Market Recon Wednesday

Good Morning,
                       As I settle in on my train ride, and start typing out this note, I can see, though it is dark, and raining outside that our planet is indeed a green planet.  Asian stocks are all up to varying degrees, and European stocks…whoa baby.  They’re all up a rough 2%.  On top of this, US equity index futures are trading at the highs of the over-night, well above last night’s closes.  Perhaps all of the joy in Europe can be tied to some lousy macro out of that region.  All in one session, German Retail Sales, German Unemployment, EMU Unemployment, and the headline EMU CPI all missed expectations.  Party on dudes.  Oh wait, bad news is good news…. PARTY ON DUDES !!  Tonight……multiple PMI numbers out of China.  Oh, the fun never ends.
                      Trader types have all been watching out for a re-test of the August lows.  Was that it yesterday.  We came awfully close, but somehow I thought that such a re-test would come on bigger volume than that.  Looking back in a few months, we will all know if that was our re-test, or if we are simply foolish mortals.  My gut is that we get another bloody nose (or two, or eight) before these breadcrumbs lead us out of the woods.  Working today?  You probably should read Sue Chang’s article at MarketWatch today.  It’s short and to the point.  Sue points out that September 30th ends up negative for stocks 62% of the time in the post-war period, which makes it the worst performing day of the year over that time frame.  So much for end of quarter mark-ups.
                       We’ve got some macro-economic data on our table today.  More than likely, however, by the end of the day, Fed speakers will steal the focus of the financial community….again.  That said, let’s get on with the macro.  At 08:15 ET, we’ll see the ADP Employment Report for September.  This one is supposed to be something of a predictor for the Private Payrolls portion of Friday’s Non-Farm Payrolls number.  The validity of this number as such a predictor is debatable.  What’s not debatable is that at 08:15, the futures market will react to this print.  Expectations for this item today are for a rough 191k, which would be in line with the August print.
                       There are two more macro items on our docket.  The September Chicago PMI will hit the tape at 09:45 ET.  This diffusion index, that is based on a Chicago area survey of purchasing managers is still worth a look, but does not carry the impact in the markets that it used to.  Consensus for today is for something close to 53.4, off of the pace of August 54.4.  There is a skew in the range to the low side of consensus.  What could end up being the most important number released today could just be the weekly Oil Inventories print at 10:30 ET.  We saw a contraction in supply last week, and the experts are looking for another one today.
                       Now, for that rascally bunch.  Yes, the Fed speakers.  They say that “Seasons don’t fear the reaper”, but the markets….they certainly do fear the Fed Chair.  Janet Yellen will speak at 14:00 ET this afternoon from St. Louis.  Word on the street is that she’s well hydrated.  Before we get there, though, New York Fed Pres. William Dudley will step to the plate in the Big Apple at 8am ET, and long after the closing bell….Fed Gov. Lael Brainard speaks at 19:00 ET, also from St. Louis.
                       Reminder….. Chinese PMI party tonight.  All the cool kids are going.
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Sarge’s TRADING LEVELS
(Yes, there are so many these days, but that’s the environment that we’re in)
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SPX: 1921, 1915, 1909, 1902, 1896, 1891, 1879, 1872

