Corrective Action In the Market Could Be Developing
By Doug Kass
Our Federal Reserve-centric stock market followed the script on Friday, moving both up and down as Fed chair Janet Yellen used her Jackson Hole speech to say something while committing to nothing.
Stocks briefly rose when Wall Street focused on Yellen’s remarks that the Fed might use additional stimulus tools, with the Fed chief saying: “Future policymakers may wish to explore the possibility of purchasing a broader range of assets.”
But equities quickly fell back as the business media quoted Yellen as saying: “I believe the case for an increase in the Fed funds rate has strengthened in recent months.”
The Fed chair argued that the data show the U.S. economy is reaching both full employment and the central bank’s inflation goals. Vice Chairman Stanley Fischer then told CNBC that Yellen’s comments were “consistent” with a September hike.
Contributing to the downside move, St. Louis Fed President James Bullard more or less warned of possible asset bubbles on Friday. Traders and investors also decided to rethink hawkish comments that Kansas City Fed chief Esther George had given on Thursday.
All in all, as I wrote in Friday’s missive The Fed Has No Cred, the central bankers’ musings and arguments are beginning to resemble the U.S. presidential election!
Was Friday a Reversal Day?
The market ultimately ended Friday off of its session lows, but the S&P 500 modestly breached its six-week-old narrow price range to the downside.
My guess now is that corrective action could be developing after Friday’s loss of momentum. Step back for a moment and you’ll see that nearly all of the S&P 500’s post-Brexit-vote gains came in the first three weeks following Britain’s June 23 referendum.
While stocks have seen been selective follow-through since mid-July, the market’s strength has narrowed. That’s a warning sign. Telecoms, utilities, REITs and defensive consumer staples closed near multi-month lows, while technology, banks and brokerages ended near their multi-month highs.
Market sentiment has become similarly bifurcated. While investor sentiment as measured by various surveys remains at a bullish extreme, most of business TV’s “talking heads” are alert to the uncertainties that surround the November election and the market’s historical September weakness.
Lastly, intermediate indicators like the McClellan Summation Index remain at high overbought levels.
The Contrarian View
Now, I always like to consider contrarian possibilities, and today, I see two potential ones:
* A continuation of a narrow trading range and very low volatility, which we saw in the month-long period prior to Friday.
* A quick market drop and a spike in volatility.
But the clues are unclear as to what’s really going to happen. After all, we saw a sharp U.S. dollar bounce on Friday, while gold broke down to a recent low and bond yields moved above their recent range. (The 10-year U.S. Treasury yield closed at 1.62% after trading in a 1.5%-1.6% range for weeks.)
The Bottom Line
I suspect that Wall Street will be thinly populated Wall Street during this last week of August as we head toward the long holiday weekend.
So, it wouldn’t surprise me to see weekly volume hit a low, with prices continuing in a narrow band. As such, I think that we’ll get little indication this week of stocks’ prospective price movements into the autumn.
Nevertheless, I’m left with two key conclusions and observations from last week:
* The markets are moving more than ever in response to “Fedspeak.”
* Friday was something of a reversal day, at least in technical terms.
Add it all up and, I remain cautious for the post-Labor Day period. So I’m sticking with the investment mantra: “Sell In September or Get Dismembered!”
Doug Kass is president of Seabreeze Partners Management Inc.
August 08: Can we trust this rally (follow-up)
There are lots of bears out there, but they are in full retreat as the US markets keep soaring.
Friday’s rally came in the wake of news of the second consecutive strong monthly employment report; nonfarm payrolls rose by 255,000 in July, and on top of June’s blowout gain, which was revised up by 5,000, to 292,000. The past two months’ strong showings all but put the shockingly weak May payroll numbers as one time outliner.
The latest data are robust enough to keep the labor market on track, but not so strong as to spur the Federal Reserve to raise interest rates in the near term. Meanwhile, central banks abroad—most notably last week the Bank of England—continue easing. The United Kingdom central bank lowered its key lending rate 25 basis points (one quarter of a percentage point), to 0.25%, the lowest in its 322-year history, while expanding its bond purchases—even including corporate securities—to counter the economic impact of Brexit.
