Wednesday, March 31, 2010

Quote of the Day

"The greater danger for most of us lies not in setting our aim too high and falling short, but in setting our aim too low and achieving our mark."
— Michelangelo: Italian artist and sculptor

Tuesday, March 30, 2010

Gone Fishin'

I am out of the office this week, so my blogging will be sporadic at best.

Have a good week--

Friday, March 26, 2010

Quote of the Day

A diplomat is a person who can tell you to go to hell in such a way that you actually look forward to the trip.
-- Caskie Stinnett

Flop And Chop

The market appeared as if it was putting in a negative reversal yesterday, opening higher and then closing lower, but this morning it is again getting a nice bounce.

Overnight, People's Bank of China said rate hikes could be months away. This helped boost Asian markets. In Greece, the country received a deal on its sovereign debt crisis, which is backed by the IMF and eurozone and funds can be tapped if the country is unable to raise funds on its own.

This news boosted the euro at the expense of the dollar. But commodities prices aren't down that much, with oil trading near $80.40 and gold hovering around $1092.

In economic news, Q4 GDP was revised slightly lower vs. earlier projections, coming in at +5.6% vs. 5.9% previously. Also, the House is expected to announce an expansion of its foreclosure -prevention efforts. Under this plan, FHA will allow some borrowers who are underwater to refinance into govt.-backed loans.

The 10-year yield is lower to 3.86%; and the VIX is down -3.9% to 17.68 after yesterday's spike above its downtrending 50-day average.

Among sector ETFs, materails are leading the way (+1.35%) followed by financials (+1.19%). Healthcare is lagging (-0.34%). In the subsectors, homebuilders are strong (+1.67%) as are steel stocks (+1.87%) and emerging market etfs.

Trading comment: The chart below shows an interesting phenomenon. I have said that the market doesn't always have to pullback to relieve an overbought condition. Lately, the Nasdaq has been climbing higher, albeit it in a choppy fashion. This chopping and flopping around has given the oscillator time to pull back from its overbought levels, and this puts the market in better shape to rally going forward.

There are obviously more indicators and factors to take into account than this, but this is one of the things I watch so I wanted to point it out. The other is the put/call ratios, which have not been showing too much complacency lately. So the above items, coupled with the fact that we are approaching quarter-end, keep me bullish at this juncture.

Wednesday, March 24, 2010

Dollar Surges On Portugal Debt Re-Rating

The markets are lower this morning on the heels of some mixed economic data, as well as news out of Portugal that Fitch has lowered its sovereign debt rating from AA to AA-.

The debt re-rating has caused the euro to selloff and the dollar to surge to a 10-month high. The strength in the dollar is weighing on commodities, with oil down near $80.50 and gold dipping below $1100.

In economic news, new home sales for February fell -2.2%, weaker than expected. Durable goods orders were up +0.5% (vs. +0.6% consensus), and ex-transportation orders rose a better than expected +0.9%.

In Asia, markets were mixed overnight, with Japan and China eking out small gains. The 10-year yield is sharply higher to 3.76%, and the VIX is spiking +9.25% to 17.87.

Among the sector ETFs, they are all lower this morning, with financials (-0.06%) down the least. Real estate (IYR) is bucking the weakness so far (+0.14%), while gold miners (GDX) are down the most (-3.25%).

Trading comment: The market continues to act well. I would not be surprised to see a small 1-2 day pullback, but I still think many investors remain underinvested (or short), and that money wil continue to be put to work on any pullbacks into quarter-end.

We are also getting into that window where we will start to hear about upcoming earnings for Q1, and I think that earnings reports for the most part should be strong, and that analyst revisions will continue push estimates higher (which should help stock prices).

Tuesday, March 23, 2010

Quote of the Day

"And in the end it's not the years in your life that count. It's the life in your years."
— Abraham Lincoln: 16th president of the United States

Stocks Flat After Yesterday's Strong Rebound

The market is roughly flat on no real news announcements. Google (GOOG) is lower after shifting its search engine off mainland China, but this has been expected for awhile.

Existing home sales last month came in about as expected, falling -0.6% vs. last year. The other commentary on the economy came from St. Louis Fed Pres James Bullard, who said that labor data should look better in March, and that the economic recovery is on track as household spending improves and business investment continues to pick up.

