Market Recon (New Year’s Eve) Special

Good Morning,
                        Put on your helmets, gang, I’m going to hit with what I’m looking for in 2016, and then we’ll throw the daily macro at you.  Buckle up.  As for today…. I think there’s going to be a play at the plate with two outs in the bottom of the ninth.
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2016
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A Nasty Cold Gale
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                  Headwinds?  What headwinds?  All of those roadblocks to success that littered your path in 2015, are still in place….. and then some.  Strong US Dollar…check.  Weak Oil….check.  Lack of Global Demand…..check.  Emerging Market Mayhem….check.  Actually, all of those are indeed one connected problem, adding up to a nasty, cold gale.  You can also think of them as a train,  The strong dollar is the engine.  That’s what decides what direction the train will move in.  The lack of global demand, the emerging market melt-down, and weak oil (commodities) are all boxcars on that train.  Certain areas may improve, but this is going to be a rough go…. and they’ll keep dragging each other along.  Then there’s the caboose.
                  The caboose is monetary policy.  The caboose used to be the engine.  For years, and years, we’ve seen quantitative easing coupled with artificially low interest rates.  What this did, was pull consumption forward.  Not that consumption was all that awesome, but it would have been even worse.  This caused a boost in equity (all asset) valuations to the high end of what I would call a comfortable range.  Now, with QE over and out…and an increase (at least for now) in the Fed Funds Rate, valuations may not come in (Oh…they may), but I find hard to believe that in the midst of an “earnings recession” they will go any higher.  One obvious support for current valuations is that grandma and grandpa still can’t make any money away from the markets.  There’s  a lot more to this, and we should go into greater depth, but this is supposed to be a short note, and I am but a simple man.
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Spitting Into the Wind
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                    So, we’ve got mouths to feed.  We’ve got people who need us to find a way…. so, we will find a way.  We will adapt to our environment.  What seems likely?  Well, core inflation does seem to be around 2%, that is if you don’t try to be deceptive when you measure it.  Wages do seem to be waking up just a little bit.  To me….that means that household spending is likely to rise.  Things are still not easy out there.  Increased use of credit (at a greater pace than increased household spending) seems somewhat likely to me…perhaps…even the use of….revolving credit.  So, as ugly as it is, rotating into Consumer names doesn’t seem that stupid to this guy.
                    The economy may not cooperate.  The yield curve is flattening.  That’s often sign of a coming recession.  Even on days that the dollar flexes it’s muscles, the Small Caps fail to lead.  Small Caps do not do much international business.  In a healthy economy with a raging dollar, Small Caps should be amongst the leaders.  Not happening.  That extra household spending we spoke of, may be spent just to maintain familial standards of living.  Therefore, I think I’m going to favor the Staples over the Discretionary.  Food and household products before video games, and recreation…. making sense?
                    What to bet against?  Health Care has been a top performing sector for what seems like ages.  They even call it the Obama-Care put.  (I don’t touch Bio-Tech, so I’m not going to go there)  This is an election year…just sayin’.  Health Care costs are on a tear versus other consumer costs.  The middle class is getting their collective faces ripped off here, but the middle class does get themselves out to vote.  The Republicans are sure to go after Obama-Care yet again, and the Democrats, in my opinion, will likely have to agree to some kind of impactful change in this space.  If you decide to hedge your longs with a negative bet in the Health Care sector, just remember,  buying puts risks a whole lot less dough than shorting equity when you’re wrong.  Just thinking out loud.
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Allocation
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                    For the entire 2015 calendar year, I never went below 35% cash, nor below 17.5% bonds (No junk, keep your fat yields).  You know what?… My levels are high for Wall Street, and maybe overly conservative, but they have served me well.  I think you need at least 5% in the precious metals (I am currently below that)… A rip in the price of gold in either direction would seem possible.  Thinking I want some exposure/insurance.  That only leaves 42.5% for equities/options.  I don’t give advice, I just tell you what I’m doing, or thinking of doing.  If the S&P 500 is up 25% in 2016, and you’re only up 10% because you go with these numbers, I’ll buy you a cup of coffee.  We don’t swing for the fences here, we get on base so we can score in case there’s a big inning.
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Today’s Macro
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08:30 ET
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Initial Jobless Claims (Weekly): This had been an item, that even though near long term lows…. had been trending higher in recent weeks.  Until last week, that is, when the number reported was 267K, a four week low.  Expectations for today are for 272K, which is just a smidge below the four week moving average……. how this data-point is intended to be viewed.  One note of caution…the consensus is very close to the low end of the range for this one today, with the skew to the upside.  There could possibly be a nasty surprise here.
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09:45 ET
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Chicago PMI (December):  This one had lost stature in recent years, at least in my eyes, and then wham !!!  In November, the Chicago PMI very nearly hit the ISM November print right oin the head with a very contractionary 48.7.  Projections for this item today (Which I am notably not mocking) are for a very slightly expansionary 50.2.  This one is going to be close, kids.  Philly, NY, and Dallas all got their tails kicked in December.  (Man, did Dallas get their tail kicked.)  The market will watch this one today.
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10:30 ET
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Natural Gas Inventories (Weekly): This data-point has printed in contraction for four consecutive weeks.  Now normally, I warn you about the insanity of trading Nat Gas Futures on Thursday mornings.  Been there, done that… not going back.  Ever.  Now, with the recent volatility surrounding Nat Gas, I can only….utter…   “The Horror, the horror”.  I’d rather trade Bio-Techs.
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Notes to Clients, Prospective Clients, and Readers
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 *                Happy New Year, Gang.  I truly hope that all of your hard work is rewarded with some prosperity in the coming year.  It is also my wish that for your families, 2016 is a healthy year full of all of the blessings that God will allow.  Amen.
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 *                Your old buddy (that’s me) will be on vacation next week.  Mind you, Deep Value would never leave you flat while I am away.  Your other old buddy, Paul Lawless will man my spot on the trading floor, and be answering my phones.   Get fired up for a week with Paulie !!  Market Recon will not publish during the period 4 January thru 8 January.

