Tuesday, January 31, 2012

Stocks Poised To Finish January On Positive Note

Stocks are higher in early trading on several positive earnings reports as well as a bounce back after three straight down days in the S&P 500. Yesterday the S&P got down near 1300 before buyers stepped in. That level also coincides with the 20-day moving average for the SPX.

The S&P 500 is poised to close out January with solid gains. Those who follow the "January effect" will note that the Stock Traders Almanac says that as goes January, so goes the year. The implication is that when January shows gains, it bodes well for a positive year in the market.

In earnings news, we are seeing more positive reactions in stocks this morning than negative. Among the gainers are: PFE, BIIB, LLY, TYC, UPS, PCAR, HRS, MAT, and ARMH.

Stocks falling after report earnings include: XOM, AVY, MHP, ADM, and the big loser today - RSH.

In economic news, the Case-Shiller Index showed another 1.3% drop in November from October. The Chicago PMI Index fell to 60.2 from last month's 62.5. And the Consumer Confidence index fell to 61.1 in January from 64.8 last month.

Asian markets were higher overnight, and the euro is higher this morning after speculation over continued progress in Greek debt talks. This one has really been a yo-yo, with lots of ups and downs. There is also talk that European officials have reached some agreement on future bailout funds for the eurozone, but I haven't seen details.

Commodities are higher today. Gold prices are up to $1747, oil prices have topped $100 to $100.50, and copper and silver prices are higher as well.

The 10-year yield continues to languish, still hovering near the 1.83% level. And the VIX is up a touch to 19.55, but hasn't closed above 20 in nine days.

Trading comment: After 3 consecutive down days and a test of the 1300 level yesterday by the S&P 500, I would have expected dip buyers to come in stronger. The SPX has bounced back to 1312 as of now, but already in early trading the gains have faded. We will have to see if buyers come back in later today. Also, the market continues to work off its overbought condition. There are a lot more stocks reacting positively to earnings reports this morning than ones that are selling off. Also, the SPX is on the verge of a golden cross, where the 50-day crosses above the 200-day average. This generally bodes well for further gains in the market.

Monday, January 30, 2012

Monday Morning Musings

The market is lower in early trading after closing last week higher for the 4th straight week. Guess how many times the market closed higher for 4 straight weeks in 2011? Zero. So it's the first time in awhile we have seen that streak. The market is also overbought and sentiment has risen to bullish levels in recent weeks. All of this sets the stage for a normal pullback-- possibly.

There isn't that much in the way of market moving news this morning, so the markets are taking their cues from overseas. Asian markets were lower overnight, and Europe is lower this morning. Concerns about Greece's ability to reach a compromise to its debt situation is weighing on Europe, and the euro is also weaker.

Commodities are sliding. Gold prices have eased back to $1725; oil prices are lower near $98.80; and copper and silver prices are down also.

There were a few companies reporting earnings this morning, but nothing too notable. Earnings season continues this week, but many of the biggies have already reported.

All 10 of the S&P sectors are lower so far today. Energy stocks are down the most, while utilities are down the least. Among international ETFs, China (FXI) is down the most in early trading.

The buying in the bond market has been furious since the FOMC meeting, and the 10-year yield continues to drop as a result. The 10-year yield is now below 1.85%, and nearing its lows from mid-December. Last year's lows back in September were 1.70%.

As for the VIX, it is spiking +9% today back above the 20 level. That's right about at the downtrend line that has been in place since late November, so we will have to see if that trendline holds.

Trading comment: We trimmed a few positions last week as the market got overbought, but will look to add back to positions on any further pullback. Usually the normal course of these short-term pullbacks is that the market gets overbought, pulls back a little to relieve that condition, and then rallies back again. If it goes on to make a higher high, the uptrend is in tack. But if the market makes a lower high, it is often a sign that a deeper or longer consolidation is in the works. For now, let's not get ahead of ourselves and see how quickly this dip gets bought. I think a lot of portfolio managers were not positions for the strong January we have seen and remain underinvested.

Friday, January 27, 2012

GDP Accelerates, But Still Below Expectations

The markets are mixed in early trading, with the Dow and S&P lower but the Nasdaq higher. Advance estimates on Q4 GDP came in at +2.8%, which is below consensus which was looking for +3.2% but still above last quarter's reading of only +1.8%. For those folks still calling for recession, GDP needs to either going to fall off a cliff or we are going to see some big revisions.

