Market Recon Thursday

Good Morning,

                     Jobs Day !!  Oh, yeah, get some.  Does it matter?  Now?  Even with nations, states, commonwealths, and the guy across your street drowning in debt?  Yes, Virginia…it does.  Jobs, and the quality of demand for labor are still the most important things relevant to our economy, our lives, and the velocity of money.  There may be developments out of Greece today, but all indications are that we will not have significant breaking news on that front until after the referendum on Sunday.  Puerto Rico seems to be, for now at least, meeting obligations on a day by day basis, and Chicago is….well….Chicago.
                     About those jobs..  At 08:30 ET, we’ll get our weekly Initial Jobless Claims print that we always get on a Thursday, as well as the “once a month” Employment Situation release from the BLS that usually comes on a Friday.  The Jobless Claims number came in at 271K last week, and economists generally expect this week’s print to be in line with  that one.  There is virtually no range for this print, meaning that we are either reasonably sure of the number, or everybody is copying each other’s work.  Now, for some meat and potatoes.  June Non-Farm Payrolls are expected to tail off from May’s 280K to something near 230K.  There is almost no skew that I see, but if there is one, I think it may be to the low side.  The Unemployment Rate is not a serious number.  We all know that.  Traders don’t respect it.  Sentient beings who read newspapers,and try to understand the news don’t respect it.  The guy down your block, who used to make 85K, and now works for $9 bucks an hour doesn’t respect it.  Nonetheless the charade must go on, and the expectation is for a drop to 5.4%.  Average Hourly Earnings are projected to have increased by 0.2% m/m, off of the 0.3% pace seen in May.
                     Two important items that are part of the Employment Situation release that most economists do not generally make a prediction for, are the Participation Rate, which currently stands at 62.9%, and the U-6 Unemployment Rate.  The U-6, while not a true Unemployment Rate is the closest thing to an honest measure of the Labor Situation that we have in this country.  That number has been improving throughout the recovery, and stands at a seasonally adjusted 10.8% coming into this morning’s print.  Funny, how they try to bury this rate, being it’s twice as high as the one that they’re trying to sell you.  Factory Orders are due at 10am ET, and the Natural Gas number is due at 10:30 ET.
                      I do not see any Fed speakers out there today, and “earnings season” won’t start til next week, so enjoy your families this weekend, and most of all…..be safe. Have a very happy 4th of July !!
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Note to Readers:  This will be the last Market Recon note for a while.  As most of you know, every once in a while I have to disappear for a little bit, and that time is upon me again.  I will be at my spot on the NYSE trading floor on Monday, and Tuesday, and then I likely won’t see you for most of  the rest of the month.  May you have a wonderful July, and may God bless you.
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Sarge’s TRADING LEVELS
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SPX: 2099, 2090, 2081, 2075, 2068, 2057
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RUT: 1272, 1264, 1258, 1252, 1248, 1243

The Wednesday Wrap

The Wednesday Wrap

Macro:
ADP Employment beat, Markit Mfg PMI beat, ISM Mfg beat, Construction Spending beat, Total Vehicle Saleson consensus, Oil Inventories rose.
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1) All of the major Equity indices were up on the day, with the DJIA on the high end (+.8%), and the Russell 2000on the low end (+0.2%).  Volume remained above average.  Hopes for a post-last minute deal for Greece supported stocks, while lack of progress throughout the day pressured them.
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2) The Financials, and Consumer Staples were your most victorious sectors for the session.  Energy shares were severely beaten, as Crude was absolutely crushed.
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3) The Transports closed in the green today, despite the drag on the index that was the sell-off for the airlines after the DOJ confirmed a probe into possible collusion in that industry.
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4) Treasuries finished lower on the day, after trading in fairly tight range over the duration.