All that liquidity sloshes around the globe in search of the highest returns, which lifts asset prices, including U.S. stocks and bonds.
That said, the advance has been accompanied by low volume; even Friday’s rally came on below-average turnover. That should keep investors alert to a “bull trap.”
July 19 Can we trust this rally?
First, good news:
Representing the “better” category of data:
• Industrial production up 0.6% in June versus 0.3% consensus
• Retail sales up 0.6% in June versus 0.1% consensus
• Initial unemployment claims down to 254,000 as of July 14 (weekly) versus 265,000 consensus
• NFIB small business optimism index up to 94.5 in June versus 93.9 consensus
• Payrolls up 287,000 in June versus 180,000 consensus
• ISM Non-Manufacturing index up to 56.5 in June versus 53.3 consensus
• ISM Manufacturing up to 53.2 in June versus 51.3 consensus
Many of the above economic indicators—including jobless claims and the ISM readings—are leading indicators. The stock market is a leading economic indicator as well. To see them collectively moving higher is not surprising.
Second, cautionary facts:
Nine out of 10 S&P stocks are already above their 50-day averages. Investors last week plowed $11 billion into stock funds, the most in nine months. It seems that this rally has been helped by central bankers forcing money into stock markets. U.S. stocks get bids because, quite frankly, what else is there? Treasury yields are sagging near all-time lows, and investors actually paid to lend money to governments because of negative rates. Roughly 30% of global bonds, or $13 trillion worth, now feature negative yields, up from none just two years ago, notes Bank of America Merrill Lynch. A conventionally balanced portfolio of 60% U.S. stocks and 40% Treasuries yields just 1.9%, the lowest ever. All this forces investors looking for bond substitutes to go further into stocks, real estate, emerging markets. Investsors around the globe are chasing yields. Yield-pimping sectors are doing extremely well: telecoms (up 22%) and utilities (up 20%).
What central bankers can offer, they can take away: watch for Federal Reserve policy. In the immediate aftermath of Brexit, the fed funds futures market was forecasting a 15% chance of a rate hike by year-end; while as of Friday, it was up to nearly 45%. The three-week decline in the volatility index (VIX) has been the largest on record. The 10-day advance/decline is at its highest level since late-2011. However, individual new high data have not expanded . And seasonality could spoil the bulls’ party as July strength has historically often led to a weaker August-September (especially in election years).
June 28 What? What Brexit?
The S&P 500 rose 1.8% to 2,036.09 today, while the Dow Jones Industrial Averageadvanced 269.48 points, or 1.6%, to 17,409.72. The Nasdaq Composite gained 2.1% to 4,691.87.
Wells Capital Management’s Jim Paulsencalls the Brexit crisis “wimpy.” He explains why:
At least for the US Markets, this has been a wimpy crisis. The S&P is less than 2% below its level of a week ago Friday, the DXY dollar index is only a little more than 1% higher than it was a week ago Friday and the 10- year bond yield is less than 10 basis points below where it was a week ago Friday.
Would US investors even know it was a “crisis” unless they listened to or read the news???
Just an impression … Awful wimpy crisis so far!
June 22 SKEW & Brexit
The CBOE Skew Index – referred to as “SKEW” – is an option-based indicator that measures the perceived tail risk of the distribution of S&P 500® log returns at a 30- day horizon. Tail risk is the risk associated with an increase in the probability of outlier returns, returns two or more standard deviations below the mean. Think stock market crash, or black swan. This probability is negligible for a normal distribution, but can be significant for distributions which are skewed and have fat tails. SKEW quantifies the additional risk.
The value of SKEW increases with the tail risk of S&P 500 returns. When there is no tail risk, SKEW is equal to 100. Historically, SKEW has varied in a range of 100 to 150 around an average value of 115. Close to 100, the probability of a steep market decline remains very small. As SKEW rises above 100, this probability increases. The low skew readings might be a sign that portfolio managers and other players in the index market are not aggressively taking positions in S&P 500 puts to hedge stock positions. The high skew readings suggest otherwise. As of today, Skew is at 136.
