At these prices, now would be a good time to pick up some LNC, PRU, GE and MSFT.....
As to the rising likelihood of QE3 after the spate of weak economic reports and, as Rev Shark (and others) on RealMoney.com suggests, I believe the political opposition toward more quantitative easing, unlike last summer, is materially less hospitable.
It is a crutch used by the bullish cabal, and I am not falling for it.
As a result, the threshold to acceptance of a QE3 program is much lower with regard to acceptable GDP growth.
The financial sector is being obliterated. The fundamentals for the banking industry have turned more dire.
The ISM Manufacturing number for May was abysmal -- and you can't put lipstick on the (economic) pig. As confirmation, watch the yield on the 10-year U.S. note, which is at about 2.98%.
The yield on the 10-year U.S. note just dropped below 3% for the first time since December 2010. The economy has hit the wall.
Despite interest rates being driven lower and a lowly 4.55% 30-year mortgage rate, mortgage refinancings dropped by nearly 6% this week.
The Mortgage Bankers Association attributed the drop to "too many potential refi borrowers having too little equity remaining in their homes."
U.K. manufacturing PMI fell to 52.1 last month from a downwardly revised 54.4 in April, well below the 54.1 consensus. A disappointment.
In China, the May manufacturing index came in at 52. April's print was 52.9 and the expectation was 51.6. (If you believe this number, so far it looks like a soft landing in China).
The ADP was a disaster. Looks like a smooth and self-sustaining recovery is not in the cards.....
Wednesday, June 1, 2011
Wow; Turn The Page On The Calendar And........POW
When the market action is this ugly, many just stay out of the way and let it play out.
There are fund managers who like to average into this sort of weakness, but these are folks with lots of capital who can make small incremental moves. Most individual investors are better off not trying to catch falling knives or safes. It's far too easy to average in too much, too early. What kills more traders than anything else is averaging down into a position that just keeps falling.
There's probably no hurry to declare a bottom at this point.
There are fund managers who like to average into this sort of weakness, but these are folks with lots of capital who can make small incremental moves. Most individual investors are better off not trying to catch falling knives or safes. It's far too easy to average in too much, too early. What kills more traders than anything else is averaging down into a position that just keeps falling.
There's probably no hurry to declare a bottom at this point.
Thoughts For Tuesday
Several observations at day's end:
1. The trend remains the bull's friend.
2. That trend has been so powerful that even Nouriel Roubini, David Rosenberg and many other intellectual bears have either given up or receded in their ursine arguments.
3. Ultimately, corporations will be victimized by screwflation, as a higher cost of living for the average Joe reduces demand for products. Yes, for now, corporate profitability is terrific, as Jim Cramer relates. But business' disproportionate share of GDP and profits will come to an end -- it always does -- and I believe it will occur sooner than later. It may come via more populist tax reform and/or through an increase in wages.
4. I believe investors are more heavily invested than many believe. How else to explain the fear that developed in the hedge-fund community prior to the last week's advance?
5. It is nuts to think that the sovereign debt crisis will not affect our economy and markets.
Talking heads continue to believe that the "soft patch" is transitory; the bond market is making a different conclusion.
The U.S. stock market is punch-drunk with liquidity, but with the yield on the 10-year U.S. note yield approaching 3.00% ... who do you want to believe?
So Nouriel has been wrong for over two years now and he finally acquiesces.
A massive restructuring of debt in the eurozone seems inevitable.
1. The trend remains the bull's friend.
2. That trend has been so powerful that even Nouriel Roubini, David Rosenberg and many other intellectual bears have either given up or receded in their ursine arguments.
3. Ultimately, corporations will be victimized by screwflation, as a higher cost of living for the average Joe reduces demand for products. Yes, for now, corporate profitability is terrific, as Jim Cramer relates. But business' disproportionate share of GDP and profits will come to an end -- it always does -- and I believe it will occur sooner than later. It may come via more populist tax reform and/or through an increase in wages.
4. I believe investors are more heavily invested than many believe. How else to explain the fear that developed in the hedge-fund community prior to the last week's advance?
5. It is nuts to think that the sovereign debt crisis will not affect our economy and markets.
Talking heads continue to believe that the "soft patch" is transitory; the bond market is making a different conclusion.
The U.S. stock market is punch-drunk with liquidity, but with the yield on the 10-year U.S. note yield approaching 3.00% ... who do you want to believe?