Market Recon Wednesday

Good Morning,
                        I know that you’ve been asking yourself if Tuesday’s “run”, after Monday’s sell-off was the coming of the bearded fellow in the red pajamas.  Well…. good chance that you’ll find that answer today.  WTI Crude is back in “slap me around” mode this morning after the American Petroleum Institute predicted a hefty increase in supply when the EIA spits out their weekly inventory print at 10:30 ET.  To make matters worse for the energy sector, there is also some profit taking going on in the Nat Gas arena here in the zero dark hours.
                      Globally, equity markets are well mixed in the early going.  Shanghai is up small, while the DAX is slightly lower, but nobody is even half of a percent from where they started.  US futures markets are trading sideways as well, but there is some of that “thin ice” feeling.  I guess soon enough, we’ll find out how key last night’s close above SPX 2077 actually was.  The macro calendar is rather light all around the planet this morning, but what I see, I’m not really loving.  Spain missed it’s mark for the CPI Flash, Norwegian Retail Sales disappointed, and the Italian Treasury held a rather lackluster auction for 10 year paper.  Norway ??  Diggin’ deep, kids.
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The Goods
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10:00 ET
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Pending Home Sales (November):  In October, Pending Home Sales showed a m/m increase of 0.2%, which may seem rather paltry, but keep in mind that three of the four months prior to that sported fairly nasty contractions in that space.  Consensus for today appears to be up around 0.6% m/m.  Now, stay with me here….that 0.2% in October was a huge miss, up against a 1.6% m/m consensus at that time.  That miss came to fruition last week, when November Existing Home Sales missed badly (November New Home Sales missed badly last week too).  Point is…. I do not trust the consensus opinion of late in anything housing.  This is not usually a high focus number, but another nasty miss could leave a nasty mark.  BTW, the y/y print has been trending steadily lower ever since April.
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10:30 ET
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Oil Inventories (Weekly):  How do you ruin what might appear to be a very fragile “Santa Claus” rally ???  Smack the stuffing out of Crude… that’s how, and that is what happened after that API number this morning.  This could just be the item of the day.  Last week, we saw contraction in supplies, and it was a sizable reduction at that…. -5.9 million barrels.  Not only that, but last week was the second of three that we saw reduced supply.  Expectations (that are almost always wrong., mind you) are for a further draw down, though smaller… maybe -1.8 million barrels.  Do I trust that  number ?? Not a chance.  Do I trust the number put forth this morning ??  Aahhhh, I don’t know.  Do I think traders will  react to this number ??  You can bet your tail.
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Remember gang, if nobody’s got you up against a wall, while his buddy goes through your pockets, then it ain’t so bad.  Everything is relative.  Now, get in there.  Rise.  Prove yourself to yourself.  You are the only guy/gal that you have to impress today.  The rest of us are simply peripheral noise..