RUT: 1110, 1104, 1099, 1094, 1090, 1084, 1079, 1075

Market Recon Tuesday

Good Morning,
                       I hate when the ugly stick is out.  Ever since the Crash of 1987, I have feared the ugly stick, and you should too.  Very few places to stick your head out, and when you do….whack !! Treasuries seem to be the only place to hide at these times.  If you follow me, most of you know, I maintain a higher bond allocation (17.5%, since forever), and since early August…. a higher cash allocation (40%) than most of my peers.  I always have, however been bond heavy.  Gets me out of a tough scrape every now and then.  Most of that, thankfully is in Treasuries.  Every time I think about cutting back on that allocation, within a few days time I find myself glad that I did not pull that trigger.  I currently have precious metals at 2.5%, and equities at 40%, and on a day like yesterday, even a fairly low percentage of equity leaves a nasty mark.  I’m thinking, not acting, but thinking of taking precious metals to 7.5%.  May need the counsel of Dave Williams from Strategic Gold on that thought.
                    US futures markets have been all over the map this morning. Where they are, as I bang out this note probably has no bearing on where they’ll be at the opening bell.   There really are so many landmines to avoid.  Health Care is not the trustworthy space that it had been, not even close.  Mining is a mess.  Construction Materials is ugly.  Energy is well….. energy.  Commodities.  China.  You know, Catherine Murray asked me in a live interview at BNN (Canada’s financial network), a couple of weeks back, if I traded the Biotech space.  I told her that I did not.  She asked me why, and I told her that those stocks scare the heck out of me, that I leaned my lesson years ago.  Boy, am I glad I’m too scared to trade that group.  I know that I would have jumped in too early.  That’s why we who trade, make rules for ourselves…..and we never break them.  Never.
                    With all of these potholes in the road, it’s a good thing that our legislative leaders seem like a swell bunch of guys who cooperate well, and our Federal Reserve Bank seems clear on the immediate direction of monetary policy.  At least there’s no uncertainty there.  Think like the kid on the cover of Mad magazine.  “What me worry?”.
                    You guys want to talk about macro today?  Me neither.  You do need to be cognizant that the weekly Redbook is due at 08:55 ET, July Case-Shiller is up at 9am ET (Consensus: 5.2% y/y), and Consumer Confidence (not Consumer Sentiment) is a10am ET release.  Consensus for that one is around 96.1.  There, we did macro.
                     OK, gang.  I know that you’re anxious.  Take it slow.  Don’t do anything in reflex, make sure you have a reason, any reason.  I know it hurts, and it’s hot, and it makes your head itchy, but keep your helmets on….and buckle those chinstraps.  We don’t need any John Waynes out there.  It feels like the market wants to test the August lows, but honestly the only thing we know about today’s equity markets is that they won’t close unchanged.
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Sarge’s TRADING LEVELS
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SPX: 1915, 1909, 1902, 1895, 1889, 1880, 1867, 1862

RUT: 1110, 1104, 1099, 1094, 1088, 1084, 1075, 1068

Market Wrap Monday

Good Evening,.
Macro:
Personal Income missed, Consumer Spending high, Core PCE on consensus, Pending Home Sales missed very badly, Dallas Fed slight miss.
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Fed Speakers:
William Dudley sounded hawkish, while Charles Evans came in later, sounding dovish.  This clearly demonstrated the uncertainty surrounding the Fed, and thus exacerbated the risk-off environment in just about every asset class.  Nice goin’, Slick.  No soup for you, one year.
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1) All four major indices took a severe beating today as preservation of capital became the focus.  The S&P 500, Russell 2000, and NASDAQ Composite all surrendered more than 2.5%.  Only the DJIA, which only represents 30 stocks kept it’s decline under 2%.  Trading volume picked up late in the day, at the lows of the session, and ended up quite heavy.
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2) Let’s talk S&P sector indices, shall we.  Health Care gave up almost 4%.  Within that sector, Biotech gave up almost 5%.  Energy -3.5%…. Materials -3.2%….. Consumer Discretionary -2.9%.  Ok, ok, I give….Were there any winners ???   No.
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3)  US Treasuries were today’s only safe haven.  This gave the Utility sector enough of a boost to keep it’s performance to a -0.6% day.  Even Gold was slapped around.  Rounding out our circle of doom, Crude and the US Dollar also had really lousy days.
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4)  “Clubber, what’s your prediction for the fight?”……. “Pain”.

