Market Recon Monday

Good Morning,
                       Buckle your chinstraps, gang?  Probably should.  If you have not taken your first peek at global equity indices this morning, then you don’t know.  There’s a new sheriff in town, and ugly is his name.  Moral has not improved, and apparently, the beatings have continued.  The Shanghai Composite (China) -8.5%, Nikkei (Japan) -4.5%, and Sensex (India) -5.5% have been severely dislocated.  European markets are all down at least 2% as well, as I type.  S&P futures are trading well below (very well below) fair value, but are also well above their overnight lows.  On top of all that, Crude, the WTI variety has been trading with a 38 handle this morning.  Many folks were hoping that the PBOC might pull a rabbit out of a hat this weekend, but that clearly was not the case.  Is the PBOC out of magic tricks?  Yeah, right.  US Treasuries anyone?  Get ’em while they’re hot.
                      I don’t know where the equity markets grab a toehold, nobody does….. but I do know this.  Investors, and asset managers will at some point, come to the realization that they can not make decent dough anywhere else.  Stocks have enjoyed an “only game in town” status for quite some time now.  In fact, even if the FOMC were to hike the Fed Funds Rate just a smidge (which they likely can no longer do), like they have been expected to do, it does not change the playing field one iota as far as that is concerned.  That doesn’t mean that you can time this market.  Don’t even try.  The buyers will be back, but there’s still fear out there, and when there’s fear, the main theme becomes “preservation of capital”.  A visible capitulation would be a wonderful thing to see on the charts.  We may get that today, but we may not be that lucky.  Now that humans don’t do the bulk of the trading like they used to, the wash-out may not have the same feel to it that we’re expecting to see.
                     There are no domestic macro-economic data-points to peruse this morning.  The earnings calendar is, at this point, on the back burner.  What we do have is Atlanta Fed Pres. Dennis (Spider) Lockhart, who spoke in a rather hawkish manner a couple of weeks ago, and will speak from Berkeley, California just before tonight’s closing bell.  What could go wrong?  Hey, listen to me….you woke up this morning.  They can’t beat that, and they can’t beat you.
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Sarge’s TRADING LEVELS
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SPX: 1973, 1958, 1944, 1926, 1905

RUT: 1150, 1140, 1133, 1122, 1110

Market Wrap Friday

Good Evening,
                       No reason to dance around the issue.  Often in these notes, I mention how a stock, or a sector was “slapped around” some.  There was no slapping around today.  For equities, this was more like being put up against a wall, and getting shot.  The only thing missing was the blindfold.
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1) The DJIA, S&P 500, and the NASDAQ Composite all took a beating of more than 3% on the day.  The Small Caps had a “nice” day, as the R2K merely surrendered 1.3%.  Trading volume was very heavy.  How much of that volume was attributed to options expirations, and how much to the sell-off is hard to say.
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2) Treasuries, and Precious Metals had nice days, but not what you might expect in light of the circumstances.  Where did that money go?  No doubt that there’s more cash in circulation tonight than there was this morning, but did I mention that the VIX ran up 46% today.  Jeekies !!
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3) I don’t think there’s a need to talk sectors tonight, but if it’s something you look at every night…. Info Tech got itself obliterated, while Consumer Discretionary, Energy, Financials, and Health Care were merely annihilated .  Utilities, and Telecom clearly out-performed everything else today, giving up less than 2% each.
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4) For the third consecutive day, selling pressure increased into the bell, which indicates a growing aversion to risk (duh).  This trend will be something to pay attention to, and possibly take advantage of when timing trades next week.
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5) Have a nice weekend.

