Market Wrap Monday

Good Evening,
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Macro:
Chicago PMI missed, Dallas Fed Manufacturing Survey missed very, very badly.
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1) Crude was a far bigger story today than stocks were.  WTI soared another 8%, and even traded above $49 a barrel.  This gave strength to the Energy sector, the only sector finishing in the green for the day.
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2) All of your major Indices gave up close to a percent today, with the exception of the Small Caps.  The Russell 2000 only lost 0.3% today.  Trading volume was well below last week’s levels.  All four major indices closed out their worst month in years, surrendering a rough 6% throughout August.
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3) Treasuries were hit hard late in the day, and as they were, so were the Utility, and Health Care sectors.
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4) My take…. The Fed is confused, and putting out mixed signals.  Chinese leaders are confused, and sending out mixed signals.  The only guys not confused are Oil traders.  They certainly seem to know what they want to do.  The market is trying to price in multiple uncertainties all at once.  This is why every twenty minutes or so for, market participants…. seems to have it’s own personality.  Better learn to live in this environment… it’s not going anywhere anytime soon.
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Levels:
SPX: Our 1986 was a precision strike at the top, while 1979 worked as resistance twice, as well.  I did give you 1972.  You might have been better served by 1970.  It does look as if a level is also developing in the 1960’s.
RUT: I gave you 1162, and  1156…. the tape gave you 1164, and 1156.

Market Recon Monday

Good Morning,
                       Stanley Fischer had a message for you.  In fact, it appears that most of the Fed officials at the big pow-wow in Jackson Hole felt the same way.  Basically, to make it short, the turbulence seen in financial markets of late has not had a significant impact on the Fed’s decision making process as far as getting the Fed Funds Rate off of zero some time this year goes.  I can live with that.  You all know that I am something of a policy hawk, and while I often doubt the Fed, there’s no way in heck that the fair price of credit is close to zero if the economy is really expanding at an annualized rate of 3.7%.  Yes this should cause dollar appreciation, and that is a risk, but these guys are starting to see consumer level inflation (outside of crude, and imports) on the horizon.  Wouldn’t you rather have this gang out in front of inflation than chasing it?  I know that I can’t be the only one old enough to remember how lousy that felt, and how desperate the morale of the average American citizen was at that time.
                        US Futures markets are lower this morning in response to Jackson Hole.  European equity markets are also down a  rough percent, but that could be due, as much to disappointing numbers as anything that any central banker might have said.  This morning, German Retail Sales, French Consumer Spending, and Italian Unemployment all missed consensus, and in the case of German Retail Sales….. missed badly.
                       From a macro perspective, a busy week will get off to a sleepy start today.  All we have to look at today are a couple of tertiary items that traders generally do not react to.  At 09:45 ET, the Chicago ISM, will release the Chicago PMI, an item that used to garner a lot off attention as a tone setter for the national picture (which you’ll get tomorrow).  Maybe today, with a light schedule, you’ll get a reaction.  The expectation is for slight improvement to something like 54.8 (ish).  When you’re not sure, make sure you always add an ish.  “Don’t wait up for me honey….I’ll be home late-ish”  At 10:30 ET, you can probably expect that the Dallas Fed will let us know that their manufacturing sector losing streak has continued.  There are no earnings releases that you need to be cognizant of, and it looks to me as if the Fed crowd may sleep in after their party out west.  They will be out and about this week, however.  As a reminder, we’ll get key Chinese PMI data tonight, and there will be global impact.
                        It’s Monday morning, gang.  Crank it up.  Your family is counting on you.  Providing is one thing.  To be a shining example of what you would want your children to be, that’s another.
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Sarge’s TRADING LEVELS
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SPX: 2012, 2005, 1993, 1986, 1979, 1972, 1955, 1947