The dollar is stronger so far, but this is barely weighing on commodities. Oil is flat near $81.50, while gold is trading higher to $1105.

Asian markets were mixed overnight; the 10-year yield is down to 3.65%; and the VIX is a tad higher to 16.91, after a big reversal lower yesterday.

Trading comment: Yesterday's strength was surprising, and again indicative to me that there is money looking to be put to work. The market was weak after the open yesterday, and it looked like a pullback was in the cards. But buyers quickly stepped in, and the market rallied to close with solid gains. Although we could again get a 1-2 day whack at any time, I continue to feel that this could be the pattern into quarter-end, as portfolio managers don't want to look too underinvested.

long GOOG

Monday, March 22, 2010

Monday Morning Musings

The market is shrugging off some potentially negative headlines so far today, including the passage of the healthcare bill, monetary tightening in India, and renewed concerns over Greece.

Healthcare stocks are higher after the House of Representatives approved a Senate bill overhauling the U.S. health-care system, handing President Barack Obama a key victory. House lawmakers voted 219-212 to approve the reform bill, a wide-ranging measure aimed at extending insurance coverage to about 32 million Americans. The legislation costs $940 billion over 10 years. Congressional analysts estimate it will cut the deficit by $138 billion during that period. No House Republicans voted for the Senate bill, which now goes to Obama for signature. 34 Democrats also voted against it.

Asian markets were lower overnight after the Reserve Bank of India raised interest rates for the first time in nearly two years. Policy makers said containing inflation has become "imperative". Also, European bourses were lower after German Chancellor Merkel's remarks that Greece doesn't need financial support.

The dollar is higher on the euro's weakness, which is weighing on commodities. Oil and gold are both more than -1% lower, trading near $79.50 and $1095, respectively.

In corporate news, the Financial Times is reporting that Google (GOOG) could reveal as early as today its closure of its Chinese search business.

The 10-year yield is lower to 3.66%; and the VIX is 1.6% higher to 17.23.

Trading comment: The market has continued to work off its recent overbought condition by mostly trading in a sideways consolidation fashion. This is a bullish resolution to being overbought, as opposed to experiencing a sharp pullback. I would like to see further consolidation this week which could set us up for another push higher into quarter end.

Leading growth stocks also continue to hold up well, despite having become somewhat extended on the charts after their recent runs higher. I would point to the action in these stocks as being a better leading indicator of what the overall market is likely to do, so in that sense I remain constructive.

long GOOG

Wednesday, March 17, 2010

VIX Falls To Lowest Level Since May 2008

The market is higher again in early trading, and I've lost count of how many up days in a row this has been. I think the SPY has been up for 14 straight days, which is quite a feat. My guess is that portfolio managers are starting to feel some performance anxiety ahead of the end of Q1 when they have to show performance. This is likely causing them to use every small dip to put money to work and avoid being left behind by a stampeding market.

There has not been a lot of newsflow in the market, but yesterday the Fed said it would keep rates exceptionally low for an extended period. This news was greeted with buying overseas, as Asian markets rose overnight, led by China. The Bank of Japan also kept rates low, and stepped up its short-term lending plan from 10 trillion Yen to 20 trillion Yen in an attempt to keep the Yen from rising.

In economic news, producer prices fell more than expected last month (-0.6%), supporting the notion that inflation pressures remain subdued.

The 10-year yield is down a bit to 3.65%; and the VIX is falling -6.1% today to a new yearly low, and its lowest level since May 2008. The chart below shows how long it has been since we saw the VIX is such low levels. It's hard to tell, but if you look at the lower half of the chart, it shows the price action of the S&P 500, and what is interesting is that May 2008 marked a high in the market that we have yet to retrace. I'm just saying.

Trading comment: I raised a little cash yesterday, and will use today's strength to take some more partial profits on things that have run. I still feel the market is too extended, the ISE call/put is flashing too much complacency, and that the market is vulnerable to at least a short-term pullback. But I remain bullish for the intermediate-term.