Takeaway: enough puts have been purchased by portfolio managers; speculative call buying have been done as well. Whether Brexit happens or not, by June 24, many out of money calls and puts are going to lose money fast, faster than you can say “fast”.
June 20 Brexit= non event=another Y2K
Brexit is probably most widely broadcasted known unkown event ever. The reality is the market knows what to expect, this bipolar event has almost all participants of market on edge, yet folks are lined up to buy weakness, and global central banks are primed with liquidity. I do hope that the event come and go without much of shaking to the steability of the US market. Y2k deja vu?
More important news for me is this one: on Friday, June 17, St. Louis Fed President James Bullard released a paper advocating that based on the current economic “regime” of roughly 2% growth, a 4.7% unemployment rate, and inflation approaching the Fed’s 2% target for the personal consumption expenditures deflator, one increase in the fed-funds target, to 0.63% should suffice. And so long as those economic conditions obtain, that’s where he expects the funds rate to be in 2017 and 2018.
My call: buy gold on any kind of weakness.
June 09 Gold, I tell ya!
George Soros The billionaire fund investor recently guided his firm, Soros Fund Management to be positioned defensively for a possible collapse of the US and European markets. It’s recent 13-F filings showed that Soros’ firm loaded up on bearish put options that profit from declines in the SPDR S&P 500 ETF (SPY). Soros also added a 19 million-share stake in Barrick Gold (ABX) and a one million-share chunk of Silver Wheaton (SLW)
The rationale behind his move: Brexit referendum that may pull the UK out of European Union; China’s bad debt issue may spiral out of control.
Gold prices ticked higher on Thursday to the best level in nearly one month. Futures prices rose 0.4% to $1,267 in recent trading, while the SPDR Gold Shares (GLD) added 0.2%.
Load up gold, this time?
Where Are We with Market Valuations?
June 1st ushers in a new quarter. It is time to look at market valuations.
1. the ratio of total market cap (TMC) to GNP
Over the long run, stock market valuation reverts to its mean. A higher current valuation certainly correlates with lower long-term returns in the future. On the other hand, a lower current valuation level correlates with a higher long-term return. The total market valuation is measured by the ratio of total market cap (TMC) to GNP — the equation representing Warren Buffett’s “best single measure”. This ratio since 1970 is shown in the second chart to the right. Gurufocus.com calculates and updates this ratio daily. As of06/01/2016, this ratio is 118.7%.
Based on these historical valuations, we have divided market valuation into five zones:
|Ratio = Total Market Cap / GDP||Valuation|
|Ratio < 50%||Significantly Undervalued|
|50% < Ratio < 75%||Modestly Undervalued|
|75% < Ratio < 90%||Fair Valued|
|90% < Ratio < 115%||Modestly Overvalued|
|Ratio > 115%||Significantly Overvalued|
|Where are we today (06/01/2016)?||Ratio = 118.7%, Significantly Overvalued|
2. Shiller P/E: 26.3 (+ 0.11%)
Shiller P/E is 57.5% higher than the historical mean of 16.7
Implied future annual return: -0.2%
Historical low: 4.8
Historical high: 44.2
S&P 500: 2099.33
Regular P/E: 24 (historical mean: )
May 26 Final thrust to lower high, and then…
There is still a huge amount of chart resistance overhead on the S&P 500 between 2115 and 2135, in round numbers, from the top of the market’s two-year sideways range.
May 23 The Standard & Poor’s 500 index weekly review and outlook
The Standard & Poor’s 500 index closed at 2130.82 on May 21, 2015, 3.7% higher than it did on May 20, 2016. The Dow Jones Industrial Average ended last May 19 at 18,312.39, some 4.4% above where the blue-chip gauge finished the week. The Nasdaq Composite hit 5218.86 on July 20, almost 9% above Friday’s close.
Louise Yamada, the wizard of market watchers said recently that “in looking at a Dow chart over the past few months, there have been recurring moves every two months or so in the past half-year, with high-water marks reached last December and in April around 18,000 and lows around 16,000 (not including a short spike down to around 15,660 on Feb. 11).” Now she sees the Dow rolling over once again. From Friday’s close at 17,500.94, a break to 17,100 would point to 16,000 as the next stop. In terms of the S&P 500, breaching 1985 (from Friday’s close of 2052.32) would put the index on the way to its key support of 1800, she says.
