Market Recon Friday

Good Morning,
                        GDPs are underperforming across Europe (including Germany)…..new credit is drying up in China……the lack of global demand has many commodities trading at multi-month lows….. earnings pretty much stunk….. the Mets, ahhh… let’s not go there.  On top of all of that, today is Friday the 13th.
                        The good news?  You did wake up on this side of the dirt today, gang.  That’s the key right there.  Never underestimate waking up.  If you can breathe…if you can think…then you can fight.  If you have a sentient thought, go with it.  Just make sure you have an exit plan that you’ll stick to, and spend the extra dough on protection.  Oh, and on the way home tonight, at least acknowledge that homeless guy that you ignore everyday.  The last one’s an order.  Now, buckle those chinstraps, and let’s do Friday.
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Broad Based Market Smack-down
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                        Snap into a Slim Jim.  Well, we did tell you that we were skating on thin ice.  Some of these Retailers, and some of the Oil names are simply screaming opportunity here.  I’m drooling.  Media, Info Tech.. they’re still hanging tough.  Have I ever been wrong ?? Yes, indeed.  Will I ever give up ?? LOL, No.  That said, if you believe in a year end rally…..then this is what you’ve been waiting for.  Go out far on your option calls, that gives you time to still be right if you’re wrong today or tomorrow.  Don’t play the Fed, you can’t count on them.  Do play what you understand the best.  Discipline in.  Discipline out.  Risk management.  No “I took a shot” nonsense, unless it’s found money.  Understand ??
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No Macro for the Wicked
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08:30 ET
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Retail Sales (October):  Here it is, the highest impact macro-economic data-point of the week, at least as far as market participants are concerned.  Last Winter, and Spring, if you’ll recall, Retail Sales were downright ugly, and they did improve a little throughout the year.  Then wham, September turned ugly again, and you’re seeing some of that lack of performance in the less than stellar earnings releases being turned in by some of your favorite chain retailers right now.  Consensus is for serious improvement in October on a month over month basis.  The street is looking for headline results of 0.4% up from 0.1%, and Core results of 02% up from -0.3%.  Fingers crossed.  The market could turn on this one.
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PPI (October):  The Producer level measure of inflation printed deep in the hole for September, both at the headline, and at the core.  I don’t know how much it all means to the marketplace, as this item has been far more volatile all year than has it’s consumer level cousins.  Look for a bounce here today…maybe month over month growth of 0.2% for the headline print, and 0.1% m/m for the core.  Trader reaction should be muted.
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10:00 ET
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U of M Consumer Sentiment (November [p]):  Consumer Sentiment is expected to have improved from the 90.0 that we saw in October’s final print.  Projections are for something like 91.7.  There may be something to this.  As you know, I walk in a few different circles, so my month to month experience is not isolated to the world of a middle aged New York Caucasian male.  I do see young people, not the sissies that you see complaining about everything under the sun, but real hard working young people leaving low paying jobs for slightly better jobs.  I am not sure….my sample is not large enough to know, but I am seeing it to some degree, after having not seen any good news in that regard for a very long time.  Traders will react to this number.
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Business Inventories (September):  It’s dated.  It’s not sexy.  This will be overshadowed by the higher impact data that we’ll be privy to on this day.  In other words, Wall Street won’t get fired up.
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11:45 ET
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Fed Speaker:  With only one Fed Speaker on today’s docket, it should be difficult to send mixed messages, but Cleveland Fed Pres. Loretta Mester will give it her best shot.  What was that yesterday anyway ??  Evans, and Dudley run left, while Bullard, and Lacker run right, and their “leader” sticks her head in the sand.  Nice.  Still think Ron Paul was wrong about these guys?
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Friday’s Earnings Highlights
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Before the Open:  JCP (-.56), TYC (.61)
After the Close:  Remember that disgusting plate of nachos…..Oh yeah, I know you do.
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Sarge’s TRADING LEVELS
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SPX: 2068, 2062, 2055, 2045, 2035, 2026, 2020
RUT: 1170, 1164, 1159, 1154, 1145, 1136, 1131