In other economic news, The Univ. Of Michigan consumer sentiment survey rose to 75.0 in January from 74.0 last month.

Earnings reports are being greeted with much cheer this morning. Despite a handful of better than expected reports, very few stocks are higher after reporting today. The few that are trading higher include: HON, EMN, and INVN.

But the list of disappointing reactions is larger and includes: RVBD, F, CVX, PG, SBUX, and MO.

The euro is higher this morning, and helping most commodities. Gold prices are up to $1732; oil prices are still above $100; and copper and silver prices are higher as well.

The 10-year yield has stopped dropping for the time being and found some support at the 1.93% level for a 2nd day. The VIX is fractionally higher to 18.75 and also looks to be bottoming.

Trading comment: I still think this overbought market appears a bit tired and in need of some sort of rest. If the market closes lower today it will be the first back-to-back down days since mid-December. That's a pretty long streak. What will be interesting will be to see how quickly dip buyers come in and look to get more invested on any market weakness. I suspect this first pullback won't gain much traction before rallying again.

Thursday, January 26, 2012

Is The Market Tired Yet?

The market was higher in early trading, but has since faded back into the red. Yesterday's FOMC announcement provided some fireworks when the Fed said they would essentially be on hold with interest rates until "late 2014", and that they would remain extremely accomodative.

That isn't an explicit announcement of more quantitative easing (QE), but it sure is an implied one. Commodities wasted no time rallying, and everything from gold to silver to copper and oil took off. The CRB is up again this morning. Gold prices have reached $1725, silver and copper are higher, and oil is back above $100 to $100.50.

In earnings news, we are seeing positive reactions in stocks like: CAT, MMM, OI, JCP, and especially NFLX which is up 22% on a short squeeze.

Negative reactions include: T, VAR, UA, NVR, CTSX and SNDK.

In economic news, durable goods for December were better than expected at 3.0%, and last months orders were revised higher to +4.3%. Not bad. New home sales came in below expectations at 307,000, which is also below the prior months units of 314,000.

Asia was mixed overnight, while Europe is higher today on renewed optimism that progress is being made on Greek debt negotiations. The euro is also bouncing vs. the dollar.

The 10-year yield really plunged after yesterday's FOMC announcement, and today it is sliding further down to the low level of 1.95%. It is hard to tell if this is more a statement of a slowing economy or just the Fed pinning the long-end of the curve down with its 'operation twist'.

As for the VIX, it is up 2.1% this morning but still low overall at a level of 18.70.

Trading comment: I enjoy reading Jeff Saut's commentary each week. I have read him for years, and he often talks about these "buying stampedes" that we see in the market. Said stampedes usually last from 17-25 days, with very brief pullbacks along the way before eventually tiring out. Well folks, since this buying stampede started on Dec. 20th that is exactly what we have seen. And by my count today is day 25 of the current run. As such, I want to be careful about chasing things higher here. The market does appear poised for a rest. Hopefully that will provide a better opportunity to add to stocks that reported strong earnings and are poised to continue to lead.

KAM Advisors has long positions in: GLD, SLV, VAR

Wednesday, January 25, 2012

Apple Blowout Earnings Lifts Nasdaq

The markets are mixed this morning with the Dow and SPX lower, but the Nasdaq higher after Apple (AAPL) reported blowout earnings last night. Expectations were already running higher for AAPL coming into the quarter, and many people feared the stock could sell off after reporting just due to profit taking. But the upside that AAPL reported was far greater than expected in nearly every category. Earnings blew past estimates, unit sales were record, and margins were much higher than we have seen. Currently AAPL is up 7% near $450.

A few other companies beat estimates but their stocks are lower after reporting, including UTX, BA, and COP.

In economic news, pending home sales for December fell 3.5%, which was below consensus. This doesn't seem to have moved the market much. Participants are likely waiting to hear the latest monetary policy statement from the Fed, which will be released at 2pm EST. The big question is whether the Fed will change its language surrounding holding rates low "until mid-2013".

