All posts by sarge986

Market Wrap Tuesday

Good Evening,
                       A wrap of today’s market offered in response to specific request, but for all to share.
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Fernando Valenzuela
                       Little bit of a screwy day. Not completely out of left field, but a little screwy nonetheless. The day began with UK Prime Minister calling for a snap election. This makes sense from her point of view, as she is dealing for the moment, from a position of strength. This also will push out the need for her to defend herself in another general election until 2022. That should make the Brexit negotiation that much smoother…. should…. unless the situation in Scotland becomes even more complicated. We’ll know more on 8 June. What we knew today was the Pound screamed higher, kissing 1.29 vs. the US Dollar at one point. FYI, the Euro, and the Yen also took flight against the greenback.
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Nothing to See Here
                     The there were some disappointing quarterly earnings results. UAL dragged the Transports out back, while GS, and JNJ put the whammy on the DJIA. Should I mention HOG? Jeekies. Oh, the broader indices did fight back, and there were some notable winners, even among Dow components. UNH, for one responded very well to earnings. Broadly speaking though, the Financials took it on the chin with Health Care, while the Staples and the bond proxies stayed in the green.
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Macho Man
                     The bond proxies? You bet your tail. With uncertainty in the UK, a tug of war in France, a planet mired in chaos, the reduced expectations for a June rate hike thanks to some lousy macro, and did I already say a planet mired in chaos?…. Treasuries ran wild, just like the late “Macho Man” Randy Savage used to. You know gang, every time I try to lighten my bond portfolio.. I end up getting cold feet…and every time… I’m glad for it.
                      It may be noteworthy, kids.. that both Oil, and Gold stayed near where they began despite all of that dollar weakness, and Crude had to make a nice comeback to just get there.
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P.S. For all of you numbers junkies out there, IBM just reported a beat on EPS, and a miss on revenue. The stock is down 3.3% in the immediate aftermath.
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P.S.S. I suddenly feel like a Slim Jim.
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Positions in stocks mentioned: none. I left them out on purpose, but 4 for the top 9 on the Dow there, Chilly Willy.

Through the Window

               It was a cold January morning in 1983. What I saw through the window stopped me in my tracks. Still does when I think of it. The most beautiful girl that I had ever seen, or ever would see. Being loud, laughing, wearing a white T-shirt with black polka dots, and black jeans. It was as if I had been hit by lightning. Thirty-four years later, the image is as clear as it was that morning. That mental image still makes me hold my breath for a second. I went inside. I tried to talk to her. It wasn’t easy. I dated many girls back then, but this time …… I already knew the stakes were high. I could not screw this up. It would still take me four more years just to ask her out on our first date. That day was the first time I ever saw my wife. Want proof of God’s existence ?? There it is right there. I won’t get religious on you here, but there was something at work far greater than I.
              This morning I woke up on the right side of the dirt once again. I have a pretty good winning streak going in that regard. Today is the 28th anniversary of the day I married that girl. A purpose for life? You bet. For richer or poorer? Done both….. a couple of times over. In sickness and in health? Been there and back….. in spades. Children? Two young men that any man would be proud to call sons. To love someone…. To care for someone over a lifetime. What an honor !! What a responsibility !! I won’t bore you with a long note. I merely want to encourage young married couples to hang in there, if at all possible. Don’t give up, even when the world around you is an ugly place. Always remember that the girl (guy) you fell for, is still there. Right in front of you. Always was. Always will be.

Market Wrap Wednesday

Good Evening,
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Sidewinder
                       Technology shares outperformed the marketplace today, which is why the Nasdaq Composite ran away from the DJIA, and the S&P 500. That said, it’s hard to imagine a day coming after a severe sell-off that satisfies neither the bulls, nor the bears. No follow through, no rebound. No response to weak guidance from NKE (outside of that specific security, that was -7%). No response to a terrorist attack in London.
                       Walking on eggshells. Perhaps, after getting roughed up yesterday, investors (and algos) will wait until hard news on health care reform breaks before deciding which way to take the market’s next leg. There was a brief attempt at a rally in response to the Rep. Nunes’ press conference, but that was short lived.
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Winners & Losers
                       Outside of the tech space, Treasuries, and thus most of the bond proxies found support… as did Gold. you could not exactly say that traders took off the safety trade. Telecom was an outlier, selling off badly, while the banks seemed to stabilize if not find a buy side. The US dollar remained weakfish, as did oil, illustrating just how bad the environment is right now for Crude. That said Crude remains well above the crucial spot just north of $47 a barrel, despite another large inventory build.
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Trading Levels
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SPX: Our 2337 level at the bottom of the chart was precise, as was our 2345 resistance that held into mid-morning. we were, however sloppy at the top. I gave you nothing between 2345, and 2358. A stone wall formed at 2352, a level that has held since 1pm on Tuesday, so there is clearly something there.
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RUT: The 1349 level at the top was nearly perfect. and our 1342 level did truly work well for most of the day. Honestly, just missed 1335 support until it was real.