Tuesday, March 16, 2010

Fed Announcement Should Show Little Change

The market is flattish in early trading, ahead of today's FOMC meeting. I do not expect there to be much change, if any, in the Fed's statement that will be released this afternoon. If there is any change, it is likely to just be additional color on the end of the MBS purchases scheduled for this month.

European bourses were higher after reports surfaced that officials have reached some agreements to provide financial aid to Greece, although no specific amounts were released.

Asian markets were mixed, with Japan edging lower and China bouncing +0.5%.

In economic news, import prices fell -0.3% in February, housing starts were weaker than expected (-5.9%) last month, but building permits fell less than expected (-1.6% vs. -3.4% consensus). Severe snowstorms in the Northeast may have skewed these figures, which are always lumpy to begin with.

The dollar is lower this morning, which is boosting commodity prices, as well as the energy and materials sector. Oil is higher to $80.80, while gold is also up near $1124.

The 10-year yield is lower at 3.67%; and the VIX is slightly lower to 17.90.

Among the sector ETFs, materials are strongest (+0.90%), while healthcare is weakest (+0.0%). Gold is up the most among the sub-sectors (+2.58%), while homebuilders are lagging (-0.06%).

Trading comment: The market remains a bit extended due to its streak of up days. I have raised some cash in our aggressive accounts to take advantage of any pullback. But I am not turning bearish. I expect any dip to be a pause that refreshes, and I think the recent breakout to new highs in the Nasdaq and small- and mid-cap indexes is an indicator that the markets can continue to climb in the intermediate-term.

Monday, March 15, 2010

Quote of the Day

Retired Tiger hedge fund manager Julian Robertson recently said this about Obama:

"Obama, from all I read, thinks that on every occasion that he is the smartest person in the room. And I think he often probably is, but you can't run the biggest business in the world having never run even a country store."

Monday Morning Musings

The market is trading lower this morning, after the S&P 500 Index ran into resistance at the 1150 area, which is the level of its previous highs back in January.

The Nasdaq is also lower, led down by Apple (AAPL), which looks to just be profit taking, and Google (GOOG), which is down by -3.3% after news came out that the search engine giant is no longer censoring its search results in China. This could cause them to get booted from the country. That would benefit Chinese-search company Baidu (BIDU), and that stock is spiking +7.0% on the news.

Amid sector ETFs, consumer staples (XLP) are leading (+0.42%) after Pepsi (PEP) said that it will boost its dividend by 7%. Energy stocks (XLE) are taking it on the chin so far (-1.80%).

Asian markets were mostly lower overnight, led by China (-1.2%) amid continued concerns that the country's central bank will further tighten monetary policy.

The dollar is higher today, which is pushing oil prices below $80, while gold is hanging in there near the $1105 level.

The 10-year yield is higher at 3.72%, and the VIX is spiking a little, up +5.8% to 18.60.

Trading comment: The market is up a lot over the last couple of weeks. In our aggressive accounts, we are raising a little cash to take advantage of a potential pullback. But in our balanced accounts we are pretty much just sitting tight with the cash we already have, and will look to add more to our favorite names on said pullback.

I haven't finished my latest sentiment roundup, but for the most part the sentiment indicators have started to move off of their previous bearish levels, but still have room to run before they start flashing warning signs of becoming overly bullish and complacent.


Thursday, March 11, 2010

Financial Reform Bill To Debut Monday

The market is slightly lower this morning, though its already well off its earlier lows. Senator Corker just gave a press conference that a financial reform bill is likely to be unveiled Monday, even though it will not be a bi-partisan effort. It appears Sen. Dodd is under some pressure to get a bill out, even though it may not be ready for primetime. The uncertainty around this issue is likely an overhang on the financial sector today.

Now Pres. Obama is coming on TV to make some comments, and his appearances have never helped push the markets higher.

The dollar is lower today, but it isn't really helping commodity prices all that much. Oil is lower below $82, and gold is roughly flat near $1104.

Asian markets were mixed overnight; the 10-year yield is higher to 3.74%; and the VIX is up slightly to 18.93.

Trading comment: The market has had a very impressive streak of consecutive up days here, so I think a much needed rest is in order. I think any pullback will be shallow, but with the put/call ratios coming in at low levels lately, I would not be surprised to see a 1-2 day selloff in the market. I would use any weakness to add to names that have recently broke out, or those that are just beginning to break out.

