Tuesday, June 10, 2014

Time To Say Goodbye

I want to thank everyone who has been reading 'In The Money' over the years.  It has been over 9 years that I have been writing daily market commentary.  Back then there were very few blogs, but now there is a plethora of market content on the Internet.

So as of tomorrow we will stop publishing our daily commentary on this blog.  We will still write periodic market pieces on stocks, investor sentiment, etc. that you can view at these sites:

Seeking Alpha - http://seekingalpha.com/author/jordan-kahn

Wall St. All-Stars - http://wallstreetallstars.com/

Twitter - https://twitter.com/KAM_Advisors

Facebook - https://www.facebook.com/kamadvisors

Thanks again and happy investing--

Monday, June 09, 2014

Monday Morning Musings

The market looked a little weak before the open but it is now nicely higher.  Go figure.  This has been a slow motion melt-up rally, with the S&P 500 higher for 12 of the last 13 days.  And the one down day saw the index lose a whopping 2 points!  I hope anyone short this market doesn't work on a high floor.

There was a lot of M&A action over the weekend.  Tyson Foods is buying Hillshire Brands for a 6% premium, Analog Devices is buying Hittite Micro for a 29% premium, and Merck is buying Idenix Pharma for more than triple its Friday closing price.  Nice gain.

Asian markets were higher overnight.  China's export figures were better than expected (+7.0%) but import figures were worse (-1.6%).  Japan's GDP jumped 6.7% in Q1, prompting the BoJ governor to state that the stimulus plan launched last year achieved its goal of boosting the economy and ending deflation. 

Europe's markets were up slightly.  Eurozone investor confidence fell to 8.5 from 12.8.

Oil prices are higher to $104.15 and drivers are likely not going to be happy at the pump as the summer driving season kicks into gear.  Gold prices are flat near $1253.

The volatility index hit another multi-year low last Friday breaking below 11.  Folks are now wondering how long it could go?  I think we will see the VIX spike from here at some point, and I even think it offers a good trade for folks who trade options.

Trading comment: Despite the market remaining overbought, it refuses to pull back.  Frustrating if you have lots of cash to put to work.  But there are still stocks breaking out of recent consolidations that look good.  We just don't want to chase anything that has become extended in price.

Thursday, June 05, 2014

Draghi Moves Closer to Qunatitative Easing

Markets were lower in early trading but have since bounced back to positive.  That has pretty much been the pattern recently, as any early morning weakness quickly dissipated and buyers re-emerged.  The gains haven't been big on a percentage basis, but the market continues to inch higher without much of a pullback at all.  That makes it tough for folks that are underinvested and looking for a good buying opportunity.

Of course, the big news this morning was the action by the ECB which announced several monetary easing actions.  The ECB lowered their key rate to 0.15% from 0.25%, lowered its marginal lending rate from 0.75% to 0.40%, and actually made deposit rates negative at -0.1% from 0.0%.  In addition, they will deploy targeted long-term refinance operations. 

These moves are aimed at spurring more lending and stimulating economic activity.  Negative deposit rates makes it unattractive for banks to hold cash, and encourages them to lend more.  Ditto the targeted LTRO program.  The ECB is also said to be preparing for further action which will likely include asset purchases (like the Fed and Banks of Japan and England have already done).

The euro, which has been weak for the last month, is actually higher on the news.  Oil prices are a bit lower near $102.31 while gold prices are rallying to $1254.

The 10-year yield is a little lower so far to 2.59%.  It was higher early this morning but ran into its overhead 50-day average and has retreated.

The volatility index is 2% lower so far back below the 12 level to 11.83.

Trading comment: The incessant creep higher in the S&P 500 is a little troubling.  Or at least its frustrating.  Investment managers don't like to pay up for stocks and would rather wait for a dip to do more buying.  But the SPX has basically been higher without much of a pullback for the last 11 consecutive days.  That makes it overbought, but not wanting to give back any gains.  We think a little patience is required as well as looking for stocks sporting fresh breakouts that are not yet extended.

Wednesday, June 04, 2014

More Mixed Economic Data

Markets started out lower again this morning but are already trying to reverse early gains and move into positive territory.

Economic data this morning was mixed.  The ADP Employment report showed the private sector added 179,000 jobs, which was below estimates of more than 200k.  So that was a bit weak and weighed on sentiment, but we still need to see if it correlates to Friday's govt jobs report.

The ISM Services Index on the other hand surprised to the upside, rising to 56.3 in May from 55.2 the prior month.  This was the strongest reading in two years.  And while we know that Q1 GDP was much weaker than expected, Q2 is estimated to bounce back fairly strong.  So the 2-quarter average should be roughly in-line with the low 2% growth rates many had expected.

It is likely that stocks will continue to trade in a narrow range today ahead of the ECB announcement tomorrow and the jobs report on Friday.

Asian markets were mixed overnight, and Europe is lower this morning.  Eurozone GDP rose 0.9% year/year, while the services PMI fell is several peripheral European countries.

Oil prices are higher today near $130.35 while gold prices remain weak around $1243.

The 10-year yield is rising a bit further and has now climbed back to 2.61%. 

The volatility index remains near low overall levels at 12.0.

Trading comment: The market continues to hold near its recent highs and shake off any early morning weakness.  Volumes have been low but we should see a pickup the next 2 days as the big news announcement traders are waiting on hit the wires.  For now, we continue to look for upcoming weakness to add to stock exposure favoring large-cap names over small.

Tuesday, June 03, 2014

Waiting On The ECB

Stocks are slightly lower in early trading, but really have not gone much at all following their recent rally.  The S&P 500 has closed higher in 7 of the last 8 trading sessions.  That leaves the market in a short-term overbought condition.  Nonetheless, selloffs continue to be brief affairs.

Large-cap stocks continue to garner most of the buying activity, as the mid-cap and small-cap indexes remain below their recent highs and even below their 50-day average in the case of the latter.

There really isn't much in the way of market moving corporate or economic data today in the U.S.  It feels like most investors are waiting to see what the ECB announces on Thursday.  Speculation is running high that they ECB will announce some non-traditional monetary stimulus, maybe QE or something like it.  It could be that the markets have been running in anticipation of this.

Asian markets were mixed overnight.  China's HSBC manuf. PMI fell to 49.4 from 49.1.  Hong Kong retail sales fell -9.8%.  And a BoJ governor said he expects inflation to reach its 2.0% target in Japan in 2015.

Europe's markets are lower today.  Eurozone CPI rose 0.7% on a yearly basis.  And Spain is nearing approval of a pro-growth economic plan.

The 10-year yield is rising a bit further to 2.56% today.  And the VIX is up 3% but still at low levels near 11.95.

Oil and gold prices are relatively flat near $102.46 and $1244, respectively.

Trading comment: The market has had a big run the last couple of weeks, at least judging by the S&P 500.  We don't like to chase strength too much.  But as we always look for leadership, it appears that large-caps are taking the helm from smaller-cap stocks.  So this is where we want to focus more attention as we look to buy any dips that hopefully will materialize.

Monday, June 02, 2014

Monday Morning Musings

Stocks are pulling back in early trading on the heels of some weaker economic data, both here and abroad, as well as some profit taking after last week's runup.

The ISM manuf. index for May fell to 53.2 from 54.9.  Consensus expectations were for a rise in the ISM following the strong Chicago PMI we saw recently.

There isn't a lot of other market moving corporate news this morning.

Asia was mixed overnight, with China and Hong Kong markets closed.  China's PMI rose to 50.8 from 50.4, and Japan's PMI rose to 49.9 from 49.4.  Although China's PMI rose, its export component contracted for the 2nd month in a row.

Europe's markets are slightly higher today.  The Eurozone manuf PMI fell to 52.5 from 52.5.  France and Spain improved while Germany, Italy, and Great Britain slid.  But all eyes will be on the ECB later this week for their upcoming policy meeting where they are expected to announce some sort of monetary stimulus plan.

The 10-year yield is getting a bounce today and back above the 2.50% level to 2.51% so far.

The volatility index is also bouncing from low levels, up nearly 6% so far to 12.05.

Oil prices are slightly lower to $102.42 and gold prices are also a bit weaker near $1245.

Trading comment: The breakout in the S&P 500 last week above 1900 was a bullish event, including the fact that the market didn't reverse from those levels.  We think the breakout holds for the intermediate-term and would look to use the 1900 level in the SPX as buying support.  Leadership has narrowed somewhat from the biotech and social media stocks, but there are still lots of stocks making new highs from various other industries that are worth a look.