Market Wrap Tuesday

Good Evening,
 
Cometh the Ugly Stick
                       Whoa doggie. Guess that’s what risk feels like. Had almost forgotten. Remember the Ugly Stick? Yeah, the stick was out and about today, and he was laying down the hurt. The banks as a group gave up almost 4% on the day. The Small Caps surrendered 2.6%. The NASDAQ Composite? Ouch. In fact among the eleven sectors of the S&P 500, Financials, Industrials, Materials, Tech,, and Discretionary names all backed up more than one percent. Within the Industrial space, it was an especially bloody day for Aerospace & Defense (-1.7%), the Airlines (-3%), the Rails (-2%).The list goes on, and on.
 
The Return of Headline Risk
                      The point is that health care reform is seen as not likely to pass on Thursday. No health care reform, no budget. No budget, and the pillars of expected economic growth start to unravel. Tax reform, fiscal spending, repatriation… the whole ball of wax starts to crumble. When the whole ball of wax starts to crumble, so will confidence. Consumer, Small Business, Homebuilder… gone, gone, gone. Do you panic? No, I don’t think you do. Do you react? Probably. I went shopping,  but not with cash. I bought into the airlines and energy today, but I took more profits in the banking space earlier in the day to create the capital. I’m now skinny on banking, a little skinnier than I want to be if the agenda gets back on track, but if I need to get back into that space, the market will be open on the day I want to do so. It would have been a mistake in that case, but a mistake made for the right reason, and it preserved capital. Capital preservation was the name of this game.
Run to the Hills
                      Flight to safety is what they call the behavior seen across markets today… or you can call this the “deflation trade”. Kind of like that one. Banks, Industrials, Small Caps. Sold, sold, sold.  Treasuries, Gold, and Utilities… Take ’em, take ’em, take ’em.
 
Right Side of the Dirt
                      If you got hurt today, take it in stride. Remember gang, if you are still on this side of the dirt, and you still have your health, and your mind… well, then you are not really having all that bad of a day, now are you? Capital risk is part of the game we play, and generally speaking, it’s kind of fun. You’ll live.

Market Wrap Monday

Good Evening,
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Sir, I’m Not Made of Steel.
                       Well, that was exciting. Tax reform. Deregulation. Fiscal spending. Repatriation. We will have none of that, thank you. Instead, we’ll take hour upon hour of “Russia interfered with the election” When did Russia begin interfering in US politics? Decades. Oh. Wire tap? Not legally. Yeah, well no kidding. Basically nothing new was undiscovered at today’s hearings, with the exception that there is an ongoing investigation that we all well suspected was underway already anyway. More time was spent avoiding answering questions than actually answering them. The markets, for the most part… yawned.
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Round Up
                         Continued strength in US Treasuries has to be the day’s biggest story. Not only at the long end, where the ten year now yield just a bit more than 2.46%, and the 30 year is giving up less than 3.08%, but the yield on the closely watched two year note moved down to 1.288%. That wasn’t enough to save the bond proxies, though. The Utility sector gave up -0.7%, and Telecom backed up -0.4%. The Financials were again the weaklings (-0.9%), as banks and consumer finance type names took the brunt of the day’s action. As for the commodity space, Oil was once again hit with the ugly stick, though the Energy sector skated closer to the flat-line.
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Revenue
                          I don’t know if you kids will agree, but it is starting to feel like we are walking on egg shells. Stuck between not wanting to bail before reaching the promised land, and being sorry that you never bailed in case we just never reach it. You know how to ease that feeling, right? Sector Diversification, and purchased protection in the name(s) that scare you the most. In the meantime, for your other names (if you are not already), see which names you already own that have correlated options that might trade at anything resembling a decent premium. Go out on expiration if you must. Writing calls against holdings may not provide much, but it does provide something… and you may get away with it in a sideways market. Revenue… a whole lot better than a sharp stick in the eye.
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Trading Levels
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SPX: I gave you 2377 this morning. That was a little sloppy. Morning support showed up at 2375, and survived a multitude of rapid testing. After the breakdown, the index found resistance at 2376.
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RUT: After the opening the slid, the small cap index gave you a range of 1381/1388 versus my range of 1382/1390. Sort of close, no cigar.

