Bull and Baird Blog - September 19, 2016

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:

  • Every single article is about the Fed meeting or Hillary Clinton sneezing so we’re gonna move to the big finish instead.

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

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

Have a good night.