Market Recon Monday

Good Morning,

                     What’s going on in China?  It’s hard not to notice July’s y/y decline in exports of 8.3%, coming after the positive pop seen in June for that same data-point.  Imports also fell by more than 8%.  At least June sported no such optimistic head fake in that department.  On top of all of this, the Chinese PPI, which always seems to contract, contracted more than usual….and more than expected for July.  So, what does the Shanghai Composite do?  Why it soars of course…. to the tune of almost 5%.  There seems to be two obvious reasons for this surge of strength in Chinese equity prices.  One of those, we all know very well, “Bad news is good news”, when a central bank with room to maneuver is involved.  Yes, with all that the PBOC has done, they still do have that kind of room.  Two, the government controls a lot of these companies.  That said, they can control consolidation, if it makes sense to them, and it soon likely will.
                     We do not have any domestic macro to get you fired up today, but we do have Fed speakers.  Federal Reserve Vice Chair Stanley Fischer is scheduled to make some comments via satellite at 07:15am this morning, but he will not be the main event.  Remember what Atlanta Fed Pres. Dennis Lockhart do to the marketplace early last week?  Well, he is on the docket to speak twice today.  First, at 9am from the Fed’s own Atlanta branch, then at 12:25 from the Atlanta Pres Club’s luncheon.  At that little get together, there will be a question and answer session, so that’s where you’re likely to hear something unpredictable.
                     Later this week, July Retail Sales will be the focus, as will quarterly earnings that will be released by several retailers, but today, the focus will be food.  Before the open, DF, and SYY both report on what one might call a slow day for data.  I am flat both of those.  We’ve been range bound since February, gang.  Last week we slid toward the lower end of the range, but there still is some downside room to be had, if we need it, without having to label this range as “broken”.  I do not think that it is time to panic, but I am not stupid, at least that’s what my Mom says.  There’s nothing wrong with taking a shot at certain levels, if you have a reason (and some tolerance for risk), just spend the extra few bucks and protect yourself.  Now, go get ’em.
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Sarge’s TRADING LEVELS
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SPX: 2103, 2094, 2087, 2082, 2076, 2068, 2057
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RUT: 1221, 1217, 1211, 1206, 1200, 1195, 1189

Market Recon Friday

Good Morning,

                     This sure has been quite a week, with the damage to the marketplace feeling far worse while it was happening, then it really looks like when you step back and take it all in stride. We’re still in a range, and many of your trend lines remain in tact.  That said, this week is not yet done, and today is July “Jobs Day”.  The headline event will obviously be the Non-Farm Payrolls print, which is expected to sport something like a 217K tag.  The range today spans all the way from 210K to 270K, so there is plenty of room for an upside surprise.  Not so fast you say?  The ADP number was awful on Wednesday.  That’s true, but that is neither here nor there.  This report would have to be downright atrocious for the FOMC to consider putting off a hike in the Fed Funds Rate any further than they already have, and that’s this guy’s humble opinion.  What will also be important, will be the Participation Rate, Average Hourly Earnings, and the Underemployment Rate (U-6).
                     You all know how laughable I think the headline Unemployment Rate is, if you’ve read my notes on a “Jobs Day” before.  Did you know that Gallup publishes both a U.S. Unemployment Rate, and an Underemployment Rate as well.  Funny, Gallup’s data doesn’t jive very closely with the BLS numbers.  Currently Gallup shows Unemployment at 6.1% vs. BLS expectations of 5.3%, and Gallup shows Underemployment of 14.2%, vs the U-6 of 10.5% released by the BLS for June.  Hmmmmm.  Somebody is lying to somebody.
                     Did everybody watch the debate(s) last night?  I thought the main event was every bit as entertaining as we had expected.  The picture, however is probably more clouded than it was before the evening even commenced, as the two front runners, Donald Trump, and Jeb Bush did not seem to have the best of times, while some of the secondary players clearly helped themselves.  I am not a registered Republican, so I can’t vote in this primary anyway, but I am a conservative man, and I am starting to have a favorite,,,,,, how about you?  The whole thing is so very interesting in a professional wrestling kind of way.
                     OK,  let’s talk about you and me, and everyone else who might be reading this note.  There’s just one thing that I will ask of you today, and I will ask it of you til the day you die.  Make the most of what you are. Leave it all out there on the field.   I will promise to you to be the best man I can.  Now, it’s your turn.  Rise.  No surrenders.  There may be no victory at the end of the road.  There may be……. not a single person in the world who will even remember that here, you made a personal stand.  They do not need to.  The anonymity of it all will make your attempt all that much more glorious.  Esprit de Corps will define us, and we will all shine.
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Sarge’s TRADING LEVELS
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SPX: 2103, 2094, 2086, 2081, 2075, 2068
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RUT: 1226, 1221, 1217, 1211, 1206, 1199

Market Recon Thursday

Good Morning,

                     Globally, there’s not a lot out there this morning to catch your interest today.  Greece is Greece.  Puerto Rico is Puerto Rico, at least until 13 July.  Nothing incredible happened in China overnight.  The Mets continued their sudden rampage through the National League East, but even they are off tonight.  What does interest me right now is not financial at the surface, but certainly could, and likely will impact economics, and the financial markets down the road.  This Republican debate tonight is possibly the most bizarre thing that I have ever seen, and what’s making it even more interesting is the fact that with Hillary Clinton’s reputation having hit the proverbial iceberg in the middle of the night…… this is starting to matter.
                   Ten Republican candidates will participate in the main event tonight, but before that, there will be a “pre-debate” debate that will include the six candidates that did not make the cut for the main event.  You are going to hear something from sixteen Republican candidates tonight.  I won’t bore you, or insult your intelligence by telling who I might like, or dislike, but this will certainly be “must see TV”.  Bring a big bowl of popcorn, and order a pizza.