RUT: 1178, 1172, 1167, 1162, 1156, 1149, 1140, 1132

Market Recon Friday

Good Morning,
                       China?  Sure the Shanghai Composite is up again today, but that kind of news is sooooo Tuesday.  There’s a new sheriff in town, and it’s the old sheriff.  Goes by the name of Crude.  Oil that is, Black Gold.  So, now we do know that much of that price action yesterday was indeed initiated by short coverings.  We also know that the gains were exacerbated by Venezuela linking arms with the Sovie…err Putin to try to get a whole bunch (OPEC) of oil producers to go ahead, and cut production.  Good luck on that one.  I’m guessing the Saudis have probably already though of this…. and rejected it.  Let’s just see what Crude, and the energy sector do this morning.  If I were a betting man…. hey wait, I’m not a betting man.  You’re on your own with this one.
                      When the clock in New York strikes 08:30, you’ll be hit by a triple headed monster.  The Hydra??  Good guess, but no.  That’s when the Bureau of economic Analysis will release it Personal Income, and Outlays report for July.  What the data will include will be Personal Income, Consumer Spending, and the all important PCE Price Index.  In other words, there’s a lot of stuff in there that the Fed looks at.  Most economists are expecting that both Income, and Spending grew by 0.4% m/m, which would keep Income on it’s recent pace, and would be a pop for Spending.  That brings us to Janet Yellen’s favorite measure of consumer level inflation.  I am kind of a nerd, but I’ve got to tell you, that I have a favorite baseball team.  I have a favorite flavor of ice cream…. but I don’t really have a favorite measure of consumer level inflation.  They all rot.  That said, we’re looking for m/m growth of 0.1% at both the core, and the headline.
                     What we can not forget about is the University of Michigan’s final Consumer Sentiment print for August.  The mid-August print disappointed at 92.9, but keep in mind that the very similar Consumer Confidence print put together by the Conference Board on Tuesday surprised big to the upside.  Keep in mind that this print generally does move the market when it is released, gang.  You also can’t rule out that somebody in Jackson Hole says something stupid…… or smart.
                      Anybody who saw Carlos Torres, and Dan Murphy play hacky sack last night, knows the Mets are different this year.  Surely the MLB play of the week.  It’s Friday, my fine bunch of pals.  Finish line is right in front of you.  Stay focused, and let’s get everybody out of here in one piece.  God bless.
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Sarge’s TRADING LEVELS
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SPX: 2121, 2012, 2005, 1992, 1980, 1973, 1955, 1947
RUT: 1172, 1167, 1162, 1157, 1149, 1140, 1132, 1126

Market Wrap Thursday

Good Evening,
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Macro: Q2 GDP revision easily beat, Initial Jobless Claims beat, Pending Homes Sales missed.
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1)  Equity markets closed significantly higher for the second straight day, but they certainly did not take the short cut to get where they were going.  In a way, the charts sort of remind me of Barry Sanders, the football player (not Bernie Sanders, the socialist), who might on a 50 yard run, end up running about 175 yards.
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2) All of the broader Indices gained between 2.25%, and 2.5% on the day, and the rally was broad based.  However, it was the Energy sector that stood head and shoulders above the rest, scoring nearly 5% worth of gains.  The weakest sectors were Consumer Staples, and the Utilities, both of which were up more than 1% today.
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3)  To give you an idea of the kind of day this was….. the S&P Health Care sector index was virtually unchanged at 3pm, and closed almost 2% higher for the day.  BTW, trading volume dropped off significantly today.
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4)  It was Crude Oil that drove that Energy sector, and the market in general today.  Most of us spent at least part of our day trying to figure out if, for oil,  this was a short squeeze or not, when it broke late that Venezuela had called for an emergency meeting of OPEC members, presumably to put a cut in production on the table.
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5) Treasuries, and Gold both stayed surprisingly close to unchanged on the day, with Gold finishing slightly higher, and Treasuries tilted lower, but somewhat mixed.
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6) One more day, tired is only in the mind….you’ve got this.  I mean it.