Market Recon Friday

Good Morning,
                        Thank goodness it’s Friday.  Although in this case, I am quite sure many of you would eagerly trade Friday for Tuesday, and put that dough back in those 401Ks.  It was Aldo Nova who told us that “Life is Just a Fantasy”……. well, Aldo was misinformed….and we had better get busy.  Truth is that the weight of everything facing this market, Global Demand, Disinflation, the price of Crude (and other Commodities), Chinese economic conditions, and Emerging Market Currency swings has in aggregate…put the markets in a place where there is little impetus to add to one’s risk portfolio.  Late Thursday, the S&P 500 reached a level that we all were watching all year, and the best reason to buy stocks at that point was simply that it’s hard to make a buck anywhere else.  Well, I think most of us are willing to miss a percent, or two, or three, to ensure that we do not lose ten percent.  That, friends, is how “buyers’ strikes” happen, and the trading volume is sort of telling us that, at least to this point, that is what has occurred.
                        What today is, to most of the world is Flash Manufacturing PMI Day.  Markit will release one of those for the U.S. at 09:45 ET, but it will not get much hype.  For the rest of the planet, though, this kind of data does have impact.  China led things off last night with the Caixin (formerly HSBC) number, and they missed badly.  Very badly.  The print showed Chinese manufacturing in deep contraction, and voila !!  The Shanghai Composite is down 4.3% as I type out this note.  Japanese stocks have given up 3%, and the rest of Asia is getting slapped around as well.  In Europe, where they print the Manufacturing, and Service sector PMIs at the same time, we basically have seen mixed numbers in Germany, and lousy numbers in France, but a respectable performance overall by the EMU.  European equities are lower, but behaving far better than their Asian counterparts.
                         I see no Fed speakers out there today.  You will see quarterly result from FL, and DE this morning.  I am flat both of those names.  This is an expiration Friday, so there will be ramped up volume going into the close, and the close has been horrific over the last two days, so keep that in mind.  Gang, have a good day.  Try to remember that everybody’s got something that hurts.  Next guy, or gal that pisses you off….. be excellent to them.  You may need it more than they do.  Carry on.
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Sarge’s TRADING LEVELS
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SPX: 2068, 2058, 2051, 2043, 2035, 2028, 2021, 2012

RUT: 1195, 1190, 1185, 1178, 1167, 1162, 1154, 1150

Market Wrap Thursday

Good Evening,
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Macro: Initial Jobless Claims missed small, Existing Home Sales  beat, Philly Fed beat.
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1) There was more blood in the markets today, than there might be at a crime scene.  Every Major Equity Index gave up more than 2% on the day.  Six of the ten S&P sectors gave up more than 2%.  All ten sectors finished the day in the red.  Volume was moderate, heavier than we’ve seen this Summer, but not really heavy.
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2) While many industries were roughed up, it was those darn Media stocks that were absolutely punched in the teeth.
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3) Identifying the winners today is a whole lot easier than selecting one or two, or 250 stocks to represent the loser group.  Safe haven was where the money went.  Safe haven as in US Treasuries, and Gold.  The yellow metal tacked on about 25 clams.  Remember what I told you this morning.
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4) Many of us were looking at $SPX 2044 as the level that would either make or brake this market, and you can clearly see that when that level cracked, the market did move violently.  The volume does not identify capitulation however.  Maybe tomorrow on expiration Friday??  Maybe not.  You weren’t hoping to retire anyway….were you?  Let’s see how that Chinese number comes out tonight.
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5) Retail Crowd: I see your pain on Twitter.  Remember gang, when something goes terribly against you, dollar cost averaging isn’t always smart.  Many have been led to believe that buying the dip is standard practice.  If you’re not sure that you believe in the stock, protection is often cheaper than throwing good money after bad, or you can simply play volatility in the name if you don’t think the darn thing will sit where it has landed for too long.  If you don’t get carried away, which is easy to do, options are a very useful tool, and not hard to learn.

Market Recon Thursday

Good Morning,

                    Yes, the many levels of ugly have continued on into the Thursday morning trade.  Most European equity indices are down about a percent this morning, and then there’s China.  The Shanghai Composite gave up 3.5% today, government entities buying and all.  Oh, and oil looks good on the charts here. LOL, not to mention our S&P futures market.  Actually what does look good this Thursday morning are your “flight to safety” vehicles, like Treasuries, and Gold.  I know a certain Screaming Eagle (literally) named Dave, who will talk to you about that, if you’ll listen.  He works about 10 feet to my left.  If my readers from the media need an intro, just ask.