IBM looks like it could be poised to play catch up; WFR broke out yesterday; DISCA looks good; and RIMM looks like it can still move higher. Just to name a few.


Wednesday, March 10, 2010

S&P 500 Near New Highs

The stock market is higher again this morning, defying those who continue to call for a pullback. I have been talking about how even though the market had become overbought, instead of pulling back it mostly went sideways while the overbought condition got worked off. This was a positive sign, and as you can see in the chart below, the oscillator has confirmed the recent highs in the market by making a higher high.

Speaking of new highs in the market, the Nasdaq, small- and mid-cap indexes have all made new highs for the year. Only the S&P 500 has yet to confirm this breakout. But at 1148 right now, it is not far from breaking out into new high territory soon.

The Nasdaq is again leading the SPX today. The strongest index is the biotech index, with acquisitions taking place in the sector, the BTK is up +5.4% today. Financials are also strong, with a successful preferred offering by Citi, couple with short-covering and positive comments from analyst Dick Bove, pushing the BKX up +3.2%. The energy index (XOI) is lagging, -0.14% so far.

Among emerging market ETFs, Brazil (EWZ) is up most, +1.55%, while Russia (RSX) is lagging, -0.41%.

The dollar is lower today, helping to support commodities. Oil is trading higher near $82, while gold is flatting around $1122.

Asian markets were mostly flat overnight. China fell -0.7% after Chinese banks reported extending about 700 billion yuan in new loans for February, half the amount loaned in January as tighter lending restrictions took hold.

The 10-year yield is rising to 3.74%, and the VIX is down -2.2% to 17.52, very close to new lows.

Trading comments: Not much to add to what I stated above, and what I have been saying the last several days. The indexes are making new highs, and growth stocks are breaking out and showing strong technical action. I am staying the course, and looking for dips to add back to names in which I have taken partial profits.

long EWZ, XBI

Tuesday, March 09, 2010

Quote of the Day

"We are all faced with a series of great opportunities brilliantly disguised as insoluble problems."
— John W. Gardner: former secretary of health, education and welfare

Happy Anniversary, Mr. Market

Today is the 1-year anniversary of the market bottom, when the S&P 500 touched 666 in what some are calling a 'generational low'. Today the S&P stands some 70% above those levels, thought still well off its previous highs. The S&P would have to rally another 35% to get back to its previous highs.

Tech is again outperforming so far, after Texas Instruments (TXN) raised its growth expectations in its conference call last night, and Cisco (CSCO) said it will be announcing a major technological advancement.

Asian markets were higher overnight, while Europe was bit lower this morning. Analysts at Fitch kept its negative outlook on Portugal's AA rating after the country announced on Monday new austerity measures. Its hard to see how Europe is going to grow with all of these austerity measures being adopted.

The dollar is higher today, which is weighing on commodities a bit. Oil is a little lower near $81.25, and gold is also lower to $1117.

Among industry ETFs, transports are leading (+1.13%) with a fresh breakout today in the IYT. Real estate is also doing well (+0.52%), while gold miners are lagging (-0.91%).

The 10-year yield is flattish near 3.70%, and the VIX is a touch higher at 17.87.

Trading comment: The market remains overbought but refuses to give up recent gains. This is a positive sign, and if we can work off this overbought condition by simply trading in a mostly sideways consolidation, I would expect more upside to follow. The S&P needs to get above 1150 to breakout to new highs for the year, so that could be an area where the market runs into some resistance.

Monday, March 08, 2010

Monday Morning Musings: Healthy Digestion Ahead?

The markets are mixed so far this morning, with the Nasdaq leading the broader market by a tad. Corporate newsflow has been relatively light, and there are no major economic reports to speak of.

Greek worries continue to ease after Frech Pres. Sarkozy said that the EU would support Greece if required to do so, but Greece responded by saying that it will not need foreign help.

The dollar is slightly weak today, but commodities are mixed. Oil is trading higher, above $82, while gold is lower near $1125.
Looking at the sector ETFs, tech is strongest (+0.4%), while energy is weakest (-0.5%). Real estate is also strong (+0.72%), while emerging market etfs are lagging.

