In The Money

Tech Stocks Continue To Lead

2012-03-21T08:10:00.003-07:00

The market is lower in early trading on the heels of a mild pullback in the indexes yesterday. Tech stocks are relative outperformers so far this morning with many of them trading higher so far. Energy stocks continue to lag in what looks like some sector rotation going on.

Helping tech sentiment was earnings out last night by Oracle (ORCL) which were better than expected and resulted in a nice pop for the stock.

Overnight, Asian markets were mixed. The dollar is higher today relative to the euro, with mixed effects on commodities. Oil prices are higher near $106.50, but nat gas is lower. Gold prices are also higher at $1650, but copper prices are down a bit.

In economic news, existing home sales for February came in at 4.59 million units, down slightly from last month's 4.63 million units but generally in-line with expectations.

Fed Chairman Bernanke and Treasury Sec. Geithner are testifying before Congress today about the European debt crisis. They keep harping on the risk to the taxpayer, but it is nearly impossible that the ECB wouldn't repay the loans and they also guarantee to adjust for any currency fluctuations. Pretty good credit if you ask me. Most of these Congressmen (and women) are basically clueless about modern day interbank finance, so it's painful to listen to them.

The 10-year yield is lower today to 2.31%. And the VIX is down -2.5% despite the selling in the market, down to 15.16.

Trading comment: Today is day 2 of the mild pullback, at least so far. This is kind of the pattern we have seen, and if the SPX continues to hold above 1400 I think it is likely that we will simply see another stair-step higher pattern into quarter end. Market leaders continue to hold up well despite the near-term handoff from energy stocks to the tech sector.

China Growth Conerns Resurface

2012-03-20T07:46:00.003-07:00

The market is lower in early trading, which is something I haven't said very much in recent weeks. Profit taking after the big run we've had could always be viewed as a factor, but it is still early in the day so we will have to see how the market finishes and how volume comes in.

One of the good things about recent selloffs is that they have been accompanied by lower volume levels, so they did not look like big distribution days.

Asian markets were lower overnight and Europe is down this morning. There have been some concerns swirling about China's growth rate and how much it will cool. This has the emerging market ETFs trading lower this morning, as well as commodities.

The dollar has also been firm (safety trade), which is weighing on commodities. Oil prices are lower to $105.90 and natural gas prices are lower also. Gold prices have eased back below $1650, with silver and copper prices lower as well.

Financial stocks are bucking the early weakness and trading higher while all other sectors are negative. Energy stocks are down the most so far. Defensive consumer staples are down only slightly as a group.

In corporate news, Tiffany (TIF) raised guidance and its stock is spiking. But Adobe (ADBE) reported disappointing earnings and its stock is lower.

The 10-year yield is slightly lower after another big spike higher yesterday. It is currently at 2.35%. The volatility index (VIX) is only 2% higher so far to 15.35. I think I would have expected a bigger pop in the VIX considering the low levels we are at.

Trading comment: Since the market bottomed last winter, most pullbacks along the way have been brief 1-3 day affairs. And each time the market quickly recovered to go on to make higher highs. It will be interesting to see if the same pattern appears this time around. But considering investor sentiment has yet to reach bullish extremes that have preceded longer market tops in the past, I would remain in dip buying mode. I have mentioned focusing on individual stocks, and I would add sector rotation to the mix. For example, if energy stocks continue to pullback they will likely present a good buying opportunity.

KAM Advisors has long positions in VXX

Can The Nazz Make It 12 In A Row?

2012-03-19T07:28:00.002-07:00

The market put in another solid week last week, and is slightly higher again in early trading this morning. For its part, the Nasdaq has been up for 11 straight weeks. That's quite a streak and one that is likely to come to a halt soon.

Apple (AAPL) has certainly been doing its part to help buoy the index, and this morning AAPL investors got more good news in the form of a dividend and a share buyback. AAPL said it will institute a $2.65 quarterly dividend and commence a $10 billion share buyback. This will likely not put much of a dent in the growing cash hoard at Apple, but it is nice they are giving some back to shareholders.

The dividend is also likely to attract some value-type investors who have mandates that they can only hold dividend paying stocks. At $2.65 a quarter, the dividend yield would be about 1.8% at current levels.

Outside of that it is a lackluster Monday morning in terms of corporate newsflow.

Asian markets were mixed overnight, and Europe was a bit weak this morning. The dollar is up a little vs. the euro, and commodities are mixed as well. Oil prices are higher at $107.66 but natural gas prices are lower. Gold prices are higher to $1657 but silver prices are lower.

The 10-year yield is hanging on to last week's big spike higher and hovering around 2.31%. And the VIX is up 3% this morning to 14.95, still at 1-year lows.

Trading comment: Lots of fixed income vehicles, from ETFs to closed-end funds, saw sharp selloffs last week. This was likely a knee-jerk reaction to the spike higher in yields, but if this turns out similar to recent selloffs in fixed income funds it will just be another correction and nothing more. If these funds don't rally again and begin to show more long-term topping formations, that would be a stronger signal that the rotation out of the safety trade of bonds and into equities has some legs to it. Time will tell.

KAM Advisors has long positions in AAPL, VXX

Will SPX 1400 Be A Ceiling?

2012-03-15T07:50:00.002-07:00

The market is higher again in early trading. Yesterday the market sold off in the afternoon, but the damage to the market was minimal.

Economic data was solid this morning. Initial jobless claims were lower for the week, coming in at 351,000 and continuing claims were down also. The Philly Fed survey improved to 12.5 from 10.2 in February. And the Empire Manuf. index improved to 20.2 from 19.5 in February. So the economic data continues to show steady improvements in recent months.

Asian markets were up slightly overnight, while Europe is mixed this morning. Fitch Ratings lowered the outlook for the UK to 'negative' last night. But the euro is still getting a bounce relative to the dollar.

The lower dollar is helping commodities bounce a little. Gold prices are up a tad to $1651 and silver prices are higher as well. Oil prices are also up a little near $105.55.

The 10-year yield is holding on to yesterday's massive gains and sitting near 2.26%. And the VIX is roughly flat near 15.35.

Trading comment: The SPX is approaching that big round 1400 level. When the SPX got to 1300 it pretty much powered through it and then corrected to come back down and retest 1300 as support. But given how little correction we have had since SPX 1300 I don't anticipate the same action. More likely, the 1400 level will act as resistance the first time up and the market could pull back from current levels. Of course, I have been preaching not to let the action in the major indexes keep you out of making good investments.

KAM Advisors has long positions in VXX

Banks Stocks In Action

2012-03-14T07:37:00.002-07:00

The market is up slightly in early trading, following its best rally of 2012 yesterday on the heels of the bank stress tests.

The latest bank stress tests showed that 15 of the 19 largest firms passed. Several of them announced dividend increase and share buybacks on the heels of the results. JPMorgan led the way by announcing a big divy hike and buyback before the Fed had even released the results from the tests. Banks stocks rallied strongly on the news with many of the big name stocks up 5-7% yesterday. Most of the banks are higher again today. But a few big banks that didn't pass include Citigroup, SunTrust (STI), and Metlife (MET).

Asian markets were mostly higher last night, except for Japan where investors were disappointed by the lack of increased monetary easing. Europe is also higher today, but the dollar is gaining relative to the euro.

The strong dollar is weighing on most commodities. Oil prices are flat near $106.75 but natural gas prices are lower. Gold prices are down further back to $1650, and silver and copper prices are lower as well. Gold prices are now back below their 200-day average, which is a negative technical development.

I have been harping on the 10-year yield lately and its inability to get above recent resistance around 2.10%. Today we are seeing a nice breakout above those levels with the 10-year yield reaching 2.23%. I view this as a positive development in that it both reflects an improving tone about the economy and hopefully some selling in bonds that could flow into the equity markets.

As for the VIX, it is up slightly after yesterday's big plunge lower and trading near 14.95. I have added some VXX positions for a trade and as a portfolio hedge as I think volatility levels have gotten quite low.

Trading comment: The S&P 500 almost touched 1400 this morning which is the highest level since June 2008. It is also the type of big round number where the market could pause to take a breather. Of course, AAPL continues to surge to new highs and with the banks back in favor we could see the market simply run right through SPX 1400. Sentiment indicators have yet to show excessive optimism but it will be interesting to see if this weeks action brings out more bulls.

KAM Advisors has long positions in AAPL, GLD

Waiting On The Fed

2012-03-13T08:13:00.003-07:00

The market is nicely higher in early trading. The S&P 500 has been able to surpass its previous highs above 1378 and is currently trading at its best levels since June 2008.

There is little in the way of market moving corporate news once again. In economic news, monthly retails sales came in better than expected at +1.1% for February.

The dollar is sporting gains again today, which is weighing on the commodity complex. Oil prices are flattish near $106.35; gold prices have dropped back below the $1700 level, and natural gas prices are down near $2.25; silver prices are lower as well.

Overnight action in Asian was positive, and Europe is showing gains this morning also.

The latest FOMC policy statement will be released later today at 2:15 EST. There is the usual chatter about whether Bernanke will mention more QE3. I doubt we will hear it, and more likely he will reiterate the slow pace of the recovery and that the Fed will remain accomodative.

The 10-year yield is getting a boost to 2.08%, a level that has acted as a ceiling for the last few months. And the VIX is down another -6% today to a 1-year low at 14.65. I think that the move lower in the VIX is getting long in the tooth, and I am now considering buying some volatility as a small hedge in portfolios.

Trading comment: The song remains the same. The market continues to ignore calls for a correction and today is making new recovery highs. We will have to see if the Fed announcement results in a sell the news type of reaction in the market. But judging by the VIX, fear continues to come out of this market. Despite the additions to equities, it is somewhat odd that we have not seen much in the way of outflows or selling of bonds. As such, I would view a breakout in the 10-year yield as a positive in that it could signal a move out of bonds by those who have been glued to the safety trade.

Monday Morning Musings

2012-03-12T07:37:00.002-07:00

The markets are slightly lower in early trading, and there isn't a whole lot in the way of market moving news this morning.

Asian markets were slightly weak overnight. China posted larger than expected trade deficit and that has caused some to speculate that global demand for China's exports isn't as strong as it has been in recent quarters.

The dollar is relatively flat this morning, but most commodities are lower. Oil prices have eased back to $105.75 and natural gas is lower to $2.37. Gold prices are back below $1700 to $1697. Copper and silver prices are lower as well.

The financial sector which has been leading recently is the day's biggest laggard so far, while defensive utilities have resumed the lead.

The 10-year yield is sitting right at that 2.00% level that I keep mentioning. And the VIX is down a whopping -10% today new lows. It hasn't been this low $15.35 since July 2011. Of course that was before last summer's swoon which saw the VIX triple from the 15 level. A colleague told me that some of the weakness is due to traders rolling their positions to the new front month options, but I don't think that could account for all of this large decline.

Trading comment: I keep saying that hasn't been a great strategy to wait for the market to take a rest and then look to buy on the weakness. A better bet has been to simply focus on your individual stocks and add to them on weakness, which has come periodically more as a result of sector rotation than an overall market correction. Last week, the market experienced a brief 3-day pullback but that was quickly followed by some buying. That has left the S&P 500 just a few points away from its recent highs at 1378. Since every pullback has been quickly followed to a return to new highs, one would expect the SPX to surpass 1378 shortly. If it doesn't that would be a notable change in character. Of course, the Nasdaq has been up for 10 straight weeks so I would think a down week is coming at some point. But again, I am focused on the action in individual names. And AAPL continues to be a monster.

KAM Advisors has long positions in AAPL

Does Strengthening Economy Take QE3 Off The Table?

2012-03-09T07:33:00.002-08:00

The dollar is rallying this morning on the heels of a better than expected jobs report. The stock market is also nicely higher, and lo and behold the S&P 500 is right back at its highs from last week.

Nonfarm payrolls rose by 227,000, above expectations. Private payrolls also beat expectations and grew by 233,000. The unemployment rate remained steady at 8.3%. With increasing signs of an improving economy, one has to wonder what those calling for QE3 will have to hang their hat on after this?

Overnight news that Greece's debt swap was met with better than 80% participation may have helped Asian markets rally, but it has done little to help the euro this morning vs. the strong dollar. The euro ETF (FXE) is sitting right on its 50-day support.

Commodities were lower this morning, but most have since rallied. Gold prices are higher to $1710, oil prices are up to $106.70, and copper and silver prices are higher as well.

The 10-year yield is bouncing to 2.05%, but it is still in this multi-month trading range that has not been able to get above 2.10%. As for the VIX, it is plunging this morning down -7% to 16.67. I am surprised by the sharp drop in the VIX, but looking at the chart it looks possible that we could see new lows in the VIX if the market keeps rallying.

Trading comment: The SPX is right back at its highs for the year. I said earlier this week that after the 3-day decline we wanted to step in and do some buying. Even though I thought the correction wasn't over, I stated that just going by the action in the major indexes wasn't the best strategy over the last several months. You have to follow your stocks, and add to them when they are showing good setups. Waiting for the market to correct more sometimes can keep you from making good individual decisions. Also, Colorado had a big win last night vs. Oregon. They play again tonight in the semi-finals of the PAC-12 tourney here in LA. Go Buffs!

Eurozone Optimistic About Greek Bond Swap

2012-03-08T07:51:00.002-08:00

The market is trading higher in early trading, seemingly taking most of its cues from overseas markets. There isn't a whole lot in terms of market moving economic data or corporate news in the U.S. this morning.

Overnight, Asian markets rallied strongly and Europe's markets are nicely higher this morning. There seems to be more confidence right now that Greece will be successful in its effort to conduct its debt swap. This can also been seen in the bond yields of other PIIGS countries which have started to ease a bit.

The ECB and the Bank of England both opted to keep rates at current levels. ECB Pres. Draghi hinted that the ECB could be done with its LTRO operations, and that now it's up to the member countries to take control of their debt situations and deal with them. He said that the ECB has done its part by taking the tail risk off the table.

The euro is also higher this morning at the expense of the dollar. This is helping commodities, with oil prices up to $106.75 and gold prices bouncing near $1695. Copper and silver prices are higher as well.

The 10-year yield is higher today at 1.99%, but still not able to get above that 2.00% level and stay there. As for the VIX, it broke back below its 50-day yesterday and is moving lower again today. Currently it is down -4.75% to 18.15 as fear quickly comes back out of the market.

Trading comment: Yesterday's snapback rally came on very low volume, which will lead many participants to question the conviction behind the buying. It is possible we could see the same type of action today, although it is still early so first we need to see if these early gains stick. Since I have said this year I think it will be more productive to focus on individual stock action and not the major indexes, I am looking for stocks that have already corrected or appear poised to break higher from recent consolidations. Some candidates I am looking at include: SRCL, CTSH, LNKD, BMY, and AGNC to name a few.

KAM Advisors has long positions in AGNC, BMY, CTSH, LNKD, and SRCL

Is The Market Selloff Over?

2012-03-07T07:30:00.004-08:00

The market is getting a small bounce in early trading, but so far it feels like a weak attempt. Lots of folks are pointing out that yesterday was the biggest decline of the year, but it hasn't exactly been a normal start to the year. As such, we were overdue for a day like yesterday, which wasn't even that bad of a selloff in the big picture scheme.

This morning's ADP Employment report was solid at 216,00 payrolls in February. That's up from last month's 173,000. Hopefully this translates into a good govt. payrolls report on Friday. Q4 productivity was also revised higher to 0.9%, although there was a big jump in unit labor costs.

Asian markets were lower overnight, but Europe is higher this morning despite the big Greek debt swap that is taking place soon. There isn't much action in the euro or the dollar.

Commodities got hit yesterday, and are relatively flat so far today. Oil prices are down slightly to $104.50, and gold prices are up just a bit to $1677.

The 10-year yield is getting a small bounce to 1.96%. And the VIX is down -3.5% so far back near 20.15 after a big spike higher yesterday. The VIX is still above its 50-day average which is hovering around 19.60 and we will have to see if it acts as support.

Trading comment: Everyone wants to know if yesterday was the end of the selling? I think that is unlikely. We have seen plenty of one-day pullback over the last few months, but I think the breaking of that uptrend line that's been in place means that the market could have a bit more consolidating to do. I still don't think it's going to be anything other than a mild correction though. The S&P 500 is still well above its uptrending 50-day average (currently 1323), and I think we could see the senior index come closer to this support before all is said and done. I covered a bit more of our etf hedges yesterday, and would look to start doing some buying on any further weakness in the market.

A Change In Character For The Market?

2012-03-06T07:56:00.002-08:00

The market is down sharply in early trading, with the Dow on pace for its first triple digit decline on 2012. Of course, it's still early so we could see dip buyers step in again before the close. But with the markets up for 8 of the last 9 weeks, many participants would welcome seeing the market digest some of its recent gains.

There isn't much in the way of market moving news this morning, so people are reaching for headlines to attach to the selling. Some are looking at China's lower GDP forecast, but that news was out yesterday. Others are pointing to the -0.3% decline in Q4 GDP for the eurozone, but this was unchanged from the previous forecast so it's not new information. One new datapoint was Brazil posting lower growth than expected. As such the emerging markets ETF (EEM) is down -3.35% in early trading.

