It is difficult to draw any significant conclusions from the weaker action today. Some market players are obviously nervous about some negative news over the weekend. The downgrade of Spanish debt could easily weigh on European action Monday and give us a poor start when we reopen on Tuesday. On the other hand, we have a strong tendency toward positive new-week and new-month opens. If there isn't any particularly negative news in Europe, or the top kill works and the BP oil leak is plugged, we could see some strong gains to kick off the week.
I can see scenarios in either direction, but it's a coin flip. The technical patterns in the major indices are equally mixed. We obviously had a problem with the big technical level at 1,100 on the S&P500 today, but it was the first try, and we ended up with a lighter-volume pullback. It wouldn't be at all surprising to see the bulls make another run at a break higher next week.
While further upside may be an okay bet in the short term, the longer-term technical picture still looks quite poor to those "technical wizards" out there. We are still technically broken and in the midst of a correction. The action this week doesn't look like much more than a dead cat bounce, and it didn't do much to repair the damage we have suffered. The volume on Thursday tells us that buyers didn't have real conviction, and when you consider that we also had end-of-the-month mark-ups, the action is even less impressive.
Longer term, this market may not be out of the woods. While we could see more of a bounce next week, the action is quite different than what we saw during all those V-shaped bounces over the past year. With European problems at the forefront, negative summer seasonality kicking in and some major technical overhead, it is going to take some hard work to put this market back into an uptrend.
The good news is, for those so inclined, that this correction is giving us a new supply of trading opportunities.......
Friday, May 28, 2010
Thursday, May 27, 2010
Still A Long-Term Bull
While I remain intensely concerned about the "state of the market's rules," I remain steadfastly bullish (longer term) as stocks continue to gap lower. There seems to be no safe place and differentiation (the absolute key to long term market health) remains non-existent.
I'll grant the market does have a few "real" fundamental issues to deal with. In fact, it always does.
* Increased regulation -- this simply raises the cost of doing business and will compress EPS.
* Future rising rates -- I see rates rising faster than pretty much anyone at this point, though this is not a 2010 issue.
* Geopolitical concerns -- always an issue in the market place.
* Inflationary pressures -- again, while I think many have moved back into fearing deflation and a double dip, I'm more concerned with a new sustainable rise in inflation, which would be driven by another round of likely irrational bullishness in commodities like oil.
* European de-unification -- the Euro's need to move closer together and present a unified front on issues like naked short selling and CDS', until they do the Euro block will suffer economic pressure, both macro and market based.
I still see stocks discounting far too much in their valuations. Further, as I've written, I see our current disjointed set of market rules causing more pressure on these valuations than any/all of the above.
On the bullish side of the ledger:
Low Rates... for now, all time historically low rates will prove strongly stimulative.
The more people say buy and hold is dead, the more I believe it will be rewarded in the future.
Isn't one of the main market tenets to buy low and sell higher? (Though I've been known to buy high and sell higher)
I still stand by my highly variant view of a much stronger U.S. economic growth pattern. Frankly, I find it stunning this is so debated, given nearly a year of strong evidence. Recent reports are being ignored and are still showing a condition set much more like a strong V shaped recovery than the popular belief of L-shaped or a stagflation scenario.
I see the labor and housing markets improving markedly. As I said last year, we’ll start seeing job gains versus losses earlier than expected, and this is indeed happening and will continue.
As written previously -- "The Apple (AAPL) Tablet will be another game-changing product and the next great extension of the iPhone platform. This product will be the first fully functional touch-screen computer and will usher in a new era of innovation (for Apple and certain chip companies)." The new era of innovation is nearly upon us and the next 3-6 quarters should be very exciting.
Also as predicted, "I think dollar bears will be disappointed and the dollar will be a strong currency, possibly one of the best performing around the globe for the bulk of the year." Further, even though the dollar has rallied hugely, stocks are flat on the year. So while it's disappointing to see stocks lose all their gains on the year -- I think stocks have generally held much stronger than many would have thought had you told them the dollar would rally this much 6 months ago. Further, I still think we will see global investors buying US dollar-based equities (vs. bonds currently) and a transition should occur where a strong dollar is supportive to US equities.
A huge valuation contraction, especially in technology: The valuation multiples have declined massively during the first two quarters as EPS has surged as much as 25-35% for leading companies, and stocks' prices have given up most or all of the gains for the year. Metrics on revenues, P/B and P/Cash have also declined materially and stand again at historically low levels.
