The Top End Of The Range

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

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

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

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

News Highlights:

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

Have a good night.