Friday, August 31, 2012

Bernanke: The Song Remains The Same

The market is higher in early trading, coming more off the heels of developments in Europe as opposed to comments from Bernanke's speech in Jackson Hole.

Europe's markets were higher this morning after the EU plans to make the ECB the sole authority in granting back licenses.  This could pave the way for the ESM to get a bank license which as we have said would dramatically increase its lending capacity.  There is also chatter that the head of the Bundesbank is resigning, which would remove one of the biggest opponent's to the ECB's current plan of action.

The above news has the euro rallying as well as Euro stock markets.  Asian markets were lower overnight on continued fears of a hard-landing in China.

As for Bernanke's speech, I have been saying for weeks that I thought it was highly unlikely that we would hear about new QE initiatives and that it was more likely that he would reiterate what he as been saying recently - that the Fed stands ready to provide additional stimulus as needed by the economy.

That is exactly the tone that Bernanke's speech took today.  He said that the use of non-traditional policies involves higher costs that traditional policies, and as such the bar should be higher for the use of such policies.  He also took a stab at the Administration for its lack of further fiscal initiatives by saying that "Monetary policy cannot achieve by itself what a broader and more balanced set of economic policies might achieve."

The market showed some initial disappointment with his remarks and sold off, but that dip was quickly bought again as investors conclude that the Fed stills stands ready to step in, and the ECB is getting closer to providing more support to Europe.  Also, a note out of Goldman this am says they think China's economy will pick up into the end of the year.

Commodities are higher on the lower dollar today.  Oil prices are higher near $95.88.  Gold prices are up to $1672, and silver prices are higher as well.

The 10-year yield remains weak falling to 1.60%.  And the VIX is down -4% back to 17.13.

Trading comment: Looks like the Bernanke selloff came a day early and today's market strength is more about optimism that the ECB will announce some policy initiatives next week to help the eurozone crisis.  I expect volume to be light today ahead of the holiday weekend so I don't want to make any big bets before next week.  Volume levels should pick up again in September and we will see if the market has the strength to push to new highs or if it needs a deeper pullback first.

Thursday, August 30, 2012

Bulls Pull In Their Horns Ahead of Jackson Hole

The market is lower in early trading, following weakness in overseas markets overnight.  Asian markets were lower across the board.  A Chinese State economist said inflation will rise above 3.0% in August, which might explain why the PBOC has been reluctant to lower interest rates.

Europe's markets are also lower despite Germany posting an in-line unemployment rate of 6.8%.  Bond yields in both Italy and Spain are slightly higher today after Italy auctioned off 5- and 10-yr debt.  Angela Merkel is visiting China, where the Prime Minister said his country remains committed to investing in Europe.  But I haven't seen many initiatives aimed at helping Europe at large, rather the moves I've seen are strategic investments by China to strengthen their commodity needs.

In the US, retailers released same-store sales for the month and many have been better than expected.  But retails stocks are flattish overall, being held back by the bearish tone of trading today.

The dollar index is rising again weighing on most commodities.  Oil prices have pulled back to $94.00, and gold prices have eased to $1654.

The 10-year yield is hovering above its 50-day support near 1.62%.  And the VIX has spiked 5% this morning, breaking above its 50-day average to 18.0.

Trading comment: I think some traders were hoping the market would rally more going into the Jackson Hole event, looking for a buy-the-rumor, sell-the-news type pattern.  But the market has been flat the last few days so maybe some of these folks are taking some chips off the table today ahead of the big event tomorrow.  I am on record as saying I do not expect any explicit new QE initiatives, and that could leave the market ripe for disappointment.  To the extent that the market pulls back today, that could lower the odds of a larger selloff tomorrow.  I also expect that volume will be relatively light tomorrow ahead of the Labor Day weekend, which could add to the element of volatility.  But next week things heat up again as traders return from their vacations and the ECB meets next week hopefully with some further policy announcements.

Wednesday, August 29, 2012

Q2 GDP Gets Positive Revision

The market is again flattish near the open but not really giving much back.  This quite action looks to me like more consolidation of recent gains that could lead to another push higher, although I also think the lack of any QE mentions on Friday from Jackson Hole could lead to some short-term disappointment.

In economic news, Q2 GDP got a positive revision from 1.5% to 1.7%.  Separately, pending home sales for July rose 2.4%, which is a big turnaround from the previous month's -1.4% decrease.

Asian stocks were mixed overnight, with China down another -1.0% after the Vice Commerce Minister reiterated that weak exports will weigh on the country's growth objectives.  Last night Joy Global (JOY) missed estimates and lowered guidance due to weakness in both Europe and China.

Europe's markets were lower this morning but have bounced since after ECB President Draghi reiterated that it will do whatever is necessary to maintain price stability.

The dollar index is higher today and weighing on most commodities.  Oil prices are lower to $95.15.  Gold prices are pulling back near $1660.  And silver and copper prices are lower also.

The 10-year yield is higher today to 1.67%.  And the VIX is also higher by 1% to 16.68, which is bumping it right up against its overhead 50-day resistance.