Asian markets were lower overnight, with China down -1.4%. Europe is lower this morning, with some chatter that there is concern about Greece's upcoming bond swap later this week. The euro is also lower today, and the flight to safety is boosting the dollar.

Commodities are lower across the board, with oil prices down near $105 and gold prices back below $1700 closer to $1672.

The 10-year yield has dipped back below 2.00% to 1.94% currently. And the big surprise is the 15% spike in the VIX that has taken it back above the 20 level to 20.60. The VIX has been in a downtrend for months, and this is the first time the VIX has been above its 50-day average since the day after Thanksgiving (11/25).

Trading comment: Today will be an interesting day. Everyone has been saying that they are waiting for a pullback in the market to do more buying. But I posed yesterday that if the decline came swiftly, it would shake the dip-buyer's confidence. We will probably hear some of that today, with people shifting their tunes and saying this is probably the beginning of a correction. Given that the sentiment indicators never reached bullish extremes, I think that this pullback will likely be of the shallow variety. As such, I want to stick my toe in the water and start to do a little nibbling today. If the market continues to slide, I will leave myself room to do more buying on further weakness.

Monday Morning Musings

2012-03-05T07:51:00.002-08:00

The market is lower in early trading on relatively light news and probably a dose of profit taking. The big news overnight was the announcement out of China that they will target growth of 7.5%, which would mark the slowest growth since 2005.

China is struggling with the goal of increasing consumption and the domestic demand within its economy and trying to decrease the export and govt. investment side of the equation. Asian markets were lower overnight following the announcement.

In corporate news, AIG said it will sell its shares of AIA and use the expected proceeds of roughly $6 billion to reduce the balance it still owes the US Treasury Dept. In other news, BP has reached a settlement regarding the Gulf spill oil claims for $7.8 billion.

In economic news, the ISM Services Index rose to a very strong reading of 57.3 in February from 56.8 last month. This is a fairly strong datapoint, considering the services sector makes up roughly two-thirds of the economy.

Energy prices and materials stocks are lower following the China news. Oil prices are lower to $106.22 and gold prices have fallen back to $1700. Copper and silver prices are down as well.

The 10-year yield is hovering just below the psychological 2.00% level. And the VIX is spiking 8% higher this morning near 18.70. I am hearing options players in the VIX are increasing their bets that the recent rally is getting long in the tooth and a correction is near.

Trading comment: The consensus opinion seems to be that the market should experience a mild pullback and that such a pullback will be a buying opportunity. Since the consensus forecast rarely comes to fruition in the manner most are expecting, it is likley that either the market will continue to stair-step higher, or we will get a sharper correction than most expect and that will startle the conviction of the dip buyers who have been waiting for a pullback. Investor sentiment has yet to reach extreme bullish levels seen at prior market tops. As such, we are going to keep our focus on how our stocks are acting and not be overly concerned with taking our cues from the major averages.

Weekly Recap

2012-03-04T09:49:00.001-08:00

Here is the weekly recap from Briefing.com:

Stocks finished the week in lackluster fashion, but the S&P 500 still posted another weekly gain -- the eighth in nine weeks. Commodities were cut down, though.

Early action was choppy and without leadership. It was also undermined by weakness in the Energy sector, which came under pressure in conjunction with lower oil prices. The Energy sector settled with a 1.1% loss, which is worse than what any other sector suffered, while oil closed pit trade with a 1.9% loss at $106.68 per barrel. Earlier this week oil hit a multi-month high near $110 per barrel.

The major equity averages set impressive marks of their own earlier this week. The Nasdaq notched its highest level in more than a decade, while the Dow and S&P 500 both printed their best intraday levels since 2008. Along the way the Nasdaq Composite kissed the 3,000 mark, but failed to hold its ground there. The Dow closed above the psychologically significant 13,000 line after a few failed attempts, but was backed down by week's end.

With the major equity averages trading at such heady levels, many pundits are predicting a pullback, especially since stocks are showing some signs of fatigue. In anticipation of possible volatility, there was strong rotation into the dollar. The dollar marked its lowest level of the past three months earlier this week, but it finished out the week in impressive fashion. Its 0.8% gain on Friday helped fuel a weekly gain of 1.2%. Efforts to reduce risk were more pronounced among commodities. While oil's tumble made the most headlines, the rest of the complex was also clipped aggressively. That resulted in a 1.0% loss for the CRB Index on Friday. It fell 1.5% for the week.

Share volume has been paltry all week and was especially pathetic on Friday. Against an uncertain near-term outlook for the market, the absence of corporate news or economic data of consequence suppressed share volume, which barely totaled 520 million shares on the NYSE.

Market participants got a substantial helping of data on Thursday, overshadowing a raft of same-store sales results, which actually proved impressive.

The latest initial jobless claims count totaled 351,000, which is little changed from the prior week's tally of 353,000, but also on par with the 355,000 claims that had been expected, on average, among economists polled by Briefing.com. The numbers were supportive of an improving labor market picture, even though the headline unemployment rate remains elevated.

Personal spending increased in January by 0.2%, but income increased by 0.3%. Neither was as strong as what had been expected -- the Briefing.com consensus called for a 0.4% increase in both pieces of data.

The ISM Manufacturing Index fell to 52.4 in February from 54.1 in the prior month, but it still suggested that manufacturing activity expanded during the month. Nonetheless, expectations called for an improvement to 54.7, making the report a disappointment.

Construction spending for January also proved displeasing. It slipped by 0.1%, which isn't drastic, but it came in stark contrast with expectations for a 1.0% increase.

Fed Chairman Bernanke delivered a semiannual monetary policy report to the Senate Banking Committee on Thursday, but his comments reflected those he delivered to the House Financial Services Committee on Wednesday. Altogether the Chairman's remarks weren't surprising, but the lack of reassurance regarding the Fed's commitment to an accommodative monetary policy was credited for inviting selling interest.

Prior to Bernanke's report market participants learned that fourth quarter GDP was revised upward to a clip of 3.0%, which is greater than the 2.8% that had been reported in the advance reading. The upward revision came as a surprise since no change had been expected, but there response to the news was restrained.

Consistent with an improving macro picture, the Fed's Beige Book indicated that overall economic activity continued to increase at a modest to moderate pace in January and early February. That's not to say that all activity is consistently improving, though.

Data unveiled earlier in the week indicated that durable goods orders fell in January by 4.0%, which is far worse than the 1.4% decline. The steeper-than-expected drop follows an upwardly revised 3.2% increase in the prior month. Excluding transportation, durable goods orders declined during January by 3.2%, which contrasts sharply with the 0.2% increase that many economists had expected to follow a downwardly revised increase of 2.1% in the prior month.

The Conference Board's Consumer Confidence Index ran up 70.8 in February. It was at only 61.5 the month before. Many had expected only a modest improvement to 62.5. Sentiment surrounding housing improved with news that pending home sales increased by 2.0% in January. That was double the pace that had been generally predicted among economists.

Europe was in sharp focus at the start of the week because of news that G-20 officials want eurozone officials to establish additional financial safeguards before more funds are made available to the International Monetary Fund for commitment to the continent. It came back into focus by mid-week because of news that more than 800 banks in Europe cumulatively borrowed more than $700 billion in three-year loans through the second installment of its LTRO operation. Reports of individual funding by week's end helped bolster confidence in several European banks.

There wasn't a great deal of corporate news in play this week, but Apple (AAPL 545.18, +0.71) made headlines when its market cap ballooned to more than a half of a trillion dollars.

Earnings announcements were relatively limited, but Transocean (RIG 54.19, +0.62) posted numbers that were met with a positive response earlier this week. Home improvement retailer Lowe's (LOW 28.13, -0.25) announced quarterly results that featured an upside earnings surprise.

Light Day For Market Moving News

2012-03-02T07:28:00.002-08:00

The markets are mixed in early trading on a very light morning in terms of newsflow. The S&P is down slightly while the Nasdaq is up a touch. There are really no big earnings announcements to speak of, no economic reports on the calendar, and no rumors or big announcements coming out of Europe. As such, I expect a light volume day without too much fanfare.

The big news of the day is the IPO of YELP. I use this app on my iphone, but its too early to say how profitable this company will be. In my experience, its often better not to chase these IPOs and wait at least a few months for them to settle in and created their first consolidation base.

WYNN has been bouncing lately, but the stock is halted this morning after opening up over 6% on news pending. No idea what it could be that would cause them to halt the stock. My guess is it is something to do with the Okada dispute.

Asian markets were higher overnight, led by a 1.4% gain in China. The dollar is higher again today vs. the euro, and near a 2-week high. This is weighing on commodities with oil prices weaker to $107.60 and gold prices down a little near $1714.

The 10-year yield has fallen back below the 2.00% level. How many times have we seen this in the last year? It is currently at 1.98%. And the VIX is flat around 17.25.

Trading comment: There are more calls this morning that the market is showing some fatigue and in need of a rest. With so many people looking for it, my first inclination is to say that we likely won't get what the consensus is hoping for. But there is a chance that we could get a quick, sharp correction that startles investors and makes them question their 'buy the dip' intentions. We still haven't seen the big spike in bullish sentiment to extreme levels, but just the fact that the market has been up in 8 of the last 9 weeks lends itself to the notion that a correction would be health. Last, did you see that Birinyi said the S&P 500 could reach 1700? That would be something. Have a good weekend--

Can Apple Continue Its Parabolic Move?

2012-03-01T07:41:00.003-08:00

The market is higher in early trading, quickly bouncing back from yesterday's mild selloff.

In the manufacturing sector we have seen a string of improving activity readings in recent months. Today's ISM is the first datapoint to show some slowing. The ISM Manuf. index for February fell to 52.4 from 54.1 the prior month. Yesterday's Chicago PMI reading was solid, so we will have to wait and see if this ISM is the start of a trend or just a one-off weaker reading.

Same-store sales reports for retailers came out this morning and are generally positive. This likely coincides with the improving consumer confidence readings we have seen recently. Hopefully this continues and starts to boost the economy at which point we could get a mini virtuous cycle going. Further improvements in the housing sector would also help in that regard.

Gold and silver prices are bouncing back a little this morning from yesterday's sharp selloff. Some people pointed to Chairman Bernanke's speech yesterday and the lack of a mention for further QE3 in his comments. I think that may have been a very small part of it, but I don't think too many traders had their hopes up on more imminent quantitative easing.

The volume in the GLD and SLV was extremely high. And the fact that it came on the last day of the month to me looks like it could have been lots of hedgies scrambling to lock in profits on the last day of the month and all rushing to sell at the same time as the price action continued to deteriorate.

Asian markets were lower overnight, but Europe is higher this morning.

Materials stocks are leading the early action, while defensive consumer staples are lagging. This is pretty much the mirror opposite of yesterday's action.

Oil prices are up a bit to $107.75, and gold prices are higher near $1722. The 10-year yield is getting a boost above the 2.00% level to 2.04% currently. And the VIX is down -4% early to 17.75. While the VIX is still in an overall downtrend, it looks like it could be starting to form a bottoming base.

Trading comment: The parabolic move in Apple (AAPL) looks unsustainable to me. It is still our largest position overall, so I'm not complaining, but the history of this type of action in stocks always seems to slow. It would not be surprising at all to see the stock remain firm into next week's Apple event when they announce the iPad3 and then for the stock to selloff. I likely won't do much trimming ahead of that event as I still think AAPL shares are cheap relative to earnings and that despite whatever correction could ensue the stock should still be higher at year-end. I don't want to sound complacent, I just think that the stock has been undervalued for a long-time and its finally starting to get upward revisions to its valuation by the market.

KAM Advisors has long positions in AAPL, GLD, SLV

Euro Banks Flock To Cheap LTRO Money

2012-02-29T08:04:00.002-08:00

The market was higher in early trading, but unlike most recent sessions we have seen the early gains reversed and as of this post the major indexes are trading in the red. If the day plays out like many before, the market should regain its footing into the close. If not, it would mark a rare change of character for this market.

The big news out of Europe was the latest round of cheap money offered to banks over there via the ECB's LTRO program. This time around more than 800 banks lined up to participate with the ECB lending a total of 530 billion euros. This figure was slightly above estimates and slightly above the first round of LTRO when 489 billion euros were lent.

Hopefully the large liquidity injection will be put to productive use and help the banks shore up their balance sheets. As for the sovereing debt issues in Europe, you can't really solve debt problems with more debt but I do view this as a type of kicking the can down the road scenario. In that sense, it gives the markets more time to price in the fiscal realities and gives the banks more time to reposition their books. So purely as an investor I like the program.

In economic news in the U.S., Q4 GDP was revised higher to +3.0% from a previous estimate of 2.8%. Also, the Chicago PMI came in better than expected at 64.0 vs. 60.2 last month. This continues the streak we have seen of strong readings in the manufacturing sector.

Stocks up on earnings: AH, ITT, COST, FE, CPRT, VRSK

Stocks lower on earnings: SODA, LIZ, JOY, SPLS, FSLR, PANL

Despite the LTRO, the euro is lower this morning and that is weighing on commodities. Gold has staged a big downside reversal so far and its trading down to $1730. Oil prices are also lower near $105.75.

The 10-year yield is getting a bounce near the 2.00% level. And the VIX is only up 2% so far to 18.30.

Trading comment: Today has the makings of a down day for once, but with dip buyers at the ready another positive close wouldn't surprise me either. Materials stocks are down the most today, while defensive consumer staples are bucking the weakness so far. Lots of stocks look extended on their charts, so a pullback or at least some consolidation would be constructive to allow these stocks time to trade sideways and build another base. It's hard to see the current pace of advance in the market continuing without a breather.

KAM Advisors was long FE, SODA

Consumer Confidence vs. The Bond Market

2012-02-28T07:41:00.002-08:00

The market is higher again in early trading. Pullbacks continue to be brief affairs and the stock market mocks those calling for an imminent correction.

The strongest piece of economic data today was the Conference Board's Consumer Confidence index which spiked to 70.8 in February from 61.5 last month. That's a big jump and we also saw a rise in the Univ. of Mich consumer confidence index earlier in the month.

So it's safe to say that consumers are becoming more upbeat about the economy. We know from the relentless rise in the stock market that investors are becoming more upbeat about the market as well. But what doesn't translate is what is eating at bond investors?

The 10-year yield continues to drift lower, now back down to 1.90%. If the bond market were even a tad more upbeat about the economy and global markets, I would expect the 10-year to have already reached 2.5-3.0% levels.

Some would argue that the Fed is skewing this indicator with their operation twist buying. But this is a very deep market, and the Fed can only effect things at the margin. They can't fully absorb a global selloff in Treasuries, if and when we ever get one. In the meantime, the 10-year yield remains an outlier in terms of improving sentiment indicators.

The rebound in the housing market hasn't shown up yet in the Case-Schiller figures. This index fell another -4.0% in December, even though its data lags a bit. We will have to see if the index picks up as it starts showing 2012 figures.

On the earnings front, I see more stocks gapping higher on positive reactions to earnings. The poster child today will be Priceline (PCLN), but also take a look at SINA, DPZ, and AZO to name a few. On the disappointing reaction side are SWN, TECD, and FDP.

Commodities are mixed so far. Oil prices are a bit lower near $108, while gold prices are higher to $1785 and copper and silver prices are up even more (on a percentage basis).

The VIX is flattish around the 18.15 level.

Trading comment: Yesterday we trimmed our longs in SODA, but the stock continues higher today. Google (GOOG) is also moving back above its 50-day average, which is a good sign. Tech stocks are leading the early action while defensive utilities (last year's winners) continue to lag. With the markets up as much as they are since the October lows, I would expect to see some larger increases in bullish sentiment in the advisor surveys, but we haven't seen the extreme readings yet. Maybe this week will begin to show more bullishness.

KAM Advisors was long GOOG, PCLN, SODA

Monday Morning Musings

2012-02-27T08:24:00.002-08:00

Last week I called this market the Groundhog Day market, and this morning that notion is repeating itself again. Go figure.

The market was lower in early trading, but dip buyers have quickly stepped in and the major indexes are already back in positive territory. As we near month-end, I sense performance anxiety setting in. And I would expect it to become more pronounced as we get closer to quarter-end.

In economic news this morning, pending home sales for January increased 2.0%, above expectations. The homebuilding stocks are reacting positive to the news, as well as positive comments from Warren Buffett about the housing market.

Asian markets were mostly lower overnight, and Europe is lower this morning. G-20 officials met over the weekend, and indicated that additional financial safeguards are needed in Europe before additional funds are made available from the IMF.

Stocks rising after reporting earnings: LOW, CTB, and VRX.

Stocks falling after earnings: DNDN, KWK, BRK/B

The euro is lower, with mixed effects on commodities. Gold prices are slightly higher to $1780, and silver and copper prices are higher as well. Oil prices are down a bit, but still high on an absolute level at $108.80.

The 10-year yield is fading further back down to 1.93%; and the VIX is 3% higher to 17.80.

Trading comment: I haven't seen any definitive news, but the positive reaction in ESRX and MHS this morning hints that the FTC might be looking favorably at the merger. Industrial stocks are leading the early bounce, while defensive utilities are lagging. Priceline (PCLN) reports earnings tonight after the quarter, and the stock is trading at new highs going in. Other stocks trading at new highs today include AAPL, MELI, COH, MA, MNST, and SCSS is very close.