Bottom line, as disturbing as the market rules (and market actions of late) can be, the lightning fast compression in valuations of stocks that are producing prodigious EPS and cash flows should prove supportive of stocks and provide a solid base for another surge in performance in the weeks/months ahead.
very long AAPL
I'll grant the market does have a few "real" fundamental issues to deal with. In fact, it always does.
* Increased regulation -- this simply raises the cost of doing business and will compress EPS.
* Future rising rates -- I see rates rising faster than pretty much anyone at this point, though this is not a 2010 issue.
* Geopolitical concerns -- always an issue in the market place.
* Inflationary pressures -- again, while I think many have moved back into fearing deflation and a double dip, I'm more concerned with a new sustainable rise in inflation, which would be driven by another round of likely irrational bullishness in commodities like oil.
* European de-unification -- the Euro's need to move closer together and present a unified front on issues like naked short selling and CDS', until they do the Euro block will suffer economic pressure, both macro and market based.
I still see stocks discounting far too much in their valuations. Further, as I've written, I see our current disjointed set of market rules causing more pressure on these valuations than any/all of the above.
On the bullish side of the ledger:
Low Rates... for now, all time historically low rates will prove strongly stimulative.
The more people say buy and hold is dead, the more I believe it will be rewarded in the future.
Isn't one of the main market tenets to buy low and sell higher? (Though I've been known to buy high and sell higher)
I still stand by my highly variant view of a much stronger U.S. economic growth pattern. Frankly, I find it stunning this is so debated, given nearly a year of strong evidence. Recent reports are being ignored and are still showing a condition set much more like a strong V shaped recovery than the popular belief of L-shaped or a stagflation scenario.
I see the labor and housing markets improving markedly. As I said last year, we’ll start seeing job gains versus losses earlier than expected, and this is indeed happening and will continue.
As written previously -- "The Apple (AAPL) Tablet will be another game-changing product and the next great extension of the iPhone platform. This product will be the first fully functional touch-screen computer and will usher in a new era of innovation (for Apple and certain chip companies)." The new era of innovation is nearly upon us and the next 3-6 quarters should be very exciting.
Also as predicted, "I think dollar bears will be disappointed and the dollar will be a strong currency, possibly one of the best performing around the globe for the bulk of the year." Further, even though the dollar has rallied hugely, stocks are flat on the year. So while it's disappointing to see stocks lose all their gains on the year -- I think stocks have generally held much stronger than many would have thought had you told them the dollar would rally this much 6 months ago. Further, I still think we will see global investors buying US dollar-based equities (vs. bonds currently) and a transition should occur where a strong dollar is supportive to US equities.
A huge valuation contraction, especially in technology: The valuation multiples have declined massively during the first two quarters as EPS has surged as much as 25-35% for leading companies, and stocks' prices have given up most or all of the gains for the year. Metrics on revenues, P/B and P/Cash have also declined materially and stand again at historically low levels.
Bottom line, as disturbing as the market rules (and market actions of late) can be, the lightning fast compression in valuations of stocks that are producing prodigious EPS and cash flows should prove supportive of stocks and provide a solid base for another surge in performance in the weeks/months ahead.
very long AAPL
Yes, AAPL Trades At Over $250; But It's Also Damn Cheap
AAPL is a total, major focus of mine. To me, though, the question is how can Apple be this cheap? Use the old 10-to-1 rule. You need to divide this stock by 10 to think about it. Would you buy a $25 stock at a 12 multiple that has $5 in cash, no debt and is growing at an accelerated rate -- perhaps as much as 20%? How about if it only had single-digit share in all of its market places? How about if it had new product cycles, several of them, happening all at once?
You would say it is a steal. But, because it is at $250, people feel it is expensive. And, because it has passed MSFT in market cap, people are totally skeptical.
The thing that makes me feel skeptical: How can Microsoft be that big? Or XOM, for that matter, my least favorite major oil?
long AAPL
You would say it is a steal. But, because it is at $250, people feel it is expensive. And, because it has passed MSFT in market cap, people are totally skeptical.
The thing that makes me feel skeptical: How can Microsoft be that big? Or XOM, for that matter, my least favorite major oil?
long AAPL
Just End Of The Month Markups; Or Maybe The Real Thing?
China bulls vs. Europe bears and market mechanics? There's a claymation, tag-team death match, with the bears having an edge on most days -- but not today. That's why we had the biggest up day in 10 months.
If you look at your screen today, everything that's roaring is totally China-driven: minerals, mining, mining equipment, energy, chemicals, and tech (that's Asia, especially semiconductors). The rest totally came along for the ride, including the financials, which I regard as DUDS that are going up less than they came down.