Trading comment: Our market continues to hover near recent highs without giving much back.  Normally this is bullish action, and shows the market is resting and potentially building its internal energy for another push higher.  This comes against a backdrop where global growth continues to slow.  Europe is in recession with austerity measures still taking hold.  And China is slowing with less levers to pull to stimulate growth as easily as it has in the past.  The Shanghai stock market is back to March 2009 lows, which has to be a bad sign in and of itself.  So those are the crosscurrents facing investors today.  It almost feels like a game of musical chairs where investors want to stay in stocks for as long as the music continues to play, but once it stops there could be a rush to the exits. 

KAM Advisors has short positions in JOY

Tuesday, August 28, 2012

Consolidating Ahead Of Jackson Hole

The markets are down slightly in early trading, but have mostly been consolidating in a sideways fashion after failing to hold at new highs last week.  This Friday brings the big Jackson Hole symposium where investors think Bernanke could comment on further QE initiatives. 

I still fall in the camp that says with the markets near new highs, the Fed would rather keep its powder dry.  My guess would be we will just hear more of the same from the Fed, that they stand by ready to support the economy with easy monetary policy should economic growth continue to slow.  As such, I think if the markets are pricing in more QE announcements on Friday then we could see some disappointment.

In economic news, the latest consumer confidence reading for August came in at 60.6, which is well below last month's reading of 65.9.  Separately, the Case-Shiller home price composite rose 0.5% which is a nice turn from last month's decline of -0.7%.

Asian markets were mixed overnight after the Japanese govt. downgraded its economic assessment due to slowing exports.  European markets are generally weaker this morning despite stable peripheral bond yields.  ECB Pres. Draghi said he will not attend this week's Jackson Hole symposium due to a heavy workload.

The dollar is lower today, with commodities mixed.  Oil prices are higher to $96.25 after weakness yesterday.  Gold prices are flat near $1675.  Silver prices are higher while copper is lower.

The 10-year yield is lower again to 1.63%, nearing its 50-day support.  And the VIX is currently flat 16.32.  It also bumped into its overhead 50-day resistance this morning before turning lower.

Trading comment: The market continues to trade in a fairly tight range.  It has been awhile since we have seen big swings in the market.  And with the VIX at 16 and change, it doesn't appear that traders are expecting volatility to pick up in the near-term.  But in my experience, having an event like Jackson Hole on the Friday before Labor Day could be a recipe for increased volatility.  I think trading volumes are likely to pick up in September, and the contrarian prediction would be for the market to complete this multi-month cup-and-handle formation its working on and stage another upside breakout. 

Monday, August 27, 2012

Monday Morning Musings

The markets are roughly flat this morning despite some declines in Asia overnight.  The Jackson Hole summit is coming up later this week, and investors are still hopeful that Bernanke will talk about some additional easing.

There was also quite a bit of M&A news coming out of the weekend.  Hudson City Bancorp (HCBK) will be acquired by M&T (MTB) for a 12% premium.  Kenexa (KNXA) will be bought by IBM for a whopping 42% premium.  And Dollar Thrifty (DTG) is being bought by Hertz (HTZ) for an 8% premium to Friday's close. 

The other big news was from the courts late Friday when Apple (AAPL) won a big patent victory over Samsung.  The stock has boosted AAPL to new highs, while hurting those stocks that will have to either redesign their products or even pull some from shelves pending resolution.  AAPL was also awarded $1.05 billion in damages. 

Separately, the energy sector is on alert as Tropical Storm Issac enters the Gulf of Mexico and could disrupt oil production in the region.

Asian markets were lower overnight after China got hit by 1.7% following the release of disappointing industrial profit growth (5.4% in July).  The Shanghai composite continues to hit levels not seen since March 2009. 

Europe is roughly flat this morning despite comments from Germany over the weekend again speaking against the ECB plans to buy government debt.  The President of the Bundesbank repeated that such actions could be illegal and could produce intended consequences.

The dollar is flattish today, as are most commodities.  Oil prices are slightly lower to $95, while gold prices are flat near $1672.

The 10-year yield is lower to 1.65%.  And the VIX is 5% higher today almost back to the 16.0 level following last week's options expiration.

Trading comment: We finally did get a down week in the market last week, but it wasn't by all that much, and volume was relatively light.  The SPX got down to its 20-day average on Friday, where buyers stepped in and the market rallied.  This morning the market is trying to add a little bit to those gains.  I still expect more consolidation overall this week, but any news out of Jackson Hole could cause some fireworks.  I continue to watch for stocks breaking to new highs, and the group that seems to have a lot of names is the biotech group. 

KAM Advisors has long positions in AAPL

Friday, August 24, 2012

Are You Looking For More Than A 2% Pullback?

The markets quickly shook off some mild weakness after the open and are currently in positive territory.  Overnight action in Asian and Europe was lower, though not much in the way of impactful news.

Asian markets gave back most of the previous day's gains.  There is still chatter about China's central bank easing, but who knows if and when.  Meanwhile, HSBC lowered its China growth forecast for 2012 from 8.4% to 8.0%.

In Europe, Greece's PM is meeting with the German Chancellor.  It will be interesting to see if he can persuade Germany to extend the timeframe for Greece to meet its commitments.  Peripheral yields are rising today, with Spain's 10-yr at 6.49% and Italy up to 5.77%.

In economic news in the US, durable goods had a nice showing up +4.2% in July, up from 1.6% in June.  Not bad.