Market Recon Tuesday

Good Morning,
                        Global equities are stronger today to varying degrees, but hey…. green is green.  Amazing what traders can do if they can just keep the dollar in place while Crude hides it’s scarred face from that darned ugly stick.  The more dramatic upward price movement this morning has been seen across Europe, which is in my opinion, quite notable after the week/month or so that they have had in that neck of the woods.  Apparently, whether successful or not remains to be seen but, Santa is going to give this thing a go.
                        Time (really past time) to start thinking about your 2016 re-weights.  For my rookies out there, keep in mind that if you are timing your own re-balance… that many funds are doing the same, and you can sometimes save a few bucks by waiting a week or so, while that new money runs through the market like a bull (literally) through a china shop.  Honestly….only you will be super careful with your money.  If I am setting up a long or short bias in a certain stock or certain sector, I want it to be because that’s how I feel (knowing that I did my homework), and not because some 29 year old with two rich grandpas that was handed a job at some fund somewhere “took a shot”.
                        Gang, there sure ain’t a lot to look at this week, but today does stand out among it’s peers this week…as the one day with just a little bit of macro.  So, without further delay., let’s get after it.
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Just a Little Bit of Macro
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08:55 ET
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Redbook (Weekly):  Normally, the Redbook is of interest to those following the retailers, but not headline type material.  This one may be a little more in focus for all traders than usual.  For one, this report is for the week ending on Saturday 26 December, so this will encompass both the last minute Christmas Shoppers, and the all-important day after Christmas.  Secondly, for many Eastern US urban areas, the weather was quite balmy, which you would think somewhat conducive to both shopping &  to selling.  I think we’ve got to look for something with a 3 handle on a year over year basis for this to be considered a bullish print.
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09:00 ET
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Case-Shiller HPI (October):  Home Prices gapped up 5.5% y/y in September on a non-seasonally adjusted (honest) basis, and that same pace of growth is consensus for October.  That last print was the largest percentage gain in that space since July of 2014.  Traders may not follow the FHFA print, but that “lesser” HPI scored a 6.1% y/y gain for October last week.  That FHFA result, and a range for this item that is indeed skewed to the high side lead me to believe that if there is a surprise today, it will be a pleasant one.
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10:00 ET
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Consumer Confidence (December):  The Conference Board’s survey, not to be confused with the University of Michigan’s print, really took it on the chin in November.  Last month this data-point printed at 90.4, which would have been a kick-tail number up until mid-2014, but ended up being the weakest print in this space for all of 2015 (and a dramatic drop from October’s number).  The smart folks in the room are looking for a rebound to something in the 93-94 area.  The low end of the range is 90.7, meaning that nobody, but nobody is looking for a further decline in this space, at this time.
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Not quite sure.  Think the parking lot was even emptier than yesterday.  That said…… Let’s do Tuesday.