Market Recon Monday

Good Morning,
                       There are a few arrows headed in different directions this morning.  Let’s try to make sense of some of this.  Chinese Industrial Profits sported almost a 9% y/y plunge from August 2014 through August 2015.  This has global equities, and US futures markets trading lower this morning…just about everybody, that is…except Shanghai.  Makes sense?  No, but I would point out that today’s volume in Shanghai is notably low, and other Chinese markets are closed for a holiday.  BTW, the really important Chinese macro is due this Wednesday evening.  The yield spread between US Treasuries, and similar duration Corporate debt is growing.  That’s a bad sign.  The Hulbert Investor Sentiment Index is currently at the lowest level since it’s creation in 2000.  That’s probably eventually good, if you’re a contrarian, which I sometimes can be.  I do think, however that we’ve got some wrinkles to get though in our immediate front, most visibly avoiding a US government shut-down, and what’s going to be a pretty rough third quarter for corporate earnings.
                       It is Monday, gang.  Sometimes Monday sort of catches you by surprise.  I mean, you do know it’s coming, but somehow….. just getting going is so darn hard…. and kid, it ain’t just you.  Volumes ten to be lower on Mondays, and particularly lower early on Mondays.  Today though, easing into the work week, is simply not a viable option.  Unlike other “Jobs Weeks”, the macro gets started right away this morning, and on top of that, the Fed has decided to inundate us with speakers today.  You do not need to be told, that the spoken word can be as sharp a weapon as any macro-economic data-point when it comes to moving markets.  That said, let’s get after it.
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05:15 ET
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Fed Speaker:  Fed Governor Daniel Tarullo spoke this morning on Regulation from Paris, France.  I don’t see any earth shattering news out this item.  Noteworthy, if for nothing else, because this was the first of at least four speaking appearances today by voting members of the FOMC.
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07:45 ET
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Fed Speaker: New York Fed Pres. William Dudley is scheduled to be interviewed by the Wall Street Journal’s Jon Hilsenrath at this time.  Read that last sentence again.  Wonder if any headlines will come out of this?  The topic?  Oh just interest rates, and inflation expectations.
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08:30 ET
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August Personal Income: This data-point has become very consistent.  Expectations for today are for a print of 0.4% m/m growth.  If this happens, and July is left unrevised, then this would be the fourth consecutive month of 0.4% growth.  The entire range for this one spans only from 0.3% to 0.5%, so nobody is thinking surprise in this space today.
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August Consumer Spending: Almost a similar story here.  We’re looking for month over month growth of 0.3% for the third consecutive month…. and again the range is tight.  You can see from the recent trend that income is finally putting a small winning streak together versus spending, which has to be taken as a positive.  I know you’ll hear others pushing for spending, but this trend is allowing some folks to simply catch up a bit.  When they’re comfortable they’ll spend.  They’ve proven that.
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August PCE Price Index:  There are two prints that trader types will look at here.  The headline print, and the Core print.  Simply put, Core PCE is now the most heavily focused on of all measures of consumer level inflation.  Change that.  This is probably the most heavily focused on macro-economic data-point that we have at this time.  There…said it….during “Jobs week”.  Look for prints of 0.1% m/m at the Core, and 0.0% m/m at the headline.  The ranges are tight, and I do not see a skew.
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10:00 ET
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August Pending Home Sales: Two months ago, this item hit a wall, but seems to have gotten back on track in July.  Today, expect growth of 0.4% to keep this item on track.  The range for this one is wide, so you could see anything here from a severe miss to a fairly strong beat.  Fortunately this is not one of the more closely watched pieces of the housing pie.
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10:30 ET
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September Dallas Fed Manufacturing Survey:  What is there to say? Not only has Dallas been in a constant state of manufacturing contraction since 2014, but New York, Philadelphia, Richmond, and Kansas City all printed in contraction for September.  Soooooo…….good luck in this space today.   We’re looking for something around -9, which would be slowing of the decay seen in August (-15).
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13:30 ET
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Fed Speaker: Chicago Fed Pres. Charles Evans will speak on monetary policy from Milwaukee, Wisconsin.  Evans is seen as very dovish by most Fed watchers.  In fact, probably only Narayana Kocherlakota of Minneapolis has a more dovish reputation than does Evans.
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17:00 ET
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Fed Speaker: San Francisco Fed Pres. John Williams will speak from San Francisco.  Williams also has been seen as a dove in the past, and even though he was part of those nine a week, and a half ago… he has been making a little more sense of late.
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                        Good luck today, gang, and good luck this week.  It may get a little rough out there, but you’ve done “rough” before, and you do “rough” well.  Now, get in there, and be who you need to be.
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Sarge’s TRADING LEVELS
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SPX: 1950, 1939, 1929, 1921, 1915, 1909, 1900, 1895

