because I had no idea they still sold purses (I bought my high school fling one of these in 1989…it was huge in the day!), and CROX must’ve stepped in it because it lost 22%. I used to love my CROX until the 9yr old next door openly mocked me. Get out. Winners were GNW, DDD, MTOR, and AIG. By lunch we sat on 2,159, up 0.1%, praying something would happen in the afternoon.

The sad, quiet, final few hours brought nothing fresh and tasty and we closed basically where we were at lunch. 2,163, up right around 0.3%. So yea, yesterday was all about the same old stale concerns that have been with us for months, arguably YEARS. Down 50bps yesterday, up 30 bps today. What changed? Nothing. Someone hit the buy button more than the sell button I guess. Anyway, fairly quiet session that put us right back into this range, wish us luck tomorrow where maybe someone will worry about Central Banks losing control? How about insider selling, that’s always a fun one. Oh and fund flows….YES! Fund Flows, always the best reason to sell. 

Final Score:  Dow +23bps, S&P500 +31bps, Nasdaq +43bps, Rus2k +86bps.

Volume was average. Our desk was better to sell. Buying in REITs and Consumer. Selling in Drugs and Media. Shorting in Retail. 

News Highlights: 

We are going to end tonight with people being awesome because they are. You are, I am, we all are! Boom!

https://www.youtube.com/watch?v=BvJIfDy6CVQ

Have a good night

The Dog Days of Summer Are Upon Us

The Dog Days of Summer Are Upon Us

Equities start the day lower as the dog days of summer are upon us. I’m not sure what’s bumming me out more, the fact that the people around me are starting to talk football or that the S&P500 is locked into some kind of sideways “I don’t care” range. I mean how can we be talking about football already, it’s only August 2nd! Let’s not rush the summer shall we? We only get so many of these so let’s focus on lemonade and sunburns instead. Anyway, should we care that the market is in one of the tightest ranges in years? I’d argue no because that’s exactly what you want to see after a multiyear breakout. Up, up, and away only works for hot air balloons and paper airplanes, it usually doesn’t work for equity indices. Sideways gives everyone time to adjust to a new paradigm, it allows those who missed the recent move an opportunity to board the train or risk missing out on another new high. But Mike, what about earnings? Are they good or bad? Well my friends that’s a tough question because earnings season is more about “expectations” than reality. Are we beating expectations? Sure, I guess you could say that. 63% of the S&P500 reported and 71% beat EPS and 57% beat Revs (those Factset links are so good). EPS growth rates are still negative but Revenue growth rates are flirting with positive numbers! That being said, those are just numbers on a page, they really don’t tell the story of what we see day in and day out. People are still worried that the economy is slowing, people are still worried that central banks have lost control, people are still about European banks, people are still worried about oil, people are still worried that pumpkin spice lattes will be the only thing on the menu in 4 weeks. However, and this is the sweet juicy center, people being worried IS A GOOD THING. Heck Goldman just said sell stocks and Gundlach just said “sell everything.” I wonder…are those the kinds of things you see at a euphoric “tops”? I know that’s not a comprehensive look at sentiment but it is one piece of the puzzle. I don’t know, it’s still summer, let’s not make too much of price action when half the world is on a beach.

After the open stocks felt a bit like this. Actually they felt a lot like that as we slid lower on no real news. Economic data was OK, PCE was broadly inline and ISM NY flipped from 45.4 to 60.7 (imagine making any kind of decision based on regional Fed ISMs, they are more volatile than the Middle East). Bonds were lower as was the dollar and Crude so basically everything was being sold (maybe Gundlach is onto something here). Stocks seemed particularly weak though and we struggled to come up with an exact reason why. I guess a re-test of the 2,135 area is inevitable, plus, let’s face it, summer markets can act wonky given half the world is on a beach or hiking thru the woods (I did this last week, was refreshing for the soul). Winners were MNK, DNB, BIIB, CVS, and ABC. Losers were DAL, JWN, KSS, RCL, and M. By lunch we sat on 2,150, down 1%, as people turned to the old “growth concerns” panacea to explain the day’s price action. Gotta love that one right? Roll that puppy out anytime you want, freshness is guaranteed!

The rest of the day was the market trying not to go out on the lows which, fortunately for us, worked! 2,157, down 0.6%, which, honestly, felt like a win given how we traded all day. Can we chalk up today’s weakness to noise? Sure, I’ll allow it. We would need to break 2,135 to the downside for Bears to claim any kind of victory so let’s not start panicking just yet. Guess what…all these worries you read about on a daily basis are always with us. CS and Deutsche got you down? Has been so for months. You worried about 2% GDP? Join the club. Oil got you weak at the knees? It was at $28 in February. The Packers look better than the Bears? No comment. Wall of Worry my friends, it’s not the most overused catch phrase for no reason. 

Final Score: Dow -49bps, S&P500 -64bps, Nasdaq -90bps, Rus2k -138bps.       

Volume was high. Our desk was better to buy. Buying in REITs and Health Care. Selling in Energy and Banks. Shorting in Autos and Banks. 

News Highlights: 

Ok tonight I am guaranteeing you one thing….GUARANTEEING. You will cry watching this man see his mom for the first time in years.  

https://www.youtube.com/watch?v=JcBl4XIjwxc#t=0m33s

Have a good night.

Highs, No New Highs, Highs, No New Highs

Equities start the day lower as we do this “highs, no new highs, highs no new highs” thing every other day. You know what’s more impressive than this? Ok nothing is more impressive than that. You know what’s slightly less impressive than that stud kid? The fact that this market breakout has gone uninterrupted. When the S&P finally made a new all-time closing high on July 11th everyone and their mother was worried about a head fake. A Lebron James knee shattering juke where people get sucked in and spit out like they went thru a jet engine. Which is to be expected right? We had just spent the better part of 1.5 years going sideways so being wary of a breakout was absolutely the correct view to have. But what about today? What view should we have right now? Well, if you look around at all the various sentiment indicators we get you’d probably be inclined to be bullish. AAII Bulls are only 35% even with new all time highs (some people think this one is worthless but whatever), the BAML fund manager survey showed record levels of CASH, and if you take a gander thru various media outlets you’ll find more than your fair share of “the economy still sucks” articles. Here comes a personal anecdote that you can completely ignore if you like…you ready? The day we hit new highs I went to 4 or 5 major news outlets to see what their commentary was on the event. CNN.COM had “stocks hit new highs” as their 8th link, I mean you literally had to hunt for the story to find it.  NBC/CBS/ABC barely had any mention at all and Drudge was talking about Trump. Do you get the sense that exuberance abounds, that new highs are going to bring us a fresh “Stuart” Ameritrade ad? Does this feel like the 2000 / 2007 “everything is awesome” tops to you? It doesn’t to me, which is why I think it continues. 

After the open the market fell half a percent because “investors have trepidation with valuations at these levels”. I love quotes like that, I really do.  I mean 50 bps is basically noise on any given day but we have to have a reason my friends! So why was the market down this morning? Because it’s quiet, and when its quiet things can drift. Plenty of stocks to talk about though so let’s get to it! There was much JOY at JOY as Komatsu offered 28.30 per share for the company. EBAY rallied 11% because I sold $500 worth of kids toys on there and it cost me $100 in fees. QCOM gained 7% after reporting a beat last night. Ever seen a chart of their last few earnings reports? Looks like a Red Bull event. LUV fell 11% because owning airlines is always turbulent (I went there), SHW dropped 6% after their report because painting your kids room is impossible, just pay the $100 to someone, and INTC lost 3% because data centers are apparently a mess. You’d think with all these earnings that volume would be off the charts but it wasn’t, summer has arrived and when heat domes sit over our heads stocks be quiet. By lunch we sat on 2,165 down 0.3%. Someone call top, I dare you.

The back half was a bit more downside but a close exactly where we were at lunch. Well, 100 companies have reported in the S&P500 and I’m not sure what trends we can glean just yet. I’ve heard optimistic commentary as well as negative so who knows. Right now the EPS growth rate stands at -2% but the SALES growth rate stands at +1% and that hasn’t been positive in forever. We’ve gone 8 straight sessions without dipping below the breakout close of 2,137 and that alone is an astounding fact. The longer we tread these waters the less likely this entire thing is a sham or a mockery  or a shammockery. Imagine we churn these levels for a few more weeks; the high of that 1.5 year range will be bedrock solid support.  

Final Score:  Dow -42bps, S&P500 -36bps, Nasdaq -31bps, Rus2k -49bps

News Highlights: 

Tonight we are going to end on the cringe-iest video I’ve ever seen.  I laughed at first but the pain experienced must be real.

https://www.youtube.com/watch?v=mMS62hTRy7o

Have a good night

Don’t Let Me Down Down Down

Equities start the day lower as we go a FULL DAY without a new high. Remember when we used to laugh at the prospect of new highs? I do. I remember all those days of sideways grinding in 2015 and most of 2016, God I hope we never see those again. So part of my 42yr old midlife crisis involves listening to vast amounts of EDM. Now EDM is usually the purview of millennials, as a music genre it typically doesn’t speak to a middle aged father of 2. Beat drops, flashing lights, jumping up and down to music with no words, not your typical suburban fare. But not me my friends. I ready to embrace glow sticks and nightclubs because childlike youth is fading faster than my hair color. Where was I going with this? Oh yea, so my new favorite song is “Don’t let me Down” by the Chainsmokers and while I was blasting it in my 2006 grocery getter last night one of the lyrics seemed appropriate for this market environment:  “It’s in my head, darling I hope that you’ll be here, when I need you the most”. Never before have we needed the market to hang in there this much. Never have we needed earnings and economic data to support valuations this badly. Never have I tried to use an EDM song lyric to write a market related recap. I think you get what I’m trying to say though, we are basically cultivating a tiny seedling, one that has grown thru an amazing amount of thorns and thickets and bugs and weeds. If this breakout fails you will hear more top calls than a group of Australians on the summit of Everest (that was awful). So dear CEOs and CFOs of the 500 S&P companies: Don’t let me down down down.  

After the open we tried to tread carefully thru the risks but the market had already decided it was going to be a down day. Lots of people on Twitter were talking about plagiarizing speeches and where to find the biggest Charizard but they should’ve been talking about NFLX, IBM, and HUM. NFLX earnings whiffed because intl subs were weak, IBM fell slightly because it’s a behemoth that goes nowhere, and HUM lost 4% because the U.S. Gov’t might block all their hopes and dreams. Earnings should set the tone for the next few weeks so the last thing we want to see is big names like those struggling. Goldman also reported this morning and while it looked like a beat the stock fell 1%. Financials…I mean we want to see these do well but the sheer number of headwinds they face boggles the mind. Negative rates / Regulations / Investment Banking slowdowns / a lack of quality candy when you open a checking account they just never end. That being said, sentiment is so bad in this sector that you have to wonder if it’s all priced in (the chart of XLF isn’t completely awful). Winners were EMC, MCD (apparently MCD is going to have a few pokestop’s in Japan, this thing is just getting started), JNJ, CMG, and FFIV so all was not lost my friends. By lunch we sat on 2,159, down 30bps, taking a pause from this “new highs” thing that’s been all the rage lately.

The afternoon brought your typical snoozy price action and we closed at 2,163, down 14 bps. In the end we saw a very tight trading range so let’s not make a mountain out of a molehill. Instead let’s hit up this link for 5 rebuttals to bearish arguments then go outside and prepare for the 100 degree weather coming our way. Would you rather have super hot summers or super cold winters? I think I’d take hot summers because walking to your car in -30 sucks. I mean who would actually choose the cold over the hot? Anyone? 

Final Score: Dow +14bps, S&P500 -14bps, Nasdaq -38bps, Rus2k -62bps. 

Volume was low. Our desk was better to buy. Buying in Industrials and Tech. Selling in Health Care and Semis. Shorting in Materials. 

News Highlights:  

So all your wakeboarders and boat owners out there…..ever try this?  I mean what happens if you fail…

https://vid.me/9qyk

Have a good night

The Great Brexit Bounce Is Upon Us

Equities start the day higher as the great Brexit bounce is upon us. So I have to apologize to you my fine readers for not writing lately, I’ve been way too consumed with the misery that a single vote thrust upon us. Now I don’t have any wisdom to convey around this event, I wish I did. I don’t have a PhD in Geopolitics and I can’t pretend to know what’s going on in the minds of my friends across the pond. The people of the UK have decided that their future will not involve the EU and that’s fine, they have the right to do that, it is a democracy after all. What we as capital market participants have to do though is deal with the fallout, the repercussions, the wreckage. The biggest problem I have with this event isn’t that it came out of left field, or that I was on the side of Bremain, or that this is some “nuclear bomb” none of us were prepared for, no, the biggest issue as I see it is that animal spirits have just been slaughtered. Any chance the global economy had of finally breaking out of this malaise has been pushed back months if not years. Think about it like this: the US Economy is a giant 747 sitting at the end of a runway. It revs its engines, roars down the runway ready to take us on a glorious vacation to prosperity but then something goes wrong and it never takes off. The engines wind down, we reach the end of the asphalt, turn around and try again. Brexit just blew out an engine, flat out destroyed it. Can we call the fine people at General Electric or Rolls Royce and get another one? Sure, but that’s going to take time because engines are hard to build. Confidence here and abroad will be shaken for a while and there’s nothing we can do about it. Animal spirits are back in their holes, worried, hunkering down. Let’s hope they come out again soon because the world desperately needs their love.

After the open we got a textbook “the market has been pounded for 5% the past two days let’s see if we can bounce it” type of a rally. I hate those kinds of moves though, they never mark the end of a panicky stretch. When waterfall declines and uncertainty grip the tape you want to walk in to futures down huge with news headlines about redemptions and recessions and the end of the bull market. That’s how near term bottoms are made, not on these “oh I hope all that selling is done because I’m going to dabble here” 1% wishy washy rallies. Bonds didn’t exactly cooperate either, 10yr UST hovered around 1.45% most of the day and if this puking was truly at an end I’d expect to see yields a bit higher. We got a couple of economic data points in Consumer Confidence and the third look at 1st Quarter GDP (do we really need 3 revisions on this?) but they didn’t move the needle at all, nothing does when headlines roar. Energy, Financials, and Tech led because they’ve been beaten down the most. Names like SWN, MRO, COG, C, BAC, and WFC stopped going down for at least one day. Losers were DOW, DD, HRL, RTN, and TSN but there was no rhyme or reason there (Dow did cut a bunch of jobs). By lunch we had managed to recover the 200 day MAVG (2,022) but it felt as flimsy as my commitment to spinning classes. 

The rest of the day was up and to the right and by the time the bell rang we managed to close on the highs!  2,036, up 1.78%! You know what…that’s not a bad day at all. But…but….we aren’t out of the woods yet. Tomorrow will be incredibly important because it will let us know whether today was just short covering or the beginning of the end for Brexit worries. Will Brexit sit next to Ebola and the Debt Ceiling or will it take its spot next to Lehman or LTCM? Time will tell but I think the former is more likely than the latter. Still, new highs seem so far away. Now it looks like they won’t be here to stay. Oh I believe…in yesterday. 

Final Score:  Dow +157bps, S&P500 +178bps, Nasdaq +212bps, Rus2k +162bps.

Volume was high. Our desk was better to sell. Buying in Media and Retail. Selling in Drugs and Financials. Shorting in Materials. News Highlights:

We’ll end tonight with a solid Fail video that REALLY picks up around the 2 min mark. It also has the worst hurdler of all time in it. Don’t miss this one! 

https://www.youtube.com/watch?v=JFO7YIK79So

Have a good night

Macro Once Again Takes the Driver’s Seat

Equities start the day lower as Macro once again takes the driver’s seat. Now I don’t live in the UK, I visit often and I love it but I am not a resident of that proud nation so I can’t exactly speak to this Brexit thing. Should they stay in the EU? Shouldn’t they? Who knows, that’s up to them to decide. From what I understand this is more of an “immigration” issue than anything else and we all know how much press that’s getting here in the US of A. What I do know is that the market has NOT priced in Brexit… but it is currently trying to do so. VIX soaring, Yields falling, Stocks quaking, Clients pausing, Oil plummeting, all of these things are the net result of an event the market can’t get its arms around. REMAIN has been the de facto outcome for a long time, in fact gambling sites STILL make REMAIN as the favorite. But every time we see a poll saying EXIT is leading the market has to re calibrate and that process is brutal and unfocused. There is NO ONE that knows what Britain leaving the EU would do to the Pound, the FTSE, all the European Stock indices, and the price of Curry in the West End. No one. So should you panic? Dump stocks? Run for the hills until you get “clarity?" (still cracks me up that people think that’s a thing). No, don’t be short sighted. Whether Britain is in the EU or not doesn’t have a long term impact on the corporate cash flows of 500 stocks in the S&P. It’s a blip, a re-pricing, an event that tips the cart but one that ultimately fades into history just like the rest. Guess what the market also digested? World War 2. When you fly from your home to that glorious vacation spot with blue waters and Corona’s sometimes you fly thru turbulence along the way. Right now the fasten seat belt sign is on but guess what, that beach is still waiting for you down the line and the turbulence will eventually pass.

After the open it was a whole lot of this. I mean weren’t we within 1% of a new all-time high just last week? Thanks Brexit. I will say this; everything I saw today was exactly what you’d expect capital markets to do as they grapple with an unknown event. Credit markets weaken, Financials weaken, Sovereign Yields fall, Dollar rises, Stock markets sell off, I mean this price action was straight out of central casting. Retail Sales beat but no one cared. The FOMC decides on rates tomorrow but no one cared. Curb Your Enthusiasm is coming back for another season but no one cared. Markets HATE uncertainty more than anything else and we are blanketed in it right now. Any winners at all? STZ, YHOO, SYMC, and PRGO but none were all that impressive save maybe PRGO. Losers were Energy, Materials, and Financials, led by SYF, COF, LUV, AAL, and NAVI. By lunch we were sitting around 2,070 hoping for another poll to come out. Sigh…is this how it’s going to be all the way until June 23? I’m guessing yes. Oh by the way, Deutsche Bank has the same market cap as Snapchat right now. Let that sink in (gotta give credit to @stockcats for that awesome tidbit).

The final hour brought a small rally on the realization that A) The Fed is not raising rates tomorrow and B) Brexit is WAAAY over blown. In fact, let’s end with this awesome link from David Merkel in which he sums it up perfectly: “Looking over this, the UK already depends less on the EU than most member states, making the exit less of a big deal for the UK and the EU. My view is this: leaving the EU won’t be a big thing in the long run for the UK. In the short-run, there will be some uncertainty and volatility as things get worked out. For the rest of the world, it will be a big fat zero, so ignore this, and focus on something with more meaning.” This is just another thing to fret over nothing more. Markets love to do this from time to time and Brexit is no different than Cyprus Banks or Italian Elections or American Debt ceiling fights. Remember those? Markets trembled while people thought the United States might actually default. COME ON MAN. 

Final Score: Dow -32bps, S&P500 -18bps, Nasdaq -10bps, Rus2k -25bps 

Volume was high. Our desk was better to buy. Buying in Health Care and Tech. Selling in Financials and Industrials. Shorting in Retail. News Highlights:

So tonight I have something unusual to end on. 2 videos…both breathtaking (you’ll see).

The first is a spectacular video of an amazing spot in Norway.

The second is an idiot falling off a bull. That idiot being me.

Have a good night.

So Close, Yet So Far

Equities start the day higher as new highs remain tantalizingly close. Remember when you were a kid and that Transformer toy on the top shelf was JUST within your reach yet you couldn’t grab it? Yea that’s where we are right now, so close yet so far. Actually, since I just alienated half my audience, let me rephrase that opening sentence. Remember when that video game on Amazon was just a bit too expensive and you were waiting for that flash sale so you could spend your bitcoins on it? Yea that’s where we are right now. New highs in $SPX are less than a percent away and it has everyone asking this question: What is the catalyst? Well my friends I’m here to tell you that there IS NO CATALYST, there is no single event / story / headline that will take us there. Instead we are brewing a cocktail of all the following: 1) Positioning. Tons of money has left the market in search of some kind of promised land (BAC thinks it’s about $60B) and that money may be remorseful soon. 2) Rotation. Energy / Materials / Financials, all the things you want to see leading are leading. This isn’t a utility based rally, people are actually buying the stuff that moves. 3) Fed punting. June is at 0% and July isn’t far behind, plus we have no Fed speakers until the next meeting so we won’t have to worry about hawks hawking. New highs are going to sneak up on people and by the time they notice the market will be racing like Secretariat. What do you think a breakout is going to look like given we’ve been at these levels for about a year and half? Here’s a hint: it won’t be calm. This tape won’t let people jump into new highs easily, it is going to GO. Anyway, the disbelief is real, don’t discount that. Everywhere you look it pervades sentiment and that will be a powerful force once it reverses.  

After the open we spent the first half of the day slowly moving higher. Inch by Inch, tick by tick it found its way to the 2,118 level where we paused. Why the grind? Well Europe had a decent session, up 1-2%, and oil managed to secure the $50.25 area. Recall that energy earnings stabilizing is part of the base case for new highs so we definitely need oil to remain here. Not a lot of economic data to speak of, just unit labor costs and nonfarm productivity but you have to be a real economic hipster to care about those. The biggest winners were energy stocks as you might imagine, stuff like EOG, NFX, MRO, APA, and COG (FFIV led all winners because they were said to hire advisers on takeover interests). Losers were health care names like BIIB, ALXN, and VRX, each with their own little soup bowl of misery. By lunch we were wondering if the rally would hold because momentum felt like it was fading out (like my interest in going to Whole Foods, watching Silicon Valley, and wearing salmon colored pants).

The afternoon saw a small selloff and a close around 2,112, up a measly 10bps on the day. Quiet session too, volume was way below normal. Now before we can enjoy all this “chasing” I’ve been talking about I feel like we have to get by the Fed Meeting and this whole EU Referendum my friends across the pond have decided to engage in. Could it happen before then? Sure, I guess, but it seems unlikely to me. Those are fairly sizeable speedbumps down the road so I doubt we can go full Vin Diesel until they are behind us. Anyway, here we sit, watching and waiting like Ramsay Bolton for the Starks. How much do we want to wager that Ghost kills him? I’ll make it even money (Jon 5 to 1  / Sansa 3 to 1). 

Final Score: Dow +10bps, S&P500 +13bps, Nasdaq -14bps, Rus2k +26bps. 

Volume was low. Our desk was evenly matched. Buying in Energy and Industrials. Selling in Financials and Truckers. Shorting in Index ETFs. News Highlights:

So apparently some guy named Kimbo Slice died today (RIP).   I checked out some of his Youtube videos and he seems like a real beast! Check out this football hit:

https://www.youtube.com/watch?v=tt8AQCnMBjU&feature=share

Have a good night.

I Might Be the Best Armchair Quarterback in History

Equities start the day lower as apparently someone built a wall at 2,100. Trump, the Nights Watch, members of the Qin Dynasty, Hadrian’s legions, I don’t know… some of those or all of those must’ve been involved because we can’t get thru 2,100 for the life of us. Now there’s a few reasons why we can’t get but the most important of them is this: sentiment peters out around these levels. We keep seeing the same thing over and over again: market acts weak, sells off to 2,075 or 2,050, sentiment gets sour as a patch of kids, the market reverses, everyone gets caught offsides, and we rip back to 2,100. The problem is there’s nothing to take us past there. Macro won’t do it, it’s consistently tepid. Earnings haven’t even tried because they are too busy contracting. Then we get big picture stuff like Brexit or a Fed Hike that halt everyone in their tracks because who wants to stand in front of one of those trains? I mean at this point why even bother? Why not miss the next 20-30 points and just buy the breakout instead? I would but I don’t run money, I just sit here typing hoping someone will listen. Heck, I might be the best armchair quarterback in history! Anyway, here we sit waiting for a reason to go higher while two massive events loom in the distance. Anyone think we’ll remain here until those two get resolved? Does a bear… oh forget it.

After the open the open we retreated from the Wall for all of 15 minutes before clawing our way back to 2,100. Oil was lower overnight until a story came out that OPEC May Consider New Oil Output ceiling at Thursday’s meeting”. So wait...hold on…let me get this straight. Oil at $25, pump it like it’s hot. Oil at $50 and it’s time for a production cap? I mean what levered long 3x oil futures and options fund came up with this headline? Ugh. Anyway, oil rallied and it brought the market higher with it. Couple macro data points in the morning: ISM manufacturing in the low 50s, Markit Manufacturing PMI in the low 50s, and Construction spending slightly lower. Nothing at ALL there to talk about, same as it ever was. What we do need to talk about though is EQR (we rate Neutral). EQR is an apartment REIT that just so happened to have warned us about “falling rents in NYC and SF” and that warning managed to knock 4% off the stock price. Let’s break this down shall we because there might be more to this story than we think. My initial thought was that both a Wall St slowdown and a Tech bubble slowdown were the primary culprits but that’s probably only scratching the surface. Recall that the BIG theme lately has been “everyone will rent going forward because housing sucks” oh and Millennials hate owning things. Builders have been cranking out multifamily dwellings to play this but what if we just saw the top? What if this whole thing was a fad and people do indeed hate renting forever and actually want a home at some point? Way too much apartment supply + a potential fad + demographic bulge + easing lending standards (recall both Chase and WFC are offering 3% down mortgages) + a hatred of doing laundry with quarters and doesn’t housing all of a sudden seem a bit more interesting? If you are HD or FBHS or LOW or SHW aren’t you licking your chops? Anyway, by lunch we sat on unchanged because 2,100 is the new magnet.

We got the Fed’s Beige Book in the afternoon and while it had a somewhat subdued tone to it that’s not going to stop them from raising rates in June or July. We closed at 2,099 after starting the day at 2,085 so I guess that’s a win. We get a smattering of data tomorrow and one last jobs report before a potential hike on Friday so I imagine the market will be fairly sideways before then. Maybe people are just waiting for clarity before buying? That’s my absolute favorite “useless phrases” you hear ALL the time. Clarity…as if such a thing even exists. Yep, I’m in the prediction business but I need to be sure before making a call. Hilarious. Final Score: Dow +1bps, S&P500 +11bps, Nasdaq +8bps, Rus2k +71bps.  

Volume was slightly below avg. Our desk was evenly matched. Buying in Tech and Industrials. Selling in Energy and Software. Shorting in Energy. News Highlights:

Tonight we are going to end with the worst back flip in the history of back flips. No one fails this hard (and typically lives I guess?)

https://www.youtube.com/watch?v=NAFIOdhDKdY&feature=youtu.be  

Have a good night

 

Indecision 2016 Rolls On

Equities start the day lower as Indecision 2016 rolls on.  Actually it’s not even Indecision 2016, it’s more like Indecision 2015-2016 and potentially 2017-?  For a market that is literally going nowhere we sure do fret and worry and overanalyze a lot right?   Is it a bear market?  Is it a bull market?  Will the Fed hike in June?  Are there any dire wolves left?   All these questions circle around us like those little birds when bugs bunny gets knocked out but ultimately they’ve been for naught.  We stand here HOLDING THE DOOR against all the negativity thrown at us and while we do we can’t see all the good that’s out there.   Jobs are still being created, PMIs are still above 50, Leading indicators are still leading, people are still buying homes, and Summer is finally upon us.  But I guess that’s not enough?  Those things can’t stop the howling winds from blowing White Walkers up to our front door and making us worry about the future?  One day this stalemate will break, one day something will either push this market to new highs or usher in the next bear market.  Until then we sit here and try to come up with new ways to describe sideways price action.   Violently Unchanged.  Sharply nowhere.  Sound and Fury signifying nothing.  No one is winning right now which bears a remarkable resemblance to Westeros right?   Please, for the love of God, someone do something to break this stalemate!  I’d rather write about a roaring bear market than one that goes absolutely nowhere.

After the open we traded in a whopping 5 point range for the entire first half of the session.  That’s right kids, 5 points.   Flash PMI for May was treated with as much importance as a piece of used chewing gum and the only stock mover of note was MON who got an all cash offer from Bayer.  Summer Monday you say?   You betcha, in fact volumes ran about 30% below the 20day mavg.  So what can we talk about here?  I don’t know, maybe some fancy schmancy technical analysis?   We held 2,040 last week and all the chart gurus say that’s a good thing.  Ok, I believe them, I mean I don’t have some CMT thing after my name so that sounds good to me.  We’re stuck between the 50 and 200 day now so you have to figure whichever way it breaks will have a bit of momentum behind it.   What’s the next catalyst though, it has to be the Fed meeting and that isn’t until June 15.   Are we really going to tread water until then?  The answer is probably yes which means we need to hit google really quick.  Yep, this is you, and me, and everyone else.  Just no wind at all for weeks.  By lunch we sat on unchanged.  In fact the whole day felt unchanged.

The final hour brought a small selloff but it was ultimately meaningless.  This market has gone nowhere for two weeks now (hasn’t been up or down two days in a row over that time frame) and it feels like the only thing the market cares about is Fed speak.  Utilities led all losers today because that’s what you’d expect before a hike (I assume they’ll hit bonds next).  So here we sit and here we’ll stay until Janet and her crew update us in a few weeks’ time.  How good was that episode last night?  Just awesome, I wish the market had as much action as HBO on Sunday nights.  Final Score:  Dow -5bps, S&P500 -21bps, Nasdaq -8bps, Rus2k -8bps. 

Volume was awful.  Our desk was better to sell.   Buying in Semis and Retail.   Selling in Financials and REITs.  Shorting in Energy.  News Highlights:

We’ll end tonight with a fantastic little dice trick.   Man if you could do this at a bar you’d be drinking free forever!

https://www.youtube.com/watch?v=4idzBXCxvUw

Have a good night.

So Did We Learn Anything?

Equities start the day higher as earnings season winds down. So did we learn anything? Are there any takeaways at all?  Hard to say, but earnings growth is still falling faster than dire wolves in Westeros. As you can see in this fancy orange bar chart I grabbed off Bloomberg earnings growth is something awful like -8% this quarter. Blah. That being said, the world thinks this was the trough and we have nowhere to go but up. Are they right? Who knows, but unless the Dollar remains weak and Crude oil remains strong that upward trajectory may just turn down again. Speaking of turning down, who else is beyond bored with the Danerys storyline? Jesus can she stop saying her stupid 18 word name for one freaking episode? I don’t care that you are unburnt or queen of the Andals, take a shower will you? So what are the catalysts out there now that earnings are fading into the twilight? How about buybacks!! Everyone’s favorite “it’s really the only reason stocks go up” meme is ready to return to your world. The buyback window is finally re-opening (credit to GS) so maybe this slow grind lower we’ve endured over the past two weeks will finally catch a bid. Are buybacks the panacea that will save us from the depths of misery? Of course not, but at least they help on the margin. Unfortunately it looks like we are doomed to the fate of sissyphus. Push the rock up the hill (hey things aren’t that bad), get near the top (we’re about to breakout!), slip (oh wait things aren’t exactly fixed are they), rock slides downhill (oh man here comes the recession and earnings collapse), and we walk down to start all over. We closed at 2,057 on Dec 31, 2014. We opened today at 2,057. I mean they write Twilight Zone episodes about this kind of stuff.

After the open I spent the first 4 hours looking for something to write about and came up empty. I mean if I were a journalist at the WSJ or Marketwatch I woulda called in sick. “Hey, let the intern try to describe an unchanged market with no macro data, I got a cough!” Ok something must’ve happened right?  Sure, KKD got a $21/shr offer from Germany’s JAB group. $1.35B for the world’s best donuts? You bet. You know what else JAB owns? Keurig, Peets, Jimmy Choo, and Einstein Bagels to name a few. So if you are woman who loves super high heels with your coffee and donuts these guys got you covered. Wait… Jimmy Choo makes men’s shoes too? Honestly I had no idea but I’m definitely not in the $650 loafer category (you junior bankers are though! Hit up this link and impress your MD because those Excel skills are probably lacking am I right?) Where was I? Oh yea a market that went nowhere for the first half of the day. Look, there’s no economic data at all until Friday so we’re gonna need someone to say something controversial (luckily its Politics season). Winners MNK, AGN, CMG, HCP, VRTX, and BIIB.  Mostly health care stocks because felines who impact the pavement sometimes produce upward velocity thereafter. Losers were FCX, CHK, RIG, DO, NEM, basically every energy and material stock. By lunch we sat on unchanged going absolutely nowhere fast.

The rest of the day should’ve been spent calling our Mothers and thanking them for being awesome because come on, don’t just do it on Mother’s Day. Mothers are the greatest people in the world so tell them that more often. There’s an old jewish proverb that says “God could not be everywhere, and therefore he made mothers” so call her up again, make her night! We closed unchanged on the day and there honestly isn’t one thing I want you to take away from May 9, 2016 other than……….The Cubs are winning the World Series!!!!!!  BOOK IT!!!!!!!  

Final Score:  Dow -19bps, S&P500 +8bps, Nasdaq +30bps, Rus2k +32bps. 

News Highlights:

Well there are none.  Literally none.  But I do have an amazing video to end on tonight so let’s move to the big finish.

Remember my last recap where I had a video of a guy eating corn from a drill?  Well it appears other people have tried it, including this poor poor woman.  Oh man…ouch…

https://www.youtube.com/watch?v=v9xRByNPKjM

Have a good night.

We Are In The Middle

Equities start the day lower as all the grumpy people come back to work. Up 16pts yesterday on no real news? Awesome. People come back from a day off and we fall 16 pts overnight? Not so awesome. So I swore to myself I’d never write another recap until lie chester city won the Premier League (I pronounced it this way for the longest time. Lie chester square used to get me too) and Jon Snow came back to life so I guess here we are. Jon Snow is alive? I love that show so much, right when you think everything has settled down they smack you in the face and say “WAKE UP”. Speaking of getting smacked in the face, why does the market keep grinding lower lately? Weren’t we supposed to be out of the woods? Well my friends we aren’t out of the woods, in fact we are right where we belong walking along the same trail we’ve been on for years. Mediocare economic data? Check.  Mediocare earnings? Check. Central banks doing everything they can? Check. Sentiment swinging from “get out the canned beans Margaret, the Recession is upon us” to “Margaret, I think we need one of those Tesla Model 3 things they just announced”?  Check.  Guys Guys Guys.  Nothing has changed.  Mid to low 50s PMI, 250k jobless claims, weak Q1 GDP, minimal wage growth, companies buying stock hand over fist, the Fed “monitoring the situation carefully”, and a stock market that runs out of steam near 2,100. ZZZZZ. Wake me up when 1) Earnings growth stops going down  2) The market breaks 2,150  3) Jon Snow puts a dagger in Ramsay Bolton’s nether regions  and  4) Trump debates Clinton (I swear this draw Superbowl type ratings).  WE ARE IN THE MIDDLE.  Not the bottom and not the top.  THE MIDDLE. 

After the open they did this to stocks. The story of April was rotation, rotation away from safety and into risk and now that trade seems to have reversed. Which makes sense right? If you piled into risky stuff thinking new highs were imminent you are bound to unwind a bit of it when things stall out. That doesn’t mean that the market is a raging sell it just means that things have become a bit less “chasey”. Earnings basically wind down this week so let’s check out the latest summary from @Factset. Now I’m not one of those “what’s the earnings beat rate” hipsters so I’m going to skip over that data point, instead let’s look at guidance shall we? “At this point in time, 54 companies in the index have issued EPS guidance for Q2 2016. Of these 54 companies, 36 have issued negative EPS guidance and 18 have issued positive EPS guidance. The percentage of companies issuing negative EPS guidance is 67% (36 out of 54), which is below the 5-year average of 73%.” Ok, so that’s not extremely informative but it’s definitely in the “less bad” category right? Anyway, if you are an earnings nut make sure you read thru that link, it’s awesome. We bottomed around 1130am ET when Europe went home (I guess they were grumpy) and proceeded to rally all the way thru lunch. We didn’t quite make it back to green numbers but our first test of the 2,050 area was a success.  Winners: FMC, FIS, MNK, ENDP, and MYL.  Losers: FCX, PBI, CHK, SWN, and MRO. How fun does this look btw? Sign me up!  

The rest of the day was a sideways mess with little to chance to spread our wings. We closed at 2,063 down 87bps as the market continues to pullback from its recent highs. So like I said in the opening paragraph welcome back to “the middle”, in fact if I were to compare this tape to a song lyric it would be “you can checkout anytime you want but you can never leave”. I mean look at this madness…just look! How many headlines and market comments and predictions have we seen over that time frame…2.8 million? At least? Yet in the end it’s just one giant sideways grind? I don’t know, I guess we continue to plumb these levels until something real happens. Maybe those really goofy aliens from Mars Attacks will show up and vaporize a few factories and robo advisers, make us have to rebuild from scratch.

Final Score:   Dow -78bps, S&P500 -87bps, Nasdaq -113bps, Rus2k -168bps. 

News Highlights: 

  Ok, I decided I’m going to try tonight’s end link and report back to you fine people.  I just have to wait for corn to be in season and my neighbor to come home so I can borrow his drill

https://www.youtube.com/watch?v=1ZTj4ZdUgR8

Have a good night

A Great Stabilization

Equities start the day higher as the Red Woman shocks the world. Look, I’m all about this whole “she’s ancient and magical and powerful” vibe but come on now, can’t you give us a headshot or something? Game of Thrones is officially back and if you have been reading my recap over the years you’d know that I excel at one thing: spoiling the heck out of my London colleagues. Hey, its 2016, if you can’t watch #GoT on Sunday night then you are going to be spoiled, I’m sorry but it’s true. Literally the whole world talks about it over coffee and donuts so don’t come here expecting a spoiler free zone. Ok, now that the ground rules for Season 6 are out of the way let’s do a quick “big picture” update shall we? The best way to describe the past few months is that we’ve gone thru a “Great Stabilization.” Here are all the things that stopped going down: Oil, China, Credit, Transports, Europe, and Sentiment. Once those stopped acting like death we saw R&R kick in: Risk and Rotation. People stopped piling into Utilities, Telecom, and Staples and started rotating into risky sectors like Energy, Materials, and Industrials (Financials too but everyone hated that sector like Ramsay Bolton). Headwinds then turned into tailwinds as the dollar stopped going up and commodities stopped going down. So does that mean our economic malaise is about to end? That 2-3% GDP growth and mid 50s PMIs are a thing of the past? Nope, not at all. It just means that sentiment about the world ending has abated and that change in the winds was enough to drive us to 2,100. The area above 2,100 is a bigger task though, like taking Winterfell back or dating one of those Sand Snakes (they are literally the worst part about this TV show.  Just awful). New highs are composed of earnings growth and Europe hitting its stride. It’s about China reigniting its animal spirits and Japan getting back on track. What I’m saying is that we could be back to the grind. Back to this 2,050 – 2,125 area that we spent most of last year wallowing in. Risk and Rotation are good but we need a bit more to take back Kings Landing.

After the open we saw a bit of “un-rotation”, if that’s even a word. Heck, I don’t care if it is or not, I’m using it. Boom, how powerless are you! Energy, Materials, and Industrials were the big losers while Staples, Utilities, and Telecom the big winners. I guess we could say “profit taking” but can you profit take a giant rotation trade? Probably not. Anyway, it was quiet because we have a Fed meeting on Wednesday. This always happens during Fed weeks, all the attention gets drawn to the actual announcement and away from everywhere else so volumes were running about 10% below normal. New Home Sales missed but let’s turn to Bill for commentary on that sector because there’s no one better. So yea, other than a small unwind of a popular trade there really wasn’t much to talk about in the morning. I could keep trying to put you to sleep with random commentary but instead I say we look at a ridiculous golf trick shot. I bet I can do this, need to find a volunteer at Baird and get it done. 

The rest of the day was a non-event and we closed slightly lower for the session. Blah, what a boring Monday. You know what did happen though, we got a Golden Cross in the S&P with both averages up sloping! Wow that sounds fancy right? I mean I don’t know about you but that’s better than the Cubs winning the World Series and the Bears pounding Green Bay by 50. Actually no it isn’t but I’m trying to be as dramatic as possible. Here, let Bespoke tell you what happens after just such an occurrence. If we got dovish commentary out of the Fed, further gains in Transports/small caps, and a week of solid earnings we might just touch those old highs! But beyond there, man I don’t know, maybe if I call Bear Market again we will rally another 13%?  Look I’ll do it, don’t tempt me. I’m willing to destroy my letter writing reputation so your stocks go up, that’s how committed I am here.