But Europe's credit woes haven't gone away; they just aren't able today to upset the China applecart. That could be tomorrow's business.
Chinese economic growth can offset European economic weakness. But China can't offset the systemic risk of Europe, which is in hiding today but hasn't gone away. The economic-growth risk can take us down to Dow 9500. Systemic failure, however, takes us down to the low 8000s on the Dow.
I like China. I believe India and Brazil can come roaring back, But I know that the credit risk of Europe is a huge stumbling block that can only be removed if there is unity in Europe, and we don't have that yet. If you layer on the worries about whether our market is working right (the flash crash) and factor in the exodus of the individual investor, then you get a market that is simply rallying because it is oversold, and the bears pressed their bet too far.
That's why I remain cautious; and own all AAPL - an extremely cheap stock by the way. If that systemic risk comes off the table, I will change my view and my caution. But not until then. A huge up-day does nothing to change that.
Further, the weak close on Wednesday was a trap for the bears, who were caught out of position when China denied rumors that it was dumping European debt. We gapped up big and, after some minor hesitation, we slowly, but steadily, ramped up the remainder of day. We even managed another upward spike at the close to breach 1,100 on the S&P500.
Although breadth was exceptionally strong, volume was mediocre. But that tends to be a consistent pattern in this market ruled by machines. Oil stocks were leading early in the day, but weakened following comments by President Obama. However, strength in steel, coal, various commodities, retail and regional banks more than made up for it.
It certainly was a good day for the bulls, but the more important issue is whether it was the start of new uptrend, or just another good-sized, oversold bounce within a major downtrend. At this point, the S&P500 is right around its first important technical hurdle, at 1,100-1,104, which is the 200-day simple moving average. There is still plenty of overhead resistance to deal with, but the bulls put some points on the board today and have some momentum. Counter-trend bounces can be fast and furious, so you have to give them some room to run. We've had two failed bounce attempts already this week, and that may have served to shake out the weak hands.
We have a three-day weekend coming up, which means we will have thinner holiday trading tomorrow. Typically, market players are in a good mood as they look forward to the break, and we should have a bullish bias to the action. Then again, I'm sure the bears are going to be looking to remount shorts at some point, though I expect they will stand aside until next week......
long AAPL
If you look at your screen today, everything that's roaring is totally China-driven: minerals, mining, mining equipment, energy, chemicals, and tech (that's Asia, especially semiconductors). The rest totally came along for the ride, including the financials, which I regard as DUDS that are going up less than they came down.
But Europe's credit woes haven't gone away; they just aren't able today to upset the China applecart. That could be tomorrow's business.
Chinese economic growth can offset European economic weakness. But China can't offset the systemic risk of Europe, which is in hiding today but hasn't gone away. The economic-growth risk can take us down to Dow 9500. Systemic failure, however, takes us down to the low 8000s on the Dow.
I like China. I believe India and Brazil can come roaring back, But I know that the credit risk of Europe is a huge stumbling block that can only be removed if there is unity in Europe, and we don't have that yet. If you layer on the worries about whether our market is working right (the flash crash) and factor in the exodus of the individual investor, then you get a market that is simply rallying because it is oversold, and the bears pressed their bet too far.
That's why I remain cautious; and own all AAPL - an extremely cheap stock by the way. If that systemic risk comes off the table, I will change my view and my caution. But not until then. A huge up-day does nothing to change that.
Further, the weak close on Wednesday was a trap for the bears, who were caught out of position when China denied rumors that it was dumping European debt. We gapped up big and, after some minor hesitation, we slowly, but steadily, ramped up the remainder of day. We even managed another upward spike at the close to breach 1,100 on the S&P500.
Although breadth was exceptionally strong, volume was mediocre. But that tends to be a consistent pattern in this market ruled by machines. Oil stocks were leading early in the day, but weakened following comments by President Obama. However, strength in steel, coal, various commodities, retail and regional banks more than made up for it.
It certainly was a good day for the bulls, but the more important issue is whether it was the start of new uptrend, or just another good-sized, oversold bounce within a major downtrend. At this point, the S&P500 is right around its first important technical hurdle, at 1,100-1,104, which is the 200-day simple moving average. There is still plenty of overhead resistance to deal with, but the bulls put some points on the board today and have some momentum. Counter-trend bounces can be fast and furious, so you have to give them some room to run. We've had two failed bounce attempts already this week, and that may have served to shake out the weak hands.
