Market Recon Monday

Good Morning,

                     This week may be July “Jobs Week”, but before we even think about what will transpire in a few days’ time, I think that we’ve got some wood to cut.  There’s a lot on your table today, and it’s best that we waste no time, and get working.  Start the music.
                     First off, there are a couple of international items impacting global markets this morning that you may want to stick in the back of your pretty little head as we proceed.  It would be impossible to miss the continued weakness in Chinese equity markets this morning, after both the CLFP (Friday night), and the Caixin (Markit) (Last night) Manufacturing PMI’s failed to impress.  C’est la vie.  In fact the Caixin number printed deeply in contraction.  On top of that, Greek market re-opened this morning, allowing investors to get out of their frozen positions.  Rubbing salt in the wounds, Markit released their Greek Manufacturing PMI as well this morning.  The number came in with a “30” tag, when something in the mid-40’s was expected.  Yikes.  Greek stocks opened down more than 20%, but are currently off of their lows
                    Let’s get to some domestic macro, shall we?  Some key data will be released by the Bureau of Economic Analysis at 08:30 ET.  That’s when we’ll see June numbers for that timeless rivalry between Personal Income, and Consumer Spending, and top it off with the ever important (to the FOMC) Core PCE.  Most economists are expecting to see a noticeable drop in the pace of growth for both Income, and Spending this month.  Before you go getting all bent out of shape, May brought home an unusually large pop for both of these items, so this consensus view would sort of just bring us back in line with where we were two months ago.  We look for month over month increases of 0.4% for Income, and 0.2% for Spending.  The projection for Core PCE is just a m/m 0.1% increase, which should leave the y/y print right around the 1.2% level, which is where it has been stuck.  This may make Janet Yellen nervous, but as a child of the 1970’s, I’m OK with a lack of inflation.  Yay, gasoline.
                   We all know that China has two manufacturing PMI’s, and so do we.  The one released by Markit (also known as the one nobody looks at) will print at 09:45 ET.  The highly visible one, known as the ISM Manufacturing Index will print their July number at 10am ET.  Expectations are for a headline of 53.6, which would be just a smidge of an increase in the pace of growth seen in June. This item has been known to move the marketplace, so keep your helmet on.  We will also get a look at June Construction Spending at 10am.  Throughout the day, the different auto makers will be releasing their unit sales for July, which will immediately impact those individual stocks.
                   Today also brings us a pretty healthy day on the earnings front.  Among the many firms reporting today, you will hear from DO, NBL, and TSN before the opening bell, and ALL, AIG, and THC after the close.  I am flat all of these names, as well as their derivative products.  All of that creates quite a puzzle for any brain to work through..  Take your time, think about what you’re doing.  Do everything that you do for a reason that you could explain to a child.  Have an escape plan.  Carry on.
Sarge’s TRADING LEVELS
SPX: 2125, 2116, 2110, 2101, 2094, 2083
RUT: 1249, 1244, 1239, 1234, 1227, 1221

Market Recon Friday

Good Morning,

                     European equities are mixed this morning, while sovereign debt out of that region is showing weakness.  This comes after Eurostat released a hotter than expected Flash Core CPI number for July the Euro-zone, and worse than expected macro numbers out of Italy, and France.  In Asia, Indian stocks are roaring after surprisingly strong production numbers were reported from a number of industrial sectors, and there is weakness in Shanghai ahead of tonight’s PMI data.  What does this all mean to us?  I’ll let you know when the ref blows the whistle, but our focus should remain on the Fed, the underlying macro that influences the Fed, China (the economy, not the stock market), and the welfare of municipal debt.
                      Let’s do the macro dance.  At 08:30 ET, the BLS will print it’s Employment Cost Index for the second quarter.  This is a danger zone for the economy, as it measures not just wages, but benefits plus all of the hidden costs that go into employing an individual.  Danger?  Yes, because this item has been running higher over the last year nad a half than it had for several years before that.  Today, we look for another pop, +0.6% q/q, on top of Q1’s 0.7% q/q increase.  The Chicago PMI will print at 09:45 ET.  That one has less of a market impact than it used to, so don’t get too worked up over it.  What will impact your morning will be the University of Michigan’s final July Consumer Sentiment number that comes out at 10am.  This item sported a 93.3 tag two weeks ago, and comes into focus today, particularly after the weak Consumer Confidence release that we saw from the Conference Board on Tuesday.  The U of M number is projected to easily hold that 93.3 line, and possibly push up into the 94’s.
                      I do not see any Fed speakers hiding in the weeds today, but earnings releases are a different story.  Fridays are usually a light day as far as the earnings calendar is concerned, but today brings us a few big fish, with the focus on energy names.  Before tofday’s opening bell rings at 11 Wall Street, you will hear from CVX, XOM, PSX, NWL, TYC, and WY, among others.  Have a good day, gang……and may many victories be yours.  Two bells…..then we rest.
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Sarge’s Trading Levels
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SPX: 2128, 2120, 2110, 2100, 2093, 2082
RUT; 1242, 1237, 1233, 1227, 1221, 1215

Market Wrap Thursday

Good Evening,

Macro:
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 Q2 GDP mildly disappointed, but with a strong revision to Q1.  Jobless Claims printed at Consensus.
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1) Major equity indices closed nearly unchanged, with the NASDAQ Composite in the lead.  Volume was above 2015 norms, but below what we’ve seen in the immediately recent past.
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 2) The Energy sector was the day’s weakest performer on lousy earnings, and soft oil prices.
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 3) Utilities were your top performers as a direct result of strength in the Treasury market.

Trading Levels, Thursday 30 July 15

Mornin’

I have not been back long enough to research an intelligent Market Recon note for today, but chart-work is a lot quicker to put together.  I see no reason not to publish my Trading Levels for today.  Have a good day, gang.

SPX:  2128, 2120, 2110, 2099, 2092, 2081

RUT: 1242, 1237, 1233, 1226, 1221, 1215

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.