Flattening 2/10 yield curve: another indicator of bond market expectations, 2 year vs. 10 year UST yield spread, has been a very accurate recession forecaster in the past as it has inverted (short yield trading above long yield) 100% of the time ahead of the past five past slowdowns. The good news so far is the 2/10 yield curve is nowhere near an inverted state yet.
S&P prices were choppy and displayed a series of lower highs and lower lows, though the technically important 2040 support neckline of the head and shoulders pattern did not break decisively. The short-term trend remains down and key intermediate term indicators has not reach oversold levels, as measured by the NYSE McClellan Oscillator breaching the -80 level and VIX Index moving above its Bollinger Band, which suggests that the current corrective action isn’t finished.
3. Concern: fragile US economy and policy mistake
Steven Blitz, chief economist at ITG Investment Research, assigned a 60% chance of probability of recession in the next 12 months, largely because of possible policy error:
“My 60% probability really means to convey a sense that the economy is nearing a point where policy mistakes can kick it into recession. A lot of data appear to be more middle or end-of-cycle in their behavior. This means to me that the economy is more susceptible to a policy mistake. The Federal Reserve really needs to be careful and more recent statements from [Chairwoman Janet] Yellen suggest they are.”
Blitz went on to outline his bearish scenario:
“Understand the Fed tightening began after QE3 ended, and the forward market started pricing an aggressive forward trajectory for Fed policy, aggressive for this economy. Media focuses on the funds rate, but forward pricing matters most. Forwards determine the Treasury yields against which mortgages, corporate borrowing, and dividends are priced. As an increasingly aggressive Fed policy tack was priced in, capital markets reacted as they always do once the Fed starts in this direction—the 2s/10s yield curve flattened, equity markets weakened, and economic growth began to decelerate, which continued into the first quarter.”
May 18 Stocks Slide as Hawkish Minutes Highlight Rate-Hike Potential
The US Fed just released its minute from April FOMC meeting at 2:00pm EST. The key phrase is “Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee’s 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June.”
A “collar” that pays to hedge S&P downside risk
Buzz Gregory, one of Wall Street’s most respected strategists, is telling clients to prepare for the stock market to suffer a “death by a thousand cuts” correction.
In a recent trading note to his clients at Goldman Sachs, Gregory warned that the Standard & Poor’s 500 Index could decline 5% to 10% over a prolonged period without a substantial move in the CBOE Volatility Index (VIX). This winnowing down could occur as investors react to market headwinds including rising stock valuations, slowing stock buyback demand, potentially hawkish U.S. rate surprises, negative economic growth and event risks like Brexit and the U.S. election.
Gregory says the S&P 500 options market is pricing a 5% stock correction over the next three months at odds of 21%, just below the long-run average of 23%. The market puts the likelihood of a 10% drawdown at 11%, compared with a long-run average of 13%.
Yet the VIX, which most investors use to assess risk and options market dynamics, is muted. The fear gauge is around 14, a level that suggests investors are complacent about market risks. By Gregory’s valuation methods, which rely heavily on economic data, the VIX should be priced around 18.5.
To temper market risks, Goldman is advising clients to sell S&P 500 upside calls and buy puts. This “collar” strategy protects a stock portfolio against a decline in exchange for limiting the upside. The put, of course, increases in value if stocks decline. The call should expire worthless if stocks fail to advance (and the seller pockets the income). Many institutional investors regularly collar portfolios to lock in gains and insulate stocks from declines.
The US market weekly review (May 09-May 13)
It was a fluctuating week for the major indices of US market. The Dow posted its biggest gain since March on Tuesday, only to record its worst fall since Feb 11 the next day due in part to big retail chains’ weak earning reports. The real problem is weaker consumptions growth. And that problem isn’t going away.” Given that consumer spending amounts to roughly 70% of gross domestic product, it is hard to see how a hibernating consumer bodes well for economic growth. “One would think that the fact that one of the warmest winters in 122 years, robust job growth and tax refunds — and $32 trillion in asset gains (!!) — failed to persuade consumers to accelerate their spending would spur a rethink” on the part of investors, Stephanie Pomboywrote from MacroMavens advisory commented a week ago.