  Final Score  Dow -15bps, S&P500 -18bps, Nasdaq -21ps, Rus2k -18bps

News Highlights:

For tonight’s final link we are going rope swinging!  500 feet above the ocean! 

https://www.youtube.com/watch?v=koW2Clc0xEA&feature=youtu.be&t=10s

Have a good night

The S&P500 Makes New Highs

Equities start the day higher as the S&P500 makes new highs! That’s right, new highs my friends, don’t be fooled into thinking price is all that matters. As the ever informative @ukarlewitz points out, the S&P500 Total Return Index has reached a new high water mark. Total Return Index you say?  Yep, #dividendsmatter. I mean shouldn’t we look at both price appreciation AND dividends when it comes to investing? It’s not like we can exclude them, they do provide vast swaths of investors real money to spend on things like nachos and inflatable pool toys (my mind is still on Spring Break). So will the actual S&P500 index catch up to its holistic partner? Probably, but it feels like things will get a bit tougher from here. We’ve rallied 15% from the February lows without any meaningful pullback to reset the bar and honestly, how often does THAT happen? Sentiment, while not ragingly bullish, has become a bit of a headwind too. II Bulls are at their highest level of the year (47%) and Bears have dropped to 21%. So it’s not like we can say “no one is bullish take ‘em up” without feeling a bit disingenuous. Earnings, what about earnings you say? Well, at this point they are “better than expected” but it’s still fairly early in the season (RBC put out this blurb today:  17% of the S&P’s market cap has now reported (60 names). So far EPS has beaten by an average of 4.5% vs. expectations of loss of 6.9%).  Oil, what about oil you say? Well my friends, I wonder, can we actually describe the current level of oil prices as “Goldilocks”? At $40 its still low enough to provide relief to everything from consumers to airlines and at $40 it’s no longer this giant fire breathing dragon that encompasses every worry about global growth. Is $40-$50 the sweet spot? It might just be. Anyway, new highs and no one is talking about it! Perfect, let’s keep it that way!

After the open it felt like we were going to have a “go nowhere, do nothing” day. The first hour or so was spent bumping up against resistance around the 2,100 level. I went so far as to say the market “felt like it was on mile 19 of a marathon” on Twitter because exhaustion was rampant. But no…no…this one will not be held back by a lack of Power Bars and blisters on its feet.  We gave 2,100 the laugh and pushed higher thru lunch. Existing home sales beat expectations and if you are in the market to sell a home get out there my friends, there’s profits to be had! Sellers of US Homes are reaping the biggest profits since 2007! Who wants an 80-10-10 mortgage and a 5 bedroom home in Port St Lucie? THIS GUY. Intel announced they would lay off 11% of their workforce and the stock rallied 1.2%. Just goes to show you that stone cold efficiency is still embraced by the street. Other winners were DFS +8% (who has a Discover card? Honestly I’ve never owned one and I’m 42), TXT +4.8% (earnings), CHK +4.9% (up like 82,485% since Feb because the whole world sold it over the past few years), and YHOO +4.1% (because nothing says “buy me” like a company running a messy asset sale process). Losers were mainly Utilities and safety plays like KO (earnings viewed as disappointing) and  HSY (Easter is over, time to move on I guess).  Honestly, the rotation from boring / safe / dividend back into risk has been breathtaking. Names that no one would touch with a 50 foot pole are all of a sudden hotter than San Francisco real estate. Industrials, which were in a “Recession” two months ago, are near all-time highs. The fickleness of market is absolutely epic. Hey isn’t today 4/20?  Man the only 420 I know is my weight, who are these people. 

The back half of the day saw the market drip drip drip lower as the dollar churned churned churned higher. King dollar, the great arbiter of risk nowadays, guess you have to have it on your screen if you wanna know what people are thinking. We closed at 2,102, only slightly higher on the day but still in green numbers. So I guess the beat goes on. We continue to see a rotation away from the things that worked (staples, utils, telecom) into the stuff that moves like a Tesla in ludicrous mode. Does that rotation smell like chasing? Sure, a little.  When you see “risk on” trades AFTER a huge move it does make you wonder what investors are thinking. Are they reaching or is this the start of a fresh breakout? No one knows but can you blame them? What happens if this thing keeps going, how can someone explain their love for Utilities when Cyclicals are up double digits? How can you explain your love for tissue paper when earnings aren’t as bad as people expected? Oh well, guess we wait and see what the future has in store. For now the market and its participants are slowly re-embracing risk and it has brought us to new highs (technically true, don’t tell me dividends don’t count).   

Final Score:  Dow +24bps, S&P500 +8bps, Nasdaq +16bps, Rus2k +18bps     

News Highlights:

I’ll end tonight with two videos because I couldn’t decide which one I liked more 

The first is a really brave man

The second is a really brave man and woman that will leave you shaking your head.   The chair is my favorite part

Have a good night

What Happened During Today’s Wild and Wacky Session

Equities start the day higher as Jamie Dimon once again rides to the rescue! Love him or hate him, Dimon is an immovable object in an industry constantly being scorned. He goes about his daily life trying to keep his bank on top and who could blame him for that, a good CEO would always do thus. Anyway, enough back slapping and fawning admiration, did JPM actually crush earnings or what? I mean not really…they didn’t blow the doors off and report a new type of credit card that charges people for even looking at it. They reported a decent quarter but the bar for them to hurdle looked a bit like this. I spoke about this very thing yesterday and JPM may have just proven my point:  no one owns this sector, everyone hates this sector, it’s the only industry group trading below 1x book value and every headline you read about them is as dire as they come so you could say expectations are as bad as they get. So what we look at is not the news, but the REACTION to the news, and it was overwhelmingly positive. That being said we can’t draw any major conclusions just yet. We need to see C and BAC and WFC and a few other banks report before we can say “maybe their house isn’t falling over, maybe it’s just leaning a bit.” Chinese export numbers were also good but let’s circle back to that in a bit so I can make a hastily drawn conclusion to prove an untestable hypothesis (I’m the king of that). First, let’s see what happened during today’s wild and wacky session.

After the open we got, dare I say it, more of the same? A continuation of this slow, grinding higher market where people look around and say “why was I so negative in January”? Retail sales stunk but no one cared. Oil inventories were high but no one cared.    All the early winners this year like Consumer Staples, Utilities, and Telecom were summarily booted to the curb in favor of pain train places like Financials, Industrials, and Materials. BTU declared bankruptcy, the 20th coalRecap company to do so in the past decade continuing a trend towards alternative energy. Coal…I mean welcome to the history books.  Financials though…financials were the sizzle on the steak. JPM +4.2%, C +5.6%, MS +5.2%, Anton’s checking account -28%, BAC +3.9%, it was smash and grab all thru the sector. You know what?  Let’s not get crazy here. All of ONE bank has reported so far, let’s not usher in a new golden era just yet. Are expectations too low for these things?  Maybe, maybe not.  Today would have you believe that yes, they are too low, but let’s circle back on Friday after we’ve seen a few more hit the tape. Losers were everything “safe” like RAI, MO, CPB, KMB, and HRL. Smokes, food, and diapers:  get out.  By lunch we sat on 2,078, up 0.5% with people marveling at everything from transports to energy.(Speaking of Transports, how awesome is a 1) break of the 200 day  2) a retest  3) continuation higher. Simply gorgeous).

The rest of the day was up and to the right and people rediscovered their joy of stocks. I mean jeez….even GPRO was up big. JOY was up big...a MINING stock.  What’s next, is 3D printing going to be all the rage again? Restaurant review sites back to $10B valuations? So China, I was supposed to mention my thoughts on that right? China had better than expected Export numbers last night, great, let’s sound the all clear and buy up all of Shanghai. But that’s kinda what’s going on the past few weeks to be honest. Data is improving, crude oil is improving, maybe banks are improving, maybe China is stabilizing. Back in Jan/Feb the world was ending and recession was near and bear markets were all the hot rage. But now it’s different, the tone has changed to one of…dare I say it…cautious optimism? Which is hilarious to me, 100% I can’t believe what I’m seeing hilarious.  Price truly does make the news doesn’t it? You would think that a headline comes out, people analyze the news, price improves/falls, and the world keeps on spinning. But no, it’s actually the other way around. Price improves/falls, some news comes out, people extrapolate that things must be improving/ worsening and the world keeps on spinning. Right now people think things are getting better, that the headwinds we faced JUST 8 WEEKS AGO have abated and maybe, just maybe, new highs are imminent. Why is that? What changed? Prices are higher, that’s it. 2,080 on the S&P has made people feel good again about the world again.  God Bless the USA. 

  Final Score:  Dow +106bps, S&P500 +100bps, Nasdaq +155bps, Rus2k +218bps. 

News Highlights:

Every now and then I run across a blog post or a piece of writing that truly inspires me.  That makes me sit up and digest every word on the page. This is one of those and I pray you read it start to finish because it is truly worth your time.  I promise

http://paulgraham.com/vb.html

IMF Once Again Lowers Its Global Growth Forecasts

Equities start the day higher as the IMF once again lowers its global growth forecasts. If you were looking for something to sit alongside Death and Taxes, IMF forecasts being “too high” would fit in nicely. Hey, I missed you guys, like a lot. Between Spring Break, work travel, taxes and the fact that it still snows in my home town in April I haven’t had a chance to commune with you fine people. Did I miss anything? Has the market gone anywhere in the past two weeks? Let’s take a look……aaaaaaand it’s sideways. I’m sure a ton has been said over that time frame but ultimately price is all that matters and right now price is saying “zzzzzzz”. But hey, earnings season has arrived, it’s catalyst time baby!   Time to read thru endless conference calls about strong dollar, weak demand, weather, and tepid global growth then draw a broad conclusion that will be proven wrong within a month or two.  Rinse and Repeat.  Speaking of earnings, this is the only chart you need to look at to realize their importance (h/t @_SeanDavid). Sentiment rises and falls, Central Banks create acronyms and programs, Oil flips and then flops, but earnings are what ultimately drives stock markets. By the way, that chart is also good at refuting the notion that our market is “Central Bank driven”. Oh is that right? Janet Yellen and Ben Bernanke managed to grow SPX earnings every year from 2009 to 2014? (whether they have peaked or not is a topic for another recap). Anyway, let’s see what the crazy happs were today. 

After the open it was all about that Texas Tea, black gold, the thing we’ve worried about for 4 straight months. A random headline from Interfax about Russia and Saudi Arabia agreeing on a production cap (gotta be like the 10th time a headline like this has appeared) hit this morning and Crude managed to break its 200day MAVG for the first time since 2014. The problem is that the 200day for Crude is still downward sloping so while this is a positive step it’s not like we can ring the “all clear” just yet. Bottoms are made by sentiment bouncing up and down then getting actual confirmation from the data, we just need that second part to happen now.  Obviously energy was the big winner and if you look at some of these moves they are simply breathtaking: CHK +33%, WLL +12%, TDW +21%, SWN +15%, if you were a beaten up oil company your stock looked like a tech IPO today. The other sector that did well today was banks if you can believe that. I swear, I have never seen a sector with worse expectations going into earnings than banks right now.  Be it capital markets or a flat yield curve or energy exposure or a global slowdown the reasons for hating them are numerous and diverse.  If there was EVER a case for jumping over a broomstick this has to be one of them.  I feel like, short of these guys reporting a record number of dogs and cats murdered in their boardrooms, that things can’t possibly be as bad as the market expects right? Losers were JNPR, MNK, AA, and FAST. FAST is always one of my favorites to watch in the industrial sector and their earnings last night weren’t exactly blockbuster so I guess we won’t get too excited about a definitive bottom there. By lunch we sat on the highs, 2,059, up 0.9% as everyone cheered the fact that gas is more expensive now. 

We continued to rally the rest of the session as the bears got squeezed into the close. I guess, as earnings start up in earnest, the bullish case has morphed into 1) it’s not as bad as we think  2) oil has bottomed  3) china is stabilizing and 4) credit has stopped freaking out. We also have Global PMIs on the upswing so maybe the “worst case scenario” for the next 3 to 6 months is “general malaise continues” instead of “raging worldwide recession.”  I guess the grind will continue for the foreseeable future though, interest on trading desks seems extraordinarily light right now so I’m not sure who’s even on what side to be honest. Who out there is ragingly bullish? Anyone? Who out there is still ragingly bearish (minus Zero Hedge and Hussman)?  Anyone? Is AAII Neutral going to make a new high here? Earnings, please, for the love of God, kick this market into a new gear, I’m begging you.   

Final Score:  Dow +94bps, S&P500 +97bps, Nasdaq +80bps, Rus2k +104bps. 

News Highlights: 

 We’ll end tonight with one of the craziest stunts I’ve seen on TV.   We obviously don’t get to watch “Britain Has Talent” or whatever the heck it’s called now so thank God Youtube exists.   Whoa. 

https://www.youtube.com/watch?v=xd40Sj7z06E#t=1m49s

Have a good night

The Hilarious Symmetry of Markets Rears Its Clown Face

Equities start the day lower as the hilarious symmetry of markets rears its clown face. Honestly, you have to laugh at this thing from time to time or you’ll go insane from the bouncing around.  On the lows the following things happen: people get worried about a recession, people say the Fed is done cutting rates, everyone gets bearish in the sentiment polls, and people lower their SPX price targets. So what happens as you approach the highs? People say the economy is doing ok, people say the Fed might hike sooner rather than later, everyone stops being bearish in sentiment polls, and people start talking about new highs in SPX. I mean come on, are we really going to do this every 100 points? What if this is all just the middle?  What if we are just seeing a period where the market swings around because there’s no clear trend? What if I told you that the S&P500 has underperformed 1 month Tbills in 12 of the last 20 months (h/t @michaelbatnick). Why? Because it just keeps going nowhere. Big rise. Big fall. This is all noise, all of it. There is no trend, stop trying to make one up (a lesson I learned painfully over the past month) I’m going to point you to the following link and give you this quote because it’s all you need to know right now: “A flat-ish market is out of the ordinary. Investors don’t like to see things that are out of their comfort zone. When nothing is happening in the markets people tend to try to make something happen on their own. The problem most don’t realize is that trying harder in the markets tends to leave you worse off, not better. Patience is always a virtue in the markets, but maybe more so during a bunny market. You can’t force things.” 

After the open it was WHAT WE THOUGHT IT WAS, a holiday tape where all the action was in the first 30 minutes and then everyone left for Texas or Missouri or Alabama or wherever their family trips took them. It’s been a really slow week and today was no different my friends. Hey, let’s talk economic data because there’s really nothing else for me to write about. Weekly Claims is still as good as it gets, Durable Goods are chopping along, and people still aren’t eating enough BBQ in Kansas City to get the regional index into positive numbers. All of these are same old same old, absolutely nothing stands out as a game changer. The big winner today was PVH, who is seeing explosive growth for Tommy Hilfiger in China. Man I remember wearing those blocky symbol shirts and rocking their sweet sweet cologne. Ahhh, college. Hey you know what else in is PVH’s pile of luxurious brands? Tommy Bahama! Is it bad that this is literally my favorite clothing store? Does something happen at age 40 when Hawaiian shirts and chinos suddenly become your defacto “lemme lounge around wardrobe? Though maybe it’s just me...oh God please say it’s not just me. Where were we, oh yea markets. A whopping 6 point range for the first half of the day led to all sorts of talk about Wisconsin vs Notre Dame and whether or not this is the most disgusting food on the planet (I voted yes).      

The back half saw us rally up to unchanged where we finished an absolutely uneventful week. Now the bullish side of this would say “we ripped off the Feb lows so a week of sideways is good for us to digest” and I guess you could say that’s true. The bearish side would say “we’ve stalled out, oil has turned over again and there’s no upside catalyst left” and I guess you could also say that’s true. Or, like I said in my opening paragraph, we could all settle on the notion that nothing much is going on, that we are stuck in a super long sideways range with random volatility exacerbated by machines and the proliferation of ETFs. And you know what? That would also be true. So let’s keep chatting about markets because it fun and engaging but remember that a grain of salt is often needed when you look at day to day movement. This is the long run.  This is the long run.  This…is just the middle. Anyway, have a good holiday, chase down some chocolate eggs, hug your family, or just enjoy a quiet weekend. Thanks for spending 5 minutes reading my ramblings, I always appreciate it. 

Final Score:  Dow +8bps, S&P500 -4bps, Nasdaq +10bps, Rus2k +36bps.

News Highlights:

I have two links tonight because everyone already checked out so let’s end this puppy.

The first is an optimistic look at where we might go in the short term!

The second is an early favorite for Dad of the Year.   Kudos dude…kudos.

Have a good night

Another Senseless Attack Rocks Our World

Equities start the day lower as another senseless attack rocks our world. Once again we wake up to the faces of terrorized civilians whose lives are forever changed by the hand of cruel savages. Once again we are reminded that there are countless things to be afraid of as we try to chart a course through this thing called life. But you know what? Screw that, screw being afraid. I choose to live life by looking at the bright side, by embracing family and friends even with the knowledge that there are evil people lurking in the shadows.  Live, love, travel, smile, because that’s why you are here. Why spend your precious time listening to doomsayers and embracing their negativity? Why let it affect your life and your goals? One of my favorite writers spent this morning pointing out all the misery you could’ve feasted on over the past few decades and how it’s EXACTLY the same right now. Honestly, click that link, read it and them come back here because it is SO worth your time (if you can’t because your work blocks financial links for some unknown reason *cough* send it to your personal email and read it there). Worries about sluggish growth, worries about GAAP vs Non GAAP, worries about China, worries about the Fed, worries about Share buy backs, these are not NEW, they’ve been around for decades. So while you troll that “the market is a bubble blog” and while you read CNN and cancel those plans to travel thru Europe remember one thing: optimism about life, optimism about mankind, optimism about the future should be your default setting. Why? Because humanity perseveres in the face of adversity. Always. 

After the open the market had multiple reasons to sell off yet didn’t. Usually a global terror event like theis gives sellers a reason to step on the gas but those that did burned out their engine. Europe, which was down all day, ended in the green. Our market spent the first 1.5 hrs in the red but nothing could stop the grind higher and by lunch we were tasting green (no idea but I like how it sounds). Can we take a moment to talk AAPL? It’s been awhile since I’ve chatted about one of my two favorite companies (the other being DIS) so let me address their announcement yesterday. The potentates at the top of Apple’s pyramid have decided that when it comes to consumer electronics innovation, the freaking size of the screen is all we care about. We have small phones? Make bigger one’s. Wait we have big phones now? Make smaller one’s. What are the AD GENIUSES that came up with this strategy? Guys, for crying out loud, you have more screens than a Buffalo Wild Wings, stop screwing with the size. How about batteries that last long enough for my kid to surf Cartoon Network for more than 4 hours? How about waterproofing these things so a rainstorm doesn’t cost me $700? How about re-designing iTunes because it’s the worst program since Flappy Bird. Honestly, you got the range of sizes covered, MOVE ON. My patience for Apple is running thin, it might be time to find another favorite company (DIS stays). Alright, what did well today: ENDP, SPLS, WDC, SHW, and CERN. What didn’t:  RIG, RCL, PCLN, CCL, and TRIP.  

The rest of the day was a slow fade to end just shy of positive numbers. 2,049, down 0.09%. Price action the last two days has been just what we need to digest the big move off the lows. We open, trade sideways, move higher after lunch, then settle into the close.  Are we overbought?  Sure.  Are people starting be less bearish?  Sure. Have the recession calls mostly ended? Sure. The story remains the same though.  Rally to the highs, people get optimistic, data isn’t good enough and we roll over. Crash to the lows, people get bearish, data isn’t bad enough and we rally. But there’s no reason to call bubble. There’s no reason to say “our economy is due for a melt down”. I don’t remember who said it but I had a link recently with this quote “owning stocks is a bet on the ingenuity of humans”. That’s right, they are. They rise and fall over the short to medium term but in the long term you are a fool to bet against the human spirit.  

News Highlights: 

 We’ll end tonight with being grateful.   A simple a video as any but one that I watch every now and then to remind me that life isn’t about stuff.

 https://www.youtube.com/watch?v=Eyfa1yR8tx0

 Have a good night

Going Full On Positive

Equities start the day higher because it’s St Patty’s Day! Honestly, is there a better random holiday than St Patty’s Day? God truly favors the Irish, they are just the nicest people on the planet. So in honor of St Patty’s being such an awesome day we are going full on positive in the recap.  Nothing but good news, green faces, amazing accents, and a really mediocre beer that for some reason is insanely popular (im sorry, but Guinness is not good). The S&P sits at 2,025, up 10% from the lows, so let’s talk about all the good things that are currently happening. 1) Oil looks to have bottomed. It bottomed when we saw an inventory number that looked like the number of stars in the sky yet the thing closed HIGHER on the day (Mar 2). It bottomed when companies like MRO and WFT issued tons of shares and closed HIGHER. It bottomed when people started calling for $20 oil.  2) The “Industrial Recession” may have been tamer than we originally thought. Take a look at the chart of FAST (we rate neutral), this thing is HYPER sensitive to Industrial trends and look at what it’s done over the past month. 3) Regional manufacturing indices are bouncing. Empire and Philly Fed are back in positive territory. 4) Homes are still a “we’re sailing between the 40th and 50th parallel” tail wind for the economy. There are nowhere near enough new homes.  5) USD has started to weaken as well, it’s had a nice pullback from the highs. Does this have the potential to boost EPS? Sure, if it continues, but the jury is still out on that. The Dollar moves like a supertanker so let’s not get crazy here.   That being said, suddenly $120 might be low for 2016 SPX earnings especially if CFO’s stop saying “oh man this dollar is killing us” 6)  Have you seen the Transports lately? FDX reported last night and things aren’t so bad my friends. So there we have it, maybe all the doom and gloom was overdone? Maybe we should’ve looked to the Irish for their innate joy of the world instead of trolling thru endless apocalyptic blogs? God I love St Patty’s day, especially when the NCAA Tournament starts at the same time!

After the open it was up and to the right…AGAIN.   The low was made a whopping 30 minutes into the session and by lunch you woulda thought our economy was growing at 5% with 1.5% unemployment and the Cubs in the World Series. Let’s talk CAT for a second. Now cats are stupid and no one should own them as a pet but CAT the stock…check out this move after the company LOWERED its quarterly guidance. You know what the hardest lesson to learn in stock trading is? Other than beating the VWAP?  That news isn’t what’s important, it’s the REACTION to the news that matters. CAT has been one of these “the world is a mess, China is a mess, no one wants tractors” trades for the longest time (we rate outperf). When a company lowers its guidance and the stock rips….well that’s what we call “priced in”. It’s the same thing for FAST and Oil and all that stuff I mentioned in the first paragraph:  apparently the market was way too bearish on EVERYTHING. Would FDX stock do this if we were on the verge of a worldwide recession? (we rate outperf)  Other winners today:  CHK, FCX, EMR, DVN, and DO.  Losers:  ENDP, LLY, CMG, MNK, and ISRG.  Let us also look at the chart of IBB, a once proud franchise succumbing to endless rotation. By lunch the S&P was only down 0.09%...for the YEAR. Epic comeback from the recession of 2016, which I think lasted about a week.

The rest of the day was more of the same, up and up until we stalled near the finish. We didn’t manage to recover green numbers YTD but we are tantalizingly close so we may as well call it what is: still a bull market. Ok, there, I’ve had my mea culpa so I’m going to stop beating myself up over it.  The economy is still muddling along, the Fed has told us that “2 hikes instead of 4 sounds about right”, and price action continues to show that everyone is off sides so let’s put these recession worries on the back burner. In order for this to truly be a bear market we’d have to see 1,700 before 2,130, and we closed today at 2,040. Ummmm, yea. So either the market rallies 4% and validates the Bull or drops 17% and creates the Bear.  Which do you think happens first?   

Final Score:  Dow +90bps, S&P500 +66bps, Nasdaq +23bps, Rus2k +155bps, and TRANSPORTS CLOSED ABOVE THEIR 200 DAY FOR THE FIRST TIME SINCE MAY OF 2015.         

News Highlights:

Since it’s the Tournament and St Patty’s Day and no one is reading this we are moving on to the big finish!

Both of my final links are somewhat inspired by St Patty’s Day so buckle up!

The first link is a grumpy old Irishman giving his opinion of St Patty’s Day with endless Americans milling about. 

The second is what happens when you drink endless beers.   Fail time!!!

Have a good night

The Ides of March Descend Upon Us

Equities start the day lower as the Ides of March descend upon us. Like Caesar I feel like I’ve been stabbed a million times by mistaken calls, rushing to judgment, and just plain poor timing. Here we sit, with the S&P at 2,019, defying all the recession/bear market calls made over the past two months and yet no one seems to be winning. If you look around the blogosphere or Twitter you will be hard pressed to find someone who pounded the table on the lows, someone who said “guys, it isn’t that bad, why are we selling everything like its 2008 all over again?” Time and again the market reminds us of a very powerful lesson, one that even the most seasoned veteran takes decades to learn: invest out of consensus. Imagine taking a stand in February because 1)  everyone was bearish 2)  everyone was calling for recession 3) everyone thought the Fed wouldn’t raise rates in 2016 4) everyone was underweight energy 5) everyone was buying puts  and 6) everyone was raising cash. It would’ve been hard, no doubt, I’m not trying to say it was obvious on Feb 12 that the low was near, but those are the times when the scales are tipped entirely in one direction, those are the times when smart money strikes. Right now they are calling Feb 12 the “Jamie Dimon low” and they should, he deserves that credit. The CEO of JPM made a stand, spent his own money to buy his own stock because being out of consensus is what good investors do. Instead of doing that I made a bear market call that looks ridiculous in retrospect, so now I sit here stabbing myself over and over again making sure I remember that fateful day. Anyway, let’s see what happened on a random Tuesday in March.

After the open we traded lower on the heels of a mediocre Retail Sales report. It wasn’t so much the current report but the previous one which got ratcheted lower. Does anyone else think that economic data should be on a 1 month lag? What’s the point in telling us that Whirlpool sold 0.4% more trash compactors in January and then in February telling us “oh wait, actually it was 0.1%, sorry, this whole stats thing is hard.”  Whatever, after we got moved on from the Retail Sales report, we spent the rest of the morning talking about VRX. Now I’m no biotech investor and I really haven’t been following this stock at all but I do know that this chart is brutal. Wow. I’m going to assume that in the annals of being a CEO one of the last things you want to have to say on a conference call is “I don’t know exactly when we are going to file our 10k but April is a good guess” (they get penalized after Mar 16).  Valeant will be one of those case studies in business school where the professor says “see, you can’t just copy Hedge Funds and expect to outperform, you have to do your own homework”. Other losers:  FCX, MNK, LUK (brutal read thru on JEF earnings), TWTR, and ENDP. Winners were EQT, SRCL, AAPL, and MJN because babies are born every minute people, they need those liquefied peas. By lunch we were grinding higher even with 1) oil down  2) credit wider 3) Transports lower and 4) the potential for another night of listening to Trump talk about steak and water. Unbelievable this market, it’s a complete 180 from a month ago. 

The final hour brought nothing, in fact today was a bit of a bore fest. A 10 point S&P range because the Fed decision is tomorrow. Will they raise rates? I doubt it, financial conditions have tightened enough for them to take a month off so don’t expect much action. Speaking of action, if you are bearish on the market this is about the best downside catalyst will find. Buybacks have been one of the major drivers of price action so their absence is usually felt in the short term. Well my friends, another day is done, another goat rodeo is in the books. Let’s meet back here tomorrow so we can talk about “measured pace” and “no set path” and “will rise when we deem appropriate” and “jesus can anyone make that sound interesting to an ordinary person”.   

News Highlights:

Tonight we are going to end with a bike trick video. These, along with skiing and fails, are some of my favorite ending links. This one is particularly interesting because it features a guy jumping from the handlebars of a moving bike onto a skateboard. Whoa.

https://www.youtube.com/watch?v=m8_ovAttiQU

Have a good night

Draghi Goes Ham on Stimulus

Equities start the day higher as Draghi goes ham on stimulus. “Going ham” might be my favorite new way of saying someone “went crazy” so expect to see it a lot going forward, it’s definitely underutilized in financial media. Ok, so what exactly did Super Mario do this morning to get equity markets all fired up? Well, he basically lowered every single interest rate they have, expanded the size of the QE programme (going British there), introduced a new TLTRO (fancy term for refinancing) in which banks can actually get PAID to lend (or, alternatively, pay the ECB to leave the money there. You can’t make this stuff up), and wrapped the whole thing up by saying they will start buying non-financial investment grade corporates. So yea, short of him saying “we are buying crude oil and equities” he basically threw the kitchen sink at this deflation monster. Here’s the problem though, they are kinda all in. What happens if this doesn’t work?  What happens if equity markets move on from chasing this central bank carrot? I don’t know but it would mark a major turning point in worldwide equity market strategy. For years now every time a Central Bank brought out their favorite bazooka we’ve seen equities pop like a kid who ate 28 Sweet-tarts (literally one of the worst candies). Actions like these have been incredibly positive for risk appetites in the past so today’s price action will be a HUGE tell, HUGE.  You might be standing on the doorstep of a world where crazy acronyms and “whatever it takes” doesn’t matter anymore. Is that scary? Honestly…in my opinion…no, not at all. We need to get back to a world that cares less about overnight lending rates and more about corporate cash flows with a multiple attached. Is that too much to ask?

After the open….actually instead of telling you how the market reacted to Draghi let me just show you a picture of the DAX, that should tell you all you need to know. Yep, look at that reaction to kitchen sink stimulus my friends, nothing but down and to the right. I wondered on Twitter last night if expectations for the ECB were too high but you know what?  It turns out they weren’t, it’s just that things are morphing. As 2016 grinds on there is one subject that is becoming rapidly clear:  Central Banks have run out of bullets. Everyone hates negative rates and all these fancy re-financing operations aren’t driving economic activity at all. The Euro had a weird day where it initially sold off vs USD but ended up RALLYING. Why? Because Draghi also said this: "We don't anticipate that it may be necessary to reduce rates further." Even they know there’s no point in going even further to the left of the decimal point. We sold off all morning long and the tone of the equity market has now shifted from “are we going to make another run at the highs” to “l guess that 2,000 level is still stiff resistance”. Can I morph into a range bound bear? Is that a thing? 1850 – 1950 with overshoots in both directions but with a bias geared lower? That’s too complicated isn’t it, man this predictions thing is tough. We bottomed out around lunch and managed to tick higher as Crude reversed. Let us not forget that Crude and SPX love trading with each other so apparently that’s still a thing. Winners CPGX, DG, ESV, NEM, and HPE. Losers WMB, CF, IRM, GME, and LM.  

We went nowhere in the afternoon but did manage to close well off the lows. So, what can we take away from today’s wonky ups and downs? Well 1) we are still churning the high end of the range. Overhead resistance remains firm in the low 2,000s  2) the ECB brought out its dog and pony show and it didn’t help us one bit 3) sentiment has shifted back to neutral, AAII Bulls is back to its “no signal at all” area (37% bulls) 4) defensive stocks are still leading, Telecom and Utilities haven’t faded one bit and 5)  we are going to need an honest to goodness catalyst to go higher, Quantitative Stimulation ain’t gonna get it done anymore.   

Final Score:  Dow -3bps, S&P500 +2bps, Nasdaq -26bps, Rus2k -82bps.

News Highlights:

The other day I had a great video of “Near Death Experiences” as filmed by GoPro users. Well, here is volume 2!

http://tinyurl.com/hxvdncd

Have a good night

The Ever Shifting Narrative Shifts Again

Equities start the day lower as the ever shifting narrative shifts again. You know what’s frustrating? Other than snow on Monday and 60 degrees on Tuesday? Going from a bull to a bear, something I’ve done recently. It’s that being a bear is the frustrating part, I think my reasons for switching sides were sound (global slowdown, earnings recession, tighter financial conditions, Fed at the start of a tightening cycle), it’s that the market doesn’t care what you think, it doesn’t operate under the notion that any of what I just mentioned matters. It will always do its best to frustrate / punish the maximum number of people at once and whoa nelly is it doing that right now. The prevailing narrative to end 2015 was “slow growth but we’ve had that for awhile so the market is fine”. Then 2016 shows up and the bottom drops out, all the fears get magnified and recession calls become voracious (thankfully I wasn’t in this camp). But you know what?  The negativity down at 1,850 was too much, it was too chicken little, it caught very smart people leaning the wrong way (including me) and now it’s hammering all of them plus more.  Should I capitulate and say “I was wrong, it’s not a cyclical bear market”? Not yet, but I’m close.  My favorite trend measure is the 10 month MAVG so take a look at it here. It back tests really well, there are very few head fakes, so to me it represents the best way to look at the big picture.  If we break back above the 10 month, and hold a retest, then I was wrong about switching camps. I will show up here, admit it, and tell myself “you are an idiot”.  Until then it’s entirely possible we are seeing a counter trend rally and eventually the malaise will return and markets will grind lower.  Big rallies can happen in a bear market, it’s not unusal (old link, but still relevant). Anyway, it’s weird, I’ve been writing these recaps for about 6 years and never once took the bearish side. 6 years. Never once called the market a bubble or spouted a bunch of “the Fed is evil” blather. So what happens when I finally switch sides?  This.. Ugh. Is Game of Thrones back yet? I feel like Jon Snow right after the last pow wow with his Night’s watch bros…

After the open I was filled with outrage from the moment the bell rang. Wait..why so angry Michael? Was it the continued bounce in energy? The fact that the market only goes up now? The odd strength from Utilites and Telcos? Nope, none of those, I was outrage at this. I mean…I’m speechless here. You are telling me that baseball hats with curved brims are now DAD HATS?   Like only a DAD would wear a baseball cap how it was meant to be worn? I’m angry, I might write a letter to someone, I’m just don’t know who to address it to. Anyway, we rallied from the overnight lows because the market is STILL washing out everyone who was a bit too bearish on the lows.  Energy was once again the bigger winner and if you own any of these single digit names like TDW or WLL or SWN you are seeing CRAZY moves lately. Your favorite name moved +15% on a Friday? Sure, no sweat, Monday might bring +25%. Bespoke even looked at how single digit stocks have moved sincethe Feb 11 low and it is out of this world.  Why are they moving like this? Because NO ONE OWNS THEM. Look at the last BAML fund survey, they even said “contrarians would go long stubborn short positions in Energy, EM, Materials.” Losers were Tech and Consumer (primarily NFLX and NKE). By lunch we were grinding around on the highs, 2,006, up about 0.3% as the squeeze continued.

We sold off after lunch but bounced in the final hour to close at 2,001, up very slightly on the day. So I guess the big question is this:  where can the market go now? You know the least crazy answer might just be “nowhere”. We spent the better part of last year going sideways and it’s not out of the realm of possibilities that we do it again. Selloffs down to 1,900 when fear takes over and rallies up to 2,000 when hope trumphs. Rinse and Repeat. The economy / earnings aren’t good enough for new highs yet they aren’t bad enough for new lows. Now those facts can change, so we need to be vigilant with the data, but for now it looks like the market has found a range.  

Final Score:  Dow +40bps, S&P500 +9bps, Nasdaq -19bps, Rus2k +113bps

News Highlights:

I have two awesome GoPro type videos to end with tonight

The first is a nice compilation of near death experiences.   All sorts of scary stuff

The second is just plain scary period.  Some guy climbing down a building using no ropes.  Ugh

Have a good night

 

Leo Finally Gets His Oscar

Equities start the day higher as Leo finally gets his Oscar. You know things are right when Leonardo Di Caprio has the same amount of Oscars as Three Six Mafia. I mean when it comes to art, you can put his performance in the Revenant or The Departed of Wolf of Wall St right next to “It’s Hard out Here for a Pimp.” Hey, today is Leap Day! We definitely needed a recap on Leap Day, I can’t miss the opportunity to moan about the fact that it happens in February. Hey guys, we’re gonna give you an extra day once every four years but we’re putting it in one of the coldest, darkest months. Enjoy! I mean who are the AD WIZARDS who came up with this? Speaking of cold and dark, how is the market doing lately? Actually...not that bad to be honest. We’ve managed to avoid the pit of despair below 1,850 but we also can’t rise up to glorious heights of 2,000. We’ve entered this new range of 1,850 to 1,950 because A) there is no recession which would be the catalyst to plunge stocks lower and B)  there is no growth which we need to rip stocks higher. Instead we are stuck in this rolling bear market where sectors get taken out one by one.  Why did we rally over the past two weeks? Because sentiment was godawful and even in a bear market you see the occasional “way too many people are negative” rallies, but that doesn’t mean the trend has changed. In fact, take a look at this post by Josh in which he talks about MKM Partners latest technical update. The 10 month MAVG is key, we all watch it, and it continues to roll over. This is one of the best “trend” indicators we have and it is NOT signaling the all clear so tread carefully at these levels. Anyway, well done to Leo and Spotlight and all the other winners last night. Thank you for bringing your wonderful craft into our world. 

After the open everything was up or as we like to call it “month end”. Gold, Stocks, Bonds, Oil, you name it and it was higher this morning. That being said, it was super mega ultra quiet. When I looked at my trusty volume monitor it showed us about 20% below a normal day’s pace. Blah, guess everyone was worn out from another insane month of volatility. Ok, we’re gonna need to ramble to fill this space. How exactly did Chris Rock raise $65k in cookie sales last night? I mean even if a box was $100 he’d need to 650 of them and that’s a lot of Do-si-Dos. Maybe there was a few blank check pledges and a “get me those Peanut Butter Patties by Tractor Trailer next week” type things. Super Tuesday is tomorrow, at least we’ll get an entire day of “this person is good, this person is bad, this person should drop out” even though nothing will change no matter who gets elected. Politics…an even bigger waste of time than the “Best original sound editing design” award. Winners were SIG, CNX, OKE, CF, NFX, and QRVO. Losers were VRX, ENDP, SWN, MNK, RHT, and MNST. Hey you know what I saw this weekend? You won’t believe this….honestly I was stunned. Someone using a Blackberry…WHOA. And the crazy part? He works at my firm! Our restaurant analyst, David Tarantino, who by the way does a spectacular job for our clients, can’t let go of his little chiclet keyboard waffle! Time to pour over the last conference call from BBRY, see if he got a mention. “Monthly Active Users were steady last quarter at one”

The final hour was nothing but a selloff. Above 1,950 this market is a screaming sell. Has been, will be, still is, don’t chase the upside please. VRX had a horrible afternoon after it announced a fresh SEC inquiry. Look, this may not be a widely held stock like AAPL but it will definitely weigh on overall market sentiment. It’s a big company held by a lot of large institutions, you can’t minimize the knock-on effects. We closed on the lows, 1,932, down 75 bps as even typical month end price action couldn’t save us. Ok, so February ends with a small monthly loss but that’s WAY better than the down 6% we saw at the half way point. The market is in a downtrend, it may not be severe like in a crisis but it is lower. These bounces you see are driven by sentiment not fundamentals so don’t chase your tail all over the place. Hopefully March brings us a warm spring and better economic data because we desperately need both to start feeling better about ourselves. The tone is still very morose out here, SPX 1,950 did nothing to change that. Did I mention it’s leap day? Anyone out there have a birthday on Leap Day? How do you decide what day to celebrate it during a normal year?   

Final Score:  Dow -74bps, S&P500 -81bps, Nasdaq -71bps, Rus2k -32bps.        

News Highlights: 

Since it’s almost the end of ski season we are going to need one last look at the absolute best sport ever. This guy makes insane videos, you GOTTA watch the whole thing.

https://www.youtube.com/watch?v=HhabgvIIXik&feature=youtu.be

Have a good night.

Swings in Sentiment

Equities start the day higher on one of the lamest oil headlines I’ve ever seen. After we spent yesterday basking in the warm glow of a day off I was hoping we’d start the week with some kind of good news. Instead we got this “4 oil producers agree to output freeze at current record levels”. Oh is that right? You guys are going to just keep producing huh? Isn’t this like saying “I’m gonna go ahead and freeze my current cupcake intakes at these levels in an effort to stop this downward spiral my weight is in”. You know how long Crude remained green today? About a nano second. Guys, I know you don’t wanna take advice from a gray Midwest equity trader but if you plan on addressing this sea of oil we are swimming in, locking your production right here is about as useful as a Kanye West tweet (he’s $58mm in debt? Doesn’t his wife make like $5mm a day on her stupid app?). So the macro slog remains the same: worries about growth and European banks which slams credit which slams equities which slams high PE stocks which slams sentiment which slams everyone’s P/L. Rinse and Repeat. We aren’t getting out of this until the world reprices itself for a new level of economic activity. You may want the pain to stop and I may want the pain to stop but it won’t until the towel is sailing across the mat with Burgess Meredith in the corner yelling “NOOOOOOO”. Did you enjoy your day off? I sure did, is there a better holiday than Presidents Day? Our kids have school while we lounge around! God Bless you Washington and Lincoln, you guys rock. 

After the open the day turned into a real slog. Honestly it felt like a quasi-holiday as volumes ran 10% below 2016’s average and interest in trading seemed scarce. Empire Manufacturing turned in its 6th straight negative reading so that didn’t help matters at all. The NAHB Housing index also missed but this one is still near its highs so meh. Two big movers of note! ADT rose 47% after agreeing to be acquired by Apollo and CYH fell 22% after announcing a surprise quarterly loss. CYH…ugh…how are we supposed to think about something like this? They basically said “there were less sick people” which, you know, is usually a good thing. I mean this is like same store sales falling yet in this instance it was less people who were hurt / sick / injured / potentially dying. Yea…hard to root against that my friends. What else…CHK FCX and WMB all rose big because when these dog house stocks rally they rally HARD.  Aint no one messing around in CHK for a 1% gain…no no…they in there for the 17% random rips. GOGO fell 27% after American Airlines said “it’s not me, it’s definitely you”. Airplane Wifi, this is one of my ALL TIME favorite 1st world problems. When someone says “my internet stinks at 35k feet” I can’t help but get irrationally mad. Are you freaking kidding me? You are in metal tube hurtling the air at 450mph and you are bummed that Youtube stutters? Come on MAN. Banks did ok today so that was one less worry for us. Two things I check when I walk in the door: the price of oil and where DB is trading in Germany, you can pretty much call the day with those two pieces of information. We rose throughout the morning because sentiment is awful right now and “less bad news” is basically all we need to see a big gain. We’ll see what happens above 1,900 though because I can’t imagine there’s legs above there.           