RUT: 1135, 1130, 1125, 1119, 1110, 1104, 1099, 1094

Market Recon Friday

Good Morning,
                        Unless you watch cartoons all day, you know that Fed Chair Janet Yellen gave a speech last evening in Massachusetts.  We zigged, and we zagged throughout the day on Thursday, and we blamed it all on anticipation of said speech, even though we had a lot of macro to chew on.  Lady Janet did not disappoint.  She sounded sort of hawkish, sort of, kind of promising a rate hike later this year…..maybe…almost.  Actions do speak louder than words, and….not to sound like an old gypsy or anything…but, she did choke on her words.  We have seen many vague attempts at disinformation over the years.  “Show me”.  Regardless, market participants across the globe, with the notable exception of Shanghai rejoiced at the mere perception of clarity from the US central bank.  There’s a lot of green across your screen this morning, kiddies.  Party on.  It may, or then again, it may not last all day.
                        Don’t forget that the Pope is in town today, gang.  You probably want to give yourself extra time to do whatever is that you’ve got to do.  The city will obviously be a mess.  Wherever you find yourself stuck, they probably sell cheeseburgers.  How bad can it be?  You know, I kind of like the way the macro looked in yesterday’s note.  I think I may stick with that layout…at least on days where we have a couple of items to look at.  Speaking of the macro….
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08:30 ET
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Q2 GDP (Final): Our first revision to Q2 GDP came in at a surprisingly high 3.7% q/q when measured in SAAR fashion.  Several areas within the report showed marked improvement from the first estimate two months ago.  Today, the expectation may not be for any kind of significant revision, but a confirmation of an economy growing at a 3.7% clip would be just dandy.  Look for the GDP Price Index to stick at 2.1% q/q SAAR, which btw, happens to be above the Fed’s 2% inflation target.  Just sayin’.  No, he didn’t.  Oh, yes he did.
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09:15 ET
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Fed Speaker: St. Louis Fed President James Bullard will speak on monetary policy from St. Louis.  Bullard is not a voting member of the FOMC this year, but has been openly critical of the FOMC’s indecision last week, which automatically gives him more credibility than the rest of that gang at the Fed.
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09:45 ET
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September Service Sector Flash PMI: Not highly focused on, this data-point is likely to slip through the cracks unnoticed.  That said, I do find it quite interesting.  I just don’t think that Americans have ever really caught on to the data set released by Markit every month.  The projection for this item today is for a 55.5 tag, which would be up slightly from August’s 55.2.  There is a slight skew in the range to low side, but very small.  A large surprise here, would indeed surprise me.
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10:00 ET
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September (final) University of Michigan’s Consumer Sentiment: This data-point carries more weight with traders than a lot of folks realize.  It is closely watched, and can certainly move the marketplace at the time of it’s release.  Consumer Sentiment has fallen off of a cliff since this item peaked in June.  The expectation (hope) is for something of a rebound from September’s absolutely shockingly poor preliminary print of 85.7 to something around 87.  Just for giggles, August’s final print came in at 91.9.  That’s a pretty lousy month, gang.
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13:25 ET
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Fed Speaker: Kansas City Fed Pres. Esther George is all set to speak on monetary policy from Omaha, Nebraska.  She is usually more of a policy hawk than most of her peers, and like James Bullard, does not have a vote this year.  Funny, they drag out two hawks the day after the Empress tries to sound hawkish.
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                         It is Friday.  Once you get through all of this, and for those of you working in NYC, through winding your way around town today, you will have made it.  Then you can relax.  Until then, be the example.  If you would be embarrassed if your Mother, or your children could see you at any point, then you probably shouldn’t do it.  Now, get out there, and lead the way.  No excuses. No fear.
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Sarge’s TRADING LEVELS
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SPX: 1971, 1962, 1956, 1949, 1939, 1930, 1921