KAM Advisors has long positions in AAPL, COH, ESRX, MA, MELI, MNST, PCLN, and SCSS

Groundhog Day In The Markets

2012-02-24T07:53:00.003-08:00

The markets are slightly higher in early trading. It seems like I am posting the same comments every morning, in a groundhog day like scenario for the markets lately. The major indexes are up a bit, one sector takes over the lead while another takes a breather, a handful of stocks gain on earnings, and a few new breakouts get added to the list. I don't know how long the pattern can continue before something comes out of left field and smacks investors upside the head, but for now we'll continue to focus on what's working and try to maximize profits.

In earnings news, stocks sporting positive reactions: MELI, MNST, AIG, and CRM. MELI was actually down last night after reporting, but by the time the market opened this morning investors were back in a buying mood. Stocks showing declines after reporting include ADSK and NEM to name a couple.

In economic news, the Univ. of Mich consumer sentiment survey improved to 75.3 in Feb. from 72.5 last month. New homes sales came in better than expected at 321,000 units in January, although that figure was slightly below the previous months level.

Asian markets were higher overnight, led by a 1.2% bounce in China. Europe is higher this morning as the concerns surrounding Greece calm a bit.

The euro is also getting a bounce at the expense of the dollar, while commodities are mixed. Oil prices are higher again near $108.15. Copper prices are also higher, but gold prices have eased back near $1775 and silver prices are slightly lower as well.

The 10-year yield is back below the 2.00% level, despite the improving economic data. It is very hard to tell how much of this is the Fed buying bonds to keep a lid on rates. Normally I would have expected the 10-yr to drift higher by now.

The VIX continues to drift lower also, down close to the 16.50 level this morning.

Trading comment: It's very hard to buy stocks that have broken out to new highs or that have gapped higher after reporting strong earnings. But those seem to be the stocks that are leading the market so far this year. One way to get comfortable with this is to buy a half position in stocks breaking out with the idea that you can add to your positions on a pullback. I remember buying a half position in JDSU in 1999 and it turned out to be one of my best trades ever. I'm not comparing this environment to 1999 but rather trying to highlight a strategy of staging your buys into growth stocks.

KAM Advisors has long positions in MELI, MNST

Europe Economies Still Sluggish

2012-02-22T07:45:00.000-08:00

The market is mixed in early trading, having started out in negative territory but currently trying to work its way back to the flat line.

Asian markets were higher overnight after China's manufacturing PMI increased to 49.7 from 48.8 last month. This figure is still below the key 50 level which marks the difference between expansion and contraction.

Europe's markets are lower today after its eurzone manufacturing PMI index inched up to 49.0 from 48.8 last month. But that 49.0 reading still points to contraction. Additionally, Greece had its credit rating downgraded again by Fitch and its market swooned by 5%. In England, some officials at the Bank of England have called for additional stimulus measures.

Stocks rising this morning on earnings include: FIRE, INTU, HSTM, and GRMN to name a few. Stocks declining on earnings are DELL, MGM, CAKE, DLTR, and CLH.

The euro is lower this morning, and most commodities are lower as well after a big up day yesterday. Oil prices are flat near $106; gold prices are slightly lower to $1756; silver prices are lower also, while copper prices are flat.

The 10-year yield is steady near 2.04% and the VIX is up slightly to 18.50.

Trading comment: Call me crazy, but I don't have much hope that the market will give underinvested bulls the pullback they are hoping for. Nothing has been able to knock down this market. Earnings misses have been shrugged off, options expiration was yawn, overbought readings were worked off effortlessly, and the Greek bailout dealings look like more of a distraction than anything. Look at AAPL-- that high volume reversal didn't lead to any follow-thru selling and the stock is back at new closing highs. Stocks have continued to stairstep higher, with sector rotation keeping any one group from seeing prolonged weakness. At some point we will surely have a correction, but waiting for it has been a losing strategy. I still think adding to leading stocks on pullbacks works best. Trying to invest in the year's laggards will likely continue to be frustrating.

KAM Advisors is long AAPL

Monday Morning Musings

2012-02-21T07:34:00.000-08:00

The market is higher again this morning after Greece reportedly agreed to terms to receive its latest round of bailout funds to prevent it from defaulting on its debt. European markets are mostly lower this morning seeing a sell-the-news type of reaction to Greece.

Asian markets were mixed overnight, despite Chinese officials decision to trim the reserve requirement for banks.

More companies are reporting earnings this morning. Stocks rallying on their earnings reports include HD, M, and SKS to name a few. Stocks seeing disappointing reactions to earnings are WMT, CIEN, EXPD, and GPC.

The bounce in the euro is weighing on the dollar but helping commodities. Oil prices reached $105 this morning; gold prices have rallied back above $1755, and silver and copper prices are higher as well.

Energy and materials stocks are leading the early action, while defensive consumer staples and healthcare stocks are lagging.

The 10-year yield is higher to 2.05% near the top of its recent trading range. The VIX is also higher by 1.75% to 18.10 which is a little odd given the early gains in the market.

Trading comment: The Nasdaq finished last week higher marking the 7th consecutive week of gains. I went back to look for the last such streak and had to go back to the spring of 2010 to find one. Back then, the Nazz actually posted 8 straight weeks of gains but then the markets endured a sharp 10% correction over the next 2 weeks. I'm not saying the same thing will happen this time around, but the market remains overdue for more than just a one-day pullback like we've seen. That said, it has paid this year to focus more on individual stock than the overall market. The action in leading stocks continues to be strong.

Are Bond Yields Poised To Move Higher?

2012-02-17T08:05:00.000-08:00

The market was higher in early trading, but has since given up those gains and is slightly in negative territory. The S&P 500 is down less than the Nazz so far, as financials and industrials are leading the early action while biotechs and other large-cap tech are lagging.

The yield on the 10-year note has moved above the 2.00% level by just a bit. The 10-year first fell to the 2.0% level last August and has been trading in a volatile but sideways fashion for the last six months. With economic datapoints improving, I would expect the 10-year yield to move a little higher despite the fact that the Fed is likely still buying long-term bonds.

Stocks trading higher after reporting earnings include AMAT, CPB, and HNZ to name a few. Stocks falling in reaction to earnings are BIDU, JWN, GIS, and HMSY.

Asian markets were higher overnight. The euro is also higher this morning, despite the fact we have no definitive news regarding the Greek debt situation.

Commodities are mixed. Oil prices are higher and have traded above $103; gold prices are slightly lower near $1724. Copper and silver prices are lower as well.

The VIX recently bounced off of its overhead 50-day near the 21.50 level but then moved sharply lower. Today it is down another 5.5% back to 18.15. At the time of the spike, I surmised it might have been exacerbated by this week's options expiration, which finishes today. So we will have to see if traders reload on puts next week and volatility spikes again.

Trading comment: The relentless march continues. The market has hit 9-month highs this morning. Growth stocks look to be subject to some profit taking today, but I don't expect it to last long. I still think the strategy of buying leading stocks on pullbacks will outperform, and by leading stocks I mean those that recently reported strong earnings and have been breaking out to new highs.

KAM Advisors has long positions in GIS

Financials Shrug Off Potential Moody's Downgrade

2012-02-16T07:43:00.002-08:00

The markets are higher once again in early trading. Yesterday the market paused and gave back some ground, but it wasn't a big down day by historical standards. The market seems to be consolidating its recent gains in more of a sideways fashion as opposed to a meaningful pullback.

Today's news out of Moody's about potential downgrades in the financial sector are being shrugged off by the market. In recent months, this sort of news would have hit stocks and dragged down the financials. This goes to show how forgiving investor sentiment is currently.

In economic news, jobless claims came in better than expected for another week. And the Philly Fed survey was also better than expected coming in at 10.2 for February from 7.3 last month.

Earnings reports are a big of a mixed back this morning. While most folks focus on which companies beat or missed estimates, I like to also look at how stocks are reacting to earnings. This can give investors a good sense of how much of the prior quarter was already priced into stock prices.

Stocks rallying after reporting earnings include: GM, DUK, ASPS, and VFC. Stocks declining on earnings are: CBS, APA, MAR, CF, and WM to name a handful.

Asian markets were lower overnight, and Europe is lower today on continued concerns about Greek debt talks. The euro is also slightly lower today relative to the dollar.

Commodities are mostly lower as well. Oil prices are flattish near $101.75; gold prices are down near $1720; silver and copper prices are also lower on the day.

The 10-year yield is getting a bounce to the 1.97% level. And the VIX is down fractionally to 21.0 after a big rise in volatility yesterday.

Trading comment: Yesterday's action was completely colored by the action in AAPL. The stock is down further today, but it is now keeping the overall market down. Industrials are leading the early action, while healthcare stocks are lagging. Sector rotation continues and I still would look to add to stocks that recently gapped higher after reporting earnings if you can buy them on a dip. Those stocks should continue to lead the market.

KAM Advisors has long positions in AAPL

Will China Support Europe?

2012-02-15T07:52:00.000-08:00

The markets are nicely higher this morning after a big rally late in the day yesterday reversed the earlier losses from the session.

Asian markets were higher overnight after comments from a China official that hinted at the country looking to increase its investment in the eurozone. This also appears to be helping European markets this morning, even as the euro is lagging. A couple of GDP reports out of Europe showed that Q4 GDP declined -0.2% in Germany but rose +0.2% in France. Both were a little better than expected.

In the past Chinese officials have said they are not looking to increase their investment in the troubled eurozone. So this would be a bit of a change, although we would still have to see what any involvement looked like. My guess would be they are more inclined to invest directly in companies over there, especially natural resource companies, as opposed to simply lending to over-indebted governments.

In earnings news, positive reactions to earnings reports continue to trump negative ones. The list of stocks rallying after earnings includes: CMCSA, TEVA, MET, WCG, ANF, DF, DVN, and VMI. The only major stock trading down after earnings is Deere (DE).

In economic news, the Empire Manufacturing index for Feb. rose to 19.5 from 13.5 the prior month. The Housing Market index also improved in Feb. to 29 from 25 in January. These are small datapoints that continue to line up on the side of the ledger that supports a continued improving economic outlook in the U.S.

Commodities are mostly higher today. Oil prices are higher again near $101.70; gold prices are higher to $1733; silver prices are also higher, while copper prices are lower so far.

The 10-year yield is up just slightly to 1.94%; and the VIX is up +5% right now to 20.56. The higher VIX today is a bit odd given the gains in the market, and could be related to positioning ahead of this Friday's options expiration.

Trading comment: The action in stocks continues to be very positive. The list of those looking for a correction continues to grow. I even had a client call me yesterday and ask if we should be looking for a correction. Alas, it's never that easy, is it? AAPL just crossed the $500 mark on Monday and its already testing $525 today. The list of market leading growth stocks also continues to broaden, which is a marked change from 2011 when defensive stocks like utilities and consumer staples fared the best.

KAM Advisors has long positions in AAPL and DE

Moody's Downgrades More European Countries

2012-02-14T07:37:00.000-08:00

The market is lower this morning in early trading, but if the recent pattern continues then that would mean that the dip buyers will appear at some point and the market will close in positive territory. I'm not saying that will happen, just that has been the pattern in recent weeks.

Yesterday the market cheered the Greek austerity package. But today there is a slightly different tone after Moody's downgraded the countries of Spain, Italy, Portugal, Slovakia and Slovenia. Moody's said these countries as being susceptible to the growing financial and macroeconomic risks.

There was another handful of earnings reports out last night and this morning. On the upside are a couple of standounts such as RAX and KORS. On the downside are stocks such as BWA, UTHR, CPLA, and GT. FOSL had started out lower in reaction to earnings, but has since reversed higher on strong volume.

In economic news, retail sales for January rose 0.4%, which was below expectations. But the ex-autos figure was 0.7% which was higher than consensus estimates and above last month.

Asian markets were higher overnight after Japan announced that it has expanded its asset purchase program.

The dollar is higher this morning, and most commodities are slightly lower. Oil prices are higher near $101, gold prices are flat around $1725, but copper prices are lower.

The 10-year yield has started to drift lower to 1.94%, which is right around its 50-day average. The VIX is up nearly 5% to just under the 20 level.

Trading comment: Healthcare stocks are leading the action this morning. Nearly all of the healthcare stocks I follow on my screen are bucking the early weakness. ESRX is acting better, shaking off last week's rumors about its acquisition. ISRG is surging to new highs. While we often focus on how "the market" is doing overall, this year could yield better results for those who focus on individual stocks.

KAM Advisors has long positions in BWA, ESRX, GLD

Monday Morning Musings

2012-02-13T07:38:00.000-08:00

The market is higher this morning on relative light newsflow other than the headlines out of Greece. Greece's parliament has approved the new austerity measures it needed to accept in order to get its latest round of bailout funds.

The news has helped push European markets higher, as well as the euro. Asian markets were also higher overnight. But there is very little in the way of domestic economic data out this morning or corporate earnings reports of any consequence.

Friday's action saw one of the first selloffs of the year, but so far the action has not carried over this morning. Financial stocks are strongest so far, while defensive stocks like utilities are lagging.

The dollar is lower and most commodities are higher. Oil prices are up near $99.70, gold and silver prices are up slightly, while copper looks to be lower right now.

The 10-year yield is flattish around 1.96%. And the VIX is down -5.7% so far to 19.61 after a big spike higher on Friday that took the VIX all the way up to touch its overhead 50-day average.

Trading comment: The stairstep higher action continues. Most stocks have given little reason to sell them, and growth stocks continue act better than their defensive counterparts that led for most of 2011. Investor sentiment continues to grow more bullish, but has still yet to reach extreme readings that in the past have led to sharp selloffs. One anecdotal sentiment call was this weekend's Barron's cover, which said Dow 15,000 on it. Such bullish cover stories in the past have often coincided with bullish sentiment nearing some sort of peak.

Greece: Buy The Rumor, Sell The News?

2012-02-09T07:46:00.000-08:00

The market is slightly lower in early trading despite rumors circulating that a deal has been made between Greece politicians on the austerity measures. I have to wonder if we will see the classic buy the rumor, sell the news reaction. By that I mean that the market has been running higher on the perception that a Greek deal was in the works. Now that we might actually have an official deal, the market could be ready to take a breather.

There was another large handful of earnings reports last night and this morning. Stocks trading higher after reporting earnings include: ALXN, V, AKAM, SCSS, and PM. Stocks trading lower on earnings reports are CSCO, NWSA, PRU, and PEP to name a few.

In economic news, weekly jobless claims fell to 358,000. This was an improvement vs. last week's tally of 370,000.

Asian markets were mixed overnight. A key inflation reading in China came in above expectations. Europe's markets were slightly higher on Greek rumors, and the euro is also higher.

Commodities are getting a boost from the weaker dollar today. Oil prices are higher near $99.60, gold prices are up to $1750, and copper and silver prices are higher also.

The 10-year yield is rallying further, now up to 2.04%. And the VIX is 3% higher so far to 18.70.

Trading comment: Interesting action in AAPL lately. I'm not sure why the steady flow of funds into the stock. Of course, AAPL has been undervalued on a PE basis for a long time. So it could be that investors are suddenly willing to give it its due and a higher multiple to boot. I don't like the recent parabolic action in the stock. Maybe that's just the nightmares I still have about YHOO in 2000. But I would like to see AAPL make a more constructive base, or at least show an ascent on the chart that isn't so steep. I bet that's the first time you ever heard a money manager complain about making money, huh?

KAM Advisors has long positions in: AAPL, ALXN, SCSS, PM

Positive Earnings Reactions Continue To Outpace Negative Reactions

2012-02-08T07:30:00.000-08:00

The market is slightly higher in early trading. For the first morning in awhile, there were no headlines out of Greece about progress or delays in its debt settlement talks.

Asian markets were higher overnight, led by China after the govt. raised gasoline prices and also provided support to the real estate market by instructing lenders to accommodate first time homebuyers.

In earnings news, positive reactions to earnings reports continue to outpace negative ones. Among the stocks rising after reporting are: TWX, DIS, CVS, AGU, IR, and the big ones of the day - RL and BWLD. Stocks declining after earnings include S, PNRA, and OPEN.

The euro is roughly flat this morning, and commodities are mixed. Oil prices are higher to $99.60, nearing the $100 level again. Gold prices are slightly lower nearing $1740. Silver prices are also lower, but copper prices are getting a boost.

The 10-year yield is rising further to 1.99%. The 2.00% level has acted like a magnet since early November. The VIX is flattish near the 17.60 level.

Trading comment: The stairstep higher action continues in the market. Those waiting for a pullback continue to be frustrated. This year is shaping up so far to be a year where it is proving more profitable to focus on individual stocks rather than the major indexes. I am focusing on those stocks that continue to show leadership and work their way to new highs. Also, stocks that have posted strong earnings and reacted positively should continue to act well. I think chasing laggards here in hopes of them playing catch up is a prescription for underperformance.

Will Dip Buyers Continue To Surface?

2012-02-07T07:43:00.000-08:00

Lately it seems like every dip we've seen in the market has been quickly bought by folks looking to get more invested and put money to work in equities. With the market down slightly again this morning the question is will dip buyers continue to show up?

Earnings reports continue to garner positive reactions for the most part. The list of stocks moving higher after reporting includes: KO, SWI, HAR, PRGO, TDG, CSTR, APC, and YUM. A couple of stocks lower on their earnings reports are EMR and GSK.