The afternoon brought nothing new as we went sideways for the last 3 hours of the session. We closed at 1,894, up 1.6% but there really wasn’t any meaningful change to the narrative. We are going to continue to see days like today because equity bounces will be both swift and meaty. Earnings are over (check my link in the news highlights) and the main takeaway will be “blah, those didn’t do anything to help the macro picture”. The market will continue to be dominated by swings in sentiment so don’t walk away from big rallies thinking all is clear. The upside is absolutely capped, there is no path back to 2,000 that I can see. And again, feel free to quote me on that, I HOPE I’m wrong.

Final Score:   Dow +139bps, S&P500 +165bps, Nasdaq +227bps, Rus2k +245bps.  

News Highlights: 

We’re going to end tonight with a London Tube fail.   It’s an oldie but goodie and I’ve always wondered what it would be like to attempt this because it looks like fun.   Actually maybe not… 

https://www.youtube.com/watch?v=tZMaEPPw1Zs

Have a good night.

 

It's A Bear Market

Equities start the day higher on one of the lamest oil headlines I’ve ever seen. After we spent yesterday basking in the warm glow of a day off I was hoping we’d start the week with some kind of good news. Instead we got this “4 oil producers agree to output freeze at current record levels”. Oh is that right? You guys are going to just keep producing huh? Isn’t this like saying “I’m gonna go ahead and freeze my current cupcake intakes at these levels in an effort to stop this downward spiral my weight is in”. You know how long Crude remained green today? About a nano second. Guys, I know you don’t wanna take advice from a gray Midwest equity trader but if you plan on addressing this sea of oil we are swimming in, locking your production right here is about as useful as a Kanye West tweet (he’s $58mm in debt? Doesn’t his wife make like $5mm a day on her stupid app?). So the macro slog remains the same: worries about growth and European banks which slams credit which slams equities which slams high PE stocks which slams sentiment which slams everyone’s P/L. Rinse and Repeat. We aren’t getting out of this until the world reprices itself for a new level of economic activity. You may want the pain to stop and I may want the pain to stop but it won’t until the towel is sailing across the mat with Burgess Meredith in the corner yelling “NOOOOOOO”. Did you enjoy your day off? I sure did, is there a better holiday than Presidents Day? Our kids have school while we lounge around! God Bless you Washington and Lincoln, you guys rock. 

After the open the day turned into a real slog. Honestly it felt like a quasi-holiday as volumes ran 10% below 2016’s average and interest in trading seemed scarce. Empire Manufacturing turned in its 6th straight negative reading so that didn’t help matters at all. The NAHB Housing index also missed but this one is still near its highs so meh. Two big movers of note! ADT rose 47% after agreeing to be acquired by Apollo and CYH fell 22% after announcing a surprise quarterly loss. CYH…ugh…how are we supposed to think about something like this? They basically said “there were less sick people” which, you know, is usually a good thing. I mean this is like same store sales falling yet in this instance it was less people who were hurt / sick / injured / potentially dying. Yea…hard to root against that my friends. What else…CHK FCX and WMB all rose big because when these dog house stocks rally they rally HARD.  Aint no one messing around in CHK for a 1% gain…no no…they in there for the 17% random rips. GOGO fell 27% after American Airlines said “it’s not me, it’s definitely you”. Airplane Wifi, this is one of my ALL TIME favorite 1st world problems. When someone says “my internet stinks at 35k feet” I can’t help but get irrationally mad. Are you freaking kidding me? You are in metal tube hurtling the air at 450mph and you are bummed that Youtube stutters? Come on MAN. Banks did ok today so that was one less worry for us. Two things I check when I walk in the door: the price of oil and where DB is trading in Germany, you can pretty much call the day with those two pieces of information. We rose throughout the morning because sentiment is awful right now and “less bad news” is basically all we need to see a big gain. We’ll see what happens above 1,900 though because I can’t imagine there’s legs above there.           

The afternoon brought nothing new as we went sideways for the last 3 hours of the session. We closed at 1,894, up 1.6% but there really wasn’t any meaningful change to the narrative. We are going to continue to see days like today because equity bounces will be both swift and meaty. Earnings are over (check my link in the news highlights) and the main takeaway will be “blah, those didn’t do anything to help the macro picture”. The market will continue to be dominated by swings in sentiment so don’t walk away from big rallies thinking all is clear. The upside is absolutely capped, there is no path back to 2,000 that I can see. And again, feel free to quote me on that, I HOPE I’m wrong.

Final Score:   Dow +139bps, S&P500 +165bps, Nasdaq +227bps, Rus2k +245bps.  

News Highlights: 

We’re going to end tonight with a London Tube fail.   It’s an oldie but goodie and I’ve always wondered what it would be like to attempt this because it looks like fun.   Actually maybe not… 

https://www.youtube.com/watch?v=tZMaEPPw1Zs

Have a good night.

February Finally Arrives

Equities start the day low as February finally arrives! I never been happier to see a month that includes snow, freezing temps, a lack of meaningful sports, an extra workday, and a Super bowl that I predicted! BOOM, call me butter because I’m on a roll! I made 4 predictions in my Jan 5 recap and one of them was “The Carolina Panthers will win the super bowl over the Denver Broncos and no one will watch” which, unfortunately, happened to draw the ire of my friends down south. Ok, I’m sorry guys, people will watch it and Cam Newton will win it but I still think ratings will be slightly lower. Alright, now that my back patting is out of the way, what’s the best way to sum up January? I think this will do nicely, and even a big rally on the final day did absolutely nothing to dull the pain. We are stuck my friends, stuck in an unforgiving market that prays only to the God of Crude Oil. This whole nightmare scenario will ONLY end when we see a day where Crude is down big and stocks are up big. That’s basically all we are looking for at this point (besides economic data that doesn’t crater and a Saturday spent doing this). I don’t know, I spent a lot of January soul searching because my views on the market appeared wrong. I’ve always been in the “we are in a slow growth world, that is not a bubble, in which markets do just o.k. and investors can find places to park their money in that make sense”. Yet I sat and watched small cap curtain makers in Utah drop 15% because Saudi Arabia refuses to cut oil production. Maybe this is a Bear market, maybe it’s time that I recognize a cyclical bear inside a secular bull. It probably won’t be the end of the world if we have a down year, it probably won’t be the end of the world if we clear out a bit of excess leverage, it probably won’t be the end of the world if valuations get reset, it probably won’t be the end of the world if Carolina wins their first superbowl and manages to do so by less than 6 pts.

After the open, it felt like the insane price action of January had been left on the trash heap of history. A whole bunch of sideways nothing as Crude traded down 6%. I will say, cheap oil didn’t crush the market today which might be a somewhat positive sign. Man, I can’t WAIT for Crude oil to be more expensive that will definitely solve all our problems. We did trade lower though because that’s what happens after you rip 2% the day before. TWTR was a big winner up 6%!  How dem apples? Throw enough “such and such is looking to buy them” at the wall and eventually something will stick! What else: CMG managed a 4% gain after saying its e-coli thing is winding down. Just in time too, man I can’t eat another one of those gordita crunch wrap from T Bell, those puppies are turning my guts into Mount Vesuvius. Other winners were SYY, CNX, STX, ADS, and NFLX. Losers were all energy stocks again so throw a dart at one of them because it was probably down 3%+. The Iowa Caucuses are tonight, are you ready for 8 months of Presidential news chatter followed by 4 years of people saying “impeach!” no matter who wins? Ahhh politics, I hate you more than stale milk duds. Can you tell it was kind of slow today?  It was, which was bizarre. Feels like everyone ran a Triathlon in January and now they’re nursing a blister the size of Texas. By lunch we were off the lows trading around 1,930 in the S&P (down around 0.3%).

The final few hours saw us move into the green as Vice Chairman of the Fed Stanley Fischer said “yea…things seem a bit dicey…we’re not sure about our next move”. Oh boy we’ll take it! Crude ended the day down about 6% yet stocks closed flat…is that the disconnect we’ve been waiting for? I sure hope so, it’s definitely a step in the right direction! I think we grind a bit higher but we are bound to run into massive selling so I don’t think this is over just yet. Good day though, lots to like about late price action. 

Final Score:  Dow -10bps, S&P500 -4bps, Nasdaq +14bps, Rus2k -29bps.    

News Highlights:

I have a great link to end on tonight so give it a chance! It’s a bit long but I swear you will marvel at how strong these athletes are. I cannot imagine how hard some of these moves are!

https://www.youtube.com/watch?v=oYgDT9fSiAs

Have a good night.

Stocks Have Risk

Equities start the day higher as we get another one of these “but it has to bounce right?” type of moves. You know what the most frustrating part of these selloffs is? What really grinds my gears? No, not the whole “losing money” thing, come on, I’m talking about the phone calls from family and friends, the one’s where they call or text you saying “what in the #$#$@#$ did you do to the market!” I love those so much, actually no I don’t love them, I detest them and not for the reason you think. Yes it stinks when someone you know loses money and they are frustrated over it but what people fail to grasp is this whole “equity risk premium” thing. It’s a fairly complicated term for the average person to understand but in the end you earn excess returns over, you know, cash, because STOCKS HAVE RISK. This little downdraft we are living thru, along with every other one in the history of markets, is how you earn that premium. Sitting here suffering at the hands of oil sellers and fidgety stock market participants is how $1 grows so much over your life. Yet the pain of watching your account slowly bleed overcomes people so much that they ignore that fact and call the one person they know in this industry to, well, complain about it. Yet when their account goes up 213% since 2009 they are nowhere to be found! Where’s the love? Where’s my free drinks when the S&P rises 28% in a year!! I don’t know, I’m partially venting here given the insanity lately but I have no other outlet than you fine people. By the way, have you ever seen more recession calls due to an 8% drop in the S&P than you have in the past two weeks?  Holy cow, not only is there a new one every single day but even level headed people have started to turn to the darkside. Take a look at this chart from MS noting big drops in SPX without a recession. Couldn’t this just be a garden variety correction?

After the open we saw horrible, gut wrenching price action…again. Same story different day.  An overnight bounce gets chipped away at all day until it finally relents under overwhelming selling pressure. Oil falls, then the Russell 2000 falls, then the Transports fall, then Credit spreads widen, then the S&P gives up the ghost. I wish I had better news for you but the entire first half of the day was a goat rodeo. What fell the most? Names like TWTR, SQ, GPRO, YELP, all the hot growthy tech stuff  is actually acting WORSE than energy names. Speaking of energy names we got more fresh lows there than temps in the Midwest over the past few days. CHK, ESV, COP, NFX, WLL, MRO, NBL heck I could just list the entire sector, all act puke-tastic.  Winners were VIAB, NFLX, M (einhorn likes it), HCN, and CPB.  So yea, a bit of media, a retailer with hedge fund backing, a REIT, and chicken noodle soup. Speaking of winners, our fantastic sales team in London did a little screen for what names are making RELATIVE highs compared to the S&P. Here’s a few of them for you to ponder: JNJ, T, KO, MCD, SBUX, KMB, ADBE, ACN, LMT. If you are looking for “leadership” or “what is working as the overall index shivers” those are a few of the names. By lunch we were headed lower faster than a German U Boat during the Battle of the Atlantic. DIVE DIVE  WHOOP WHOOP

The afternoon saw retest of the 1865 level and a hold! If there’s any silver lining to be found here it’s the fact that we’ve retested the August lows twice now and held both times! What would we need for the market to stabilize? I would think crude oil would have to trade sideways for about a WEEK or more plus transports and credit would have to show signs of stabilization.    Earnings, for now, don’t seem to matter because all we do is trade off the price of crude on an intraday basis. That has to break down, that correlation has to end and then MAYBE we can put the pieces back together.  Until then all you need is a Cl1 quote, that’s it. I want to wrap up today’s recap with a deep thought, something you will probably disagree with but here goes:   Hotel California is one of the most overrated songs ever to grace the airwaves. Glenn Frey, the world will miss you, you were a generational talent, but I hate that song so much. Overplayed doesn’t even begin to describe it, please just make it end.  Hotel California and Brown Eyed Girl need to go away forever (sorry Van M)   

Final Score:   Dow +18bps, S&P500 +5bps, Nasdq -26bps, Rus2k -128bps. 

News Highlights:

Tonight we’ll end with a teenager doing teenage things.  Like being dumb…for no reason at all…

https://www.youtube.com/watch?v=DUt3Zxb1WVY&feature=youtu.be 

Have a good night.

Depression Begins To Spread Its Wings

Equities start the day higher as depression begins to spread its wings. I don’t know whether it’s a January effect or a cold thing or the fact that the entire world is now bearish but the start of this year feels particularly grim. I can’t recall any of the past few years starting off with so many people writing eulogies for the market.   The latest one comes from Goldman and while it’s not necessarily a “the top is in” call it does have a very “this whole thing is winding down” feel to it. I have to give them credit though, that piece is really good and you should go read it right now (they tweeted out the link this morning). Here’s the thing, over the past say 4-5 years we’ve seen all kinds of people scream “top” and “bubble” and “sham” and “centrally planned” and “fake” and “what a joke this all is” primarily because 1) they are perma bears and 2) they just flat out missed it. Now those people are easy to ignore because they always scream the same thing (my news highlights last night showed how Marc Faber sings the same tune over and over). This time is different though, 2016 has brought out some VERY smart people who are noticing twilight settling over the valley. Is this particular stretch of bull market over? Probably, a lot would have to go right to continue this epic run and those pieces just aren’t falling into place. Is the economy late cycle? For sure, I doubt anyone would argue against that. Should we sell and go all cash and cheer for the market to punish everyone left in it? No, of course not. Markets go up and down, you get good times and bad, it happens, that’s why the equity risk premium exists. Maybe a smaller allocation to equities makes sense going forward, maybe it doesn’t, no one will know until the dust settles. One thing we can say for certain is that the tone of macro commentary has changed significantly, you would be hard pressed to find optimism about the next 12-24 months both in the Global Economy and in the market. The contrarian in my adores that fact but the rest of me can’t help but notice a LOT of non perma-bears turning out the lights. Sigh. 

After the open we saw ANOTHER session where early morning highs gave way to afternoon pain. Now if you’ve read along with me all these years you know I’m a big fan of “price action”. Now price action is a nebulous term, it has no real agreed up on definition and major decisions aren’t usually made on how the market “feels”.   But it does provide us a glimpse at psychology and psychology is a big part of what moves the market. We started the day higher for the same reason as yesterday, because we are oversold. In a bull market once the tape gets horribly oversold dip buyers rush in and save the day….we’ve seen it for years.  Lately we are seeing the exact opposite, any rally is being used as a chance to lighten up and that tells me a lot. Crude was green most of the morning: didn’t matter. Over the past month Crude and stocks have moved in tandem (credit @ukarlewitz) so we should’ve seen a rally and we didn’t.  Bad…bad....bad. Price action has turned horrendously bad my friends. CSX reported last night and yes, they beat EPS and missed revs, get used to hearing that. What troubled me the most about their conference call? This statement:  CSX Corp. executives said on Wednesday that current pressures on rail cargo volumes are at levels not seen outside a recession.  Ugh, just kill me now. Our fantastic analyst Ben Hartford has this chart in his 2016 outlook.  To quote Scooby Doo:  ruh roh.   Remember those comments from FAST last quarter?   Starting to look VERY prescient.   No one wants to hear both FAST and CSX say “yep, haven’t seen this outside a recession peeps.”   But now they basically have…so yea.    Wanna know what the big winner was today?  CHIPOTLE! Yea, take that e-coli. 6% like it was nothing. Other winners MET, SWN, ED, and SRE. Losers were WMB, CHK, BWA, and TSO. Did you know WMB was a $40B market cap company…. IN JUNE OF 2015.  Now? $10B. I mean does this not remind everyone of banks in 2007-2009? I used to sit at my desk and marvel at the fact that C and BAC could go down every single day and then go down some more.  Never thought I’d see it again so soon.     

The rest of the day was abject misery covered in vomit. Down and to the right for every agonizing tick until we finally closed the day at 1,890, down 2.2%. So the past few days I’ve talked a lot about sentiment because it’s important. Sentiment can move a market more than anything I’ve ever seen and that includes random headlines and horrible earnings. Let’s finish tonight with this thought: fear is back. Fear has become the de facto stance right now and not the fear of missing it. The past few years have seen vicious rallies because dip buyers feared missing the bottom. That is no longer the case, “fear of losses” has taken over. There is no one around to prop this thing up, it will not rip back to 2,100. Dip buyers are gone..poof. The tone has changed and we could be in for a lot of very choppy price action. “The easy money has been made” is a terrible statement, stupid, almost insulting, but I can’t think of a better way to describe the big picture. Remember how the market used to feel bulletproof? That someone would always ride to the rescue when things seemed bleak? Those days are over, done, finished. 2013 feels like a myth right now. A stock market rose 28% in a 12 month period?  Come on.

Final Score:  Dow -221bps, S&P500 -250bps, Nasdaq -341bps, Rus2k -330bps. 

News Highlights: 

To miserable for news highlights today so we’ll have to end on a Fail video.  Basically sums this whole thing up anyway (that rock jump at 4:46 is insane).

https://www.youtube.com/watch?v=WImgnGXwpjU 

Have a good night.

2015 Recap Season

Equities start the day higher as I kick off this 2015 Recap season with a win. Wait, that was the Packers, on a ridiculous “no catch” call. Come on, in what world is that not considered a catch? Did Jerry Jones run out of “hey we need the right call here hint hint” passes from the league? Anyway, I was waiting for the first week of the year to go by before writing a recap so I could get clarity on the market. Don’t you just love that phrase in our industry? “Im not making a call without further clarity on the situation.” Just awesome, as if such a thing exists that would make hard situations easier to analyze. Speaking of hard situations, I might have to close my backyard oil exploration company because gas in my neighborhood is cheaper than a snickers bar. $1.95 to fill up my suburban grocery wagon? What year is it? Check out what the drop in oil is projected to do to the S&P500: "Profit is forecast to have grown 2 percent in the final three months of 2014 and increase 2.8 percent for the current quarter, down from analysts’ October estimates of 8.1 percent and 9.2 percent, respectively. Without energy companies, profit gains would have been 4.7 percent and 7.8 percent..." The market flat out doesn’t know what to do / think about falling oil prices. The only thing with more diametrically opposing views than Bryant’s catch is whether $40 oil is good or bad for stocks. Is it deflation? A precursor to slowing global growth? Yes. Is it amazing for consumers/global economies?  Yes. Should it worry you as a stock market investor? Yes. Should you rejoice in lower energy costs? Yes. Did Tony Romo look like a total wuss with that balaclava on?  Yes.

After the open stocks fell as Crude oil dropped 5%, or as most energy traders call it, Monday. I can’t even remember the last day Crude oil rose, feels like an eternity. Have you ever wondered what a chart of oil would look like if we invented a car that got 286 miles per gallon? I’m guessing this, yet that car doesn’t actually exist. Commodity forecasting….good luck!! No economic data today and nothing meaningful out of Europe so all we had to go on was more energy uncertainty. Two stock meltdowns today worth mentioning: SNDK and TIF. SNDK fell 13% because I can get an 85 TB hard drive for the price of a chicken mcnugget and TIF slumped 13% because two months’ salary? Come on…what ever happened to true love ? (they were both pre-announcements) Winners were BMY, CELG, FTR, WIN, and LULU which soared 8% after I bought two pair of $35 underwear there.  No joke, they sell $35 men’s underwear, I’m in the wrong business. By lunch we sat on 2,030 down 0.7%.

In the afternoon we watched US CENTCOM’s twitter account get hacked by some kind of cyber caliphate. ISIS has computer nerds too?  What good are F-22s gonna do against that? How the heck can US CENTCOM get their twitter account hacked? Do they use two factor authorization on that thing because my son does on his level 89 World of Warcraft wizard and he’s never been hacked. Sigh. I mean come on man, do I need to start a cyber-security business to go along with men’s underwear? Anyway, the market closed right where we were at lunch, 2,028, down 0.8%. Earnings kick off soon and I’m hopeful that some good old fashioned corporate data kicks the market from its endless fascination with a single commodity because it’s dire at this point. There are two things that can instantly lift this market: QE out of Europe and a whole slew of earnings beats. Let’s hope we get both soon. 

Final Score:  Dow -54bps, S&P500 -81bps, Nasdaq -103bps,  Rus2k -47bps.      

News highlights:

We’ll end tonight’s recap with a guy jumping thru windows.  And ladders.  And other tiny spaces.   Truly amazing stuff (the one at 2:28 is ridiculous). 

https://www.youtube.com/watch?v=0hR7RyDLCs8&a

Have a good night.

The Wheels Seem To Be Coming Off

Equities start the day lower as the wheels seem to be coming off. You know everything seemed to be going fine lately right?   We were chugging along, showing off our slick stock picking prowess and then 2016 hit and BAM, this happened. It’s been awhile since our last update so let’s spend some time catching up shall we? (I missed you guys) 2015 ended up being the great year of nothing, a forgettable 12 months where the market went nowhere and the only people who made money were either dividend clippers or fans of the FANG stocks. Booo, ain’t nobody got time for a 1.3% year, don’t they know we have spiraling college payments ahead of us? So what about 2016, shouldn’t we be looking forward right now? Yep, but Wall St strategist seem to be lukewarm about our prospectsTen Wall Street strategists tracked by research firm Birinyi Associates expect the S&P 500, on average, to finish the year at 2220. That is good for about an 8% gain. 8%?   WHHATTT? Since when does the ever bullish Wall St hive mind predict single digit returns? What is this world coming to? To make matters worse, my favorite prognosticator Byron Wien has gone full blow bear in his 10 surprises for 2016! Dogs and Cats my friends, the horrible end to 2015 has bled into the new year and now everyone is predicting doom and gloom! But isn’t that a good thing? Don’t we want people to predict the end of this bull market?  In some ways yes but in other ways no because they could be right. One thing’s for sure, as long as China has a raging forest fire in their stock market we aren’t going anywhere anytime soon. What a mess over there, when you ban selling stocks you know things have gone off the rails. Anyway, let’s see what happened today and then I’ll give you my top 3 predictions for 2016 to end the recap.

After the open we got a heck of lot of sideways price action with no discernible intraday trend. Crude higher? Buy stocks. Crude lower? Sell stocks. Europe green? US green. All kinds of random movement because people are still shell-shocked from yesterday. Speaking of yesterday, should we care that the first session of the year was so bad? No, not at all: “Since 1928 the S&P 500 has lost more than 1% on the first trading day of the new year 14 other times, and after such occurrences, the index typically rallied the rest of January and the rest of the year, rising an average 3.3% and 2.9%, respectively, according to Bespoke Investment Group.” See? Anyone can make stats work for them it’s magic!! Ok, what were the movers on this fine Tuesday?  FIT came out with some kind of Casio calculator watch remake and promptly got smoked. Well done guys. TWTR is debating upping their character limit to 10,000 words and promptly got smoked. Well done guys. Energy stocks opened for trading and promptly got smoked. Well done guys. On the flip side FSLR rallied 8% because Goldman likes their prospects, HAR gained 3% because they bought a cyber security company and everyone loves that phrase, and MU posted a 2.5% win because it has been absolutely decimated for a year straight. You know what chart flies under the radar right now? Equity market volumes, it is entirely possible they bottomed in 2014 (I use the 200day MAVG of volume in that chart). Last year featured the first YoY rise in number of shares / ETFs traded since the black plague rolled thru Europe. I guess that’s a somewhat good sign for the overall equity business? Yes, no, maybe? Anyway, by lunch we were trading just shy of unchanged in a relatively meaningless session.

The last few hours brought nothing new and we closed slightly higher on what ended up being a rather forgettable day (why do I always end up writing on flat days and not the big one’s?  I’m an idiot). Ok let’s finish up with my top 3 “take them to the bank” predictions for 2016. As always these are for entertainment purposes only so don’t go over to Ladbrokes and bet the ranch. 1) The Carolina Panthers will win the super bowl over the Denver Broncos and no one will watch it. Seriously who wants to see these two teams face off? ugh. 2) Marco Rubio will win the GOP nomination and lose to Hillary Clinton. Trump will fade when it comes to the ground game, he just doesn’t the necessary troops to slog thru all the primaries. 3) The S&P will close at 2,120 (roughly 3.5% gain). I think we get one last up year before this cycle finally sputters to an end. I’m basing that on $125 in earnings and roughly a 17 multiple. Plus everyone is starting to turn bearish so I want to be on the other side of this “the bull market is ending in 2016” trade. Bonus prediction!! 4) ESPN will go over the top. Disney, realizing that declining subscribers are holding back its valuation will begin to offer ESPN a la carte in a skinny bundle and that will mark the end of the “1000 channel” cable era.  Our kids will laugh at the fact that we paid $100 a month for stuff we never watched. Anyway, Happy New Year my friends, let’s get this puppy going right!  

Final Score:   Dow +6bps, S&P500 +20bps, Nasdaq -24bps, Rus2k +16bps

News Highlights:

Tonight we are going to end with one of the luckiest guys on the planet. Watch this car crash (your jaw will drop) and look how close he came to the Perly gates.

https://youtu.be/S5NWcdq4Wf4?t=69 

Have a good night.

D-Day Finally Arrives

Equities start the day higher as D-Day finally arrives. Yellen and her crew are loaded up in their Higgins boat armed with higher rates and promises of labor market strength ready to assault Omaha beach. So….did they hike? Didn’t they? Stay tuned because I can’t cut to the big news this early in my recap otherwise you’d hit the funny link and promptly delete this (like 99% of people do anyway). Decent rally yesterday but most of it was position squaring / oversold bouncing so let’s not break out the party favors just yet. Has anyone been successful in avoiding spoilers about this new Star Wars movie? I’ve been pretty good about dodging the internet lately but I’m wondering…will there ever be a truly “out of the blue” surprise ever again? Imagine The Usual Suspects coming out in 2015, “he’s keyser soyze” would be spoiled in 1.2 microseconds. We live in a world where it’s basically impossible to avoid TWTR / Text Messages / idiot friends / random Bloomberg news headlines / email which bums me out. Where has the magic gone? We are to interconnected, gimme some space yo! Alright, I filled enough of this first paragraph with random musings, let’s move on because you came here for the big Fed news!!

Ok, I can’t wait any longer so let’s get to it. Today featured the biggest tiny rate increase in the history of capital markets (credit @qz). Lemme set the stage: we had a small rally going in the morning but it faded as the day went on. Why? Because big moves can’t stand up to the uncertainty of a Fed decision so as the announcement hit we were basically unchanged. At 2pm ET the Fed symbolically ended the Financial Crisis and raised the Fed Funds rate by 25bps (unanimous decision). Today….I consider myself….the luckiest man….on the face of the Earth…because I saw a Central Bank move off the zero bound. I mean we have Switzerland and Germany and most of Europe WAY below the zero bound yet here in the US our Fed is acknowledging that the economy is resilient, that a global financial catastrophe won’t keep us down forever. Momentous? Sure, from a historical point of view it definitely is. Will this change your investing life? Probably not. Technically our central bank is still VERY accommodative so it’s not like the big picture has shifted dramatically. And you know what else? Interest rate cycles take forever to play out so it’s not like you need to make a decision about your money by the end of the week. I’ll tell you what continues to be negative though, my interest in talking about rates / rate decisions. Ugh, enough already jeez. So what moved? Would you believe Utilities led all gainers? Man, who had that one in their playbook? I guess it is one of the most beaten down sectors in 2015, I assume everyone was looking for a sector that might outperform on the way up.   What else did well? FSLR, WHR, CVS, WYNN, HON. Losers were STILL energy names like MRO, DVN, HAL, and BHI. Crude can’t get out of its own way, this thing is gonna be ugly for a long time (more crude sitting in inventories than winter coats in New York City) 

We closed on the highs of the day, 2,074, up 1.5% but I doubt we can attribute all of that to the Fed. We’ve been oversold for awhile and credit has finally calmed down a bit so that’s goosed us up. I think we take one last shot at 2,100 where we will finally close for the year (remember I said 2,103). Guess what’s about to happen people…the Prime Rate is about to go up! Anyone remember the last time that happened? I don’t, heck all I know about Prime is that it tastes good medium rare. Uncharted waters right now but would we have it any other way? No! Bring it on! Anyway, let me sum up by saying you just witnessed history. They will write about today’s decision in finance history books that you pay $210 for and read once (then sell back for $28). Will historians be kind to Janet? I think they will because it’s better to have small gradual rate hikes than one giant one because our central bank got behind the curve. We have, in Janet Yellen, an amazing chairwoman. She is doing us all proud so don’t believe the haters, they are the one’s that bemoan an expansion in its 78th month as “fake”.  Rock on everyone, USA USA USA.  

Final Score: Dow +128bps, S&P500 +145bps, Nasdaq +152bps, Rus2k +154bps. 

News Highlights:

I have three links tonight because they are all awesome and I want them to stand on their own.

The first is from Morgan Housel, 122 things everyone should know about investing.  It’s fantastic, read the whole thing, I’m serious.  I love #26

The second is Google’s Year in Search 2015.   Inspirational stuff

The last is a guy ski jumping off an old, decrepit ski jump in Michigan.  Oh and he’s jumping off it in regular skis while landing backward.  Wow.

Have a good night.

 

The Fed Awakens

Equities start the day higher as the Fed Awakens. If there’s anyone more excited about the Star Wars movie on Friday I’d love to meet ‘em. I guess it’s time to dust off that Chewbacca outfit because I wanna see some Stormtroopers get blown up. Speaking of blowing up, have we talked about High Yield yet? No? Ok let’s keep this one simple and quick: you are witnessing the final chapter of this “ZIRP / Reach for Yield” era. It’s coming to an end and you have a front row seat. High Yield is a class of debt that a lot of people own at the wrong price. You bought a bunch of unsecured debt yielding 5% on a company that may or may not actually have a working product? Sorry, you reached and it didn’t work out. You speculated on a CCC rated debt yielding 6% for a company in restructuring? It’s over, you probably lost. The Fed is about to engage in a rate tightening cycle and it was always going to catch someone offsides. This era of people chasing yield was always going to be messy when it finally unwound but you know what? This one isn’t systemic, banks aren’t going to be the big losers here (whew). They don’t hold big inventories in it, they don’t trade big size in it, and they don’t have short term borrowings that are pledged against it. Investors are the one’s who will bear the brunt of the losses and…well….isn’t that how it should be? People take risks, sometimes they work out and other times they don’t. The high yield unwind heralds the beginning of a new era and risk “re-pricing” comes along with it. As equity market participants we will be forced to watch the carnage (and feel some pain along the way) but this one isn’t going to nuke your SBUX or DIS holdings while you sit there shell-shocked. We aren’t looking at the next great financial crisis, the recipe is just not there. But…an era of risk “re-pricing” does affect equity market valuations so that WILL BE something we need to monitor. My friends you sit on the cusp of a new age…let’s hope it’s a friendly one.

After the open it felt like we were set up for one of those “waaaay too many people are bearish, rip their faces off” type of rally. All morning long we heard less and less about High Yield and more and more about “maybe things will be ok after tmmrw”. Here’s a question (one that Josh Brown asked too)….did we just live thru the Fed selloff? We fell from 2,100 down to 1,994, couldn’t we make the case that the hike was just priced in? Are there people who think a Fed move on Wednesday would be met with FURTHER downside? I don’t, but I also thought the hike was priced in weeks ago. I bet a lot of that move was pricing in the Fed, but also things like tax loss selling and those aforementioned debt worries.  Still, you have to feel better about where we are now vs on the highs going into tomorrow’s meeting. Ok, what moved today? Energy, by a lot. The S&P Energy sector was up 2.8% as names like ESV, RIG, HP, FTI, and DO roared higher. Other winners included AMG, ILMN, ENDP, and LUK. Losers were MMM, CNX, COG, and CHK proving that a rising tide doesn’t lift all boats, especially if they are filled with coal and leveraged balance sheets. By lunch we sat on 2,050, up 1.3%, in a full blown short covering rally.

The final hour saw us pull back slightly from the highs to close at 2,043, up just a shade over 1%. Ok, look, the market is running out of days here and you are about to witness something that hasn’t happened since 2006. Does that mean you should buy the open tomorrow? No, but you don’t need to sell it either. It looks like 2015 wants to land on unchanged so try and ignore all the noise until January.  High Yield implosions and energy weakness aren’t going to go away and I’m not trying to minimize their importance.  Credit leads (like Transports) so we will need to see that bizarre sector of the capital markets settle down before any meaningful rally can happen. Santa: all I want for Christmas is 2,100 on the S&P and Star Wars not to suck. Actually I’ll just take the second part please.   

Final Score:  Dow +90bps, S&P500 +106bps, Nasdaq +87bps, Rus2k +141bps.

News Highlights:

We’ll end tonight with the absolute worst martial arts demonstration ever.   I have a treasured client from Scotland, I hope she doesn’t see this.

https://www.youtube.com/watch?v=nQwYmpvFnlU&feature=youtu.be

Have a good night.

Greece Day and Night

Equities start the day higher as I attempt to go an entire recap without using the word crude. SH@#$#@. Well, so much for that, I had high hopes I’d be able to do it. Back in my day, when we used to walk to school and not have our parents call us an Uber and demand a text from the teacher when little Izzy arrived, we used to talk about Greece nonstop. That was the hot jam because when banks were quaking on the shores of the Aegean Sea you just had to sell your SBUX. I mean people will for sure stop buying coffee if a $85mm market cap bank filled with olive oil deposits goes under. Greece day and night, Greece would either rip the market 2% or hammer it for 3, it was fun times. Well I guess 5 years of one topic was enough (was it 5 or 6?  felt like a hundred) so we’ve moved on to obsessing about Texas Tea, black gold, petroleum distillate, fossil oils.  Never mind earnings or the Fed or sentiment or valuations, the price of dead dinosaur remnants rules with an iron fist. I’m chalking this whole thing up to the fact that there really isn’t anything else to talk about. The whole rate hike thing is priced in so that’s out.  It’s 52 degrees in the Midwest so I can’t whine about the weather.  The Government isn’t doing anything stupid like threatening default or not paying its bills so we got nothing there. Valuation and price multiple is esoteric and subject to the whims of sentiment so meh. What’s left? What can a market, whose sole purpose in life is to worry, worry about other than a black tarry substance that is used to make overpriced hunks of metal move? Speaking of worry, can you imagine what you are feeling the moment before they let go? ZERO chance I’d do this.     

After the open it felt like a holiday trading session for the first time all month. None of this swinging around in 1% increments because people think energy is the death of the bull market. No Fed speakers and no Economic data to mull over so let’s goto the leaderboard and make fun of someone. MW fell 17% after earnings and I bet they don’t like the way their stock looks, in fact I guarantee it. It appears the Jos A Bank “buy one suit get 14 free plus an iPhone and a TSLA” acquisition is like trying to digest a hippopotamus. This was a $70 stock in June, in fact you could say the chart of Mens Wearhouse looks a lot like oil! What else. HPY and GPN are circling each other, GPRO rose 11% because someone thinks they would look good on Cupertino’s campus, and CMG bounced 4% because nothing goes down in a straight line. Losers were FSLR, WYNN, ES, DOW, and CIEN. Speaking of the past, remember when FSLR used to go down literally every freaking day?   I think it was in 2011 yea?  It would be on the “biggest losers” list more than Charlie Brown and Fruitcake. So it was a quietish morning and by lunch we sat on 2,059 up 60 bps while crude hovered around $37 a barrel. I swear the first thing I do when I wake up now (other than push the slobbering dog off me) is check the price of oil. It’s weird how that stuff develops over time right? The first thing to check in the morning has gone from 1)  Greece to 2) AAPL to 3) Treasuries to 4) Greece to 5) Crude oil. There’s always that one thing…ALWAYS. Have I mentioned how awesome this Christmas Song is? So good. This one too…unmatched.

The afternoon featured a selloff from the highs and a close at 2,052, up 47bps. Why the selloff? Because there was really no reason for the rally, so it just kinda fell on itself like a wet soufflé. I assume, minus some kind of OPEC event, that tomorrow will be a snooze a thon. Only 14 trading days left this year and one of them is a half day. If we didn’t have this crude volatility I have no idea what would be moving the market right now because it’s the ONLY story we have at. And don’t tell me the Fed because that one is priced in. So yea, I guess until year end all you need to know is the price of a barrel of oil because that’s what’s moving your savings account around.    

Final Score:  Dow +47bps, S&P500 +23bps, Nasdaq +44bps, Rus2k +28bps

News Highlights:

I have two “action sports” links for you tonight!

The first is a crazy wingsuit video, haven’t had one of those in awhile

The second is one of those sweet GPRO videos where a guy rides a bike on a slack line. Well kinda like that…

Have a good night.

Crude Oil Preannounces Negatively

Equities start the day lower as Crude oil preannounces negatively. You know the one thing that constantly amazes me with respect to capital markets is just how poor they are at pricing things. Which seems odd right? I mean I thought the goal of free markets populated by every single capitalist minded person on the planet was to provide a real time look at supply/demand/sentiment/information and then determine a price of something intrinsic to its value. A year ago we thought Crude oil was worth $105 a barrel. Now it’s got as much value as a pile of chicken in a Chipotle fridge (I do love the place but is there anyone with worse PR right now? Horrendous). Now before you write me an email saying “the world changes” I want to say this…..can it really have changed THAT MUCH in the past 18 months? Crude fell from $145 to THIS VERY LEVEL ($38) back in 2008-2009. Remember that time frame?  The entire Western world was nearly brought to its knees but an earth shattering mispricing of levered risk. In the past year China slowed a bit and people worried about global deflation, certainly nothing like the screen shaking panic of Lehman failing and AIG writing unlimited insurance contracts on homes worth $200. Sure, supply has soared. Every person in North and South Dakota is pumping oil and OPEC refuses to budge on production. So yea, part of this decline makes sense, I get it. Supply is super high and demand is falling, yes, don’t think I’m being deliberately obtuse. I guess my whole point is that sentiment around oil seems to be the worst part of the past 6 months. Oil falls and it crushes a small cap company that sells wicker chairs to grandmas in Vermont. The infection is real and sometimes insane!  Did you hope for a quiet end to the year? I did, all I wanted to do was decorate my living room like this and listen to Michael Buble. Do you think Michael Buble lives in some remote hideaway 11 months out of the year and comes back JUST for December? I swear you never hear a thing he does until the last month of the year. gonna be an amazing annuity for him until he dies.

After the open it appeared yesterday’s panic selling would continue unabated. Crude fell thru $37 and anyone trying to dip buy looked like this (wait for it…I’m begging you). How about this pattern in the market lately? Start at 2,100, fall to unch on the year (2,055), bemoan our lives, prepare for doom. Rip back to 2,100 because hey, it’s oversold, feel great about Santa, cheer the market. Rinse and Repeat. Will anything break this see saw in December? Stay tuned to find out. Ok, so the morning was all about oil’s continued drop and whether companies like KMI will cut their dividend. I’ll admit this openly: I thought the low in oil was early this Fall. I thought we had finally reached the point where bad news was priced in and companies in the energy sector had been set for Armageddon. Well…wrong as wrong can be so I give on calling the bottom, I guess its $0. I mentioned 2008-2009 earlier and price action in energy names bears an uncanny resemblance to banks back then. They just fall and fall and fall, then fall some more and people puke and then they fall again. We sold off in the morning but a small bounce in Crude kept us from one of those “down all day in a straight line” events. Winners NRG, COG, ALXN, AZO, ILMN, and CELG.  Losers LUV, SPLS, HRB, KMI, FCX, AA, and MOS. You think these people captured this throw in one take or did they try it a few times? I bet one take.

The back 9 was sideways and the pain in Crude appeared to have less impact as the day wore on. We closed at 2,063, down 65bps, but that was well off the lows. I guess there is only so much “sell stocks because oil is weak” that the market can take. Well my friends / compatriots / compadres….so much for a quiet news less week, I woulda wagered my original R2D2 figure that Dec 7 to Dec 11 would be completely sideways and hoo boy would I have gotten smoked. Don’t people know it’s the end of the year? Who is winging around indices here with 17 days left and one week until a Fed rate hike? Hello? Are you out there? Let’s blame algos, everyone else seems to. Darn algos, take a break from all this 0 and 1 stuff will you?   

Final Score:  Dow -92bps, S&P500 -65bps, Nasdaq -7bps, Rus2k -42bps. 