                   Speaking early this morning from Jakarta, San Francisco Fed Pres. John Williams waffled back and forth in tone.  I could not tell if he wants to raise the Fed Funds Rate in September or not.  He likely doesn’t know either.  The problem with extricating ourselves from years, and years of easy money policy is that you, and I, and the guy who picked up your trash this morning, all have as much experience as Janet Yellen in doing so.  It’s not in the textbooks.  Let that sink in for a bit.  There will be no immediate help from that quarter.
                   Let’s do some macro.  Always helps when we let the nerd run wild.  There are quite a few macro-economic data-points on tap for today, and most of them will hit during normal trading hours.  The only item due at the “usual” time of 08:30 ET, will be our weekly Initial Jobless Claims print.  This one used to be frightful back in the days of massive lay-offs, but thankfully Jobless Claims are not what they used to be.  The expectation for today is 271K, with a very tight range, so it would not take much to surprise, but my guess is that a surprise is not in the cards.
                  Things will get juicy at 10am ET sharp.  That’s when you’ll get July Existing Home Sales (the largest slice of the housing pie), The August version of the Philly Fed Manufacturing Index, and the Conference Board’s Leading Indicators for July.  To simplify things, let’s just toss the Leading Indicators out the window.  They will be useless to you as a trader.  Nobody I know has ever looked at this data-point, and likely….nobody ever will.  It’s probably meaningful to somebody, just not kids like us.
                  The Philly Fed will be “uber” important today, particularly after the Empire State laid an egg on Monday.  Philly still expanded in July, but missed expectations rather badly just putting an increased focus on this month.  Existing Home Sales hit an eight year high in June, so a small pullback in July would be fine.  Anything above 5.4 million units on a seasonally adjusted, annualized rate would be just dandy.  Last, and definitely least (unless you’re in it) will be the Natural Gas number at 10:30.  China fans….the Caixin (formerly HSBC) Flash Manufacturing PMI is due tonight.
                  If you have a plan, stick to it.  Today may give you that sick feeling in your guts, but your plan should have prepared you for such a gut check.  If you do not have what you consider a plan, then do not create one on the fly.  That’s how you get hurt.  Good luck, gang.  You know where I am.
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Sarge’s TRADING LEVELS
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SPX: 2103, 2095, 2087, 2078, 2071, 2065, 2057, 2045
RUT: 1224, 1218, 1212, 1206, 1201, 1195, 1189. 1179

Market Wrap Wednesday

Good Evening,

Macro: July CPI missed at both headline & Core, Oil Inventories showed much higher supply than expected.
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1) All of the Major Equity Indices gave up more than three quarters of one, but less than one full percent.  Trading Volume increased to what might be considered “normal levels”  These two sentences can hardly tell today’s story.
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2) Markets were, at first, under pressure due to unsettled Asian markets, and heavy selling in Crude.  The  Energysector was beaten like a rented mule, surrendering close to 3% on the day.  The Fed Minutes (remember those) were (ooopsies !!) released earlier than the scheduled release time of  2pm ET.  Said Minutes showed a lack of agreement between the hawks, and the doves.  Markets rallied to the point that they were nearly unchanged.  Hooray…..right?
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3) That’s when the equity markets remembered that they absolutely hate uncertainty, and stocks were sold into, and on the closing bell in dramatically ugly fashion.  There was a winning sector.  Try and guess !!  Utilities ??  Good job, Here’s a treat.
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4) As you might have expected, Treasuries were strong, as was Gold, and the Dollar got slapped around a bit.  Have a good night.

Market Recon Wednesday

Good Morning,

                     Chinese stocks were catching another serious beat-down today, my dear readers.  The Shanghai Composite nearly grazed it’s lows for the Summer, when wouldn’t you know it…… several companies just happened to decide to reveal their largest shareholders.  Doing so, those companies informed the investing public that several state-backed firms were buying their stocks.  That, my friends, as the guard at the gates of the Land of Oz once said…”is a horse of a different color.”  The rally was on.  The Shanghai Composite, previously down more than 5%, closed up more than one percent.  The Shenzhen Composite, which is kind of a small-cap incubator type of exchange index, closed up more than 2%.  Party on, dudes.
                     European equities are down a rough percent across the board this morning.  Blame it on unsettled Asian markets, blame it on Greece.  Blame it on Rio.  Actually, most European markets are off of their lows after the German Bundestag (Parliament) passed the Greek bailout, so we can’t blame it on Greece.  The DAX did, however, crack technical support,  so you may want to keep an eye on that one.

                     Can we do the U.S. yet, Sarge???  You’re boring the crap out of us.  Since you asked politely, let’s do it now.  There’s no denying that this week has been quiet up to this point.  Let’s hope that what we’ve got in store for today can jazz things up just a little bit.  Nothing seems to get the juices flowing these days more than consumer related data, and primo among those items would have to be any data covering consumer level inflation.  What we’ll have at 08:30 ET are July’s CPI numbers.  The projection here, is for 0.2% m/m growth…both at the headline, and at the core.  Anything coming in a little on the hot, or cold side in this space will, not maybe, but will impact futures markets at that time.  The weekly Oil Inventories print is due at 10:30 ET, and you all know the stretch of negative numbers that we’ve seen here for quite some time now.  Crude will react to this release.
                      You may not have any Fed speakers probing the perimeter today, but you won’t need them.  You’ll get the FOMC Minutes at 14:00 ET.  This may not tell us exactly what the voting members of the FOMC currently think, but it will tell us what they were thinking way back on 29 July.  Take that with a grain of salt if you want, given recent developments regarding the Chinese economy, and the Chinese currency….. but you know what?  Anything is possible on a Fed Day, or a Fed Minutes Day.  This item will also possibly suppress trading volume until this release, so be prepared for that.  Let’s just hope that there is something here to pop that volume after we see it.  What we do know, is that since that last policy meeting, Dennis Lockhart has sounded hawkish, and Stanley Fischer has sounded dovish.  Fischer has stressed that inflation remains a top concern of the Fed….which brings us back to our 8:30 data-point, and also raises the possibility that there was more than the usual give and take at that last Fed pow-wow.
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Sarge’s TRADING LEVELS
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SPX: 2117, 2111, 2103, 2095, 2087, 2081RUT: 1228, 1224, 1218, 1213, 1206, 1201

