Lowered expectations for the monthly jobs report due to poor weather set the stage for a gap-and-run reaction to a decent report. Once again, it was straight up on good breadth but mediocre volume. That has been the case every day this week, as an overbought market become more overbought. If the buyers have any worries or doubts, they aren't showing them. There isn't much new that can be said about this amazingly strong market. Any and all bearish fundamental and technical arguments are just plain wrong. It doesn't matter who you are or how smart you are, if you don't love this market, then you are on the wrong side of the action.
The problem is: There is no way to be logical about when we might see a possible top. We are already past the logical points were we should have reversed course, or maybe struggled a bit. If you can't use logic, then the only alternative is to have faith, and that seems to be the best investment approach right now. This parabolic move has picked up steam all week, but we are heading into a Monday, which has been the best performing day of the week by far, over the past year. The way to make the big money in the market is to ride the trend, but if you aren't at least a little nervous when we are this extended, then you probably weren't trading to the bottom last March. The bulls certainly deserve respect. Still, you have to wonder how much longer they can continue this sort of action........
Friday, March 5, 2010
Thursday, March 4, 2010
Will We Sell The Job News - Or Is It A Bear Trap?
For the third day in a row, we had some mildly positive action, which means that the IWM is now up 15 of the last 17 days. The senior indices haven't done quite as well, but they sure aren't pulling back much. Once again, we had good breadth, but volume was lighter on the Nax. The higher dollar was the biggest negative today, but market players shrugged it off and loaded up on retailers instead. Buyers continued to chase some very extended charts and didn't seem to be at all worried about the jobs report that is due in the morning. The Obama administration has already lowered expectations with comments that poor weather may affect the numbers. I don't know if that is true, but it makes it easy for the bulls to dismiss a soft number. So the pattern of an extended market just becoming more extended continues. With the way retail stocks are acting, you would think we are in a booming economy that is creating tons of new jobs rather than losing them at a slower rate. The best way to deal with this is to ignore any logic that leads you to a bearish conclusion. This market has very stubborn and persistent buyers, and they are not going away just because some bears happen to believe that the economy isn't really all that great. We are set up fairly well for a sell-the-news reaction to the jobs report in the morning, but I'm not sure that's going to happen. My gut tells me we won't sell off tomorrow.....If the news is better than expected and we gap up, many technical dudes out there will definitely be looking at selling and shorting though.....
The President's Against Real Health Care Reform
Unnoticed at the summit was a diatribe in which President Obama showed he has no patience for any kind of health-care reform that most Republicans, most economists and many non-ultra left Democrats believe in—namely the kind that corrects the incentives that inflate costs.
Back in 1992 there were an epic series of Senate Finance hearings. They represented a remarkable meeting of minds across a broad swath of health-care wonks and economists (not interest groups) that the original sin was the exclusion of employer-provided health insurance from taxable income—imposed carelessly by the IRS in 1943 so defense contractors could compete for workers without transgressing Roosevelt-era wage and price controls.
Everybody knows this turned "insurance" into something else. Call it prepaid health care, as Milton Friedman did. Call it a giant tax Laundromat for the nation's private health spending.
It became a massive subsidy to third-party payment, an incentive to channel every ache and pain through an "insurance" bureaucracy. It became an incentive for the most economically competent Americans—the secure, high-earning employees of corporate America—to overspend on health care, treating it as a free good.
What a surprise that the medical-industrial complex reorganized itself in light of this central driver. Nobody was looking for price tags so price tags disappeared, as did any competition on price, and any clarity on price versus value. Simple.
To Mr. Obama, however, such insurance is insurance—the way it's supposed to be, and anybody who doesn't agree must be smoking something.
Self-evidently idiotic, he indicated at the summit, is the idea that health insurance might go back to being "the equivalent of Acme Insurance that I had for my car. . . . It's basically not health insurance. It's house insurance. . . .
"I'm buying that to protect me from some catastrophic situation; otherwise, I'm just paying out of pocket. I don't go to the doctor. I don't get preventive care. There are a whole bunch of things I just do without. But if I get hit by a truck, maybe I don't go bankrupt."
We won't unpack the assumptions in this rant: That the affluent, educated beneficiaries of this tax loophole aren't capable of spending wisely on their own health care.
Mr. Obama hereby chucks over the side virtually all creative thinking about our health-care predicament, not to mention the single worthwhile policy innovation of the past two decades, the health savings account. In an unwisdom that he will probably come to understand only in his later years, Mr. Obama wastes the umpteen months his predecessor spent stumping the country for HSAs as a way to give consumers some financial "skin in the game." It was a theme voters could grasp because it made sense, unlike the Rube Goldbergism of Mr. Obama's health-care plan.
This week even Warren Buffett called the Obama plan "2,000 pages of . . . nonsense," adding, "The problem is incentives."