News Highlights:

So it’s been unusually warm here in the Midwest. It’s pushed back the start of skiing season and that bums me out (amazing bonding experience with kids). For tonight’s ending link I found a skiing video with no snow! How cool is this? (especially the end)

http://tinyurl.com/gpuww8m

Have a good night.

Draghi’s Bazooka Blows Up

Equities start the day lower as Draghi’s Bazooka blows up. Super Mario cut their deposit rate by 10 bps, kept the volume of monthly QE purchases the same, and extended the program by 6 months but I guess the market was expecting him to buy Dax futures because it puked almost immediately. You know it’s rare to see someone like Draghi or Yellen whip out some kind of stimulus and have the market sell off on the news. I guess we truly are at the point where people expect “extraordinary measures” to include stuff like “I’m gonna hand out money to anyone who asks for it” or “if your debt is CCC rated and trading for .50 on the dollar I’ll buy it”. Bunch of spoiled brats up in this piece, my God. Yellen spoke yesterday (and today) and all but affirmed that a hike is on deck. Does tomorrow’s NFP report matter at all? No. Here let me repeat that….No.   It would have to be -500,000 followed by a press release from Tim Cook saying “Apple is laying off half of Silicon Valley” and THEN they might consider changing their minds.  It’s done. Done. Accept it. If the Fed doesn’t raise rates on Dec 16 I’ll eat a Ghost Pepper on Camera and post it as the final video. So why did the market fall 1% on Wednesday?   Because it was up 1% on Tuesday. I kid you not this is the most schizophrenic market I’ve seen since 2011 (remember that whole “Italy is going bust” thing?). No one knows how to embrace this rate hike, heck I bet 50% of us have never even SEEN a rate hike, so expect whippy price action until Dec 31. Crazy my friends, as crazy as this (honestly, what did they expect to happen there?  Come on hipsters, go kayak in a fountain or something).

After the open we could best describe price action with this picture. Nothing but wailing and gnashing of teeth over the ECB’s failure to provide a nuclear explosion of stimulus. I don’t know, I guess I’m tired of seeing markets rise and fall based on esoteric feelings around Central Bankers. I can’t wait to move on from this era if that ever happens.  Let’s do a quick macro summary of the day: 1) bonds destroyed (10yr yield largest single day move since 2013)  2) credit wider  3) dollar destroyed   4) stocks blasted  5) oil higher and 6) a rate hike all but accepted (have you ever seen a chart of the wu-xia shadow fed funds rate? Well now you have, and it’s positive for the first time since the crisis). Just your typical day in December when most people want to shop on AMZN and find addresses for that one person your wife won’t stop bugging you about for that stupid Christmas card that you don’t care about wait where was I going here? The intraday chart of the S&P looked like cranberry sales and by lunch we were looking at a down 1% tape. Winners were AVGO, KR, BRCM, NEM, DG, and GMCR.  Losers SWN, URBN, PVH, VRTX, and CHK. Remember when that Mclendon guy borrowed a bunch of money against CHK shares and bought art and gave onsite Botox treatments to Chesapeake employees? We might need to put “if CEO goes insanely levered against his own stock to buy random stuff it might be time to worry” in the trader handbook. 

The rest of the day was the same…down and to the right. We managed to close off the lows but not by much.  2,049, down 1.4%. You know what? I find it hard to believe that Draghi could crush the US stock market for 1.5% but I guess that’s what we’re going with. Actually let’s spin this wheel to see why the market was down today. “Someone had the number”?? Good enough. Maybe too many people are lined up for this Santa Claus rally and the market wants to punish them for being early? Yes? Is that possible? 2,055 is flat on the year, maybe it wants to hang around here until Yellen has her day. I still think we close around 2,100 because that’s where we’ve been drawn to all year.  Did we see a policy mistake today? The first from any major central bank?  Possible, but it would take forever and a day to find out so let’s not jump to that conclusion yet. We’re down 50 S&P points in two sessions, I’m betting tomorrow will be higher.

Final Score:  Dow -142bps, S&P500 -144bps, Nasdaq -167bps, Rus2k -177bps    

News Highlights: 

We’ll end tonight with a guy falling off a really high rock.  While climbing it….

https://www.youtube.com/watch?v=oVnAVcbMoSM

Have a good night.

December to Remember Begins

Equities start the day higher as a December to Remember begins! Who doesn’t love December? Everyone is in a good mood, the year is winding down, holiday decorations abound, and we get to guzzle eggnog, which is the best drink since someone mixed ginger beer with vodka. I love it, I’ll even take a bit of snow here and there without complaint. Did I miss anything over the past few weeks? The S&P was trading 2083 on Nov 18, it closed yesterday at 2080, so I guess no.  Everyone be trying to catch winners like this but it’s impossible when the market decides that sideways ain’t just for Merlot anymore (how about the grammar in that sentence? Thank God I don’t have an editor). Lots of stuff on tap this week (two Yellen speeches, the ECB, and a jobs report) but honestly, does anyone think the market will do anything before Dec 16? No freaking way pal, the first rate hike since the Cretaceous period is going to cast an endless pall on price action. Ok, since there are exactly 20 settlement days left in the year I’m going to predict the final S&P print on Dec 31 (I like to wait to the end to make my predictions, forget all this “year in advance” nonsense). You ready? 2,101.58. BOOM baby, specificity isn’t just for stats class my friends. The market has been drawn to 2,100 all year like a moth to a flame so I’m sticking with that level for my endgame.  Which is a shame really, all the narratives and worries and hand wringing may end up with a total return of 0-1%. ZZzzzzzzzzz. Anyway, bring on the final month of the year and 500 calorie drinks that I get sick of after one.  

After the open, there was an intense force trying to pull the market higher but a really awful ISM Manufacturing number kept us from going anywhere. 48.6…yikes…the worst ISM since 2009. Remember what Fastenal’s CEO said to us? “The industrial environment is in a recession,” so I guess this really shouldn’t be a surprise. Oberton is no dummie, that guy (and his company) are dialed in so you gotta pay attention when he speaks. Higher rates in two weeks? I mean why wouldn’t the Fed want to hike into a contractionary manufacturing sector, 1.8% GDP, and oil at $41. Seems like a no brainer to me.   Volumes were light again but that will be the case for the rest of the year, you can’t expect a ton of activity with mere weeks remaining. Ok what did well today: WYNN, LLY, CNX, AET, MU, and AAL.  Losers were CMI, CSRA, KMI, FMC, and CF. There was a distinct lack of individual stock news though. Cummins was the biggest loser simply because it caught a downgrade, I mean the stock has been falling for months now it’s not like anything new hit it.  Which, frankly, is a problem for the market too.   There just isn’t anything new and there won’t be for awhile. Test the highs, test the lows, grind sideways, close. You could copy paste that for last few weeks and it would be spot on. Stock valuations are just “average” right now so there’s no impetus in either direction. Do me a favor and go read this post, it’s really good explainer of where we are at the end of 2015. 

The rest of the day was actually higher! See…you doubters….all we needed for a 1% rally was a sub 50 ISM number! Let’s face it, none of this has to do with eco data or Yellen or the pace of rate hikes.  It’s just Santa time. Let’s goto the great Jeffrey Saut for today’s ending factoid: “in the last 20 years, the large and small caps have been positive from November 20th into year’s end 18 times. Of interest is that the Russell 2000 (small caps) has, on average, gained 5.6% over that timeframe, while the Russell 1000 (large caps) has rallied 3.4%. Also of note is that, over the past 27 years, from December 16th through year end, the S&P 500 (SPX/2080.41) has been up 24 times and down only three times.” Ho Ho Ho my friends, welcome to the best seasonal trade of the year. Giddy up Rudolph. 

Final score:  Dow +95bps, S&P500 +107bps, Nasdaq +93bps, Rus2k +50bps.  

News Highlights: 

We’ll end tonight with a reader submission! I get these from loyal readers every now and then and this one blew me away. Sweaty palms the whole time 

https://www.youtube.com/watch?v=lq-54gox6-k

Have a good night.

Is That Too Much To Ask For?

Equities start the day lower because they need to start the day lower. Up 10% in a month, almost without a breath, generally doesn’t lead to even higher outcomes. The market needs about a WEEK of sideways where people start to question whether it has run out of steam. Is that too much to ask for? I’m practically begging for the market to slow down here. Let’s move on from macro for a second because there’s a story near and dear to my heart that we need to talk about. ATVI, Activision Blizzard, agreed to purchase King Digital last night for the tidy sum of $5.9B. First let’s get the disclosures out of the way, Baird doesn’t cover KING and we rate ATVI a Buy. Ok, so, the good people who make awesome games like Hearthstone and Starcraft decided they needed mobile users. Ok, fine, I get it. 500mm mobile users is a lot. Moms and Dads and Kids like to crush candy in the bedrooms and on the toilet so this acquisition makes some sense. What did they pay? $5.9 billion US dollars. Wow, that’s a big sum. Let’s review a couple other of my favorite acquisitions to see how it compares (this is all for entertainment purposes, don’t write me emails about how it doesn’t compare). The good people in Burbank CA who wear mouse ears on their head paid $4B for Star Wars. They also paid $4B for Marvel back in the day but let’s stick with the recent stuff. The good people in Redmond WA paid $2.5B for Minecraft because literally every single kid in the world loves the game, plays it daily, and watches some dude named Stampylonghead on Youtube. It’s a phenomenon. Anyway, what’s my point here. Oh yea, here it is. What is this fascination with mobile users? Do companies think games on phones and iPads have unlimited shelf lives? I played candy crush for 4 minutes and moved on. I played Draw Something (a game Zynga paid like $200mm for) twice and deleted it. I think the one metric companies will regret in a few decades is this rush to grab mobile users who are as fickle as the weather in New England. Anyway, gaming is awesome, I love the stuff ATVI puts out but this one seems odd to me. Ok let’s move on.

After the open, ATVI spent about 10 minutes lower before hitting a new all-time high in rapid fashion. So as it pertains to my rant, everyone basically gave me the finger. I thought the market would have a bit of mediocre sideways price action today yet it turned out to be another buy the dip event. For Bears everyday must feel like this. Stocks spent the first hour wobbling but turned positive and made their way to 2,109 by lunch. Energy was the big winner folks…wanna know why? Of course you do, otherwise you wouldn’t be reading this. Actually does anyone read this or do they just click the final link. Ok, all 4 of you reading (including my boy Adrian) here is why: BECAUSE NO ONE OWNS THIS SECTOR. BAML puts out that awesome Fund Manager survey and for the past, I don’t know, 6 months people have been saying “I’m underweight Energy”. The only explanation for this sector’s movement is that it’s under owned. I mean oil is still at $47, it’s not like the commodity itself has had a huge rebound. Yet the stocks that make up the S&P Energy sector are up 20% from their lows. Pain Trade. Pain for those who should own more of it and don’t (which we have to assume is everyone?). In fact, you could argue the S&P is doing the exact same thing. Punish people for disbelieving in its bouncebackability. Punish everyone for bailing on Cyclicals. Punish everyone for bailing on Materials. Punish everyone who brought their kids candy into my office and made me sick. Does anyone actually like Baby Ruth? I get that it’s steeped in history but frankly it sucks. It’s probably the last chocolate candy I’d choose from a bowl. Snickers is like evolution of what Baby Ruth should’ve been. Winners: PXD, CHK, MOS, ATVI, DVN, FCX, heck anything energy should be on there. Losers FIS, ADM, MLM, DNB, HPE, and AIG.

The back half of the day saw a small selloff but we still closed in the green. 2,109, up 25bps. Guess what my friends, we are less than 1% from a new all-time high. Let’s list the current wall of worry shall we? 1) China slowdown. 2) cmdty bust 3) earnings recession 4) Fed rate hike 5) slowing revenues 6) manufacturing slump 7) emerging market slump 8) valuation 9) high yield trembling and 10) economy on verge of contraction. Aren’t those great? I love them all like children. Have any of them actually ended the bull market? No, but you have to love the fact that we fret over them daily. When there is no wall of worry that’s when you head for the hills. Did I mention auto sales are having their best 2 month stretch in 15 years? Guess what doesn’t precede a recession…rising auto sales (h/t @ukarlewitz).

Final Score: Dow +50bps, S&P500 +27bps, Nasdaq +35bps, Rus2k +46bps

News Highlights:

Have to skip these because I need to run so let’s hit up the big finish 

Tonight we have Jimmy Kimmels famous “parents tell their kids they ate the Halloween candy” skit. I love this thing, he’s done it for years and I laugh every time. 

Check it out. https://www.youtube.com/watch?v=N1pTZTHZF4E 

Have a good night.

You Gotta Love The Stock Market of 2015

Equities start the day flat because holy cow did you see that move yesterday? Up 1.6%?  Did someone discover a new way to calculate EBITDA? You gotta love the stock market of 2015 don’t you? If you are wrong way on the market all you have to do is wait a day, maybe two, and you’ll be proven right. Glorious. So what was the 1.6% ripper zipper all about? I guess further clarity around the timing of the first rate hike? FOMC minutes in the afternoon basically said “yea Dec feels good” and we were off to the races. If I ever….EVER…see another headline that says “stocks fall on rate hike fears” I’m gonna beat the writer up on Twitter. This rate hike is baked in, it’s known, the market has accepted it and moved on. Please…PLEASE don’t tell me it’s not priced in because it is. That being said let’s move on from rate hike talk because it’s getting tiresome. The biggest thing we need to worry about is positioning. With 30 days to go positioning becomes EVEYRTHING in the market ESPECIALLY since the tape is flatrish YTD (I’m gonna set a record for most capitalized words in a recap today.  BOOM). Think about this: if you manage billions benchmarked against the S&P, and it’s flat on Nov 20, even the slightest underweight/overweight can make or break the whole enchilada. Yesterday’s move felt like people trying not to miss the best, most reliable seasonal trade of the year. What if I told you that the S&P has been positive the last 30 trading days of the year for a remarkable 12 YEARS IN A ROW (h/t @ryandetrick). That’s crazy, so how people are positioned is going to matter a LOT. Look at the most recent BAML survey…you think those people want to see us go out on the highs while sitting on the sidelines? NO WAY!!!

After the open there were two stories of note and pretty much nothing else. UNH came out and said “we’re struggling with these Obamacare exchanges” and that pretty much whacked the entire healthcare sector. All the big insurers were hit for 4,5,6% as people wondered where they go from here. Since I know absolutely nothing about the exchanges and how these insurers fare inside of them I’m going to move on because shark infested waters ahoy. The other story was the Square IPO pricing below its range and how that might affect unicorn valuations. Ok, let’s put that in English for everyone playing at home. A highly valued San Fran startup sold shares to the public, at a level below its last private funding round, so now everyone is questioning whether random pictures that explode after 10 seconds and delivery services that bring Tide and salted cashews to your door for free are really worth billions of dollars.  What gets more “that’s a bubble” calls Silicon Valley or the S&P500? I think I’d make it pick’em, maybe Silicon Valley is a slight favorite. Marc Andreesen had this awesome quote on TWTR:  “1999: Tech IPOs pricing above filing range = clear sign of a bubble! 2015: Tech IPOs pricing below filing range = clear sign of a bubble!”  Ok let’s get back to stock movers: GMCR +18% (down like 5000% in the last year), SJM +7% (raspberry will always be the best), CRM +4% (don’t fade Benioff), andEA +4% (that Star Wars game looks amazing). By the way, SJM is just incredible.  New all-time highs for a company that simply makes food everyone eats. Is it really that easy? I guess sometimes it is. Losers were all those health care stocks along with CHK, whose bonds are fracking ugly (see what I did there? Didn’t even to use caps). By lunch we were sitting on unchanged going nowhere fast. 

The final hour brought nothing new, in fact we spent the entire day trading sideways (which, frankly, is amazing the day after such a huge gain). One thing I want to point out before closing up this pizza shop is CSX which, as you know, is a transport. Look at the price action today on HUGE volume. That’s exactly the kind of thing we want to see to feel better about the health of our bull market. Transports need to start making their way higher again, it’s a must, imperative. Seeing a rail act like that is a good sign so let’s hope it continues. All micro today my friends, nothing new on the macro front to fret over. Who doesn’t love talking about rails and jelly companies? I sure do!  

Final Score:  Dow -2bps, S&P500 -11bps, Nasdaq -3bps, Rus2k -43bps.    

News Highlights:

So in Tuesday’s recap I had the craziest picture of a guy slacklining across a canyon.  Well, I found the video to go alongside it.   Holy … $#@$##@…are you kidding me?

https://vimeo.com/146064760?ref=tw-share

Have a good night.

An Ever Shifting Narrative Loses Its Luster

Equities start the day lower as an ever shifting narrative loses its luster. Narrative…that’s a great word. Sounds fancy yet its definition is very simple: a story. What story could we possibly come up with for the price action we’ve seen in Oct and Nov? Is there one? Up 10% in Oct because the market was just too over sold. Down 3% to start Nov because the market is just too over bought. Down 2.3% on Thursday and Friday of last week just because. Up 1.3% yesterday because maybe 2.3% was too much. The problem with narrative (with respect to stock markets) is that there almost never is one, at least one that makes sense on a day to day basis. Every now and then I have the pleasure of speaking with someone at Bloomberg or the WSJ about the day’s events and I often feel bad that they have to write a big serious story when nothing is going on. “Oh great, core CPI was unchanged and the NAHB housing index is at 64, let’s craft a story to describe why the S&P fell 0.16%”. Ouch! At least I can use this space to poke fun at crazy statements and random stock movements….they have to be serious all the time! Anyway, here we sit with the U.S stock market unchanged on the year even though it’s swinging around in percentages week to week. What’s the narrative? That the Fed is hiking rates and China is a hot mess. But if you think those are what’s causing the market to fall 1% on a Friday and then rally 1% on a Monday you are coo coo for coco puffs. Markets are a coin flip from day to day, so when we craft a narrative remember that we are crafting one because heads came up instead of tails. Actually isn’t the heads side heavier than tails? Always bet on heads.

After the open it was all consumer all the time. We have such an amazing consumer team here that we gotta talk about their names when we can. HD, WMT, TJX, DKS, URBN, all of those were in the news in some way. URBN fell 3% and bought a pizza chain so God only knows what’s going on there. I mean when ‘m hunting down a hipster t shirt with “Vote Galactic Empire” on the front I’m ALWAYS jonesing for a slice of ‘roni. HD rose 4% because when it comes to retail, nails and iPhones are the phi slamma jamma du jour. Did you know that since 1982, homebuilders have outperformed the S&P500 more than 75% of the time from Nov to Jan? (h/t Charles and Wojs) TJX gained 3% because when you think Maxx savings, you think TJ. DKS dropped 9% because maybe more people are buying baseballs online?  I don’t know, shopping at places like DKS and Sports Authority always feels a bit disjointed. There’s never enough employees, you wander these big aisles in between tent poles and canoes hoping to find a pair of workout shoes you like, you finally find the shoe section and there’s like 4 pairs of shoes with none in your size and no one working there, then you walk out disappointed and start searching for it online. But hey, they do have like 58 kinds of baseball mitts! What am I leaving out….oh WMT. They reported last night and managed a 3.5% gain because the freaking stock is down 40% this year. Who slams WMT for 40% in a year?  They aren’t researching flavonoid suppressing drugs people (I’ve always wanted to work that word into a recap.  I don’t even know what they are to be honest). By lunch we had endured a few ups and down to land on 2,060, up 37bps. I could tell you a story about the morning but it wouldn’t make any sense, we’re winging around for no particular reason right now.

The rest of the day was ugly. There were reports of a failed attack in Germany and any time that kind of stuff hits the wires you know people are going to get closer to home. We closed at 2,050, down 13bps, but that was WELL off the highs. The big winner ended up being ARG who got a takeout offer from Air Liquide (great name). M&A in the industrial / material sector? We’ll take it. I don’t know my friends, there is no real theme to the market right now. It’s basically changing its mind as much as a teenager in clothing store so it’s hard to have a solid opinion on which way it wants to go. Price action feels so random and any narrative you read is going to be changing by the minute. Are we really going to go thru all these ups and downs to close an entire calendar year at unchanged? Sure starting to feel that way. Thank god I didn’t stop reinvesting those dividends! 

Final Score:  Dow +4bps, S&P500 -13bps, Nasdaq +3bps, Rus2k -25bps.

News Highlights:

Since it’s almost winter I figured I’d end tonight with easily the worst fall I’ve ever seen on a ski slope.   The sound really makes it so put on those headphones!

http://tinyurl.com/qg5n9fr 

Have a good night.

The Great November Quagmire

Equities start the day lower as the Great November quagmire sucks everyone in. What exactly is the market doing right now?  Does anyone know? Earnings are over, the Fed decision isn’t until December, economic data is scarce, and yet the past 8 sessions have been mostly lower. I guess we can chock it up to all the typical labels: profit taking, more sellers than buyers, exhaustion, commodity weakness, buyer strike, blah blah blah. All the stuff you read in a headline or in a tweet that basically act like empty calories (my favorite type of calorie). Instead of talking about the same thing over and over again let’s ask ourselves the following two questions (and try to answer them quickly without putting you to sleep) 1) What does the upside look like and 2) what does the downside look like. Here we sit around 2,075 in the S&P and most of the super smart techy finance geeks think the index will do $122-$125 next year in earnings. A 17x multiple on $125 is 2,125 so one could say the upside is as meager as a dinner of cottage cheese (which I love btw). We would need some kind of global economic acceleration to get either the multiple to expand or earnings to go up…ugh. The Fed is optimistic about the economy and maybe China / Draghi will get things done abroad but come on. It’s possible I guess but likely difficult.  What’s the downside? Basically China imploding and finally dragging the US into the negative phantom zone. Again, it is possible but do you think any of the high ranking big wigs in the Communist party would let that happen without trying out extraordinary measures first? Probably not. So what’s the main takeaway then? Why haven’t I wrapped this up yet? Ok here it is:  we are going to continue to grind like we have the past few years. BOOM. COP OUT CENTRAL BABY. I just don’t see the big upside or the big downside playing out. I guess we are stuck with modest growth and the hope that economic powerhouses across the sea can get their act together. I know that’s not glamourous but it’s the scenario we face.  So all we can do is keep searching for good ideas amongst the molasses.

After the open we saw a continuation of this miserable leaf grinding, soul crushing price action that’s been with us for a week. Down and to the right for no reason at all which makes everyone think “oh it must be rate hike fears”. Yet banks were down and treasury yields were lower so damn the narrative, full steam ahead! Hey I didn’t get a chance to talk about this yesterday but I’m sure you saw the move in M off earnings. Lots of people are trying to paint broad strokes about consumer weakness from some of these names (M, WMT, KSS, etc) so should we bail on this sector? Guess what the last place I’d look at to gauge the health of the U.S. consumer? Mall stores, particularly one’s that don’t sell iPhones or Kohler toilets. I just don’t think a store that resides in a place that less and less people go to is a fantastic barometer of consumer spending. I might be wrong but is there any doubt that the ways people acquire consumer goods has been changed forever? Would be a good discussion for another recap but I gotta move on. 6 different Fed speakers weighed in today so let me sum them all up for you: we are looking to hike in Dec. Some cautious commentary but they mostly pointed to meeting their targets soon. We retested the 10month MAVG (huge level) of 2,055 and managed to bounce off it. Whew. By lunch we sat on 2,058 holding our breath for a higher afternoon.

Which……….never came. Every small bounce got hit and @ryandetrick chart of 2015 vs 2011 has turned into a Nostra freaking damus situation. If this thing continues on its course we should see even more pain before Santa Claus finally arrives to save the day. Commodities were once again weak and my hope that Energy has bottomed might be a smidge premature (put me in with everyone else I guess).  Winners: VIAB, VRSK, PVH, ATVI, NEE, and HCN.  Losers AAP, MNK, CNX, FCX, GWW, and OI, heck anything in the Energy, Industrial or Materials space that recently bounced. We closed at 2,046, down 1.3%, on a day where no one expected anything like this to happen. We also lost the 10 month MAVG again so that concerns me greatly. Well, look on the bright side, at least we aren’t overbought anymore!  I honestly don’t know whose selling stocks here given we chased this puppy from 1,800 up to 2,109 just last month. Why sell a week later when nothing incremental has really appeared at all. Odd price action, very odd, apparently everyone is weak kneed right now. I wouldn’t haven expected the S&P to drop 3% in the first half of Nov at all. What a mess.  

Final Score:  Dow -144bps, S&P500 -140bps, Nasdaq -122bps, Rus2k -196bps.  

News Highlights:

We’ll end tonight with something I didn’t even know existed.    How did I miss this on Spring Break? 

https://www.youtube.com/watch?v=x9z0bXCd9SY

Have a good night.

As The Year Comes To An End...

Equities start the day lower as the year comes to an end. Wait, did you just say the year was coming to an end? What’s that about? Well, there are all of 36 trading days left in 2015…36…and a few of those are around major holidays where no one cares that the market is open. So basically the year is over, pack it up, hope you accomplished your goals because this one is getting long in the tooth. One last event lurks for both Bulls and Bears to look forward to…the vaunted “hiking of rates”. Have you ever seen a market related event flip flop this much in your life? China mentions a slowdown and everyone says “no hike”. The US pumps out 250k jobs in month and everyone says “hike”. It’s amazing to me that a global pool of the best and brightest minds simply cannot figure this out. It’s like watching people try to play Jenga drunk. So what should you do if you think the Fed will hike? One of my favorite bloggers says “buy stocks”  How have different asset classes in the past responded when the FOMC has raised rates for the first time? Commodities were the best performing asset; they boomed. The dollar sold off. Equities usually rallied into the decision, then sold off, and then rallied again. In all 6 cases (hiking cycles since 1983), US equities rose in the 3 months ahead of the first rate hike. Note that $SPX sold off by at least 5% in the months after the last 4 rate hike cycles began. So, to generalize, stocks rally into the expected first rate hike, then sell off and then rally again. Look, the economy can handle a freaking 25bps hike. I don’t get the insane angst over such a small move in rates. The PATH of rates is what matters so let’s hope the Fed promises (and delivers) a slow, slow, slow liftoff. Anyway, Baird has its big Industrial Conference this week so I’m coming live to you from Chicago. Sweet home Chicago. God I love this place. 

After the open, the market decided to give up ALL of last week’s gains because it has finally found the point where it sucked everyone back in. Last Tuesday we were less than 1% from an all-time high, I even wrote about how crazy that was. The problem is, once people like me start salivating you know that the move has run its course. Too many people were off sides from 1,900 up to 2,110 but that kind of thing doesn’t last forever. Today’s drop was all about punishing the late comers, people who thought Friday’s jobs report was going to be the catalyst to push us to new highs. Let’s talk stocks though, enough of this macro BS. Weyerhaeuser agreed to buy Plum Creek because they’re big fans of Pitbull and Ke$ha. Canadian Pacific might be going after NSC (+10%) because someone has to stop Thomas from his smiling rampage. Apache jumped 13% after receiving an unsolicited takeover from someone. Tell me the low in Energy isn’t near…come on. When $18B companies start getting “hey, would you be interested in selling” letters than you know the worst has passed.  Unfortunately those were the only big winners; almost everything else stunk up the joint. PCLN fell 9%, WYNN and JNPR fell 8%, heck even M and JWN fell 5%. Who sells Nordstroms before the biggest shopping month of the year?  Have you ever been in the women’s shoe section of Nordstroms around Christmas?  It looks like the Thunderdome. Get Tina Turner on the horn because I need her on Michigan Ave. 

The 2nd half of the day was mostly sideways on the lows but a late rally saved us from the gutter. So here’s the thing, if you walk away from today thinking “the market is worried about a rate hike” then I might have to send you a strongly worded email questioning your sanity. It’s not worried, the hike couldn’t be more telegraphed. I’ve been begging for a down day and we finally got one. No market recovers 10% from the lows and just keeps ripping into year end. If we get a few of these down 1% days, and a whole lot of sideways days, then we will be ready on Dec 16. 

Final Score:  Dow -100bps, S&P500 -98bps, Nasdaq -101bps, Rus2k -127bps. 

News Highlights: 

We’ll end tonight with a worldwide fail video! Accidents all over the place baby!  

https://www.youtube.com/watch?v=5kqh7l3kcSU 

Have a good night

Christmas Season Begins?

Equities start the day higher as Christmas season begins. Nov 2? Yep, Target and Wal Mart are nothing but red and green baby. It’s the most…wonderful time….of the year. I hope everyone had a good Halloween, I sure did.  My wife and I dressed up as Disney tourists and people wondered “how much of that did you buy for the party and how much did you already own?” No comment. Earnings are almost done and this week features 102 companies in the S&P which will pretty much wrap things up. How did it go? Well, about as mediocre as they could. We are going to see the first back to back quarters of earnings declines since 2009 but the market doesn’t seem to care. Crazy right? That must frustrate Bears more than that loss to Minnesota. What does the market care about? It’s still China and the Fed, with a smattering of sentiment to top things off. As long as China can stabilize here I think we’re fine. They need to find a level of growth they can maintain even if it’s below historical norms. If that happens we’ll move on from the Armageddon scenario and embrace a world of slow, modest growth. As for the Fed we have one last catalyst on the horizon and it’s a few weeks before Christmas. So while the big box retailers are trying to sell you plastic toys you don’t want and tacky decorations you don’t need, the real gift will be unwrapped on Dec 16. I know that’s a long time to wait but we have Turkey and stuffing to hold you over until then. What an amazing few months we have ahead of us, so much to look forward to. I love these last 8 weeks, they’re composed of: family, food, adult spirits, Fed decisions, football, crisp days, cold nights, performance chasing, and 85 viewings of Christmas Vacation. “Dad, that wouldn’t fit in our yard”.  “It’s not going in our yard Russ”.  

After the open, we got the weakest headline ISM Manufacturing report since 2012 and the market RIPPED higher! I love writing sentences like that, only the stock market can rally on horrible data. “Hey, my best friend got dumped by his girlfriend but he’s on Cloud 9!” Doesn’t work in real life right? Anyway, we’re at the point where slow manufacturing data isn’t a surprise anymore so the market shrugged it off. Lots of single name movers so let’s chat it up. HPQ rose 12% because breaking up the company is better than overpaying for mediocre acquisitions, DO jumped 11% on earnings, DYAX popped 28% after agreeing to be acquired by Shire (always think of the Hobbit with this company), Visa fell 3% after buying Visa Europe, and CMG dropped 2.5% because bad chicken mess you up (best episode ever). Oh and any Trekkies up on this recap? CBS is boldly going where 50 seasons of other goofballs went and plans on launching a new Star Trek series soon. I’m in, bring me my pointy ears. So it was a decent morning, up 0.6% to 2,093 by lunch. By the way, other than the holiday season you know what period we are entering?  Money making season… BOOM. Look at this stat by Bespoke: “The last 50 Years of SPX  Nov 1 to April 30, average gain: +7.3%. May 1 to Oct 31, average gain: +0.03%”.   So there you go, most of the gains are between now and the end of April so don’t do anything crazy, like this. I weep for our movie going humanity.  

The back half of the day was a rocket ship higher and by the time the bell rang we had recovered 2,100 on the S&P. Honestly, it is amazing how far we have come from the Aug/Sep lows when the death of this market was all but sealed in stone. My best take on this price action is that there are 1) still way too many people who bailed and need to get back in 2) still way too many shorts 3) still way too many people geared for a recession 4) still way too many people who think earnings were a disaster. However, that being said, we won’t continue this pace for much longer. All of the indicators that screamed “oversold” are approaching “overbought”.  @ryandetrick points out that Nov starts off awesome but generally spends the bulk of the month going sideways as we approach the holiday so let’s not get over our skis. So where do we these last two months? I bet we close +/- 3% from this exact level. The summer move was an overreaction, we’ve erased it. But the recipe for going higher just isn’t there so I bet we will sit here and churn for the next 8 weeks. Boring I know but them’s the breaks. If people missed the August / Sep dip they might just live to regret it, certainly that’s what the market is telling us right now.

Final Score:  Dow +94bps, S&P500 +119bps, Nasdaq +145bps (new 15yr high), Rus2k +208 bps (so much for this one lagging).   

News Highlights: 

We’ll end tonight with a classic fail from 2012.   Best way to describe what it feels like to be bearish right now. 

https://www.youtube.com/watch?v=Re-IxI-u-cY 

Have a good night.

October Churns To Its Magnificent Conclusion

Equities start the day slightly lower as October churns to its magnificent conclusion. Apologies for a scattered recap distribution lately, travel plus a plague knocked me out. What is it about kids that they can give you something that feels like the energy has been drained from every cell in your body yet they bounce back from it in a day? Getting old stinks. I think my immune system is on strike. Earnings are nearly halfway done so let’s turn to @factset for a quick update: “the blended growth rate for Q3 S&P 500 EPS currently stands at (3.8%). This marks an improvement from the (5.1%) expected at the end of the quarter, but still points to the first back-to-back quarters of earnings declines since 2009.” Ok, well, that’s not so great is it? We knew earnings would be squishy due to energy but it appears other sectors are Stay Puft Marshellow man soft too. Josh put up this link (that credits BAML) showing top line weakness for everyone except tech. Strong dollar, soft global demand, too much candy corn, the excuses are exactly the one’s you’d expect. Is there any good news with respect to earnings? Lay it on us again fact of sets: “In the aggregate, companies are reporting earnings that are 5.2% above expectations, better than the one-year average of 4.8%.” As always people will say we are jumping over a broomstick (insanely lowered expectations) but isn’t beating expectations the secret sauce on Wall St? It typically is, so while this earnings season seems mediocre at least it isn’t Freddy Krueger ugly. Man, that movie messed me up as a kid. I remember sleeping on my sister’s floor for a week after seeing it. I mean who makes a movie about people getting killed in their sleep? Wack jobs.

After the open there was rush to unchanged where we sat for hours. Monday’s have consistently been the slowest days of the year and today was no different. But that’s good! We need it! October is up something stupid like 8% MTD so we need 3 or 4 days of sideways to settle things down. VRX had their big investor presentation today and I’m guessing in the category of things you never want to have to say as CEO “our company is not the next Enron” ranks just behind “I’m sorry our product hurt so many people”. Brutal. What else. The Cubs got swept, New Home Sales stunk, Tom Brady is still pretty good, Hot Dogs have funky stuff in them (I’ll still eat ‘em), I’m speaking at a conference on Wednesday (come see your boy), Eastman Kodak stock still exists and it’s still falling, and Pep Boys is being acquired because who can say no to those 3 big faces (no one in Europe will understand that). Did you know FB is within striking distance of GE in terms of market cap? I know that’s a random meaningless stat but you think Zuck and his crew figured they’d pass General freaking Electric one day? Thing was founded in 1892 by Thomas Edison for crying out loud. By lunch we were going nowhere debating the top 3 Halloween candies. Here they are 1) Reese’s Peanut Butter Cups 2) Snickers bite sized 3) Kit Kat. Coming in at #456 is Candy Corn, trailing 37yr old pennies by one slot.

The afternoon was as fun as watching 13hrs of Miffy cartoons with your 6 month old and when the bell rang we had gone nowhere. 2,071, down 0.2%. Like I said before, we’ll take it though. A few days of calm let’s everyone reassess where they are in preparation for the last 2 months of the year. The Fed is on Wednesday (they’ll do nothing) so lots of attention is being drawn to later this week. Chin up though friends, the market is actually up 0.6% on the year! Amazing given I heard talk of recessions and bear markets just a month ago. It ain’t over yet!

Final Score: Dow -13bps, S&P500 -19bps, Nasdaq +6bps, Rus2k -56bps.

News Highlights:

We’ll end tonight with 2 of the luckiest people on the planet.  How is it possible they didn’t get hurt?  Amazing.

http://tinyurl.com/o4whekq

Have a good night.

Earnings, Earnings, Earnings

Equities start the day higher after the Cubs win!   Cubs win!   I’m trying not to get too excited about the prospects of a Cubs pennant because I was there at Game 6 on October 14, 2003. My brother in law had texted me “you are going to the World Series” about 3 minutes before Bartman changed the fate of Chicago worse than that fire. It was a painful night (followed by a painful game 7) so while I’m happy that they won I know that a river has many bends as it travels into the future. Earnings, Earnings, Earnings, that’s the story for the next few weeks.   Which is fine, I’d rather talk about corporate cash flows than high yield spreads or China’s export numbers (ugh).  What should we expect to hear? Endless complaints about a “Strong dollar”, in fact let’s set a betting line shall we? What will we hear more about in the next two weeks  1) how a strong dollar “impacted our results in a negative way” or 2) the fact that the Cubs won the World Series in Back to the Future 2, which just so happened to take place in the year 2015. Hmmmm…tough one right?   I think I’d make option 1 a slight favorite but it might be a pick’em. Retail sales came out this morning and while it was nothing to write home about it was still slightly positive.  In fact, Retail Sales hasn’t been negative since February so I don’t understand all the angst.  Yes it’s slow, it’s been slow for awhile, but that’s the world we live in.   This isn’t the 50s when everyone bought a new TV or the 80s when everyone bought zipper jackets and hairspray, this is 2015 and the U.S. is a slow growth economy. But at least it’s SOME growth so don’t get caught up in too much negativity.  A lot of countries around the world would swap their macro picture for ours so let’s keep things in perspective. Anyway, happy for Chicago and their baseball team, who could possibly hate such lovable losers? 

After the open, Wal Mart held a rollback sale on its stock.  An hour into the session the company issued guidance that was horrendous (2017 EPS down 6-12% vs street modelling up 4%) and the stock got hit for 10%, the worst drop in 15 years. You know the real question is this: has e-commerce reached the tipping point against big box? WMT blames higher wages for part of their guidance but COST pays something like $20/hr on average and seems to do ok?  Is AMZN just starting to eat WMT’s lunch? I guess you could also construe this as commentary on a slowing consumer but we’d need to see other companies say the same thing before jumping to any conclusion.  Intriguing nonetheless. Tons of other stocks to talk about so let’s not dwell on one thing for too long. TRIP soared 25% after partnering with Captain Kirk, SNDK said “we may need to shop this company” and gained 11%, FCS (not to be outdone) said they may need to shop themselves and rose 15%. Then Analog Devices and Maxim said they were in merger talks. Did I miss the memo on selling semiconductor companies?  Hey junior banker working on cash flow modeling for tech companies….remember how jealous you were of your healthcare compatriots? Go cntl-c / cntl –v some headlines on their face.  Who were the biggest losers besides the Walton Family?   CPHD -19%, CFX -9%, EXAS -6%, and BBY -5%. What about bank earnings?  BAC, WFC, and JPM all reported and I don’t know, meh.  JPM fell 2% but noted that equity trading was strong.  Equity trading you say? I know someone who works in that area who just so happens to be the grayest haired 40yr old on his team!  Quite the honor I might add. By lunch we were hovering around unchanged speculating on WMT’s future. I will say this…American icons don’t go gently into that good night. People said MCD was dead because of SHAK and Five Guys and that fact that millennials love burritos. Guess where that stock is now…that’s right…its all time high.  Make no mistake, WMT is an American icon, failed retailers like Sears and Montgomery Wards and Woolworths aren’t even in the same league. 

The rest of the day saw the market slip slide to close near the lows, 1,992, down 0.50%. Which, to be honest, wasn’t that bad given WMT imploded and a few of the big banks acted blah. Lots of earnings in store this week so stay tuned for further analysis and random commentary. One thing to note before we head home and rake leaves: consumer stocks might be due for their turn in the shed. Both Staples and Discretionary have managed to largely dodge the pain felt in other sectors (they are about 3-4% below their summer highs). Given the news out of WMT it wouldn’t take much more for their pretty boy face to get smashed in.  If you are heavy into Consumer you need to tread very cautiously right now, they will be in the bears sights (look at NFLX after hours..)  

Final Score:   Dow -92bps, S&P500 -47bps, Nasdaq -29bps, Rus2k -95bps (acts poor)    

News Highlights: 

We’ll end tonight with some Pool Trick shots.   Haven’t featured these in a while and they are always fun to watch.     

https://www.youtube.com/watch?v=HJ1SvjWjdGY&feature=youtu.be 

Have a good night.

There Are No Free Lunches - Ever

Equities start the day slightly lower as our two day face ripper comes to a sputtering end. Trust me, that move you saw in stocks since the NFP report shouldn’t have surprised you one bit. You get those giant rips in downtrends because the market needs to punish everyone who is hedged to the teeth. There are no free lunches, ever, hedges don’t endlessly print money because you think the market is still overvalued. When everyone hedges up and drives sentiment indicators way too far in one direction the market takes it personally so be careful about pitching a tent in the bear camp. I took a quick trip across the pond to bang on a few doors and I’d be remiss if I didn’t relay a soccer story. I was generously given tickets to attend this “Arsenal vs something United” event last Sunday and I must admit, I was pretty excited. Took the tube, drank warm beer in amazing pubs, ate crisps, complained about the weather, you know, tried to blend in. In typical American fashion I decided to show up late because…come on…nothing happens in the first few minutes of a sporting event. Ok, well, they scored 2 goals right away and I missed them both. Fine, be that way. I’m gonna go in the concourse and enjoy a quick adult beverage quick because…come on…no one scores 3 goals at the start of the game. What’s that? I missed another one? That’s nice. At least I went back to my seat to hear some local yokel yell “you didn’t miss anything yet American….” Kill me.  I flew 4000 miles and saw zero of three goals in some kind of big whoop ti do at Emirates stadium. Soccer stinks, I’m going back to hating on it. Plus, when all was said and done, I lost my co workers tickets, so now my year end review is going to include “totally irresponsible on trips abroad”. Ugh. Let’s move on to the market before I hate myself even more.

