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?


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.


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.


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!!


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.


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.


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


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


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?


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…. 


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… 


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?


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.


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.  


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.


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!


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.  


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.


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…


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! 


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:


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?)


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!


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…


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


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! 


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


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. 


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.


 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.


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!


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.


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… 


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… 


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!


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…


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).


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). 


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.


Have a good night.