Asian markets were lower overnight, led by a 1.7% loss in China. Europe's markets are also lower this morning amid continued delays in Greece's acceptance of austerity measures.

The euro is getting a bounce though, with the dollar lower. This is boosting commodities. Oil prices are back above $98 and gold prices are higher near $1735.

The 10-year yield is getting a nice bounce to 1.97%, poking just above its overhead 50-day average. For reference, the January highs were 2.09%. As for the VIX, it was higher earlier on but has since given up its earlier gains and is flat near $17.70.

Trading comment: Buy the dip remains the mantra that has worked so far this year. Investor sentiment continues to grow more bullish, but the indicators I follow are still far from levels that would indicate bullishness has reached extreme levels of too much complacency. Over the last few year, fund flows have been heavily tilted towards bond funds. It could be that we are beginning to see a reallocation out of some of those safety funds into investor allocations that are once again beginning to favor the growth side of the equation more. I know we are having those discussions at our firm, so it wouldn't surprise me to hear its going on at a lot of other firms as well.

KAM Advisors has long positions in EMR, KO, SWI, GLD, YUM

Monday Morning Musings

2012-02-06T07:37:00.000-08:00

The markets are lower this morning on further delays with the Greek debt talks. Also, don't rule out the fact that the market had a very strong week last week, so some consolidation would be normal.

I called the Greek debt situation a yo-yo recently since we continue to see so much back and forth with the talks. Today it appears that Greece does not really want to implement the austerity measures as they have been laid out. I'm not sure how much wiggle room they have considering how badly they need the loans just to make their current debt payments.

There is little in the way of economic reports this morning. There have been a handful of earnings reports, but more of them are seeing negative reactions today. Stocks down after reporting include: HUM, SYY, LAZ, and SOHU. A couple stocks higher on earnings are HAS and BRO.

Asian stocks were mixed overnight. Japan was higher, but China was flat after the IMF trimmed its economic forecast for the country to 8.25% from 9.00% on weaker demand for exports.

The euro is lower and boosting the dollar. This is weighing on most commodities. Oil prices are lower to $97.25, gold prices are down to $1721, and silver and copper prices are also lower.

The 10-year yield is slightly lower at 1.92% after a nice pop higher on Friday due to the strong jobs report. The VIX is up almost 5% to 17.93 after plunging to a 7-month low on Friday.

Trading comment: With the market lower this morning, it will be interesting to see if dip buyers quickly step up again. The market is still overbought, but pullbacks have been few and far between. Friday's strong jobs report didn't help the bears at all, as it adds another economic indicator flashing improvement for the economy. New highs on the exchanges rose on Friday, and leadership in the stock market continues to broaden. This is another positive sign for the market.

Economic Data Much Better Than Forecasts

2012-02-03T07:36:00.000-08:00

The market is rallying strongly this morning on a double dose of stronger than expected economic data. The first report was the monthly payrolls report, which showed the economy added 243,000 jobs in January. That was far greater than the 155k forecast. Private payrolls were also much greater than expected at +257,ooo vs. 168,000 consensus. Also, the unemployment rate fell to 8.3%.

The better than expected jobs report caused the futures to spike higher before the open. The market was only up slightly before the data was released. After the open, we got another dose of good economic data in the form of the ISM Services Index. The ISM rose to 56.8 in January, which was above expectations and also a nice increase from last month's reading of 52.6.

Earnings season continues to roll along as well. Among the stocks seeing positive reactions to their earnings reports are: TSN, WY, CLX, and APKT. A couple notable standouts on the downside this morning are EL and WYNN.

Asian markets were mixed overnight. The dollar got a boost from the jobs report, which is weighing on most commodities. Oil prices are higher to $97.13, but gold prices are lower near $1740, and silver prices are lower as well. Copper prices are higher on the strong economic data.

The 10-year yield is also getting a nice bounce. It is currently up 11 bps to 1.94%. As for the VIX, it has fallen another 6% and is now down at its lowest levels since last July (16.89). Do I smell a VIX trade coming?

Trading comment: Yesterday I mentioned the issue of performance anxiety, and today's action will likely put an exclamation point on it. Interestingly, the market also ran higher last year right into mid-February before experiencing a sharp 3-day correction. Guess what the high on the SPX was last Feb. before the correction? Answer: 1344. Guess what today's high is: 1343. Pretty similar. But the Nasdaq is doing much better, so I think the SPX can continue to play catch-up.

KAM Advisors was long CLX, GLD, SLV

Why The Facebook Halo Today?

2012-02-02T07:25:00.000-08:00

There is a lot of hype surrounding the upcoming Facebook IPO. Given it's size ($100b mkt cap?) and the number of user Facebook reaches, I can understand all the hoopla. But I find it a bit confusing why today, after Facebook has filed its S1, that all of the other publicly traded social networking stocks would be trading so much higher. Look at ZNGA, LNKD, GRPN, etc. and you see big gains in all of them. I find the action odd.

In earnings news, we continue to see most reports beating expectations. This morning's list of stocks reacting positive vs. negative is fairly balanced, but the stocks showing positive reactions are up a lot more than the small declines on the stocks showing negative reactions.

Among the earnings gainers are: MA, GMCR, QCOM, LVS, and NUS. Stocks declining on earnings include: AZN, CAH, DOW, CI, CMG, and AGN.

The large number of disappointments coming out of healthcare related stocks is weighing on the sector, with the healthcare etf (XLV) lagging this morning by quite a bit. Energy stocks are up the most in early trading.

In economic news, jobless claims were slightly below expectations. Q4 productivity was in-line with expectations at 0.7%, while unit labor costs were higher than expected at 1.2%.

Asian markets were higher overnight, while Europe is mixed this morning. The euro has been bouncing around the flat line this morning. Oil prices are lower to $96.75; gold prices are higher near $1757; silver prices are also higher, while copper prices are flat.

The 10-year yield is flat near 1.84%; and the VIX is down another 2% to 18.18.

Trading comment: More breakouts to new highs today. Check out RAX. See V. MA is also close. View QCOM. Here comes MELI. Obviously AAPL. And I could go on. Those waiting for a dip remain frustrated, causing them to ask, "Dude, where's my pullback?"

KAM Advisors has long positions in AAPL, MELI, GLD, and SLV

Stocks Back In Rally Mode

2012-02-01T07:44:00.000-08:00

The markets are nicely higher in early trade on a combination of solid economic data, good news out of Europe, and a bevy of solid earnings reports.

Europe's markets are higher today after a successful short-term debt offering in Portugal. Additionally, Germany, France, and the UK posted solid PMI manufacturing data. Asian markets were mixed overnight after one of China's PMI readings showed the sector still in contraction.

In terms of earnings reports here in the U.S., I like to look at how stocks are reacting to those reports. This morning we are seeing the number of stocks rallying on results significantly outnumbering those that are falling.

Among the positive reactions today are: BRCM, FTNT, STX, WHR, IACI, AET, TMO, and BEAV.

Declining stocks on earnings include: CHRW, AFL, and the big loser today - AMZN.

In economic news, the ISM Manufacturing index rose to 54.1 in January from 53.1 last month. Construction spending data for December showed a 1.5% rise, above expectations. The ADP payrolls report showed payrolls rose by 170,000 in January, but this was below the 200k figure economists were looking for.

The euro is getting a big bounce today at the expense of the dollar. This is helping commodities. Oil prices are up above $99 after falling hard yesterday. Gold prices are back to $1750. And copper and silver prices are higher also.

The 10-year yield is getting a small bounce to 1.83%. And the VIX is down -5% so far down to 18.45.

Trading comment: 'Don't fight the tape' is the mantra traders live by. So far this year, we have seen stocks stair-step higher and sector rotation keep the market moving up with few pullbacks along the way. Overbought conditions be damned. I often talk about performance anxiety among portfolio managers and I think the strong January we just had probably has most PMs caught flat-footed and looking for opportunities. One day we will wake up to a big enough selloff that it will make sense to step aside. But for the time being dips are being bought.

KAM Advisors has long positions in FTNT

Stocks Poised To Finish January On Positive Note

2012-01-31T07:31:00.000-08:00

Stocks are higher in early trading on several positive earnings reports as well as a bounce back after three straight down days in the S&P 500. Yesterday the S&P got down near 1300 before buyers stepped in. That level also coincides with the 20-day moving average for the SPX.

The S&P 500 is poised to close out January with solid gains. Those who follow the "January effect" will note that the Stock Traders Almanac says that as goes January, so goes the year. The implication is that when January shows gains, it bodes well for a positive year in the market.

In earnings news, we are seeing more positive reactions in stocks this morning than negative. Among the gainers are: PFE, BIIB, LLY, TYC, UPS, PCAR, HRS, MAT, and ARMH.

Stocks falling after report earnings include: XOM, AVY, MHP, ADM, and the big loser today - RSH.

In economic news, the Case-Shiller Index showed another 1.3% drop in November from October. The Chicago PMI Index fell to 60.2 from last month's 62.5. And the Consumer Confidence index fell to 61.1 in January from 64.8 last month.

Asian markets were higher overnight, and the euro is higher this morning after speculation over continued progress in Greek debt talks. This one has really been a yo-yo, with lots of ups and downs. There is also talk that European officials have reached some agreement on future bailout funds for the eurozone, but I haven't seen details.

Commodities are higher today. Gold prices are up to $1747, oil prices have topped $100 to $100.50, and copper and silver prices are higher as well.

The 10-year yield continues to languish, still hovering near the 1.83% level. And the VIX is up a touch to 19.55, but hasn't closed above 20 in nine days.

Trading comment: After 3 consecutive down days and a test of the 1300 level yesterday by the S&P 500, I would have expected dip buyers to come in stronger. The SPX has bounced back to 1312 as of now, but already in early trading the gains have faded. We will have to see if buyers come back in later today. Also, the market continues to work off its overbought condition. There are a lot more stocks reacting positively to earnings reports this morning than ones that are selling off. Also, the SPX is on the verge of a golden cross, where the 50-day crosses above the 200-day average. This generally bodes well for further gains in the market.

Monday Morning Musings

2012-01-30T07:20:00.000-08:00

The market is lower in early trading after closing last week higher for the 4th straight week. Guess how many times the market closed higher for 4 straight weeks in 2011? Zero. So it's the first time in awhile we have seen that streak. The market is also overbought and sentiment has risen to bullish levels in recent weeks. All of this sets the stage for a normal pullback-- possibly.

There isn't that much in the way of market moving news this morning, so the markets are taking their cues from overseas. Asian markets were lower overnight, and Europe is lower this morning. Concerns about Greece's ability to reach a compromise to its debt situation is weighing on Europe, and the euro is also weaker.

Commodities are sliding. Gold prices have eased back to $1725; oil prices are lower near $98.80; and copper and silver prices are down also.

There were a few companies reporting earnings this morning, but nothing too notable. Earnings season continues this week, but many of the biggies have already reported.

All 10 of the S&P sectors are lower so far today. Energy stocks are down the most, while utilities are down the least. Among international ETFs, China (FXI) is down the most in early trading.

The buying in the bond market has been furious since the FOMC meeting, and the 10-year yield continues to drop as a result. The 10-year yield is now below 1.85%, and nearing its lows from mid-December. Last year's lows back in September were 1.70%.

As for the VIX, it is spiking +9% today back above the 20 level. That's right about at the downtrend line that has been in place since late November, so we will have to see if that trendline holds.

Trading comment: We trimmed a few positions last week as the market got overbought, but will look to add back to positions on any further pullback. Usually the normal course of these short-term pullbacks is that the market gets overbought, pulls back a little to relieve that condition, and then rallies back again. If it goes on to make a higher high, the uptrend is in tack. But if the market makes a lower high, it is often a sign that a deeper or longer consolidation is in the works. For now, let's not get ahead of ourselves and see how quickly this dip gets bought. I think a lot of portfolio managers were not positions for the strong January we have seen and remain underinvested.

GDP Accelerates, But Still Below Expectations

2012-01-27T08:12:00.000-08:00

The markets are mixed in early trading, with the Dow and S&P lower but the Nasdaq higher. Advance estimates on Q4 GDP came in at +2.8%, which is below consensus which was looking for +3.2% but still above last quarter's reading of only +1.8%. For those folks still calling for recession, GDP needs to either going to fall off a cliff or we are going to see some big revisions.

In other economic news, The Univ. Of Michigan consumer sentiment survey rose to 75.0 in January from 74.0 last month.

Earnings reports are being greeted with much cheer this morning. Despite a handful of better than expected reports, very few stocks are higher after reporting today. The few that are trading higher include: HON, EMN, and INVN.

But the list of disappointing reactions is larger and includes: RVBD, F, CVX, PG, SBUX, and MO.

The euro is higher this morning, and helping most commodities. Gold prices are up to $1732; oil prices are still above $100; and copper and silver prices are higher as well.

The 10-year yield has stopped dropping for the time being and found some support at the 1.93% level for a 2nd day. The VIX is fractionally higher to 18.75 and also looks to be bottoming.

Trading comment: I still think this overbought market appears a bit tired and in need of some sort of rest. If the market closes lower today it will be the first back-to-back down days since mid-December. That's a pretty long streak. What will be interesting will be to see how quickly dip buyers come in and look to get more invested on any market weakness. I suspect this first pullback won't gain much traction before rallying again.

Is The Market Tired Yet?

2012-01-26T08:01:00.000-08:00

The market was higher in early trading, but has since faded back into the red. Yesterday's FOMC announcement provided some fireworks when the Fed said they would essentially be on hold with interest rates until "late 2014", and that they would remain extremely accomodative.

That isn't an explicit announcement of more quantitative easing (QE), but it sure is an implied one. Commodities wasted no time rallying, and everything from gold to silver to copper and oil took off. The CRB is up again this morning. Gold prices have reached $1725, silver and copper are higher, and oil is back above $100 to $100.50.

In earnings news, we are seeing positive reactions in stocks like: CAT, MMM, OI, JCP, and especially NFLX which is up 22% on a short squeeze.

Negative reactions include: T, VAR, UA, NVR, CTSX and SNDK.

In economic news, durable goods for December were better than expected at 3.0%, and last months orders were revised higher to +4.3%. Not bad. New home sales came in below expectations at 307,000, which is also below the prior months units of 314,000.

Asia was mixed overnight, while Europe is higher today on renewed optimism that progress is being made on Greek debt negotiations. The euro is also bouncing vs. the dollar.

The 10-year yield really plunged after yesterday's FOMC announcement, and today it is sliding further down to the low level of 1.95%. It is hard to tell if this is more a statement of a slowing economy or just the Fed pinning the long-end of the curve down with its 'operation twist'.

As for the VIX, it is up 2.1% this morning but still low overall at a level of 18.70.

Trading comment: I enjoy reading Jeff Saut's commentary each week. I have read him for years, and he often talks about these "buying stampedes" that we see in the market. Said stampedes usually last from 17-25 days, with very brief pullbacks along the way before eventually tiring out. Well folks, since this buying stampede started on Dec. 20th that is exactly what we have seen. And by my count today is day 25 of the current run. As such, I want to be careful about chasing things higher here. The market does appear poised for a rest. Hopefully that will provide a better opportunity to add to stocks that reported strong earnings and are poised to continue to lead.

KAM Advisors has long positions in: GLD, SLV, VAR

Apple Blowout Earnings Lifts Nasdaq

2012-01-25T07:48:00.000-08:00

The markets are mixed this morning with the Dow and SPX lower, but the Nasdaq higher after Apple (AAPL) reported blowout earnings last night. Expectations were already running higher for AAPL coming into the quarter, and many people feared the stock could sell off after reporting just due to profit taking. But the upside that AAPL reported was far greater than expected in nearly every category. Earnings blew past estimates, unit sales were record, and margins were much higher than we have seen. Currently AAPL is up 7% near $450.

A few other companies beat estimates but their stocks are lower after reporting, including UTX, BA, and COP.

In economic news, pending home sales for December fell 3.5%, which was below consensus. This doesn't seem to have moved the market much. Participants are likely waiting to hear the latest monetary policy statement from the Fed, which will be released at 2pm EST. The big question is whether the Fed will change its language surrounding holding rates low "until mid-2013".

In Asian, Japan was higher again while China and Hong Kong remained closed for holidays. Boy, they sure do get a lot of market holidays over there. In Europe, markets are lower amid continued delays with creditors in getting the Greek debt terms revised.

The euro is also lower relative to the dollar, weighing on commodities. Oil prices are down near $98, gold prices are lower to $1653, and copper prices are also slightly lower.

The 10-year yield is off slightly to 2.06%. Today is day 4 above the 2.0% level, but it will be interesting to see how it reacts to today's FOMC announcement. As for the VIX, it is up another 1.6% to 19.21, the 5th consecutive day below the 20 level. I think going long volatility will be a good trade at some point, but haven't done anything yet.

Trading comment: The market remains overbought but pullbacks haven't gained any traction. The SPX hit 1310 five days ago, and today it is still right at that 1310 level. So while bulls were hoping for a pullback so that underinvested managers could put more money to work, all the market has given us is some sideways consolidation. As such, it is very possible that the market continues to frustrate the majority (as that is it's job) and stair-step higher into month end.