Market Recon Thursday

Good Morning,
                        There’s some thin ice out there.  Gone are those heady days of last week, when the S&P 500 was threatening to push on up to it’s all-time highs seen last Spring.  There are a couple of things staring us in the face that I think we need to recognize.  The weakness witnessed this week is not broad-based.  In fact, outside of the Energy sector, and multi-line retailers, the market is simply treading sideways.  This morning’s keys are the $SPX 2075 level that held on the close last night while under pressure.  Actual support ??  Light holiday volume ??  I’ll let you know when the bell rings.  There is some support at 2069 just below that spot.
                        Macy’s earnings scared the stuffing out of some folks yesterday.  Has there been a structural shift in the way people purchase what they need/want?  Of course.  Does that mean that it’s time to throw in the towel on traditional retail ??  I really don’t think so.  That argument is for those who buy inventory, and stock shelves.  We’re just here to make some dough.  My thought here is that maybe we buy some long dated calls on a couple of these retail names if, and only if they take an excessive beating upon reporting.  Hang on to the calls through Black Friday.  These guys butter up their Black Friday numbers.  If you get a pop, you ring the cash register.  If not you wait…..you’ve got time.
                         The song says to keep your honor clean, gang.  Fail at everything you try…. so what.  Succeed at this, and the rest will fall into place.  Succeed at this, and you will have proven discipline.  Succeed at this, and you will have proven perseverance.  Now, I ask you….now….who can defeat you ??
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Macro til the Day I Die
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                      The really meaty macro beefs up for tomorrow.  In the meantime, there are a couple of data-points that you want to be cognizant of for today.  We’ll get our weekly dose of Initial Jobless Claims at 08:30 ET.  This item had lost it’s luster as a tradable event in recent quarters due to it’s consistency.  Well last week, the number was a bit higher than anyone I know expected.  Today, we find out if that was just a blip, or if the trend is going to start moving the wrong way.  Consensus for this one is 268K, with a “shock absorbing” range of 260k to 280k.  At 10am, the Bureau of Labor Statistics will spit out the JOLTS number for September.  Traders will not react.  They no longer follow this item, and on top of that, I don’t think they really trust the BLS all that much anymore.
                        Is that all you’ve got, Sarge ??  No, of course not !!  Because yesterday was a Wednesday, and a Federal holiday, the weekly Oil Inventories print will hit the tape today at 11am.  Now, if you watched Crude get smoked yesterday (along with the Energy sector), you’ll be on the lookout for this item.  We have seen six consecutive rather large weekly increases in supply.  The expectation for today is for an increase, although to much lesser degree.  We’ll see.
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Oh Yeah, These Guys
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                        Mario Draghi pretty much promised the EMU nothing but Gummy Bears, and Candy Canes this morning.  Our gang (hardly), aka “The Fed” is out in full force today.  Rotten trees.  What they’re selling today is anybody’s guess.  All we know is that there will likely be nothing close to a unified message put forth regarding their outlook on the future of monetary policy, (where a crazy thing called leadership would be awesome) and we also know that the marketplace will (over)react to something that somebody says.  I know, I rant on this, but I mean c’mon.  At least there’s hope in Minneapolis.  Our radar has picked up six speakers on the perimeter.
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09:05 ET…….St. Louis Fed Pres. James Bullard
09:30 ET…….Fed Res Chair Janet Yellen (FOMC Voting member)
09:45 ET…….Richmond Fed Pres. Jeffrey Lacker (FOMC voting member)
10:15 ET…….Chicago Fed Pres. (FOMC voting member)
11:45 ET…….NY Fed Pres. William Dudley (FOMC voting member)
18:00 ET…….Fed Res Vice Chair Stanley Fischer (FOMC voting member)
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Thursday’s Earnings Highlights
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                        Retailers are in domestic focus, and will remain so for the next couple of weeks.  You’ll also see VIAB this morning.  Implied volatility for that one is close to $1.75.
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Before the Open: CSCO (.56), DDS (1.20), KSS (.70), VIAB (1.55)
After the Close: JWN (.72), SINA (.21), WB (.06)
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Sarge’s TRADING LEVELS
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SPX: 2099, 2091, 2086, 2075, 2069, 2062
RUT: 1192, 1187, 1182, 1177, 1172, 1166