Investors are facing a variety of overhangs, from worries about consumer spending to cloudy expectations for corporate earnings and next month’s Federal Reserve meeting. Also, the UK is poised to vote on whether to exit the European Union. First quarter earnings season has so far come in ahead of lowered expectations. Still, corporate profits are expected to fall for a fourth consecutive quarter for the first time since the financial crisis.
Where are we headed? “Something happened Friday that’s happened only twice in over 20 years on the $SPX: The weekly 100MA has crossed over the weekly 50MA,” the blogger NorthmanTrader said. “The last two times this happened carnage followed.” this is truely somthing to chew on over the weekend.
May 12 Extreme central banks intervention is distorting The Sanity Of The Stock Market
Today’s interesting read: “If you have trouble with the concept of asset prices pushing higher given numerous fundamental concerns (earnings, margins, productivity, valuations, etc.), keep in mind that the Fed would take whatever means necessary to prevent significant deflation in the United States. The Bank Of Japan and European Central Bank have already moved into “whatever means necessary” territory; the Federal Reserve may not be far behind. While investors prefer to see their investment portfolios rise instead of fall, when government institutions start distorting markets there will eventually be negative consequences.”
A majority of analysts surveyed by Bloomberg predict the Band of Japan will boost its ETF buying — a move that could come as soon as Thursday. “For those who want shares to go up at any cost, it’s absolutely fantastic that the BOJ is buying so much,” said Shingo Ide, chief equity strategist at NLI Research Institute in Tokyo. “But this is clearly distorting the sanity of the stock market.”
May 11 The US market recap and EOD interesting reads
May 10 The US market recap and EOD interesting reads
May 06 The US market recap and EOD commentary
1. Market recap:
2. Commentary: today is the job number day. At 8:30am, US labor department released April Non-farm payroll report. It disappointed with only 160 k new jobs added in April. Feb and March payrolls were revised lower as well. Unemployment rate was unchanged at 5%. The initial negative reaction of market participants dissipated graually throughout the day. Rational behind the coming back of the indice: June or September rate hike is less likely now given this less good job report. Bad news is good news as the Fed has more reason to stay “easy” for longer. What asset class to own if ultra low rate is here to stay longer? if you are regular reader of my daily comment, you should know by now.
May 05 The US market recap and EOD commentary
- Market recap:
- Commentary: the US market was in wait-and-see mood today as traders refrained from holding too many long or short positions. All eyes are on April Non-farm payroll number, which is to be released at 8:30am tomorrow. Nonfarm payrolls are expected to extend their very solid trend with a 200,000 rise in April that would follow March’s gain of 215,000. The unemployment rate is expected to dip 1 tenth to 4.9 percent. The participation rate has been on a notable rise in this report as newcomers enter the labor market. Average hourly earnings are also expected to show traction, at plus 0.3 percent for a second month.
if we get any number less than 150K, we will be in for a mini market correction, which may push the indices to prior break-out level. In the case of S&P, we may be looking at first stop of 2038 and failing that leverl, then low of 1975. if we indeed get there, then it will be a good buying opportunity.
May 04 The US market recap and EOD commentary
- Market recap: a picture is worth mannnnnnnnnnny words. Please see for yourself.
- Commentary: S&P is at 2050 now, sitting on 50 day moving average and is still above its 200 day moving average of 2013. So far, it is still a normal profit-taking led pullback. However, there are signs that trouble is brewing underneath. According to Gluskin Sheff’s David Rosenberg”the entire complexion to this market has changed and all signs now point to a near-term correction. The yield curve hits its steepest level on April 26th. The Dow Transports-to-Utilities ratio peaked on April 21st. The relative strength of small-caps peaked out on April 27th. Consumer Discretionary stocks relative to staples peaked on April 28th.” So what’s left to buy? Gold is still the best option even though it got chopped off $10 to sell a bit cheaper today due to strength of the US dollar index (I did issue a warning 2 days ago saying it is crowded holding long positions of gold and gold miners). It may well test $1250 level, but it is still an asset class to buy at any meaningful pullback.