KAM Advisors is long AAPL

Following The Greek Yo-Yo

2012-01-24T07:32:00.000-08:00

The markets are lower this morning after a failure to find solutions to Greece's debt problems has put pressure on Europe's markets and also the euro currency. Greece's stock index is down -4.0% this morning and weighing on other markets. Data released this morning showed the manufacturing and services PMI readings for the eurozone both improved in January

Overnight in Asia, Japan was up slightly despite lowering its GDP forecast for 2012. China and Hong Kong were closed for holidays.

In earnings news, stocks are showing a mixed reaction to reports from last night and this morning. On the upside are stocks like: COH, EMC, WDC, and VMW. On the downside are TXN, MCD, TRV, VZ, CSX. Tonight AAPL reports and many are wondering if it will have the sort of reaction seen in GOOG. I think AAPL will fare better, although the fact that it has recently run to new highs does leave it vulnerable to some profit taking on the news.

The dollar is higher relative to the euro, and that is weighing on most commodities. Gold prices have pulled back to 1665. Oil prices are back below $100 near $98.90. And copper prices are down also.

The 10-year yield is roughly flat near the 2.07% level. As for the VIX, it has bounced 5% in early trading to 19.55, and briefly touched the 20 level before fading a bit.

Trading comment: Growth stocks took a back seat to defensive stocks for most of 2011. So far this year, growth seems to be readying for a comeback. VMW reported a strong quarter and got a nice reaction, similar to FFIV last week. MELI sold off in 2011 but is back in position to challenge new highs. And recent trades we have talked about including STMP and ULTA are both at or near new highs as well. While I expect 2012 to be choppy similar to last year, I do think there will be more opportunities for growth investors.

KAM Advisors had long positions in AAPL, COH, GOOG, MCD, STMP, and ULTA

Are Yields Finally Reflecting Improving Economy?

2012-01-23T07:09:00.000-08:00

The 10-year yield is finally getting a nice boost, currently near a 7-week high at 2.08%. In recent weeks as we have gotten mildly improving economic reports the 10-year yield continued to drift lower as if the economy were going back into recession. But the last few days have seen a nice lift from the lows. I would like to see the 10-year yield stay above 2.0% on future pullbacks.

Stocks are strong out of the gate this morning. Stocks have now been up 3 straight weeks to start the year. That's a better start than last year although the market now looks pretty overbought short-term.

In earnings news, the only notable report I saw this morning was Halliburton (HAL) which beat estimates but it's stock is selling off. In other news, RIMM kicked out its co-CEOs as it looks for new leadership to get things back on track.

The positive tone to the markets this morning also comes out of Europe, where Germany held a successful debt offering. The euro is higher on this as well as continued chatter that a plan to restructure Greece's debt from default is ongoing. France and Germany have also called for easier capital rules for banks, which is helping boost financial stocks.

The dollar is lower this morning, which is boosting commodities. Oil prices are higher near $99.55. Gold prices are up to $1675. Copper and silver prices are also higher.

As for the VIX, I would expect it to be lower this morning but it is currently 2.6% higher to 18.77. Some of this could be related to options expiration last Friday, during which the VIX had a big plunge lower to 18.25.

Trading comment: The market continues to work its way higher with very little pullbacks along the way. This keeps it difficult for most people to jump on board as most investors don't like to chase stocks higher. It's hard to say how long this mini-melt up will last. The market is overbought short-term and sentiment is growing more bullish as well. But so far those factors have been trumped by underinvested portfolio managers putting money to work.

KAM Advisors has long positions in HAL

Google Drops The Ball

2012-01-20T07:46:00.000-08:00

Today's reactions to earnings reports are pretty mixed, with Google being the big loser so far. I think expectations were running pretty high for GOOG to report a good quarter. So when they missed estimates by a $1, investors hit the sell button in a hurry. GOOG is down -8% so far today on a big jump in volume. We will have to see if it can recoup any of its early losses into the close.

Another stock that is taking it on the chin is ISRG, which actually beat estimates by a nice amount. GE and AXP are also lower this morning. On the plus side are IBM, MSFT, and INTC.

In economic news, existing home sales in December rose to a rate of 4.61 million units (vs. 4.55 consensus).

Asian markets were higher overnight. China rose 1.0% despite a PMI reading of 48.8 which marks the 3rd straight month the index was below the 50 level which marks the line between expansion and contraction.

The euro is lower this morning. Although there is talk of an agreement on the Greek debt issue, a colleague just told me CDS spreads are widening on Portugal to new highs, and Portugal is a much bigger issue than Greece.

The 10-year yield is finally moving above the 2.0% level to 2.01% currently. That is just above the 50-day moving average. As for the VIX, it closed below the 20 level yesterday and is currently a bit lower to 19.65 despite the market being down a bit.

Trading comment: The market could have been down a lot more following the GOOG miss and the reactions to GE, AXP, etc. So I think it is a slight positive that the market is only down slightly so far (although it is still early). I think most investors remain in dip buying mode, as many came into the year under-invested and holding too much cash. I want to focus on those companies that continue to beat estimates and lead the market. Unfortunately right now I cannot put GOOG in that category.

KAM Advisors was long GOOG and IBM

Earnings Reports Continue To Recieve Positive Reaction

2012-01-19T07:45:00.000-08:00

The market is higher again in early trading, as earnings reports continue to roll in and garner positive reactions for the most part. Bank of America (BAC) actually reported an earnings miss but the stock is trading 5% higher as investors shrug it off and look forward.

Other stocks reacting positively to earnings reports include: FFIV, EBAY, and MS to name a few. Tonight we hear from big daddy Google (GOOG) and IBM, as well as ISRG and MSFT.

In economic news, the weekly jobless claims fell by 50,000 to 352k. This is the lowest initial claims level since 2008. Hopefully this will translate into improving monthly jobs figures and a decreasing unemployment rate. The market got a boost from this data.

Asian markets were higher overnight, and Europe is up slightly this morning. The euro is also higher again, which is helping most commodities. Gold prices are slightly lower near $1656, but silver and copper prices are higher. Oil prices are also higher again to $101.35.

The 10-year yield is finally getting a boost on some of this economic data. This morning it is up 8 bps to 1.97%, but still below that stubborn 2.0% level. I think at some point the 10-yr yield could have a big spike higher. As for the VIX, it is down -4% this morning right at the 20.0 level. A close below this level would be another sign of confidence for the bulls.

Trading comment: It's hard to chase stocks ahead of their earnings reports, which is probably one of the reasons that we are seeing nice pops in those companies that reports solid earnings. The market remains overbought, but investors are in dip buying mode and we haven't seen back-to-back down days in the market since mid-December. So far this year, the market is carving out a similar pattern to 2011. Last year the market rallied all they way to mid-February before its first correction. Growth stocks are also beginning to act better as the number of new highs on the Nasdaq is slowly rising.

KAM Advisors has long positions in: BAC, GOOG, IBM

Is The IMF Bringing Out The Bazooka?

2012-01-18T07:52:00.000-08:00

The euro is getting a bounce for a 2nd day today on the rumors that the IMF is looking to expand its lending capacity by $1 trillion. That's a pretty big figure, and it seems to be helping sentiment in Euroland. But I worry that folks could be getting too complacent with the sovereign debt issues.

Earnings reports are starting to come out. On the plus side this morning in reaction to their earnings are GS, which is up 5%, and APH which saw a huge gap higher at the open. On the downside are a couple banks such as STT and PNC.

In economic news, the Housing Market Index improved to 25 from 21 last month, which was a bigger jump than economists were looking for. This release helped boost the market when it hit the wires.

The lower dollar is helping most commodities. Oil prices are higher near $100.99. Most metals are higher too. Gold was lower earlier by just a little, but silver and copper prices are both higher today.

The 10-year yield does not seem to reflect any pending economic improvement as it still lingers near 1.86%.

As for the VIX, unlike yesterday when it wouldn't budge despite higher open today it is down by 2.5% in early trading to 21.65.

Trading Comment: The SPX is trying to stay above the 1300 level where it was turned away yesterday. Also, the 50-day average is quickly moving up and should soon break back above the 200-day average. This is know among technicians as a "golden cross" and would be another bullish sign for the market.

KAM Advisors had no positions in stocks mentioned

Markets Cheer Chinese GDP Growth

2012-01-17T07:41:00.001-08:00

Global markets were higher overnight and higher this morning after China's GDP came in slightly above expectations at +8.9% in Q4. This is one of the slower readings since 2009, but I guess folks are happy it wasn't worse. There is also chatter that Chinese officials don't want it to slow more, and will be looking to take the foot off the brake that has recently been applied to cool inflation.

In earnings news, Citi (C) is down 5% right now after disappointing earnings. Wells Fargo (WFC) was in-line, but the stock is higher. And Check Point Software (CHKP) is nicely higher after beating earnings and revenue estimates.

The euro is also higher today, despite a wave of sovereign downgrades from Standard & Poors. The biggest was to France, which got downgraded from AAA to AA+. Italy, Spain, and Portugal also got downgraded a notch. For now it looks like these downgrades were priced in and bonds are not being sold off as a reaction.

The lower dollar here is helping commodities. Gold prices are up to $1658, and silver and copper prices are higher as well. Oil prices are also higher, but not able to stay above the $100 level.

The 10-year yield is flat at the low level of 1.85%. I find this somewhat perplexing, as most other markets are rallying on good economic news, but the bond market here is pricing things as if the economy is going to slow more.

As for the VIX, I would have expected it to be down on today's rally but it is actually slightly higher to 21.0. It is still early, but the fact that the VIX hasn't budged would make me a little nervous about chasing this early market strength.

Trading comment: The market continues this stair-step higher pattern that we have seen before. I think we saw something similar in the early part of 2011. Pullbacks are brief affairs and have to be bought quickly if you want to continue to participate in the rally. The October high for the SPX was 1292. This area has been providing some resistance for the last 4 days, but today looks to be convincingly broken to the upside. A close above 1292 would be another bullish datapoint for the market. Earnings season really heats up this week, so get ready.

KAM Advisors and/or clients are long CHKP, GLD

Bond Auctions Improve In Spain and Italy

2012-01-12T08:04:00.000-08:00

The market was poised to move higher at the open after improved sentiment in Europe helped push their markets and the euro higher. Spain and Italy both held successful bond auctions where yields were well lower than they had been at previous auctions.

But some early economic data in the U.S. took the wind out of the market's sails. Retail sales came in weaker than expected at 0.1% (vs. 0.4% consensus), and retail sales ex-autos actually fell 0.2% in December. Also, weekly jobless claims were higher than expected.

Back to the ECB, President Draghi held the benchmark rate at 1.00%, but said that substantial downside risks to economic activity in Europe remain.

Asian markets were mostly lower overnight after some Chinese inflation data came in higher than expected. This calls into question just how easy China will become with monetary policy given that inflation is still a problem there.

The dollar is down which is helping commodities. Oil prices are higher near $102.25. Gold prices are also up to $1635. Copper and silver prices are higher as well.

The 10-year yield is getting a small bounce to 1.92%. But the overall low levels on the 10-year do not bode particularly well for an immediate pickup in economic activity.

As for the VIX, it is up 4% in early trading to 21.87. The recent downtrend in the VIX remains intact, despite the ongoing possibility for a move higher in the near-term.

Trading comment: The market continues to put together constructive price/volume action. Pullbacks have been contained well. There is talk about Greece having difficulty making its upcoming debt payments. This could cause the whole Euro debt issue to flare up again, as we know it hasn't been solved by any means. The market seems to be calm right now with those issues, perceiving that the 'kick the can' policies are effective. But at some point I expect the whole thing to flare up again. That may not be today's agenda, but it is something to keep in mind as investor adjust their asset allocations. We still have some hedges on just in case.

KAM Advisors and/or clients are long GLD, SCO, SH

Are We Starting To Decouple From The Euro?

2012-01-11T07:53:00.000-08:00

The markets are mixed this morning, but still doing better than I would have thought given that the euro is lower on the day. I have harped on the fact that whenever the euro was down over the last year you could pretty much bet our markets were down also.

So far this year we are starting to see a little decoupling from that relationship. I know its still early in the year, but so far the euro is down -2.0% since the start of the year while the S&P 500 has gained +2.5%. Hey, it's a start right??

European markets are lower this morning ahead of the ECB meeting tomorrow. Asian markets were mostly higher overnight, except for China which pulled back -0.4% after that 2 day surge.

Energy stocks (XLE) are down the most this morning, as oil pulls back near the $100.50 level. Gold prices are higher to $1643. Silver prices are higher also, while copper looks flat right now.

There isn't much in the way of market moving data this morning. Economic reports are light, and earnings season doesn't really kick into high gear until next week.

Trading comment: Recently I commented on the S&P holding solidly above its 200-day average. The two indexes that had yet to retake their 200-days were the S&P 400 Midcap and the Russell 2000 small-cap. But yesterday both of those indexes joined the senior indexes and now all of the major indexes are above their respective 200-day averages. The longer the S&P 500 stays around these levels the closer we get to its 50-day average crossing back above its 200-day average. Traders call this a "golden cross", and it would be another bullish sign for the market.

KAM Advisors and clients are long GLD, SCO

China Rallies Hard For 2nd Straight Day

2012-01-10T07:36:00.000-08:00

The markets are nicely higher in early trading, taking their cues from overseas markets which were up sharply overnight. Asian markets were up across the board, led by another 2.7% gain in China where expectations for easier monetary policy appear to be the catalyst.

In Europe, analysts at Fitch indicated that France and Germany are likely to maintain their top credit ratings in 2012. A lot of folks have been expected France to get downgraded, so this news emboldened the bulls and Europe's markets rallied hard.

The strong 2-day rally in China has helped economically-sensitive materials stocks (XLB), which are leading the early action. Financials (XLF) are strong too, while defensive consumer staples (XLP) stocks are lagging so far.

The dollar is only down slightly, but commodities have caught a bid as well. Gold prices are up near $1635, silver prices are higher, and copper is higher as well. Oil prices are back to $102.50.

The 10-year yield is only up slightly to 1.98%, still unable to get above that 2.0% level. And the VIX is down -4.7% today to nearly a 6-month low near the psychologically important 20 level. This is a good sign for the bulls, although I still feel like a short-term spike in the VIX could be coming if we get a sharp pullback in the market.

Trading comment: The market continues to power higher. Leadership is not as broad as it often is during market advances. The list of new highs is more littered with defensive type names rather than traditional quality growth stocks. That is another reason why I feel that not everyone has embraced this rally. I know that the sentiment surveys are growing more bullish on the one hand, but on the other hand it still feels like a market climbing the proverbial wall of worry.

-jordan kahn

Getting Ready For Earnings Season

2012-01-09T07:19:00.000-08:00

There isn't a whole lot in the way of market moving news this morning. After the close today Q4 earnings season will kick off with Alcoa (AA) reporting. I don't know that many people that key off of this report, but it is still the official start to earnings season.

Overnight Asian markets rallied led by China's 3% spurt higher. There were positive comments from Chinese leaders along with rising expectations for easing monetary policy after data showing an increase in lending and money supply. This is somewhat odd given the Premier's cautious comments last week, but nothing is normal when it comes to gauging China.

In early trading, financials (XLF) are leading the way while healthcare (XLV) stocks are lagging.

The euro is getting a little bounce vs. the dollar, and commodities are mixed. Oil prices are lower near $100.90 despite increased rhetoric with Iran. And gold prices are a bit higher to $1620. Silver prices are also higher, while copper looks lower right now.

The 10-year yield is flat around 1.96%. And the VIX is getting a bounce from Friday's low levels, currently 3% higher to 21.30.

Trading comment: Most of the major indexes are now above their respective 200-day averages, and have held those levels for more than a couple of days. I still think this bodes well for another push higher. The market is overbought short-term, which could be a headwind this week. I don't like taking large positions in new stocks ahead of earnings, but we do continue to trade around our long positions with an upward bias. We are still long most of our recent trades, including SCSS, ULTA, and STMP. AAPL shares remain our largest position, and the shares briefly hit a new all-time high this morning. Despite the high price tag, AAPL shares do not yet appear close to being overvalued.

KAM Advisors and/or clients are: long AAPL, SCSS, STMP, ULTA

Jobs Data Continues To Surpass Consensus

2012-01-06T07:55:00.000-08:00

The markets are lower in early trading, despite the better than expected payrolls report that was released before the open. The main weakness this morning likely remains concerns in Europe that are helping drive the euro lower again today. And I don't need to mention the contuining correlation between stocks and the euro.

The December nonfarm payrolls report showed the economy added 200,000 jobs, which is well above the 150,000 estimate. Private payrolls also grew more than expected (212k). Additionally, the unemployment rate ticked down to 8.5%. It was expected to rise to 8.7%.

So this is good news for the U.S. economy, although you wouldn't know it from the action in Treasuries. I would expect to see yields rising today, but instead the 10-year yield briefly rose to 2.0% but has since eased back and is now back to 1.96%. Not exactly an inspiring vote of confidence in the economy.

As we have seen all week, the Nasdaq is outperforming the S&P in early trading and bucking this morning's weakness for the most part. Among sectors, consumer discretionary (XLY) stocks are higher so far, while consumer staples (XLP) are down the most.

Asian markets were lower overnight, and China is not off to a good start to the year already. The dollar is higher, which is weighing on commodities. Oil prices are lower near $101.25. Gold prices are down to $1616. Silver prices are down also, but copper prices (JJC) are higher as of now.