Here, Mr. Obama squanders the opportunity his presidency represented. For it's entirely possible to visualize incorporating this insight about the proper role of insurance with a system of guaranteed coverage and individual mandates à la ObamaCare, and indeed back when Mr. Obama was believed to be smart, we would have guessed this was the direction in which he would head.
Like any real reformer, he would have challenged both parties down to their ideological socks. Republicans would have had to swallow a universal mandate in return for an across-the-board tax cut to compensate workers for loss of the health insurance loophole.
Mr. Obama says he's content to be a single-term president. The soonest, then, we can hope for real progress on health care is three years.
His failure calls for some historical perspective. An enduring mystery is why Jimmy Carter insists on preaching about foreign policy when his real achievements were in the realm of domestic deregulation. OK, the ideas were hatching away in the back of the Nixon administration, brought forward by Ford and continued into Reagan's first term with the defeat of inflation and passage of the 1986 tax reform.
But altogether it was a period of the greatest domestic policy innovation, based on a profound bipartisan learning about the defects of what went before, namely 90 years of the "Progressive" regulatory urge.
Mr. Obama is turning out to be Jimmy Carter on foreign policy, but he's no Jimmy Carter on domestic economic policy.
In fact, he's turning out to be exactly what you fear getting when you elect a glossy unknown: a gift to the world (in his own eyes) with no real grit.
It's going to be a long three years.......
Back in 1992 there were an epic series of Senate Finance hearings. They represented a remarkable meeting of minds across a broad swath of health-care wonks and economists (not interest groups) that the original sin was the exclusion of employer-provided health insurance from taxable income—imposed carelessly by the IRS in 1943 so defense contractors could compete for workers without transgressing Roosevelt-era wage and price controls.
Everybody knows this turned "insurance" into something else. Call it prepaid health care, as Milton Friedman did. Call it a giant tax Laundromat for the nation's private health spending.
It became a massive subsidy to third-party payment, an incentive to channel every ache and pain through an "insurance" bureaucracy. It became an incentive for the most economically competent Americans—the secure, high-earning employees of corporate America—to overspend on health care, treating it as a free good.
What a surprise that the medical-industrial complex reorganized itself in light of this central driver. Nobody was looking for price tags so price tags disappeared, as did any competition on price, and any clarity on price versus value. Simple.
To Mr. Obama, however, such insurance is insurance—the way it's supposed to be, and anybody who doesn't agree must be smoking something.
Self-evidently idiotic, he indicated at the summit, is the idea that health insurance might go back to being "the equivalent of Acme Insurance that I had for my car. . . . It's basically not health insurance. It's house insurance. . . .
"I'm buying that to protect me from some catastrophic situation; otherwise, I'm just paying out of pocket. I don't go to the doctor. I don't get preventive care. There are a whole bunch of things I just do without. But if I get hit by a truck, maybe I don't go bankrupt."
We won't unpack the assumptions in this rant: That the affluent, educated beneficiaries of this tax loophole aren't capable of spending wisely on their own health care.
Mr. Obama hereby chucks over the side virtually all creative thinking about our health-care predicament, not to mention the single worthwhile policy innovation of the past two decades, the health savings account. In an unwisdom that he will probably come to understand only in his later years, Mr. Obama wastes the umpteen months his predecessor spent stumping the country for HSAs as a way to give consumers some financial "skin in the game." It was a theme voters could grasp because it made sense, unlike the Rube Goldbergism of Mr. Obama's health-care plan.
This week even Warren Buffett called the Obama plan "2,000 pages of . . . nonsense," adding, "The problem is incentives."
Here, Mr. Obama squanders the opportunity his presidency represented. For it's entirely possible to visualize incorporating this insight about the proper role of insurance with a system of guaranteed coverage and individual mandates à la ObamaCare, and indeed back when Mr. Obama was believed to be smart, we would have guessed this was the direction in which he would head.
Like any real reformer, he would have challenged both parties down to their ideological socks. Republicans would have had to swallow a universal mandate in return for an across-the-board tax cut to compensate workers for loss of the health insurance loophole.
Mr. Obama says he's content to be a single-term president. The soonest, then, we can hope for real progress on health care is three years.
His failure calls for some historical perspective. An enduring mystery is why Jimmy Carter insists on preaching about foreign policy when his real achievements were in the realm of domestic deregulation. OK, the ideas were hatching away in the back of the Nixon administration, brought forward by Ford and continued into Reagan's first term with the defeat of inflation and passage of the 1986 tax reform.
But altogether it was a period of the greatest domestic policy innovation, based on a profound bipartisan learning about the defects of what went before, namely 90 years of the "Progressive" regulatory urge.
Mr. Obama is turning out to be Jimmy Carter on foreign policy, but he's no Jimmy Carter on domestic economic policy.