Market Recon Monday

Good Morning,
                        I know that we had a nice move last week in US equity markets, but it is this week that traditionally is when you would see that fabled “Santa Claus” rally.  As you are most likely well aware, a well rounded long biased portfolio can squeeze a percent or more out it’s performance this week, a rough 75% to 80% of the time.  That said, there’s no such thing as a free lunch, so stick to your targets, and take profits in names that you held onto for too long and then suddenly, unexpectedly present said profit.  First, and foremost…. the markets would actually have to rally.
                        In order to see the rally from last week continue, Oil will have to play ball.  Last week, Crude found that salvation bid.  So far today, WTI is a bit soft, as traders in those markets take some profits.  Shanghai kicked things off with a 2.5% beat-down, and pretty much the entire planet (less, those closed for Boxing Day) have followed suit.  S&P futures are trading eight points below fair value as I type this note out.
                        There are no earnings releases out there this week that I think worthy of a spot in the marble notebook.  Doesn’t look like any Fed Speakers will be out and about either.  That leaves us with the macro calendar, which itself is very light compared to last week’s heavy duty macro blitz.
                       We only have one macro-economic data-point to look at today, and that would be the long time loser, also known as the Dallas Fed Manufacturing Survey, December edition.  The last time this item avoided the dubious distinction of printing in contraction was December of 2014.  The expectation for this release is something close to -5.2, which would complete a winless 2015 in Big D.  Only slightly worse than the Cowboys.  I will have you know that there are outlier economists who are projecting a positive number today.
                        Good luck today, gang.  If you’re already working hard, the battle is half won.  Stay focused.  Arrogance will cut you off at the knees as fast as will laziness.  I trust that you are neither, but if you are like me, you must guard against both.  Carry on.

Market Recon Christmas Message

Good Morning,
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The Greeting
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                        Christmas Eve.  Half Day of Trading.  Presents.  Materialism.  Santa.  What does it all mean?  Not all of that stuff, gang.  True, Christmas has become a cultural holiday, and there really is nothing wrong with that, but let’s not forget….. let’s not ever, ever forget that Christmas is a religious holiday first and foremost.  I am Irish Catholic, and a little (a lot) proud of it.  I grew up in Queens. New York.  I never met a person who went away to college until I got a job at the New York Stock Exchange.  All that means is that I’m going to call a pretty straight shot.
                        The PC crowd has tried to make sure that everyone gets offended by everything these days.  I don’t know where that came from, but I’ve never been offended by anything representative of someone else’s faith.  So…….From me, for those who believe and their families, I wish you the merriest, and most blessed Christmas possible.  As to rest of you (whom I also do love), have an awesome three day weekend.
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The Gut Check
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                         It’s at this time of year that we really have to take stock of our lives.  It’s a good time for a self induced gut check.  Do you love someone who is lost to you, but should not be?  Are you sorry for, or hurt by something that happened way back?  Do you even care about that dirty guy under that dirty blanket that you just walked by this morning?  (He might need to be acknowledged)  You can do this.  We only get 50 or so opportunities like this…. to re-check ourselves, and that’s if you’re lucky.  (Assuming that you live a very long life, and also discounting the years spent prior to you figuring out that you’re the jerk in the room)
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Team
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                         Please don’t be offended.  I certainly do not speak to you from a mountain top.  I have been, and often still am…. that jerk in the room.  We can not improve this place, this country, or this planet, unless we all try.  Silly, right?  Not if we make a stand, clench both fists, and say “No More”.  The ways of this world will not weaken our moral compass.  We will not do, or allow it, because whatever it is, it is now commonplace.  We will do what is right at all times, and under all circumstances.  Our children will see that example, and will then have a better chance.  Our friends will see our lead, and one or two might follow.  This country, our people were not set up to fail.  We will not fail.  It starts with you and I.  We will try…… we must try….. for each other, and then we will try even harder.
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The Blessing
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May God bless each, and every one of you…. especially the most forgotten amongst us.
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For those for whom this applies….. Merry Christmas !!! ….. and for those who are not celebrating….. Happy Weekend !!.