After the open it felt like the market was exhausted and traded like it too. A pathetic attempt at 1,990 fell apart and by lunch we had dropped to around 1,974. I said this a few weeks ago but the 1,995 – 2,000 range is a wall of selling, there is just so much supply there you can’t change your mind about the trend until you see that hurdle cleared. The IMF lowered its World Growth forecast for the 18th time in the past 2 months so if you’re still dialing up Lagarde’s number for your models feel free to move on. We get it…China, Commodities, Emerging Markets, changing Demographics, etc etc. Global Growth is slow after the biggest crisis of our lives? You don’t say? Healthcare got smacked today after ILMN pre announced dragging names like VRTX, ENDP, CELG, and BIIB with it. I guess the pain in healthcare won’t be cured overnight (yea I went there). You know I will say that Arsenal’s stadium is pretty cool, had a real Wrigley Field vibe to me. I get why people dig that place so much. Winners were ENS (talks with JCI), DD, HP, RIG, FSLR, and HES. Energy and Materials! Crude actually rose 5% today to near $49, I mean if Crude can go up maybe we got a shot here. DD’s CEO left, and they cut forecasts, yet the stock rallied 7%. So many people looking for bottoms in names like these it’s amazing. Almost any big news is readily embraced as a change in the winds. We’ll see. 

The rest of the day was quiet and a small rally kept us from the lows. When all was said and done we closed at 1,980, down 0.3%. Look, here’s the thing, buying stocks at these levels is a bit like trying to navigate this. It might work but there’s downside to even trying. Wait for the break higher if you wanna play the Q4 seasonal (which I think is still a thing). Wait for earnings to see if companies say “it’s really not THAT bad.”  If they do, and sentiment stays depressed, then I think we have a legit shot of going higher into year end. This week is a weird no man’s land before that happens and as the great Teddy KGB once said: “Go awayyy, Mike. This one's no good for you.” You know what is good for you? London. Awesome city. 

Final Score:  Dow +5bps, S&P500 -39bps, Nasdaq -72bps, Rus2k -72bps.  

News Highlights:

We’re gonna skip the news highlights because it’s late here and the hotel is SOOO FAR AWAY.  

The final video reminds me of how awesome it is to come home after being gone for a while.  The first 5 seconds destroys me in this one, gut punch right away.  There’s even some DIS love in there too!

https://www.youtube.com/watch?v=liJS13ek5G8

Have a good night.

I Love October!

Equities start the day higher as October begins! I love October, I say this every October and I’m going to keep saying it every October until the recap dies a slow quiet death like The Walking Dead currently is. Buzzfeed even has this awesome listicle about “things you should cook in October” so they are excited too. The market enters the final quarter of the year sucking wind like it just ran a beer mile and my guy Carl Quintanilla posted this chart on Twitter that we need to talk about (he credited @humonthemarkets). It shows the number of times the S&P has finished the year positive after being down at least 6% at the end of Q3. In case you are too busy to click that link, or your ADD is raging, the number of times is 1. One. Which is the loneliest number. Ok, well, it looks like this year is washed up, but I want you to look at is the Q4 performance in those years. In the 16 instances mentioned Q4 is positive 11 of the times, for an average gain of around 8%. So while you dump stocks and rue the day the Fed casually mentioned raising rates let us not forget that Q4 is typically the promised land for stock performance, even in really puke-tastic years. Is this trying to look on the bright side?  Absolutely, it’s incredibly easy to be negative nowadays. Maybe Santa Claus can deliver a flat to slightly up year…is that too much to hope for? Maybe it is, but if he can’t deliver that maybe he can send me this so I can get away from my kids in a pool. Seriously, who else is a human jungle gym when they are in a pool with their kids? It’s brutal.

After the open it was nonstop selling all the way thru lunch. I mean there must be some way outta here…said the joker to the thief.  There’s just too much confusion…and the market can’t get no relief. You know what the big loser today was? Utilities. So much for hiding in safe places during a storm. FE, PEG, ED, DUK, D, EXC…all down 1.5%+. You know what else? Freaking Dunkin Donuts was down 12%. Can you believe that?  Donuts.  I mean if donut sales are slowing I may as well cash in all my chips and prepare for our new bartering society because the world is melting down (they had poor comps). Purple Haze, all in my brain, lately things they don’t seem the same. Amen Jimi. VRSK is going to be added to the S&P, replacing JOY. An IT services / data company replacing a good ole fashioned construction / mining equipment concern, I guess that’s the story of our economy now. 10yr yields are back near 2% so if you forgot to refi you may get another shot soon. So much for pricing in a hike. By lunch we were trading around 1,908, down half a percent. Quiet start to Oct though, didn’t have the same manic feel yesterday had. Earnings don’t start in earnest until Oct 12 so it could be relatively docile until then (at least we have NFP tmmrw).

We actually saw a rally in the afternoon….how about them apples? Maybe all this doom and gloom is caked on a bit too thick my friends. There was a bearish diverge though as small caps underperformed so it wasn’t all peaches and cream. We closed at 1,923, up very small, but that is 3 days in a row higher which should break this horrendous downside momentum. Winners were Health Care and Materials and if anything needs to bounce it has to be those sectors. I’m guessing the jobs report won’t be a huge game changer for the market, it’s been between 175 and 300 for years now so let’s not go crazy. It would have to be something nuts like -200 or +500 for me to take note but I will definitely be at my desk watching alongside everyone else. Last quarter people, one last shot at glory in 2015.  Make it count.  

Final Score:  Dow -8bps, S&P500 +19bps, Nasdaq +15bps, Rus2k -28bps.           

 News Highlights: 

Tonight’s final link is a good old fashioned Fail Video but this one has an embedded story to it!   Watch til the end to see what happens! (you’ll see the story shaping up halfway thru) 

https://www.youtube.com/watch?v=x5ZxRObLLzE 

Have a good night

Text Book Oversold Bounce

Equities start the day higher on a text book oversold bounce. I tend to write that sentence a lot in the middle of these “Let’s blow up the stock market” moves because they happen frequently. Down 2.5% on Monday? You bet your tootsies that futures will be higher overnight. But all it does is invite selling, no one is going to chase the market after being beaten into submission. You know how they say the “stock market is not the economy”….I hear that phrase tossed around a lot in financial circles. It never really hit home until the past month or so. I mean this is an epic disconnect in the United States right? We have PMIs still in the 50s, a strong to very strong labor market, consumer confidence near 100, housing prices that are steadily rising, home sales that are steadily rising, positive GDP, rising retail sales, and rising industrial production. Take a look at the Big Four Indicators on Doug Short’s website….none of those look all that ugly do they? Recession end bull markets, period. That is a true statement. So either the market is starting to discount a potential recession or this is just a really volatile correction in the bull market we all know and love. Which one is it….which one. I wish I knew, really I do. Maybe the fact that I made a real estate transaction is the tell here. I bought my first home in 2007 and my second in 2015. Feel free to send me hate mail, I’m sorry, I ruined it all. Did you know the Cubs won the World Series in Back to the Future 2 and that took place in 2015? No way that was just a fluke, get on the bandwagon kids.

After the open we headed lower because that’s just the way things work nowadays. “Oh is that a rally I see? Here, take $500mm worth of stock to sell, I’ll end this quick.” Unfortunately we are in a bit of a vacuum right now, earnings don’t start for a few weeks and macro data doesn’t seem to be having any impact at all. You think a 200k jobs report on Friday is going to stop people from selling Biotech and Materials? “Hey Joe, we printed 195k jobs again for the 80th consecutive month, maybe this economy thing is ok. Shut up Dave and puke out our hospitals.” Nature abhors a vacuum and in the absence of something meaningful like earnings everyone has taken to focusing on Glencore, High Yield debt, and sectors like Health Care and Energy as their tell. Icahn is all beared up…he even put out a video called “Danger Ahead”. Sounds like a great Bruce Willis movie title to me. Remember when bigtime investors got bearish over steak tartare and Dewars at Smith and Wollensky? Now they do it on Twitter and Social media. Embrace the carnage. Hey, one of my colleagues put together a list of names that FELL THE LEAST in the 2007-2009 “burn the house down” market (SPX fell 58%). Here are a few to whet your appetite: CMP, NFLX, EW, RGLD, KW, THOR, SWN, AZO, WMT, GILD. I guess if playing defense is your thing that’s a decent list to start on. Anyway, that small selloff was erased and the market actually ticked higher thru lunch! Angels we have heard on high…sweetly singing over o’er the plain…or however it goes. You know what I love about that song? You get to hear who has good lungs when you hit that GLOOOOOOOOOOOOOOria part. So many people who don’t workout.  By lunch we were up 4 pts, 0.25%, but it felt like a million.

Aaaannnddd you can probably guess how the afternoon turned out. Down and to the right, as always. Rus2k closed negative for the 8th straight day. Apparently eight isn’t enough (last time is happened was 2008). We did see a tiny, tiny rally at the last minute that kept us from another red close so we had that going for us.  Which is nice.  Look on the bright side, at least there’s only 1,884 points left before zero in the S&P! There’s always a silver lining! I’m guessing tomorrow is going to be awful…month end trading in a terrible month. Just feels like the marginal losers will be tossed on the scrap heap indiscriminately. We’ll see I guess.  

Final Score:  Dow +30bps, S&P500 +12bps, Nasdaq -59bps, Rus2k -61bps.

News Highlights:

Tonight I am ending with a couple .gif files. They are quick, to the point, and mind blowing.

The first is the strongest person I’ve ever seen

The second is something you’d expect at the carnival not a morning show.

Have a good night.

Punting Stocks

Equities start the day lower as we continue to punt stocks. Speaking on punts, did you see what the Bears did on Sunday?  Of course you didn’t because no one wants to watch the Bears. They punted on every drive.  All of them. Is it bad when the Cubs are your only hope in October?  Since my sporting world has been turned upside down they may as well turn my investing world upside down too. Wait…they did that already? Great, maybe I’ll get a razor blade in my apple on Halloween. Misery abounds my friends but I’m not going to let it get me down! Life is a precious gift, so I wake up each day with a smile on my face and trundle off to Baird to try and brighten someone’s outlook (no one is buying this are they).  Speaking of no one buying have you see Biotech stocks? Talk about a pain trade.  The sector was up as much as 30% in the summer and now it’s down on the year.  The optimist in me thinks that corrections are over when the takeout the leaders but this one doesn’t feel anywhere close to being done. Watch credit…I’m serious. Watching credit in 2007 was key because it led pretty much everything lower so at least you had a heads up. High Yield was getting pummeled this morning but Investment grade kinda hung in there so it wasn’t total carnage. If you need places to watch this hit me up on email and I’ll send you my favorite metrics.   Punted on every down…a worse outcome than that England rugby match (that one was brutal). 

After the open it was uninterrupted selling from the ding dong. Glencore, a name that doesn’t get a lot of press on Main St USA, is rapidly becoming the poster child for the Great 2015 Shellacking. A giant leveraged materials/trading conglomerate quivers as their stock plummets and their CDS levels soar. Does that statement remind anyone of anything?  This is starting to feel like the real deal Holyfield isn’t it? Biotechs like VRX got pummeled again but to be fair, so did everything else.  The CEO of VRX even put out a letter defending his share price. Welcome to the party pal. A few hours into the day we were down 2% and it felt like 3% was in our sights. The biggest winner was Alcoa, AA, after they announced they’d split the company in two. Wait…if they split the company which one of the new entities will kick off earnings season?  This is important; I hope the bankers put some thought into that.   Also please don’t name it something dumb like alphabet or mondelez, get creative this time Kellogg grads.  Other winners were TAP and RAI.   Beer, Cigarettes, and a corporate restructuring situation…the apocalypse is upon us and apparently bankers will be the new Mad Max.  You wanna know how dire this market has become?  You can’t even hide in something like Mead Johnson (MJN) anymore.  They make baby food for crying out loud and the stock is down 30% YTD. Where can you hide? Right now in places like ATVI, AZO, CMG, and SBUX but if this market really has topped out you’d think they would be in the bear’s sights.  By lunch it was a pure misery fest of selling heaped upon selling, 1,890, down 2.3%.  But…..I thought … you said we were ok spider?  No you’re definitely not ok spider. 

The afternoon saw a speed bump of a bounce that got bulldozed and by the end we had lost this month’s mortgage payment. Down 2.5%...felt exactly like this. You would think we’d get a massive face ripping rally given all this negativity right? If it does come you have to stay away from it…. big meaningless rips can occur in strong downtrends. The upside isn’t clear until we break 2,000 so keep your eyes focused there. Credit is absolutely worth watching as is the fate of companies like Glencore. The market senses blood from leveraged companies, if things settle down in credit they should start to settle down everywhere else.  Doesn’t mean we are out of the woods but it means that the disease probably won’t spread. Interesting times my friends.

Final Score  Dow -191bps, S&P500 -256bps, Nasdaq -304bps, Rus2k -287bps. 

News Highlights: 

We’ll end tonight with an insane Frisbee toss.   I can’t imagine how many attempts it took to finally complete one throw.   Has to be 100+ 

https://www.youtube.com/watch?v=JMHfEUwOtv0

Have a good night

Loss of a Legend

Equities start the day flat as a legend passes away. The great Yogi Berra died last night and the world is a slightly worse place today. In his honor let’s use a few of his quotes to kick off the recap. “You can observe a lot by just watching”. The market has been miserable the past few weeks, absolutely horrible, and sitting at my desk every day watching the carnage has taught me a lot. The mood of the market has changed, “buy the dip” isn’t even a thing anymore. Market psychology is a powerful force, maybe the most powerful force, and it has gone from bullish to decidedly bearish. “We’ve made too many wrong mistakes”.  Believing that 1) the Fed solves all market problems 2) China can weather any slump  3) European QE is the answer 4)  Buybacks will support the market and  5) falling Crude prices are net positive  may come back to bite us.  “The future ain’t what it used to be”. The primary trend has changed, and it has changed meaningfully. Paul Tudor Jones said “bad things happen under the 200 day” and he is right. My colleague in London Steve Holt put it this way “when the market closes below the moving average for a month or more (sustains) the downside is pretty big with very few headfakes” (You got quoted with Yogi Berra and Paul Tudor Jones, I want a raise!).  “It ain’t over till it’s over”   We may yet recover from this dip but it’s going to take a herculean effort.  What could right the ship?   What if we woke up and saw this headline “China to engage in open ended QE.”  Would that be enough? Maybe, hard to tell, the impact of monetary QE seems to be waning, but it would jolt markets in a huge way.  “We have deep depth”.  The great 2009 -?? bull market may be ending but you know what?  We will endure because that’s how things work.  Markets rise and fall but our great nation (and other great nations) have incredible bouncebackability (did Yogi use this word?  He had to). The future is and always will be bright. 

After the open we spent the entire morning drifting around on low volume. Today is Yom Kippur so holiday markets will act holiday-ish. Two things dominated conversation today: The Pope and Volkswagen. I must say, I like this Pope, seems to be a good guy, but are they really going to shuttle him around in a tiny Fiat? Can’t my main man get a Ferrari or a Lambo or something? Though I guess humility and simplicity is kinda his thing so it makes sense. Speaking of humility, the CEO of Volkswagen is off for a permanent vacation in the Alps because his cars did a little rule bending. Come on man, you can willfully deceive regulators like that, they get really itchy about that kind of stuff.   Me, I disclose everything.  You want my lunch receipts for the past year?  I got the records right here, don’t judge me on my Chipotle consumption though (barbacoa soft tacos is the plan, extra cheese on those bad boys).   What else….no rhyme or reason to winners today: TSO, CCL, AZO (still near its all-time high. I guess auto part retailers are the place to be?), and PYPL, but most of the losers were Materials names like CNX, FCX, VMC, and JOY because Chinese manufacturing data stinks. By lunch we were sitting on unchanged with volumes running 20% below recent trends. Oh and if you are looking for tasty treats for your Halloween party this right here is a brilliant idea. You can thank me later. 

The rest of the day was similarly quiet and we closed almost exactly where we were at lunch. Rather forgettable day here so I won’t bore you with any more of the details. Needless to say I am worried about the market and I’m hoping that fact is the bottom of this selloff.  It just feels like so much has changed with respect to price action, the market isn’t acting like it has been for the past few years.  Almost every dip from 2011 to 2015 was a solid buy and this one doesn’t feel that way. Often times it’s hard to sell stock for clients and that tells me that dip buyers are gonzo…poof… up and vanished. I go back to the notion that there wasn’t excessive euphoria a few months ago so that can’t possibly have been the top. Maybe the market is just dead money for a while? Is that just wishful thinking?  I’ll admit I feel confused about where we are going so I guess we watch the tape and look for clues about sentiment in every nook and cranny. Rest in Peace Yogi, thanks for adding your wit and humour to the world.

Final Score:  Dow -31bps, S&P500 -20bps, Nasdaq -8bps, Rus2k -26bps. 

News Highlights: 

 We’ll end tonight with something I still haven’t been able to figure out.   Someone help me out here. 

https://www.youtube.com/watch?v=wk8lzdl1264

Have a good night.

Fall Rapidly Approaches

Equities start the day higher as Fall rapidly approaches. Did you know Fall starts on Wednesday? I didn’t either and it’s always bittersweet to see summer go. Do you know what else is bittersweet? Watching the Bears and listening to the Fed. Actually watching the Bears isn’t bittersweet it’s awful and they are awful. The Fed though…what a mess. I was hoping that they’d bite the bullet and do one of those “dovish hike” things but instead they decided to fret about China and the market hated it. Guess what Janet, if you are and your crew are worried about what’s going on across the Pacific it’s going to be even worse in the stock market. Let’s face it boys and girls: the uptrend is broken, kaput, finished. The bull market that started back when the Fed first engaged in QE has come to an end. Unless they decide to restart this puppy we are now beholden to growth concerns across the planet. No more shrugging off Europe because the Fed is spending $80B a month. No more multiple expansions because the banking system is being goosed. No more beating the Packers because Cutler or Clausen or whoever else they put back there can’t get it done. The Fed typically does a good job managing the market’s expectations but on Thursday they blew them up by delaying a decision for external factors. If they did it once they’ll do it again, and unless China turns its supertanker around we are in for a long slog. 2,000 in the S&P is now insane upside resistance, mark it on your chart because that’s the roof. Until that roof is blown off it feels like the house is in questionable shape. Oh the humanity.

After the open, Hillary Clinton decided she had enough of this whole Biotech thing and came up with this"Price gouging like this in the specialty drug market is outrageous," Clinton tweeted at 10:56 a.m. "Tomorrow I’ll lay out a plan to take it on."  So if you’re Hedge Fund bet against drug companies because Twitter is a thing…you won! We had a decent morning rally going before this happened but by lunch time it had evaporated. There isn’t a single person alive who would characterize this tape as a “buy the dip” type of affair anymore. That whole notion feels like it’s been buried in the Nevada desert next to Jimmy Hoffa. Then this awesome quote came out by Atlanta Fed President Lockhart to really stir things up: “Fed ready to hike FFR ‘as things settle down’”. Oh is that right? You are waiting for things to settle down huh?  I’m also waiting for GQ to come calling about my awesome Dad bod and tendency to wear Crox around my yard. Things to settle down….sigh. Hey, I’m not investing in oil until that Middle East thing settles down either, I’m gonna need some clarity there. Health Care led the way lower after Clinton decided to pipe up and the biggest losers ended up being names like BIIB, VRTX, ENPDP, and REGN. Nice work. Winners were oil names because when the world decides to pound drug companies it takes a break from the energy sector. We got a real mess of a market here don’t we?  By the way, with Fall starting you know what’s not far off? This magnificent goodness (how steep is that one hill...my God)

The rest of the day was commercials by Draft Kings and Fanduel. Seriously, it’s getting to the point where I will never visit these sites because I’m so angry at them. I could pick that dude who won $1 million out of crowd right now. STOP WITH THE ADS ALREADY (sorry Europeans on the recap, this one is going to fly over your head). Actually the rest of the day was quiet but a small rally kept us from closing in the red. But here’s the thing….who’s left to sell U.S. Stocks? Bloomberg tackled that question here so give it a read. Sentiment is horrendous right now….awful….so if our upside is capped then the downside is too (absent a fresh catalyst).  A new sideways range? Maybe, sure starting to feel like it until the next Fed meeting.  

Final Score:  Dow +77bps, S&P500 +46bps, Nasdaq +4bps, Rus2k -19bps     

News Highlights:

Tonight we have some wedding fails because if there’s anything that screams funny its people messing up one of the best days of their lives!

https://www.youtube.com/watch?v=A6F-uVmvza4

Have a good night.

Fed Decision Eve

Equities start the day flat as we drift thru Fed decision eve. Here’s a question: What percent of the population do you think knows that there’s an FOMC decision tomorrow and that they might raise rates for the first time in a decade?  I’ll set the O/U at 5.  In fact I called my Dad and asked him what a “Fed rate hike” was and he thought it had something to do with credit cards so there you go. You know the problem with this Fed meeting is that everyone is concerned with what’s going on in the foreground. What’s the headline….what’s the decision….what is the immediate impact? But all of that has been priced in, the Fed has telegraphed this hike all year. The wise man knows that the real action is in the background! What’s their guidance for the next hike…what’s the bar going to look like for another 25bps…is this a “one and done” scenario? The phrase “dovish hike” has been tossed around endlessly the past week and that’s exactly what we need to see.   “We are hiking 25bps because unemployment is stupidly low and wage pressures are coming but our next hike is orbiting somewhere near Pluto”. Wouldn’t that kind of decision be welcomed with open arms? (I should put the Journey video here but the song is so bad I can’t even take it). I think so but we’ll have to see. Anyway, let’s hope something happens on Thursday because the market truly is ready for it. We’ve been primed for months now, pull the trigger Janet (I still think they wait until Oct or Dec…sigh). 

After the open we got a decent rally that took us right back to where overhead resistance is fierce. 1990-1995, man that level is going to be harder to break thru than overcooked garlic bread (they should use it to support building foundations). Let’s put this random daily noise aside for a second and talk beer. Mmmmmm, beer. I walked in this morning to learn that AB Inbev is planning some kind of bid for SAB Miller. Wow…if you thought Time Warner joining up with Comcast and DirectTV was crazy how about every single macro brew being under one banner. Have you ever seen a list of the 20 most popular beers in America? It’s pretty sad, but not entirely unexpected (what is unexpected is Heinenken at #10.  Ugh). A merger of these two would bring almost every beer in the top 10 under one company! Will it happen?  Who knows, but it makes for great barstool talk. Did you know they make Corona such that it tastes the same both warm and cold?  Science! Needless to say all the beer companies were up nicely today including TAP, one of my favorite ticker symbols around. Energy was the other big winner along with materials because, like I said before, when we get these bounces people head straight to misery row to grab stuff that moves. FDX was the big loser after cutting forecasts and warning about “weaker than expected economic conditions”.   Sounds like just the thing for a rate hike right? IF you look back at the end of the last cycle FDX was a gradual but constant decliner. Keep your eyes on this stock my friends, pray it didn’t call the top in the middle of this year. By lunch we sat on 1,988, the year in which Roy Jones Jr got unbelievably robbed.  

The back half of the day saw us run up to the highs where we halted in anticipation of tomorrow’s festivities. Ok, here is what the market is expecting with what I think would be the reaction.  1)  25bps hike with extremely dovish commentary. Take ‘em up. I think we are prepared for this and it clears the overhang. No more Sword of Damocles. 2)  no change with hawkish commentary (a hike is still imminent but not now). This is the status quo and I think we go nowhere. We remain in a tight range until the next meeting. 3)  25bps hike with hawkish commentary. The market isn’t prepared for them to say “we are hiking and could hike again before year end”. That’s the worst case scenario and I think stocks would get smoked. We want option 1 or 2 but I think we get option 2. Status quo and we wait…wait for life to throw us another bone somewhere down the line. Tune in to the recap tomorrow to find out!  

Final Score:  Dow +84bps, S&P500 +87bps, Nasdaq +59bps, Rus2k +79bps.   

News Highlights: 

I got two links for you tonight on the eve of this momentous occasion that like 48 people care about. 

The first one is going to make you cringe 

The second one is going to make you cry (if you aren’t stone hearted.  And it might help if you are a parent) 

Have a good night

A BIG Week Is Upon Us

Equities start the day higher as a BIG week is upon us. That’s right kids, this is the week William and Mary plays Virginia in football, can you imagine how crazy things are going to be down there? Wait…actually this is the week there’s a 30% chance the Fed does something they haven’t done in years, let’s talk about that instead! Tigthen…don’t tighten….hawkish…dovish…literally anything can happen so you’re lucky that I’m here for some good old fashioned predictions. 1) I don’t think they go this week. There’s two meetings left and things have gotten a bit iffy lately so Sep is off the table.  2) I do think they tighten in 2015 no matter what.   The Fed has telegraphed it all year, it’s going to happen. 3) I don’t think it has to be Dec. Did you know there’s a meeting in October too? No one seems to talk about my favorite month as being in play but it is. 4) I do think Fear the Walking dead sucks, I had such high hopes. 5) I don’t think the Fed tightening will lead to some kind of calamity. 6) I do think they will provide insanely dovish guidance after the first hike to the tune of “we are doing this because conditions warrant it, but the next hike will require a St Louis arch to jump over”.  7) I don’t think Jay Cutler will ever beat the Packers again. I’m getting mad just thinking about it. 8) I do think the market is prepared for a tightening, they have guided us all year it won’t be some kind of shock when it happens. 9) I don’t think the market will recover its highs anytime soon and neither does MKM partners. This is a great link, give it a read.  10) I do think I’ll move on because 10 of these was way too much.   Happy Monday everyone! Let’s get into it.

After the open nothing happened. In fact less than nothing happened and I’m afraid it’s going to be that way until Thursday. We have the Fed meeting later this week and the start of Rosh Hashanah so interest in equity trading ran super low. There was no economic data either so we can’t even make fun of people overreacting to statistical noise. A 10 point range most of the day (1949 – 1959) led to talk about football games and staring at this picture wondering where it is. Winners were BXLT, CHK, RIG, XRAY, and XLNX.  Losers FSLR, COG, NUE, CF, and FMC. Honestly, it would take a herculean feat to make this morning sound interesting so I’m not even going to try. A forgettable 4 hours where even the most die-hard market addict would’ve fallen asleep. I will say this though: the market feels like it’s gone from “buy the dip” to “sell the rallies”. There is no love for stocks on downdrafts at all, it’s amazing how fast sentiment changed. Did the market really top out earlier this year? Aren’t tops supposed to be euphoric? Did that one strike you as being euphoric? 

Nothing happened the rest of the day and we closed right where we were trading around lunch, 1,953, down 50bps. Let’s end with this awesome quote by Howard Marks.  As you know, I’m a big fan of his approach to investing. He has his head screwed on right as it pertains to the big picture. Anyway, here is a link to his latest missive with the following thought: “The best way to get through a downdraft is to verify your thesis, tighten your seatbelt and hang on.  If you sell just because there’s a downdraft (or an updraft), you’ll never get that twenty-year winner”. I mean yes, he is basically saying that you “buy and hold” through the bad times but with the caveat that you “verify your thesis”. Which is important right? If you entire thesis is based on low rates from the Fed…and they start tightening….then maybe it’s time for a new strategy. But if your thesis is that Disney is an incredibly well run company, executing on its business plan even in tough times (they bought Marvel during the 2008-2009 financial crisis), then why bother staring at it because China decided to throw its own crash party. Bob Iger probably isn’t sitting in his office saying “damn, the Shanghai Composite fell 40% from its high, cancel the Main St Electrical Parade until we get some clarity there”. Marks is right, investment returns have fat tails, the 20 year winner is what you are aiming for here. So circle the wagons, check your thoughts, and if necessary make adjustments but I imagine you’ll find that you don’t need that many.   

Final Score:  Dow -38bps, S&P500 -41bps, Nasdaq -34bps, Rus2k -37bps

News Highlights:

We’ll end tonight with a quick look at why I will never do this sport.   I would definitely be the guy that would hang on too long

https://www.youtube.com/watch?v=030TR44sVHA

Have a good night.

The Trend Is Broken

Equities start the day higher as our last holiday until Thanksgiving comes to a close. Booo. There is the often maligned Columbus Day and the exceptionally awesome Veterans Day but exchanges are open for both of those so they don’t count. Did you have a nice three day weekend? I did, managed to paint my son’s room 50 shades of grey. There’s nothing that brings about a bigger sense of failure than trying to paint the edges of a room right? It is literally impossible to succeed even with tape, the misery is real. Anyway, this isn’t a holiday or a painting blog so let’s catch up on the market. Futures were higher because Asia had a strong close and Europe partied to the tune of 1.5% so everyone felt pretty good about themselves this morning. But there is so much damage my friends, so much to consider when you see these overnight moves. The trend is broken…shattered….left in so many pieces. We are prone to these incredible bounceback rallies but they are nothing but noise until the leg is repaired. We would need to see all kinds of up volume, oil to stabilize, China to stabilize, industry groups to resume uptrends, the Fed to do SOMETHING (sounds weird right), and sentiment to stop feeling like its puppy got run over. The problem is, all those things won’t happen at once, and I’m not saying you need to sit in your bunker until they do. I’m just saying that these big rallies aren’t meaningful yet, we need a lot more to happen to get this train back on the tracks. Barry had a good article on this topic today, go give him a read before you move on.

After the open it felt like Labor Day was still in full effect. Decent overall volumes but institutional clients seemed absent. The only economic data point was the NFIB Small Business index but come on, that one ain’t moving the needle. We soared off the open to 1,960 where we stayed all the way thru lunch. Yep… it was one of those sessions where all the gains come in the first 20 minutes and then we stare at sideways for hours. As always cyclicals led the bounce: Industrials like DOV, TXT, and GE.  Materials like FCX, OI, and DOW. When it comes time to rip ‘em they go RIGHT to the beaten down dogs. Not that many losers to speak of, only NFLX demands our attention. Remember NFLX? The darling of 2015? This thing was up 157% YTD at the start of August and now it’s up a paltry 94%.  94%...pffffttt….I don’t even get out of bed for that return. A rule of thumb I’ve lived by (over the past few years) is that corrections are typically near their end when everyone starts puking the biggest winners. Is it different this time? Maybe, we’ll see, but once everyone starts dumping DIS and AAPL and NFLX and SBUX you know towels are being thrown in. Anyway, fairly quiet morning led to some mediocre lunch and talk of how the Packers are going to beat the Bears by 35 on Sunday. Sounds right to me, in fact the Packers are a guaranteed lock to cover (please work…please work..)

We broke the sideways range around 1pm ET and it was off the races. By the end of the day we had managed to gain a tasty 2.5%. So should we sound the all clear? Of course not, like I said before it’s going to take a lot more than this. Volatility is back with a vengeance and all it would take is a bad night in Shanghai to erase all of this. I imagine we’d need to recover 2,000 on the S&P to get any real buyers back in the market so patience is probably still warranted. Hey…let’s end on a positive note shall we? Take a look at this chart of European bank lending to non-financial corporations. That’s a mouthful right? Let me sum it up differently: Green Shoots.   

Final Score:   Dow +242bps, S&P500 +251bps, Nasdaq +273bps, Rus2k +225bps.  

News Highlights:

We’ll end tonight with a couple “high flying” links

The first is a bike jump that I don’t really get.   Was the whole plan to crash?

The second is the highest and longest slackline ever attempted.   Slack line videos are starting to pass wingsuits as my “no freaking way” favorites.

Have a good night.

Are We Out Of The Woods Yet?

Equities start the day lower and all anyone wants to know is….Are we out of the woods yet, are we out of the woods yet, are we out of the woods yet, are we out of the woods. We got a LOT of Bad Blood going on right now because everyone and their mother is worried about China. Speaking of worries, you can put the month of September next to Chinese manufacturing numbers because it is one dire month for stocks. Ok, let’s fill this Blank space with some fresh thoughts shall we? Ever heard of the 10 month MAVG? Probably not, but I wish you would because it’s followed by the Pro’s to sense big trend changes. Take a look at this fantastic chart from dshort.com and you’ll see that buying and selling a 10 month simple moving average has been fairly effective since the early 90s.  Now a lot of people will say “but Mike, All you had to was stay in the market over the long run and you generally avoid all these whipsaws”. That’s a decent argument, but with respect to this bull market it’s starting to feel like Everything has Changed. Volatility is back with a vengeance, dip buyers are Never ever getting back together, and all sorts of investment Style’s aren’t working. Look, in my Wildest Dreams I never thought we’d see the kind of moves we saw in August. The 10 month MAVG filters out daily noise and shows you long term trend changes. When the trend changes its important to decide: do I want to still be here or do I want to get Clean. This is a pivotal moment folks, either the bull market ended in August or this is just another whipsaw. I don’t know the answer to that question but it feels crazier now than it has in a long time. Welcome to trading in New York. (that wasn’t bad right? I think Wildest Dreams is my favorite of her new songs). 

After the open it was another one of those “everything is down” type days. 500 stocks in the S&P and you were hard pressed to find 4 or 5 that weren’t hideous. Just an across the board 2.5% puke fest led  by financials, energy, and materials. It really is ALL about cyclicals right now. On miserable days they get crushed, on rebounds they soar. Bi polar? That’s an understatement. Couple economic data points today: ISM Manufacturing continues to lumber around the 51-52 area and August Flash PMI was inline at 53. Quieter selloff than the one’s we saw last week, in fact if I didn’t have this $20k a year Bloomberg terminal I would’ve thought it was another slow summer day. Who really got pounded? NFLX, DLTR, FCX, and JOY. FCX was up big the other day because Uncle Carl took a stake, today no one seemed to care. Things are just that schizo. Any winners at all? CVC and AAL. An Airline and a cable company…good luck finding the pattern there. One weak sauce rally got smacked and by lunch we were on the lows, 1,922, down 2.5%. Duran Duran last week, Glen Miller today. We’re really swinging thru the centuries of music here (see what I did there?  That one just came to me.  BAM) 

The final hour it went down, they were yelling timber. Look, we can try to dress this up anyway we want but we hit resistance, period. There was overhead selling, a lot of it, and once that geared up there was nothing anyone could do about it. That’s the problem with trend changes, when you try to go back to the old ways it doesn’t work. Now we have to retest the lows and like any retest it’s going to suck.  I wish I felt like I was 22 because my youthful optimism is running on E right now.  3% rallies and selloffs are becoming the norm….what is this 2008?  2011? Can China really do this to global markets? I guess the answer is yes. One lesson that comes back time and again is that the globe is tiny, no market is insulated from a slowdown. Even if it’s across the Pacific Ocean.

Final Score:  Dow -284bps, S&P500 -296bps, Nasdaq -294bps, Rus2k -271bps.   

News Highlights: 

We’re gonna end with some Crossfit fails because if there’s anything that sells well its Crossfit fails.  You know what the first rule of Crossfit is right?  You ALWAYS…

https://www.youtube.com/watch?v=opYj0XICHvQ 

Have a good night.

GDP Revises Itself Into Candy Land!

Equities start the day higher as GDP revises itself into candy land! The first look at 2nd Quarter GDP came in 2.3%, today we got the 2nd look at it came in 3.7%. So you know where I’m going with this…that’s right…USA USA USA! By the way, how odd is it that the economy is doing better than the financial markets, it’s been the other way around for a long time. There’s lots of reasons to be worried about equities but is U.S. macro data one of them?  So this week I had planned on writing every single day because the market has gone Crazy Eddie (I used to love those commercials) but it’s been so insane on an hour to hour basis that I’m struggling to even drink water during the day.  Remember how I used to complain that it was slow and the market was going sideways? Not anymore my friends, this is like going from an all vanilla diet straight into Chubby Hubby (it’s the best Ben and Jerry’s flavor hands down). So where are we in this correction thing? I was quoted as pretty bearish in Marketwatch so you can thank me for ringing the bell at the bottom.  I suck. We are a whopping 7% off the all-time highs and I’m reading about people calling for QE4 and Janet to cut rates. Is that really where we’re at? Have we become SO ADDICTED to central banks that even the slightest weakness brings out calls for stimulus? My God, I didn’t realize the drug was that powerful. I don’t think we’re going to have a V shaped recovery like last October, this is a real macro earthquake (that one was dumb, people thought we were all going to a die from a random disease). What would signal an all clear?  I’m not sure to be honest, we’d need a couple days of huge up volume to start (we got one yesterday at least).  Anyway, let’s see what Thursday brought. 

After the open it was Rip City baby and we’re not talking about my 2nd home of Portland Oregon. Up 4% on Wednesday? Bah, that’s not enough. Another 2% this morning to 1982. Hungry like the wolf, hungry like the wolf. Crude surged, Yen surged, and everyone who dip bought on Tuesday finally took a breath. If I told you this was the cover of the next Bloomberg Mag would you laugh? I love it. Energy and Materials were the big winners, utilities the big losers (relatively). FCX was up 30%. 30.  CNX was up 13%. These moves are just ridiculous. Did you know someone bought 11k shares of AAPL at 92.21 on Monday a mere fifty two seconds after the open?  Closed today at 112. Efficient markets. Volume was good too, the big index ETFs didn’t do as much as they did on Monday but they still did a ton so don’t let anyone say volume was poor. There were two losers of note, PDCO and WSM both on earnings. This morning was definitely interesting…for crying out loud oil was up 10%. We live in a world where GE can fall 20% and oil can rally 10% for no reason at all.  I love it!  It’s as crazy as this guy right now

The afternoon saw a huge selloff and then a huge rally to close the day. 1,987, up 2.4%. No joke, it feels like everyone is lost right now. 1-2% swings intraday are becoming ho hum at this point. Why did the market rally?  No one knows. Why did it selloff?  No one knows. It’s acting on pure emotion and that’s dangerous in either direction. We did get another big up volume day so the Monday low is starting to firm up a bit. It’s still hard to say whether the worst is over, I’ve seen more intraday Vs and…whatever the opposite of V is...lately than I have in the past few years. It’s hard to have firm convictions here. Is it too much to ask for a quiet Friday?

Final Score:  Dow +227bps, S&P500 +243bps, Nasdaq +245bps, Rus2k +188bps.    

News Highlights: 

So we’re gonna skip the usual funny link and go with a bit of inspiration.  It’s a 4 minute video so all you ADD types will probably close the link after a few seconds.  But I promise you, you’ll miss out on gold.  

https://www.youtube.com/watch?v=sycgL3Qg_Ak

Have a good night

Last Night Was Crazy

Equities start the day lower….actually screw it, I need to invoke Special Order 86 here. When Special Order 86 is implemented we scrap the regular recap and go with a full on stream of consciousness writing style. I do this for special events such as the Flash Crash or Lehman brothers because the regular format is too boring for the clown fiesta I just witnessed. You’d think re-entry after vacation would be gentle right, a nice long runway where you get back in the groove. But not for me…no….Mr A gets thrown into a fire pit of China imploding and Oil trying to trade for a dollar. Overnight looked pretty grim, down 2%ish. Ok, fine, it happens, markets can have a bad night from time to time. But last night was Krusty the Klown krazy as the Shanghai Composite fell 8% and our futures fell 4%. I honestly can’t remember the last time futures were down 4% pre mkt, maybe the financial crisis but usually those days started out ok and then fell apart. Today started out horrible and then the open was even worse.

Let’s look at HCA to give you a bit of perspective about how the day started. HCA has been a huge winner this year, in fact it’s been a huge winner for a while now. Hospitals…I mean hospitals are popular places for, you know, sick people and such so they make a lot money. Anyway, here is an updated chart of HCA after today.  Are you kidding me…really? You’re gonna do that to a big hospital group? This isn’t some startup that just reported zero revenues and loss of 3 million mobile subscribers this is an honest to goodness medical conglomerate. You know what? There are more charts that look as dumb as HCAs. CL, COST, GE, CVS, SBUX, and KR (it’s a grocery store for crying out loud) pick any of those and you will see insane moves. Colgate….they sell toothpaste and freaking dish soap and the stock was down 20% on the open. Sigh. So what’s the main takeaway from the morning? That 1) volatility can be off the charts at times, we’ve been lulled to sleep  2) the market can still break, huge stocks like GE can fall 20% out of the blue and 3) good brokers save you from these idiotic moves or at least help you navigate them. It kinda looked and felt like Flash Crash 2.0 my friends. By the way, next time we see transports and cmtdys sell off we need to listen with both ears, They literally told us this was going to happen. So the open was nuts, and it felt like full on capitulation to me. But then we started rallying in a big way. The Dow was down 1000 points after the open, by noon it was only down 200 points. Apple had a 150bn round trip on its market cap, 150 BILLION. This is the largest most liquidly traded stock in the world and people couldn’t decide on its market cap to within 150 billion dollars. Billion…with a B. Did I mention this was going to be stream of consciousness because I’m rambling here! Look at the chart of XL, does that look like normal price discovery to you? Sigh…..these markets. I have to relay this awesome quote by @cullenroche before we move on: “The stock market is the only market where things go on sale and all the customers run out of the store”. How good is that?

