Doh !! Survivng a Goof

True Story.
                          The story you are about to read is true is one of those “Only me” stories. For those of you who don’t know me, I’m an Irish Catholic kid from Queens, NY. You can go ahead, and put the emphasis on Catholic. I practice the faith. I’m working all day today, and I’m having a good day, a really good day. Almost as good as yesterday. This market has made good days easy to come by of late. That is where the story makes an unexpected turn.
                           My wife (nice lass that she is) reminds me that today is a Holy Day of Obligation. Well, she’s right… it’s the Feast of the Immaculate Conception. I check the nearby church’s website, and I see that there is a 12:10 Mass, so I place a few bids and offers well away from the market in some names that I either am involved in, or am willing to be involved in. Then I hold my breath for about an hour and a half. One of those orders was a $73 bid for Express Scripts (ESRX). At the time, the last sale was around 74.25, so I wasn’t extremely worried about it. You can probably figure out the rest. I had an errand to run after church, and got back to the office at 13:20. I sit down at my desk.  Poof… the first thing I notice is that while my P/L for the day is still quite respectable, it’s not what it should be. No position of mine had moved all that much. Then I saw it. I had indeed paid 73 for ESRX. Citron Research had been tweeting while I was at Mass. Andrew Left was apparently going to lay the hurt on this stock, and do it after today’s close on CNBC. The stock was trading at $68. What do I do?
Choices.
                          Do I buy more to lower my average price? Do I sell the shares, and chalk it up to a lesson learned? (Don’t go to church ?? … Don’t take your eye off the ball ??) Do I go the expense of buying puts, and rest easy that I have at least controlled my potential for loss? Maybe I close my eyes, and hope the problem goes away? I actually tried that last one. Doesn’t work. Having an otherwise decent day/week does allow one to properly think through a course of action. So think I did.
                           With Citron Research tweeting about a $45 target, and knowing that the greatest potential for risk in either direction would occur between tonight’s close, and tomorrow’s opening bell, I took the best course of action I could come up with. I got long Dec 9 (tomorrow) 70 straddles for a net debit of 2.50. That’s lost money, but it’s also peace of mind. If ESRX gets hit by a Tsunami, I’m out at an effective price of 67.50. A kick in the pants for sure, but worse things have and will continue to happen. On the other hand, if the public rejects this negativity, and we see an overnight move higher, however unlikely…. I can load up for an effective cost of 72.50. Either way, I will be flat this name by tomorrow (Friday) night’s closing bell. I also have the option, should the stock go higher today, of taking a profit on the calls, knowing that I have downside protection due to my holding of the corresponding puts.
                            Stupid? Not really. Careless? Probably. Survivable? Definitely.