Market Recon Wednesday

Good Morning,
                        Equities are strong across Europe this morning (despite disastrous numbers for French Consumer Spending & Italian Retail Sales), and if you have not seen US futures markets just yet…they are trading well above fair value.  The catalyst?  Oil.  Pure and simple.  WTI Crude has further strengthened here in today’s early going…oh, and probably a little of what I wrote about yesterday morning, although some of those “bargain” entry points are starting to disappear.  Is the chase on?  Maybe.
                        We have oodles of macro scheduled for your enjoyment today.  Lot’ of high impact type stuff too.  I know, it’s December 23rd, and you want to make merry, but (another big but), alas…. we have a job to do, so we might as well do our very best.  Enough small talk, let’s get right to it.
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The Numbers
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08:30 ET
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Durable Goods Orders (November): Durable Goods orders have remained volatile in 2015 (though nothing like Autumn 2014), slipping back and forth between growth, and contraction throughout the year.  The headline print for October came in at a hefty 3.0% increase on a m/m basis (3rd best of the year), while the Core (ex-transportation) print sported 0.5% m/m growth (2nd best of the year).  All of that warm and fuzzy wonderfulness is expected to have unfortunately dissipated in November.  We look for scores of -0.5% at the headline, and a flat 0.0% m/m at the Core.  The range is very wide for the headline print, with several economists fairly distant from zero in both directions, increasing the likelihood of a surprise in that space. Oh joy.
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Personal Income and Consumer Spending (November): I consider these two items to be the greatest rivalry in macro-economics.  Basically, it’s a measure of how well the guy across the street, and the lady with all of the cats who lives on your corner are doing.  If their expenses are growing faster than their income, some people (selfish ones) will love it, but in the end, everybody gets hurt.  So, we’re rooting for Income here, and Income has indeed won the last two monthly battles.  Said it before, the consumer has to be comfortable.  The projection here is that the winning trend ends in November.  Look for Personal Income to have expanded by 0.2% m/m in today’s print, off of October’s 0.4%.  You can also expect to see that Consumer Spending grew 0.3%m/m, up from last month’s 0.1%.
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PCE (November):  Here we are, watching Janet Yellen, and the FOMC family singers’ favored measure of consumer level inflation.  We are expecting to see a headline print of 0.0% m/m, and growth of 0.1% m/m at the Core.  Now, we all know that the year over year number will be somewhere close to 1.4%, even though Core CPI is already at 2.0%.  Let’s play a game called “Follow the measure of consumer level inflation that tells people that they aren’t paying more for stuff, because they’re are all morons, and they might freak out if you tell them something else”.  Oh, I see you thought of that game already.  My bad, Carry on.
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10:00 ET
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New Home Sales (November): Consensus for this item is for 505K units when measured in seasonally adjusted, annualized rate kind of way.  This would be up from 495K in October.  Know what I think ???  I think this consensus view was formed by the same cast of characters that missed yesterday 10% drop in Existing Home Sales…..nice job fellas.  Spin the wheel….pick a number.  You might be closer than these guys.
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U of M Consumer Sentiment (December final): The preliminary print from the Victors of the West came in at 91.8 two weeks ago.  With that warm, and fuzzy vibe going around, we’re going to take a shot and look for something with a 92 handle.  Go get ’em, sport.
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10:30 ET
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Oil Inventories (Weekly): Last week we saw an increase in supply here in this space of 4.8 million barrels, when a contraction of something like 300K was expected.  Instead of throwing a number at you here, we’re just going to tell you to buckle your chinstrap at 10:29.  Fair enough ??
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Fed Speakers
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               Yeah right, it’s the holidays.  There are also no significant (in my opinion) quarterly earnings on today’s docket.

