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.
- Succinct Summation of the Day’s Events: Market just creeped higher. Couple good earnings reports and a little help from a rally in Crude (feels weird to type that).
- I think Stanley Fischer is great, take a look at this recent quote: "We have to ask what will go wrong," he said. "I say that if we get this in proportion, we're going to be changing monetary policy from the most extremely expansionary we've been able to do in all of history, to an extremely expansionary monetary policy." This is what I don’t get about market reactions to good economic news. They are going from Mach 5 to Mach 4, not exactly hitting the brakes.
- 3 Misconceptions about Risk Management. This one was my favorite: Intelligent investors understand the importance of planning for a wide range of outcomes by thinking in terms of probabilities, understanding that they will be wrong from time-to-time and having the willingness to admit they can’t or don’t need to know everything. I subscribe to the Dean Mathey philosophy: “Be optimistic but always plan for the worst.”
- Doesn’t look like sentiment has gotten crazy near the highs: According to the weekly survey from the American Association of Individual Investors (AAII), bullish sentiment rose from 28.7% up to 32.07%. This is now the sixth straight week where bullish sentiment has been below the bull market average of 38.7%, which is the longest streak since last August.
- How does this guy even do this? Gotta give him credit for not missing at all
- Would you believe an 8yr old can make $157k a month on Youtube? They can..and do. Charliscraftykitchen, for example, has become YouTube's largest food channel, according to Outrigger Media, through weekly clips of a young girl (Charli) making treats. The video "Cupcake Marshmallow Pops" has generated nearly 2 million views since it was posted in February; the channel as a whole nets some 29 million views each month, said Outrigger Media, which works to help brands navigate YouTube's sprawling landscape. What's more, it averages monthly ad revenue of $127,777, Outrigger Media estimates. And that's after YouTube's cut
- How do the Big 4 economic indicators look right now? Not great…not at all: The overall picture of the US economy had been one of slow recovery from the Great Recession with a clearly documented contraction during the winter, as reflected in Q1 GDP. Data for Q2 supported the consensus view that severe winter weather was responsible for the Q1 contraction -- that it was not the beginnings of a business cycle decline. However, the average of these indicators in recent months suggests that the economy is at risk of outright contraction. Retail Sales and Industrial Production have been the source of weakness. We must see these improve in the months ahead to avoid an outright recession.
- Honestly…this is breathtaking right?
- How could you possibly screw this up more
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.