The lunchtime rally fizzled out a bit and by the time the bell rang we closed down 4%. Puking in the gutter, face down, had 82 tequila shots and a 6 pack of taco bell tacos ugly. Only THREE STOCKS in the S&P closed up by more than 1% (GAS, SWKS, and GMCR) so the pain was real. Pardon my french but ZUT ALORS was that a bad day. The kind of day where hitting bids gets you nothing. Ugh. So here’s the deal: I said it was “all noise until we break 2,050” and now we have, so it’s not noise anymore. The market has all kinds of technical damage and this palpable uncertainty won’t resolve itself quickly. We have officially entered a correction. Will the Fed hike this year?   Most people would say no but I still think there’s a decent chance they do (Dec not Sep). I don’t think they care if financial assets quake from time to time, they want to begin some process of normalization however small that may be. Remember how we were trading in the tightest range ever? Not so much anymore, but this is why they call them “Risk assets” so embrace the madness. I’m going to leave you with one last chart…of the VIX….going back to 2008….and wonder…. W…T….   

Final Score:   Dow -358bps, S&P500 -394bps, Nasdaq -382bps, Rus2k -390bps.   

News Highlights:

I’m too wiped out for links, I might fall asleep in my car before driving home. Let’s move to the big finish.

I looked for a video that best represented what it’s like to be in the market right now. I thought I did pretty good job all things considered.  

https://www.youtube.com/watch?v=QsQpfHM9ICQ

Have a good night.

The Dog Days Descend Upon Us

Equities start the day lower as the dog days descend upon us. Late August…what’s there to say about markets in late August? What’s there to say about markets in Late August that are going sideways? What’s there to say about markets in Late August that are going sideways and have been so since last November? Well, let’s try to say something otherwise this is just a glorified Youtube blog. Led Zeppelin wrote a wonderful diddy called “The Song Remains the Same” and that’s what we’re going thru right now. Macro data is junk, oil is a trainwreck, China is so slow that they can’t even hide it anymore, and valuations are thick so we can’t rally. That being said, pessimism remains high (check out this article in Bloomberg today), the US is still the only place with growth, and 2,050 refuses to be broken so we can’t sell off. All that remains is the Fed and we FINALLY have a meeting in play. Sep 17, the first time in forever where interest rates might actually move, has become our only catalyst on the horizon. But it has been thus for weeks, even months. The song has been the same since we turned the calendar and it will remain the same until something happens with Janet’s crew. Buckle up….because it’s gonna be a….wait…. actually you don’t need to buckle up, the next few weeks are going to be a death march. 

After the open we saw the kind of price action you’d expect from late summer markets. A sharp selloff (on nothing) immediately followed by a sharp rally (on nothing). Thin markets? Check. Easy to push around? Check. Everyone dreaming of the last few weeks on the beach? Check.  No macro data?  Check.  Ok, I guess there were two small data points in Empire Manufacturing and the NAHB housing index but those are B levels releases, on a busy day they typically get lost in the background.  We saw all kinds of short covering moves, names like CMCSA, DISCA, CHK, YUM, and even AAPL were up big.  AAPL short covering?   Probably, the stock has spent quite a few weeks in the shed. ZU rose 50% after agreeing to be acquired for $18.75 a share. I love that company name so much. EL was the biggest dog falling 6.5% after earnings.  You know what they blamed right?  Yep, currency, the new catch all for “our sales were weak”. Other losers were CVX, HAL, NBL, and NFX (energy still can’t catch a break). I wanted to save this link for my news highlight but it’s just so juicy that I have to put it in here. The NYT wrote some kind of massive AMZN hit job today (click here to read it) and it makes the place sound like a giant career MMA match:  At Amazon, workers are encouraged to tear apart one another’s ideas in meetings, toil long and late (emails arrive past midnight, followed by text messages asking why they were not answered), and held to standards that the company boasts are “unreasonably high.” The internal phone directory instructs colleagues on how to send secret feedback to one another’s bosses. Employees say it is frequently used to sabotage others. (The tool offers sample texts, including this: “I felt concerned about his inflexibility and openly complaining about minor tasks.”). I wonder what the point of this article was?   Why now? It’s a brutal attack on the culture of an American Titan. 

The rest of the day was sideways (get used to it) and we closed at 2,102, up 50bps. Stop me if you’ve heard this before but we are right….back…in….the….middle….of….the….range. But hey, at least we’re back above the 50 and the 200day. So did you enjoy your Monday? I hope you did, just because it’s Monday doesn’t mean you can’t have a great day. It’s sunny, we’re alive, summer winds are blowing, your family loves you, and the market closed higher.  Go for a walk, hug a kid, kiss your dog, all is well in the world.

Final Score:  Dow +39bps, S&P500 +52bps, Nasdaq +86bps, Rus2k +102bps 

News Highlights: 

So here’s a quick rule to live by in life.   Never go down a water slide in some rundown, beatup, 3rd rate water park.   Ever.   This guy must be in the hospital…still….even though this video is from 2012.  

https://www.youtube.com/watch?v=UN4Do2rwS-E 

Have a good night.

A Great Recipe for Alpha

Equities start the day lower because it’s Tuesday. Seems odd right? Take a look at this article by Bespoke if you want to invest in the S&P this year (I love random factoids, by the time its discovered / talked about it up and disappears). Lots to chat about overnight so let’s get right to it! China pulled out the old “when all else fails devalue your currency” play and it rocked capital markets all over the globe. Currencies in Asia wigged out, Treasuries rallied (reduces chance of Sep hike I guess), and stock indices quivered. Should we be worried that another 1997 Asian currency thing is upon us?  Not really, that was a widespread and dramatic devaluation so I don’t see a lot of parallels. Google decided that its name wasn’t crazy enough and opted to change it to Alphabet. Yep, you read that right, Alphabet. I’ll put that on the list next to Mondelez as “Top 5 worst company names”. Why did Google choose to undergo this corporate restructuring?  Smarter people than I have written on it so read Salmon here and Malik here. Yesterday’s rally was pretty impressive right?  1.3% for no reason other than we were a touch oversold. But that’s been the story of 2015, endless whipsaws in a 4.5% range. Every rally is met with a chorus of “here comes the breakout” and every selloff is met with a chorus of “the top is in”.   Until we break this horrendous channel all of this price action, and I mean ALL OF IT, is just noise.  But…that doesn’t mean opportunites are scarce. RBC noted that the CBOE correlation index has its lowest close in 6 years yesterday. Flat markets…low correlations….plenty of company specific news….that’s a great recipe for Alpha my friends (I mean look at the chart of ADBE).   

After the open stock bulls looked like this. Everyone and everything got run over, especially energy and anything China related.  Your favorite company makes tacos and fried chicken that get sold in Shanghai?  Pummeled.  Your favorite Energy stock was up 7% yesterday? Not anymore. Crude touched $42 a barrel which is right back to multi-year lows.  I mean if you crave biotech type volatility with commodity price swings then the Energy space is your bag baby. Winners were few and far between, the aforementioned Alphabet or Google or whatever it’s called was up 4% joined by the likes of MPC, AAL, VLO, and DAL. Like I said before, the biggest losers were energy stocks, materials stocks, and people levered to the dragon like YUM, WYNN, and even AAPL.  By lunch we were down 26 pts, about 1.3%, but you know what…that’s where we closed on Friday. Feels like blackjack table in these here markets. Hey, I’m on a 5 hand winning streak, up $5,000, tipping waitresses with black chips and planning out my night at Pure.  What’s that? I lost on 20 and now the shoe is on my throat, I’m back to flat and hoping to get comp’d at the seafood buffet? Up’s and down’s all over the place, it literally changes like the summer wind. Came blowin in….from across the sea (I love that song). 

The final few hours were spent on the lows and not even Superman could’ve saved this one. 2,085, down 0.95%, ugly all the way around. Hey, here’s a trivia question for you (courtesy of Factset): What was the most cited keyword during this earnings season by companies in the S&P500? The answer: “Currency” (after that was Europe and then China but currency was the top dog). Strong dollar…strong dollar…strong dollar. So yea, you can see why this China move is freaking people out.   Does it put the Fed on hold for Sep?   Maybe..probably..you’d have to think they are incrementally concerned.   I remember the time when bad news was good news, guess we don’t live in that environment anymore huh. 

Final Score:  Dow -121bps (about to have a death cross.  Ooooo spooky), S&P500 -96bps, Nasdaq -127bps, Rus2k -94bps.

News Highlights: 

Tonight we’ll look at the world record free solo for Slacklining.   You know slackline really is the perfect term for this sport right?  

https://www.youtube.com/watch?v=EzrI8BeOw_0

Have a good night.

Media Takes Its Turn Imploding

Equities start the day flat as Media takes its turn imploding. You know what, if I dropped out of space and read about the carnage in Energy stocks and Media stocks I woulda bet the market was down 15% YTD. Is this gonna be a sector by sector crash? My boys at Disney reported yesterday and while expectations were thru the ROOF it was ESPN that sunk the boat. All kinds of concerns about the “cable bundle” have cropped up lately and Disney’s earnings didn’t help at all. The cable sports network is an absolute behemoth so when they mentioned “some subscriber losses” it opened the door for people to go all Jason Vorhees thru the sector. VIAB / CMCSA / AMC / DISCA / etc…I mean if you have a show that runs on cable bundles you are in the crosshairs right now. Which begs the question….is this an overreaction? Is the cable bundle really going away? Personally I think it is, and 2015 will be the year where it all tipped over.  I’m not sure anyone in my family really watches TV anymore so I am witnessing it firsthand (certainly my kids don’t.  I wish I could buy stock in just Youtube).  That being said, the bundle isn’t going away anytime soon and these horrific moves are probably just weak kneed bulls leaving the sector.  These been a lot of money made here so I sense a stampede for the exits.  But can ANOTHER group of stocks melt down and have the overall market ignore it?  Can we have DIS and everything cable related get crushed alongside every Energy AND Material name? No way right?  With a Fed rate hike looming? Is it time to turn bearish?

After the open it felt like these names were going to lead us into a massive nosedive. DIS fell another 2% dragging stuff like FOXA, CVC, NWSA, and TGNA with it. At one point the entire media sector of the S&P was down 4%....you’d think they produce coal for cying out loud! No real economic data to speak of, weekly claims but that thing hasn’t changed in forever. We get the jobs report tomorrow so we’ll save our employment talk for another day. You know what bounced today?   Energy…it happens. When CHK leads all gainers you know the world is turned upside down. Other big winners were RIG / HP / NFX / DO / SWN. GMCR brewed up a cup of lukewarm misery dropping 29% after another abysmal quarter. Remember when KO invested $1.25B in this company at $75 a share? Not an ideal outcome so far.  WFM hit a new low because apparently Asparagus water isn’t selling well (there is an INSANE amount of whole food competition right now. I can get organic beet flavored syrup in about 82 different places). KORS and ZU actually did ok after reporting! ZU’s 13% gain managed to cut their YTD losses to just -42%! Boom shaka laka. Most of the chatter today was about media stocks though and by the end of lunch we sat on 2,076, down 1%. Fairly ugly price action in the first half, not a lot of positives my friends. Can I buy the Sommelier channel a la carte yet? Who’s gonna make that happen for me? 

The rest of the day was spent in a quiet slumber as the S&P probed the depths of the day’s lows. Did you know we’ve crossed the 2,100 level 43 times in 2015? Can anyone remember the last time we traded as horizontal as this?  It must be before my time because I started here in 2007, watched the market go down every single day for 3 years then watched it go up every day for the past 5. I can’t take all this treading water, it’s making me nuts. The million dollar question is this: can we really keep going back and forth with all this horrible internal action? I find it hard to believe the market can sustain new highs as the Fed Hikes and each individual sector has its moment in the woodshed. First it was Transports, then Energy, now Media. Something better change quick or the sum of the evidence will be impossible to ignore.  

Final Score:  Dow -67bps, S&P500 -76bps, Nasdaq -162bps, Rus2k -130bps 

News Highlights: 

We’re gonna skip my fun time happy links today because my final video is that good. 

Ever see a guy paraglide into a tram thousands of feet above the ground and almost miss it and plummet to his death?   Yea me neither. 

https://www.youtube.com/watch?v=vcv5i0bX3tc 

Have a good night.

August Sizzles On The Platter

Equities start the day flat as August sizzles on the platter. Not a great month for stocks but I’m telling you what, this time it’s different (the worst phrase to use in investing!!). All those other Augusts didn’t have the Fed standing in the batter’s box ready to swing a huge bat. We’ve been on hold all year waiting for Janet and her crew to make their move so I don’t see why anything would be different this month. Sure, we’ll have our up’s and down’s like the others but ultimately this market is going nowhere until that first rate hike is handed down. All the major concern has shifted to AAPL as it broke its 200 day yesterday. Is that a big deal? Sure, maybe, I guess it could be. It’s been pointed out that only a few stocks are leading the parade and Apple is definitely one of them so if it falters that’s a pretty big deal. On the other hand, Transports have successfully traded above their 50 day MAVG for four days now which might signal a change in that goat rodeo (we need it to change badly). So many cross currents my friends…which one should we pay attention to? I guess all of them, or none of them, I’m not sure they matter. The Fed…The Fed looms….it’s all about that Sep meeting. We can talk endlessly about trends and moving averages and margin debt and training camps but none of it means jack right now. We wait…just wait…..like standing at the bus stop staring down the street saying “really..are you ever gonna get here?” 

After the open, this was an actual headline on the venerable “Drudge Report”. Two thoughts swirled thru my gray hair covered head and I pondered the ramifications of such a claim  1) COME ON MAN  and  2) I wish I thought of it because that’s some epic clickbait. Apple did indeed trade lower (down 3%) but I honestly doubt one company could “bring down the market”. A few could (financials circa 2008 almost did), but one company, no matter how big, probably won’t crater a $19 trillion dollar market. That being said, this video about sums up Apple’s chart. We spent most of the morning going sideways because its August and virtually everyone is on vacation still (you should see the string of “out of office” I get when I hit send on this thing, it looks like a slot machine). A few decent movers to talk about though. NFLX rose 7% because they are launching in Asia, VMC also rose 7% after beating earnings with their pointy ears (sci fi nerdery!), and IPCM jumped 35% after getting a takeout offer from Team Health. Hey junior banker….are you in Healthcare M&A or Healthcare banking anything? Congrats on winning the 2015 lottery. Losers were ALL, NRG, NK, and CNX. Coal…my God. Are there going to be any survivors in this space?  Maybe Tiffanys? All of their charts look like the glidepath to runway 10L at O’hare. 

The afternoon saw us break the sideways malaise and trade lower.  Why? Well, it wasn’t Apple or Crude oil. Atlanta Fed President Lockhart said “there’s a high bar not to act in Sep” and that was enough for sell algos to break away from smashing coal stocks and start smashing all stocks. We closed at 2,093, down 22 bps, but we’re still nowhere. Someone on Twitter said its been 50+ days since we made a new high and that’s the longest streak in 2+ years. We’re on perma hold people, it’s like calling the cable company and trying to cancel. Sideways, it ain’t just about Merlot anymore.

Final Score:  Dow -22bps, S&P500 -22bps, Nasdaq -19bps, Rus2k -24bps.    

News Highlights: 

Once again I have a couple end links for you.   This time we’re gonna see just how big your attention span is.

 The first video is 14 minutes of motorbike crashes.  Lots of painful stuff in here

 The second video is 14 seconds of hammer throw fail.   I guarantee 99% of my readers choose this one.  We live in such a quick hit society right?

 Have a good night.

The Old “Bad News Is Good News” Trade Rears Its Head

Equities start the day slightly higher as the old “bad news is good news” trade rears its head! We got the vaunted “employment cost index” report at 730am CT and it showed a very small gain in wages. Small gain in wages…you know what that means right? Speculation the Fed will push back its interest rate hikes! Yay! In the absence of Greece or China we’ve run back to the warm comfort of Fed watching. You know what’s been quiet lately?  Macro headlines, which is great. Frankly I’d rather talk about company specific stuff than speculate over Chinese brokerage accounts and whether the Greek Finance minister is playing some kind of chess game against his German allies. Gimme good old fashioned CEO speak over currency interventions any day. So here we sit, 2,108, smack dab in the middle of the range because we have NOWHERE ELSE TO GO (best Richard Gere line of all time). The rally has run out of steam and we’re coasting on fumes. Josh looked at this very issue and came up with one conclusion: anything can happen. “Flat markets do not necessarily suggest any particular outcome when the S&P 500 finally breaks out of its slumber. It’s been down three times, flat once, and markedly higher in the other eight instances.”  So there you go, don’t fret about it. Personally I welcome a flat tape, I truly think it gives PM’s an excellent chance to outperform. If you are in things like DIS, SBUX, UA, EXPE, NFLX then you love a market that goes nowhere. Throw up a bunch of Alpha and all of a sudden the world is smiling at you. Speaking of smiling its Friday, let’s do a quick recap and enjoy the weekend! 

After the open all anyone could think about was the Hamptons. Well, at least that’s what it looked like judging by price action. A whole load of sideways between 2108 and 2113 my friends. Hey, remember how I was worried about transports? (along with just about every other person on the planet)  Let’s see how they are doing shall we?  According to my fancy downward line and circle chart it’s entirely possible we’ve turned the corner in these things. We’d have to see a bunch of follow thru (rapidly) but the fact that they made a higher high bodes well. The biggest loser today was OCN, which got hated on more than a Minnesota dentist (company has been struggling for a while now). In the larger caps LNKD and HBI both fell nearly 10% because I guess not enough people are looking for jobs in their underwear. Who knew. Winners were CCE, EXPE, RCL, COLM, and SHAK.   Consumer stocks…so hot right now. By lunch I’m guessing most of the East Coast had left because the market sat on 2,107 and refused to budge. I mean it was SHARPLY unchanged. 

The end of the day saw this headline: “Bullard says Fed in ‘good shape’ to raise rates in September” and that was enough for a small selloff. We closed at 2,103 which is, again, right down the middle of the 2015 fairway. Let’s face it, the market isn’t going anywhere until the fed does something so be prepared for endless horizontal index charts. Next week is the end of earnings and the beginning of August. Both of which I am sad about.   Where did the summer go? Sing us out of here Jean Valjean “The summers dies one by one, how soon they fly on and on”  

Final Score:  Dow -29bps, S&P500 -20bps, Nasdaq -1bps, Rus2k +52bps     

News Highlights: 

I have two solid links to end on tonight. 

The first is the most flexible person I’ve ever seen 

The second is arguably the dumbest person I’ve ever seen 

Have a good night!

The Great Angst Continues

Equities start the day lower as the Great Angst continues. Angst is a funny thing, it comes and goes (especially in teenagers) for no apparent reason. Websters calls it “a feeling of deep anxiety, typically an unfocused one about the human condition.” One day you are smiling and laughing and the next you hate everyone and everything. The U.S. equity world is suffering from angst right now and I’d be hard pressed to tell you the exact reason why. No doubt it has plenty of worries on its mind: China meltdowns, Energy stock meltdowns, breadth, how awful this Ballers show is, Transports, summer daydreaming, and a host of other things. But the angst comes and goes and I have no idea why. We’ve seen the market dive like a Los Angeles class attack sub and rise like an F-16. Puke thru the 200 day and bounce it’s head against the ceiling. So we have to ask ourselves this question: What is the primary trend? Is it still higher? At this point I would say no, it isn’t higher. It’s actually sideways and I don’t know what changes that.  Economic data is just ok, sentiment is just ok, earnings are just ok (if you take out these godawful energy names), and there’s only 6 stocks doing the heavy lifting (AMZN,, GOOGL, AAPL, FB, NFLX, GILD).  If I’m right and the market has gone into a sideways trend that makes stock picking all the more important. Index funds look great when the market goes up 30%, what happens when it goes nowhere?  The Great Angst my friends….that’s what we are dealing with right now. 

After the open it was all red numbers all the time. I figured we’d bounce after that shellacking we took on Friday but green colors were hard to find. Down we went to the 200 day Maginot line (2,064) which thankfully stopped the Huns in their tracks. Utilities and Telecom did ok but you know what sectors didn’t do ok? Energy and Materials. You know what sectors don’t do well ANYDAY? Energy and Materials. Remember when everyone thought banks were finished in 2008? It’s starting to feel that way with Energy stocks.  Literally none of them go up…ever. Exxon Mobil, the king of the energy names, has gone straight down for a year. The last time that stock saw such incredibly horrid price action was…yep… when everyone thought the banks were going to sink the world. Has sentiment reached bottom in these things? I don’t think so, for me the bottom is usually when you read headlines like “Blackstone to buy energy assets from XYZ” or “Goldman Sachs to invest in XYZ debt”. I want those smart money / PE stories where you know the best investors in the world see incredible value.  Winners today: TEVA / WAB / AGN / ATHN.  Losers:  MYL / UNFI / GRUB / RARE / S. By lunch the S&P was grinding lower because China’s overnight crash made everyone nervous (how crazy is it that the Shanghai composite dropped 8% in one day and our S&P has traded in a 6.7% range ALLL YEEAAR) 

The final few hours were slow and spent between 2,066 and 2,070. By the time the bell rang the Maginot line held (as opposed to the historical one!) but the damage was done.  2,067 down 50bps. You know what really irks me about markets?   The ridiculousness. When the Shanghai Composite went from 3,240 to 5,200 the S&P didn’t give a rip. Up 58% in 6 months while we went nowhere. Now, with the thing falling like Lehman brothers, we suddenly care?   Now it matters to us? I just hate the asymmetry of it all. Blah, now I’m angsty.

Final Score:  Dow -73bps, S&P500 -58bps, Nasdaq -96bps, Rus2k -92bps. 

News Highlights: 

We are going to end tonight with a smile!   Its summer, its warm, time to feel happy about life. 

The first video is a look at sheer determination 

The second is how awesome people can be.   I love the kid at the end. 

Have a good night.

All Macro Hell Continues To Break Loose

Equities start the day lower as all Macro hell continues to break loose. Fresh off a 4th of July Holiday and this is what I get? Really? Remember how everyone called the US a bubble for the past 6 months and I argued it wasn’t because your uncle’s buddy wasn’t giving you stock tips at cocktail parties? I still stand by that thought process and if you really want to see what a bubble looks like (in real time) wander over to the Chinese market. Over there hairdressers are giving advice about stocks and when things go south they just flat out ban selling. Remember that chart I posted that showed the growth of Chinese retail brokerage accounts?   Yea, the telltale signs were there. As for this Greece thing what more is there to say? It’s a tragedy on multiple levels and the fact that we have no compromise (or even a hint of one) days after the referendum doesn’t bode well at all. So should we puke out of stocks here? Take our Disney and Apple and Amazon and run for the safety of cash?  I don’t know…even with all this trouble abroad we are flat on the year and only 3% from the all-time high. That’s pretty impressive right?  We’ve seen a 32% drop in the Shanghai Composite in a little under a month and most of Europe is preparing for Grexit. Yet the S&P held its 200 day on Tuesday and price action hasn’t been atrocious (though it’s not pretty either). The primary trend higher is undoubtedly on hold, it has been for a few months. I just don’t think it’s OVER…not yet. Recessions end bull markets and economic data just isn’t pointing to one. So I think you ride out the choppy waters and hope your best ideas go sale. NKE, DIS, LLY, HAS, all 4 are near their 52wk highs. Should I sell because levered up hairdressers are getting a taste of reality?

After the open everything was going fine until the NYSE broke. Wait…another exchange broke? Come on, say it ain’t so. Yep, and this one elicited ALL KINDS of conspiracy theories in the media and on Twitter. Let’s back up a smidge: this morning United Airlines had to ground its fleet because of some computer glitch. Fine, it happens, I had a flight grounded once because the emergency slide wouldn’t function. Anyway, they started flying again mid-morning and no one thought twice about it. Around 11:30am ET the NYSE put out a release saying that they needed to halt trading on the floor because of “system issues”. Now this is where the Davinci Code / Illuminati / precious metal hoarding people came out of the woodwork wondering if the two were related. Then, to make things even stranger, the WSJ.com went down for a bit. Crazy right? But you know what, even with the NYSE down we could still do our job. We could still execute client orders on any of the other venues available to market participants. So the next time you hear people complain about fractured markets and too many places to trade stocks think about the events of July 8, 2015. The NYSE went down and markets still functioned, they didn’t curl up in the fetal position and wait for some political leader to sound the all-clear. Good job everyone. Unfortunately stock exchange glitches are the last thing we need while Greece and China do their thing so we spent the entire morning trading lower. By lunch we sat 2,053, down 1.3%. Did you know earnings start soon? Is there a single person talking about them / writing about them? Will they matter at all if China drops another 30%?

The afternoon saw the NYSE re-open for business (nice job boys) and stocks hit fresh lows, 2,046, down 1.66%.  It was one ugly day here my friends and every stock market bear is growling their heads off right now. I will say this: it doesn’t feel panicky here, which might be a bad thing. On the whole I feel like people are still complacent about US equities given how long we’ve traded sideways. I might be wrong too, I might be too blasé about a changing macro landscape. But we are only 4% from the all time high, not even halfway to a “correction”. I mean didn’t people want a dip?   Didn’t people want a chance to jump in at better prices?   Before we wrap this up I wanted to mention MSFT, who took a $7.6B impairment on their mobile phone business (Nokia basically). What’s so noteworthy about that (other than the size of it)?  Well, the entire Nokia acquisition cost $7.3B.  So yea…ouch.    

Final Score:  Dow -147bps, S&P500 -166bps, Nasdaq -175bps, Rus2k -153bps.

News Highlights:

I think we need to skip to the big finish because 1) today was brutal and 2) this kind of video perfectly sums up the market.

https://www.youtube.com/watch?v=jQLRXH31qfA

Have a good night.

Earnings Finally Matter

Equities start the day lower as earnings finally matter!  Hooray for that my friends!  I spent an entire weekend at a water park with my kids (I could write a recap 8 pages long about my experience but it might come off a bit snooty) and while they dodged tattoo’d people and questionable liquids I read Twitter looking for something to write about. You know what I DIDN’T find over the past few days? A bunch of articles about Greece, how awesome is that? I reveled in the fact that Eurogroup commentary was sparse and talk about Grexit and Greferendums and Garbanzos were nowhere to be found. Just good old fashioned earnings and macro. Speaking of macro, how about this move in Gold? Another new low as the one precious metal looks incredibly tarnished. Imagine you bought Gold back in 2011 as Europe was threatening to crumble. How did your investment do? Well, if you held it to today you’re only down about 43%. Yikes….at least it’s not 100% right? (I’m a brightside guy) I was never a gold bug and I don’t really subscribe to the “anarchy” trade. I guess it could be a store of wealth if the world turned into a Mad Max movie but would you really want to live in that? Buying rice and band aids with your stash of silver eagle coins you held for just such an occurrence? Did you know the 5yr compound rate of return for the precious metals mining index is now the lowest in modern history? I guess I’m a stocks guy and always will be, but that’s not to say commodities don’t have their place in this game (see my news highlights).

After the open it was lower for longer as we once again retreated from the top end of the range. How crazy predictable has that trade been? Three times we’ve tried to breakout and three times we’ve failed (this is possibly the third...we’ll see). No economic data to speak of so let’s move thru the earnings list shall we? LXK was the biggest loser down 20%. Guess that printer business is tougher than I thought.  IBM (-5%), UTX (-7%), and VZ (-2.3%) were all whiff central which smoked the Dow for 1.25%. How bad was that move in UTX ? Only the re-open after 9/11 had a bigger one day drop…ouch.  CHK fell 7% as it suspended its dividend and now everyone is looking at it with a wary eye. Significant amount of debt, losing money, and now no divvy….not an ideal combo at all. Any winners up in this mug?  HOG, HAR, and ZION. Borrow some money and buy a motorcycle with a cool infotainment system because that’s what worked! (actually that doesn’t sound bad does it).  By lunch the market felt horrible but it was only down 50bps to 2,117. One of those days where you look up and see endless red but I guess it wasn’t all that bad.

 The final hour brought a small rally but you know what, it went nowhere. We closed at 2,119 almost exactly where we were at lunch. So here we sit, at the top of the range once again. We NEED a catalyst to break this stupid deadlock. But you know what? We have one on deck…AAPL. Put your faith in the fruit my friends because if they blow it out tonight we could be off to the races.  

Final Score:  Dow -100bps, S&P500 -43bps, Nasdaq -21bps, Rus2k -45bps.

 News Highlights: 

 I have a couple videos to end on tonight so I’ll give you a choice.

 The first is a tee shot of death

 The second video shows the worst special effects in movie history.   This one made me laugh more than the first to be honest.

Have a good night.

Retail Sales Whiffs

Equities start the day lower as Retail Sales whiffs. Seriously, we can hit space rock from 4 billion miles out but we can’t get a retail sales number to beat? I thought this was the country of “spend until you die,” did I miss some kind of seminar where we changed gears. If I told you Retail Sales hasn’t beat expectations one stinking time this year would you believe me? Yea, actually you probably would. This is just going to reinforce all the chatter about late cycle slowdowns and a recovery that is waning. Sigh.How about this price action though? The last two days have been incredible and I know the EXACT reason why the S&P is up 2.3% from Thursdays close (I bet you want this information BEFORE the rally huh). Cash baby!  It’s all about that cash money. BAML put out their latest Fund manager survey and cash levels are the highest since Lehman (Josh talked about it here).  Why are they so high? Because everyone has been following the same pattern all year long  1)  Macro flares up (in this case Greece and China)  2)  Sell because I’m a weak knee’d bull at the highs  3)  rub my hands waiting for a big pullback because WE ARE DUE FOR ONE  4)  headlines rage and I feel good about my cash holdings.  Im gonnna get DIS for $30   5)  headlines die down because a central bank / policy maker said or did something.  Maybe I shouldn’t wait any longer   6)   oh man a snapback rally and I did nothing  7)  it’s right back near the highs and now I’m offsides / underweight  @#$#@%#$   8)   rinse and repeat. So let’s see if today was more of the same, basically we have to ask ourselves “are too many people positioned incorrectly right now?”

 After the open it sure felt like they were. Bad retail sales? Take em up! The low was the OPEN as apparently everyone has regained their love for US equities. Quiet morning though, and I’m sure all the brokers out there miss last week’s volatility already. JPM and WFC reported today and both kinda said the same thing: we’re doing ok, trying to cut expenses where we can and dealing with this low interest rate environment. Same old same old for these two juggernauts. TWTR was the subject of shenanigans today. Some yahoo put out a fake webpage that looked EXACTLY like a real Bloomberg story and this was the result.  Now you know I love the TWTR service, especially for what we do.  It’s an invaluable real time information service and traders thrive off it. But it can be easily misused / gamed. It’s obvious that multiple algo’s out there exist to simply scan headlines and react so tread carefully.  Up and to the right all the way thru lunch where we landed on 2,110, a full 3.2% higher than last week’s low. Remember when this article hit on Sunday night? (click the link just to see the title)    Yea…so about that…

The rest of the day was blah, we actually faded a bit at the close because buying pressure ran out of steam. 2,108, up 0.4% was the final tally and if I were a betting man I’d say the market will be lower on Wednesday. We’ve come a long way from last week’s lows, it’s time to catch our breath. So yea, I think the past few days have been about wrong-way positioning. “Grexit” became the base case last week, consensus if you will. Everyone had shuffled their hands for exactly that event and it didn’t occur. You know what they say about investing and consensus right?

Final Score:  Dow +42bps, S&P500 +45bps, Nasdaq +66bps, Rus2k +63bps.

   News Highlights:

  

We’ll end tonight with one of the worst dives I’ve ever seen.   How painful do you think that was?   Like papercuts all over your back with lemon juice painful? 

https://www.youtube.com/watch?v=qUIu65jSLOs

Have a good night.

Greece Reaches Some Kind Of Deal

Equities start the day higher as Greece reaches some kind of deal. I’m not sure how many times I’ve written that sentence in the history of my market recap but I know it’s greater than 5. Is it a good deal for Greece and her people? I don’t know, I’m probably not the foremost expert in currency union politics (I know, im sorry, I skipped that class for this crazy “mimosas in PJs party”) but could any deal be all that great without some kind of haircut / debt relief? Actually reading through the text of it we could probably sum this thing up with one phrase: “the beatings will continue until morale improves”.That being said, what appears like more of the same for Greece is not more of the same for stocks! We walked in to futures up 12 pts (about half a percent) and this little correction feels like its run its course. How do we know that for sure? A guy I follow on Twitter (@dasan) pointed out that Apple was the tell (you knew I’d bring this stock up didn’t you?). Back on Thursday people were puking Apple stock like iPhones caused Global Warming. Why does that matter? Because when the best stock on the board gets taken to the woodshed people are at the end of their selling list (they make 92% of smartphone profits for crying out loud). When you’re thru all your shaky stuff and decide that Apple or Disney or Nike have to go well that’s what we call capitulation my friends. So hopefully Greece and the market can settle down for a bit because we have earnings on deck  You know, actual corporate cash flows that get assigned a multiple and determine a stock’s valuation? Heaven forbid we focus on those instead of year 82 of a Greek crisis.

 After the open the NY Post ran this story and we were off to the races. Unfortunately the race ended right after it began because the market decided to go sideways. A 4 point range between 940am and 1pm? That’s right, Greece being fixed mean volatility go bye bye. I mentioned last week that I thought “kicking the can” would put us right back into the range and boy did it ever. Speaking of things that are bankrupt, apparently 50 Cent filed for Chapter 11 today. Come on, how is that even possible? This guy had a once in a life time home run with sugar flavored water and now he’s not even liquid? Lots of fresh all-time highs today: DIS, DG, UA, NKE, SBUX, EA, AMZN, and FB to name a few. Who else is pumped up for this AMZN Prime Day thing? I know I am.If they have paper towels on sale I’m gonna buy 2 years worth because my kids use a roll a day.  Seriously though, this whole thing is just genius. 1) Create a special shopping event mid-year for a select group of customers  2) all of a sudden “non-Prime” people feel left out  3)  people hate feeling left out   4)  especially when paper towels are on sale  5)  prime subscriptions sky rocket   6)  AMZN locks in more recurring revs (think how much COST makes off all those recurring membership fees)  7)  Bezos laughs all the way to buying a Greek island.  Brilliant.  Anyway, by lunch we trading near the top of the daily range but going nowhere fast.

 The last few hours saw us break out of that miserable range and close at the highs of the session, 2,099, up 1.1%. So here we are, back at 2,100, facing the exact same scenario we faced before Greece rocked the boat:  a market trading at a fairly rich valuation alongside an economy that is puttering along.  But you know what, it’s been that way for a long time.   Greece was never going to be the end of the rally, nor was China’s gong show.   The end of the rally is a recession, period, and that’s not here yet.  So get ready for companies to jump over a broomstick because earnings estimates have been lowered dramatically.  You know what that means right?  Time for the old “but they beat expectations” rally!

Final Score:  Dow +122bps, S&P500 +111bps, Nasdaq +148bps, Rus2k +106bps.

  News Highlights:

 

We’ll end tonight with friends who make poor decisions.   If your best girl is rocking out to her favorite song this might be the last thing you want to hand her.

https://www.youtube.com/watch?v=gKSJg0CTBQ4

Have a good night.

The Second Half Begins!

Equities start the day higher as the 2nd half begins!  Any guesses what the first half brought us in terms of stock market returns? Tell em what they won Johnny! YESSS you won a whopping 20bps…0.20% on your money! (S&P500). Talk about a whole lot of angst for nothing. That being said, if you invested in a few major countries on the continent of Europe you won all kinds of double digit returns (as long as you invested in Dollars that is).  Speaking of Europe did they fix Greece again? Our friends in Athens appear to have come to the realization that they overplayed their J – 4 hand and called up the Germans and said “so about bailout thing…yea it looks pretty good”. No joke this is impossible to figure out. Actually it’s not impossible to figure out, the Greek gov’t backed itself into a corner thinking they’d win some kind of National mandate to tell its creditors to pound sand. Unfortunately it looks like the majority of Greeks want to stay in the Eurozone so whatever game they were playing appears to have failed. Will this Greferendum happen?  Won’t it? Stay tuned. Speaking of staying tuned, anyone try out that Beats 1 radio yet? (it’s in your music app on your iPhone now)  I listened to it last night and it made me feel like I was hip again.  Think they are going for the suburban Dad who wants to feel like he lives in Soho and drinks in speakeasies?  Probably not huh.  Anyway, where do we go from here?   I think right back into the range. Michael Santoli of Yahoo pointed out this factoid on Twitter: “This year is the closest to the flat line after six months of any year since good recordkeeping began in 1928. And the S&P was contained within a 7.7% high-to-low range the whole time – the third tightest span for a first half ever, following 1993 and 1994.” A Greece meltdown could’ve changed that; a return of “kick the can mode” will just reinforce it.  Oh well, its summer and we have Friday off, get excited people!

After the open you could sense a bit of optimism that a deal was shaping up over there in those olive groves.  Lots of headlines back and forth talking about concessions and bailouts and potentially suspending this vote on Sunday.  But alas nothing firm shaped up and Tsipras said the vote would indeed be on.  Sigh. A 1% rally got cut in half by lunch as we settled right back into a circling pattern of uncertainty. You know there’s one thing people don’t get about equity markets if they don’t live and breathe them on a daily basis: uncertainty is worse than bad news. Nothing meaningful can happen as long as the Sword of Damocles dangles. We’d rather it fall and deal with the aftermath than sit endlessly staring at it.  CB (one of my favorite public company names) was the big winner as insurer ACE agreed to acquire them for $28B.  High end insurance products are popular you say?  Why does that not surprise me. “Uneven recovery” will be the best description of the past decade once history books are written. Other winners HIG, WYNN, TSO, and VLO. Losers were DAL, LUV, AAL, basically all the airlines as the DOJ opened some kind of investigation into them. How about investigating how lame coach class breakfast is on Transatlantic flights. A roll with butter and 2oz of OJ? Thanks United, Ill just gnaw on magazine instead.

The back half saw a late day rally and we closed the day at 2,077, up 0.7%. Volume has been ok the past few sessions so I won’t complain any more about slow summer weeks. Fortunately we bounced off the 200 day MAVG so downside momentum should be broken for now. Still we wait….wait for the holiday and Greece to decide on her future. Until then most of this is noise so don’t read too much into daily price action. When markets fixate on one specific event they become insanely unpredictable (much more than normal) so we need to take these moves with a grain of salt.  Still we like to see green on the screen and Kermit was definitely hopping around.    

Final Score:  Dow +79bps, S&P500 +70bps, Nasdaq +53bps, Rus2k +20bps.    

News Highlights:

We’ll end tonight with some sick road bike tricks.   I find it hard to believe this guy didn’t destroy thousands of dollars in bikes practicing this stuff, I mean road bikes aren’t exactly a dime a dozen!  

https://www.youtube.com/watch?v=BM0oQIRIyrs

Have a good night.

Whatever This “Greferendum” Thing Is

Equities start the day lower on whatever this “Greferendum” thing is.  I leave for a week and you guys let Greece come back and bite us?  Ok, that’s it, I’m not leaving you in charge anymore, I guess I need that teenage babysitter still. Greece is shutting down its banks and putting the bailout measures to a vote so I guess that’s the end of the bull market in the US huh? Actually it’s not, and if you are puking out Disney because of a situation that’s been going on for 5 years than I don’t know what to tell you. Imagine you decided that the market was too scary in 2011 when this whole thing kicked off. Europe was quaking, bond yields were soaring, headlines were blaring, you figured that cash was the best option in the face of massive uncertainty. What did you miss?  Oh I don’t know, about 900 S&P points, a 91% return to be exact.   But this time is different right? They are closing banks and they are on the verge of default. Ok, that’s troubling, and a lot of people are going to suffer some very real consequences. Here’s the thing though: if there’s two things I’ve learned since 2008 it’s that the sun will rise tomorrow and Governments / Central Banks will do whatever it takes to make sure the system doesn’t implode. If we need some new acronym filled program to ringfence Greece then they will invent it. If they need a parallel currency for a awhile, they will issue it. If they need PhDs and Bankers to sort out all the mess, they will hire them. Worry about the following before you worry about Greece: Puerto Rico default, Transports falling, Breadth, a cool summer, Fed policy mistakes, Chipotle running out of Barbacoa (the only option), and another Bush v Clinton election cycle. Everyone has had enough of this Greece issue, please just end it.