Asian markets were higher across the board overnight; the 10-year yield is higher to 3.70%; and the VIX is up +2.1% from Friday's very low levels.

Trading comment: The market has done a very good job hanging in there after reaching its recent overbought condition. The graph below shows that the oscillator has consolidated in a sideways fashion, rather than plunging back down to lower levels.

This is a healthy way for the market to work off its overbought situation, and could mean that after 5 straight up days in the S&P 500 last week, that any pullback could be shallow. Another supporting factor is the fact that upside volume on the NYSE on Friday topped 90%, a rare occurrence.

Friday, March 05, 2010

Traders Leaned The Wrong Way Ahead of Jobs Report

The market is nicely higher in early trading after a better than expected monthly jobs report. Nonfarm payrolls for February showed -36,000 job losses, but this is less than the consensus for -68,000.

Moreover, that consensus figure had been moving lower in recent weeks, from a figure closer to -20,000, as people speculated that the inclement weather during the month would weigh on the employment picutre.

Yesterday, the put/call ratio closed at a very high level of 1.01, which is odd for an up day in the market. It looks like traders were placing bearish bets ahead of what they thought would be a worse than expected jobs report. But as the soup nazi said, "no soup for you!" So this morning those traders are caught leaning the wrong way, and that is likely adding to the upside pressure in the market. I don't like strong market opens on Friday, and would not be suprised to see some of this strenght fade before days end.

Apple (AAPL) is up +3.4% this morning to a new high on the news that the iPad will go on sale April 3rd. I think it is going to do very well. I usually wait for the 2nd interation of new tech products, but I'm thinking of breaking my rule and getting one right away. One reason is that I've been watching the Cavs' games on my iPhone via NBA League Pass. It's great, but it will be SO much better on an iPad. Not to mention how much better it will be to read the newspapers I download, play video games with my kids, and just about everything else I do on my iPhone except talk.

Asian markets were higher overnight; the 10-year yield is also higher to 3.70%; and the VIX is plunging -6.3% to a low level of 17.50.

Trading comment: The Nazz is only 9 points away from a new high, and many stocks continue to break out to new highs. I continue to say follow the leadership. I know volume has not been great so far, but I don't want that to keep me (or you) from making money.

long AAPL

Thursday, March 04, 2010

Market Wrap: Nasdaq Leads Late-Day Push

The market finished on a solid note today, ahead of tomorrow's widely anticipated employment report. There has been a lot of chatter that the number will be weaker than consensus. While that could hit the market short-term, I think the fact that it is being widely expected increases the prospect of a weak number already being priced in.

The dollar was higher today, as the euro lost ground. This weighed on commodities a bit, while financials stocks led the rally for a chance. The euro was unable to continue its bounce, despite both the ECB and Bank of England holding their target lending rates steady.

In economic news, the pending home sales report was weaker than expected (-7.6%), but this could have been weather related. Factory orders were solid, +1.7%. But the most bullish report was the final Q4 productivity report which showed an increase of +6.9%, and a veritable plunge in unit labor costs by -5.9%. With labor costs making up the largest component of inflation, I continue to believe that inflation pressures will remain subdued for quite some time.

Retailers were also strong today after a raft of better-than-expected same-store sales results for February. Most people remain bearish on the retailers due to the negative stories you hear in the media about the cash-strapped U.S. consumer. But look at the retail ETF (XRT) - its breaking out to new highs all week. I like that.

I also liked the action in Goldman Sachs (GS) today. GS is a barometer not just for the financial sector, but investor confidence as well. Today, GS broke above its 50-day average on strong volume. If it can reverse its recent downtrend, I think it will help change the tone of the overall market to the good.

long GS, XRT

Wednesday, March 03, 2010

Greece Decides To Take Its Medicine

The market is getting a small bounce this morning on some solid economic news, and a rally in the euro after Greece announced its austerity plan.

Greece has vowed to reduce its deficit by 4 percentage points, to 8.7% of gross domestic product, by the end of 2010. That would still leave the deficit above the euro zone's 3% limit. Greek gross public debt exceeds 113% of GDP, the second highest debt-to-GDP ratio in the European Union.