Market Recon Wednesday

Good Morning,

                     Where do want to start?  China (Ugleeeeee !!!!), or Greece, where I’m not sure ugly is the appropriate word.  Actually, I’m not sure what an appropriate word might be.  Let’s start in China.  Last night (NY time), HSBC, and the government released their twin Manufacturing PMI numbers for China, and you guessed it….they both missed consensus.  That may have been the catalyst, or maybe it’s just that the whole deleveraging process still has a few miles to run, but Chinese stocks gave up their gains from that oddball session on Tuesday, closing down 5%.  Folks, I wouldn’t trade Chinese equities with your money right now.  Losing my shirt scares me more than making a fortune delights me.
                     Greece, now in default, has apparently made overtures toward their lenders this morning.  That’s why European equity markets are in party mode as I type out this note.  You have probably noticed the pop in US futures markets.  I don’t know how much faith you can put in anything right now.  Is this sincere?  Will there be a referendum at all?  Will the people of Greece throw a group tantrum?  Instead of judging, put yourself in their shoes.  Your life has drastically changed for the worse over the last few years.  It’s still changing for the worse.  You have money in the bank, but you are not allowed to access it.  You feel betrayed by your leaders.  You feel betrayed by your creditors.  Never mind whether or not these statement are backed by fact or not.  The recipe is there for both chaos, and a humanitarian disaster.  Those things will cost Europe more in the end, than allowing Tsipras to somehow save face.  I do not know how this plays out, and neither do “the experts”.

                      Macro ??  Gang, I hate to distract you form all of the headline making that we see around our planet this morning, but we have a fairly large batch of macro on our plates today…and then there’s “Jobs Day” tomorrow.  First lets’ get rid of today’s items that in the end, won’t impact your trading session.  The Challenger Job Cut Report will not sway the markets, and will not sway you, unless you’re an unfortunate target.  Motor Vehicle Sales do matter, but the numbers are released sporadically, and will push or pull specific stocks.  There will not be a “Whoa Baby” moment there.  What will immediately impact the futures market will be the June ADP Employment Report.  That number will be released at 08:15 ET and will be forgotten 24 hours and 15 minutes later.  The consensus for today is for 218K, up fro  last month’s 201K.  The range is broad, basically 200K to 250K.
                       You’ll get hit with a double dose of manufacturing data next.  At 09:45 ET Markit will print their PMI number……and nobody will notice (except me), and at 10am ET, we’ll see the ISM print.  That one counts.  The expectation (hope) for this June number is for a 53.2 tag, up from May’s 52.8.  The 10am hour will also bring us May Construction Spending.  Lastly, but certainly not least importantly, we’ll get our weekly Oil Inventories report at 10:30 ET.  we are going for our ninth consecutive contraction in Oil supply this week.
                       No doubt, we’ve got a ton of moving parts impacting what we do right now.  No harm stepping back when you need to, in order to gather your thoughts.  Slow things down when you need to, and play small ball.  Singles hitters still make the all-star team.
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Sarge’s TRADING LEVELS
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SPX: 2107, 2099, 2090, 2080, 2074, 2068, 2057, 2052

RUT: 1283, 1278, 1272, 1265, 1259, 1253, 1248, 1243

The Tuesday Wrap

The Tuesday Wrap

Macro:
Case-Shiller miss, Chicago PMI miss, Consumer Confidence beat
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1) All four major Equity indices closed up anywhere from a smidge to a half of one percent on heavy “end of the quarter” volume.
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2) Markets were pushed one way or another all day by rumors of a last minute kicking of the proverbial can forGreece.  As of now, there has been no actual kicking.
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3) Energy shares were your best in class today, as they rallied along with Oil.  Telecom was the worst performing sector for the day.
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4) Treasuries finished the day lower, after zigging and zagging throughout the day on rumors along with the stock market.