                   Unless you trade natural gas, there really is only one piece of macro to chew on this morning, and that is our weekly Initial Jobless Claims print.  Yeah, you’ll get the Challenger number early in the day, but it will not impact the marketplace, at least not today.  Jobless Claims have been skating between last week’s 255K, and the 290K’s since March, so folks losing their jobs, as a major symptom of a struggling economy is clearly abating here in 2015.  Unless, of course….. you’re that guy or gal.  Today, we expect something around 273K, which is near the high end of a 250K to 280K range.  Consider this an appetizer for all of the jobs related data that we’ll see tomorrow.  Or, maybe consider it the “pre-debate” debate.
                   Again today, I do not see any Fed speakers lurking about, but they did catch an alligator in New Jersey the other day, so anything is possible.  Today is another high volume earnings day, but the big, sexy names seem to be dying down.  Well known corporations reporting today include DUK, MYL, NYT, and VIAB this morning, as well as ED, and ZNGA tonight.  I am flat all of these names.  The market seems to be respecting it’s levels lately.  Hopefully that helps you.  Good luck gang, and keep up the good fight.  Sarge out.
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Sarge’s TRADING LEVELS
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SPX; 2117, 2111, 2103, 2095, 2087, 2081
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RUT: 1243, 1237, 1233, 1226, 1221, 1217

Market Recon Wednesday

Good Morning,

                     So, Dennis Lockhart, who is a voting member of the FOMC rattled the marketplace yesterday when he indicated that the bar would be high for not raising the Fed Funds rate at their September pow-wow.  Many in the trading community have started to doubt that the first rate hike will come that soon, with probabilities dropping below 50%.  From where I stand, Lockhart is spot on.  Many economists are ratcheting up their growth estimates for the second and third quarter as far as GDP is concerned.  Could you imagine 3% annualized GDP with the price of credit still being essentially zero?  Absurd, right?  The path to a healthy economy, and a truly healthy marketplace must be coupled with normalized monetary policy.  That said ( I grew up in Queens), let’s cut the crap, and do what we’ve got to do.  On top of that, next time that we face an economic crisis, which is very realistic, wouldn’t it be wise for the Fed to have some wiggle room?  They will have to take baby steps of course, so the dollar doesn’t go wild on us.  Just a guy thinking out loud here.  Carry on.

                    “Jobs Week” starts to get it in gear this morning at 08:15 ET, with the July edition of the ADP Employment Report, which is something of a predictor for the Private Payroll portion of the Non-Farm Payrolls number, although they do not always line up….and there is some back and forth over which one is the more accurate of the two.  The futures market will react to this one.  For today, we are looking for something close to 213K.  The range spans from 180K to 265K, with the skew being slightly to the higher  This comes off of a June print of 237K.  We’ll see June Trade Balance figures to look at come 08:30 ET, but as a trader, this item is not likely to have much of an impact on you.  After the markets open, Markit will release their Service Sector PMI for July, which will pass unnoticed…..then at 10am ET, the more highly visible ISM Non-Manufacturing Index will hit the tape.  Consensus calls for a slight uptick to the 56.3 area today.  June printed at 56.0 for this one.
                     Today is another busy earnings day.  Before the open, the headliner will be PCLN, followed by HCA, and TWX.  After the close, such well known names as CBS, FIT, and SUN will report, but TSLA will steal the show.  I am flat all of these names.  I do not see any Fed speakers hiding in the weeds for today.  Good luck today, gang, and God bless.
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Sarge’s TRADING LEVELS
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SPX: 2110, 2102, 2095, 2087, 2081, 2075
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RUT: 1244, 1236, 1232, 1226, 1221, 1217

Market Recon Tuesday

Good Morning,

                     Yes, Puerto Rico really did default.  The whole ball of wax is really messy.  What you need to know is that not all Puerto Rican debt is on a level playing field, being backed differently,  nearly a third of all U.S. municipal bond funds are holding some Puerto Rican debt, about half of all P.R. debt is insured, and that P.R. will hold a meeting with her creditors on July 13.  That meeting will be aimed at cutting some kind of deal, aka as a haircut……and yes, your retirement money is likely to be impacted.
                     Interesting new rule for short sellers coming out of China, don’t you think.  The new rule, if I understand it, simply means that those traders must hang onto those positions overnight before they can cover.  Wow, imagine that.  Voila !!, the Shanghai Composite ramped up over 3.7%.  A few hours in that market is quite a risk, and they just took a sizable portion of the offer side out of the picture.
                     The domestic macro picture is rather thin today.  You’ve got the weekly Redbook print at 08:55 ET for the retail crowd.  Then we’ll see the Census Bureau’s June data for Factory Orders at 10am ET.  This one is not a red star item, but on a day without a lot of competition, a surprise could have an over-sized impact on the marketplace.  The expectation today is for a m/m increase of 1.8%, coming off of May’s disappointing -1.0%.  The range on this one today is wide, so anything goes, really.
                     Today is a big earnings day.  Well over two hundred firms report today.  Before the open, you’ll see numbers from the likes of AET, COH, and K among others.  After the close, the market spotlight will be on DIS, a name you all know that I have been long for a very long time.
                     OK, the plan is simple today.  Work hard.  Stay focused.  When you feel your mind stray a little, pray a little, and remember the folks for whom it is your responsibility to support.  We can do this.  It is not more than we can handle.
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Sarge’s TRADING LEVELS
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SPX: 2116, 2110, 2101, 2095, 2086, 2075
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RUT: 1244, 1239, 1233, 1226, 1221, 1217

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