The Trend Is Broken

Equities start the day higher as our last holiday until Thanksgiving comes to a close. Booo. There is the often maligned Columbus Day and the exceptionally awesome Veterans Day but exchanges are open for both of those so they don’t count. Did you have a nice three day weekend? I did, managed to paint my son’s room 50 shades of grey. There’s nothing that brings about a bigger sense of failure than trying to paint the edges of a room right? It is literally impossible to succeed even with tape, the misery is real. Anyway, this isn’t a holiday or a painting blog so let’s catch up on the market. Futures were higher because Asia had a strong close and Europe partied to the tune of 1.5% so everyone felt pretty good about themselves this morning. But there is so much damage my friends, so much to consider when you see these overnight moves. The trend is broken…shattered….left in so many pieces. We are prone to these incredible bounceback rallies but they are nothing but noise until the leg is repaired. We would need to see all kinds of up volume, oil to stabilize, China to stabilize, industry groups to resume uptrends, the Fed to do SOMETHING (sounds weird right), and sentiment to stop feeling like its puppy got run over. The problem is, all those things won’t happen at once, and I’m not saying you need to sit in your bunker until they do. I’m just saying that these big rallies aren’t meaningful yet, we need a lot more to happen to get this train back on the tracks. Barry had a good article on this topic today, go give him a read before you move on.

After the open it felt like Labor Day was still in full effect. Decent overall volumes but institutional clients seemed absent. The only economic data point was the NFIB Small Business index but come on, that one ain’t moving the needle. We soared off the open to 1,960 where we stayed all the way thru lunch. Yep… it was one of those sessions where all the gains come in the first 20 minutes and then we stare at sideways for hours. As always cyclicals led the bounce: Industrials like DOV, TXT, and GE.  Materials like FCX, OI, and DOW. When it comes time to rip ‘em they go RIGHT to the beaten down dogs. Not that many losers to speak of, only NFLX demands our attention. Remember NFLX? The darling of 2015? This thing was up 157% YTD at the start of August and now it’s up a paltry 94%.  94%...pffffttt….I don’t even get out of bed for that return. A rule of thumb I’ve lived by (over the past few years) is that corrections are typically near their end when everyone starts puking the biggest winners. Is it different this time? Maybe, we’ll see, but once everyone starts dumping DIS and AAPL and NFLX and SBUX you know towels are being thrown in. Anyway, fairly quiet morning led to some mediocre lunch and talk of how the Packers are going to beat the Bears by 35 on Sunday. Sounds right to me, in fact the Packers are a guaranteed lock to cover (please work…please work..)

We broke the sideways range around 1pm ET and it was off the races. By the end of the day we had managed to gain a tasty 2.5%. So should we sound the all clear? Of course not, like I said before it’s going to take a lot more than this. Volatility is back with a vengeance and all it would take is a bad night in Shanghai to erase all of this. I imagine we’d need to recover 2,000 on the S&P to get any real buyers back in the market so patience is probably still warranted. Hey…let’s end on a positive note shall we? Take a look at this chart of European bank lending to non-financial corporations. That’s a mouthful right? Let me sum it up differently: Green Shoots.   

Final Score:   Dow +242bps, S&P500 +251bps, Nasdaq +273bps, Rus2k +225bps.  

News Highlights:

• Succinct summation of the day’s events: relief rally after nothing bad happened overseas. That’s what most of the rallies have been lately…less bad across an ocean.
• I always love a good quant’s take on the market, so much data and numbers and statistical analysis: Question: Any other observations you have from the last couple of weeks that you think people might be interested in? Lo: Yeah. August sucks.
• Look at all this optimism from my guy Bill.  How dare he have hope for the future? The prime working age population peaked in 2007, and appears to have bottomed at the end of 2012. The good news is the prime working age group has started to grow again, and is now growing at 0.5% per year - and this should boost economic activity.  Demographics are now improving in the U.S.!
• Parent of the Year only costs $4k? Seems like a steal to me! 
• Buybacks are not some enemy of economic growth (says the FT): Buybacks are indeed up, amounting to about a half-trillion dollars annually. But is that bad? Is American business really liquidating itself, destroying businesses with buybacks? No
• Show your Freshman in college this chart, particularly the Y Axis.
• NZ or Montana? Which one wins?
• Take your vacation…or you might die. Men are affected, too. A 2012 review of 50 years of research published in the American Journal of Epidemiology showed that a ten-hour-or-more workday increased the risk of coronary heart risk by 80%, in both sexes.
• You gotta make this Buffalo Chicken melt with beer cheese fondue.  Wow.
• This is the most expensive car ever sold at auction ($9mm USD). I don’t know….really? I guess you have to like the number 7.
• I always wondered what it would be like to slide down those museum walls. 
• Now that my friends…is  a save.   And another save.  And another save…

We’ll end tonight with a couple “high flying” links

The first is a bike jump that I don’t really get.   Was the whole plan to crash?

The second is the highest and longest slackline ever attempted.   Slack line videos are starting to pass wingsuits as my “no freaking way” favorites.

Have a good night.