In Asian, Japan was higher again while China and Hong Kong remained closed for holidays. Boy, they sure do get a lot of market holidays over there. In Europe, markets are lower amid continued delays with creditors in getting the Greek debt terms revised.

The euro is also lower relative to the dollar, weighing on commodities. Oil prices are down near $98, gold prices are lower to $1653, and copper prices are also slightly lower.

The 10-year yield is off slightly to 2.06%. Today is day 4 above the 2.0% level, but it will be interesting to see how it reacts to today's FOMC announcement. As for the VIX, it is up another 1.6% to 19.21, the 5th consecutive day below the 20 level. I think going long volatility will be a good trade at some point, but haven't done anything yet.

Trading comment: The market remains overbought but pullbacks haven't gained any traction. The SPX hit 1310 five days ago, and today it is still right at that 1310 level. So while bulls were hoping for a pullback so that underinvested managers could put more money to work, all the market has given us is some sideways consolidation. As such, it is very possible that the market continues to frustrate the majority (as that is it's job) and stair-step higher into month end.

KAM Advisors is long AAPL

Tuesday, January 24, 2012

Following The Greek Yo-Yo

The markets are lower this morning after a failure to find solutions to Greece's debt problems has put pressure on Europe's markets and also the euro currency. Greece's stock index is down -4.0% this morning and weighing on other markets. Data released this morning showed the manufacturing and services PMI readings for the eurozone both improved in January

Overnight in Asia, Japan was up slightly despite lowering its GDP forecast for 2012. China and Hong Kong were closed for holidays.

In earnings news, stocks are showing a mixed reaction to reports from last night and this morning. On the upside are stocks like: COH, EMC, WDC, and VMW. On the downside are TXN, MCD, TRV, VZ, CSX. Tonight AAPL reports and many are wondering if it will have the sort of reaction seen in GOOG. I think AAPL will fare better, although the fact that it has recently run to new highs does leave it vulnerable to some profit taking on the news.

The dollar is higher relative to the euro, and that is weighing on most commodities. Gold prices have pulled back to 1665. Oil prices are back below $100 near $98.90. And copper prices are down also.

The 10-year yield is roughly flat near the 2.07% level. As for the VIX, it has bounced 5% in early trading to 19.55, and briefly touched the 20 level before fading a bit.

Trading comment: Growth stocks took a back seat to defensive stocks for most of 2011. So far this year, growth seems to be readying for a comeback. VMW reported a strong quarter and got a nice reaction, similar to FFIV last week. MELI sold off in 2011 but is back in position to challenge new highs. And recent trades we have talked about including STMP and ULTA are both at or near new highs as well. While I expect 2012 to be choppy similar to last year, I do think there will be more opportunities for growth investors.

KAM Advisors had long positions in AAPL, COH, GOOG, MCD, STMP, and ULTA

Monday, January 23, 2012

Are Yields Finally Reflecting Improving Economy?

The 10-year yield is finally getting a nice boost, currently near a 7-week high at 2.08%. In recent weeks as we have gotten mildly improving economic reports the 10-year yield continued to drift lower as if the economy were going back into recession. But the last few days have seen a nice lift from the lows. I would like to see the 10-year yield stay above 2.0% on future pullbacks.

Stocks are strong out of the gate this morning. Stocks have now been up 3 straight weeks to start the year. That's a better start than last year although the market now looks pretty overbought short-term.

In earnings news, the only notable report I saw this morning was Halliburton (HAL) which beat estimates but it's stock is selling off. In other news, RIMM kicked out its co-CEOs as it looks for new leadership to get things back on track.

The positive tone to the markets this morning also comes out of Europe, where Germany held a successful debt offering. The euro is higher on this as well as continued chatter that a plan to restructure Greece's debt from default is ongoing. France and Germany have also called for easier capital rules for banks, which is helping boost financial stocks.

The dollar is lower this morning, which is boosting commodities. Oil prices are higher near $99.55. Gold prices are up to $1675. Copper and silver prices are also higher.

As for the VIX, I would expect it to be lower this morning but it is currently 2.6% higher to 18.77. Some of this could be related to options expiration last Friday, during which the VIX had a big plunge lower to 18.25.

Trading comment: The market continues to work its way higher with very little pullbacks along the way. This keeps it difficult for most people to jump on board as most investors don't like to chase stocks higher. It's hard to say how long this mini-melt up will last. The market is overbought short-term and sentiment is growing more bullish as well. But so far those factors have been trumped by underinvested portfolio managers putting money to work.

KAM Advisors has long positions in HAL

Friday, January 20, 2012

Google Drops The Ball

Today's reactions to earnings reports are pretty mixed, with Google being the big loser so far. I think expectations were running pretty high for GOOG to report a good quarter. So when they missed estimates by a $1, investors hit the sell button in a hurry. GOOG is down -8% so far today on a big jump in volume. We will have to see if it can recoup any of its early losses into the close.

Another stock that is taking it on the chin is ISRG, which actually beat estimates by a nice amount. GE and AXP are also lower this morning. On the plus side are IBM, MSFT, and INTC.

In economic news, existing home sales in December rose to a rate of 4.61 million units (vs. 4.55 consensus).

Asian markets were higher overnight. China rose 1.0% despite a PMI reading of 48.8 which marks the 3rd straight month the index was below the 50 level which marks the line between expansion and contraction.

The euro is lower this morning. Although there is talk of an agreement on the Greek debt issue, a colleague just told me CDS spreads are widening on Portugal to new highs, and Portugal is a much bigger issue than Greece.

The 10-year yield is finally moving above the 2.0% level to 2.01% currently. That is just above the 50-day moving average. As for the VIX, it closed below the 20 level yesterday and is currently a bit lower to 19.65 despite the market being down a bit.

Trading comment: The market could have been down a lot more following the GOOG miss and the reactions to GE, AXP, etc. So I think it is a slight positive that the market is only down slightly so far (although it is still early). I think most investors remain in dip buying mode, as many came into the year under-invested and holding too much cash. I want to focus on those companies that continue to beat estimates and lead the market. Unfortunately right now I cannot put GOOG in that category.

KAM Advisors was long GOOG and IBM

Thursday, January 19, 2012

Earnings Reports Continue To Recieve Positive Reaction

The market is higher again in early trading, as earnings reports continue to roll in and garner positive reactions for the most part. Bank of America (BAC) actually reported an earnings miss but the stock is trading 5% higher as investors shrug it off and look forward.

Other stocks reacting positively to earnings reports include: FFIV, EBAY, and MS to name a few. Tonight we hear from big daddy Google (GOOG) and IBM, as well as ISRG and MSFT.

In economic news, the weekly jobless claims fell by 50,000 to 352k. This is the lowest initial claims level since 2008. Hopefully this will translate into improving monthly jobs figures and a decreasing unemployment rate. The market got a boost from this data.

Asian markets were higher overnight, and Europe is up slightly this morning. The euro is also higher again, which is helping most commodities. Gold prices are slightly lower near $1656, but silver and copper prices are higher. Oil prices are also higher again to $101.35.

The 10-year yield is finally getting a boost on some of this economic data. This morning it is up 8 bps to 1.97%, but still below that stubborn 2.0% level. I think at some point the 10-yr yield could have a big spike higher. As for the VIX, it is down -4% this morning right at the 20.0 level. A close below this level would be another sign of confidence for the bulls.

Trading comment: It's hard to chase stocks ahead of their earnings reports, which is probably one of the reasons that we are seeing nice pops in those companies that reports solid earnings. The market remains overbought, but investors are in dip buying mode and we haven't seen back-to-back down days in the market since mid-December. So far this year, the market is carving out a similar pattern to 2011. Last year the market rallied all they way to mid-February before its first correction. Growth stocks are also beginning to act better as the number of new highs on the Nasdaq is slowly rising.

KAM Advisors has long positions in: BAC, GOOG, IBM

Wednesday, January 18, 2012

Is The IMF Bringing Out The Bazooka?

The euro is getting a bounce for a 2nd day today on the rumors that the IMF is looking to expand its lending capacity by $1 trillion. That's a pretty big figure, and it seems to be helping sentiment in Euroland. But I worry that folks could be getting too complacent with the sovereign debt issues.

Earnings reports are starting to come out. On the plus side this morning in reaction to their earnings are GS, which is up 5%, and APH which saw a huge gap higher at the open. On the downside are a couple banks such as STT and PNC.

In economic news, the Housing Market Index improved to 25 from 21 last month, which was a bigger jump than economists were looking for. This release helped boost the market when it hit the wires.