In earnings news, Autodesk (ADSK) got hit by more than 20% overnight after missing earnings and lowering guidance, but it is bouncing back a little bit so far.  Also, (CRM) was lower overnight after a mixed report and guidance, but it has since climbed back into positive territory.

Commodities are mixed so far with the dollar index up slightly.  Gold prices are down a little to $1671 while silver prices are higher.  Oil prices are also up a bit near $96.65.

The 10-year yield is down a little to 1.65%.  And the VIX is also 2.7% lower to 15.51.

Trading comment: From its intraday highs on Tuesday to this morning's lows, the S&P 500 has pulled back 2.0%.  Sometimes in a normal uptrend that is about all an investor should expect from a pullback.  A 2% pullback is often considered a pause that refreshes.  The SPX has also drifted back to its 20-day average, where so far it looks to be finding support.  So if you are bullish, you are probably buying this morning's dip.  But there is still a lot of concern out there, and a lot of folks are still looking for more of a pullback before committing more cash.  If I had to guess, I would probably fall somewhere in the middle with the thinking that we could just chop around in this general range for a bit longer before seeing another push to the upside.  But it will be interesting to see how the market closes ahead of the weekend.

Thursday, August 23, 2012

Gold Breaking Out On Hopes Of More QE

Global markets were higher overnight on hopes that the Fed left the door open to more QE, even though I think with the S&P 500 near new highs it is unlikely that they move now.  I think they would rather wait for another rough spot in the markets, or possible if the economy gets hit by the fiscal cliff issues.

Asian markets were higher after China's HSBC PMI index rose to 47.8, even though this reading is still a 9-month low for the manufacturing sector.  In Beijing, Fed member Charles Evan suggested that QE3 would add confidence to the markets.  I'm not so sure I agree, as it would also send the signal that the Fed remains worried about the economy.  But it would reinforce the "Bernanke put" moral hazard.  On the flip side, Fed member Bullard threw some cold water on the whole idea.

Despite gains in Asian and Europe, markets in the US are lower this morning.  I think this is normal action after Tuesday's downside reversal.  So far this is just a normal pullback.

In economic news, new home sales for July hit a rate of 372,000, which is up from June's rate of 359k.

In earnings news, GES, HPQ, and BIG are all down a lot after missing earnings reports.  HAIN is a standout on the upside, up 18% after beating estimates and raising guidance.

Gold and silver prices continue to add to their recent breakouts, which many are interpreting to mean the market is anticipating more QE.  Gold prices are higher to $1676, and oil prices are up near $97.65.  Copper prices are higher as well.

The 10-year yield is falling back to its 20-day average near 1.67%.  And the VIX is rising +4.6% so far to 15.80, which is still a pretty low absolute level for the index.

Trading comment: On Monday I said that the market has had quite a string of weekly gains and I thought it was likely that markets would take a rest this week.  That call looked iffy on Tuesday as the market made new highs for the year.  But the inability to hold those levels, the downside reversal from there, and the pullback follow through action today are in-line with what I was expecting.  This action is actually healthy, as it allows the market to work off its overbought condition.  I think it is likely that underperforming investment managers and dip-buyers will come back in, but be patient in letting the market find some support.

Wednesday, August 22, 2012

Don't Hold Your Breath For FOMC Minutes

The market is lower for a second day after yesterday's breakout to new highs was sold into and the markets reversed lower.  Volume is running pretty light this morning as many participants await the release of the latest FOMC minutes.  There have been high expectations for the last few meetings that the Fed would tip its hat in terms of further QE.  I don't think we will hear anything new, and with the markets making new highs I think the odds of something coming out of next week's Jackson Holy symposium have diminished as well.

Asian markets were lower overnight after Japan's trade deficit missed expectations and showed that exports to Europe fell -25% and exports to China even fell 12%.

Europe's markets are also lower after S&P said even a full bailout in Spain wouldn't cause them to change their ratings, which are at outlook negative. 

In US economic news, existing home sales for July hit 4.47 million units, a bit below estimates but up from the prior months reading.  Separately, Toll Brothers (TOL) reported strong quarterly results and that is boosting homebuilding stocks.

In the REIT space, Health Care REIT (HCN) will buy Sunrise Senior Living (SRZ) for a whopping 62% premium to yesterday's closing price.

On the flip side, shares of DELL are down -6.5% after missing on revenues and issuing downside guidance.

The dollar is roughly flat so far, as are commodities. Oil prices are up slightly near $97.20 and gold prices are at $1643.

The 10-year yield has given back some of its recent gains and is trading near 1.75%.  As for the VIX, it is up 2% so far to 15.30.

Trading comment: Yesterday's failed breakout stands out on the charts.  The S&P 500 briefly touched new highs before reversing lower into the close and finishing down for the day.  Today the market is down again (so far).  So the inability to hold at new highs and follow thru on that move likely means that the market has some consolidating to do of its recent gains at best, and more of a pullback in store at worst.  We also know that investor sentiment has grown more bullish of late, which lowers the wall of worry a bit.  I would not be surprised to see the market chop around more to keep investors on their toes.

Tuesday, August 21, 2012

Germany Still Opposed To ECB Bond Purchases

The markets are higher in early trading after a lackluster day yesterday in which stocks didn't give back much at all of the gains they've made over the last several weeks. 