Market Recon Tuesday

Good Morning,

                     Today is the day that Greece is expected to default on an approximate $1.72 B payment to the IMF.  There are last ditch efforts to get both sides back to the bargaining table, so anything can still happen, and headlines remain the greatest risk to your money as we proceed.  Talk about risk….how about what happened in China this morning.  Volatility is not a strong enough word for this.  As you know, the Shanghai Composite has been getting slapped around for about a month.  Well, this morning, that index opened in sell-off mode.  The index was down over 5%, and then the sell-off was over.  The shares began to rally, and it kept on going until the Shanghai Composite closed up 5.5% for the day.  Ridiculous.
                    Did you ever think that the employment situation would be overlooked by the markets during “Jobs Week”?  Me neither.  Well, it looks to me as if that day has come.  For now.  There is some macro out there today, but the market will not fixate on it.  The most important number due today is probably the April release (9am ET) for the Case-Shiller HPI.  The 20 city, non-seasonally adjusted, year over year print (the one traders follow) is expected to show 5.3% growth, up from 5.0% in March.  You’ll also see The Chicago PMI at 09:45 ET, which is not what it used to be in terms of trader impact, and the Conference Board’s Consumer Confidence at 10am.  That one still has some luster.
                   With the Greek, and Puerto Rican debt crises threatening the Fed’s attempt to lift the Fed Funds Rate later this year, you may have noticed that yesterday, those who lay odds on a September rate lift off, drastically reduced those odds. Fed speakers could impact markets even more so than usual.  I have none of the radar for regular trading hours, but NY Fed Pres. William Dudley will speak from Brussels well before markets open here, and St’ Louis Fed Pres. James Bullard will speak tonight, well after today’s closing bell at 11 Wall Street.  Dudley has an FOMC vote, Bullard does not this year.  Stay sharp.  Don’t lose your edge, and good luck.
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Sarge’s Trading Levels:
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SPX: 2090, 2080, 2071, 2063, 2057, 2052, 2042
RUT: 1265, 1259, 1253, 1248, 1243, 1235, 1227

The Monday Wrap

The Monday Wrap

Macro:
 Pending Home Sales beat, Dallas Fed contracted, but beat.
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1) Every major Equity index gave up anywhere from 2% to 2.5% on the day, as Greece, Puerto Rico, and Chinagave traders plenty of reason to sell stocks.  Exacerbating the sell-off, at least for the Financials were diminishing odds of the Fed’s implementation of an interest rate hike later this year.
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2) Financials may have been your worst performing sector, but the beat-down was broad based.  Materials, Health Care, Consumer Discretionary, and Info Tech all gave up more than 2%.
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3) Utilities, down half of a percent were easily the best sector on the day, supported somewhat by the safe haven seeking surge in Treasuries.
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4) Trading volume was heavier than usual, which is saying something given that Friday was the Russell Rebalance, and tomorrow is the end of the quarter.

Market Recon Monday

Good Morning,

                     I’m going to go out on a limb and guess that today’s release of Pending Home Sales for May isn’t what’s on your mind this morning.  If it is, you must work in real estate.  If you work in the financial markets, then Greece is what’s on your mind first and foremost, and secondly…..maybe…the interest rate cut made by the PBOC over the weekend that did not rescue Chinese stock markets.
                     OK, Greece will almost certainly miss their 30 June deadline at this point (Never say never).  Greek banks will not open today, and likely will be closed at least a week, or until a resolution, or maybe the lack of a resolution becomes clear.  Then what?…….Every headline will carry exaggerated weight in the marketplace as we pass 30 June, and approach the 5 July referendum on the bailout plans that have been proposed. (The Tsipras government is recommending a “No” vote).  If the people vote “yes”, I can’t imagine the Tsipras government surviving.  If the people vote “No”. then they’ll default, and probably leave the EMU down the road.  The only guarantee  is that something will happen that we haven’t thought of yet.
                     FYI, more than a billion euros were withdrawn from ATM machines in Greece this past weekend, and all over the country, those machines ran out of cash as worried people stood in line desperately trying to get to their money.  No lines today however, as the people seem resigned to the fact that there is none available,  There is misery, and miserable people rebel.
                     If you are not aware of what is going on in the futures markets this morning, you may want to take a peek.  It’s ugly out there, but far less ugly than it was overnight.  Followers of the S&P 500 should find out early today if the lower end of the range that we have been in since early April will hold.  Like I said a while back, we are range bound, until we are not range bound.  We may leave our zone of safety today, but the futures market has indicated that there is support a rough percent lower than where markets closed on Friday.    Bottom line is that this week may be short, but it will not be fun.
                     As you might expect, US, British, and German sovereign debt products are experiencing the safe haven benefit that they usually do when seas get rough.  On the other hand, Italian, and Spanish debt have a very different experience in times like this.  What does Arthur usually say?  “Stay nimble”???  He’s got that right.  Good luck, gang.
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Sarge’s TRADING LEVELS
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SPX: 2107, 2099, 2090, 2084, 2079, 2073, 2068, 2057
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RUT: 1283, 1278, 1272, 1266, 1257, 1253, 1248, 1243