Market Recon Wednesday

Good Morning,
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The Elephant in the Room.
                       OPEC Secretary General Mohammed Barkindo got this party started early, apparently stating that a deal would in fact, get done today. Add to that some positive comments from Bijan Zangeneh (Iran’s Oil Minister), who had not been extremely cooperative in the past, and voila !! Crude prices were off to the races, reclaiming levels not seen in over 24 hours. (Oooh!!, Ahh!!) Scuttlebutt has it that a production cut is being bandied about that would exempt both Nigeria and Libya, and that the cartel is in contact this morning with non-OPEC producers, whose level of participation is unknown (at least by this guy) at this time. What is also unknown would be the exemption status of Iran, a nation that was rumored to be in line for such a benefit back in September. The bottom line, gang… is that there’s a lot of pressure here to get something done, something that sounds like more than window dressing. This pressure is going to be today’s driver. Without a deal, there is no ability to collude… and there is absolutely no cartel.
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A Lot on Your Plate Today.
                      As you lift that pretty head of yours off of the pillow this morning, you’ll soon realize that there’s a ton of macro-economic data on your plate today. If you read me, you know I have been skeptical of this economy every step of the way, but let’s call this what it is. Sure, we can find something negative in most spots if we really try. It’s not really so hard to support an agenda if you have one.
                      Our only agenda, however should be to excel within the environment provided. That environment is different now. It’s not just yesterday’s revision to Q3 GDP, and the Atlanta Fed’s projection for Q4, … it’s both Consumer Surveys, it’s the almost weekly improvement seen in the retail related Redbook, it’s Durable Goods, it’s home prices, and it’s all five major regional Fed district manufacturing prints hitting the tape in a state of expansion, supported by New Orders. Just makes my little heart burst with joy that this all started in an environment less conducive to growth than the one that we appear to be headed into.
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Trader Focus
                       Well, if that whole OPEC shindig, and that plate full of macro isn’t enough to rattle your cage, today is the final day of November. We’ve seen significant movement in just about everything from currency valuations, and yields to the major equity indices … not to mention all of the sector rotation. You’re going to have to deal with the month-end shuffle on top of all of those headline level events as mangers re-balance their books. the good thing is that you probably will not be bored. Go get ’em, gang.
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Reminder: This is the last day that my morning note will be published at sarge986.com  …  Tomorrow we move over to thestreet.com
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Macro
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08:00 – Fed Speaker: Dallas Fed Pres. Robert Kaplan, who will vote on monetary policy in 2017, has joined the chorus of central bankers preparing the marketplace for this anticlimactic rate hike that we’ll see in two weeks. Kaplan speaks this morning from New York City, and will take questions from the media.
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08:15 – ADP Employment Report (November): Expecting 162K, October 147K. The interesting thing here is just how sharp an indicator this item is for the all important Non-Farm Payrolls print. That fact is not readily identifiable to the naked eye upon release, but when smoothed out over time after revisions, the two are nearly identical. The BLS print is much more volatile, which is probably due to the fact that ADP, a corporation is simply more efficient than would be a government agency. After accepting that, over the last ten months, or simply 2016 YTD, Non-Farm Payrolls are averaging 184.5K (with a high of 292K, and a low of 11K), while the ADP number has averaged 182K (with a high of 205K, and a low of last month’s 147K). From a macro point of view, this data-point matters. From the market’s stance, it certainly matters to equity index futures traders, but will be absorbed by the time the 09:30 crowd gets going.
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08:30 – Personal Income (October): Expecting 0.4%, Sept 0.3% m/m.
08:30 – Consumer Spending (October): Expecting 0.5%, Sept 0.5% m/m. Income has suddenly started trending higher. That’s good. Spending has also started trending higher. That too is good. What’s not so hot, is when Income does not keep up with Spending. Income has failed to keep pace in five of the last six months, and as you can see, we are looking for more of the same today. We love an aggressive consumer, I mean who doesn’t?  The best consumer though, is a comfortable consumer, and I do think there is progress. The sub-components of yesterday’s Q3 GDP release support that. If you see side by side strength here today, the markets will cheer.
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08:30 – PCE Price Index (Oct): Expecting 0.3%, Sept 0.2% m/m 1.2% y/y.
08:30 – Core PCE Px Index (Oct): Expecting 0.1%, Sept 0.1% m/m 1.7% y/y.  There should be some movement in consumer based inflation for October, particularly at the headline. The year over year Core data is what market participants will be watching. Regardless of what hits the tape today, I think we all know what’s on the way. That said, you get a Core print above 1.7%, and you’ll get a spark in the markets. this is one of the single most important items in our macro-universe.
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09:15 – Fed Speaker: Federal Reserve Gov. Jerome Powell will speak twice today from the Brookings Institute in Washington. The day’s topic will be “Understanding Fedspeak”. Could have used a speech like this …oh, six or seven years ago. There will be a Q&A session after the speech.
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09:45 – Chicago PMI (November): Expecting 52, October 50.6. Although we have officially stated an expectation for this data-point today, the expectation here is actually quite meaningless.  The last time that the Chicago PMI printed within even 1.5 of consensus view was in August…. of 2015, and on more than a few occasions the miss was enormous. What’s real is the print itself, and we expect to see a sixth consecutive month of expansion in the Chicago region’s business conditions.
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10:00 – Pending Home Sales (October): Expecting 0.5%, Sept 1.5% m/m. This item is considered a leading indicator for Existing Home Sales, as new construction is excluded from the data. Though there is a loose correlation, this remains low on the totem pole for housing numbers as far as market impact is concerned. We expect only small net change for October, which is actually unusual for this volatile series.
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10:30 – Oil Inventories (Weekly): Exp +1.3M barrels, Last Week -1.3M barrels.
10:30 – Gasoline Stocks (Weekly): Exp +1M barrels, Last Week +2.3M barrels. Like the Chicago PMI, this is another space where expectations, and reality often have trouble coming close. The API prints released on Tuesday evenings are usually closer than is professional consensus. API is reporting a draw at the headline of -717K barrels for Crude. As far as Gasoline goes, API printed a 3.36M barrel inventory build. Crude drifted slightly higher last night in response to these numbers, but OPEC clearly will have more of an impact in this space today than will these silly fundamentals.
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11:45 – Fed Speaker: Federal Reserve Gov. Jerome Powell speaks publicly for the second time today, and for the third time in two days. Yes, he is still a permanent voting member of the FOMC.
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12:35 – Fed Speaker: Cleveland Fed Pres. Loretta Mester will speak on monetary policy, and the economy from Pittsburgh. Mester who will vote in December, but not in 2017 has been one of the FOMC most outspoken hawks for most of the second half of the year. Like Kaplan earlier, she will answer questions from the media today.
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14:00 – Beige Book: I don’t think we are on the lookout for anything shocking here today. We all know that this economy finally seems to be improving on several fronts. The surprise would be if anecdotal evidence compiled across twelve regional Federal Reserve districts failed to illustrate that image in the aggregate.
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Sarge’s Cash Levels
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SPX: 2218, 2211, 2204, 2195, 2187, 2180
RUT: 1348, 1339, 1334, 1327, 1319, 1314
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Wednesday’s Earnings Highlights
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Before the Open: AEO (.41)
After the Close: LZB (.38), GES (.14)