Market Wrap Tuesday

Good Evening,

Macro: Housing Starts beat, Housing Permits missed
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1)  Equity markets were broadly down small.  (Is that possible?)  The NASDAQ Composite, and Russell 2000 were actually down a rough three quarters of one percent.  Trading volume remained at incredibly light levels.
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2) Certain Retailers, and Automobiles were your winners, along with Building Products.  Semiconductors, andMiners were smacked around some.
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3) Treasuries were also moderately lower, while Gold, and Crude both recovered from early sell-offs to finish on either side of unchanged.
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4) Which one of the following would you believe? 
 
a- Live Sasquatch found in Canadian Rockies
b- Sentient Alien life form discovered on Venus
c- Fitch upgrades Greece’s credit rating
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…..  Incredibly, the correct answer is c.

Market Recon Tuesday

Good Morning,

                     Global markets are lower this morning, but they largely pale in comparison to what happened in China.  The beating that the Shanghai Composite took was simply awful, accelerating into the close, as the index gave up 6.2%.  Not only that, in China, “limit down” is 10% for any single listed security.  Rumors are that 58% of Shanghai listed securities hit that limit today.  Earlier in the session, the PBOC had injected a large amount of dough into the system via reverse repurchase operations (short term loans to commercial lenders), but the government did not directly prop up the equity market late in the day, like some investors had expected.  This exacerbated the downward pressure.  I think it was Thelma who used to say “Jeekies” at a time like this.

                     U.S. futures markets are lower, but in a controlled sort of way.  As with the rest of the planet, there seems to be widespread caution, but the panic appears to be confined to China.   This being the case, we might as well check out what’s on tap in our own backyard for this Tuesday.  We’ll get Housing Starts, and Housing Permits for July at 08:30 ET.  For Starts, the expectation is for an improvement to 1.19 million units on a seasonally adjusted annualized rate  (SAAR), while Permits are expected to have “cooled” off a bit to 1.23 million units (SAAR).  In each case the range presents about 100K worth of wiggle room on either side before anybody is truly surprised.  So, there is plenty of room for error.  Other than this housing data, all we really have today, from a macro perspective, is the retail sector’s weekly Redbook print, due at 08:55 ET.  There are no Fed speakers out there today, but there are some key earnings dotting an otherwise light calendar, as the season winds down.
                     The retail sector remains front, and center this morning with quarterly data coming from HD, TJX, and WMT before the opening bell.  I am flat TJX, and WMT at this time, and I am nearly flat HD after taking a profit ahead of this release.  Why risk it after such a nice run-up?  I am not a daredevil.  Don’t lose interest in this light August volume, gang.  Tomorrow, brings us the CPI, and the FOMC Minutes….. and after that.. the Philly Fed looms.  Other than that, have a nice day.  DeGrom goes tonight.
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Sarge’s TRADING LEVELS
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SPX: 2117, 2111, 2104, 2095, 2087, 2081
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RUT: 1237, 1233, 1228, 1224, 1217, 1212

Market Wrap Monday

Good Evening,

Macro:
Empire State missed very, very badly, Housing Market Index missed small, TIC crushed expectations.
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1) All of the Major Equity Indices turned an early sell-off into a positive day, as the Russell 2000 gained more than one percent for the session.
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2)  Media stocks, Home-builders, the Airlines, and Health Care names were the days’ best performers.  ThePersonal Products industry was dragged down by the severe beating handed out to EL, after they missed on revenue expectations.  Other than than, the weakest performance was turned in by the Energy sector.
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3) Trading volume fell to levels that are below what most market observers would consider to be “very light”.
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4) The Dollar was strong, and so were Treasuries.  Gold moved higher, as Crude weakened.
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5) Have a magnificent Monday night.