We have a three-day weekend coming up, which means we will have thinner holiday trading tomorrow. Typically, market players are in a good mood as they look forward to the break, and we should have a bullish bias to the action. Then again, I'm sure the bears are going to be looking to remount shorts at some point, though I expect they will stand aside until next week......
long AAPL
Wednesday, May 26, 2010
I Can't Remember A More Frustrating Day
After the vigorous intraday recovery on Tuesday, the market was poised for some follow-through today. We had a pretty good start this morning, but the buyers were unable to generate sufficient momentum, and we fizzled out in the last couple of hours of trading. AAPL was up over 6; it finished down about 1. Very, very frustrating.
A failed bounce is what you'd expect to see when the market is correcting, but I'm a bit surprised that the bulls didn't make a better effort. I thought we'd suck in more bulls before we saw red in the indices again.
The good news is that despite the negative close, we ended up with positive breadth of about 3,425 gainers to 2,350 decliners, with oil and commodity plays leading. Retailers and regional banks were the primary laggards today. Retail, in particular, looks like it is cracking.
There isn't any great mystery about what the excuse is for the selling pressure; helped greatly by our market's structural collapse. The market's broken; just a few million dollars of no position limit futures can bring down a cash market supposedly worth over a trillion dollars. The economic issues in Europe continue to fester. There just isn't much clarity there, and market players are going to stand aside until there is.
Technically, we were oversold enough to justify a bounce toward 1100 on the S&P500, but, instead, we now we are right in the middle of a little trading range, with 1090 the top and 1040 the bottom.
The bottom line right now is that we are in a downtrend. We have had a few oversold bounce attempts that have failed, and we can't be at all confident that the market has bottomed. Fundamental conditions have changed with the European issues, and there doesn't seem to be any quick or easy resolution on the way.
long AAPL
A failed bounce is what you'd expect to see when the market is correcting, but I'm a bit surprised that the bulls didn't make a better effort. I thought we'd suck in more bulls before we saw red in the indices again.
The good news is that despite the negative close, we ended up with positive breadth of about 3,425 gainers to 2,350 decliners, with oil and commodity plays leading. Retailers and regional banks were the primary laggards today. Retail, in particular, looks like it is cracking.
There isn't any great mystery about what the excuse is for the selling pressure; helped greatly by our market's structural collapse. The market's broken; just a few million dollars of no position limit futures can bring down a cash market supposedly worth over a trillion dollars. The economic issues in Europe continue to fester. There just isn't much clarity there, and market players are going to stand aside until there is.
Technically, we were oversold enough to justify a bounce toward 1100 on the S&P500, but, instead, we now we are right in the middle of a little trading range, with 1090 the top and 1040 the bottom.
The bottom line right now is that we are in a downtrend. We have had a few oversold bounce attempts that have failed, and we can't be at all confident that the market has bottomed. Fundamental conditions have changed with the European issues, and there doesn't seem to be any quick or easy resolution on the way.
long AAPL
Market Was Up Nicely; Now It's Flat.......
The downside probe is a combination of two items: one, the chatter making the rounds that China is reviewing its Euro Zone bond holdings and two, margin calls hitting trading desks (as they typically do at 11:30AM and 2:30PM eastern).
As always, the reaction to news (supply) will be entirely more important than the news (supply) itself.
As always, the reaction to news (supply) will be entirely more important than the news (supply) itself.
Tuesday, May 25, 2010
Randoms
Can the ECB pull one out of Big Ben's playbook? Have the shorts spent too much firepower? In fact, where has the selling come from in recent weeks? Will we see a coordinated action from the EU?
All this and I haven't even mentioned Korea.
GS had a big day today in the face of generally weakened financials.
BAC is down from $16 of late, but I think this name may report one of the strongest in the group for the next couple quarters.
I’m still wondering how NVDA is trading this cheaply given a very strong product cycle forthcoming.
I think C could be in the speculative catbird's seat now with ETFC's reverse split. Last of the pennies in the SPX. So, when we do see northbound action in the tape they could see some pent-up demand on those seeking low price plays.
All this and I haven't even mentioned Korea.
GS had a big day today in the face of generally weakened financials.
BAC is down from $16 of late, but I think this name may report one of the strongest in the group for the next couple quarters.
I’m still wondering how NVDA is trading this cheaply given a very strong product cycle forthcoming.
I think C could be in the speculative catbird's seat now with ETFC's reverse split. Last of the pennies in the SPX. So, when we do see northbound action in the tape they could see some pent-up demand on those seeking low price plays.
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