Market Wrap Tuesday

Good Evening,
                        The markets, at first glance closed up small. Taking a look under the hood though reveals some interesting developments. so, let’s take that look…
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The Macro !!
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                        The macro was not just okay. The macro is starting to reveal an economy that might just be hitting that elusive “breakaway speed” that the increasingly less important crowd at the FOMC was so worried about a few years ago.
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GDP ?? Bang !!  Personal Consumption Expenditures revised considerably higher. Final Sales to Domestic Purchasers (more important than you think) inched higher. Durable Goods revised even higher, and wait for it…. wait for it….  Gross Domestic Income prints at it’s best level since Q2 2014.
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Get some.
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Want more ??  Get in line.
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Redbook ?? Bang !!
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Consumer Confidence ?? Bang !!
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Fed Speakers ?? Ignored. Win, win, win.
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         The S&P 500 has largely gone sideways now for three sessions, which seems a bit like digestion to me. Corporate earnings are improved. Growth is starting to click as we go into an era that could realistically involve lower taxes all around, repatriated funds, and more spending on infrastructure (fiscal) & development (corporate). I’m not telling you this all ends well. How the heck do I know? I am telling you that I think this is a good spot to be in for right now.  BTW, if you’re in the retail trade since earnings based on historical norms, you’re also thinking of getting flat this week. I’m two thirds of the way out myself.
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Winners.
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          Italian equity, and sovereign debt. Somebody, somewhere thinks that they’re out of the woods on this one. Domestically, Health Care led the way, supported by the Providers and Biotech. The Utilities also turned green as Treasury yields fell.
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Losers.
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           Crude took an all morning beat down before stabilizing thanks to an OPEC fumble at the five yard-line.  OPEC does have time for one more possession, but a field goal is not going to cut it.  The Energy sector obviously took a second consecutive kidney punch.  Gold rallied late to close down small, as the US Dollar spent the day rolling down a hill.
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Okay gang, have a great night, and stay motivated.