- Other note-worthy observation: monetary policy has pretty much run its usefulness, and central bankers around the globe have not much monetary ammo left to fire up the economy. What can help is massive fiscal policy overhaul, ie, run huge deficit and lower corporate tax. This is exactly what Donald Trump is “trumping”. He isacting more and more “presidential” now, and he may ascend to the presidency in November. Is he the Regan 2.0?
May 03 The US market recap and EOD commentary
- the market recap: the S&P 500fell 0.9% to 2,063.37, while theDow Jones Industrial Averagedeclined 140.25 points, or 0.8%, to 17,750.91. TheNasdaq Composite dropped 1.1% to 4,763.22.
- Commentary:Have I told you so! Yesterday I mentioned in the daily commentary that the US dollar holds the key in determining the fate of commodities and precious metal. Indeed it does, today we saw a reversal of trajectory of the US dollar (going higher for the first time in a week). As a result, crude and yellow metal went down in reverse correlation. To make the matter worse, China released its April manufacturing data yesterday. Caixin PMI was at 49.4 for the month, worse than estimated 49.8. S&P is retracing recent gains and heading lower to key level of 2050.
Trade with care.
May 02 The US market recap and EOD commentary
1. the market recap: sell in May and go away did not happen today. The S&P 500 gained 0.8% to 2,081.43 today, while the Dow Jones Industrial Averagerose 117.52 points, or 0.7%, to 17,891.16. The Nasdaq Composite advanced 0.9% to 4,817.59.
April 28 The US market recap and EOD commentary
- the market recap: The Dow Jones Industrial Average lost 210.79 points, or 1.17%, to 17830.76. The S&P 500 Index fell 19.34 points, or 0.92%, to 2075.81. The Nasdaq slid 57.85 points, or 1.19%, to 4805.29.
- Commentary: it is the worst decline in all major indices in 2 months. What has triggerred the declines? We can point fingers at governor Kuroda of Bank of Japan for failing to come up with a big bazooka of further easing. BoJ decided to keep its monetary policy on hold instead.Japanese Yen rallied hard to above 108 against the US dollar. Also blame bad Apple as it keeps dragging down blue chips since its disappointing earning casts doubts on earnings of other blue chip stocks. To make the matter worse, billionaire Carl Icahn disclosed that he’s veryskeptical of the broader stock market and has been shorting! “I still am extremely cautious about the market,” he said. The reason is the “experiment” of easy-money at the Federal Reserve and overseas’ central bankers embarkation into negative interest rates. He warned of “tremendous bubbles.” The S&P plunged to session lows immediately afterward. However, there are undeniable evidence pointing to a continued bull: The Dow Jones Industrial Average just experienced a so-called “Golden Cross.” This is a technical term used to describe the 50-day moving average crossing above the 200-day moving average as both moving averages are rising. Also, all 10 S&P 500 sectors are above their 200-day moving averages. So today’s selloff is just most skeptical group of market participants taking profits from recent gains and running away with their gains. I guess they did this as calendar is turning from April to May. Alas, the adage of “Sell in May and go away”.
April 27 The US market recap and EOD commentary
Shares of Facebook (FB) are up $10 in afterhour trading, or almost 8%, at $118, after the company reported Q1 revenue and profit that topped analysts’ expectations, and said its board voted to create a new class of shares, a “C” class, that will have no voting rights, but that will be issued as a one-time dividend, two shares apiece to each A and B holders. Revenue rose to $5.382 billion, yielding EPS of 77 cents. Analysts had been modeling $5.26 billion and 62 cents.