 After the open all of my stock index charts looked like this, and if you really want an eye opening look at carnage wander over to the indices trading across the pond.  Italy -5%, Spain -4.5%, Cac 40 -3.7%.   Yikes, that’ll leave a mark. We had a small rally in the morning as optimism about this being “no big deal” worked its way thru our collective thoughts, unfortunately it didn’t last long and by lunch the S&P had lopped off 1.5%.    Winners and losers?   If the company produced a product that keeps lights on in your home it was up, if it produced anything else it was down.   Hey…you….sitting there on the Tube reading this email….are you ready to hear about Greece for 4 days straight?  No?  Well too bad, because that’s all that’s going to happen.  Dear CEOs / CFOs reading this recap, if you have bad news lurking I’d dump it on the tape TONIGHT! Would anyone even notice? Your product made a bunch of tree frogs sick and the EPA is on your back? Time for a press release! Earnings look a tad light because your new spandex socks are ugly? Call up Bloomberg asap! Anyway, the market spent all morning / afternoon puking on itself because an issue that’s been with us for half a decade might be coming to some kind of messy conclusion.

 The end of the day saw stocks REALLY turn lower and by the time the bell rang we had lost 2%.  Take a look at this one day move in the VIX…if that doesn’t wake the market up from its summertime slumber I don’t know what will.   Only 6 names in the S&P closed positive today…that is an absolute wood shedding.   So before we wrap this up and drown ourselves in a vat of bourbon I wonder…what happens if Greeks vote Yes to this referendum?   Do we re gain all these S&P points in one fell swoop?  Probably not right?  What I’m trying to say is this….do we really believe this entire selloff is about Greece or are there just too many overhangs and this one finally broke our back.  Greece is just one thing, there are a few others circling which make me uneasy.  Oh well, we’ll find out soon enough, but the bull market has definitely been put on hold.

Final Score:  Dow -195bps, S&P500 -209bps, Nasdaq -240bps, Rus2k -258bps.

News Highlights:

For our final video I wanted to link something relevant to today’s price action.   I think this one worked out pretty good! 

https://www.youtube.com/watch?v=fRQvKsVg6RI

Have a good night.

Confusion Reigns

Equities start the day higher as confusion reigns. Actually maybe it’s just reigning in my brain because I’ll admit to being oddly confused. Let’s look at the big picture shall we? The Fed told us “we really want to hike rates this year but it might be a one and done situation”. Ok, that’s good, seems bullish to me. Transports continue to break down like Tiger Woods golf game so that’s definitely bearish. Sentiment is putrid (AAII bullish sentiment has now been below 40% for 17 consecutive weeks ) so that’s definitely bullish. Valuations are still expensive but I won’t outright say that’s bearish given how hard it is to call the top. Still, that’s not exactly good so we’ll lean negative there. The Rus2k and Nasdaq composite are threatening to break out to new all-time highs so yea, those go into the bullish camp. Volume is abysmally low (on a per share basis) but I don’t think that’s bullish or bearish it just is what it is. Donald Trump might be the most entertaining politician we have so I’ll put that one into the “I hope an asteroid hits the Earth” soon camp. I don’t know my friends, are you as confused as I am? I get that all these conflicting themes is the main reason we have no trend but have you ever seen a more forgiving market than this? Both sides, bulls and bears, have been rewarded for being patient.  On May 21, if you were a bear, and staring at new all-time highs in $SPX, all you had to do was wait 2 days for a huge selloff. On June 8, if you were a bull, and had just lived thru 3 ugly sessions in a row, all you had to do was wait 2 days for a huge rally. Should we be celebrating this market? One that forgives poor entry points in rapid fashion?  Maybe, I’ll admit I haven’t seen anything like this in a long time. New highs today? Wouldn’t surprise me, let’s find out.

After the open we did indeed get new highs! Boom shaka laka. Where you say? Well not in the S&P that’s for sure but the Russell 2000 and the Nasdaq both printed new all-time highs. Not only that Biotechs printed another new high. I love how Biotechs pull back a bit and everyone screams “yep, that’s the top” and a month or so later they laugh in the rear view mirror.  Why the morning rally?  I think a lot of people are off-sides, I really do.   All these sentiment indicators scream “I don’t like the market so I’m just watching for now” and when that type of view pervades a market it’s ripe to go higher. Did Greece get fixed?  Nope, we got one rumour saying there was going to be some kind of debt relief but it was summarily dismissed when the Eurogroup said “we got nothing here people”. Economic data was actually decent: CPI was tame and Philly Fed beat so we had that going for us. By lunch the two aforementioned indices were squarely on their highs and the S&P was doing it best to catch up, 2,119, up 0.9%. Did it feel ragingly bullish on the desk? Not at all, and I like that fact. No one talked about new highs and that suits me just fine.

The final hour saw more Greek headlines including this one from Dijsselbloem “Greece moving in direction of Euro exit”. I know this is nothing but posturing and putting the onus on the Greeks to come back to the table but I hope they actually are close to an exit. I just want an end to this story and so does everyone else.  Stay or go, pay or don’t pay, just end it, please. The sun will rise in Athens and Berlin and London and New York. The stock market will survive as will the bond market. The Greeks need to find a way back to prosperity so whatever path they take I hope they find it soon. We closed at 2,121, just 9 points shy of the record. So what should we expect tomorrow or Monday? Why a selloff of course. If the pattern of 2015 holds we will see lower prices within a day or two. Man I hope I’m wrong about that but we’ve been here before remember? (the end of May)  

Final Score:  Dow +100bps, S&P500 +99bps, Nasdaq +134bps, Rus2k +129bps.  

News Highlights:

We’ll end tonight with a look at what happens if you try and get your golf ball back from a crocodile.  Or is it an alligator.   Who knows, but what is this guy doing…seriously.

https://www.youtube.com/watch?v=AnD70z1be3w&app=desktop

Have a good night.

Another Dot Day

Equities start the day higher on another Dot Day! Yep, that’s right my friends, only in finance could we make a dot chart seem like the most important thing in the world! To be fair, the path of future interest rates is critically important to what we do, I just love how something as simple as a few dots has taken on a life of its own.   Fed Day! Who doesn’t love hearing from our friends in Washington about liftoff and inflation expectations and wage pressures, I mean if you don’t live for this stuff than I’m not sure we can be friends.  It’s hard to imagine that the Fed could be more important than it is right now. Every word, every motion, every eyebrow raise is watched like a hawk by the entire investing world.  Will they hike?  Won’t they? Has it always been such?  Frankly I’m not sure, I started in the equity trading world in the year of our Lord 2007 and the only thing I’ve ever known about the Fed is that they cut rates.  Cut, Cut, Cut, never hike.  I’m curious to see what the market does when we finally light this candle because we need a bit of uncertainty.  Uncertainty creates opportunity for you and me.  It allows people to shake off the cobwebs, to overcome their own inertia. So did they hike today? Did they hint at a hike? Did someone protest Janet at the Press Conference? Read on to find out.

 After the open it was nothing but lower. Lower on Monday. Higher on Tuesday. Lower on Wednesday. Hey this market thing might be in some kind of pattern here, trading it might be easier than we all thought! Actually I’m guessing it was lower due to Transports. Honestly look at this chart, talk about rolling over right?  Transports aren’t in some kind of vicious correction like last October, they are in a multi month sustained downtrend making lower highs each time. It is extremely difficult to remain constructive when there are so many different things breaking down (breadth is another one to worry on). Remember sentiment? How I keep pointing out that there are very few bulls? The I.I. survey was out this morning (newsletter writers) and it showed only 45.5% bulls (down from 47.4 last week). If sentiment is ugly, and bulls are scarce, why is this market struggling so mightily? I mean what’s a contrarian to do here, just sit around suffering the slings and arrows of outrageous fortune? By lunch we sat on unchanged waiting for the big show to begin.

 At 2pm we got the Fed announcement along with a new dot chart! Marvel at its beauty my friends because it looks like the Fed wants two hikes this year (is it me or does that chart look like a game of Galaga?). Essentially the Fed told us that the economy is growing moderately and looks strong enough to support an interest rate increase so buckle up. The interesting thing is that stocks rallied instead of sold off. Wouldn’t two rate hikes be disastrous for stocks? You could argue yes (in the very short term), but maybe the market is waking up to the fact that what’s really important is the PACE. Yellen said “the spirit of Fed guidance is consistent with gradual” so I assume people are factoring that more and more into their thinking. We closed at 2,100 on the nose, which was slightly higher on the day. So here’s the big question:  did anything meaningful change today? Do we need to reassess our views of the market? I would say no, most of what we got out the Fed was what we expected going in.  Will they hike this year? I’m starting to move into the “yes” camp even though there are a lot of smart people who still say “no”. I think they want to do it to prove they can, pause, and then see what happens.  Frankly I’m concerned about price action in Transports more than I am about Fed Funds being 0.50 instead of 0.25. I think you should be too.

Final Score:  Dow +17bps, S&P500 +20bps, Nasdaq +18bps, Rus2k -9bps  

News Highlights:

We’ll end tonight with what must be the two dumbest beach goers on the planet.   Seriously guys…what the ….

https://www.youtube.com/watch?v=3NV9WQn9v5M

Have a good night.

Greece Continues To Roil The Market

Equities start the day lower as Greece continues to roil the market, which is a SHAME SHAME SHAME (that wasn’t a big spoiler right? Actually if you didn’t see last night’s GoT finale it might be in your best interests to stop reading. I can’t help myself here). I don’t know whether to label this Greece thing a tragedy or a comedy but I’m sure it’s a mixture of both at this point. Here, this link sums up what everyone thinks when they read another “Stocks fall on Greek headlines” story. The problem is, this never ending parade of talks is causing our market to bleed out like Jon Snow. Every day another paper cut knocks 10, 15, 20 bps off YTD returns and frankly they are starting to add up. That being said, my hopes for the market are the same one’s I have for our now Ex-Lord Commander…..resurrection. Greek headlines are just noise, if we survived the goat rodeo that was 2008-2009 we can survive Greece leaving the Eurozone and the ECB backstopping every piece of Hellenic paper in existence. So while we don’t have access to any red priestesses we do have access to a gray haired central banker who just so happens to be one of the most powerful people in the world. Janet and her team meet this Wednesday and maybe, just maybe, something comes out of it that perks up the market. I’ll miss you Jon, and Jaime, and maybe even you Cersei, waiting a year for your favorite TV show to return is worse than volume-less markets and missing the VWAP. Hey HBO, I’ll pay triple next year if you bring GoT back in the fall!     

 After the open it felt like we’d get some “For the Watch” action as the S&P dropped nearly 1%. I was hoping to see a few stocks get stabbed in the stomach to rile up trading a bit.  But it was all for naught my fellow crows, morning weakness lasted as long as Stannis’ archers. The low of the day was made just 22 minutes into the session and we spent the rest of the morning grinding higher. Why the intraday rally? Absolutely no reason whatsoever, both Empire Manufacturing and Industrial Production missed so it’s not like we got some unexpectedly good data. Price action is noisy right now and the theme of the year continues to be “if you don’t like your position just wait a day, you’ll be proven right”. In fact you don’t have to sit around thinking you are a slubberdeguillion all the time, just be patient and it works out! (I’ll set the o/u at 3 for people who know what that word means). Winners were CI, FSLR, AET, NEM, and ALXN.   Losers MU, SNDK, TDX, STZ, and HUM. Just another fun filled Monday where we stare at the tape waiting for something to move the market.   Something not Greece….for the love of God…

 The rest of the day was fairly meaningless. We spent the 2nd half in a 4 point range (2082 to 2086). There just isn’t a lot going on right now ex-Greece so it’s getting pretty hard to keep you entertained. I assume the market will be dead tomorrow given the Fed decision on Wednesday so stay tuned for more channeling stocks.com   

Final score:  Dow -60bps, S&P500 -46bps, Nasdaq -42bps, Rus2k -31bps.

News Highlights:

 I could only find one article today worth your time so please check it out.  It talks about the difference between ordinary investors and extraordinary investors.  I like this thought process a lot:  “When ordinary investors read a report suggesting that oil prices are sure to rise, they investigate which airlines have the best hedging strategies in place. When extraordinary investors read the same report, they investigate which aircraft manufacturers are working on future-friendly designs that dramatically increase fuel efficiency.  And when ordinary investors arrive home to find their teenaged kids ditched their chores to video chat with their friends, they get upset and take away the kids’ devices. Extraordinary investors also get upset and take away their kids’ devices, but not before figuring out what new apps they were using and how to invest in them.”

We’ll end with two sports related links because the NBA and NHL finals have inspired me  (go Hawks)

The first is a play that took 4 different actors to pull off.   You think they practice that?  

The second is the highest basketball shot ever recorded.    Wow.

Have a good night.

Retail Investor Bullishness Becomes Scarce

Equities start the day lower as bulls become scarce. I don’t know, that might be a pretty controversial statement to make, let’s rephrase it to “retail investor bullishness becomes scarce.” AAII surveys come out on Thursdays and today’s showed only 20% bulls. Not only that, the ratio of bulls to bears is at a level we haven’t seen in in years. So what big conclusion can we draw from this one data point? Well, if we are being responsible about our commentary we would say none given it’s just one factoid, but if we are using it as part of a broader view it could have some relevance. The bear case is valuation and an overloved / overbelieved market that is bordering on a bubble right? So when we see something like the AAII survey we have to ask ourselves one question: “would sentiment surveys in an overloved bubblicious market look like this?” I would argue no but that’s just my opinion and you may disagree with it. Which is fair, disagreements are what makes a market. Now as you know, I’m a huge fan of sentiment measures so when I see something like this I tend to feel better about my market view. Now I’m not advocating an “all clear” bell to go load up on margin I’m just saying that it doesn’t feel like this puppy is about to come to a crashing end. I guess the sideways grind will continue because sentiment isn’t overly bullish yet we have no real catalyst to go higher. Will the tightest range in 20 years continue? I think so my friends, I can’t point to a multitude of factors that argues for either direction. There’s just so much conflicting data that it doesn’t surprise me how boring the market has become. Wait for the Fed, wait for Greece, wait for earnings, wait for speeches, wait for data, wait to see if Danerys gets off her dragon and helps the people she left behind (I mean how screwed were they?).  

After the open it looked like we were going to have a bit of follow thru from yesterday’s stampede. Unfortunately we got a negative Greece headline and that dropped us right back to unchanged. Sigh. Bespoke did a great job on Twitter pointing out how ridiculously hard it is to trade headlines so yea, fun times abound.  Retail sales were out this morning and they actually beat! USA  USA  USA. In fact, take a look at the Atlanta Fed’s GDPNOW series that puppy is back near 2%!   Call off the recession forecast my friends because it looks like the Great Thaw may have actually happened (I’m doing my part).  After that little Greece selloff we spent the next 4 hours going sideways because that’s what the S&P loves to do nowadays.   What else.  LULU dropped 1% because the Founder is selling 20 million shares!  Wow.  Energy names fell because Crude oil was down and Offshore Drillers got drilled because Barclays had a piece saying “The worst has yet to pass.”  Lovely. KKD was a big winner though (+13%)!  Who doesn’t like to see the Donut trade do well, that’s just good ole fashioned sugary heaven!   By lunch we sat on 2,110, up 0.25% going completely bonkers over the quiet-ed-ness.   That’s not a word but I’m going with it so deal.

And hoo boy is it apropos. Absent the first hour of the day we spent the entire session in a 3 pt range. Hello, is anyone out there? Is this thing on? Man it’s hard to write about a market that’s in a 6 month range. God bless Financial Journalists because this really must be taxing their creative writing skills.  The market went nowhere today because nothing happened.  The market went sideways today because sideways is the new up. The market refused to either rally or selloff because Janet Yellen is on vacation in Ibiza (where do we think she really goes?  I’ll guess Martha’s Vineyard or Maine. Somewhere she can get away from it all). Anyway we closed at 2,109 which was basically unchanged.  I’m sure Friday will bring ALL sorts of crazy volatility so stay tuned for a new low in dispersion (what an awesome fancy term, I need to use that one more). 

Final Score:  Dow +22bps, S&P500 +18bps, Nasdaq +11bps, Rus2k +16bps.

News Highlights:

Well, when things go nowhere the news gets really boring so let’s move to the big finish.

Tonight we’re going to look at a cringe worthy video.  This is either the luckiest man in the world or the stupidest man in the world.  We almost had the Darwin Award winner here people!

https://www.youtube.com/watch?v=caE9AfN_W-w

Have a good night.

Great Long Boring Streak Ends

Equities start the day lower as our great long boring streak ends. Wait…the long sideways grind in the market ended? No, don’t be silly, that one is gonna be with us for awhile, I mean our long boring streak of no Triple Crown Winners! Way to go American Pharaoh! Your epic success will be remembered by the American public for at least another 24 hours then horse racing will once again disappear into the background like so many faceless men. How about that jobs report on Friday? Wage growth plus employment growth?  Best of both worlds if you ask me, unless you were rooting for bad news so the Fed won’t hike anytime soon. Unfortunately jobs reports seem to have lost their impact on the market, other than the first 30 minutes of the day Friday was a complete snooze fest.  Then again Mondays have been snoozefests too, I can’t even tell you the last Monday that mattered.  Did the investing world decide that Fridays and Mondays are for catching up on bill paying and screen staring?  Oh well, here we sit smack dab in the middle of the range waiting for the Fed to do or say something. I miss the days when earnings and, you know, company specific stuff actually mattered. I might lodge a protest about this new “the only thing that matters is central banks” world. Who can I email? Lagarde?  Draghi? Does the ECB have some kind of message board I can post on?

After the open it was another summer session filled with low volumes and lower prices.  Let’s circle back to the market in a second because I want to point you to this awesome story that reminds me of 1999. Check out this quote: “Consumers like Tom Zhang are deferring big-ticket purchases to chase the rally. The Beijing resident was deciding between a Buick and a Volkswagen Passat before concluding his 300,000 yuan ($48,000) would be better off in equities. He was right, as his holdings soared to 800,000 yuan in value in little more than a year. “I feel like I am good at this, that I can make more,” Zhang, 26, said as he left a branch of Qilu Securities Co. in Beijing. “Why would I kill the hen when there are more eggs on the way? I can always buy my car later.”  The dude skipped buying a car so he could invest in stocks!  Can you believe that?   Roll out the Stewart commercial in China stat! Yea it must be a bubble in the US because the CAPE Q Stark Crestmont Ratio is at 4.285 on a rolling twelve month basis. Sigh. Anyway, it might’ve been slow today but the market sure dumped on itself.  Down all morning long for no reason at all to land on 2,081 (-0.55%).  Seriously, there was NO NEWS, none.  No economic data, no speeches, nothing out of Europe, zip, zero.  I guess the market really wanted to get back in the middle of this year’s range because heaven forbid we sustain a breakout. Winners were few and far between (SEE, FTR,TWX, BLL) while losers were everywhere (WYNN, AAL, DAL, EBAY, AVGO). Pretty ugly first half, let’s see if our back 9 was as bad as Tigers on Saturday.

It wasn’t quite that bad, but it was still bad. A random Greek headline came across but come on, we get those hourly so who cares. A brief uptick was summarily smacked and by the time we closed we were back near the lows, 2,079, down 0.6%. Only 6 names in the S&P were up more than 1%, and NONE were up more than 2%.  I wish I could make more of price action but it was deadski and volume was low so let’s just chalk it up to Monday blues. Hopefully tomorrow brings greener pastures because today was godawful.  

Final Score:  Dow -46bps, S&P500 -65, Nasdaq -92bps, Rus2k -58bps 

News highlights:

We’ll end tonight with one CRRRAAZY mountain biker.   Why do I feel like that slope is steeper than we think.

http://tinyurl.com/ood5d25

Have a good night.

One Day We...

Equities start the day slightly lower as we continue to act like this (credit to one of my favorite follows @ivanthek for inspiration here). Honestly, there is no better picture to describe the current state of price action than that one I just posted. One day we obsess about Greece, the next we don’t. One day we obsess about margin debt, the next we don’t. One day we rally 1% because we felt like it, the next we sell off. One day we are putting kids on a boat, the next we are a white walker (that episode was top 3 all time). Deer in headlights, that’s what’s going on right now. Trade up to 2,120, stop and stare, then run away. Trade down to 2,100, stop and stare, then run away. Absolutely no conviction to go higher and no conviction to go lower so here we sit. Is that a bad thing? I guess it depends on who you are and what your role in the market is.  Do PM’s want a sideways year where we close +/- single digit %? I would think so, that’s a prime opportunity to outperform. Do brokers want a sideways year with no volatility? That’s an easy one to answer. Do investors want a sideways year? Maybe, maybe not. A market that trades straight up can be dangerous to navigate so a year of treading water might be good to blow off some froth. Yet we hate to lose a year of performance in our lives because little Kate’s college tuition is getting stupid. We closed at 2,110 on Feb 20 and we closed at 2,111 on June 1…embrace the grind my friends because it appears to want to stick around for awhile! I mean we had something crazy like $130B in stock buybacks in April and that wasn’t enough for new highs? What’s it gonna take he

After the open we rallied most of the morning because Vehicle sales were good and Sepp Blatter resigned. What do you think is higher…the average number of goals in a FIFA game or the % of Americans who know who Sepp Blatter is? Wow…that’s gotta be close right? I’m not sure I could even make a market on that it’s so tight. Vehicle sales beat expectations and you know what, they are on pace for their best year since 2001. Jobs, cars, hotel rooms, housing…man if we are on the verge of a recession I must be misreading the tea leaves. Fixed income had another one of those “lets smack bonds around” type sessions with 10yr UST hitting 2.26% and German bunds up 17bps to 0.71% (worst day in years). I know that doesn’t mean much in the grand scheme of things but stocks have tended to perform well this year when fixed income hits the skids.  When that “lowflation” trade has a bad day we usually have a good one.  PVH was the big winner today, up 8% off earnings. Calvin Klein and Tommy Hilfiger? Yep, must be time to break out the pink collared shirts for summer. Other notable gains from FCX, ZION, ESV, and NE. Losers were IRM, CMS, DAL, CNP, and ANTM. Not a lot of rhyme or reason to the move this morning, I guess just wandering around happy that we weren’t bonds. 

The final hour saw us trade back to unchanged and sit there. Onwards my friends! Onwards to more sideways! I guess we shouldn’t be surprised given that there is an ECB meeting tomorrow but once again the market went nowhere on nothing. I wish I had more for you but what can you say about $SPX down 2 points? I mean at least Transports closed higher?  That’s a good thing right?  

Final Score:  Dow -16bps, S&P500 -10bps, Nasdaq -13bps, Rus2k +17bps.

News Highlights:

We’ll end tonight with some seriously cool bike tricks. I’d love to know how a hobby like this gets started, or what the medical bills look like over time.

http://tinyurl.com/qz3vqpl

Have a good night.

Shanghai Drops A 6%’er On Us

Equities start the day lower as Shanghai drops a 6%’er on us.  A one day decline of 6% brought the famed Chinese index back to levels not seen since May 22! In fact, on a 1 week trailing basis the index is still POSITIVE. How about that factoid? Imagine the S&P dropping 6% in a day to return to a level seen just a week prior…hilarious. I wish I had clients trading this thing because it would make for awesome conversations. “Hey, how about that move last night? It’s ok, even with a giant 1 day drop we are up 43% YTD.” Dan Strumpf of the WSJ wrote a fantastic article that you have to read if you transact in US equities (relevant for institutions primarily).  In it he talks about the fact that volume has gone wonky on us.  The profile of volume used to look like a smile, lots of action in the morning then a lull around lunch then lots of action around the close.  Lately it’s turned into a J, and if you care about VWAP (I mean who doesn’t, what an awesome invention.  ugh) this article means the world to you. I’ve argued in this space that a human is the best defense against algos, especially in panics like the Flash Crash. This story/trend is another example of why having a good partner on the sell side can add incremental value to your process. If your trader doesn’t understand why this is going on, and isn’t working around it, then they are doing a disservice to your execution costs. I see this play out every day, and adapting how I work client orders is something I iterate all the time. I’m glad the WSJ wrote this article because it should kick off a discussion about how the nuts and bolts of trading is currently evolving.  Anyway, let’s see if we overreacted to anything about Greece or the Fed today.

After the open we did catch a few headlines that Greece was nowhere close to a deal and the market did sell off about half a percent, but it was tepid action. 2,121 down to 2,112 but then it settled into a sideways grind the rest of the day. We’ll keep this section short because honestly there isn’t much to talk about. $GPRO was the big winner, up 7%, because they are thinking about making a drone.  If it’s anything like this right here I’m all in. Other winners were WDC, JCI, RL, and CMG.  Any new all-time highs today?  ATVI, BF.A, and IMAX. So maybe people are boozing while playing World of Warcraft on big screens?  USA  USA  USA.  Losers were primarily energy names like CHK, SWN, CNX, and RRC but URI lopped off 8% after speaking negatively at a conference.   Dick Fuld capitvated our attention around lunch as he spoke for the first time since 2008. I don’t know what to think here..…I get that Americans love a good comeback but aren’t there people who should just fade into the history books?  Who am I to judge though, my contribution to society might be a Wall St blog that typically ends with people hurting themselves. Speaking of that, I have a good one tonight!
The afternoon was a snooze fest mixed with elevator music and we closed at 2,120, down 0.12%.  Absolutely nothing incremental came out of today (we are still going nowhere fast) so let’s wrap this puppy up.  Unfortunately Friday is shaping up to be dire, most of the big catalysts are next week (ECB, Jobs report) so my hopes for wicked volatility are exiting stage left. One final thing before we blow this popsicle stand: Transports were weak again so make sure you have that on your radar. I just don’t think this market can sustain new highs while these things sustain new lows (I haven’t switched to bearish, it’s just weird to see). Curious divergence my friends. 

Final Score:  Dow -20bps, S&P500 -12bps, Nasdaq -17bps, Rus2k -10bps

News Highlights:

Not much out there so let’s skip to the big finish.

Tonight we have the worst zip line accident I’ve ever seen.   Actually it’s not just the zip line, it’s a bunch of other crazy accidents, but the zip line one looks so painful.  

https://www.youtube.com/watch?v=Z8Bf0B_PM-Q

Have a good night.

Corruption Gets Swept Up All Over The Place

Equities start the day higher as corruption gets swept up all over the place. Talk about cleaning house…FIFA and Cersei Lannister in the same week? Epic stuff my friends. They were dragging soccer dudes out of the Baur Au Lac with sheets on their heads! I’ve been in that hotel and I bet those were 800 thread count Egyptian.  Place is super swank. Hey, here’s a question for you, is the market still only concerned about the Fed? You’re darn tootin it is, when you see a 1% drop in the S&P because people bought more washers and dryers you know this thing is crazy obsessed with rate hikes. Bernanke is over in Korea telling people to chill out with commentary like “a rate hike means the economy is strong,” but here in equity land no one is listening. I mean why wouldn’t we want to flip out over rates going from 0.25 to 0.50. Half of 1 percent? Time to bunker up with Spaghetti’s O’s and cash.  It is what it is though, so I guess we deal with it. Frankly if you want something to worry about worry about Transports. This chart is really starting to break down and there aren’t a lot of instances where a drop like this ended up being no big deal. So here we are, at the end of May, near the highs but still worrying about the same darn things. Greece and a rate hike. A rate hike and Greece.  Pray for an alien invasion because otherwise it’s going to be a long summer of staring at Fed speeches and knee jerking to CPI reports. Fun times!

After the open, the market did its absolute best to wipe out yesterday’s selloff. Good earnings? Nope, unless you count TIF who managed to crush it. Dovish speech from the Fed?  Nope, all quiet on that front. AAPL car? Please. All we had was a few random comments about a potential Greek deal and that seemed to be enough. Is this 2011? Did I just write that...again…for the 800th time? Yep, I sure did. Like I said before, there are very few things the market is concerned with right now and unfortunately Greece is still one of them. Maybe when my son is writing this recap in 16 years he’ll get to talk about Hellenic Pension reform and ELA expansions, I mean who doesn’t want to factor that into their investment process. The aforementioned Tiffany’s was the big winner because if anything screams economic recovery in the US it’s high end jewelry. Other than little blue bags winners were primarily tech names like JNPR, SNDK, SWKS, NVDA, and BRCM (WSJ reporting AVGO might be looking at them. This tech sector has gone full M&A Gaga right?  I live for EBITDA…DA.DA..DA..DA…) Losers were KORS (-24%...man that handbag market is fickle), FOSL, COH, CVC, and NBL. By lunch the S&P was up a juicy 0.8% because apparently yesterday’s move was an overreaction so today we decided to overreact in the opposite direction. 

The afternoon was like this for Bears (does that work? Does the video play?) as we stair stepped higher and higher. By the time the bell rang it was like Tuesday never happened: 2,125, up 1%. So yea, down 1% one day, up 1% the next…can you feel the conviction? I want to end on this quote by Fischer because I think it’s incredibly relevant (especially after yesterday’s tantrum). “There is so much importance given to the first move. But I think it’s misleading,” he said at the Interdisciplinary Center in Herzliya. “You say liftoff and you think of rockets” that go into orbit after 10 seconds, he said. “That’s not what we’re talking about.”  I don’t know why the market keeps spinning off its top every time we get a good piece of economic data.  These guys have said countless times that the tightening process won’t be a relentless hike in rates so maybe today was all about cooler heads prevailing. Maybe this 1% wasn’t about Greece and it was about people buying a ridiculously overdone selloff because the market continually screws up pricing a Fed move. It’s at least possible right?  

Final Score:  Dow +67bps, S&P500 +92bps, Nasdaq +147bps, Rus2k +126bps.   

News Highlights: 

So we’ll end tonight with a fishing video.   I’m not a huge fishing guy, something about hooks and bait and sitting around just doesn’t do it for me.   This guy however, this guy must love it.  My only question is…what’s next?   What’s his next move here?

https://www.youtube.com/watch?v=jPXtl15W4lQ

Have a good night.

Global Bond Yields Continue To Get Jiggy With It

Equities start the day lower as Global bond yields continue to get jiggy with it. Why are bonds selling off all over the place after people couldn’t buy enough 0.1% yields? Well you know why…because crowded trades will get punished, and they will get punished hard. AOL got bought today! How about that? (I decided against using “You got Sale” because it felt played out) VZ acquired them for $4.4B ostensibly to get their ad-tech and content. Ad-tech? You got me, I’ll have to defer to tech blogs on that one. Did you know AOL still has over 2 mil dial up subscribers? How is that possible…who is using dial up to check  AOL mail? (I actually know one person with an aol.com email! He’s a legend!) All morning long twitter was obsessed with the oldies but goodies. AOL, Compuserve, even Prodigy. Who remembers Prodigy? I do, it was my very first email service out of college (late 90s). Here it is in all its horrible low resolution glory. How I long for the days when big blocky letters and “flash” video was the rage. These millennials and their instachatsnapgram…bah. In my day we played “Where in the world is Carmen San Diego” and checked stock quotes with 1hr delays. Web browsing? Please…we were lucky to be able to find the weather and sports scores in under 15 minutes. And this wasn’t even that long ago you whippersnappers! Anyway, futures were down about 10 pts at the open because people can’t puke bonds fast enough. I mean this is basically what we are dealing with right now (found on Twitter @stocktwits, so good). Let’s see what happened next..

After the open it looked like we were going much lower. Down 0.5%...then 1%....it felt like all of Friday’s gains were going to be erased in violent fashion. But stocks turned around about an hour into the session because bonds also turned around. Bonds…how many times can we write about bonds in a stock market recap?   I guess a lot, and I need you to check out this article because it’s important to what we do here. “It doesn’t take much to cause a rout in the bond market these days”…great title…and you know what? It could be written about stocks too. Sitting in my chair I see it day in and day out, names you think are liquid can turn illiquid in a hurry. Large caps, heck even mega caps, can trade like butter spread over too much bread. The Global markets are prone to crazy jitters nowadays so I’m a tad concerned how they will act in a panic. Bond markets are supposed to be as deep as the Marianas trench yet we’ve seen 10yr UST and German Bunds move like a small cap printing company in Dubuque. Anyway, today was not a panic, yields reversed their course so stocks reversed their course. By lunch we had rallied all the way back to unchanged, 2,102. I mean who doesn’t love range bound markets? I sure do! What’s better than writing about a market that bounces between two lines ENDLESSLY! Winners were AOL / PLL (selling themselves), DISCA, RIG, EW, and HUM. Losers FMC, IFF, GPS, and RAX. 

The afternoon was nothing special and we closed just shy of where we were at lunch, 2,100, down 0.2%. The recap is going to be absent the next few days, its author is moving homes and needs to pack 18tons of toys into boxes. Honestly, I need to write a recap about moving homes because there are relevant market lessons to be learned about consumption, planning, excess, and frustration. Brutal. The market is still range bound yet appears to be oddly sensitive to wacky moves in debt markets right now. That kind of stuff warrants caution, bond markets are no joke and even someone hip deep in bubble wrap doesn’t want to risk injury here. Weird tape my friends. Let me get my robo-advisor on the horn and see what he says about sentiment right now, I need someone to bounce a few ideas off of. Oh wai..… 

Final Score:  Dow -21bps, S&P500 -30bps, Nasdaq -35bps, Rus2k -22bps.

News Highlights:

We’ll end tonight with a total bro video.   I mean this is as bro as bro gets right?   Looks like fun but its all bro’s.  I can’t stop saying bro bro!

http://tinyurl.com/n96tlac

Have a good night.

The Circus Comes To Town

Equities start the day higher as the circus comes to town. That’s right boys and girl, let’s peek under the Big Top and see what the April Jobs Report had for us! A three ring extravaganza of 223k jobs, a 5.4% rate, and 2.2% wage growth (YoY). But Michael, what do those numbers mean because they sound pretty good. Most of it was inline, we were looking for 228k jobs and a 5.4% rate, so spot on there. Wages however…that’s the key. Gundlach said it the other day at a presentation but wage growth is critical to Fed watching right now. They would be WAY more inclined to spike the punch bowl if wages started to meaningfully tick higher. The latest job report didn’t show that, the 2.2% YoY growth was slightly below expectations so stock futures reacted positively (perverse I know. Are we rooting against people making more money?). So as we take our seats to watch lions jump thru hoops and traders try to beat impossible VWAPs we need to ask ourselves one question:  did this report change anything about our view on the market? To me it didn’t, the numbers weren’t rip roaring but they also weren’t terrible, which means the basic growth story is still intact. And honestly isn’t that the story of the past, oh I don’t know, 4 to 5 years? Good but not great. Like unsalted peanuts. But hey, it’s Friday, let’s look at what happened and then spend our precious time with family and friends (and especially Mom this Sunday!).

After the open we got the remix to ignition, hot and fresh out the kitchen, people buying like crazy, had every PM out there wishin’. (R Kelly in the recap? Feeling frisky today) Straight up price action from the get go my friends, up 1.2% in the first hour. Did you know today is the 70th anniversary of VE day? Well it is, and Europe celebrated by buying everything they could: DAX, CAC, FTSE, IBEX, all up 2-2.5%. The Tories won in England and just hearing that word makes me wish we had something better than Democrat and Republican. My friends across the pond have all the good English words. Chancellor of the Exchequer? Jammy Git? Brekkie? Love them all. Ok tell ‘em who the big winners were Johnny! Materials, Health Care, and Energy. Names like NRG, BOJA (I really like that song), SWN, RCL, BIIB, and DATA. Not a lot of losers to speak of, only NVDA, MNST, and CERN stand out. A solid morning of buying left us at 2,115, up 1.3%, just a few points from a new all-time high (I’ve written that 14 times in the past few months). You gotta give this market credit for being forgiving right? Bulls, Bears, both have won lately. All you have to do is wait a few days and eventually it goes you way!  

Nothing happened in the afternoon and we’ve seen this kind of price action SO many times on Jobs Days. You get that giant rip in the first 20 minutes and then you may as well have gone home because its sideways the rest of the day. A close at 2,116 SHOULD make us happy but come on, how many times have we hit this level only to fall down again? I absolutely refuse to get excited about a breakout until we can laugh at 2,130. You know what though? We’ll take it. Anytime you go home with $SPX up 1.35% it’s a good day. And it’s the freakin weekend baby lets go have us some fun!  

Final Score:  Dow +134bps, S&P500 +134bps, Nasdaq +117bps, Rus2k +76bps

News Highlights:

I once again have two end links for you tonight!   Im having trouble figuring out which one is better so let’s just use both.

The first is a double bicycle kick goal. Can’t say I’ve seen that before (or a video with this bad of quality in 2015)

The second is a bit old, but it shows some of the best surfing wipeouts ever. These look so painful, imagine how much you’d get tossed around.

Have a good night.

Great Flash Crash of 2010

Equities start the day higher on the anniversary of the Great Flash Crash of 2010. I poured thru the history of my recap to see if I could find the one from that day but alas, my record keeping sucks. I suck. Anyway, it was so fun to write that day, what a surreal experience that was. I remember sitting at my desk sipping on an overpriced coffee drink and watching Accenture’s price go to $1. $1 you say? Yep, the market was so broken that a multibillion dollar consulting company was trading for less than my drink. Could it happen again?  In my opinion? Abso-freaking-lutely. The equity market is so fractured that I find it hard to believe it couldn’t break again given the right circumstances. But you know what? You know what clients will value when that happens? A human being sitting at their desk making intelligent decisions. I had plenty of sell orders on that fateful day and guess what I didn’t do: recklessly sell them no matter the price, which is exactly what computers were doing. “Oh I’m sorry Mr Client, you told me to work 25% of the volume. Sorry you sold it $15 lower” – regards, Skynet. I engaged my clients and we made smart decisions because, you know, that’s why they are trusting you with their stuff. I hope we don’t see another Flash Crash, I really do, but I worry about market liquidity all the time. It is SO easy to move stocks nowadays, even names you think are liquid can be really hard to transact in. When everything hits the fan again you think all these wide bid / offers and relentless algos will treat us well? I don’t. But me, and every one of my colleagues at Baird will do our absolute best to protect our clients’ best interests. That’s why they are here and we won’t let them down.

After the open, our old friend Yellen tried her best to crush us all. “Equity valuations are quite high”….gee thanks Janet, that’s just what we were looking for on this exact day. You know who else is worried about valuations. EVERYONE. DON’T MAKE ME GET UPSET HERE. I swear, you can’t swing an Apple Watch without hitting someone worried about stock valuations or startup company valuations or home valuations or bond valuations. Man I really want to rant here but I have to contain myself, this is supposed to be a semiprofessional recap. Here, let’s pretend to goto this church and do a bit of zen meditation (honestly how breathtaking is that place). Back in market land we sold off most of the morning. Why? Well I could go on and on (and I have lately) but it comes down to this: the market just doesn’t wanna break out, nor does it want to sell off, it just wants to sit here and make both camps as miserable as possible. Range bound trading baby. The Dow (I know) has gone 37 days without setting a 1 month high or a 1 month low, longest streak in over 100 years (credit to @jlyonsfundmgmt on that). Winners today were GEVA (up 113%!), WU, CVC, EXPD, and EA. Losers were ZU (love the name but the stock is having real issues), FTR, ALXN, and FOSL. By lunch I was mostly marveling at the continued surge in treasury yields, 2.23% on the 10yr, up from 1.9% at the end of April. Crazy town (how about this headline: German bond investors just lost 25 years of yield in 14 days)  

The final few hours saw us bounce around but nothing meaningful came of it and we closed lower once again. So all the talk on trading desks will be about a double top up at 2,117 but you know what? Neither side has the advantage right now. We are back to flattish YTD because bulls have no giddyup and bears have no oomph. It’s just a whole lot of quick sand right now. We pull ourselves up only to sink right back down. I guess we look at Friday’s jobs report now but honestly…what am I rooting for? Good or bad? Do I want a ton of people to find jobs? Is that good for stocks? I hate this, I hate not knowing what to root for. Bears Packers…the choice is clear. Cubs Brewers…the choice is clear. Pizza vs Cheeseburgers…yea there’s no clear winner there. Where was I going with this? Oh yea, markets are confused and unsure what to even root for right now. That’s why we sit here going nowhere fast.

News Highlights:

Have to skip these today, sorry, heading down to Chicago to our Conference but I won’t skip the big finish!

The first link is someplace I desperately want to go now.   I’ve never really had a thing for the Grand Canyon but this looks incredible!

The second is a guy who I’m putting in the running for Dad of the Year.  I never would’ve thought about using a javelin to pull my kids tooth out.  Brilliant.

Have a good night.

A Much Needed Day Off

Equities start the day higher as my friends across the pond get a much needed day off. You know how many public holidays they get in the UK this year? 8. Can you believe that? We get 11, Spain gets 14 and Italy gets a whopping 16, but our fine friends in London only get 8 public holidays to soak up that cloud filled sky! I spent a lot of time reading over the weekend, because my entire home is boxes (moving is the worst), and everyone under the sun is still calling top. Bill Gross called “top”, while also depressing me about death (to be fair, he’s called top about 15 times now). Warren Buffett says if interest rates rise it’s probably the “top.”   At least Grantham at GMO says the top is still 100 pts away right? So let’s look around a bit shall we? Are there warnings signs we should be heeding? You all know I love this piece by Merkel “Fundamentals of a Market Top” and one of the things he mentions is that “the quality of IPOs decline.” Is that happening? Well, this article won’t help us sleep at night: “About 30 percent of companies that went public last year acknowledged they were at serious risk of incorrectly reporting their financial information, according to a study by New York law firm Proskauer Rose LLP. That’s up from 17 percent of issuers in 2013, the study shows.”   What about retail investors, they aren’t piling in right?  “A broad look at the 6.5 million customer accounts at TD Ameritrade indicates that retail investors are "pretty fully invested" in stocks, the online brokerage's CEO said Thursday.”  Yea…so….how about that Game of Thrones last night? You sure don’t wanna be hanging out in one of Littlefingers retail establishments nowadays do you?