Market Recon Tuesday

Good Morning,
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Tightening Cycle.
                        Today will mark the return of Fed Speak as a threat to the marketplace, as we’ll hear from two voting members of the FOMC currently filling slots with permanent voting rights. We keep hearing that the “WIRP”, or the probability of an increase in the Fed Funds Rate at the December meeting culminating on 14 December is 100%. The CME website also tracks this data. The CME is reporting a “mere” 94% chance. Regardless, what I think is far more interesting than trying to figure the odds of an increase at this meeting is that, at least according to the CME, there is close to a 19% chance of a second hike by the (Ides of) March 15th meeting. FYI, there is no January meeting this year; the first policy announcement of 2017 will come on 1 February. By then. some of this year’s leading hawks will have left the committee to be replaced by seemingly more dovish crew. Seemingly, with a new administration in place.
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Dollar / Oil / Energy.
                       The US Dollar is gaining some strength today, negatively impacting gold, and oil in the early going. Of course, there are other factors slapping oil around. For one, energy traders are again starting to doubt OPEC’s ability to even put together a meaningless agreement filled with exemptions for multiple members. (These guys are even more entertaining than academics playing the role of central banker) That said, the energy sector appears to have been ahead of the game yesterday, but the game is not over. Before tomorrow’s meeting comes to a bone jarring end, expect to see both elation, and disappointment as speculation, and manipulation run rampant. I wouldn’t even trade the space over the next two days, unless I was 100% okay with being wrong. This is not something you bet the tuition on.
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The College Football Playoffs.
                        Was it a first down? It really didn’t look like it to me, but it was razor close, and even on replay….still too close to overturn. I am not here to plead anyone’s case for playoff inclusion, at least not anyone currently in the top ten. Has anyone taken a look at Western Michigan? I know, I know… they play in a lesser conference. So what? These guys are 12-0, and are mired way back toward the back end of the top fifteen, surrounded by teams with two or three losses. This Western Michigan team still has a conference championship game to play. What if they win that game, and win a bowl game.  Is there going to be a 14-0 team filled with over-achieving, probably under-recruited kids left out? This is where big time sports fails the little guy. Maybe they don’t really belong in a final four playoff. Maybe they get crushed. Maybe, just maybe they don’t. They deserve the chance to be beaten on the field.
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Publishing Note: Don’t forget, we’re moving over to TheStreet on Thursday.
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Macro
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08:30 – GDP (Q3-rev): Expecting 3.0%, Q3 adv 2.9% q/q SAAR. In the advance release, Q3 showed significant improvement over Q2, at least at the headline. The oddity, at least to me, was that Personal Consumption Expenditures (the strength of that weak second quarter) put it’s second worst quarter in two and a half years to the tape. The strength in this report came from Durable Goods (two straight), and Exports (which came out of nowhere), namely agricultural (soybeans) exports. The expectation for today is that these strengths will not be revised lower, and the report will not be hurt by Gross Domestic Income, which we have not seen yet. A significantly downward revision could change market sentiment, based on the Fed’s ability to carry forth with their intent.
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08:55 – Redbook (Weekly): Last Week 1.0 y/y. This item may get more notice than usual today. Black Friday numbers came in a little sloppy for many brick and mortar retailers. When measured year over year, this item has been on the rise since early October, and like I always tell you… this number stays above 0.5%, and nobody will focus on it.
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09:00 – Case-Shiller HPI (September): Expecting 5.2%, August 5.1% y/y. This data is sliced and diced several different ways. For example, home prices out west have outperformed all year, while the northeast has continued to struggle mightily. The headline number is the one that the marketplace will notice. That specific item has seen it’s growth stall in the low to mid 5% range, but it is still growing steadily. HPI’s are not a game changer for equity markets, but are on that next level as far as sentiment goes.
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09:15 – Fed Speaker: New York Fed Pres. William Dudley is set to speak on Puerto Rico’s economic situation from San Juan. Dudley is a permanent voting member of the FOMC, who has made an effort to prepare markets for a hike in the Fed Funds Rate in two weeks. he will open himself up to a Q&A session after this speech.
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10:00 – Consumer Confidence (November): Expecting 100.8, October 98.6. Consumer based surveys always have the potential to move markets. This one missed in October after significantly out-performing both it’s own expectations, and the U of Michigan’s Consumer Sentiment numbers for several months prior. That Sentiment print absolutely popped on Wednesday, and we look for a Trump rally inspired boost in confidence here today as well.
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13:40 – Fed Speaker: Federal Reserve Gov. Jerome Powell will speak on the outlook for the US economy to the economic Club of Indiana. Powell is a permanent voting member of the FOMC, and spoke two weeks ago on the prospects of a potentially tougher environment for international trade going forward. Powell will answer questions after this speech.
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Sarge’s Cash Levels
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SPX: 2224, 2215, 2204, 2194, 2187, 2180
RUT: 1349, 1339, 1332, 1327, 1319, 1314
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Tuesday’s Earnings Highlight
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Before the Open: TIF (.67)

Market Wrap Monday

Good Evening,
                       The breeze felt different today. Not horrible. Different. This certainly did not feel like the end of the world.  Trading volume was light, the retreat was orderly, and in a way quite purposeful. First, and foremost… the US Dollar took a breather (hooray), and US Treasuries found a bid (phew !!). In fact, Treasuries found a few bids. These two factors did a lot of what you would think that they might do. Gold firmed up, The Utility sector was the day’s clear winner, and then there was Oil. Oil….hmm.
                       WTI Crude roared today. Hopes of an OPEC deal? Really? Is that why the Energy sector, and the Railroads were led out to the woodshed? Could Crude be trading off of the Dollar, and it’s underlying dependent stocks trading off of OPEC hopes and fears? I’ll let you know when I know. In the meantime, there was much profit taking among the Small Caps, and the Financials (particularly the banks after Jefferies downgraded C & WFC). People who suddenly find themselves with found money, and little protection…will take that money off of the table. It’s okay, and it’s healthy.

Market Recon Monday

Good Morning,
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Cyber Monday.
                        Today, (as if you didn’t know) is known as Cyber Monday. The catalyst for this moniker was that plenty of folks (since the invention of the internet) went back to work on the Monday after Thanksgiving only to continue shopping on-line after kicking off their holiday season on Black Friday. These cute nicknames may persist, but consumer behavior has clearly continued to evolve. Surveys are starting to show that internet based shopping grew on Black Friday by more than 20% year over year, while actual foot traffic through brick and mortar retailers retreated an approximate 1%. In addition, less actual money may have been spent, as on-line (especially mobile) shopping seems to be more target specific, lending itself less to peripheral, or impulse purchasing. Remember, today’s 15 to 24 year olds are comfortable shopping this way. These kids also grew up in hard times. They don’t spend thoughtlessly.
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This Week.
                       Today may provide little in the way of earnings, or “red star” macro-economic events, but make no mistake, the week ahead is heavy in data.  Not only will the next four days pack together a Q3 GDP revision, the PCE Price Index, ISM manufacturing, the Beige Book, and at least seven Fed speakers from a domestic point of view, but there will be high-end external threats as well. Wednesday brings the OPEC circus to town, as well as Chinese PMI numbers, German Retail Sales, and European inflation data. Then next Sunday, Italians will vote in their constitutional referendum. OPEC (likely to disappoint) rumors, and polls (Don’t trust the polls) out of Italy will slap Crude prices, and currency exchange values around throughout the week. there could also be a safe-haven effect here.
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Sell The News?
                         We’ve already been buying the rumor. Where are these potential road blocks? What is the news?
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1) The OPEC meeting that will either fail completely or produce an agreement with so many holes in it as to be useless?
2) That Italian referendum that will either strengthen the Italian central government (and the Euro), or produce even more uncertainty?
3) The ECB policy meeting on 8 December when Pres. Mario Draghi either announces an extension to the ECB’s QE program or makes sure markets understand that they are going to have to?…. Then if that extension looks and smells like a tapering.
4) The FOMC policy meeting on 14 December when folks realize that more than one rate hike (more like a tightening cycle) is being priced in?
5) Donald Trump’s presidential inauguration on 20 January, when folks realize that his proposed policies may actually take a while to implement?
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Trader Focus.
                          Don’t get me wrong. There’s still plenty of reason for market optimism going forward, but those policies, such as lower corporate tax rates, and repatriated money are not right around the corner. On every position initiated you already have both a target price, and a panic point, right? (Trading discipline 101) Stick to your intent. What is immediate, in a broad sense is the investor sentiment that has brought us here. The US share of planet earth’s market cap is now at a 10 year high. Put protection (as to the SPY) is at a six month low. According to surveys I’ve seen, the percentage of individual investors describing themselves as bullish has more than doubled from less than 25% to a rough 50% just since the US election. The “America First” trade has undeniably been a rousing success. Danger lurks? Danger always lurks. Simply put, most of you suddenly have something to protect, but you have not yet protected it. There is money to take off the table, and a series of news events with the potential to rattle some cages.
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Publication Note: Sarge’s MARKET RECON will be moving to TheStreet as of this Thursday…. December 1st.
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Macro
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10:30 – Dallas Fed Manufacturing Index (Nov): Expecting 1.7, Oct -1.5. This item will not impact your day as a trader. There is, however… something interesting going on here. We look for the “headline” General Activity Index to print in positive territory today. The last time that Dallas actually hit the tape in a state of expansion was way back in December of 2014. To put it bluntly…. this series is trying to end a 22 month losing streak. On top of that, NY, Philly, Richmond, and KC have all already printed in expansion this month. The last time all five of these “major” Fed regional manufacturing data-points all printed positive together was one month earlier… in November 2014. (The Empire State was negative at the headline in December that year.)  Hopefully, conditions in Dallas are already as bad as they can possibly get thanks to the rebound in Crude prices since last year. We’ll see today.
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Sarge’s Cash Levels
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SPX: 2224, 2216, 2205, 2194, 2187
RUT: 1355, 1349, 1340, 1333, 1327
 
Monday’s Earnings Highlight
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After the Close: THO (1.23)

Market Recon Wednesday

Good Morning,
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Coming in Hot.
                        Aggregate Euro-Zone Manufacturing is showing signs of an awakening. Not only did the EMU’s flash PMI for November beat consensus, but France hit the tape in expansion (at least at this flash) for the second consecutive month after spending most of the year down in the 47/48 range. In case you were unaware, the service sector had already been running rather warm across Europe. What does this mean? It could very well mean an upward bump for EMU Q4 GDP, which has been running at around 1.6% y/y for most of 2016, after performing slightly better in 2015. Is 2% “a Bridge too Far”? The ECB’s next policy meeting is slated for December 8th, where I would think an extension to the current quantitative easing (QE) program will be announced. The impact to the American trader will be based on what that extension looks like… be it a tapering, or a continued “forward march”. The impact on the DXY, which is heavily weighted toward the Euro will not be insignificant.  One more fly in the ointment will be the Italian referendum vote on December 4th, which nobody on this side of the Atlantic is paying any attention to. What it boils down to, in comparatively simplified terms for us would be something like a constitutional battle over state’s rights. After populist votes in the UK , and the US, anything is possible, and we already know that polling is useless.
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You Know This, but New Kids may Not.
                         Earnings season is for the most part in the rear view mirror, but due to the shortened work week, we are faced with an absolute plethora of macro-economic data for the day. Like our esteemed (or maybe not so esteemed) central bankers, a large portion of the trading public (professional & retail) may just take their collective eyes off of the ball. True, you can trade from anywhere these days, and people are reachable unless they make an attempt not to be.  That said…later today, and especially on Friday, there may be a spot or two where market inefficiency makes a rare appearance. If you are the hunter, good luck. If you are going to be watching football for four to four and a half days, then you need to button up tight (hedge yourself). Weekends at long enough. Extended weekends are dangerous.
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Trader Focus.
                         One thing you have to keep in mind is that round numbers like 19,000, and 2200 mean absolutely nothing to us. They are just numbers on a chart, and to be honest, nobody, but nobody trades off of the DJIA. We care about performance in the credit markets, currency valuations, policy direction, and money flows. Yes … I know stock valuations are high, but they are only a lagging indicator. I look at PE ratios… I am not discounting them, but they are merely a symptom of the demand and supply equation. The patient is already either sick or healthy by the time this is obvious. The already mentioned money flows control that just mentioned equation, which itself is simply the result of sentiment. There it is…. sentiment. What is moving the needle on sentiment? Right now it’s policy direction, but it can be anything from inflation expectations to whether the old NFL or the old AFL wins the Super Bowl. Watching, listening, and putting in the homework has never been more important. Talk to people of all walks. Hear them.
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Macro
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08:30 – Durable Goods Orders (October): Exp 1.5%, Sept. -0.1% m/m.
08:30 – Dur Gds Orders ex-Transp (October): Exp 0.2%, Sept 0.2% m/m.
08:30 – Core Capital Goods (October): September -1.2% m/m.  Durable Goods will be one of two “red star” macro-economic releases set for today, the other being New Home Sales. The headline number here is always volatile, and has made a habit of both missing expectations, as well as printing in contraction this year. There, however does seem to be some life in areas of manufacturing of late, and we still expect to see stronger data for November than we are used to. Offsetting that will likely be already weak October data that is revised lower still. This data will impact Q4 GDP expectations.
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08:30 – Initial Jobless Claims (Weekly): Expecting 250K, Last Week 235K. As we have two “red star” events today, we also have several “no star” events. the first of three consecutive such releases, Initial Jobless Claims have lost their ability to impact the marketplace due both to the regularity of the series, and the lack of the ability of those who are underemployed to even file when losing income.
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09:00 – FHFA HPI (September): Expecting 0.6%, August 0.7% m/m. This is the second of our series of three irrelevant data-points, at least as far as the marketplace is concerned. Due to the narrow scope of this item, covering only single family homes with loans backed by either Fannie Mae or Freddie Mac, the HPI to watch is Case-Shiller. That release is scheduled for next Tuesday.
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09:45 – Markit Manufacturing PMI Flash (Nov): Exp 53.5, October-f 53.4. This one might actually get some attention, though it usually does not. Being that the ISM does not flash, and that the regional Federal Reserve districts have gone 4 for 4 in terms of expansion and New Orders in the manufacturing space, this could get a (an extremely) tertiary look.
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10:00 – New Home Sales (October): Expecting 592K, Sept 593K.This is one series where there is undeniably visible strength. How important are New Home Sales? Loans, demand for skilled labor, furniture, landscaping, countless trips to Home Depot and Lowes. The multiplier effect on a local economy is both endless, and repetitive every time a New Home is sold. As with Durable Goods this morning, this item will both get a look from the markets, and move the needle on GDP. Expect to hear from the Atlanta Fed in a couple of hours.
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10:00 – U of M Consumer Sentiment (November-f): Flashed 91.6. After putzing around below trend for most of the second half, October Sentiment took a step toward the similar Confidence series with it’s highest print since June. Ironically, Confidence took a step backwards last month. What does it mean, when two very similar items spend long segments of time in disagreement? No really… I’m asking you. The marketplace does tend to react to this item. There is a lot out there today, but there also could be a lack of players (liquidity).
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10:30 – Oil Inventories (Weekly): Exp +300K, Last Week +5.3M barrels.
10:30 – Gasoline Stocks (Weekly): Exp +600K, Last Week +700K barrels. The rapidly growing supply has been a weight upon WTI Crude. That said, OPEC whispers have more to do with the speculatory nature of pricing right now than anything fundamental. The American Petroleum Institute has been a far better indicator of Wednesday’s oil number than any kind of professional consensus in recent weeks. Last night, the API reported a draw in Crude inventories of -1.3M barrels, but a surprise build in the gasoline space of 2.7M barrels. WTI is up half of one percent this morning in response.
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11:00 – Natural Gas Inventories (Weekly): Exp 40B cf, Last Week 30B cf. I’ve started to enjoy telling you each and every week about the never ending growth of supply in the Natural Gas space. I doubt Energy traders are enjoying it much. Today, we look for, and expect the 16th consecutive weekly build, as well as the 31st build in the last 32 weeks.
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14:00 – FOMC Minutes. I do not think anything that comes out in these Minutes will surprise anyone. Fed Funds Rate futures are now pricing in a 100% chance of an increase at the meeting that will end December 14. About the only way the Fed could surprise us at this point would be to announce a half point increase at that meeting. Boston Fed President Eric Rosengren, as the only voting member of the committee not to stand by any conviction at the last meeting will provide today’s entertainment.
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S&P Cash Trading Levels
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            Last night, the index sharply was repelled as it approached 2205, so we’ll keep that one in place. The mid-day bounce came at 2194, a point above my expectations, so we’ll adjust. Quite simply, the levels have been almost precise over the last week and a half or so. (Over the last four years or so) While algorithms have simplified trading for many, they are in such heavy demand that in aggregate, they have become clumsy, returning the advantage in performance to the human trader. Go team !!
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2224, 2216, 2205, 2194, 2187, 2180
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Wednesday’s Earnings Highlights
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Before the Open: DE (.38)
After the Close: Preparing the stuffing. Happy Thanksgiving, gang.
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Note: I do not intend to publish on Friday.

Market Recon Tuesday

Good Morning,
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Sub-Five Minute Mile
                     This game sure is more fun when equity markets are on the run…. and I think you have to at least mention it when the S&P 500, DJIA, Nasdaq Composite, and Russell 2000 all hit all-time intra-day highs, and close at all-time record on the same day. This had not happened since December 31, 1999. Apparently, the smart money was not nearly as worried about a worldwide Y2K systematic technology failure as were the rest of us.
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Such a Deal
                     Though equity markets in aggregate moved higher yesterday, there was a serious change in leadership, which is at least very interesting. The Energy sector ripped, as WTI Crude ripped, and Crude is on another tear this morning, btw. Materials, and Utilities also out-performed. These sectors responded well to a (thank goodness) pause in the onward march of the US Dollar against it’s competitors, as well as bargain hunters hunting down some of those lower bond prices. As far as Crude and Energy are concerned, many OPEC players are saying the right things, or intentionally allowing certain scraps of information to leak out of an ongoing “pre-meeting” meeting in Vienna. This morning, an official from the Nigerian delegation told reporters that he expected to see the groundwork for a production cut laid out this week. While this may or may not be intentional, the market impact is undeniable. Exemptions ?? Shhhhhh.
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We’ve Got Legs
                      The most blatantly optimistic signal to come out of yesterday’s record setting push was the positive performance of the sectors, and industries that had led since the election (though they did not lead). Within Financials… the Banks, Consumer Finance, and Capital Markets all shaded green, while inside the Industrials sector, not only did Aerospace & Defense keep up as did Air Freight & Logistics, but Railroads, and Construction/Engineering names actually out-performed the broader indices. Game on. Then there’s the impact that the much strong dollar, possibly less regulation, and protectionist policies coupled with economic growth is having on Small Caps. Whoa. Pauses are inevitable, but I am not paring longs on anything other but a stock specific basis for now. Oh, and shorts are only synthetic, through long puts for now. No holding stop signs up in front of steam rollers.
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Allocation Changes
                      In an effort to provide at the most simplified level, a skeleton for personal allocation that will allow for appreciation without getting one’s face ripped off, I’ve tweaked the entire model since it’s last publication. Almost all of you know that I took gold back down to 5% from 7.5% when it crossed through 1305  on the way down. That 5% stands for now, and will be moved back up to 7.5% when either one of two targets is reached. I am going to jack equities up to 55%, from 47.5%, which s still low, but we are conservative here, because we are family types. This is grocery/broken water heater money. Bonds will be cut to 15% (still kind of high) from 17.5%, with the concentration split between Treasuries, Munis, and some Corporate. Still absolutely no junk !!! Cash will be cut to 25% from the 27.5% that we had it at going into the election. Cash is always high in this space. We’re regular people here, not daredevils. Should the opportunity arise to take the gold allocation back up, that money will come out of cash.
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Thanksgiving Bonus: No Fed speakers are scheduled to get in the way today for the first time since November 3rd. There are no Fed Speakers scheduled for the rest of the week.
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Macro
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08:55 – Redbook (Weekly): Last Week 0.9% y/y. We’re starting to see some momentum in this space, at least on a year over year basis. Six of the last seven weekly prints have been at least acceptable when measured against my 0.5% minimum target, and the last three have all showed steady improvement upon each other, successively. Look for a slight slowing in the pace of that growth today, but still above our goal.
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10:00 – Existing Home Sales (October): Expecting 5.43M, September 5.47M SAAR. Existing Home Sales have averaged just above 5.4M units a month when seasonally adjusted, and annualized for 2016. Unlike New Home Sales, and now Housing Starts that have heated up in recent months, this item, which is easily the largest slice of the housing pie.. has continued to go sideways. In fact, this item has gone sideways now for close to two and a half years. An upward surprise here today after what we saw last week, would be very encouraging. The market doesn’t need it, though.
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10:00 – Richmond Fed Manufacturing Index (November): Expecting 1, October -4. November seems to be a better month than we have seen for large slices of American manufacturing in quite some time. New York, Philadelphia, and Kansas City have all printed in expansion at the headline level, and New Orders were a strength for all three, particularly in Philly. The last month that four of the five major regional Fed District manufacturing prints hit the tape above zero was way back in January of 2015.
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Tuesday’s Earnings Highlights
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Before the Open: ADI (.89), BKS (-.39), CPB (.95), DLTR (.78), HRL (.45), MDT (1.11)
After the Close: GME (.47), HPE (.60), HPQ (.36)

Market Recon Monday

Good Morning,
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Dollar Valuations / Yields
                        The US dollar is somewhat softer this morning. To keep things in perspective, the DXY is still hovering above 101, and the WSJ Dollar Index is still close to 91.5. At the same time … US Treasuries, Gold & Oil have all found bids in the zero dark hours of Monday morning. If the hopes and dreams of lower (Personal & Corporate) taxes, increased spending, rapid growth, and inflation that Donald Trump’s election has unleashed on the hearts and minds of the investing public actually do come to some sort of realization, it becomes likely that some of the shifts in investor behavior that we have seen will continue, although in slower motion.. in their general directions. That does mean that the Fed’s one quarter point a year tightening cycle does pick up the pace in 2017. Markets, we are told (by everyone) have come too far, too soon. Market prices are the result of demand and supply at a given moment in time. They are never “too far” in that moment. When you and the tape disagree… guess who’s right?  As for “too soon”, that is quite possible. The bond market is ahead of the Fed for now.  Bear in mind, that while tightening does force yields higher, and thus… dollar valuations higher that (drum poll, please) higher yields, and higher dollar valuations will also inevitably attract foreign investment, (which has been lagging of late), slowing said retreat.
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Sector Movement
                        The President-elect is two months away from taking office, and will not have a magic wand at his disposal on January 20th. Financials, Small Caps, and Industrials will all likely have to digest their recent moves. Sector related charts in these arenas will become stretched. and eventually start to make better sense to the trained eye. The Energy sector will move on rumor for another ten days or so, and then react sharply in response to the results of the OPEC meeting next Wednesday. I would think the greater risk in this space to be to the down side, particularly if WTI moves higher ahead of the meeting on rumor. There is the double edged risk here of a “sell the news” event, regardless of the actual news. Discretionary names, particularly well known retail names will also will likely be in play heading into Black Friday, and carrying through Cyber Monday. This is something that I would think you would want to play though the options markets, and leave your capital either on the bench, or better deployed elsewhere.
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Numbers
                        For a holiday week, we are not without a decent amount of market impacting type macro-economic data-points. There’s nothing on the docket today; then there’s only really October Existing Home Sales tomorrow. On Wednesday, when you’re thinking about American football, and how you will possibly sit across the table from that worthless puke of a relative that voted differently than you .. we’ll see Durable Goods Orders, New Home Sales, Consumer Sentiment, Oil Inventories, and the FOMC Minutes, so you’ll probably have to focus on something other than your dear cousin. Btw, Durable Goods are expected to show improvement, and will impact Q4 GDP expectations, which are already on the rise (Currently running at 3.6% according to the Atlanta Fed) thanks to last Thursday’s print for Housing Starts.
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Economics
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08:00 – Fed Speaker: Federal Reserve Vice Chair Stanley Fischer will speak this morning from New York City.  Fischer, a permanent voting member of the committee, spoke last week on enduring market liquidity…. veering away from policy talk. The Vice Chair is expected to “go there” today, covering monetary policy, inflation, and growth.
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S&P Cash Levels
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             You’ll notice that these levels have not changed for a few days. I don’t change things until they stop working. That said, the 2187, and 2180 levels have been absolutely spectacular for the better part of a week now. For futures traders, fair value is currently -1.35.
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2205, 2193, 2187, 2180, 2172, 2165
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Monday’s Earnings Highlights
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Before the Open: TSN (1.16)
After the Close: SINA (.36), WB (.20)