The lower dollar is helping most commodities. Oil prices are higher near $100.99. Most metals are higher too. Gold was lower earlier by just a little, but silver and copper prices are both higher today.

The 10-year yield does not seem to reflect any pending economic improvement as it still lingers near 1.86%.

As for the VIX, unlike yesterday when it wouldn't budge despite higher open today it is down by 2.5% in early trading to 21.65.

Trading Comment: The SPX is trying to stay above the 1300 level where it was turned away yesterday. Also, the 50-day average is quickly moving up and should soon break back above the 200-day average. This is know among technicians as a "golden cross" and would be another bullish sign for the market.

KAM Advisors had no positions in stocks mentioned

Tuesday, January 17, 2012

Markets Cheer Chinese GDP Growth

Global markets were higher overnight and higher this morning after China's GDP came in slightly above expectations at +8.9% in Q4. This is one of the slower readings since 2009, but I guess folks are happy it wasn't worse. There is also chatter that Chinese officials don't want it to slow more, and will be looking to take the foot off the brake that has recently been applied to cool inflation.

In earnings news, Citi (C) is down 5% right now after disappointing earnings. Wells Fargo (WFC) was in-line, but the stock is higher. And Check Point Software (CHKP) is nicely higher after beating earnings and revenue estimates.

The euro is also higher today, despite a wave of sovereign downgrades from Standard & Poors. The biggest was to France, which got downgraded from AAA to AA+. Italy, Spain, and Portugal also got downgraded a notch. For now it looks like these downgrades were priced in and bonds are not being sold off as a reaction.

The lower dollar here is helping commodities. Gold prices are up to $1658, and silver and copper prices are higher as well. Oil prices are also higher, but not able to stay above the $100 level.

The 10-year yield is flat at the low level of 1.85%. I find this somewhat perplexing, as most other markets are rallying on good economic news, but the bond market here is pricing things as if the economy is going to slow more.

As for the VIX, I would have expected it to be down on today's rally but it is actually slightly higher to 21.0. It is still early, but the fact that the VIX hasn't budged would make me a little nervous about chasing this early market strength.

Trading comment: The market continues this stair-step higher pattern that we have seen before. I think we saw something similar in the early part of 2011. Pullbacks are brief affairs and have to be bought quickly if you want to continue to participate in the rally. The October high for the SPX was 1292. This area has been providing some resistance for the last 4 days, but today looks to be convincingly broken to the upside. A close above 1292 would be another bullish datapoint for the market. Earnings season really heats up this week, so get ready.

KAM Advisors and/or clients are long CHKP, GLD

Thursday, January 12, 2012

Bond Auctions Improve In Spain and Italy

The market was poised to move higher at the open after improved sentiment in Europe helped push their markets and the euro higher. Spain and Italy both held successful bond auctions where yields were well lower than they had been at previous auctions.

But some early economic data in the U.S. took the wind out of the market's sails. Retail sales came in weaker than expected at 0.1% (vs. 0.4% consensus), and retail sales ex-autos actually fell 0.2% in December. Also, weekly jobless claims were higher than expected.

Back to the ECB, President Draghi held the benchmark rate at 1.00%, but said that substantial downside risks to economic activity in Europe remain.

Asian markets were mostly lower overnight after some Chinese inflation data came in higher than expected. This calls into question just how easy China will become with monetary policy given that inflation is still a problem there.

The dollar is down which is helping commodities. Oil prices are higher near $102.25. Gold prices are also up to $1635. Copper and silver prices are higher as well.

The 10-year yield is getting a small bounce to 1.92%. But the overall low levels on the 10-year do not bode particularly well for an immediate pickup in economic activity.

As for the VIX, it is up 4% in early trading to 21.87. The recent downtrend in the VIX remains intact, despite the ongoing possibility for a move higher in the near-term.

Trading comment: The market continues to put together constructive price/volume action. Pullbacks have been contained well. There is talk about Greece having difficulty making its upcoming debt payments. This could cause the whole Euro debt issue to flare up again, as we know it hasn't been solved by any means. The market seems to be calm right now with those issues, perceiving that the 'kick the can' policies are effective. But at some point I expect the whole thing to flare up again. That may not be today's agenda, but it is something to keep in mind as investor adjust their asset allocations. We still have some hedges on just in case.