After the open we traipsed around the highs as Friday’s enthusiasm saw a bit of follow thru. How about this market, I mean what can you say anymore. It gets smashed at the end of April down to 2080 because hey, why not. Then the first few days of this month completely eradicate that move because hey, sell in May is dumb.  Quiet on the macro front (just Factory orders) so most of the day was spent watching headlines out of Ira Sohn. Since paraphrasing is my favorite way to talk markets I’ll let Josh do the heavy lifting here (and here). Lots of great comments / stock ideas in there so give it a quick read. Who doesn’t love hearing the best and brightest throwing stuff around to see what sticks? Financials had a sneaky good day with JPM at a new all-time high and WFC not far behind (10yr yields touched 2.13, heck of a move since mid-April). Good to see my friends, we need this sector to participate to remain constructive. What else hit an all-time high?  CTSH, YUM, SJM, and AMCX. Nice list! Fast food, Don Draper, tasty food products, and IT consulting…gotta love the US economy baby! Losers were primarily energy names because these things have been hotter than Periscope lately. Stuff like RIG, VLO, DO, HES all fell 1-2%. Anyway, mostly a quiet first half as people watched Twitter and CNBC for random blurbs and ideas. By lunch we sat on 2,116, up 0.4%.

The back half brought a whole lot of sideways and we closed at 2,114, up 0.3%. The all-time closing high is 2,117 so we aren’t that far away. Signs of the top? Sure, I guess there are some of them around, it’s hard to deny that fact. But bull markets don’t die of old age, and they don’t die because a bunch of retail investors are checking their accounts twice a day. Recessions end them, Fed rate hikes can end them, and those still haven’t appeared (one of those may take a really slow pace too). So in the absence of that it’s still a bull market, and new highs are in our sight.  

Final Score:  Dow +26bps, S&P500 +29bps, Nasdaq +23bps, Rus2k +42bps

News Highlights:

We’ll end tonight with a guy throwing things over his shoulder. I love the video, some of it might be fake, but my favorite part is his chosen title.  So good.

http://tinyurl.com/px44jfb

Have a good night.

Americans Continue To Find Jobs

Equities start the day lower as Americans continue to find jobs. Yep, once again we are in the awesome position of rooting for bad economic data if you are long the market. Wait…it’s not Friday…what are you talking about Michael? Well my friends Weekly /Continuing Claims was out this morning and both showed the same trend we’ve seen for years now: a strong labor market here in the US of A. In fact, Weekly unemployment claims is at its lowest level since April 2000! I think we can all agree that less people filing unemployment claims is universally a good thing.  You know what else? Wages grew 2.6% in Q1 (YoY basis). Jobs and Wages…Wages and Jobs….are we nearing escape velocity? Honestly it’s hard to know because every time we thought we were, we weren’t. Fool me once…shame on….wait I just used this joke didn’t I. Anyway, futures sold off and 10yr yields have shot up 18bps since Tuesday (you want a real eye opener? Look at German Bund yields. Doubled in a few days! Doubled! I’m not a fixed income guy but do Sovereign bond yields double all that often? Ex a crisis?) Sentiment numbers come out on Thursday’s too and the AAII survey showed a measly 30% bulls, the 8th straight week where it’s been below its bull market avg of 38%. So let me get this straight: individuals aren’t all that bullish yet people are finding jobs and wages are ticking higher. Yep, the song remains the same.

After the open it was nothing but follow thru selling from yesterday. The same exact stuff was being pitched: Biotech / Regular Tech / Small caps and the same exact stuff was being bought: Energy (how odd is it to hear that lately) and all the currencies against the Dollar. King Dollar is having a bad few weeks right? So we wonder…has the “strong dollar” trend run out of steam? Maybe, maybe not. Steve Holt, our Head of London Sales, put together this awesome chart showing the Trade Weighted Dollar for the past few decades. This thing turns like an aircraft carrier, slowly, but when the trend changes it’s usually meaningful and sticks with us for a long time. As Davinci said:  “simplicity is the ultimate sophistication”. It looks like the primary trend has changed, there may be dips/pullbacks but the trend is dollar strength. AAPL ended up getting smacked today, I mean when you report a blowout record quarter you gotta expect your stock to fall 6.5% over the next few sessions (I get it, it was an insanely crowded trade. Had to poke fun). Other losers:  HAR, VAR, ZMH, ADSK, CRM (wait...you were just up huge!!), and YELP (at one point Yelp had a $6B mkt cap.  now its 3). Winners, like I said earlier, were once again Energy names:  DO / CHK / CNX / RIG / NE…names I’ve spoken of almost daily for the past few weeks. Ugly ugly all morning long, but I’d like to point out that the end of the month has been bad for equities for awhile now. Mar 31, Feb 27, Jan 30, Dec 30, Nov 28….all down days for SPX. Weird right? 

The last few hours were pain mixed with agony and we closed at 2,085, down 1%. Here is what I think is happening my friends, lend me your ears for one final minute. I think we are seeing some kind of Great Unwind. Now when I say “Great Unwind” I don’t mean some all arcing permanent change to the way people are positioned. I just mean a reduction in what people were holding. Markets like to punish the most people they can at one time right? We can agree that usually happens? What are all the crowded trades? 1) Long USD / Treasuries 2) Long European Debt (Bunds for example)  3) Short Energy  4) Long Europe Indices (like DAX)  5) Long Biotech  6) Long SPX 7) Long AAPL  8) Short the Euro  9) long Domestically focused equities  i.e. small caps I could keep going here but I think you get my point. All of those have reversed over the past few days, some in large ways. It’s late April and the market decided to see who was too far over their skis.  I might be wrong about that but with so much going haywire right now it’s best explained with an unwind theory. People like to protect their profits, that is a thing right? Ok let’s talk more tmmrw, this is getting too long and I can hear the “delete” buttons being hit.  

Final Score:  Dow -108bps, S&P%00 -101bps, Nasdaq -164bps, Rus2k -215bps. 

News Highlights:

We’ll end tonight with the luckiest guy in the world.   How awesome is that guy’s story going to be to his boys?  He’ll act like he was Superman right?  I bet the embellishment will be off the charts.  Actually, can you even embellish surviving that?

https://www.youtube.com/watch?v=DoAZYHqdF28&feature=youtu.be

Have a good night.

Q1 GDP Whiffs…Again

Equities start the day lower as Q1 GDP whiffs…again. Honestly, and I’ve spoken about this before, what is the deal with Q1? For the past few years it has been awful with a capital AW (5 of the last 10 yrs saw low GDP print in 1st Q). Dear economists who project GDP: winter is a thing. I mean I’m no professional meteorologist or anything but it usually gets cold between Dec and March right? I wonder though…has Winter in the US been especially bad lately? Boston did get more snow than the Castle Black and here in the Midwest the past two winters have felt like our own personal Hell. That is…umm…cold instead of hot…you know where I’m going here. I mean winter has come for decades and decades yet Q1 GDP has never been this consistently awful? By the way, if you are looking for a sharp forecast on GDP check out the Atlanta GDPNow  website . They absolutely nailed it. So GDP was weak, yes, and it pushed futures down about 15 pts pre-open. Let’s shift gears really quick and talk TWTR. I sat thru one of the most meta experiences of my life yesterday when TWTRs earnings dropped early…on TWTR itself. Some user (@selerity) found their numbers on TWTRs OWN IR PAGE, put them on TWTRs OWN SERVICE, and the company promptly lost about $8B in value. Two things stand out to me 1) you gotta be on TWTR if you work in this industry (especially if you are making investment decisions) and 2) how insane is that? I love seeing earnings reports early, because I’m a fan of watching markets deal with uncertainty, but how often do you see a company’s own product be the venue for it? Anyway, let’s see how bad the market felt about no growth.

After the open, there were more cross currents than a trip down the Colorado River. You had to have some kind of penchant for Macro analysis because things were flying around. Europe stocks down, Dax killed for 3%. Dollar crushed to late Feb levels (remember when Strong Dollar was a thing?). Bonds smacked all over the place, especially in Europe (see this story). German 10yr yields ripped 12 bps (to a whopping 0.28%) and yields on 10yr UST rose 3bps to 2.05%. Oil up another 3% because, like I’ve said for weeks, the Energy trade appears to be back. Back here stocks were hit for half a percent because apparently bad news is bad news now. I thought weak data meant lower for longer? Come on man. I mean if you wanted action in your little corner of the world you got it today plus more! On the earnings front big losses from WYNN and BWLD. WYNN because apparently Macau turned into a ghost town (revs dropped 38% there) and BWLD because wing prices went banoodles (up 41% from last year!! Thank God I like boneless). Other losers were HUM, WM, IRM, AAL, and CI. Winners were mostly energy, stuff like DO, RIG, NE, and CNX but HOT and GNW got on the scoreboard too. By lunch we sat on 2105 waiting for the FED to drop some funky fresh beats on us. 

Which they didn’t, so it might be time for a new producer. Basically they said: “winter causes transitory effects, like people bunkering in their homes so they don’t freeze to death, so hopefully things pick up in the near term”. Honestly, this is the Fed Chairman right now trying to make their move. It’s just so hard to know when they are gonna pick up that idol (let’s hope the market reaction is different too). One last thing worth mentioning:  CRM (+12%). News hit late that they hired bankers to “field takeover inquries”. Wow, that would be the largest software deal EVER if it happened. Maybe Hooli is mad about that Pied Piper thing and wants to go in a different direction? (does anyone watch this show?). We closed at 2,106, down 0.3%, and ex a few ups and downs that’s exactly where we were a week ago. Top of the range churn my friends, the story is still the same. Now we look to the jobs report on Friday and honestly I have no idea what to root for. The last time it beat big the market got crushed so who knows right? Anyway, small down day my friends, head home and see those you love.        

Final Score:  Dow -41bps, S&P500 -37bps, Nasdaq -63bps, Rus2k -98bps.   

News Highlights:

We’ll end tonight with people jumping off the World’s Tallest Building. It might be a GoPro viral video but I loved it. These people are insane.

https://www.youtube.com/watch?v=Fhskvloj1gE

Have a good night.

Let’s Skip The Monday Chit Chat

Equities start the day higher as we finally, FINALLY print new highs. We have a ton to talk about today so let’s skip the Monday chit chat and talk numbers baby. FactSet had their awesome “earnings update” out on Friday and if you wanna read the whole thing click right here. Ill summarize it briefly for you because I trust you want to spend your evening devouring the whole thing alongside a nice Chianti: EPS doing ok, Revenues are as bad as marrying Ramsay Bolton, earnings guidance is about average (so far 39 companies have issued Q2 2015 EPS guidance, 26 are negative, 67%. 5yr avg rate is 69%). What else? Barrons Big Money poll was out over the weekend, click here for a quick snapshot. What stands out to me? All the neutral answers (especially the “are your clients bullish/bearish/neutral US eqs” question). Once again we sit at fresh all-time highs and LOOK how much “meh” is out there. Is everyone painting their investment house taupe? How about positioning? What if I told you the NET short positioning in SPX futures hit a new monthly high of -46k last week. It did, so me thinks some people are off sides matey (I wanna do a talk like a pirate recap one day). Remember last week when I got despondent about the market, bitterly complained about its lack of effort? I wasn’t bearish, I hope you didn’t take it that way (one guy on Twitter did). I was frustrated that all these things I just mentioned, along with a few other things, weren’t enough, that we needed more. So what’s changed? Why the new highs? I guess all we needed was patience, and as a father you’d think I would’ve learned that lesson by now. Let’s see what happened today first then talk about where we go from here.

After the open the market once again fell from its highs, and this was my reaction. Arrrghhh! Ok, I’m not going to go all pessimistic here, yes things were looking good at the start and traded lower but it’s not like some event happened or a Fed speaker got hawkish. Biotech decided to give up 4%, and when that happens we can’t rally.  That sector has become the de facto “risk on / risk off” indicator so if we’re going to have a sustained move we need them involved. Asia surged last night, as did Europe, so the table was set. The batter was in the box. The cake was ready to be frosted. The puns were ready for inclusion. It just didn’t happen, the entire first half of the day was a slip ‘n slide lower. Materials did well though as Gold rallied $30. $30 you say? Man…the last time gold rallied that much some guy wanted to storm Ft Knox with his butler. FCX / NEM / AA, all big winners. TSLA surged 6% today as people get excited for some home battery. Elon, buddy, if you can find a way to get rid of all these AA and AAA batteries in my life I’ll pledge my soul to you. These things come spilling out of every drawer I have. By lunch we were grinding on the lows, 2,112, down about a quarter of a percent. 

The back half of the day was nothing but downside and we closed on the lows, 2,107, down about half a percent. Patience for new highs? Yep, and we got them, for about 2 trading hours. AAPL earnings are tonight so hopefully that’s a step towards repairing this damage. What other catalysts are out there lurking? Well, we have a FOMC meeting this week (in which nothing major is expected to happen) so there’s always the potential for language shifts. Also, recall that buybacks are notably absent during earnings and GS pointed out that 81% of the S&P is set to exit their quiet period next week so we have that going for us...which is nice. The setup is there, we are on the precipice, we just need one final push! (am I using the wrong phrase there?). Let’s see what tomorrow brings, we need to recover those highs quick or else you’re gonna have to google “engulfing patterns” and technical jargon like that.   

Final Score:   Dow -23bps, S&P500 -41bps, Nasdaq -63bps, Rus2k -117bps.     

News Highlights:

We’ll end tonight with something you, me, everyone has experienced at least once in their lives.   How many times have you wanted to do this?  I gotta be at least 3 bid

https://www.youtube.com/watch?v=4YR1iMXh7Nc

Have a good night 

A Truckload Of Earnings

Equities start the day lower as a truckload of earnings gets dumped in our laps. All kinds of reports last night and this morning got people buzzing about the market! Companies like FB, QCOM, TXN, DNKN, EBAY, T….I mean I could go on and on but you’d delete this email so fast it would make my head spin. We can get to the nitty gritty of winners and losers later but let’s chat really briefly about internals! How exciting, when you opened this I bet you were saying “if he doesn’t talk about market internals I’m going back to the Treasury recap where they were talking about historical yield curves.” Since we are sitting on the highs I wondered whether market breadth was where we needed it to be.., or is there a worry to be had. Bespoke had a great link last night looking at this topic and here was their conclusion: “breadth has been hanging right in there with price. This implies that there are no negative divergences underneath the surface making the market vulnerable to a bigger decline. That doesn’t mean that the market can’t fall from here, but instead that the internals aren’t suggesting any weakness.” That sounds pretty good right? I mean it’s not a screaming buy signal but it helps to hear that the machinery below ground isn’t creaking. We’ve also seen ultra broad indices like the Wilshire 5000 and NYSE Composite threatening their own breakouts so we just need it to happen! I mean doesn’t it feel like if we got one or two days of fresh highs that a giant capitulation would occur? All that patience would finally end? It does to me, which is why this entire process has been so frustrating. Ok, let’s see what Thursday brought.

After the open, we spent a little time underwater but you know what? The sun beckoned, and we swam towards the surface. Right before lunch we broke above the waves like we had just shot out of Monstro. Higher…a bit higher…then as I digested some really bad leftovers the S&P touched 2,118, JUST shy of the intraday high on Feb 25. Tons of earnings today but you know what sector had the most eye opening move? That’s right…energy. We’ve spoken about this a lot recently but wow…I mean is the bottom in here? Oil seems to have found its 2nd wind from the low 40s and today nearly touched $60. All sorts of “hey, remember me?” type moves from names like HAL, CAM, NOV, and HP. Tech and media also looked good with winners like CVC, T, DTV, EBAY, JCI, and IBM. IBM and Crude…glad they made the same recap. Both things were just hated…hated….sentiment was godawful.  Now they creep ever so higher because that hatred is fading into the rear view mirror.   Fun to watch. Losers were PHM/LEN (new home sales not so hot), TXN (earnings), and GM (earnings). By lunch it felt like we were finally going to put this sideways misery behind us!

Which we did…kinda.  The S&P touched 2120, which is a new all time “intra-day” high, but slid near the end to close at 2,113. Which is, as you know, is not a new all-time closing high. The Nasdaq composite DID put in a new all time high, so, you know, if you bought in March 2000 congrats! You are back to even! What do we need now? Follow thru, plain and simple. Friday flat out HAS to be an up day or this might all be in vain. Friday is huge…HUGE. You gotta tune in tomorrow because it’s gonna be bigger than the Superbowl….of random Fridays….in US markets….in April….of this year….

Final Score:  Dow +11bps, S&P500 +24bps, Nasdaq +41bps, Rus2k +48bps.

News Highlights: 

We’ll end tonight with something I can’t say I’ve ever seen before.   A snowmobile base jump.   You’d think they use a more beat up snowmobile given the result…

http://tinyurl.com/ne7yg98

Have a good night.

No One Is Falling For It

Equities start the day slightly higher but come on, no one is falling for it. Open near the top of the range…fake everyone into thinking positively…get a few people to chase…then slam the door in our face. Since I’ve spent the past few recaps discussing this very topic, and trying my best to come up with new ways to describe it, I figured today we’d use a picture! So I dug into my bag of tricks to see if anything worked. Lo and behold I found this one! Now make sure you click that link because otherwise this entire section is going to seem pointless. That guy with the suntanned toes, who probably enjoys the heck out of his life, is us. You, me, the market, all of us. Look how far we’ve come, we’ve scaled the mast of worries all the way from the waterline. Greece, Flash Crashes, Slow Growth, Cyprus, Italian Banks, US Govt default, Valuations, Elections, the list could go on and on. There were countless rungs on the ladder to where we are. So here we stand, proud of ourselves, we are near the highs! We don’t wanna climb down because screw that, it took a lot of effort to get here. But we also don’t wanna continue higher because…my God that water is really far and if we slip there isn’t much of a safety net. We do have a rope around our waist, the Fed, but the rope is being loosened as we speak. It might not be there for us in the near future and that concerns us. So here we stand, on this ledge, S&P 2050-2100, and we wait. We don’t wanna go down yet we don’t wanna go up. What does that mean for our future? I don’t know, no one does. All I can say is that we won’t stand here forever, pretty soon we are going to get tired of waiting for a reason to move and this ledge will be left to the history books.

After the open we got the slowest selloff of all time. It took the better part of 4.5 hours to go from 2108 to 2096. Just a long, sideways, gentle slope as we once again failed at the highs. I might have to leave this dead horse behind because it’s starting to smell really bad, but needless to say I wasn’t surprised. Big losses today from UA, HOG, and PNR are probably worth mentioning. UA missed on sales, and given the run it’s had lately (was up 30% YTD) I wasn’t surprised by the selling. HOG fell sharply after cutting shipment forecasts and PNR earnings are worth a quick look because while they said there is “broad economic uncertainty,” they also noted that “the only geography of growth we saw was North America”. Which is the whole story right? Some growth here, a struggle elsewhere. Some good, some bad. At least we know this whole “US sales vs Global sales” isn’t a made up market worry. Bill Gross called the German Bund “the short of his lifetime”. I guess we’ll see, JGB’s have certainly made a mockery of anyone shorting it for the past, I don’t know, few decades. Can you believe one of the world’s most powerful economies pays 10bps to borrow for 10 years? I wish I could read future economic textbooks, I bet they are gonna be awesome (and still have a bid offer of $5 / $95. What a joke). Winners today (can’t forget those): ATI, MYL, LRCX, VRTX, and KMB. By lunch we sat on unchanged, mired in the muck.

Nothing in the afternoon to report, we closed just shy of where we were at lunch, 2097, down a smidge. Yet once again we started the day only a few points from a new all-time high. Sigh. Earnings are off and running so I thought I’d end tonight with a quick snapshot of top and bottom line beat rates (courtesy Bespoke). As you can see, bottom line, doing fine, top line, not so fine. I know it’s early but all the fears about top line growth are manifesting themselves. Unless that beat rate starts making a significant move higher we’re gonna have one ugly quarter of sales data. And maybe, just maybe, we start climbing down the mast.   

Final Score:  Dow  -46bps, S&P500 -14bps, Nasdaq +39bps, Rus2k -6bps.  

News Highlights:

After hours movers:  CMG -4%, ISRG -3%, FBHS -1%, YHOO -1%, AMGN +2%, BRCM +4%, ILMN +3%, YUM +2%

Not much else so let’s skip to the big finish.

First, this quote.  Which I think is really really good for all the PMs out there

The risk of paying too high a price for good-quality stocks – while a real one – is not the chief hazard confronting the average buyer of securities. Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions. The purchasers view the current good earnings as equivalent to “earning power” and assume that prosperity is synonymous with safety. - Benjamin Graham

And this video, which teaches us a powerful lesson:  if you are going to cut down a tree, it’s best not to run in the direction its falling.

https://www.youtube.com/watch?v=G4pVL8Qrs5k

Have a good night.

Equities Start The Day Higher But...

Equities start the day higher but that’s leaves me a little bummed. I mean yes, its rainy and gray outside my window but futures up 13 pts should’ve cheered me up. Friday’s wallop has once again proven that we are in a trendless market. I got all optimistic the other day because the NYSE Composite was breaking out and the market was within sight of a new high but then it all came tumbling down like Danerys’ popularity ratings. What’s going on? Why has this choppy trend stayed with us for the past 6 months? I guess it’s probably a couple things  1) Europe is hot and so is Asia. The fanciest new trades are all across oceans from here. Everyone wants the Dax and the Hang Seng more than they want another round in the US. 2) People still refuse to embrace the market. About 52% of Americans aren’t even in this thing. 3) Greece lurks even 4 years later. I’m so glad we are still worrying about a Graccident or Grexit or whatever the new term is. Almost as reliable as death and taxes. 4) Transports struggle. One of my favorite sectors to watch and its mired in so much muck. How can the market rally while this sector dithers? There are more reasons than I care to list but it’s plainly apparent that we need a change in market character. We selloff, it fails, we move higher, that fails. A recurring pattern for the past 4 months that has us all treading endless water. What will break the stalemate? I guess the Fed could with dovish comments. Or maybe US Macro data will stop augering into the ground. Oil rally? Earnings? I guess those are possible too, but until you see a change in the way this thing trades cast a wary eye on the whole shebang. Shebang. She moves..she moves (you’ll sing it all day)

After the open, I upgraded my despair to mild interest as the market rallied 1%. So let me get this straight, down on Friday big just because and up on Monday just because? Arrggh. There was one stock today that I marveled at and that was OXM. Oxford Industries? I think they make those sweet Hawaiian shirts I bought at Tommy Bahamas. Wait..they do! They also make Lilly Pulitzer, which must be some kind of amazing clothes because they made the TGT supply chain cry “uncle”! Look at some of those pictures…is there a free bottle of Pappy Van Winkle with these things? I love marketing / stock stories like these, it proves that a good old fashioned idea done well still works in this crazy day and age. You don’t always need some startup with a hot new way to order kale in order to grow your net worth. What else…HAS rose 12% after earnings. I spent the weekend cleaning out my basement and I can tell you HAS must be half of it so this one makes sense. Other winners CSX, HAR, AMZN, and IBM. Imagine trying to ride the CSX train (yea I went there), it’s traded between 31-35 in the past 5 sessions. Nuts. This is a railroad with a near 10% range in a few days. Cue up Ozzy Osbourne.

The final hour saw us churn on the highs and while we didn’t close on them, we were certainly close enough. 2,100 up 0.9%. Tech stocks led the way and even those Transports I mentioned earlier did well. But no, I’m NOT falling for it! Nope. Fool me once, shame on me. Fool me…..twice….well we won’t get fooled again. I’m not getting optimistic about this market until I see 2,130 - 2140, with suitable breadth and certain sectors performing well. Until then its noise at the top…you hear that market Gods? Noise at the top! What do I have to do to reverse jinx this thing higher?

Final score: Dow +117bps, S&P500 +92bps, Nasdaq +127bps, Rus2k +104bps

News Highlights: 

We’ll end tonight with a magic trick.   I can’t say I understand how this one works but if it was done on live TV then WOW.

http://tinyurl.com/nkq9nfq

Have a good night.

The Top End Of The Range

Equities start the day lower as we continue to bang our heads against the top end of the range. Apologies for missing yesterday’s recap, I spent the afternoon preparing a speech for a local event that I really wanted to rock (put on by the fine people @NEWaukee). There should be a video of it soon so maybe I’ll end one of these notes with your boy trying to make people laugh about finance and markets! Yesterday featured a breakout I want you to see because it might end up being one of the most powerful indicators of where we are going. The NYSE Composite Index finally made a new high after basically trading sideways for over a year. Now this is a broad based, bluest of the blue type index. Small cap to large cap it even includes foreign companies with ADRs listed in the US. If this rally is going to continue you absolutely need to see indices like these making new highs. Wanna know why this gets me as excited as a ride on Big Thunder Railroad? Because the last time it broke out of a huge sideways range (the years between 1998 and 2004) it proceeded to run another 40%. A proper bull market move my friends. Now I get that it’s different every time, and I’m not saying we are due for another 40% gains. What I’m saying is that it’s another piece of the puzzle that makes me content to be on the long side, another indicator on a screen that becomes part of your process. We just haven’t seen a breakdown of internals or broad based indices quaking. Things that would make your knees knock and the siren song of cash penetrate your brain. But we still need to see the S&P make new highs, convincingly, otherwise this will be just another random blurb lost in a sea of noise.

After the open there was quite a bit to like about price action. Earnings were ok, GS crushed it, NFLX crushed it, and C beat so we a small tailwind. Yet the S&P started the day on its lows…why? Well we’re blaming Europe here, they were down 1-1.5% across the board. But instead of following them lower we crept higher as the minutes passed. You know what else crept higher? Oil. Since when is that a good thing for stocks? Since we decided a few months ago that lower oil was bad for them. Odd…I know. Remember when I said I wanted to talk Energy the other day?  In the latest BAML survey here’s what they found: Energy stocks at their most underweight in the survey’s history. Globally people despise these things like a wet basement. Wanna know the performance of the energy sector in the past 5 days? About 5%.   5%? Doesn’t seem like a lot, especially given how hard they’ve been crushed. But what we are always on the lookout for is subtle shifts in sentiment.  Data points that show max fear / anger about something. Is energy there? Maybe, only time will tell.  But I found that survey and its responses very interesting…will be curious to see what it’s at next month. We quietly grinded higher all morning and by lunch sat on 2,110, within arm’s reach of a new all-time high.  

In the afternoon my jaw dropped along with the new Star Wars Trailer. Someone get me to a Cantina because I need a drink and a clarinet! You wanna talk about expectations being met? Iger and his crew at $DIS are doing it….multiple times over. Way to go guys. Unfortunately we didn’t manage a new high today, the S&P closed at 2,104, but I was happy to see it shrug off early weakness. My gut tells me that we are going to break the top end of the range sometime in the next few weeks so hopefully I’m right. Can China and Europe and the US rally at once? Sure, anything’s possible. I just wish economic data here wasn’t so tapioca mediocre blah. Come on, someone buy a washing machine or something!  

Final Score:  Dow -4bps, S&P500 -8bps, Nasdaq -6bps, Rus2k -19bps.  

News Highlights:

We’ll end tonight with a long missed video…the good old Fail one!   Whats up with the car?  What happened there?

https://www.youtube.com/watch?v=khaKE5rqqg8

Have a good night.

Roaring Back

Equities start the day lower as I come roaring back to the recap. You know what else came roaring back? That’s right kids…my hatred for Cersei Lannister! What is it about her that makes me so mad? She is such an amazing actress, gotta give her credit for making people despise her. Anyway I’m back, Game of Thrones is back, and earnings are back! Pre open we heard from JPM and WFC, who appear to be chugging along (banks have been boring for awhile now), and JNJ, who warned on currency risks and didn’t get punished for them. I’m hoping earnings are enough to get us out of this Purgatory because even though the market traded above 2100 while I chased floaties in the ocean (never bring a floatie to the ocean) it still hasn’t broken out. The only thing breaking out right now is China and all the retail traders popping up like dandelions in summer swept field. Look at this chart! That ain’t a chart of throats slit in Westeros, that’s a chart of brand new Chinese stock trading accounts! Imagine you saw that here, imagine that’s a chart from ETrade or Schwab. There wouldn’t be a single post on Twitter or Business Insider that didn’t have the word “bubble” in it. To make this story even better the Shanghai Composite is up 100% in the past 12 months! So yes, please do continue to worry about every new high coupled with the fact that most individuals distrust the market. Makes sense.

After the open we drifted lower because Retail Sales missed again. This is the fourth miss in a row for retail sales and “weather” is starting to become a little trite as an excuse. If this series continues to drop it’s going to make defending the bull case much more difficult. We bottomed out an hour into the session and spent the rest of the morning rallying. Why a quick drop and then a rally? Because markets love to confuse the heck out of everyone that’s why! Retail Sales put a sour taste in everyone’s mouth and Europe was broadly lower so that’s probably the main reason for our morning malaise. WFC ended up down 0.7% as everyone worried about lending margins but JPM finished up 1.5% because their bond trading looked good. So there you go, investing in banks can be a wildly different experience! What else…energy led the way today as Crude rallied 3%. $53 a barrel…not bad. Winners: ESV, DO, RIG, RRC, HP. Hugely beaten down names rose 3-5%. Losers were NSC, WYNN, WFM, and KORS. What the heck? Did someone lose money to a casino, steal high end beets and kombucha for food, rob a train for money and park the cash in high end handbags? (I tried…gimme some love). By lunch we sat on 2,095 up a few points.

The afternoon featured a 1pt range! That’s right ladies and gentlemen, an index of 500 US stocks traded in a 1pt range for close to 2 hrs! The kind of excitement you haven’t seen since the greater Springfield Needle Threading competition of 1908. A very late surge pushed the index to 2,096 where it closed modestly higher on another quiet-ish day. Tomorrow we need to talk about the BAML Fund Manager survey and energy stocks. I love that survey, I think they do a great job on it. All the credit in the world to them for what I see as the best survey on the street. Why do we need to talk about Energy stocks?  If you’ve seen it already you know, otherwise tune back in on hump day for a chit chat.   

Final Score:  Dow +33bps, S&P500 +16bps, Nasdaq -22bps, Rus2k -2bps   

News Highlights:

I have two links to end on tonight so feel free to pick your poison

Since skiing season has officially come to an end (make sure to take back your kids rentals, I forgot) we need one last look at the goodness.

And the other ending link is a tree attacking a man. Have you ever seen a tree attack a man? Well now you have. Still better than that Marky Mark “Happening” movie where rhododendrons kill children and the protagonists try and outrun WIND. What a debacle that was.

Have a good night.

The Market Goes Full Blown Cobra Kai

Equities start the day lower as the market goes full blown Cobra Kai karate chop.  Danny Laruso ain’t got nothing on this market, its chop chop chop all day everyday.   Remember when I played down that big gain on Monday because it really didn’t mean much?  Yea, there was a reason for that.  All this +1%, -1%, +1.2%, -1.2% price action is interesting to write about but ultimately meaningless.  So let’s talk about a market worry shall we?  I asked people to give me their top “market worry” last week and “valuation” came up a lot.  Which makes sense right?  We’ve come a long way, it’s only natural for clients to worry about lofty prices.   One of my outstanding teammates in London (frankly they are all awesome), Ross Yarrow, came up with an interesting chart that got a lot of positive feedback.   He looked at the S&P500’s trailing P/E at the start of every year since 1955 and then plotted its full year market return.  Here is the chart, take a look then come back.  No, you gotta go look, quit reading and go look.   Anyway, more diamonds than a Fifth avenue penthouse right?  As you can see, there are plenty of years where the markets trailing P/E was much higher and yet the tape still ended positive.  There are also plenty of years where it ended negative, yes, but it’s not like we are sitting on a 25 P/E.   We are at 18, only slightly above the median valuation (again on a trailing basis).  Around this valuation about 80% of the years saw positive returns.   So my friends, is valuation a huge concern?  Of course it is, and it will be for as long as humans trade stocks.  But if we look at trailing P/E’s for the last 60 years we can’t draw significant conclusions from it.   There are plenty of years where the market is cheap and fell, expensive and rose.  So, like all things market related, it’s just a piece of the puzzle, a puzzle that is constantly changing from year to year.   

After the open, the market remained as directionless as Arya Stark in Bravos (who else is excited for me to spoil everyone in Europe/Australia about Game of Thrones?  It’s almost like a normal feature of the recap).  We got yet ANOTHER batch of mediocre economic data as ISM Manufacturing fell for the 5th straight month.  Hike rates?   That’s as crazy as trying to seize King’s Landing from the sea (oh I’m fired up).  You know what all this endless mediocre economic data is going to cement?  Miserable grinding sideways price action where everyone is frozen in place.  I mean it’s like living north of the Wall for crying out loud (I probably have one or two more in me).   We spent the early morning heading lower but after an hour settled into a sideways slugfest.  2055-2060 was the course we plotted and nothing could stop the churn.  Winners NFX, NEM, MON, WIN, and KRFT.   Losers MAC, NRG, AAL, DAL, and UHS.   You think they can bring back Oberyn at all?  Is there any magic spell for blown up squashed melon head?  Has to be right?  I mean that crazy lady in red can pop out a smoke baby why can’t we get Oberyn back?  (I am excited to see his daughters’ quest for vengeance.  They look tough as nails)

The final part of the day brought nothing new, we are still wandering a wasteland like Danerys.  We adjust a few things here and there, hope for a brighter future, but really it’s just treading water waiting for the plot to unfold.  I’m off for Spring Break but after that I’ll be here for months on end ready to write about squiggly lines, sentiment, and why Janet Yellen is like Stannis Baratheon (I have a great recap planned for that).   Whatever happens over the next few weeks I will say this:  until you see new highs with immediate follow thru the market is suspect.   It’s quiet, data is weak, the Fed is talking hikes, and flashy sectors like Biotech are creaking.  As my boy Ben Affleck said in his brilliant interview scene…SUSPECT!   Final Score:   Dow -44bps, S&P500 -40bps, Nasdaq -42bps, Rus2k -8bps 

Volume was high.  Our desk was better to buy.  Buying in REITs, Health Care, and Chemicals.  Selling in Financials and Tech.  Shorting in Pharma.  News Highlights:

We’ll end tonight with a bungee jump.  Not your average ordinary bungee jump, no, this one features one rope…for two people.  Stupidity abounds!

https://www.youtube.com/watch?v=Sh2LeKpRrRw

Have a good night.

Mr. Toad’s Wild End Of March Ride

Equities start the day flat as we continue to reel from Mr Toad’s wild end of March ride. -2.5% this week as people talk about the following: 1) The US Economy is good…but not great. 2)  Biotech doesn’t just go up and to the right  3) Airline cockpits are going to have to change in a big way  4) college basketball is still really awesome and 5) The churn is on. Now when I say the churn is on what am I talking about? I mean this isn’t a butter recap and I’m pretty sure the Amish don’t read my stuff. Basically we’re at a point of indecision right now. Every time we rally money gets taken out of this thing….so it churns. The S&P has made no gains since November, it’s a whole load of up and down price action with nothing to show for it. So what gets us over that hump? How do we fight off these nagging worries about Valuation and Company earnings? It’s a good question and I’m not sure there will be a near term answer. Look at the economic data lately, it’s just blah (absent housing and jobs). Look at earnings growth, its blah. Look at the bond market, it’s still telling us “I’m worried about lowflation and tepid growth”. Now we’ve gotten past all this stuff in the past because the Fed was crazy easy and rate hike worries were nonexistent. But the mood has changed, that thought is being pushed aside and replaced with “man, I need to justify buying the highs instead of selling them now that Fed is shifting gears” so that’s why the churn has descended upon us. Will it stick around for awhile? I think until we get more Fed meetings the answer is yes. Which should make for markets as excited as this guy!

After the open I was hoping for another one of these days but alas poor investor, it did not come to pass. The first half of the day was spent between 2054 and 2060 and near lunch it was between 2056 and 2059. The 3rd look at GDP brought nothing new and Michigan Confidence was inline. Sideways Fridays are the best Fridays! Speaking of the best, one of our top tier analysts, Colin Sebastian, forwarded me a home listing in San Francisco because I’m always on the lookout for cool cities to live in. So I eagerly opened his email and found this absolute gem for the somewhat attractive price of $1.2mm USD! Now I know what you’re thinking, but that fence won’t be a costly repair. I bet I can get it cleaned up cheap. That shower though might require one or two trips to HD but we can make it work! It’s not irrecoverable! Anyway, there is definitely no bubble out West because when I see attractive housing like that I think “it’s game on in Silicon Valley!” Biotech bounced back today as well as Consumer Disc and Utilities. Winners were CCL, RCL, KRFT, SWKS, EA, and CAG. The losing side with mixed with names like RIG, WIN, FCX, TSLA, and QEP. By lunch we sat on 2,057, exactly unchanged. 

The weird thing about today was that most of the action came in the last 15 minutes. We heard from Yellen out West and from the WSJ that Intel may be looking at Altera. Yellen said “rate rise may be warranted this year” and “pace could speed up, slow down, pause, or reverse”. So basically the Fed continues to prep the market for a potential hike. As for the Intel thing….remember how people were selling semi stocks recently? Well guess what? That ended today! By the close we managed to eek out a small gain of 20bps and you know what? We’ll take it. The churn may be on but we need any gains we can get to hold these levels. Anyway, thanks for reading this week and have an awesome weekend. Next week we are going to talk about predictions vs reactions….which one is actually more important to you? Or which one should be?    

Final Score:   Dow +19bps S&P500 +24bps, Nasdaq +57bps, Rus2k +68bps  

News Highlights:

We’ll end tonight with a really dumb way to take the train. I mean what’s it cost to ride that thing..$5? Less? Come on man.

https://www.youtube.com/watch?v=qN6xuF9X6Y0

Have a good night.

Ben Bernanke Jumps Into The Blogging Game

Equities start the day higher as Big Ben Bernanke jumps into the blogging game! Man, this financial blog space is getting pretty crowded right? If Justin Biebs starts talking PE multiples and DCF modelling I might have to find a new gig. What did Big Ben lead off with? A little treatise on why he didn’t crush older savers (I mean that’s not exactly its main point but it’s what I found the most interesting). Here’s the money quote: “the best way to improve the returns attainable by savers was to do what the Fed actually did: keep rates low (closer to the low equilibrium rate), so that the economy could recover and more quickly reach the point of producing healthier investment returns.”  Healthier investment returns! Have to admit…he definitely hit that target right? I don’t know, I guess Bernanke blogging is a good thing.  I don’t mind insanely intelligent people walking us thru complex issues but it can’t read like a textbook. Anyway, we walked in to futures up 10 because Europe was having a good day and there were a slew of Biotech deals (was or were there?  I need an editor). Look, it’s month end/quarter end, we’re gonna need some happy price action out of this puppy or else negativity is gonna spew forth like so much whipped peas out of a 6 month old. Let’s see if we got it shall we?

After the open not only did our little baby eat his peas, he was buying energy and financials like he had just raised $100mm. Futures were up 10 points at the open, by lunch they were up 26 points! Why all the lovey dovey price action? I’ll tell you why….because markets love to punish people over their skis! Everyone was leaning a bit too bearish last week so a quick reversal makes people scramble to cover. Toss in month end / quarter end and you have the potential for a nice session. That being said, we are still in the “churn” I spoke about on Friday. For any of this to mean anything we need new highs and then AT LEAST one or two days confirming them. Wanna know why volume is so low right now? (Friday was 2nd slowest day of the year)  Because this 2050-2120 range has been with us for months. No real reason to act unless there is some kind of trend change. So Dear Market Gods, strike someone with thunder or lighting or some kind of giant wave because the boring is too darn high! Winners: ADI, HCP, ESRX, KMX, CNX, and NRG. Losers ALTR, LO, MYL, INTC, RAI, and CMG. However, dear readers, there were only 10 names in the S&P down more than 1% so that’s pretty tasty action.    

The final few hours brought more upside and by the time the bell rang all 10 SPX sectors were green and we had racked up a 1.2% win. Should we care though? I guess a bit, because obviously green is better than red. But the market is still range bound, and even with a big win today it’s only back to where it was last week.  Volume wasn’t spectacular so let’s save the big parties and back slapping for another time. Good day though, I won’t minimize it too much. Further gains are needed to ramp up interest!  

Final Score: Dow +149bps, S&P500 +122bps, Nasdaq +115bps, Rus2k +140bps. 

News Highlights: