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 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.

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.

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.

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 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.

Is The Economy Bouncing Back?

Markets are mixed to lower in early trading.  There were some conflicting economic reports this morning that might leave some investors wondering if the economy is really bouncing back as much as economists predicted following the 1% contraction posted in Q1.

Personal consumption for April fell -0.1%.  With consumer spending making up two-thirds of GDP, this is not the type of data we were hoping to see.  Where is the pent-up demand from the terrible winter weather?  Hopefully May shows a true thaw.

The Chicago PMI, by contrast, showed a big improvement in May jumping to 65.5 from 63.0.  That is the highest reading since 2011 and a pretty strong level.  Consumer sentiment also remains high with the May reading staying at 81.9.

So we have some mixed signals in terms of economic data.  That said, most still expect at least a mild bounce back from Q1, with GDP growth getting back in the 2% range next quarter.  Q1 of next year could look pretty strong when compared to the year-over-year comparison of -1.0% just printed for Q1 2014.

Asian markets were mostly lower.  Japan's industrial production dropped -2.5%.  Europe's markets are mixed.  German retail sales fell -0.9%.  The ECB made additional comments that the central bank is ready to act and deploy 'non-standard' tools to combat the continued threat of low inflation.

 The 10-year yield is bouncing slightly from low levels to 2.47%.  And the volatility index remains very low at 11.48.  A spike in the VIX seems likely at some point, but timing is the key.

Gold prices are lower again to $1246, and oil prices are pulling back to $102.70.

Trading comments: No recent changes to our outlook.  The new highs in the market keeps us incrementally more bullish and we remain in 'buy the dip' mode into the early summer.  Rest up and have a good weekend.  A new month starts on Monday.

How Low Can Yields Go?

Stocks are trading slightly lower in early trading following the S&P 500 making new highs yesterday.  So far the selling action is pretty mild, and if the bears aren't able to push the market lower we could see some rally attempts into the close as the bulls regain the upper hand.

One surprising move today is the drop in bond yields.  The 10-year yield is lower by 7 basis points to 2.44%.  This is close to a one-year low in yields, which remains surprising given that the economy is supposed to be improving and inflation picking up.

One explanation is that bond yields are moving lower around the globe.  In Europe, bond yields continue to fall as deflation remains a concern, the ECB hints at cutting rates, and economic growth remains sluggish. 

Another theory is that so many people are short bonds here betting on higher rates that each of these moves lower in yields causes pain on that short trade and results in waves of short covering on those wrong-way bond bets.  This is the theory put forth by Jeffrey Gundlach of DoubleLine, and so far this year he has been right.

The notion that the drop in bond yields means the economy is slowing flies in the face of another stock-based indicator, and that is the move to new highs in the transportation index.  The $TRAN is making more new highs today, and the strength there would lend itself to the notion that the economy continues to gain strength.  Go figure.

Asian markets were higher overnight.  The Chinese press is discussing rate cuts in the face of a slowdown in the housing market.  Europe's markets are modestly higher.  Germany's GDP held at 6.7% and Swiss GDP rose 2.0%.

Trading comment: While some have been looking to 'Sell in May' and await the summer correction, the market continues to hold up well.  If the S&P 500 can consolidate its move to new highs without quickly giving up the 1900 level it would be a good sign for the bulls.  Its hard to get overly bullish heading into the normally volatile summer months, but as Jeff Saut stated yesterday, we are in a bull market and in a bull market surprises often occur to the upside.  Well said.

Is The VIX Broken?

Markets are off to a strong start.  The S&P 500 is making a new high.  Financials are leading the early action, and Bank of America is leading the financials after it resubmitted its capital plan to the Fed for review.

There was some positive economic data today also.  The Case-Shiller home price index rose 12.4% in March.  And while this data is already a bit old it does show that the slowdown we thought hit the housing market in March may not have been as pronounced as we thought.  Separately, durable goods rose 0.8% in April.

The volatility index (VIX) is 3% higher this morning, but only to 11.70.  The low levels hit on Friday were seen once last March, but before that you have to go all the way back to 2007 to find levels this low.  The question is are we ushering in a new range for the VIX in the 10-15 range like we saw pre-2007?  Or is the low VIX today lulling investors into a sense of complacency before ushering in another volatile period in the markets?  Time will tell.  But as the VIX hit 21 just a few months ago, we are leaning toward the latter scenario.

Asian markets ended mixed overnight.  Europe's markets are mostly higher today.  ECB's Draghi gave a speech yesterday and hinted at the prospect of more easing next month.

Oil prices are down slightly near $104.15.  And gold prices are breaking down and falling to $1268 after failing to overtake the $1300 level last week. 

Trading comment: Hard to fade the strong price action.  The SPX is making new highs, the NDX is close to joining in, and the mid-cap index is back above its 50-day average.  People have complained about the lower number of stocks making new highs, and that is a valid argument.  But we still have to respect the health of this market.  Narrowing markets can still go on to make new highs for awhile before running out of steam.  And it remains to be seen if there will be a new leadership group stepping up to take over for social media stocks and biotech.

Chinese Data Still Points To Contraction

Our markets are higher again in early trading on some in-line housing data and possibly some perceived improvement in Chinese data.

In the US, April existing home sales hit a rate of 4.65 million units which was up from the previous month's rate of 4.59 million.  Also, leading indicators for April rose 0.4%.

Asian markets were higher overnight after China's HSBC PMI data rose to 49.7 from 48.1 last month.  Those figures were above consensus estimates and generated some enthusiasm.  But China's Shanghai Composite actually closed slightly lower after its initial rally.  Moreover, this reading is still below the 50 level that markets the delineation between expansion and contraction.  So don't pop the champagne bottles just yet.

Europe's markets are mixed to flat today.  Eurozone manuf PMI fell to 52.5 from 53.4.  And France's PMI fell back into contraction at 49.3 from 51.2 last month.

Oil prices continue to climb to $104.10 today.  And gold prices are also higher near $1298, but still unable to crack the $1300 level and stay there.

The 10-year yield is getting a little boost to 2.55%.  And the VIX is back to extremely low levels at 11.75.  Option traders would probably benefit from buying a little protection for the summer with volatility being this low. 

Trading comment: No real changes to recent commentary.  The Nasdaq and mid-cap indexes are trying to break above their respective 50-day averages.  That could embolden the bulls here for a bit and lead to new highs in the SPX as well.  But until we see new leadership emerge in the market we still want to proceed with cautious optimism as we head into the summer months when market corrections occur with greater frequency.