The S&P 500 has touched new highs for the year, and the 1425 level where it currently trades is about a 4-year high.  The last time the SPX was at these levels was May 2008. 

European markets are higher this morning despite comments from the Bundesbank which once again reiterated its opposition to the ECB purchasing government bonds.  Much of the global stock rally has been predicated on the ECB's commitment to do whatever it takes to aid the situation, but if Germany doesn't give its consent it is going to be difficult sailing for Draghi.

Separately, Moody's analysts believe that the eurozone crisis is only at about the half way point, and that countries like Greece and Ireland could need extensions out to 2016 to get the economic situation in order.

Asian markets were pretty flat overnight.  The Reserve Bank of Australia's minutes suggested that they will hold rates steady in coming months as they monitor China's growth which they believe is stabilizing.

In earnings news Urban Outfitters (URBN) reported strong earnings and the stock is up 17% on multiple analyst upgrades this morning.

The dollar is lower this morning and trading near a 6-week low.  That is helping boost commodities across the board.  Oil prices are higher near $97.25, once again within shooting distance of the $100 level.  And gold prices are also higher to $1641, as are silver and copper prices.

The 10-year yield is pushing further into high ground, reaching 1.85%.  And the VIX started out higher this morning but has since slipped back into negative territory on a quick drop to 13.50, back near 5-year low levels.

Trading comment: I had thought the market could have a down week this week, but so far that isn't happening.  After trading in very quiet fashion yesterday, the SPX spiked higher today to make new highs for the year.  Financials are starting to act better and play a little catch up with the market.  The markets also probably like the fact that Spanish and Italian bond yields are moving lower.  I still think the pressure on those markets will resurface, but the timing of this is difficult to predict.  In the meantime we are respecting the price action and monitoring for new breakouts among quality growth stocks.

Monday, August 20, 2012

Monday Morning Musings

Global markets are struggling for direction, and the US markets are slightly lower in early trading.  Financials are leading the early action, and there is some strength in healthcare stocks after a big acquisition, but the rest of the market is mixed at best.

Aetna (AET) said it would buy Coventry Health (CVH) for $7.3 billion, and CVH is trading nearly 20% higher than Friday's closing price.

Asian markets were mostly lower overnight.  The latest report on Chinese home prices showed gains in 49 of 70 major cities, which is the best showing in over a year.  But sentiment has soured after the Chinese media are now saying they do not expect the PBOC to cut rates in the near-term.  This helped push Chinese stocks lower, closing at a 3-year low.

In Europe, markets are flat to mixed after Der Speigel speculated that the ECB could implement a new bond buying program aimed at specific yield triggers.  The ECB quickly denied the rumors. 

In earnings news, Lowes (LOW) is lower after reporting disappointing earnings and lowering guidance.

Outside of that, there are not a lot of big earnings reports or economic data to move the markets.  The dollar is down a little, but not enough to have a big impact on commodities.

Gold prices are slightly higher near $1621 while oil prices are a bit lower to $95.50.

The 10-year yield is holding the 1.80% level that it finally got above last week.

As for the VIX, it hit new lows last week at 13.30.  According to my charts, I had to go all the way back to June 2007 to find levels that low.  That is pretty surprising.  Today the VIX is bouncing 8% higher from said low levels.  I would tend to think the VIX should find some support around these areas and at some point we will likely see a spike higher, if we ever get any news again that spooks investors.

Trading comment:  The equity markets are overbought once again.  The S&P 500 has put in 6 consectutive weekly gains, which is a bit of a rare occurrence.  My bet is for a down week this week, just to break the streak.  I know that sounds a bit like amateur roulette theory, but I would still bet that way.  I am also seeing more complacency show up in the sentiment indicators.  The 10-day CBOE put/call ratio hit a new low for the year last week, and the NAAIM investor survey tied its yearly high in bullishness.  Technically, the SPX is building a large cup-and-handle formation and appears poised for a breakout.  SPX 1422 is the level to watch for new highs on the year.  But keep an eye on bullish sentiment, as it could be sowing the seeds for the next pullback in the market.

Thursday, August 16, 2012

China's Premier Keeps Stimulus Hopes Alive

It seems the whole world is anticipating more stimulus from central banks.  In the US the debate is heating up as to whether or not the Fed will provide additional QE this year.  In Europe, the ECB has hinted that they stand ready to provide additional monetary easing.  And comments from China's Premier keep hope alive for more stimulus in that country.

Premier Wen Jiabao made comments to reassure investors that the nation will meet 2012 economic and social development targets.  He also said that declining inflation gives them room to modify monetary policy, as we noted last week when the lower CPI figures for China were released.

Separately, China's foreign direct investment fell -3.6%, which is the largest decline since November 2009.  The Ministry of Finance warned that corporate profits may slow heading into year-end as exports are likely to weaken.  (maybe he didn't get the memo from the Premier)

In the US, the Philly Fed survey came in below expectations at -7.1 for August, but that is still higher than last month's reading of -12.9.  Overall this is still a weak reading for manufacturing activity.

The dollar is lower today which is helping boost commodities.  Oil prices have risen to $94.87 and gold prices are higher near $1619.  Copper and silver prices are higher also.

The 10-year is up a bit higher today to 1.81%.  And the VIX is also higher, despite the gains in the stock market so far, bouncing from its recent multi-month lows to 14.91.

Trading comment: The slow grind higher continues.  Cisco's strong earnings reaction is helping boost sentiment in the tech sector and boosting the Nasdaq.  CSCO also raised its dividend dramatically which speaks to the notion that company's are generating good cash flow but not seeing good opportunities to reinvest it in their businesses so they might as well return more cash to shareholders.  The S&P 500 is working on its 6th straight weekly gain, which is a pretty long streak.  With investor sentiment growing more bullish and complacency rising, I wouldn't be surprised to see a short, sharp pullback to keep investors on their toes.

Wednesday, August 15, 2012

Are Stocks Poised For New Highs?

The markets are slightly higher in early trading.  The S&P 500 has basically spent the last week oscillating around this 1400 level with volume running very low.  Could the stock market be building its internal energy for a shot at new highs?  Wouldn't be surprising. 

Overnight markets in Asia were lower.  China fell -1.1%, closing near a 2-week low, as investors are still hoping for a reserve ratio cut from the PBOC, with rumors swirling that this could occur near the end of the month.

European markets are also lower, despite some positive news on the UK job market with their unemployment rate falling to 8.0%.

In economic news in the U.S., the Housing Market Index rose to 37 which was above expectations and higher that last month.  Industrial production for July increase 0.6%, which was in-line with consensus.

In earnings news, a few stocks that are higher after reporting profits including ANF, BOBE, JDSU, and TGT.  A couple of stocks on the disappointing side are DE and SPLS.

The dollar is higher today, and commodities have been mixed.  After opening lower, oil prices have climbed into positive territory to $93.70.  Gold prices are slightly higher near $1606.  But copper prices are lower on the day.

The 10-year yield is getting another boost, rising to a 3-month high at 1.78%.  As for the VIX, it continues to trade at very low levels at 14.65.

Trading comment: Volume levels are running light, and the action in the markets feels subdued.  But the price action remains constructive.  After reaching overbought levels, rather than embark on a pullback, the major indexes have merely consolidated their recent gains by trading in a tight, sideways fashion.  I have to view this as positive action, and think that at some point the market will make a push higher to new highs for the year.  There is still a lot of problematic datapoints coming from the macro picture with China slowing, Europe still a mess, the ECB yet to act, the fiscal cliff still lingering, insider selling, etc.  But investors don't seem overly concerned with those issues at the moment.  Just remember that any of them could resurface at a moment's notice.

Tuesday, August 14, 2012

Retail Sales Surprise To The Upside

The market is slightly higher in early trading, refusing to give back much ground despite being overbought after it recent rally streak.

In economic news, retail sales came in better than expected at +0.8% vs. +0.2% consensus.  That's a nice upside surprise at a juncture when most people think the consumer is pulling back.  One standout retailer that reported earnings today was Michael Kors (KORS) who beat both top and bottom line estimates and also raised guidance.  It's stock popped +15% in early trading.

Asian markets were higher overnight after minutes from the Bank of Japan indicated that the central bank was considering further stimulus measures.  Also, in India recent inflation figures showed that wholesale inflation fell to its lowest level in almost three years.

In Europe, markets were also higher after some better than expected GDP reports.  French GDP came in flat when expectations were for some contraction.  Also, German GDP rose +0.3%, which was a bit better than expectations.  But overall Eurozone GDP showed a contraction of -0.2%.

The dollar is slightly higher today.  And commodities are mixed. Gold prices are weaker to $1603 while oil prices are higher to $93.40.  Silver and copper prices are also higher.

The 10-year yield is getting a solid bounce on the retail sales figures, reaching last weeks highs near 1.72%.

And the VIX is bouncing +4% this morning to 14.30 despite the market in positive territory.  Yesterday's dip in the VIX took it back down to very low levels that haven't been seen since March.  So traders may be looking to buy a little volatility protection at these cheap prices.

Trading comment: The old mantra "don't fight the tape" is in full effect.  The market continues to stairstep higher.  The Nazz is leading the early action.  AAPL has broken out of its recent trading range and is very close to making new highs.  GOOG is also trading very well and today just broke to new multi-year highs.  You would have to go back to January 2008 to find the stock trading at higher levels.  Volume levels have been light, so it's hard to judge how much conviction is behind the buying.  But you can't ignore the positive price action.

KAM Advisors has long positions in AAPL, GOOG, KORS

Monday, August 13, 2012

Monday Morning Musings

The markets are lower in early trading after coming off a week where every session saw gains for stocks.  There isn't a lot of market moving news this morning.  The big news is actually on the political front with the announcement that Romney's VP candidate will be Paul Ryan.

Apple (AAPL) is bucking the weakness and trading higher after reports out that it will introduce its iTV possibly in December of this year.

Asian markets were lower overnight, led by China's -1.5% decline as investors were likely disappointed that there have been no further comments or actions regarding stimulus measures for their slowing economy.  Also, Japan reported that Q2 GDP grew only 1.4% when a figure closer to 2.7% had been expected.

In Europe, markets are mostly higher after Italy held a bond auction that was met with pretty solid demand.  This helped boost the euro, and overshadowed comments from Finland's prime minister who reaffirmed his opposition to granting the ESM a bank license and said he is not convinced the ECB should continue with additional govt. bond purchases.

The dollar index is lower today, but commodities are mostly flat.  Oil prices are lower near $92.25, and gold is down slightly to $1620.  Copper prices are also lower this morning.

The 10-year yield got a big boost last week reaching 1.72%, but has pulled back to the 1.63% area so far.

As for the VIX, it is lower again despite the pullback in the market this morning.  Volatility continues to creep lower and does worry me a bit that too much complacency is creeping into this market.  At its current level of 14.50, the VIX is at  a 5-month low.  It briefly dipped below 14.0 in early March.

Trading comment: The low VIX does concern me a bit.  The last time it was at these levels didn't lead to an immediate selloff, but it was a better time to add portfolio protection that it was a time to chase the market higher.  The S&P 500 has been up 6 days in a row, and so far looks poised to break that streak.  If we just get a mild pullback, my guess is that it will be bought again.  As such, until this stair-step higher pattern in the markets is broken the indexes appear poised to challenge their Spring highs.  This is a development that few were expecting in August, but we know that often the market's main goal is to keep folks off balance.

KAM  Advisors has long positions in AAPL

Thursday, August 09, 2012

Markets Try For Five In A Row

Asian markets closed higher overnight with China rising for a 5th straight session.  Interestingly, the latest economic data from China was weaker than expected, but that has prompted investors to continue to expect more economic stimulus measures from the govt.  China's CPI cooled to 1.8% from 2.2% previously.  And industrial production rose 9.2%, but that is also down from 9.8% previously.

For their parts, the Bank of Japan and Bank of Korea held their respective benchmark interest rates steady at 0.1% and 3.00% respectively.

After opening in positive territory, European bourses have reversed into negative territory.  At some point, folks are going to start to wonder how Draghi is going to implement his latest promises.  But for now investors seem to be in a forgiving mood.

In corporate news, National Oilwell Varco (NOV) will pay $60 per share for Robbins & Myers (RBN), a 20% premium to yesterday's closing price.  This is helping to boost sentiment in the oil services industry.

Stocks rising on earnings: MDRX, EAT, BDC, ATK, RRGB, RDEN

Stocks falling on earnings: KSS, BCG, TK, AAP, THI

The dollar is higher again today, but not weighing on commodities too much.  Oil prices are higher to $93.77, and gold prices are up slightly near $1618.  Copper prices are higher also. 

The 10-year yield is getting another big boost.  It hit 1.72% today, which is its highest level since late May.  I'm not sure what is driving the increase.  Economic data isn't much better, but maybe some of the pessimism is simply fading.  It could also be a bit of asset reallocations out of bonds and into stocks.

The VIX is flat again at 15.37, which is a very low absolute level and likely signals some near-term complacency in the market.

Trading comment: The S&P 500 is working on its 5th straight gain.  I sense a bit of complacency creeping into the market.  The VIX is at very low levels, and the AAII survey today showed a snapback of bulls exceeding bears (36.5% to 27.4%).  The market likes to keep investors on their toes, so a brief selloff would not be a surprise in this environment.  That said, it will most likely be viewed as a buying opportunity as the stair-step higher pattern in the market persists and underperforming investment managers look to put more money to work.

Wednesday, August 08, 2012

Is The Market Pricing In More Stimulus?

The markets in the US are slightly lower in early trade following three solid up days.  Overnight, markets in Asia were slightly higher again and the hopes for more stimulus persist.

In Europe markets are mostly lower this morning.  Bank of England governor King said the British economy faces headwinds, but further interest rate cuts are not the solution.

In corporate news, Dean Foods (DF) shares are more than 35% higher after the company planned an IPO of its organic food WhiteWave Foods division.

In earnings news, Express Scripts (ESRX) is nicely higher after beating expectations and raising guidance.  Priceline (PCLN) is on the other side as its shares are getting hit hard after lower forward guidance (although they did beat earnings).

The dollar is higher today, but it is not weighing on commodities.  Gold prices are a bit higher to $1616, and oil prices are up again topping $94.15.

The 10-year yield is holding its recent gains and trading near 1.63%.  And the VIX is up a tad to 16.05.  It appears to be finding some support near this 16 level, and if prior patterns hold we should expect a down day in the market to coincide with a pop in the VIX at some point.

Trading comment: The market seems to be pricing in something good, I'm just not sure what.  Forward earnings estimates don't seem to be going up.  In fact, they are going down slightly.  The economy isn't exactly heating up, although we did have a good jobs report last Friday.  Which brings us back to the question of whether the market is pricing in more stimulus?  We are in that odd situation where the weak economy can be applauded by stock investors because it increases the probability for more QE.  And recent comments out of China suggest they are planning more stimulus as well.  I don't like to fight the price action as much as the next person, I just find it disconcerting that we still have big problems in Europe as well as the upcoming elections and fiscal cliff in the US.

KAM Advisors has long positions in ESRX, PCLN, and DF bonds

Tuesday, August 07, 2012

Is Merkel Softening Her Stance?

The markets are higher again in early trading on little new news.  Asian markets were mixed to higher overnight.  The Res. Bank of Australia held its key rate steady at 3.50% and also said that while growth in China has moderated it does not appear to be slowing further.