Market Recon Thursday

Good Morning,
                       No joke, that was some rally yesterday afternoon.  Took us about  a third of the way back to where we were…. last Wednesday when the FOMC released their minutes, so let’s not get so carried away.  Global equities are strong this morning, as are US futures markets, meaning that there is at least a chance that the rally has legs…. at least for the early going.  No doubt, it’ll be smooth sailing from now on.  You and I both know that in these volatile times, making prediction beyond your immediate front is sort of like sports gambling.  You think that you know what you’re talking about until you don’t.  Next rest stop’s in 38 miles, you kids OK?  Speaking of kids, any of you take a look at the Shanghai Composite this morning?  That little dandy closed up 5.3% on the day, after being down on the day late in the afternoon.  Looks like somebody jumped in and propped that index up going into the close.  Wonder who? They shut down all of the “speculative” traders.
                       Boy, oh boy…do we have a nice batch of macro on tap for you today.  It all kicks off at 08:30 ET, when we get our second look at Q2 GDP, as well as the weekly report on Initial Jobless Claims.  First to the GDP.  We’re expecting quite an upward revision to the 2.3% that was estimated at last month’s initial estimate.  Projections are that Construction Spending, Business Inventories, and Retail Sales will push this number up into the 3.2% to 3.3% range.  Consensus is for the Jobless Claims print to fall from last week’s 277K to something like 272K.  This item has not been volatile of late, and is starting to lose the trader attention that it used to get.
                       Garnering less attention than some of the other data-points will be July Pending Home Sales at 10am, and the Kansas City Manufacturing Index for August at 11am ET.  Sandwiched by those two, will be the weekly Natural Gas print at 10:30.  That one only matters to those who specifically trade those futures.
                       There are some earnings releases to be cognizant of today.  Before the opening bell, you’ll get numbers from SJM, and TD, and after the close ARO, MRVL, and SWHC all report.  I am flat all of these names.  What makes MRVL interesting is that they postponed this release just last week until today, so let’s find out why.  As far as Fed speak goes, the whole party at Jackson Hole gets cooking today.  The symposium is closed to the press, but you know this crowd…. they can’t help themselves.  They’ll talk to somebody.
                       Mets are still hot.
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Sarge’s TRADING LEVELS
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SPX: 1980, 1973, 1955, 1944, 1926, 1907, 1895

RUT: 1157, 1148, 1140, 1132, 1126, 1119, 1110

Market Wrap Wednesday

Good Evening,
Macro: Durable Goods Orders beat, at the headline and at the Core, Oil Inventories dropped, as did demand for Gasoline.
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1) The S&P 500 bottomed out around 12:30, and tested the week’s trend line from the bottom just after 1pm.  When the trend line broke, the Equity markets were off to the races.  Literally.
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2) Of the major indices, The R2K finished in last, gaining a mere 2.5%, with the big three all sporting increases of a rough 4%.  Trading volume remained elevated, but was lower than what we have seen this week.
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3)  Looking for a negative?  The highs of the day for both the S&P 500, and the DJIA were the lowest highs of the day for the week.  I am sure many technicians would have liked to have seen the highs of at least yesterday taken out.  Newton?  There also seemed to be a short squeeze aspect to this rally.  I asked around, there was institutional participation.  There were also some non-participants.
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4) Talking sectors?  Info tech, and Health Care went wildly higher for the day.  In fact all ten sectors scored huge gains.  Utilities brought up the rear, gaining 1.7% despite the ferocious beating taken by Treasuries.  Energy shares also showed nice gains for the day despite  a negative day for Crude.  Now that commodities have snuck their way into bullet point number four, I might as well mention that Gold gave up 13 clams on the day.
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5)  Go to bed early, or watch the Mets?  I think this one’s a toss up tonight.  Stay hungry.