In econ news, the February ISM Services Index came in at 53.0, up nicely from January's 50.5 level. Also, the ADP Employment report was in-line, showing a loss of 20,000 jobs. The big govt. jobs report is on Friday, there has been chatter lately that it could be weaker than the consensus is looking for.

The bounce in the euro is coming at the expense of the dollar, but that is boosting commodities and related stocks. Oil is higher at $80.85 and gold is also higher near $1142.

Materials stocks, like gold miners (GDX) and steel (SLX) are leading the action so far. Healthcare (XLV) is lagging. And among emerging markets, India (INP) is outperforming.

Asian markets were mostly higher overnight; the 10-year yield is higher to 3.64%; and the VIX is another -2.5% lower to 18.58.

Trading comment: The market has hung in well, even as it is getting overbought again. I am sticking with stocks that have broken out recently and continue to show good relative strength. I would feel comfortable adding to many of these names on a pullback.

Tuesday, March 02, 2010

Quote of the Day

"You have to trust in something: your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life."

— Steve Jobs: Co-founder and CEO of Apple Inc.

Stock Action Positive, Albeit On Light Volume

Stock action continues to be solid, with more stocks breaking back above their 50-day averages, and also more stocks breaking out to new highs. The overall volume on the exchanges continues to be light, but that is just a yellow flag at this point.

There were no major economic releases this morning. Australia announced it was again hiking its benchmark interest rate, but Asian markets were mostly higher nonetheless.

The dollar is a bit weak this morning, which is helping commodities rally. Oil is up near $79.75, and gold is above $1125.

Energy and materials stocks are leading the action so far. In the agribusiness sector, CF Industries (CF) updated its offer to $4.5 billion for rival Terra Industries (TRA).

Among the sector ETFs, gold miners (GDX) are leading, +2.85%, followed by steel (SLX), +2.05%). Homebuilders (XHB) are the biggest laggards, -0.43%.

The 10-year yield is higher at 3.64%; and the VIX is down another -2.25% to 18.83, its lowest level since Jan. 20th.

Trading comment: I have not changed my feelings about the market that I have stated over the last several days. The action is positive, and many growth stocks are acting well. This is the process of building the right side of stock bases on the charts (the left side being the decline from the correction).

While this process has further to go, not all stocks take the same amount of time to form bases and breakout again. This is why I try to focus on the leaders. Those stocks that broke out to new highs yesterday and today, at least the ones with good fundamentals, should go on to lead this rally (for as long as it lasts).

Monday, March 01, 2010

Monday Morning Musings

The market is getting a nice bounce in early trading on this first day of the month, and also mutual fund Monday (where funds put new money to work). There was news over the weekend that a bailout is in the works for Greece, with German and French state-owned banks likely the buyers of the debt.

There was a large earthquake in Chile over the weekend, which has caused a spike in copper prices (a lot of production comes out of Chile), so metals-related stocks are higher this morning. But the dollar is also higher, which is weighing on gold ($1114), while oil prices are relatively stable near $80.

In economic news, the ISM Manufacturing index for Feb. came in at 56.5, which is a bit below expectations, as well as below January's levels. In Europe, the eurozone manufacturing index hit a 30-month high, which is a good sign.

In corporate news, Merck KGaA topped Thermo Fisher's (TMO) bid for Millipore (MIL), and they will pay $107 per share in cash. Also, AIG will sell a pan-Asian life insurance business to Prudential PLC (PUK) for $35.5 billion in cash and stock.

Asian markets were higher overnight; the 10-year yield is also higher at 3.62%; and the VIX is roughly flat at 19.50.

Trading comment: Financials are lagging today, but many stocks are completing constructive basing patterns. The Nasdaq is breaking out over its 50-day moving average, as are a large handful of tech stocks. Some of the setups I am watching include: AAPL, ISRG, RIMM, FFIV, IBM, CTSH, WYNN, URBN, ATHR to name a few.

We still never saw the classic high volume follow through day that marks the start of many new rallies, but if things hold up, I think we could see more signs of accumulation coming.

long all stocks mentioned