Market Recon Tuesday

Good Morning,
                        I nearly did a double take this morning.  Pretty sure am I, that I saw WTI Crude trading above $36 a barrel.  Nah, that would be just plain silly.  Global equities are staying fairly close to where they started their various trading sessions so far.  In most cases (Shanghai & Europe) they opened higher, sold off hard, and then rallied hard…. kind of like what happened at 11 Wall Street yesterday.
                       Now……about that Santa Claus Rally…. Seems to me that everybody I follow is saying “Not this year”.  I know, that some folks probably think that I’m a perma-bull, I’m really not, it’s just that being a perma-bull has worked for me for a number of consecutive years now.  I still think there’s a chance for this year.  I may be wrong, heck, we’re all wrong sometimes.  There are some reasons to believe that line from “Dumber and Dumber”.  “So, you’re saying that there’s a chance?”
                       We’ve been talking all month about winning managers taking a hike.  Poof !! They’re gone.  We’ve been talking all month about Tax-Loss selling.  Poof !! That’s pretty much out of the way.  All of the landmines on our road to victory are still in the way, but…..and this is a big but….We’ve been talking all month about losing money managers who may have to jump in toward the end of the year in order to chase performance……   Oh, wait… those guys are still out there, aren’t they ??  …and they are suddenly staring at what looks like bargain entry points (and interest rates are still very low, and if Oil finds a bid….. a lot of guys are short Oil & Energy) … hmmmm.  Like I said, no promises, kiddies, but if Oil does find that bid here, well, anything’s possible.  The Mets did win the pennant, and the Jets are in the playoff hunt.
                       Gang, we’ve got a ton of macro to take in both today, and tomorrow.  No such thing as coasting into the end of our shortened week.  Let’s take a look under the hood, and see what’s gonna slap us around today.
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Macro
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08:30 ET
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GDP (Q3-F): The lack of excitement around this release is notable.  After last month’s revision to 2.1% from the initial 1.5% largely on increased estimates for inventory building, the number is expected to dip back below that 2 handle in this, the final revision for the third quarter.  Consensus is for 1.9% q/q SAAR, without much of a range.  There would likely have to be a big surprise here for anyone in the markets to get fired up.
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08:55 ET
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Redbook (Weekly):  Last week, this number dropped to 1.5% y/y.  I think all of us who watch the retailers would like to see a number that at least approached 2.0% this late in what has been an inconsistent season thus far, especially sitting on that inventory build.
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09:00 ET
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FHFA HPI (October):  Three cheers for the HPI that nobody watches.  Don’t spend any intellectual capital on this one, gang.  Case-Shiller is scheduled to be released next Tuesday.  Make sure that you pay attention to that one.
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10:00 ET
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Existing Home Sales (November):  Really, housing data already.  Man, does time fly.  It’s like being on a treadmill, or in the movie “Groundhog Day”.  We saw a nasty drop-off in October to what I still consider to be a fairly strong number.  We expect to see another drop, though a smaller one this month, to maybe 5.33 million units when measured in SAAR fashion.  The low end of the range is still 5.1 million, which would have been a great print not too long ago.  Heads up…Folks do watch this item.
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Richmond Fed Manufacturing Index (December):  They say that misery loves company.  That, I guess is about the only thing going for the regional Fed district manufacturing surveys. Richmond only has a three month losing streak going, which is a whole lot better than the Empire State, and that energy sector related mess down there in Dallas.  This will be a close one, with expectations at -1, there is a slight chance for an expansionary print in this space today.
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Tuesday’s Earnings Highlights
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                  These will be the last significant quarterly earnings releases of the week, and though they are few, there are a couple of doozies in here.
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Before the Open: CAG (.59)
After the Close: MU (.23), NKE (.86).

Market Recon Monday

Good Morning,
                        There are no domestic macro-economic events worthy of note scheduled for release today.  Ditto for the earnings calendar.  Oh, you’ll get your fill (and then some) of headline level data-points this week, and even a couple of notable quarterly earnings as well.  In fact, this might have been a sleepy, short week, Monday morning…. might have been….. if not for the high volume proverbial crowbar to the proverbial back of the skull that many of your portfolios took on Friday afternoon.
                       Global equities are painted a light shade of green this morning, with some noticeable exceptions (Spain, Japan), and US futures, at least in the early going are quite strong. As we all know…. pre-opening futures pricing can often be a result of momentum traders who are trying to swing for the fences, and not actually indicative of where stocks will open.  Then again, the stock market is, in my opinion, oversold at this point.  Sat down this weekend, did a lot of homework.  Expected to re-weight the portfolio (two weeks ahead of schedule)….ended up deciding to leave a lot more in place than I had originally expected.
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What Should I Do, Sarge ??
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                       What happened last week?  What’s ahead?  Everything that has pushed our markets sharply in one direction, or the other is still out there.    The US economy is still weaker than the surface statistics indicate.  Just ask someone who doesn’t live in a castle.  The Fed is still, and will continue to be a wild card until it’s last days.  (Probably not soon.  A boy can hope)  The balance between the benefits of, and the damage caused by cheap energy prices have left no clear winners.  Have I mentioned the strength of the US dollar ????  Eeegads. The point here is that you better make friends with volatility.  Understand it, know it.  You’ll never defeat it, but like a ballplayer who has just made an error in the field, you can not let it impact your performance at the plate.  Never react to volatility with an unplanned move.  Having a plan A, and a plan B for every single position on your book removes emotion.  If you can’t do that, then I still love you, but this ain’t your thing.
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Feeling Better About Yourself
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                       What you might not know about the great traders… is that they’re wrong a lot.  A lot.  Trust me, I know, and follow a number of them.  Many great traders are wrong almost three quarters of the time.  Although you should always have a reason when you act….The trick is not to be right all of the time.  The trick is recognizing when you’re wrong before the loss is catastrophic.  That is the trait that the great ones share.  I’m not talking about the really famous guys who can go out to the shed for another wheelbarrow full of money when they need to.  I’m talking about folks who really don’t have a net under them when they fall.  Agility is the key.  See Plan A, and Plan B comment above.  Now, go get ’em.  .