Market Wrap Wednesday

Good Evening,
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Dovish ??
                        Yes, children, we now live in a different era. The FOMC released what was taken as a “dovish” policy statement today, as they raised the Fed Funds Rate by a quarter of a percent, and signaled two more rate hikes this year. Think about that for a minute. Okay, now think some more. I’ll wait. So a dovish tightening? How so?
                        In December, “market based measures of inflation compensation had moved up considerably.” Today, “market based measures of inflation compensation remain low“. On top of that, in December, “the committee expected that economic conditions would evolve in a manner that would warrant gradual increases in the federal funds rate.” Today, committee expectations remained unchanged on this count. Oh, the pain. Still wearing some C, some JCP, some BAC, and some KEY, though a few less shares thankfully.
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The Need
                       Let’s face it gang, headline consumer level inflation hit the tape at 2.7% y/y this morning, but inflation wasn’t there on the month over month read. The pop was really only due to the complete lack of inflation that plagued the economy for all of 2015, and into early 2016. Just wait two more months, when we’re a year out from that pop in headline CPI that we went though last Spring. That’s when you’ll see headline CPI test 2.0% y/y support… without any kind of a decrease in actual prices. Then, given the volatility in the oil space, you could see a drop in real prices as well.
                         Which leads us to why it was so very important to get this rate hike on the tape. Imagine, it’s May 3rd (no press conference), or better yet … June 14th. The advance print for Q1 GDP is to be released on April 28th. Let’s just say, the print has come in at less than 1% q/q SAAR. So now, you think you are going to prep the marketplace for another rate hike with anemic economic growth, and declining headline consumer level inflation. Oh, the politics of such a thing would be so interesting. People could get fired. It was the right thing to do to set up two more rate hikes today. You can always walk those back, but it is clear that the FOMC absolutely had to move today. June is no sure thing. Not even close. They had no choice.
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Trading Levels
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SPX: Good day for the levels. First resistance was offered at 2372, which we gave you. The first stop after the Fed induced spike was at 2383, which was actually one point above the level I gave you this morning. Still scoring that a win. The top of the chart came at the 2390 spot. That was above my highest level of the day, but I did give you that spot yesterday… and it did work.
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RUT: My Russell levels were a little sloppy. This morning, I gave you 1370, 1378, and 1384 on the way up. I’d be happy if I had missed only one of them, But I missed all three. You probably would have been better served at 1371, 1380, and 1385. My apologies.
Rock & Roll.

Market Wrap Tuesday

Good Evening,
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OPEC and Pie
                       There’s really no way to sugarcoat what’s happened in the oil space. WTI sold off today, and it sold off hard as news broke early that Saudi Arabia has boosted production in February. The commodity bottomed out at 47.09 a barrel at about ten minutes after 11am this morning. Crude rallied from that point on as the Saudis explained that they had not really cheated on the OPEC deal, they had just added to domestic storage. The explanation was met with a round of good cheer. They seem like a swell bunch of guys, we should probably just take their word for it. Want more good news? API just reported their Tuesday night data showing a draw of 530K barrels for Crude… a draw !!! Another large build had been expected. API also reported a draw on gasoline stocks of 3.88M barrels. Black Gold? You betcha. WTI Crude shot up to 48.46 in after hours trading in response to these numbers. Huzzah !! Enjoy a delicious slice of pie on pi day.
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Knock ’em Down
                       Eleven sectors lined up for a scrimmage this morning. Eleven got carried away on stretchers. Oh the beat-down was ugly, well as ugly as it gets when there’s a fake snowstorm and large numbers of people stay home. Of course the Energy sector was roasted, but if you turn the machines back on, Mortimer ….  On top of that, part the reflation trade deflated a bit. Airlines, Construction, Engineering, and Mining shares all wilted. not Financials though. Banks and Consumer Finance names hung in there nicely despite the suddenly upwardly mobile market for US Treasuries. Yes, Treasuries and the US dollar bill y’all. That’s about all that was up today. Oh, and NKE & DIS (the kid came in long size). That’s why the Dow outperformed the S&P 500 in case you were wondering.
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Trading Levels
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SPX: I gave you 2365 this morning. The actual level turned out to be 2366, which became apparent around lunchtime. That spot performed spectacularly, and did not crack going into the close.
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RUT: This index formed rising top and bottom trend lines starting around 10:30, and stayed in tact all the way into the bell. I had given you 1362, which was the closing price, but not really something you could have traded. Sorry, dudes.
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positions: long DIS equity