KAM Advisors and/or clients are long GLD, SCO, SH

Wednesday, January 11, 2012

Are We Starting To Decouple From The Euro?

The markets are mixed this morning, but still doing better than I would have thought given that the euro is lower on the day. I have harped on the fact that whenever the euro was down over the last year you could pretty much bet our markets were down also.

So far this year we are starting to see a little decoupling from that relationship. I know its still early in the year, but so far the euro is down -2.0% since the start of the year while the S&P 500 has gained +2.5%. Hey, it's a start right??

European markets are lower this morning ahead of the ECB meeting tomorrow. Asian markets were mostly higher overnight, except for China which pulled back -0.4% after that 2 day surge.

Energy stocks (XLE) are down the most this morning, as oil pulls back near the $100.50 level. Gold prices are higher to $1643. Silver prices are higher also, while copper looks flat right now.

There isn't much in the way of market moving data this morning. Economic reports are light, and earnings season doesn't really kick into high gear until next week.

Trading comment: Recently I commented on the S&P holding solidly above its 200-day average. The two indexes that had yet to retake their 200-days were the S&P 400 Midcap and the Russell 2000 small-cap. But yesterday both of those indexes joined the senior indexes and now all of the major indexes are above their respective 200-day averages. The longer the S&P 500 stays around these levels the closer we get to its 50-day average crossing back above its 200-day average. Traders call this a "golden cross", and it would be another bullish sign for the market.

KAM Advisors and clients are long GLD, SCO

Tuesday, January 10, 2012

China Rallies Hard For 2nd Straight Day

The markets are nicely higher in early trading, taking their cues from overseas markets which were up sharply overnight. Asian markets were up across the board, led by another 2.7% gain in China where expectations for easier monetary policy appear to be the catalyst.

In Europe, analysts at Fitch indicated that France and Germany are likely to maintain their top credit ratings in 2012. A lot of folks have been expected France to get downgraded, so this news emboldened the bulls and Europe's markets rallied hard.

The strong 2-day rally in China has helped economically-sensitive materials stocks (XLB), which are leading the early action. Financials (XLF) are strong too, while defensive consumer staples (XLP) stocks are lagging so far.

The dollar is only down slightly, but commodities have caught a bid as well. Gold prices are up near $1635, silver prices are higher, and copper is higher as well. Oil prices are back to $102.50.

The 10-year yield is only up slightly to 1.98%, still unable to get above that 2.0% level. And the VIX is down -4.7% today to nearly a 6-month low near the psychologically important 20 level. This is a good sign for the bulls, although I still feel like a short-term spike in the VIX could be coming if we get a sharp pullback in the market.

Trading comment: The market continues to power higher. Leadership is not as broad as it often is during market advances. The list of new highs is more littered with defensive type names rather than traditional quality growth stocks. That is another reason why I feel that not everyone has embraced this rally. I know that the sentiment surveys are growing more bullish on the one hand, but on the other hand it still feels like a market climbing the proverbial wall of worry.

-jordan kahn

Monday, January 09, 2012

Getting Ready For Earnings Season

There isn't a whole lot in the way of market moving news this morning. After the close today Q4 earnings season will kick off with Alcoa (AA) reporting. I don't know that many people that key off of this report, but it is still the official start to earnings season.

Overnight Asian markets rallied led by China's 3% spurt higher. There were positive comments from Chinese leaders along with rising expectations for easing monetary policy after data showing an increase in lending and money supply. This is somewhat odd given the Premier's cautious comments last week, but nothing is normal when it comes to gauging China.

In early trading, financials (XLF) are leading the way while healthcare (XLV) stocks are lagging.

The euro is getting a little bounce vs. the dollar, and commodities are mixed. Oil prices are lower near $100.90 despite increased rhetoric with Iran. And gold prices are a bit higher to $1620. Silver prices are also higher, while copper looks lower right now.

The 10-year yield is flat around 1.96%. And the VIX is getting a bounce from Friday's low levels, currently 3% higher to 21.30.

