Bull and Baird Blog - January 22, 2014

Equities start the day flat, AGAIN, as we churn like Amish butter. Hey, let’s try to figure out what consensus is that way we’ll know what to fade. Here’s one random traders take on what the herd currently thinks. 1) We are due for a 10%-20% pullback: Plenty being written about on this topic so it’s definitely consensus, which means we should buy stocks. 2) US stocks are the place to be: BAML’s latest survey says the world is overweight equities and this Blackrock survey shows all of Wall St loves equities which means we should sell stocks. 3) Chatter says the market is overvalued at current levels: Again, citing that BAML survey, managers think the S&P is too rich (“The overvaluation view is driven predominantly by the views on U.S. equities where a net 72 percent say stocks are overvalued”) so we should buy stocks. 4) Everyone thinks US growth is accelerating. Every blogger and economist I read thinks the US will continue to grow based off a couple things like residential investment and a reduction in headwinds (i.e. gov’t) which means we should sell stocks. Hmmm, you can see the conundrum here, and I guess this is why the market continues to go sideways.From that little exercise you can see that both sides are probably right, and both sides are probably wrong. I personally think that if the market is going to correct it needs one last whoosh to the upside. That way it can draw in a few dozen more bystanders and ultimately harm as many participants as it can (sounds crazy but that’s what equities do, they always punish the masses). So I think we go higher from here not lower. Then we’ll stop and look at the road signs once again to see which path to take.

After the open we went absolutely nowhere, AGAIN. Which is weird right? There’s lots of chunky single name moves on a daily basis but they just aren’t adding up. I despise the term “stock pickers market” because it’s lazy and overused but that might just be what we have here. A market that goes nowhere but allows managers to see +/- 5% moves in some of their names? Isn’t that what they want? Hey, Bloomberg put out their Global Investor survey results today (I was in it, they send to all users) so let’s take a gander at the results shall we? If we surf our way thru all the fancy flash nonsense that crashes our browsers endlessly we find the results to the question “is this a bubble or not?” For US Equities a full 56% of respondents said the market is a bubble or on the verge of a bubble. 43% said no bubble and 1% have no idea (this should be higher). Does that strike you as an over believed market? Or are those numbers basically what we want to see? 50% are nervous, 50% aren’t…I’m supposed to be scared by that? Anyway, all day long we hovered around unchanged as neither bulls nor bears seem to be able to exert their influence. Winners TEL, TXT, NSC, BBY, SWN, and BBRY. Losers COH, ATI, MSI, IBM, PM and KSS. How about that BBRY huh? Thing is crazier than Richard Sherman after a big pick. Started 2013 up 54% only to give it all back by Christmas. So far it’s started 2014 up 42%....must be fun times in Waterloo!

The last hour saw a small rally and a small selloff to close us exactly where we were all day, yep unchanged. If I didn’t know any better I’d have thought January was all about drinking pinot noir and hating on Merlot (too vague a reference?). But while the market refuses to budge there are underpinnings of strength (Transports, Rus2k, W5000, intraday dips being defended, etc). We just need something to happen! Someone to say something (other than Icahn) and have it put a bit of giddy up in everyone’s steps. I can’t take much more of this sideways! (joke is too far away to link together isn’t it?)

Final Score: Dow -25bps, S&P500 +6bps, Nasdaq +28bps, Rus2k +47bps.

News Highlights:

We’ll end tonight with pretty much the worst driver ever. I mean I’ve seen some pretty bad drivers in those Russian videos but no one THIS bad. How clueless do you have to be to get in an accident with a kiddie train?

https://www.youtube.com/watch?v=B4ztJPUehdY

Have a good night.