Market Recon Wednesday

Good Morning,
                       Guess we’ll start this party in familiar territory…. China.  Last night, while you were still chasing tail, China’s National Bureau of Statistics released some of that nations most closely followed numbers.  October Industrial Production missed consensus (again), which has become par for the course, but something exciting did happen.  October Retail Sales came in at a year over year print of 11.0%.  That was the best print in that space since December, and coming on the heels of all of the “Singles Day” hoopla, had an optimistic feel to it.  The Shanghai Composite jerked back and forth in late trading, finally closing in the green.
                        We’ll get our own Retail Sales print on Friday, but for now, let’s just do Wednesday.  M (.53) will be the only headline level quarterly earnings release on this morning’s docket, as they kick off a week and a half’s worth of retail numbers.  There are no significant domestics macro-economic data-points to chew on.  There are no Fed speakers to listen to.  Right now, I am tracking six of those maniacs on my radar for tomorrow.  That bunch will take the day off today, though it’s doubtful that very many of them ever dug a foxhole in the rain, or ever tried to sleep in the snow.  The Banks will be closed.  The bond market will be closed.  What this all means to you, is simply that markets will be much thinner than usual.  (Easy commutes…oh yeah) You’re going to have to pay attention today, if only to ensure that if the need to defend yourself in the marketplace arises, you’ll show up prepared.
                       With all of that out of the way, thank you to all of the brothers and sisters who have honorably worn the colors.  May God bless you and keep you.  Always Faithful.  Always.
Sarge’s TRADING LEVELS
SPX: 2106, 2099, 2091, 2083, 2076, 2069, 2062