RUT: 1163, 1158, 1150, 1144, 1138, 1134, 1130

Market Wrap Thursday

Good Evening,
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Macro: 
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Durable Goods missed at the Core, hit consensus at the headline, Initial Jobless Claims beat, New Home Sales easily beat, supplies of Natural Gas grew.
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1) Fed Chair Janet Yellen spoke at 5pm ET this evening.  The key take-aways so far?  She says that “it remains appropriate” to hike rate this year.  To this, I want to say “bravo”, but what common sense I do have is telling to make like I’m from Missouri….. “Show me”.
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2) The good doctor did indicate that if the FOMC seems confident that their inflation target is on it’s way to being met, that it’s a good idea to raise rates before it gets there.  On that…. I could not agree more.  You never, never, never want to raise rates because you have to.  Can you tell that I was scarred by the 1970’s?
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3) The major equity indices all finished between a quarter, and a half of one percent lower on moderately heavier volume than we have recently seen.
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4) As stocks sold off hard, and then rallied today, Treasuries rallied hard, and then sold off, still finishing the day higher than where they started.
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5) Oil rallied throughout the day, and Gold opened higher, and stayed there.
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6) Tomorrow’s Friday.  This is not rocket science,  We are not marching in the snow with holes in our boots.  Our children love us.  This, we can do.  This we will do.

Market Recon Thursday

Good Morning,
                      Japanese stocks waited all week to open, and when they did…..hooo doggy, that was a bad idea.  the good news is that they were playing catch up, and the rest of the region didn’t catch the beat-down.  In fact, the Shanghai, and India’s Sensex showed us some green on the screen this morning. In Europe, we saw some positive macro regarding the Business Climate in Germany, and Italian Retail Sales.  Unfortunately, good news is bad in an environment dependent upon quantitative easing, and European shares are mostly lower.  Now, that we brought up the macro….. over to you, Sarge.
                      Thanks Sarge….. For those of you who love macro-economic data, and I mean…really…who doesn’t ???… We’ve got a boatload of this stuff to look at today.  Just to make sure you don’t turn into a six year old in a toy store, we’re going to slow this down, and put the pieces into proper focus for you.  So, let’s get fired up.
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08:30 ET
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August Durable Goods Orders:  The markets will pay attention to this one, particularly the Core print, or if you’re new to this…ex-transportation.  At the headline, this item grew fro a second straight month in July.  When we do see this print, although we may get an upward revision, the fun will likely stop there.  Consensus is for -2.0% month over month contraction.  That Core print is expected to squeeze out some minor growth though…something like 0.2% m/m, coming off of July’s 0.6% tag.  It will be close.
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Weekly Initial Jobless Claims:  You can probably look for something of a bounce off of last week’s really low print of 264K.  Think something around 271K, with a range spanning 265K to 280K.  This item has been very consistent for some time now, and a surprise in this space, though not likely could cause a serious knee-jerk in futures markets.
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10:00 ET
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August New Home Sales:  Here you have a another one that market participants like to focus on, with the implications toward job creation, spending on building materials, expansion of credit, and such.  On a seasonally adjusted, annualized rate (Remember SAAR), the Census Bureau has been able to print this little guy above 500K units more often than not since early Spring. Today, we expect that trend to firm up, as consensus is for 516K, up from July’s 507K.  Rock on.
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10:30 ET
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Weekly Natural Gas Inventories:  Definitely not for everyone, but if you’re that kind of guy who thinks of playing chicken on the Jersey Turnpike, while riding a bicycle is interesting, then this may be your cup of tea.  I have traded Natural Gas futures on Thursday mornings, and I have had guns pointed at my head.  Trading Natural Gas is far more frightening.  Actually, it’s not even close.
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11:00 ET
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September Kansas City Fed Manufacturing Index: The Empire State, Philly, and Richmond have all stepped to the plate this month, and we are now a very weak Ohhhhh for three.  It’s up to KC today, and Dallas on Monday to try to prevent a clean sweep.  As my little brother used to say when we were little…..”What else could go wrong?”.
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17:00 ET
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Enter the Dragon:  The Fed Chair herself, Empress Janet Yellen will speak rom Amherst, Massachusetts.  She has very courageously agreed to fore-go any question, and answer session.  (Can’t make this stuff up).  The media probably had no questions anyway.  Her speech is entitled….get this …. you’re gonna laugh (I already am) …  “Inflation Dynamics, and Monetary Policy”.  Cuz, ya know…she’s the expert.  OK, gang, let it all out.  Don’t want to hurt yourself.
                 OK, kids, I’m out of ammo.  God bless, be safe…and play to win.
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Sarge’s TRADING LEVELS
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SPX: 1956, 1949, 1940, 1932, 1921, 1912