Trading comment: Most of the major indexes are now above their respective 200-day averages, and have held those levels for more than a couple of days. I still think this bodes well for another push higher. The market is overbought short-term, which could be a headwind this week. I don't like taking large positions in new stocks ahead of earnings, but we do continue to trade around our long positions with an upward bias. We are still long most of our recent trades, including SCSS, ULTA, and STMP. AAPL shares remain our largest position, and the shares briefly hit a new all-time high this morning. Despite the high price tag, AAPL shares do not yet appear close to being overvalued.

KAM Advisors and/or clients are: long AAPL, SCSS, STMP, ULTA

Friday, January 06, 2012

Jobs Data Continues To Surpass Consensus

The markets are lower in early trading, despite the better than expected payrolls report that was released before the open. The main weakness this morning likely remains concerns in Europe that are helping drive the euro lower again today. And I don't need to mention the contuining correlation between stocks and the euro.

The December nonfarm payrolls report showed the economy added 200,000 jobs, which is well above the 150,000 estimate. Private payrolls also grew more than expected (212k). Additionally, the unemployment rate ticked down to 8.5%. It was expected to rise to 8.7%.

So this is good news for the U.S. economy, although you wouldn't know it from the action in Treasuries. I would expect to see yields rising today, but instead the 10-year yield briefly rose to 2.0% but has since eased back and is now back to 1.96%. Not exactly an inspiring vote of confidence in the economy.

As we have seen all week, the Nasdaq is outperforming the S&P in early trading and bucking this morning's weakness for the most part. Among sectors, consumer discretionary (XLY) stocks are higher so far, while consumer staples (XLP) are down the most.

Asian markets were lower overnight, and China is not off to a good start to the year already. The dollar is higher, which is weighing on commodities. Oil prices are lower near $101.25. Gold prices are down to $1616. Silver prices are down also, but copper prices (JJC) are higher as of now.

As for the VIX, despite the morning selloff the volatility index is lower on the day. The VIX is currently down -1% near 21.25. This is a pretty bullish sign, as I think many traders expected volatility to pick back up once trading started in earnest in 2012.

Trading comment: The price action continues to be constructive in the major indexes. The Nazz has been outperforming nicely. And if you look at the intraday action in the SPX this week, you can see that most of the days showed weakness in the morning but the market picked up steam and closed flat to up those days. This means investors have been buying the weakness and in most cases augurs well for more upside ahead. Sentiment in yesterday's AAII poll showed too much bullishness, so that is one red flag. Additionally, the market is overbought once again. So I wouldn't load the boat here, but I have to give the market credit for the positive price action.

Thursday, January 05, 2012

Market Shrugs Off Strong Jobs Data

The market is lower in early trading, despite what looks like a very solid ADP Employment report. The data showed private payrolls increased by 325,000 for December, which is well above consensus estimates. We will have to see if the govt. payrolls report confirms this strength.

Overall concerns remain in Europe, where bond yields continue to creep higher and recent deposit data from the ECB shows a continuation of recent trends. Europes markets are lower, as is the euro. And we know that when the euro is down our markets are down.

In other US economic data, the ISM Services Index rose to 52.6 in December from 52.0 the previous month. Nonetheless December's reading was slightly below consensus estimates.

Also, December same-store sales are coming out and are a mixed back. Despite some solid results, the retail etf (XRT) is lower on the day by -1.5% so far.

The Nasdaq is outperforming the SPX so far for a second day. Energy and industrial stocks are early laggards, while healthcare and tech are down the least.

Commodities are mostly lower. Oil prices are down near $102.75, gold prices are only slightly lower to $1608, and copper and silver prices are down as well.

The 10-year yield is lower to 1.95% after trying to get above the 2.0% level yesterday. And the VIX is up 2.3% but still relatively low at 22.75.

Trading comment: Yesterday's price action was pretty constructive as the market was lower for most of the day buy rallied late to finish up slightly. Today the market has already bounced from its early lows and we will see if buyers come back into the picture late in the day. I would have thought we would have bounced more from that strong ADP report, but with the euro down a lot I understand the concerns. Growth stocks look good in early trading. One of our recent trades ULTA is spiking back above its 50-day average, which is a good sign. And the surprise stock of the week SODA is up another 6% in early trading and up 23% for the week. Not bad.