Market Recon Wednesday

Good Morning,
                        In “celebration” of the easing of monetary policy by the PBOC yesterday, Chinese traders merely sold Chinese stocks today, instead of obliterating them.  In fact, today, the Shanghai Composite spent part of the day in the green, or as they say in that neck of the world “in the red” before selling off into their close.  A drop of 1.3% must have been a relief for those trading within an index that has lost about a quarter of it’s value since Friday’s open.
                       US futures markets are trading well above fair value right now.  What does that mean?  I think we’re all a little more skeptical of the markets than we were way back on Sunday night.  I’m reading articles this morning describing how the US equity markets are being driven by the Chinese equity markets, and I think this simplifies things way too much.  Our markets are being driven to some degree by China, but not by their equity markets.  That’s off the mark.  Our markets are being driven largely by two factors, and one certainly is Chinese.  Global demand is clearly a problem for US international corporations.  China has been the engine behind global demand, and the ability for China to continue to do so is a great uncertainty.  Stocks (and commodities) just love uncertainty.  So, now we have to re-price an entire marketplace that is unable to quantify a major component.
                         Wait…Sarge…you said there were two !!  ….and another thing, why are domestic corporations being slapped around as if they too, had all of this exposure?  Great question, glad you asked.  You might think that smaller caps, with less international exposure would be safer places to hide, and to a degree, you’re not too far off.  But….and this is a big but, the American public, also known as the American Consumer has just suffered a blow to his, or her perceived level of wealth.  The common man, or woman with no connection to this industry will be waking up to this fact over a couple of weeks, depending on how closely they follow financial news.  When folks have smaller balances in their trading accounts, in their retirement accounts, and when older folks earn even less on their CD’s, they spend less.  Yes, all of them will spend less, regardless of what surveys like Consumer Confidence tell you.  So, for domestic corporations, future activity by consumers will likely have to be re-priced as well.  Ugh.
                        Now for today’s domestic macro.  The Census Bureau will release July Durable Goods Orders at 08:30 ET.  We’re expecting contraction at the headline to the tune of -0.4% m/m, but the Core print looks a little better.  Once you strip transportation out of the number, it turns into m/m growth of 0.3%, or at least that’s what the consensus says.  You will also see the weekly Oil Inventories number at 10:30 ET.  You know how impactful this one can be to the price of Crude these days, and as they say….. “the ankle bone connected to the shin bone”, and so on.
                        The highest profile corporation that I see on a very light earnings calendar is WSM.  They will report after today’s closing bell.  I have no interest in that name.  We do have one Fed speaker lurking about on the eve of the Kansas City Fed’s “Yellenless” Jackson Hole shindig.  That speaker would be the New York Fed’s “Wild Bill” Dudley who will be holding a press conference from NY at 10am ET.
                         I’ve hit you over the head with a lot of food for thought today.  Take a few minutes, go to the bathroom, get a drink of water.  Then come back ready to work your tail off.  Good luck today, gang.  Helmets, and Flak Jackets on.  Gas mask on the hip.
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Sarge’s TRADING LEVELS
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SPX: 1945, 1926, 1915, 1902, 1877, 1867, 1850

RUT: 1148, 1140, 1132, 1121, 1110, 1104, 1100

Market Wrap Tuesday

Good Evening,
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Macro: FHFA & Case-Shiller HPI’s both missed, Service Sector Flash PMI beat, Consumer Confidence beat, New Home Sales missed, Richmond Fed missed badly.
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1) All four major equity  indices closed lower to varying degrees on rather heavy volume.  The S&P 500 & DJIA both gave up more than one percent.  The numbers don’t really tell the story of a marketplace that saw a nice day turn into what could only be described as a pukefest.  It ain’t pretty, but it gets the message across.
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2) Safe havens were….. oh, did I mention? …there were none.  The sell -off in equities hit late, and, with such ferocity that Treasuries, Gold, even the VIX never got a chance to catch up, and also finished day in the red.
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3) Telecom, Financials, and Materials were slapped pretty hard, despite some upgrades for the banks….. however the worst beating was reserved for the Utility sector (another non-safe have) after the Exelon-Pepco merger was deep-sixed.
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4) Looking for a bright side??  Internet stocks did well today.  In fact, they almost saved the Consumer Discretionary sector….. but not quite.
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5)  On the way home tonight, I keep thinking of the kid that was always on the cover of Mad magazine.  “What me worry?”

Market Recon Tuesday

Good Morning,
                        Funny thing happened this morning.  China’s central bank, the PBOC injected more cash into their financial system in the form of reverse repurchase agreements, or for regular folks…seven day loans to commercial lenders.  They pumped in 150 billion yuan  (23 billion US clams) for the second week in a row.  (After I published, I see that the PBOC has just now cut benchmark lending, and deposit interest rates, as well as lowering the reserve ratio requirement.)  What they did not do, was directly support Chinese equity markets, and those markets, in lack of a little love, took it right in the teeth…..again.  The Shanghai Composite was roasted for another 7.5%, as capital outflows continued to cross Chinese borders, and headed elsewhere.  Where?  Well, European equity market are up more than 3% pretty much across the board this morning, and US futures markets are trading well above fair value as I type out this note.  Will it hold?  Spin the wheel, red or black.
                        Macro-economic data may not be very sexy today in light of everything else going on around us, but you know what?  We’ve got a lot of this stuff on the docket today, so we better cover it, so it doesn’t smack us right in the mush, because we were distracted by something on our periphery.  We come out of the gate pretty hard with two Home Price indices, both for June at 9am ET.  One is rather narrow in scope, and will largely be ignored by traders, and the financial media, that’s the FHFA.  The other will get all of the headlines.  When it comes to the Case-Shiller HPI, the 20 city, year over year, non-seasonally adjusted print is that headline maker.  We look for 5.1% growth in this space, up from May’s 4.9%.
                        We’ll also see three data-points released at 10am ET.  The consensus among economists for July New Home Sales on a seasonally adjusted, annualized rate is for 514K units, up from 482K.  The range for this one spans from 490K to 540K, so a failure to show improvement would be a significant setback.  The Conference Board’s Consumer Confidence is expected to gap up big for August, while the Richmond Fed Manufacturing Index could garner some attention this month due the contrasting results reported by the Empire State (horrendous), and the Philly Fed (beat consensus) last week.
                        On the earnings front, we’ll hear from BBY, and TOL this morning.  I am flat both.  I do not see any Fed speakers creeping around ahead of Jackson Hole.
                        I’m pretty sure today is going to be a good day, not necessarily for market direction.  That is a positive right this minute, but there will be plenty of volatility, no doubt.  I mean for you, the good people who wake up early every morning, try hard every day, and go home to your families every night.  Today will be a good day for you, because you’ve got one coming.  Now, get out there, and be a champion today.
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Sarge’s TRADING LEVELS
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SPX: 1973, 1955, 1944, 1926, 1905, 1880, 1867, 1850
RUT: 1148, 1140, 1132, 1122, 1110, 1105, 1100, 1094

Market Wrap Monday

Good Evening,
                        To call what happened on Wall Street today “an old-fashioned beat-down” would be a lie, because there was nothing old-fashioned about it.  You may, however…. call it a beat-down, or maybe a slap-fest.  You could even just call it crazy, because that’s exactly what it was.  If you’re reading this note after a hard day of labor, you probably just want the facts, especially if you do not work in the industry, or if you are on vacation.  These  are those facts.
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1) All four major indices (DJIA, S&P 500, NASDAQ Comp, , and the R2K) finished the day at least 3.5% lower.  This came after all said indices traded at far lower levels, and nearly approached the unchanged mark, all in the same day. Trading volume was very heavy.
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2) All ten S&P sectors were beat to a pulp, with a special kind of annihilation going out to the Energy sector after Crude (WTI) was knocked down below $38 a barrel.
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3) The best performing sector for the day was Telecom.  That shooting star only surrendered 3.1% to gain those honors.
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4) About those safe-havens…..  Treasuries had a volatile, yet strong day.  The U.S. ten year finished with a yield of just above 2%, after trading as low as 1.9%.  Gold did not enjoy the status afforded safe-haven today, and actually sold off to the tune of about $5 an ounce.
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5) You may feel like you’ve put in five days already this week, but today is only Monday.  Let that sink in.  Now, I’ve ruined your dinner.  I’m sorry.  See you tomorrow.