So Nouriel has been wrong for over two years now and he finally acquiesces.
A massive restructuring of debt in the eurozone seems inevitable.
Market Recap For Tuesday, 5/31/2011
The gap up this morning resulted in a slow drip of selling as buyers worried about weak economic reports. But they shook off any worries and managed to close very strong. The skeptics will dismiss it as just end of the month window dressing, but it was an impressive comeback and a nice flurry of buying after a lack of early follow-through.
Volume picked up over Friday's very low levels, giving us a technical accumulation day, but it was still quite light and there was some very slow action. What really helped the bulls today was strong action in AAPL and QCOM, which have a big impact on the indices. But this was a broad rally, and it is difficult to find fault with it other than the fact that it is yet another V-shaped move.
Once again we are right back in the familiar pattern of having four straight positive days in a row after suffering a rather ugly technical breakdown. Overhead resistance did not matter, and the fact that we go straight from oversold to overbought is of little concern. Once we started running, the negatives are forgotten and entry points are secondary to adding exposure.
The bulls have the end of the month seasonality favoring them, but they also have momentum that is squeezing shorts and sucking in underinvested longs.
Volume picked up over Friday's very low levels, giving us a technical accumulation day, but it was still quite light and there was some very slow action. What really helped the bulls today was strong action in AAPL and QCOM, which have a big impact on the indices. But this was a broad rally, and it is difficult to find fault with it other than the fact that it is yet another V-shaped move.
Once again we are right back in the familiar pattern of having four straight positive days in a row after suffering a rather ugly technical breakdown. Overhead resistance did not matter, and the fact that we go straight from oversold to overbought is of little concern. Once we started running, the negatives are forgotten and entry points are secondary to adding exposure.
The bulls have the end of the month seasonality favoring them, but they also have momentum that is squeezing shorts and sucking in underinvested longs.
Thoughts For Friday, 5/27/2011
Run, don't walk, to read the WikiLeaks column on how "Saudis Often Warned U.S. About Oil Speculators."
On a forward price/earnings multiple basis, the financial sector is dirt cheap.
The financial sector is a market pariah.
The ISI Specialty Retailers survey declined from 55.0 to 51.5.
On a forward price/earnings multiple basis, the financial sector is dirt cheap.
The financial sector is a market pariah.
The ISI Specialty Retailers survey declined from 55.0 to 51.5.
Market Recap For Friday, 5/27/2011
The bulls closed the week by building on the oversold bounce we've been enjoying for three days, but it was only slightly higher than how the week opened. Volume was light due to the upcoming holiday weekend, but breadth was good and there were some pockets of momentum. It was standard holiday trading, with the bears standing aside while the more energetic bulls pushed things around.
It still looks like another oversold bounce to me, and with the positive aspects of the end of a month coming to a close, I am looking for the bears to make a better effort next week.
It's definitely possible that the market is going to pull off another recovery like it did in March and April, but you should note that those V-shaped bounces began in the middle of the month, after we had topped out in the first days of the new month.
Fundamentally, the news flow is difficult right now. The economic reports, such as housing starts today and numerous downside revisions of GDP by economists, have been mostly negative, and the European sovereign debt problem is still a muddle. Ironically, the poor economic news in the U.S. is pressuring the dollar, and that is helping the market, but you have to wonder if the euro has much of a basis to continue to outperform.
The biggest problem is slow action. We see weak oversold bounces in banks one day and retails the next, and that excites some folks but, overall, it's slow action and upside momentum has not been very dependable.
It still looks like another oversold bounce to me, and with the positive aspects of the end of a month coming to a close, I am looking for the bears to make a better effort next week.
It's definitely possible that the market is going to pull off another recovery like it did in March and April, but you should note that those V-shaped bounces began in the middle of the month, after we had topped out in the first days of the new month.
Fundamentally, the news flow is difficult right now. The economic reports, such as housing starts today and numerous downside revisions of GDP by economists, have been mostly negative, and the European sovereign debt problem is still a muddle. Ironically, the poor economic news in the U.S. is pressuring the dollar, and that is helping the market, but you have to wonder if the euro has much of a basis to continue to outperform.
The biggest problem is slow action. We see weak oversold bounces in banks one day and retails the next, and that excites some folks but, overall, it's slow action and upside momentum has not been very dependable.
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