KAM Advisors and/or its clients are long QQQ, SODA, ULTA, XRT

Wednesday, January 04, 2012

'In The Money' Poll - 2011 results

Congratulations to Andy Bell (hedgie in NY) for winning our 2011 forecasting poll. Andy had the SPX finishing the year at 1245, which was the closest guess to the actual finish of 1257.60. Andy will be receiving a gift card for his fearless forecast.

Overall, the In The Money pollsters average forecast for 2011 was for a 5.9% gain to 1332. This seemed like a relatively conservative forecast for the first half of the year but things changed markedly in 2H11.

For the 10-year Treasury yield forecast, the winner was Gary Smith (aka "The Internet"). Although Gary's prediction of 3.00% was well bullish of the closing level at 1.87%, it was the most conservative guess in the group. The average forecast for the 10-yr yield was 4.34% last year.

This year (2012) will be our 8th annual year for the poll. With nearly all of the tallies in, the average forecast for this year is for the S&P 500 to gain 8.5% (1364) on the year. That's only slightly more bullish than the Wall St. bigwigs polled by Bloomberg who are looking for SPX 1348 (+7.2%). Our gang also has the 10-year yield finishing 2012 at 2.77%.

Good luck to everyone in 2012!!

Taking Our Cues From Overseas

There isn't a lot in the way of market moving news this morning, which leaves the market taking its cues from abroad. Yesterday's session proved to be the biggest up move in two weeks, so its normal to see a pullback. But there were also some developments overseas.

Yields are creeping back up in Spain, which is rekindling concerns in Europe. Also, the financial health of Hungary is now surfacing. These are weighing on the euro, and we know whenever the euro is down U.S. stocks are also down.

Asian markets were mixed overnight with Japan higher but China lower again. Premier Wen Jiabo made cautious comments about the country's economic outlook, which is never a good sign for one of the worlds largest and fastest growing economies.

All of the above had led folks to the safety of the dollar, which is hurting most commodities. Gold prices are adding to yesterday's gains near $1610. And oil prices are only down fractionally after hitting $103 yesterday. But copper, silver, and most other commodities are weaker on the day.

The 10-year yield is down slightly to 1.95%. You sure don't get the sense that the U.S. economy is picking up steam with a yield below 2.0%. Where's the love? As for the VIX, it is up 3% so far back to 23.65.

Trading comment: I was fairly impressed with yesterday's action. Volume picked up to its highest level in 7 trading sessions. And technically the SPX put considerable distance from its 200-day moving average, which should now act as support. Bullish sentiment among investors is rising, but not yet at alarming levels. So I think that this rally can push higher before we have another correction. I wouldn't be surprised to see the runup continue into Q1 earnings season.

Tuesday, January 03, 2012

Bulls Cheer The Start To The New Year

The markets are sharply higher in early trading as the bulls cheer in the New Year. This buying interest was absent late last week as the market fell in the latter half of the week and pushed the SPX to close exactly flat for 2011.

Asian markets were strong overnight. India reported its best manufacturing reading in six months. Europe's markets are also strong this morning, with another meeting scheduled for Merkel and Sarkozy.

The euro is up and the dollar is lower, helping to boost commodities. Gold prices are rallying back up to nearly $1600 (+2%). And oil prices are up even more ($102.55) amid threats from Iran regarding Hormuz and blocking shipping lanes.

In the U.S., the December ISM Manufacturing index rose to 53.9 from 52.7 last month. But the market was already nicely higher before this data came out. Recent economic data has been strong, and I wouldn't be surprised to see upward revisions to Q4 GDP estimates soon.

The 10-year yield is also rallying up to 1.96%, but still below the 2.0% level that has been resistance of late. As for the VIX, it is down +3.5% so far near the 22.50 level. It will be interesting to see if the recent trend towards lower volatility persists, or if rhetoric out of Europe heats up again and drives volatility higher like in 2011.

Trading comment: The SPX is staging a strong breakout this morning. As you can see from the chart below, the SPX has been consolidating right at its 200-day moving average for the last 5 days. Today, it is spiking higher and putting some distance between what should now be support at that key moving average. This is a bullish sign and should lead to more short-covering if it holds into the close. As earnings season approaches, I also hope that we don't get any big preannouncements to the downside. We have already heard about some disappointments in the semi space, so reports related to those companies should be discounted already.