As for the VIX, despite the morning selloff the volatility index is lower on the day. The VIX is currently down -1% near 21.25. This is a pretty bullish sign, as I think many traders expected volatility to pick back up once trading started in earnest in 2012.

Trading comment: The price action continues to be constructive in the major indexes. The Nazz has been outperforming nicely. And if you look at the intraday action in the SPX this week, you can see that most of the days showed weakness in the morning but the market picked up steam and closed flat to up those days. This means investors have been buying the weakness and in most cases augurs well for more upside ahead. Sentiment in yesterday's AAII poll showed too much bullishness, so that is one red flag. Additionally, the market is overbought once again. So I wouldn't load the boat here, but I have to give the market credit for the positive price action.

Market Shrugs Off Strong Jobs Data

2012-01-05T07:34:00.000-08:00

The market is lower in early trading, despite what looks like a very solid ADP Employment report. The data showed private payrolls increased by 325,000 for December, which is well above consensus estimates. We will have to see if the govt. payrolls report confirms this strength.

Overall concerns remain in Europe, where bond yields continue to creep higher and recent deposit data from the ECB shows a continuation of recent trends. Europes markets are lower, as is the euro. And we know that when the euro is down our markets are down.

In other US economic data, the ISM Services Index rose to 52.6 in December from 52.0 the previous month. Nonetheless December's reading was slightly below consensus estimates.

Also, December same-store sales are coming out and are a mixed back. Despite some solid results, the retail etf (XRT) is lower on the day by -1.5% so far.

The Nasdaq is outperforming the SPX so far for a second day. Energy and industrial stocks are early laggards, while healthcare and tech are down the least.

Commodities are mostly lower. Oil prices are down near $102.75, gold prices are only slightly lower to $1608, and copper and silver prices are down as well.

The 10-year yield is lower to 1.95% after trying to get above the 2.0% level yesterday. And the VIX is up 2.3% but still relatively low at 22.75.

Trading comment: Yesterday's price action was pretty constructive as the market was lower for most of the day buy rallied late to finish up slightly. Today the market has already bounced from its early lows and we will see if buyers come back into the picture late in the day. I would have thought we would have bounced more from that strong ADP report, but with the euro down a lot I understand the concerns. Growth stocks look good in early trading. One of our recent trades ULTA is spiking back above its 50-day average, which is a good sign. And the surprise stock of the week SODA is up another 6% in early trading and up 23% for the week. Not bad.

KAM Advisors and/or its clients are long QQQ, SODA, ULTA, XRT

'In The Money' Poll - 2011 results

2012-01-04T11:25:00.000-08:00

Congratulations to Andy Bell (hedgie in NY) for winning our 2011 forecasting poll. Andy had the SPX finishing the year at 1245, which was the closest guess to the actual finish of 1257.60. Andy will be receiving a gift card for his fearless forecast.

Overall, the In The Money pollsters average forecast for 2011 was for a 5.9% gain to 1332. This seemed like a relatively conservative forecast for the first half of the year but things changed markedly in 2H11.

For the 10-year Treasury yield forecast, the winner was Gary Smith (aka "The Internet"). Although Gary's prediction of 3.00% was well bullish of the closing level at 1.87%, it was the most conservative guess in the group. The average forecast for the 10-yr yield was 4.34% last year.

This year (2012) will be our 8th annual year for the poll. With nearly all of the tallies in, the average forecast for this year is for the S&P 500 to gain 8.5% (1364) on the year. That's only slightly more bullish than the Wall St. bigwigs polled by Bloomberg who are looking for SPX 1348 (+7.2%). Our gang also has the 10-year yield finishing 2012 at 2.77%.

Good luck to everyone in 2012!!

Taking Our Cues From Overseas

2012-01-04T07:33:00.000-08:00

There isn't a lot in the way of market moving news this morning, which leaves the market taking its cues from abroad. Yesterday's session proved to be the biggest up move in two weeks, so its normal to see a pullback. But there were also some developments overseas.

Yields are creeping back up in Spain, which is rekindling concerns in Europe. Also, the financial health of Hungary is now surfacing. These are weighing on the euro, and we know whenever the euro is down U.S. stocks are also down.

Asian markets were mixed overnight with Japan higher but China lower again. Premier Wen Jiabo made cautious comments about the country's economic outlook, which is never a good sign for one of the worlds largest and fastest growing economies.

All of the above had led folks to the safety of the dollar, which is hurting most commodities. Gold prices are adding to yesterday's gains near $1610. And oil prices are only down fractionally after hitting $103 yesterday. But copper, silver, and most other commodities are weaker on the day.

The 10-year yield is down slightly to 1.95%. You sure don't get the sense that the U.S. economy is picking up steam with a yield below 2.0%. Where's the love? As for the VIX, it is up 3% so far back to 23.65.

Trading comment: I was fairly impressed with yesterday's action. Volume picked up to its highest level in 7 trading sessions. And technically the SPX put considerable distance from its 200-day moving average, which should now act as support. Bullish sentiment among investors is rising, but not yet at alarming levels. So I think that this rally can push higher before we have another correction. I wouldn't be surprised to see the runup continue into Q1 earnings season.

Bulls Cheer The Start To The New Year

2012-01-03T07:15:00.000-08:00

The markets are sharply higher in early trading as the bulls cheer in the New Year. This buying interest was absent late last week as the market fell in the latter half of the week and pushed the SPX to close exactly flat for 2011.

Asian markets were strong overnight. India reported its best manufacturing reading in six months. Europe's markets are also strong this morning, with another meeting scheduled for Merkel and Sarkozy.

The euro is up and the dollar is lower, helping to boost commodities. Gold prices are rallying back up to nearly $1600 (+2%). And oil prices are up even more ($102.55) amid threats from Iran regarding Hormuz and blocking shipping lanes.

In the U.S., the December ISM Manufacturing index rose to 53.9 from 52.7 last month. But the market was already nicely higher before this data came out. Recent economic data has been strong, and I wouldn't be surprised to see upward revisions to Q4 GDP estimates soon.

The 10-year yield is also rallying up to 1.96%, but still below the 2.0% level that has been resistance of late. As for the VIX, it is down +3.5% so far near the 22.50 level. It will be interesting to see if the recent trend towards lower volatility persists, or if rhetoric out of Europe heats up again and drives volatility higher like in 2011.

Trading comment: The SPX is staging a strong breakout this morning. As you can see from the chart below, the SPX has been consolidating right at its 200-day moving average for the last 5 days. Today, it is spiking higher and putting some distance between what should now be support at that key moving average. This is a bullish sign and should lead to more short-covering if it holds into the close. As earnings season approaches, I also hope that we don't get any big preannouncements to the downside. We have already heard about some disappointments in the semi space, so reports related to those companies should be discounted already.

Stocks Set To Finish The Year Pretty Flat

2011-12-30T07:51:00.000-08:00

The market is roughly flat in early trading. If the SPX were to finish at these levels, it would be up less than 0.40% for the year. I think I heard CNBC say that would be the flattest year since 1970. Nevermind the volatility along the way that saw the SPX get as high as 1370 and as low as 1074. I for one am hoping for a decrease in volatility for 2012.

There is very little newsflow today both on the corporate front as well as any economic data. Yesterday saw broad-based buying but on very thin volume, which of course pushed things higher. Volume will likely be lighter today ahead of the holiday and with the US markets closed on Monday.

Asian markets were barely higher overnight, and Europe is mixed this morning. The dollar index is lower this morning which is helping boost commodities. Oil prices are near $99.35 but gold prices have bounced to $1571. Copper and silver prices are higher also.

The 10-year yield is a bit lower again today near 1.88%; and the VIX is up a little to just below the 23 level (22.89).

Trading comment: The SPX got back above its 200-day average yesterday. That means it was only below that key average for one day, which normally would be a bullish sign. With volume very light yesterday and year-end window dressing in effect, its hard to place a lot of significance on yesterday's action. I don't want to completely discount it, but I think we will get a better sense of the action when traders are back in full force next week. So I would give the nod to the bullish side of the equation here, but wait for confirmation next week before adding to my long positions. We still have seen fewer breakouts in leading growth stocks than we would normally see if a new upleg in the market were at hand. Let's hope 2012 brings more winners.

Happy new year to everyone--

Euro Lower On Lackluster Italian Auction

2011-12-29T08:28:00.000-08:00

The newsflow is relatively light this morning, and surprisingly our markets are higher despite the euro moving lower. The results from an Italian bond auction this morning were okay, but not strong enough to help boost the euro. Yields offered on the bonds were lower than last month's auctions, but still relatively high. 10-year yields in Italy remain above 7.0%.

The weakness in the euro is boosting the dollar and hurting most commodities. Oil prices have fallen back to $98.50, and gold is down again to $1530.

In the U.S., pending home sales for November came in above expectations with an increase of 7.3%. And the Chicago PMI for December was also above expectations at 62.5, in-line with the prior month.

The 10-year yield is fractionally higher to 1.92%; and the VIX is lower by 2% so far near the 23.0 level.

Trading comment: We haven't done a lot on the trading side of things this week. As portfolio managers know well, this is a busy week for us in terms of last minute tax-loss harvesting to offset capital gains, last minute IRA contributions, as well as any year-end rebalancing. So while you hear a lot of stories about trading slowing down, it is anything but slow at our firm. And next week the fireworks will start in earnest again.

Euro Breaks Recent Support

2011-12-28T07:57:00.000-08:00

In recent months, I have said repeatedly that all you need to do is look at what the euro is doing to know how stocks are faring. This morning the euro is breaking recent support levels and falling to fresh lows.

The drop in sentiment comes on news that the ECB's balance sheet has grown to a record 2.73 trillion euros. And despite positive Italian bond auctions this morning, bank deposits at the ECB are now at a record 452 billion euros. So although the stress in the U.S. stock market has eased in recent months, the stress on the interbank lending markets in Europe remains high.

Asian markets were slightly lower overnight, while Europe is mixed this morning. The drop in the euro and rise in the dollar is also weighing on commodities. Oil prices have eased back to $100.33, but are still high amid tensions with Iran threatening to close the Straight of Hormuz (a key shipping route for crude oil). Gold prices are also lower, down to $1575.

The 10-year yield was able to get above 2.0% for a couple days, but is back below those levels today. It is currently down near 1.94% after running into overhead resistance at its 50-day average.

As for the VIX, it is up another 5.25% right now above the 23 level. A lot of traders were looking for volatility to continue lower as we neared the end of the year and another 3-day weekend, but the last 2 days have seen a fair bounce in the VIX. That said, the VIX is still well off of its highs from recent months and much closer to getting back below the 20 level where it was before the market fell out of bed in August.

Trading comment: We have been pretty quiet here in year-end trading. The SPX is at key technical levels. Yesterday it close above its overhead 200-day average near 1259. A couple of consecutive closes above this level would have put the bulls back in front. But today we are trading back down below those key levels. We will have to see how the market fares into the close, but a quick turnaround back below the 200-day in one day's time isn't what the bulls were hoping for. The SPX has been up for 5 straight days, so I would expect some normal consolidation. But I would like to see a mild price drop.

Monday Morning Musings

2011-12-27T07:58:00.000-08:00

The market has opened fairly sluggish, possibly nursing a small hangover from the holiday festivities. I took Friday off for a little golf as the weather in LA has been sunny and nice. Now its back to the grind and seeing if the markets can add to their nice finish to last week.

Asian markets were mostly lower overnight, with Hong Kong still closed. And Europe's markets were mostly higher today despite the yield on Italian bonds hovering back near 7.0% again.

Volume levels will likely remain light for this shortened week. Corporate news is relatively light this morning, but SHLD is getting whacked on poor retail sales and the announcement that it will close more stores and draw funds from its credit facility.

In economic news, the Case-Shiller home price index showed another decline in home prices for October, as prices fell 3.4%. But the Consumer Confidence index for December rose much more than expected to 64.5 from 56.0 last month. We have seen some strong consumer confidence numbers this month and it will be interesting to see if that sort of sentiment continues in early 2012.

The dollar is a bit lower but so are most commodities. Gold prices have slipped below $1600 and copper and silver prices are lower as well. Oil prices are above $100, but this has more to do with comments out of Iran about possible supply disruptions.

The 10-year yield is roughly flat near 2.01%. And the VIX, which had gotten down near the 20 level last week, is spiking +6% to 22.15 currently despite the flat market. It could be that traders are anticipating a pickup in volatility in January and are buying ahead of the turn of the calendar. This is actually a trade that I am considering.

Trading comment: The market finished last week on a strong note after 4 straight up days. I had said I was looking for an early Santa Claus rally, and it will be interesting to see how things shape up this week. I have a sense that trading could simply be quiet as traders look to just hang on into year-end. But we could also see another push higher as last minute window dressing plays out. I would start looking for things that could reverse in January. Some stocks are very extended in here, and looked primed for a pullback. Other stocks are likely being sold just to take the losses and could rebound in January. But for now I am focusing on the former.

Slight Downward Revisions to Q3 GDP

2011-12-22T08:13:00.000-08:00

I'm getting a bit of a late start today, which is often the case when my parents are in town visiting. My kids are so excited to have them there, its hard to keep them from running in and waking my folks at the crack of dawn.

The markets are higher this morning, which would make for three straight gains in the SPX if it holds. Those waiting for the Santa Claus rally to start next week might be a little late to the party.

Asian markets were mostly lower overnight, but Europe is higher today after the ECB released results from its latest liquidity program, the Long-Term Refinancing Operation (LTRO). There was strong bank participation, which hopefully will prove to be a good think like TARP was in the U.S. (even though it was unpopular).

In economic news, Q3 GDP was revised downward a bit to 1.8% from its last estimate of 2.0%. But early Q4 estimates are for growth above those levels. The December Univ. of Michigan consumer sentiment reading came in at 69.9 which is up nicely from last month's reading of 67.7. And this week's jobless claims were lower than expected. So net-net, I view today's economic data as a glass half-full.

The dollar is flattish and commodities are mixed. Gold prices are lower to $1607, while oil prices are higher back to $99.60. Copper prices are higher also.

The 10-year yield is down slightly to 1.95%; and the VIX is falling further down to the 21.0 level. I view this as bullish in the short-term, but would probably look to get long volatility and expect another pickup in Q1.

Trading comment: The SPX continues to act well since bottoming on Monday. It is outperforming the Nazz this week after reversing yesterday's lows and finishing in the green. The chart below shows that today is the third day (so far) above the 50-day average, and now the overhead 200-day is in sight. It currently sits near SPX 1259. I think if this rally continues and people look to put more money to work into year-end we could take out those levels, but I don't expect it to be a straight shot. I also think money will be put to work in the winners, not the laggards, as portfolio managers try to add to their winners and make it look like they had big positions in those stocks.

Oracle Takes Away The Punch Bowl

2011-12-21T08:12:00.000-08:00

Asian markets rallied overnight, following the strong showing on Wall St. yesterday. European markets were also higher this morning on a report from the ECB that bank borrowing needs are being adequately met.

But following ORCL's disappointing quarterly report, tech shares are down heavily this morning and that is weighing on the overall market. ORCL's stock is getting hit and hurting anything that is related to CRM, cloud computing, etc. The Nasdaq 100 is down -2.0% early, while the S&P 500 is off -0.65%.

Among sectors, tech is down the most, while defensive areas like consumer staples and utilities are bucking the weakness so far and trading in positive territory. If will be interesting to see if dip buyers show up today in tech stocks.

On the plus side, Nike (NKE) had a solid quarterly report and its stocks is up nicely today, almost back to 52-week highs.

The dollar is higher vs. the euro today, which is weighing on some commodities. Oil prices are higher near $98.38, but gold is down to $1615 and silver and copper prices are lower as well.

The 10-year yield is adding a bit to get to 1.92%; and although the market is down this morning, the VIX is also nearly 3% lower to 22.55. I still think this continues to bode well for the bulls into year-end.

Trading comment: Tech stocks are getting destroyed this morning if they are related to cloud computing, etc. Stocks like AAPL and GOOG are holding up better. It will be interesting to see which stocks bounce back first. But those that don't bounce and continue to act as laggards should be avoided for now as year-end selling of losers could continue to weigh on them. As for the SPX, it has pulled back exactly to its 50-day average, which is acting as support so far. I think that is important. A 2nd close above the 50-day would be a bullish sign, and supportive of another move higher for the senior index. I would also like to see volume on today's pullback come in lighter than yesterday's rally. So let's watch for that.

long AAPL, GOOG

Is Santa In The House?

2011-12-20T08:02:00.000-08:00

Yesterday I mentioned that the stock market was getting oversold again and sentiment was getting more bearish, but that for the market to rally we just needed some catalyst.

Well along comes Spain and out of the blue they hold a debt auction that was stronger than expected. That really improved sentiment in Europe, along with some solid sentiment surveys in Germany and the UK, and got the euro rallying. We know that lately if the euro is higher, the stock market is higher.

Asian markets were up slightly overnight, but Europe's markets are up nicely today. The Dow has spiked nearly 300 points so far. In economic news in the US, housing starts and building permits were both better than expected. Homebuilder stocks are rallying on the news.

In corporate news, General Mills (GIS) came up short of consensus estimates and its stocks is lower. CVS issued an in-line outlook and hiked its dividend by 30%. Its stock is nicely higher.