RUT: 1158, 1150, 1144, 1138, 1134, 1129

Market Wrap Wednesday

Good Evening,
Macro:
Flash Manufacturing PMI missed, Oil Inventories contracted, while Gasoline Inventories grew.
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1) All four major equity indices closed down small on very light trading volume.
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2) Construction Materials, and Mining stocks were slapped around the hardest, while Info Tech, and Utilities hung in there OK.
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3) Treasuries inched back a touch, while Gold moved ahead, and Crude was punished.
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4) This morning, Super Mario threatened to beef up the ECB’s Quantitative Easing program should the EMU’s inflation outlook weaken further.  The Spider said, today…for the third day in a row,,,that he thought there would still likely be an increase in the Fed Funds Rate in 2015.  Tomorrow…the Empress.  Oh my.

Market Recon Wednesday

Good Morning,
                      Scanning global markets, you’ll see that they’re down more than 2% in Shanghai.  Two percent must seem like a walk in the park in Shanghai these days.  You’ll also notice European equities are in the green…pretty much across the board.  S&P futures traded in a wide range over-night, and currently stand just a smidge on the plus side.  September’s global Manufacturing Flash PMI party is the culprit for most of this movement, it’s not too hard to see who did what.
                      In China, the Caixin number showed a manufacturing sector deeper in contraction than anyone thought, in fact….that was the lowest print in that space in over six years.  The numbers in Europe, for the most part…actually missed consensus, but still landed comfortably in expansionary territory.  The big surprise to the upside came for France, a nation that unexpectedly showed expansion.
                     From a domestic macro perspective, think of today as the calm before the storm.  True, you’ve got the Oil Inventories number at 10:30, and it will push the price of oil around upon it’s release, but it still is just a weekly number.  The only other item out there is the 09:45 ET release of the Markit Flash Manufacturing PMI, (Our contribution to today’s theme), but nobody really watches Markit’s numbers in this country.  If there is a reaction, it will only be due to a lack of meaningful data to feast on for today.
                     Fan favorite Dennis Lockhart, aka, the Spider will speak for a third consecutive day.  Today’s lucky city is Columbus, Georgia, at lunchtime.  The Empress doesn’t speak until tomorrow.  Spiders, Empresses…..and you thought we only had to worry about doves, and hawks.  Foolish mortal.  If only the FOMC had a suggestion box.
                     Don’t forget, kids that today is Yom Kippur, the holiest day on the Jewish calendar.  That means that many of our colleagues will be out for the day, and depth of market could be a bit thin.  Other than that, carry on.
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Sarge’s TRADING LEVELS
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SPX: 1962, 1956, 1948, 1939, 1931, 1921
RUT: 1158, 1151, 1144, 1138, 1134, 1129

Market Wrap Tuesday

Good Evening,
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Macro:
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FHFA HPI beat, Richmond Fed missed.
tonight: Caixin (formerly HSBC) Manufacturing Flash PMI…consensus is 47.6
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1) Two questions creeping into today’s conversation.
     A) Is this the beginning of the end for the debt super-cycle?
     B) Are people losing faith in the ability of the central bank to manage monetary policy?
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2) All four major equity indices took serious beatings on moderate trading volume, but did manage to close well above the lows.  Looking for a story, and not buying my first bullet point?  You can say that markets were slapped around due to concerns over Chinese demand that caused weakness in commodities, that the whole ball of wax was exacerbated by the perceived confusion at the Fed.
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3) All ten S&P sectors finished lower.  Without Hillary Clinton’s input, the Healthcare sector out-performed the market in general.  There was something close to an eight way tie for worst performing sector.
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4) Oil and Gold were also lower today.  You pretty much had to be in Treasuries in order to avoid getting kicked in the teeth.
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5) Wishing all of my Jewish friends am easy fast.  God bless.