RUT: 1201, 1197, 1192, 1187, 1181, 1177, 1172

Market Recon Wednesday

Good Morning,
                       Global equities are, for the most part…higher today, though for very different reasons.  As it turns out, the PBOC (China’s central bank) accidentally published a five month old article on it’s website, stating the intent to link the Shenzhen, and Hong Kong stock markets by the end of this year.  Although, Chinese authorities did try to explain the accidental post, Chinese stocks took off, and never looked back.  Guess they figure that where there’s smoke, there’s fire.  That link is still likely to eventually happen, but a few weeks’ time is probably way too aggressive.  European shares rallied this morning after Mario Draghi spoke once again, about possibly  adding to the easing of monetary conditions within the EMU this December.  Rock on.
                       Macro, Fed Speak, Earnings…you’re going to get hit with all of it today, so we tried to break it up and slow it down for you.  I find that the best way to tackle a series of problems is to categorize, and then take them on one by one.  That said, let’s do Wednesday.
Note:  This will be the last Market Recon note for a few days.  I will be 100% out of contact.  Please reach out to Paul Lawless at the same phone number should you need assistance at Deep Value.
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Central Bankers (The Horde)
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                        Do we have some Fed speakers today ??  Boy, do we have some Fed speakers today !!  If you’ve ever tried to chop down a rotten tree, and after a couple of hacks, seen about a zillion carpenter ants come pouring out of the trunk….that’s about what we’ve got to look forward to for today, and even tomorrow regarding central bankers.  Hordes of them…. out there protecting their rotten tree.
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05:30…..Federal Reserve Gov. Lael Brainard from Frankfurt  (Voting Member, FOMC)
08:45…..Philadelphia Fed Pres. Patrick Harker from Philadelphia.
10:00…..Fed Res Chair Janet Yellen testifies before House Fin Svs Comm  (Voting Member, FOMC)
14:30…..NY Fed Press William Dudley from NYC (Voting Member, FOMC)
18:00…..Fed Res Vice Chair Stanley Fischer from Wash, DC (Voting Member, FOMC)
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Not to mention ECB President Mario Draghi who you already know spoke this morning from Frankfurt.  He is not a voting member of the FOMC, but is said to have some influence.
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The Macro (for the kid inside)
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                      We’ll get the data rolling at 08:15 ET, when ADP releases their October Employment Report.  This predictor for Non-Farm Payrolls is expected to show something like 181K jobs created.  The range is fairly huge, spanning from 140K, to 230K.  The futures market will be impacted at the time of this release, although it did miss badly last month…..or was it the BLS number that missed badly ??  How many licks does it take to get to the center of a tootsie pop ??  All I know is that you can trade this.
                       We’ll see the September Trade Balance at 08:30 ET.  Now, traders generally don’t give a rat’s a$$ about the Trade Balance, but with August’s drop in exports, and simultaneous rise in imports, the GDP is at stake here.  With the strength of the dollar, and the apparent ongoing weakness in global demand, this is likely to be a problem that’s here to stay.
                       The health of the service sector for the month of October will be measured twice today.  Markit will print their Services PMI at 09:45 ET, and (say it with me), nobody will notice.  Then, fifteen minutes later, The ISM Non-Manufacturing Index will hit the tape.  This is one data-point that has been consistently healthy for like a mega-long time.  No variation from that trend is expected today.  Look for an expansionary tag of 56.6 ish, off slightly from the 56.9 pace seen in September.
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Wednesday Earnings Highlights
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Before the Open:  AGN (3.42), AVP (.07), LL (-.16), KORS (.89), TWX (1.09), USAK (.24), WEN (.08)
After the Close: DYN (.97), FB (.52), GDDY (.30), MRO (-.40), MET (.76), QCOM (.86)
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Sarge’s TRADING LEVELS
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SPX: 2125, 2117, 2111, 2105, 2094, 2085
RUT: 1206, 1201, 1196, 1191, 1186, 1177

Market Recon Tuesday

Good Morning,
                       There’s no denying the trend at this point.  Despite the Fed’s willingness to talk about a December rate hike.  Despite a well below average earnings season regarding revenue expectations, and especially year over year revenue.  Despite a real lack of wage growth.  Despite reduced global demand for resources and equipment, which has at least partially caused the collapse of the US manufacturing sector.  Despite all of this, and more, the S&P 500 closed last night, closed just 26 points below the record close that we saw back in the Spring.
                        What gives ??  With the exception of Health Care, which is at least somewhat political, there have been large inflows of late into both equity, and debt ETFs, more so in October than in the previous nine month combined.  Wow.  Amazing.  Remarkable….but really, what gives ??  Chase for performance ?  Sure, we always get some of that toward year’s end.  Hence, Santa Claus.  The bottom line may be very simple.  You will often hear it said that stocks are historically expensive here, trading a rough 18 times versus a traditional 15 times.  What if history no longer matters ?  What if, due to long term crisis level monetary conditions now endured, we all have almost no experience ??  What if valuations, because you simply can not make a buck away from stocks, and with money coming into the country just has to go somewhere, belong at higher than “normal” levels ??  The public, no check that, the investing public to include professionals who we now understand have no experience….are being forced to price risk without historical context.
                       That said, you’re either going to make a lot of dough, or get your face ripped off.  I think that you might make a lot of dough, and then get your face ripped off.  That could take awhile to play out.  I called for $SPX 2150 (The index was trading at 2050 at the time) by the end of the year, on October 23 with Liz Claman on Fox Business.  The index has moved faster than I expected, but I’m sticking to it.
                       Today’s macro leaves a little something to be desired as far as market impact goes.  That said, we do have a few morsels for you to chew on.  If you’ll recall…Total Vehicle Sales surprised “big time” to the upside In September, sneaking over the 18 million unit mark in an annualized rate sort of way.  Expectations for October total are for something less, maybe 17.7 million units, but that’s still a really strong number, and will fit in just fine with the last half year or so.  The total is released piecemeal by the individual auto makers throughout the day, and will have more of a name specific impact than a market-wide impact.
                       Those of you watching the retailers, and who isn’t, when you’re about two weeks out from a lot of that sector’s quarterly earnings ??…. in November ?? …. will want to keep an eye on the weekly Redbook number at 08:55 ET.  All we’ll have left after that is September Factory Orders at 10am ET.  In August, this data-point took a kidney punch, contracting 1.7% month over month.  Today’s projection is for some more pain, probably something close to -0.8% m/m.
                       Be cognizant that ECB Honcho Mario Draghi speaks from Frankfurt today at 14:00 ET.  He is the only central banker on my radar.  Ok, gang…put on your helmets, and let’s do Tuesday.
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Tuesday’s Earnings Highlights
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Before the Open: K (.84), NS (.56), ODP (.16), S (-.07)
After the Close: CBS (.80), GRPN (.02), HLF (1.05), PKD (-.13), TSLA (-.60), ZG (-.03), ZNGA (-.01)
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Sarge’s TRADING LEVELS
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SPX: 2117, 2111, 2104, 2094, 2085, 2078
RUT: 1196, 1191, 1186, 1177, 1172, 1166