The dollar is lower, which is boosting commodities. Oil prices have spiked up to $97.25, while gold prices are back above $1600 near $1618. Silver and copper prices are higher also.

The 10-year yield is getting a big boost to 1.90%, which is still a pretty low yield overall. And the VIX is down sharply again, falling more than 9% so far. The VIX is currently at 22.60 and if it closed at these levels it would be the lowest reading since late July.

Trading comment: It didn't feel very good to do some buying yesterday, but I feel much better about it today, lol. The SPX had been turned down by its overhead 50-day average the last few times. At the time, I said that I felt that was normal and that after a pullback and some consolidation we could see a successful move above that key moving average. So far today the SPX has broken above its 50-day which was at 1230. A solid close above that level should embolden bulls to do more buying and bears to cover shorts. We are still long are trading positions in SCSS, TSCO, ULTA, and STMP. We also added some IWM yesterday to add overall exposure.

KAM Advisors has long positions in all stocks mentioned

Lack of Catalysts To Drive Markets Higher

2011-12-19T07:58:00.000-08:00

The markets were higher in early trading, but have since faded as a lack of any significant catalysts exist today to help drive markets higher. There have been very few economic or corporate announcements. News out of Europe was also quiet over the weekend, with some continued chatter about whether the ECB will step up its bond purchases.

The big news even was the death of Kim Jong Il in N. Korea, and what that might mean for the transition of leadership in that country. Asian markets were down across the board overnight amid the uncertainty.

Financials have led the reversal lower this morning after the Basel committee said they would like higher capital requirements for the banks. Financials are down the most so far today, while healthcare stocks are up the most.

The dollar is up a bit today, which is weighing on commodities slightly. Oil prices are flattish near $93.60 and gold prices are also a bit lower near $1595.

The 10-year yield continues to languish down around 1.84%; and the VIX is currently up 3% right to the 25.0 level.

Trading comment: The major indexes were down an average of 3% last week, and the market is now back into oversold territory. I expect choppy trading to continue in this news driven market, but I think this week's trading will have an upward bias as people look for a potential Santa Claus rally to surface. Trading will likely continue to be light as many folks have simply called it a year and closed up their trading books. The rest of us will continue looking for profitable trades in investments on a daily basis.

Financials Lead Early Action Despite Fitch Downgrade

2011-12-16T08:25:00.000-08:00

The markets are higher again in early trading. Yesterday the rally faded as the trading session wore on. We shall see if the market can hang on to its early gains today. Today is also options expiration Friday which could make things a little more volatile, but usually most of the action happens at the open on these expiration days.

Financials are leading the early action. This despite Fitch downgrading the debt ratings of Bank of America, Goldman Sachs, and several European banks.

In economic news, the overall CPI came in flat for November, which was lower than consensus expectations. The core CPI rose 0.2%.

Asian markets were higher overnight, and most European markets are up this morning as euro bonds have seen a pullback in yields which has helped improve sentiment for the time being. The latest country looking for a bailout from the EU and IMF is Hungary.

The bounce in the euro and pullback in the dollar is helping gold prices bounce back to the $1600 level following a sharp 3-4 day selloff in the yellow metal. Oil prices are roughly flat near the $94 level. (We are still short oil via the SCO etf).

The 10-year yield continues to languish and has fallen all the way down to 1.86%. The bond market would seem to be pricing in more of an economic slowdown that most of the GDP forecasts that I have seen.

As for the VIX, it is now well below the 25 level which would signal a decline in the wild volatility that has been with us for months. It got as low as 23.50 this morning and is currently hovering just above the 24 level.

Trading comment: The SPX has bounced off of its overhead 50-day average both yesterday and again this morning. The 50-day sits near SPX 1228. That is the first level we need to close above for this rally to continue. Hopefully we don't get any more earnings warnings like we got from Intel. If so, I still think there is a shot for another push higher into year-end. I have been premature with this call, but did correctly point out that after the SPX tested its overhead 200-day moving average there would likely be a pullback and some consolidation first.

Chart of the Day: Is The Run In Gold Over?

2011-12-15T07:50:00.000-08:00

Below is the chart of gold. Over the last few days, gold prices have plunged and taken out some long-term support levels. You can see in the chart below that the gold etf (GLD) has now broken below its 200-day moving average. We have not seen this support breached in years.

If the 200-day is recaptured quickly, it could mean a shallow correction for gold. But if that key moving average is not recaptured in short order, it likely means gold prices are in for a longer, deeper correction process.

Gold prices often move inversely to the U.S. dollar, so that is a wild card in this scenario. In recent days, the euro has been very weak and there has been a flight-to-safety into dollars. If the debt situation in Europe continues to deteriorate I would expect the dollar to continue to act as a safe harbor. But I also wouldn't rule out EU officials making more announcements about "plans" to deal with the crisis which could continue to prop up their currency.

The next chart is the longer-term chart of the GLD going back to 2009. You can see that this is the first time that the long-term moving average has not held as support going all the way back to the early breakout in gold in 2009. So the recent price action is meaningful and as such I plan to keep the GLD front an center on my screens for the near-future.

For the time being, we have not trimmed any of our positions but will likely lighten up on future bounces.

long GLD

The Euro Is In Charge

2011-12-14T08:10:00.000-08:00

In recent months I have mentioned from time to time that if you want to know if the market is up or down on a given day, all you had to do was ask how the euro was doing. For the last few days, the euro has been under pressure and that has been weighing on the market.

Today, the euro is breaking down further and nearing a one-year low. Results from debt auctions in Germany and Italy failed to inspire any confidence. And the credit gauges in euroland have been deteriorating for weeks. I hope EU officials develop more of a sense of urgency.

The weak euro has pushed the dollar higher and led to a sharp selloff in commodities. Metals are down across the board today, led by silver. But gold prices are also getting hit hard and are now well below the $1600 level. Oil prices have also fallen down to the $96 level, a big drop from yesterday's rally to $100.

All of the 10 major sectors are lower so far, led by energy. Healthcare and utilities are down the least. Interestingly, REITs are actually mostly green on the day. Growth stocks are down the most relative to value stocks.

The 10-year yield is lower to 1.92%. It sure didn't stay above 2.0% for long. As for the VIX, it is up +7.7% today to 27.37, but still well below last weeks highs and yesterday it briefly dipped below 25 for the first time in months.

Trading comment: I have been trying to remain constructive on stocks, but this latest euro plunge is garnering all of the market's attention this week. The market is no longer overbought, and soon will be back to oversold levels. The SPX has broken below its 50-day average near 1226 and is currently trading near 1210. I don't want to see this 50-day average become resistance, so we need to see it recaptured in short order. Also, keep an eye on leading growth stocks, which had been looking okay but today are taking the brunt of the selling. I am watching our recent trades like RVBD, SCSS, TSCO, and ULTA closely.

long RVBD, SCO, SCSS, TSCO, ULTA

Dip Buyers Surface In Early Trading

2011-12-13T07:40:00.000-08:00

The market is higher in early trading, as buyers have stepped up to buy the latest dip that was yesterday's selloff. There isn't a whole lot in the way of positive news, but that hasn't gotten in the way of this morning's agenda to put some money to work.

The FOMC meets today and while there is some rumors of the Fed announcing further QE initiatives, I think the most likely scenario is to hear more of the same and that the Fed remains accomodative.

In corporate news, Best Buy (BBY) reported earnings that missed consensus estimates and its stocks is getting hit.

In economic news, retail sales were up 0.2% in November, which is less than expected. The combination of this report and poor BBY results is weighing on the retail sector this morning.

Asian markets were lower overnight, while Europe is getting a bounce this morning on little new news. There was some encouraging data out of Germany, but the euro is lower on the day so far.

Commodities are mixed. Gold prices are up a bit near $1670. Oil prices have been up the most, above $100 earlier, as news leaked out that Iran was looking to shut the Straight of Hormuz in some sort of military operation. But as news has come out that it remains open, oil has eased back from its highs.

The 10-year yield is getting a nice bounce near 2.05%. I think it would be a big positive for sentiment towards the economy if the 10-year yield could lift a little more. It did get up to 2.40% in October, but that rally was short-lived.

Probably the biggest suprise today was when I came in and saw the volatility index (VIX) down 9%. The VIX got as low as 23.27, although it has bounced from there. I actually bought a little VXX for a daytrade as these morning drops in the VIX never seem to stick for the entire session. But it is still a big positive if it can close below the 25 level.

Trading comment: Stocks are already off of the earlier highs as I finish this blog post. I expect trading to be relatively quiet until after the FOMC announcement when the fireworks usually begin. I don't expect any big surprises, but the market could still rally afterwards. Yesterday the SPX got down close to its 50-day support before bouncing. So the index has been squeezed between its overhead 200-day and its 50-day below. While the credit indicators are still flashing caution, I still believe we will see another push higher before year-end.

long SCO, VXX

Monday Morning Musings

2011-12-12T07:42:00.000-08:00

The markets are down sharply in early trading. So much for that bounce on Friday. As of now, it looks more like that was just a reprieve to the selling that started in earnest on Thursday. But let's see how the day shapes up.

Increased skepticism with Europe's latest "plan" has led to yields in countries like Italy and Spain rising again. Other credit metrics are also deteriorating today. Europe's stocks markets and the euro are all lower this morning.

The drop in the euro is boosting the dollar and hurting commodities. Oil prices are down to $97.65, and gold prices have plunged all the way to $1661. Copper and silver prices are also down sharply.

Asian markets were mixed overnight, with Japan higher but China down again. Some numbers out over the weekend suggested that growth decelerated for China in November.

Here in the U.S., Intel (INTC) lowered its outlook for the current quarter and that weighed on the tech sector and the overall market. INTC is blaming it on disk drive shortages (Thai flood), but most think it is also related to overall PC demand.

The 10-year yield is hovering just above that 2.00% level at 2.01%; And the VIX is up 4% so far near 27.45, but still well below last week's highs after that sharp move lower on Friday.

Trading comment: Selling has picked up again as the choppy trading since hitting the 200-day average continues. The lows on the SPX from Thursday are near 1231. So far today we have not broke below those levels, but if 1231 gives way we could see selling pick up steam. The enthusiasm over the can kicking from the EU summit last week seems to have faded quickly. I have mentioned that I thought most folks would be in dip buying mode into year end, and I still think that is the case. But I acknowledged the likely possibility of a pullback and more consolidation before the SPX made another stab at taking out is overhead 200-day resistance. I think that is what we are seeing now, but I still think buyers will step up again. So I will be patient and look for stocks that are holding up well to add to into this decline.

long SH

Stocks React Positively To EU Summit Announcement

2011-12-09T07:51:00.000-08:00

There weren't a ton of details provided about the new agreements that came out of the EU summit, but after yesterday's sharp selloff the news was enough to spur buyers back into the market.

The members agreed to tighter fiscal controls, with penalties for member nations that exceed budget deficits of more than 3% of GDP. They also stepped up the time table with which the ESM should enter the picture. But it looked to me like the dollar amounts they are talking about are still not enough to really ringfence the problems. Also, Britain decided not to sign and join into the agreement as they don't want to cede any fiscal sovereignty.

Asian markets were lower overnight, despite a CPI figure out of China that looked better than expected. Europe's markets are higher this morning, and the euro is getting a slight boost as well.

Commodities are mostly higher, except for oil prices which have been slight lower near $98.20 this morning. Gold prices are up to $1716, and copper and silver prices are higher as well.

In corporate news, both Texas Instruments (TXN) and DuPont (DD) lowered their forecasts. Those stocks are getting hit, but are not weighing on the rest of the market for the most part.

The 10-year yield is trying to get back above the 2.00% level after falling below it in yesterday's trading. And the VIX is down 7% so far down to 28.40 after spiking back above the 30 level yesterday.

Trading comment: We still have a long way to go into today's session, but so far buyers have already stepped up to the plate. I have said I thought we were in the timeframe of the year where most investors would be in buy-the-dip mode. And since yesterday was a pretty big dip by most measures, it is not surprising to see buyers come into the market. The SPX continues to consolidate underneath its 200-day average. I still believe it will make a successful breakout before year-end. But I also realized the credit gauges have not improved, and the chances for another correction in Q112 remain high.

Jordan Kahn and/or KAM clients are: long GLD, SCO, SLV, and SH

Quote of the Day

2011-12-08T11:50:00.000-08:00

From the UK paper The Telegraph:

"Draghi's insistence that the fiscal contract eurozone leaders are attempting to thrash out at their latest summit will be sufficient in itself to restore confidence is cloud cuckoo land. He cannot sincerely believe it. The problem in the eurozone is not fiscal indiscipline, though there has certainly been a lot of it, but current account imbalances entrenched by big differences in competitiveness. These cannot be made to go away with repeated rounds of growth stifling austerity, and as for Mr Draghi's claim that it is possible to have both fiscal austerity and decent growth provided competitiveness is improved, it's simply naive to believe that's what is going to happen in practice. In fact, most of the evidence from the eurozone periphery is that it is continuing to lose competitiveness against the surplus north, with Germany progressively improving its share of an ever-shrinking market. As long as that goes on, the debt problem is going to get worse, not better. This weekend's summit will do little to solve the fundamentals of this crisis. Only a fully functioning fiscal and political union, with tax and spending decisions centralised in one authority across all 17 nations can do that. Even turbo-charged by financial and economic crisis, that's a very long road indeed."

Draghi Pours Cold Water On ECB Bond Purchases

2011-12-08T07:53:00.000-08:00

The market is lower in early trading after a disappointing reaction to comments by ECB Pres. Draghi, who implied that the ECB would not step up its bond buying program beyond what has been discussed already. It's unclear to me why he is taking this tone, unless he is trying to get other players to get more involved. The EU summit is tomorrow (tonight actually) and maybe this is posturing ahead of it. We still don't know to what extent the IMF may get involved.

The ECB also cuts its main lending rate 25 bps to 1.00%. Draghi said there was no talk of 50 bps, and that the vote was not unanimous. The ECB also lowered its marginal lending facility to 1.75% from 2.00%. The Bank of England held its rate steady at 0.50%. And the Danish central bank cut its rate from 1.20% to 0.80%. So the liquidity spigot in Europe is opening, but I'm not sure even a fire hose can help more than just a temporary stop-gap.

The euro is lower on the rate cut news, and that is weighing on commodities also. Gold prices are lower near $1715, and oil prices are down to $98.75.

In the U.S., jobless claims fell more than expected to 381,000, but folks are already complaining that this figure was seasonally adjusted and is thus skewed.

The 10-year yield has eased back to 2.00%, that key level that we can never seem to hold above for too long. And the VIX is spiking +4% higher so far and has touched the 30 level again (currently 29.80).

Jon Corzine is testifying before Congress this morning about the MF Global disaster. He'll probably say that he just didn't know about the fund diversion. I don't expect them to get a lot of answers and clarity from him. What a fall from grace.

Trading comment: The biggest news item this week will be the announcement that follows tonight's EU summit. The market has recently rallied up to overhead resistance, so its normal to see a pullback from those levels. The hard part is gauging how the market will react to tomorrow's announcement. A positive reaction could result in a successful breakout above recent resistance. But a negative reaction could easily take the SPX back down to its 50-day average below. I'm betting we have a little more correcting to do, but hoping its not too big. I still think that most participants are in buy-the-dip mode into year-end. That said, I hope the EU officials bring out the howitzer.

ECB Extending More Liquidity

2011-12-07T08:05:00.000-08:00

The markets are lower in early trading, but there has not been much news. Asian markets were higher across the board overnight, while Europe is up slightly this morning.

The ECB has said that it will loosen the criteria for loan collateral, which is an attempt to provide more liquidity to member nations. Tomorrow the ECB will have its policy announcement and many investors are hoping that they ease monetary policy further with an actual rate cut. Of course, the big event this week is the outcome of the EU summit on Friday and what they will say in terms of any big initiatives to deal with the debt crisis.

The euro is down slightly on the news, and most commodities are flat. Gold prices are actually up a bit near $1734, but oil prices are lower and have broken the $100 level.

Energy and financials are lagging the action so far this morning, while healthcare and utilities are down the least.

The 10-year yield is lower to 2.06%; and the VIX is +3.5% higher near 29.25.

Trading comment: If you pull up that chart of the S&P 500 you can see that once again we were turned away at overhead resistance near the 200-day average, which sits near 1264. The market hit that level again yesterday but faded, and this morning is moving lower still. I expect some consolidation around these levels, with an eventual successful push above these resistance levels. I would actually prefer to see the market pullback ahead of the EU summit meeting. I worry that if we rallied straight into the meeting, that might increase the chances of selling off harder after the news comes out.

S&P Puts Most Eurozone Members On Downgrade Watch

2011-12-06T07:40:00.000-08:00

The market is flattish in early trading on lot a lot of news here in the U.S. The big news release came last night when S&P analysts put 15 eurozone members on credit watch for a potential downgrade. It's a bit odd that they would do them all at the same time, but not that surprising given the state of the finances among member nations.

Asian markets were lower overnight, and European bourses are down this morning as well. The dollar is slightly higher vs. the euro, and commodities are mostly lower. Oil prices are off slightly to $100.66 and gold prices are also lower near $1713.

The 10-year yield is still above its 50-day average at 2.06%; and the VIX is down a fraction to 27.65.