Market Recon Friday

Good Morning,
                        I’ve got to tell you, I really….I mean …. I really, really didn’t like the way the SPX 2047 support level broke late in yesterday’s trading session.  That spot had been like a rock through almost two complete sessions.  The technical impact of that move close could now be either wiped out, or exacerbated by the high volume impact of the quadruple witching expiration that we’ll see today.  From the early look in the futures markets, the move is lower, but like I said… this note is written quite early.
                        A couple of folks asked me last night to explain what had happened to the market just one day after it apparently had experienced a relief rally based on the Fed lift-off.  This one’s really for the home-gamers, so if you are more advanced than that, skip, down, or say a prayer for somebody.  We’ll catch up.  You see, kids, the whole thing is kind of like your nervous system.  Pinch a nerve in your shoulder, and your elbow hurts, right?  OK, so the US dollar has a massive move to the upside.  What hurts?  Commodities priced in US dollars, right?. Gold & Oil are your headliners.  What gets whacked at 11 Wall St.?  The Energy Sector….Metals & Miners…. Those Transports that move Crude.  The powers that be also bought Treasuries.  That compresses yields.  Where do investors go when yields are low?  Dividend stocks.  Poof…Utilities lead.  Remember, everything impacts something else, and the whole ball of wax is much, much more complex than this.  Heck, I’m old, and I learn stuff all the time, but if you’re new, and struggling, I hope this lays out the framework for learning.  Only go as fast as you are comfortable with.  There is no race here, and as long as I stand, you do not stand alone.
                      Everybody here?  OK, let’s move out.  Today, on top of the usual tug of war, as already mentioned, is not only an expirations Friday, but there are also some rebalances in the mix. Volume will be high, in fact volume will be very high, and will also be bell-centric.  What that means is that you’ll likely see a sharp move on the chart at closing time, and it will have less meaning, going forward than it might on a more normal day.  Oh, and those of you hanging on to options with dwindling premiums will be frustrated by the end of the day pinning.  Promise.
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09:45 ET
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Markit Service Sector Flash PMI (December): You remember Flash, right ??  He did save every one of us.  Ahhhahhh…service sector data, our economy’s bright spot, along with auto sales.  Markit’s final services PMI for November printed at 56.1, and we think that December should flash very close to that, possibly hanging onto that 56 handle.  There is virtually no range for this item.  No matter, there will not likely be a noticeable market reaction.
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10:00 ET
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Kansas City Fed Manufacturing Index (December):  We all know the tale of woe that is the US Manufacturing biz.  KC printed above zero last month, breaking the all-Fed regional multi-month losing streak…along with Philly.  Well, Philly, along with the Empire State fell back into that abyss this month, and hopes for KC are not at all optimistic.  Hey, didn’t these guys just sign Dillon Gee ??
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12:30 ET
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Fed Speaker:  Richmond Fed Pres. Jeffrey Lacker speaks on the economy from Charlotte, North Carolina.   FYI, Lacker just voted as a member of the FOMC, and will not vote again for quite some time, if ever.  Richmond does not vote in either 2016, nor 2017.
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13:00 ET
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Baker-Hughes Rig Count (Weekly):  With the state of Oil, and the Energy sector being what it is, if you haven’t already, you better start paying attention in this space.  Last week, the US Oil Rig Count dropped for a fourth consecutive week, by 21 rigs, leaving 524 in operation.
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Friday’s Earnings Highlights
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Before the Open: BBRY (-.16), KMX (.68), CCL (.41), DRI (.42), LEN (1.12)
After the Close:  Nachos, and beverages.
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Note:  As of yesterday, the options market was pricing in an approximate $2.50 worth of volatility for KMX, and close to two bucks for CCL.