In fact, he's turning out to be exactly what you fear getting when you elect a glossy unknown: a gift to the world (in his own eyes) with no real grit.
It's going to be a long three years.......
Wednesday, March 3, 2010
Pretty Good
This morning, our overbought market seemed set to get even frothier, but after a bout of profit-taking , we ended mostly flat. Breadth was still quite positive on the Nasdaq, which also boasted higher volume than the NYSE, where breadth was around even. I don't know what accounts for this difference in the NYSE and Nasdaq volume patterns of late, but it certainly makes the latter look better. Some market players cited the Beige Book for the selloff, while others blamed President Obama and the proposed "Volcker Rule" for bank regulation. I believe we were simply due for a rest; we would have found a reason, no matter what the news. Even with the softer action this afternoon, it is hard not to be impressed by the strength of the action lately. We easily broke through overhead resistance, and the pullbacks have been very mild. I'm amazed at the number of parabolic moves I'm seeing. If there is much worry out there, the action sure doesn't reflect it. With the IWM up 14 out of the past 16 days, you aren't going to find a lot of easy buy points, but this action has the same character as what we saw last year, and it has persisted to a much greater extent than nearly anyone had expected. Bulls seem to have control right now.
What A President We Have.....
GS and JPM are selling off again because Obama is sticking with the Volcker "plan." This president of ours is placing bets on the Colts in the Super Bowl and on 'Nova against Syracuse. It is ridiculous. Is he wagering on the U.S. against Canada in ice hockey? Does he think it is all a game? Does he just want the stock market to go down? What is he all about? Who is advising this guy? Why does he want to make himself irrelevant? THE VOLCKER RULE HAS NO CHANCE TO SUCCEED. None. Shorts now banging down GS and JPM again. This is pathetic. I think I'm gonna buy some GS and/or JPM leaps and just wait for some sanity. GS has to be looking very hard right now at going private......
Tuesday, March 2, 2010
Extended (Maybe), But Not Showing Much Weakness Yet
It has been a while since we have had a weak finish, but the buyers finally ran out of steam and gave back some of the day's gains. Even so, it was still a mostly positive day. Breadth was solid at close to 2 to 1 positive, and the "weak dollar" plays, particularly gold and oil, led to the upside. Lately we haven't been hurt much by a stronger dollar, but when it is weak, it is still a positive. Small-caps have been the leaders of this market for some reason that escapes me, but it was the strength in some of the bigger caps like AMZN and GOOG that has driven the broader market the last two days.
Small-cap indices are near highs while the senior indices still face technical overhead on the underside of the January highs. Given how easily the small-caps have overcome the same levels, I'm not sure how significant that overhead is. The market is back in a very familiar place with a straight-up move and some overbought conditions but few signs of weakness. It is quite easy to make good arguments for why we should pull back, but the market doesn't much care how smart the bears are. If we are going to pull back, we are at a point where it seems logical, but that was the case on Friday as well. Just sitting and holding is the approach that works, but for active traders it isn't easy when you have a market in the position that we are in now.....
Small-cap indices are near highs while the senior indices still face technical overhead on the underside of the January highs. Given how easily the small-caps have overcome the same levels, I'm not sure how significant that overhead is. The market is back in a very familiar place with a straight-up move and some overbought conditions but few signs of weakness. It is quite easy to make good arguments for why we should pull back, but the market doesn't much care how smart the bears are. If we are going to pull back, we are at a point where it seems logical, but that was the case on Friday as well. Just sitting and holding is the approach that works, but for active traders it isn't easy when you have a market in the position that we are in now.....
Monday, March 1, 2010
The Return Of Mo
The bulls really came to life today, and although the DJIA was only up about 75 points, the action under the surface was much stronger. Small-caps and big-cap technology led the way on 3-to-1 positive breadth. The inverse correlation with the dollar didn't apply today, and we saw good moves in oil, coal, steel and various commodities. The bears focused on the underperformance of financials, but there just weren't too many negatives to be found. Most interestingly, there wasn't any obvious catalyst for the strength. Some news agencies used the AIG, MIL and OSIP deals as an explanation for the jump, but there really wasn't any obvious factor for such energetic action. Technically we have been struggling right around the 50-day moving average but we cut through that with the gap up open and kept ramping up the rest of the day. The action today is very reminiscent of what we had in 2009. Underinvested bulls had to suddenly scramble to add long exposure and the bears had to run for cover. We even had light volume on the NYSE again as the Naz saw a solid increase. The momentum is back, and while you might come up with some very good argument why you don't trust it to last, you can't be very confident trying to fight it. This market has consistently run over anyone who doubts its ability to bounce. The bounce over the last three weeks has not been as vigorous as what we had seen last year, but the action today made up for it. Once again the bulls have regained the upper hand - it would probably be best to respect that fact.
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