Market Wrap Monday

Good Evening,
                       In what could only be described as a less than energetic trading session, none of the major indices ventured too far from home plate. Small Caps outperformed their larger cousins, as the Russell 2000 gained about 3/8 of a percent on the day. The Transports, or more specifically… the airlines were the day’s underperformers. Of the S&P 500’s eleven sectors, not even one closed up, or down as much as 0.3% on the day.
                      The sharpest move of the day came from the US Treasury market. Yields on ten year paper finished at their highs (the note’s lows), close to 2.62%. The two year ended up around 1.376%, rebounding somewhat after hitting 1.39%. Gold, Oil, and Silver made only pedestrian moves as the DXY recovered from it’s early lows to finish close to where it started the day.
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Trading Levels:
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SPX: The 2372 level performed spectacularly as a trading level today. providing resistance on three attempts between 10am and 3:30pm, and then once broken acting as support into the close. Barring market moving overnight news, that late action could bear significance into tomorrow morning’s opening bell.
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RUT: After half a day where my Russell levels had not worked at all, the 1370 spot established itself as stiff resistance from  13:00 on. Unlike, with it’s S&P 500 counterpart, the level remained unbroken on the close, and actually provided the closing price point.
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Note: The CBO provided scoring for the American Health Care Act after the close. At an early glance, it looks like this bill would reduce costs over the long run for the individual, and reduce the budget deficit, while unfortunately reducing the rolls of the insured. I will study this more comprehensively overnight.

Lunchtime Recon (Thursday)

Good Afternoon,
                          Crude Oil is yet again the story of the day. WTI broke below 49 early this morning, then made a nice run toward 50, but met stiff resistance at the level, and is now having trouble holding 49 at mid-day. Is there further downside? Possibly.. at least technically. Without a break and hold above 50, prices could hit 46 without further changing the actual picture. Just keep in mind, that as prices drop, so will production. Supplies will stop growing so rapidly should market prices for WTI maintain these levels.
                           In related news, the US dollar is well off of it’s highs. The DXY lost the 102 handle this morning, and met resistance on the first attempt to regain the spot. Treasuries are soft. The Two year is yielding more than 1.37% in preparation for next week’s rate hike, while the ten year benchmark now gives up about 2.58%
                            As for stocks, the S&P 500 is relatively flat. Most of the downward pressure is still coming from the Energy space, while Financials (being led by the banks) lead the winners. Health Care has remained resilient today, after an inconsistent showing since the political football started being kicked around in the headlines this week.
                            How does one survive this environment? I don’t tell anyone what to do, that’s dangerous…. but I am fairly open about what I am doing. I went back into the Energy space today. (Can’t call me yellow.) Is the timing right? Heck, if I knew that, I’d live on a beach somewhere, and talk about baseball all day. I rung the register on part of my tech portfolio (HPE) that stopped helping. That was a sizable holding for us. I had already been flat energy for a few days, which is fortunate. With proceeds from the sales of HPE (excellent trade), and LULU ( not so hot), we put about half of that dough to work. I would suggest nibbling, and leaving some powder dry. I nibbled my way back into SLB (quality, IMHO), and SN (purely speculative). Both are names that I’m comfortable with. We also sold (wrote) some VLO puts that expire tomorrow, so we may end up long that name as well. VLO is a quality name that I am more than Okay owning long term if I have too.
                            As to HealthCare, it’s tempting, but I’m not biting. If you must, my gut says to stay away from big pharma, and bio-tech. Too much political risk. Medical technology firms seem to be best in class these days.

Market Wrap Wednesday

Good Evening,
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The Ugly Stick
                       It’s not a fire sale, gang… but I bet this market has your attention. the Ugly Stick was out, and about today, and the Stick was angry. The lead story today would be Oil. Massive inventory builds do actually impact the supply/demand equation. What do you know? The good thing about WTI Crude threatening to go below $50 a barrel? They’ll produce less. OPEC tried. Their friends tried. It kind of, sort of worked for a while. That $50 support becomes resistance, and then we’ll see what’s what. Oh, did I mention dollar strength? Yeah… maybe we should stick to commodities. Gasoline, Gold, Silver, Corn, Wheat. Line ’em up. Now, knock ’em down. Stocks? Let’s go there.
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The Crowbar
                       The Energy sector obviously took a crowbar across the back, but they weren’t alone. Pressure on the bond market also put pressure on the bond proxies. Utilities, Real Estate, Telecom. Ugly. Winners? We actually had some of those. The Health Care sector. A little confusion in Washington goes a long way when you’re the 800pound gorilla in the room. Not to mention… wait for it… the retailers. Oh, take ’em. Suddenly, all the cool kids are headed to the mall headed to the mall. Macy’s (M), Nordstrom (JWN), Kohl’s (KSS), Foot Locker (FL), Signet (SIG), and Dollar General (DG). Take, take, take.
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Trading Levels:
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SPX: The index hit the wall at 2373, and finally got support at 2361. In both cases a tow point haircut from my level …  meaning that I didn’t help you all that much. On a moderately positive note, our 2366 spot did act as initial support, but failed to turn into an effective pivot throughout the afternoon.
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RUT: As for the small caps, our 1378, and 1371 levels worked extremely well for most of the day. A technical negative for the index would be that once the dam broke, support was never regained at any level, unlike the broader indices. Bear in mind that the index cracked the 50 day SMA, and now stands nine points below it.
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positions in stocks mentioned: short M puts, long KSS equity, short SIG puts