Market Recon Thursday

Good Morning,
                        On this side of the dirt…again…yessss !!!!!
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Central Banking
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                        Now that you’ve calmed down a little, just thought you’d like to know that central banks in Indonesia, the Philippines, Egypt, Norway, Ukraine, Mexico, and Chile all will announce policy decisions today.  That was in Barron’s last weekend, I’m not an encyclopedia.  For those youngsters out there, who might accidentally read my note…. an encyclopedia was how us old guys used to “Google” stuff, but we would actually have to go to library, and it would take half a day.
                        Now that the Fed has gotten itself out of it’s ZIRP policy, we can all relax because the cloud of uncertainty blurring the prism through which we see the financial markets has now been lifted.  True?  No?  Well. in a way…..yes.  While uncertainty will always go hand in hand with the human (most of you) experience, I think we can all agree that, for Janet Yellen, there is clear intent to raise rates further in coming months.  The makeup of the FOMC in 2016 will be slightly more hawkish as St. Louis, and Kansas City will join the fray, soooooo…… Barring an unforeseen (What could go wrong ??) jolt to the economy, most economists that I follow think we’re looking at a .25% increase in the Fed Funds Rate every quarter, or every trimester.  I will be less aggressive, and say that I think it will be a bit slower than that.
                       One thing that struck me about Janet Yellen’s demeanor yesterday.  She seems to support higher inflation going forward, yet fear it all at the same time.  I found that to be both human, and somewhat reassuring.  Only a fool would think that we have nothing to fear from inflation just because we haven’t felt it’s extreme anger in 30 something years.  Sort of like nighttime in the jungle….you know something scary is out there, shoot, you can hear it….. you just hope it doesn’t introduce itself.  I know many of you like when I bash the Fed, and they certainly have given us plenty of ammo over the last few years.  Just not today.
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The Macro
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08:30 ET
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Initial Jobless Claims (Weekly): This item surprised to the upside last week with a very Scrooge like 282K, which was the nastiest number that we’ve seen in this space since July.  The four week moving average is now just less than 271K.  That is also the consensus expectation for today.  Truth is anything above 250K, and below 300K will be taken in stride by market participants right now.  Good idea….Say a little prayer right now for somebody you don’t know who lost their job this holiday season.  I’ll wait.
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Philly Fed (December):  This one is the gold standard of regional Fed district manufacturing indices…. if there is such a thing.  Philly actually squeezed out an expansionary number in November after taking two consecutive kidney punches in the months prior.  Overall, the expectation is for another slight positive this month, but nothing is at all likely.  There are economists at -5 for this one, and there are economists way up at +8.  If they don’t have a clue, how are you supposed to?  Spin the wheel.  Buy a vowel.
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10:00 ET
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Leading Indicators (November):  Probably the most useless piece of macro in the entire macro universe, at least as far as traders are concerned.  Honestly, I just leave this one in my notes because I like making fun of it.  Next.
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10:30 ET
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Natural Gas Inventories (Weekly): This cute little guy has printed in contraction for two consecutive weeks.  Survey says….. let’s make it three.  I’m looking for a reduction in supply of something like 60 billion cubic feet.  I won’t even dare you to trade this release, because there’s a chance that you could get your face ripped off.
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Thursday’s Earnings Highlights
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Before the Open: GIS (.83), NAV (.63)
After the Close:  I don’t see anything exciting.
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          OK, gang.  It’s Thursday.  Now, get out there, and take Thursday down.  Let no being work harder than you.  Ever.