Market Recon Monday

Good Morning,
                        There are several moving parts for you to be aware of this morning as you prepare for your day of business, and they all have to do with global PMI data.  First up, we had the two manufacturing PMIs roll out of China over the weekend.  They both printed in contraction, but the real kick in the pants was the government’s number (49.8).  This one printed below 50, when 50 was the consensus expectation.  Not only that, the number came in below 50 for the third month in a row.  The Caixin (private) number has come in below 50 for eight consecutive months now, and for 10 of the last 11.  Needless to say, Asian markets are weak this morning.  European equity markets are generally higher though, after mixed results that included better than expected PMI prints for both Germany, and the EMU as a whole.  Oddly, in both Asia, and Europe, good seems to be good today, while bad seems to be bad.
                       When it comes to the domestic macro today, it too will be all about the manufacturing biz.  We’ll get the final Manufacturing PMI print for October from Markit at 09:45 ET…..and nobody will react.  That’s because they’ll be waiting for the ISM Manufacturing Index October release at 10am ET.  With all five Fed districts that release monthly manufacturing data having printed in contraction for two consecutive months, one would think that eventually this ISM number would test the 50.0 level that separates expansion, and contraction.  Most economists seem to think that this test comes today….and the markets will likely notice.  This is one place where the impact of both lesser global demand, and a stronger dollar will be clearly visible.
                       We’ll also get September Construction Spending from the Census Bureau at 10am.  Expectations are for a month over month increase of 0.5%, coming off of August’s 0.7%.  I think that in order to shock the marketplace, this one would have to either print above 1.0%, or in negative territory.
                       This is another hefty earnings week, filled with secondary, and tertiary type names, but there are still a few high profile corporations reporting.  Besides, you don’t need name recognition among the many to present opportunity to the few.  I only see one Fed speaker out and about today.  SF Fed Pres. John Williams is slated to speak at 12 Noon ET from San Francisco.  He is a voting member of the FOMC.
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World Series
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                          My Mets won a ball game in this World Series, and they actually brought in their closer with a lead in three other games.  That’s pretty frustrating.  It’s also a credit to the Kansas City team, and their fighting spirit.  Congrats to the Royals fan base out there.  You guys have been through it, and came out the other side.  We are jealous.  105 days til pitchers and catchers.  I think.
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Monday’s Earnings Highlights
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Before the Open: CAH (1.10), CLX (1.18), CTB (.81), L (.56), V (.63)
After the Close: AIG (1.01), FIT (.09), THC (.28)
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Sarge’s TRADING LEVELS
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SPX: 2103, 2094, 2085, 2078, 2070, 2062

RUT: 1178, 1171, 1166, 1159, 1154, 1145