European markets are higher this morning despite a terrible GDP number out of Italy (-2.5%).  Spain and Italy are up the most, and Spanish bond yields have eased back to 6.71%.

There are also comments out of Germany this morning that Merkel may be softening her hard stance on the ECB's bond buying program.  This would be a surprise.  And its not just Merkel, but the Bundestag that has reiterated its stiff opposition to shared liabilities at each and every turn of this saga.  So we will have to watch for more commentary that either confirms or refutes these rumors.

Stocks rising on earnings: CHK, FOSL, BSFT, TDG

Stocks falling on earnings: CVS, FE, TAP, CHD

The dollar is lower vs. the euro today.  Gold prices are flattish near $1615 and oil prices are higher to $93.25.  Silver and copper prices are higher as well. 

The 10-year yield is getting another boost to a 1-month high at 1.63%.  And the VIX is down again to 15.75, which is pretty near recent lows from which it has bounced.

Trading comment: The market continues to stairstep higher.  Volume has been on the lighter side due to the fact that we are in the thick of summer trading.  But don't rule out the prospect of performance anxiety setting in and pressuring portfolio managers to chase the market higher.  I have seen reports that more active managers are trailing their benchmarks this year than ever.  That's not a good feeling for portfolio managers and could result in near-term dips being bought fairly quickly as they look to keep up.

KAM Advisors has long positions in FE

Monday, August 06, 2012

Monday Morning Musings

The markets are higher in early trading, after Friday's enthusiasm carried over into Asian markets.  Asian markets rose overnight and also got a boost after the PBOC in China suggested that it would ease monetary policy in the back half of the year and vowed to help bolster the economy.

In Europe, regulators in Greece over the last week cited progress on its efforts.  European markets are higher this morning.

In earnings news, CTSH matched estimates and slightly raised full-year guidance.  Expectations had been pretty low for the company and as a result the stock popped over 12% at the open.

In other corporate news, the founder of Best Buy (BBY) submitted a proposal to buy the company for $24-26.  But its unclear if he will be able to get all the financing and actually go through with the private buyout.

Among the sector ETFs, financials are leading the early action followed by materials.  Utilities are lagging the most, followed by healthcare stocks.

The 10-year yield is slightly lower near 1.55% following Friday's spike higher.  As for the VIX, it had gotten so low on Friday that even this morning's rally can't push it lower, as the VIX is up +3.7% this morning to 16.22.

Trading comment: Don't fight the tape is an old Wall St mantra.  This market has certainly been choppy, but it has also been putting in a series of higher lows and higher highs since its June bottom.  Today the S&P 500 nearly touched the 1400 level, which would be the highest level since early May.  The one knock on this market is that it has been led more be defensive issues like utilities, staples, and healthcare as opposed to the traditional growth stocks likes tech and consumer discretionary.  But if we start to see more classic growth stocks breaking out it could be a sign that this rally has legs.  Many market participants are also leery of chasing a market at this point in the year, since seasonal patterns often lead to a correction in the Aug.-Oct. timeframe.

KAM Advisors has long positions in CTSH

Friday, August 03, 2012

Markets Jump On Delayed Reaction To ECB

The markets are up strongly this morning on the heels of big gains in Europe this morning.  While the headlines will only focus on the jobs report that came out this morning, our futures were already up strongly before that report was released.  Europe was rallying on a delayed reaction to the ECB meeting, coming to the conclusion that they have successfully kicked the can down the road again.  Spain and Italy's markets are up nearly 5% today.

In Asia, markets were mixed overnight.  China was one of the few gainers as hope bubbles that Beijing will announce further support for their financial markets.  Recently there were rumors that the govt. was urging companies to buy back their own stock.  Can you imagine if that happened here?

In economic news, our jobs report was much better than expected, which helped boost stocks.  Nonfarm payrolls for July came in at 163,000 vs. expectations for 100k.  And private payrolls rose 172,000 vs. 105k consensus.  The unemployment rate ticked up a bit to 8.3%.

Also, the ISM Services index rose to 52.6 in July from 52.1 last month.  So at least we are getting some economic reports that don't point to further slowing in the economy.  We still know growth is slowing, but at least its not across the board and in a straight line. 

Among the sector ETFs, financials (XLF) are leading the early action, while utilities (XLU) are lagging.  Energy stocks are also rallying after a big spike in oil to $90.75.

The boost in the euro is helping most commodities.  Gold is back above $1600, and silver and copper are higher also.

There were also a ton of companies that reported earnings last night and this morning, with many stocks rising after reporting. 

Stocks rising on earnings: MELI, KFT, PG, LNKD, NILE, IT, SIRO, TM, NYX, PSA, EOG, AWK, FEIC

Stocks falling on earnings: HNT, WCG, PKT, MCP, SWN

The 10-year yield is getting a rare boost on the strong economic data, bouncing to 1.57%.  It is barely breaking above its 50-day overhead resistance, which would be the first such penetration above that key moving average since early April.

As for the VIX, it is down -7% back down to 16.30.  The 16 level has acted as good support the last few times with the VIX bouncing from these levels.