The Friday Wrap

The Friday Wrap

Macro: U of M Consumer Sentiment Beat.
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1) Hard to say what the market did today.  Every index tells a different story.  The S&P 500 (what most traders refer to as “the market”) closed virtually unchanged.  The Nasdaq Composite gave up 5/8 of a percent, while the Russell 2000 gave up a quarter of a percent in the midst of it’s re-weighting.  In case anyone out there still follows the DJIA,that average gained a third of a percent on the day thanks to the surge in NKE, thus proving it’s own illegitimacy as a measure of market performance.  Why the media beats that drum, I’ll never know.
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2) Trading volume was very heavy today, supported by the Russell Rebalance.
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3) Utilities had a nice day, particularly Gas Utilities, while Tech stocks got the beat-down led by the 18% obliteration of MU.
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4) Treasuries gave up some turf today, with the US 10 year inching it’s way back within sight of 2.5% yields.

Market Recon Friday

Good Morning,

                     I was not going to lead with China, but…..my oh my.  This morning, the Shanghai Composite was absolutely shredded to the tune of 7.4%.  That index is fast approaching a 20% decline in just a couple of weeks.  Today’s trade was no better for the Shenzhen market, which was down 7.9% today, and is now more than 20% off of it’s peak.  Has the bubble burst?  Smells like it.  The Chinese Central Bank injected cash into the system this week, but it was too little, too late.  Valuations obviously had gotten out of control, and Margin debt is now 8.5% of the composite value of mainland shares. (Yikes)  The recipe is certainly there for continued contraction, but I’m glad that I don’t have to make a call on this one, and I’m not gonna.

                     What do you, the trader type need to know about this fine Friday?  Other than the fact that today is the annual June Russell Rebalance extravaganza?  Just two other things matter at all, and they both pale in comparison to what will transpire at today’s closing bell.  At 10am ET, the University of Michigan will release their final June number for Consumer Sentiment.  Two weeks ago, this item surprised to the upside with a pretty strong 94.6 tag.  The expectation for today is that they can hold this number.  The other item of the day is a speech by KC Fed Pres. Esther George, who tends to be hawkish, from Kansas City at 12:45 ET.  She is not a voting member of the FOMC this year.
                    Now, what to make of the Russell Rebalance?  If you’re new to this sport, it comes down to this, very simply….Russell reconstitutes their indices (Russells 1000, 2000, and 3000) just once a year.  Adding up all of the funds tracking these indices, the total dollar value is well over $4 trillion bucks.  The Russell 3000 represents virtually the U.S. stock market in it’s entirety, so it’s not really a factor here.  The 1000, and 2000 represent larger cap stocks, and smaller cap stocks respectively.  As Russell adds stocks to, or deletes stocks from these indices, said funds tracking these indices are forced to reconstitute their funds accordingly at the same time.  This forces huge volume, and volatility going into, and on the close of business on the day that the changes go into effect.  That day happens to be today.  The Russell 2000 will see the most additions, and deletions.  Sectors most impacted today will be Health Care, and the Financials.  This is typically the highest volume day of the year for floor traders.
                    I know today is important to you.  I sincerely hope that each, and every one of you may earn your keep today.  When it’s done, you will be exhausted, but at least it will be Friday night.  Remember, you don’t walk alone.
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Sarge’s TRADING LEVELS
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SPX; 2120, 2113, 2107, 2099, 2090, 2084
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RUT: 1295, 1288, 1283, 1278, 1272, 1266

The Thursday Wrap

The Thursday Wrap

Macro:
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Core PCE on consensus, Initial Jobless Claims on consensus, Consumer Spending beat, Personal Income slight miss. Service Sector Flash PMI miss, KC Fed negative.
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1)  All of the major Equity indices meandered their way lower throughout the day, with the Russell 2000 closing nearly unchanged.  Trading Volume improved to what we could call “below average”.
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2) Things got even uglier for the Transports, with the Railroads again being among the ugliest.
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3) Health Care was easily the leader today, and the Providers were easily their leader after the Obama-Care ruling, and some takeover talk.
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4) Treasuries sold-off, but avoided closing at their lows for the day.  Oil gave up a dollar intra-day.