April 26 The US market recap and EOD commentary
- The market recap: the Dow Jones Industrial Average edged up 13.08 points, or 0.07%, to 17990.32, while the S&P 500 Index gained 3.91 points, or 0.19%, to 2091.70. The Nasdaq lost 7.48 points, or 0.15%, to 4888.31. The February S&P Case-Shillerhome price index shows that home prices in the US are climbing strongly, although it cooled a bit from January. The Fed also began its two-day meeting today, although it is widely expected to keep rates steady.Oil closed at its highest points this year, helped by the World Bank’s assessment that the global supply glut is subsiding.
- Earning highlight: AAPL
Apple (AAPL) just reported fiscal Q2 revenue and profit that missed analysts’ expectations, despited higher-than-expected iPhone sales, and forecast this quarter’s revenue substantially below consensus, sending its shares down 8% in late trading. Revenue in the three months ended in March was $50.6 billion, yielding EPS of $1.90. Analysts had been modeling $52.02 billion and $2 per share. iPhone units in the quarter topped analysts’ expectations at 51.19 million units, versus consensus for 50 million. That represents a 16% decline from the prior-year period in units and an 18% drop in revenue.
- Earning season is in full swing this week as about 900 companies report their quarterly earnings. There are many more misses than beats, GOOGL, AAPL, MSFT, SBUX, V to name a few. Technology sector has registered a technical breakdown which signals thatthe leadership by big tech since the middle of last year is broken too.
- We are now seeing conditions parallel the extremes of the late 1990s.
- falling inflation expectations
- tumbling emerging market currencies
- extreme relative valuations for EM versus U.S. stocks and bonds
- protracted growth-stock bull market and underperforming value stocks
The last time all four of these were at, or near, historical extremes was in December 1998. if you are old enough, you should recall how 1999 bubble ended.
April 25 The US market recap and EOD commentary
- the market recap: It was a downday from the begining. At one point, the Dow Jones Industrial Average went down by 133 points. so it wasn’t too bad when the lose was narrowed to just 26.51 points, or 0.2% at the close, to 17,977.24, while the S&P 500 lost 3.79 points, or 0.2%, to 2,087.79. The Nasdaq slid 0.44 points, or 0.2%, to 4,895.79.
- Commentary: two concerns du jour that kept the market lower today. First, crude price went down today as there are signs of oil production increase. Kuwait’s crude production is recovering after its recent workers’ strike and output from Iraq has been climbing. Saudi Arabia will reportedly complete its expansion of a major oilfield next month. Second, New home sales unexpectedly declined in March, led by the weakest sales pace in the West since July 2014. Just as Stifel’sChief EconomistLindsey Piegza analysed: “the longer-term declining trend across topline sales since the start of the year, suggests a more broad-based decline in construction activity during one of the sector’s busiest seasons of the year.” in short, new home sales and construction will likely have smaller contribution to overall economy going forward.
Elsewhere, market participants are looking forward to the Federal Reserve’s two-day meeting, which starts tomorrow. The Fed has cited global market turmoil as one of its asymmetric risks and the normalization in risk appetite of the past few weeks could play a key role in the pace of interest rate hikes.
April 19 the US market recap and EOD commentary
April 18 the US market recap and EOD market commentary
April 14 the US market recap and commentary
April 13 the US market recap and commentary
April 12 the US market recap and commentary
April 11 the US market recap and EOD commentary:
April 07 the US market EOD commentary
April 06 the US market EOD market commentary
April 05 the US market EOD commentary
April 01 the US Market EOD commentary
March 31 the US market recap
March 29 the US market recap
March 28 the US market recap
March 24 the US Market recap
March 23 the US market recap
March 22 the US market recap
March 21 the US market recap
Looking into next trading week (Mar 21~25)
March 17 the US market recap
March 14 the US market recap (今天用中文)
美聯儲公開市場委員會(FOMC) 明後天將閉門開會，星期三下午將公佈議息結果。今明兩天美股成交量減少、小幅上落。如果大家還在期待美聯儲明確按兵不動不會按計劃加息。我個人覺得大家會失望了這次。1月以來的通脹以達年度1.7% (扣除食品和能源成本) 逼近2%的年度警戒線。美聯儲很有可能這次即便不加息，也會強烈暗示6月開加。股市在此高位，下行風險加大。
March 11 the US market recap
March 10 the US market recap
March 09 2016 the US market recap