Trading comment: I don't think most investors were positioned for such a strong jobs report.  The S&P 500 just broke above its July highs at 1391, which leaves the door open to 1400 near-term.  The SPX has been holding in this channel of higher lows and higher highs since its recent bottom in early June.  I still have concerns about the macro backdrop, as we know that sentiment towards Europe can change on a dime.  But I don't want to ignore the price action, which is very positive.  We are not looking to increase our equity allocations much at this point, but we also don't want to be too aggressive in adding to our ETF hedges unless we get another technical breakdown in the indexes.  So far now we are just sitting tight.

KAM Advisors has long positions in MELI, PG, PSA, AWK

Thursday, August 02, 2012

ECB Offers No New Solutions, Reiterates Commitment

The markets are mixed in early trading, and it has been a wild ride already.  In case you weren't watching the pre-markets let me tell you what happened.  I woke up at 5:30 to watch the ECB announcement.  Immediately after the ECB press release the Dow futures spike +100 points.  But as more comments came out and Draghi began to speak, they quickly reversed and pretty soon were in negative territory.  When I got to the office and the market opened, the Dow was down a pretty quick 100 points.  That's a 200 point reversal from the pre-market highs.

And an equally big reversal happened in Europe.  Europe's markets were higher ahead of the ECB announcement, but quickly moved to losses when investors didn't hear any big new policy announcements from the ECB.  Spain has moved to a -2.7% loss on the day and Italy is down -3.0% as those markets head into the close.

So what was the big disappointment? First off, remember we have been saying that the market has been rallying on hopes of some new monetary easing from both the Fed and the ECB and that it was likely we could see a 'buy the rumor - sell the news' type reaction after the central bank announcements.  Yesterday the Fed gave little new information and mostly reiterated its recent stance that has already been communicated to investors.

This morning the ECB mostly followed suit.  The ECB kept interest rates unchanged at 0.75% and didn't offer any really new policy measures.  He reiterated that countries need to go to the EFSF for assistance before the ECB can step in to help, but that once countries have done that the ECB could buy sovereign bonds directly in the market.  He said they will look at non-conventional measures, but also didn't give any encouragement about the ESM getting a banking license anytime soon.  He also said that the euro is "irreversible", so that talk about a breakup is misguided.  (But that is what we would expect him to say)

The euro is also lower following the ECB news and the dollar index is higher.  That is pressuring most commodities.  Oil prices are under $88 and gold prices have broken back below $1600.  Silver and copper prices are also lower.

Stocks rising on earnings: K, OMX, FSLR, GMCR, YELP, TWC

Stocks falling on earnings: ANF, UPL, PH

The 10-year yield is lower to 1.47%, failing to hold above the 1.50% level.  And despite the early losses, the VIX is lower again to 18.15 (-4.2%).

Trading comment: The markets are down for a 4th straight day so far, but there are signs of encouragement.  Lots of growth stocks on my screen are green, and the Nasdaq has pulled into positive territory as of this post.  Tomorrow is the big monthly jobs report, which always has elevated volatility surrounding it.  I'm not expecting a strong jobs number, but I don't think most people are.  The ADP report was stronger than expected this week, but it isn't always the best leading indicator.  In a nutshell, while I could see a short-term oversold bounce at any time, I think the lack of new initiatives by the Fed and the ECB will likely take the steam out of the sail of the markets that have been rallying in anticipation of hope.  So I want to remain conservatively positioned for now.

Wednesday, August 01, 2012

Manufacturing Surveys Show Slowing Economies

The markets are slightly higher this morning on a better than expected ADP report and ahead of the FOMC announcement later.  The ADP employment report showed the private sector added 163,000 jobs in July, which is well above the 125k consensus expectations.

As for the July ISM Manufacturing index, it came in at 49.8 which is little changed from last month's 49.7 reading.  This is the second month in a row of a sub-50 reading which is the line of demarcation between expansion and contraction.

Speaking of manufacturing readings, the PMI figures in Europe are mostly lower as well.  The eurozone's PMI is at 44.0, the UK fell to 45.4, Germany was lowered to 43.0, and France was revised down to 43.4.  So growth remains slow in Europe as these PMI readings point to further contraction.

Asian markets were mixed overnight.  China's official PMI reading was in-line at 50.1 in July, but the HSBC private estimate came in at 49.3, up from 48.2 in June.  This and the expectation that China will provide more stimulus to their economy helped Shanghai rally overnight.

Stocks rising on earnings: ALL, SIMG, PZZA, CMCSA, GRMN, AGN, SSYS, CTRX

Stocks falling on earnings: MA, ENR, HOG, ICE

The 10-year yield is bouncing back above the 1.50% level.  And the VIX is slightly lower to 18.67.

The dollar index is roughly flat, and commodities are mixed.  Oil prices are higher to $88.85 while gold prices are lower near $1601.  Silver and copper prices are lower also.

Trading comment: I doubt that the Fed announces any new QE measures today.  I think it is more likely that they repeat the mantra that they stand ready to act.  And if the data continues to weaken, then maybe they take action in September.  But I would prefer to see them keep some powder dry for if the economy really hits the wall around 'fiscal cliff' time.  The bigger market moving news could be the ECB meeting this week.  They need to announce some new measures or risk another spike in peripheral bond yields in Spain and Italy.

KAM Advisors has long positions in CTRX