Other than that there is not a lot of domestic economic data or corporate news that is moving the market. Defensive sectors like healthcare and utilities are leading the market so far while financials are lagging the action.

Trading comment: The S&P bumped its head at its overhead 200-day average for a second day and moved lower from there. The index is still below those levels but does not seem to be giving up much ground so far. The S&P 500 is now barely in positive territory for the year, and I think that performance anxiety will continue to be a factor from here into year-end. That means I expect dips to be more shallow than in recent months as more participants look to use pullbacks to their advantage. The put/call ratio opened very low this morning, which also lends itself to this thesis.

Monday Morning Musings

2011-12-05T07:28:00.000-08:00

Market participants are back in buying mode this morning despite last week's outsized gains. The positive sentiment has been helped by rumors out of Europe that the ECB is preparing to inject 1 trillion euros into its financial system to support the debt purchases in the region. It is unclear where the trillion euros will come from.

Also, Italy has established a new austerity plan. While the markets applaud this long-term thinking, don't forget that austerity measures will weigh on growth for years to come.

In economic news, the ISM Services index slipped a bit to 52.0 from 52.9 last month, but is still at a level that signals expansion in the sector.

Asian markets were mostly higher overnight, but China fell -1.2%. The dollar is lower today as the euro gets a boost. This is helping most commodities, but gold is heavy and trading a bit lower near $1748. Copper and silver prices are higher, and oil prices are up to $102.

The 10-year yield is getting a boost to 2.10%; and the VIX is drifting lower down -3.5% to 26.55 currently.

Trading comment: On Friday I showed that chart of the SPX reaching resistance levels. That level held as resistance on Friday and turned the market lower. But this morning a little good news (Europe) goes a long way, especially when you are in the final stretch to year-end and performance anxiety among portfolio managers is at a high. Buyers have pushed the SPX right back to that resistance line, which also coincides with the overhead 200-day average of the market. I'm not sure if we will stay comfortably above this level (1265) this week, or if we need to see a little more consolidation. But it does feel like if we don't get any real disappointing news that the market does want to make a successful push above these levels.

Chart of the Day

2011-12-02T12:18:00.000-08:00

I mentioned in my opening post on the main page that the market had reached important resistance. Here is the chart:

Hopefully you can see that purple trend line drawn in that I had been watching since early October as support for the SPX. Well on 11/17 you can see that the SPX broke decisively below that trendline, and the market had a correction.

Now, the market has rallied all the way back to the underside of that trendline. That seems like a logical place for the market to take a breather, and I have trimmed more of our trading positions today.

Unemployment Rate Drops To March 2009 Levels

2011-12-02T08:06:00.001-08:00

The market is higher this morning on the heels of further action in Europe to deal with the debt crisis, and an in-line employment report.

Europe was already higher this morning after news out that the ECB would loan the IMF 100-200 billion euros to fight the debt crisis. This is a backend way to get the IMF involved, by the ECB giving them the initial funds. But 100-200 billion euros is a drop in the bucket, and there is going to have to be much more involvement. I suspect EU officials will try to bring in more funds from surplus countries like China, Brazil, etc.

Here in the U.S., the nonfarm payrolls report showed that the economy added 120,000 jobs, in-line with estimates. Private payroll additions were a little higher at 140,000 (also in-line). But the big surprise was the unemployment rate, which dropped unexpectedly to 8.6%. It is now back to levels we haven't seen since March 2009. Some will argue that it's due to more people dropping out of the labor force, but that still leaves fewer people looking for jobs.

In corporate news, RIMM lowered guidance and said it will take a charge related to its Playbook inventories. That means it couldn't' sell as much as it thought, as iPad remains the #1 tablet. It's stock is down -9% so far. As for WDC, it's up 10% after raising guidance and saying it will resume production that had been halted due to flooding in Thailand.

The euro is lower today, but that isn't really hurting commodities. Copper prices are higher, and oil and gold are steady. Oil prices are still hugging the $100 level, and gold is up slightly near $1753.

The 10-year yield is easing back a bit to 2.07%; and the VIX is down -3.6% right now to 26.40. It had been down to 25.30 earlier before bouncing higher. As I have said, a move below 25 that sticks would likely embolden the bulls to be even more "risk on".

Trading comment: The market has now been up big for 4 of the last 5 sessions, even though we still have a long way to go today. But I will post a chart later that shows that the market has reached some important resistance levels and is likely due for a little pullback. I am trimming a few positions just slightly, and will wait to put more cash to work on said pullback vs. chasing things here. I hope I'm right. We are also getting into the time of year when performance anxiety peaks and where more good news out of Europe over the weekend could lead to additional short-covering.

Looking For Market To Take A Breather Now

2011-12-01T07:46:00.000-08:00

The markets are roughly flat after yesterday's outsized rally. Yesterday was one of the biggest point gains on record for the Dow. The only problem is that if you look at the list of the biggest point day, almost of all of them were bear market bounces that didn't last. Let's hope this time is different.

Same-store sales reports have been coming out for retailers and have been a mixed bag for the most part. On the upside are stocks like ROST, COST, JWN, and GES. But there have been some big disappointments such as LULU and KSS.

In economic news, the ISM Manufacturing Index for November came in at 52.7, which is a nice bounce from 50.8 last month. China's PMI last night came in below expectations and dropped below the 50 level, which marks the delineation between expansion and contraction.

Europe's markets are mixed this morning after bond auctions were held in Spain and France. The euro is slightly higher, while commodities are mixed. Oil and gold prices are both roughly flat so far at $100.50 and $1750, respectively.

The 10-year yield is higher again to 2.10%; and the VIX is down -1.55% so far near 27.37.

Trading comment: Yesterday's gain came as a big surprise to most investors. Especially since the night before S&P had downgraded the banks and the futures were pointing to a lower open. The coordinated action by the central banks led to a sharp short-covering rally. The question now is will it be more similar to 1998 when the Fed action sparked a lasting rally or more like 2008 when there was more downside to come? I would not rule out the possibility of performance anxiety kicking in between now and year-end and pressuring portfolio managers to do more buying in hopes of adding performance. I know that's how I feel on a day like yesterday.

Central Banks Coordinate Move To Ease Credit Crunch

2011-11-30T07:48:00.001-08:00

The markets are up big this morning on the news that a group of the world's largest central banks have coordinated a liquidity injection into the banking systems to help ease the tightening credit conditions that we have been talking about of late.

The action included the Bank of Canada, Bank of England, Bank of Japan, the ECB, the Swiss National Bank, and the Federal Reserve. They said, "The purpose of these actions is to ease strains in the financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and to help foster economic activity".

The central banks agreed to lower the pricing on U.S. dollar liquidity swap arrangements by 50 basis points. This is intended to help foreign banks who where having difficulty with short-term funding in the market.

Investors are viewing this as a positive sign that the central bankers learned their lessons from 2008 and appear steadfast in their intention to be proactive in avoiding another credit crunch and banking crisis.

Additionally, there was some positive economic reports in the U.S. The ADP Employment report showed payrolls increased by 205,000 in November, far more than the 125k consensus. Moreover, last month's payrolls data was revised upward to 130,000 gain. The Chicago PMI report also improved to 62.6 in November from 58.4 the prior month. So that is a good indication that manufacturing activity continues to expand.

Europe's markets are sharply higher this morning, and the Dow is up over 400 points so far. The euro is also higher which is boosting commodities. Copper prices are up 6%, silver is rallying, gold prices are $30 higher above $1750, and oil prices are back above $101.

The 10-year yield is up to 2.09% today; and the VIX is down nearly -9% to 28.0, though it has already bounced higher from its earlier lows. At the end of October it was below 25, so it still has some room to move lower if this rally is to have legs.

Trading comment: This is already a big move. The time to buy was last week, when bearish sentiment was on the rise and the market was extremely oversold. When those two combine (bearish sentiment and oversold technicals) it is usually a good setup for a market bounce. Then you just need a catalyst to spark the buying, which is what we got today with the central bank action. From last Friday's close, the SPX is already up 7%. I wouldn't chase today's strength, but I think you can continue to buy dips in here.

Consumer Confidence Jumps

2011-11-29T07:45:00.000-08:00

With all of the negative news in the media, you would think that consumers would simply remain downbeat until they see clearer signs of job growth, a housing rebound, and an improvement in Europe. But today's consumer confidence number was a big surprise.

Stock futures were barely higher prior to its release, but jumped afterwards. The Consumer Confidence Index for November spiked to 56.0 from 39.8 the prior month. Moreover, consensus estimates were only for 42.5. So that is a nice bounce in consumer sentiment, and could be play into solid holiday sales which began with a strong Black Friday for retailers.

Asian markets were higher across the board overnight after the strong rally here in the U.S. And Europe is higher this morning despite rumors that S&P might be looking at France's sovereign debt rating for a possible downgrade.

In corporate news, Tiffany (TIF) gave disappointing guidance and its stock is getting hit. Also, AMR has filed for Chapter 11 bankruptcy and will being a reorganization. Silly airlines.

The 10-year yield is higher to 2.04%; the dollar is lower, helping commodities; oil prices are up near $99.50, and gold prices are slightly higher to $1715; as for the VIX, it is down another 2.25% to 31.40, but even at a level above 31 traders are expecting continued high levels of volatility. The VIX hasn't been below 25 for more than a day since early August.

Trading comment: I said yesterday that I felt the market was very oversold, sentiment had grown more bearish, and the market should be able to add to yesterday's bounce. I still feel that way, even though volume yesterday was nothing to write home about. The SPX has been in this trading range of roughly 1150-1250 for a couple months, and could stay there. If so, then current levels are roughly at the halfway point of said trading range. In this environment, the best strategy continues to be buying the dips and selling big rallies. You have to take small profits when you have them, otherwise you are simply riding the waves up and down but never making much progress.

Hope Springs Eternal In Europe

2011-11-28T07:31:00.000-08:00

The market put in a dismal week last week, with no Thanksgiving bounce like we often see. Coming into today, the S&P 500 had been down 7 straight sessions, which puts the market in an oversold position.

Lo and behold, rumors of new progress in Europe have sparked interest in buying the recent dip and the markets are sharply higher in early trading. Asian markets were higher overnight and Europe is up strongly this morning.

In Europe, the IMF is working on loan support for Italy. And there is also talk about a new eurozone fiscal pact that would make budget discipline legally binding and enforceable by EU officials. This new amendment to the Lisbon Treaty has been pushed by Germany's finance minister who thinks this initiative would be the best way to calm market fears.

There have also been lots of talk about the strong holiday retails sales that started with Black Friday last weekend. The retail etf (XRT) is up nearly 4.25% so far today, leading the early action.

The energy and materials sectors are also up strongly with commodity prices bouncing. Oil prices are back above $99 and gold prices are up near $1717. Silver and copper prices are up nicely as well. The bounce in the euro is helping the CRB gain 1.5% so far.

The 10-year yield is trying to stay back above the 2.00% level (currently 2.04%); and the VIX is down -7.6% so far to 31.85.

Trading comment: There seems to be a lot of enthusiasm this morning to take advantage of the recent market dip. But there is still a lot of overhead resistance, and given the way the market has traded recently most investors are probably defensively positioned. If the news in Europe is for real, and can gain additional traction, that would be very good for the market. But if things flare up again across the pond, this could easily turn out to be another one-day wonder and disappointment. So I don't want to get too aggressive just yet.

Early Look: Q2 GDP Revised Lower

2011-11-22T07:52:00.000-08:00

The market is under a bit of selling pressure in early trading after briefly bouncing into positive territory. The concerns out of Europe persist, and the failure by the Super Committee to do anything regarding the U.S. deficit hasn't helped sentiment.

Bond yields are slightly higher in Europe as the bond vigilantes continue to pressure those governments. The cost of insurance in the CDS market also continues to rise, not just in Europe but emerging market CDS prices are also moving up.

In economic data, the second revision of Q2 GDP was revised down to 2.0% from an initial estimate of 2.5%. There is not much else in the way of corporate and economic news this morning.

Asian markets were mixed overnight and Europe is actually higher this morning on bargain hunting. Oil prices are up near $98 and gold prices are higher to $1700 after getting hit hard yesterday.

The 10-year yield is flat near 1.96%; and the VIX is down a little to 32.55, fading back below its 50-day average.

Trading comment: With the SPX now below its 50-day average as well as its 200-day, traders will move to an even more defensive posture. The news backdrop is very negative right now, and that should push investor sentiment back towards the bearish side of the ledger. While there are few stocks breaking out here, this could be a good time to go back and look at those stocks that were breaking out after reporting earnings and have now pulled back. When the market does find its footing, those names will likely be the first to start moving higher again.

Monday Morning Musings: All Policy, All The Time

2011-11-21T07:48:00.000-08:00

All policy, all the time. That's how it feels in the markets right now. There is very little moving the market lately from a fundamental standpoint, but very large moves from anything policy related.

Most of the policy decisions have been coming out of Europe with respect to the debt problems facing the region. Today we have more of the same concerns, with Moody's adding some cautious comments about the outlook for France's debt rating.

But the failure of the deficit reduction committee here in the U.S. is also adding an element of uncertainty and disappointment in the markets. Our Congress sure doesn't seem to possess the ability to be able to reach any solutions about our own fiscal problems, and that's not pleasing to investors.

The flight to safety is on, with bond prices rising and pushing the 10-year yield down to 1.95%. The dollar is also higher relative to the euro, which is weighing on commodities. Oil prices are down near $95.75, and even gold prices are lower today to $1702. As for the VIX, it is up another 8% to 34.65, but not above last weeks' highs.

My quote screen is for the most part a sea of red this morning. One of the lone standouts on the upside is VRUS, a former long of ours but one which we sold earlier this year. VRUS is being acquired by GILD for $137, an 85% premium. Congrats if you held any of this.

Trading comment: The S&P 500 has now broken below its 50-day average as the selling pressure intensifies. While we could easily see a bounce this week, volume levels will be very light due to the holiday trading. With the credit indicators still flashing warning signs, I want to remain cautious here and try not to be aggressive. Let the market find some support and build a base from which to launch another trading rally. No need to be a hero, as bases take time to build.

long SH

TGIF - The Song Remains The Same

2011-11-18T08:10:00.000-08:00

The news backdrop is little changed today. Concerns about the sovereign debt issues in Europe have eased just a touch on the comments by new ECB Pres Draghi who urged officials to move to make progress on the bailout plans.

Bond yields in Europe have stopped rising for the moment. Italian yields are at 6.68%, Spain is down a little to 6.43%, and France is also lower near 3.56%. And the euro is also getting another bounce today.

Commodities are mostly higher. The CRB index is up 0.5%; Gold prices are up a bit to $1725; silver and copper prices are also higher; but oil prices have slipped back to $98.50. With the global economy still slowing, it seemed odd that oil could keep up its recent trajectory that took it back above $100.

So far the materials stocks are leading the early action, while tech is lagging for a second day.

The 10-year is hovering right at that psychological 2.00% level; and the VIX which surged above 35 yesterday has pulled back -4% so far back near the 33 level. I have mentioned repeatedly that the VIX remaining stubbornly above the 30 level was indicating volatility would creep back into the market. I think some of the sharp pullbacks we've seen in the last week are prime examples.

Trading comment: It is said in the market that from failed moves come fast moves. I think that applies to yesterday's selloff. After the SPX broke that uptrend line that I have been watching, selling in the market picked up steam and the SPX quickly fell towards its 50-day average. This is a first area to look for support, around the 1205-06 area. Unfortunately, we have more policy decisions that will color the action coming up. The "Super Committee" as its called is supposed to vote on budget cuts and I think very few people if any think that they will actually be proactive in coming up with a proposal that will please the markets. Color me skeptical.

Early Look: Can The U.S. Start To Decouple From Europe

2011-11-17T07:33:00.000-08:00

The market had another down open this morning, but as of this post the Dow is back in positive territory. Asian markets were mixed overnight, while Europe is again lower today.

The latest news out of Europe was a disappointing debt auction in Spain. Spanish yields are up to 6.70%, and French yields are a bit higher near 3.71%. Italian yields have eased a touch to 6.97%. Interestingly, the euro is higher on the day.

But the higher euro isn't helping commodities so far. Oil prices are down to a still high $101; gold prices are lower again near $1745; and silver and copper prices are lower as well.

In economic news, jobless claims came in better than expected at 388,000 for the week. And housing starts for October were also greater than expected at 628,000.

The 10-year yield is hovering right at the 2.00% level; and the VIX bounced to 34 where it touched its overhead 50-day average and has since eased back to 32.90.

Trading comment: The S&P 500 has broken below that uptrend level that I showed yesterday (on my blog) and that has been in place since early October. That usually signals more of a correction in store. But I am beginning to wonder if the U.S. markets have priced in the problems in Europe and can manage to climb the wall of worry a bit more into year end. As such, I want to be a buyer on upcoming dips and position myself for further rallies. Of course, this is predicated on nothing further unraveling in Europe. They still need to figure out how to achieve the proposed leverage for the EFSF that has been talked about.

Chart of the Day: Holding support

2011-11-16T12:50:00.000-08:00

Not sure how well you can make out the chart below (you can click on it to enlarge). It is a snapshot from my trading software. On the right hand side, you can see the purple trendline I have drawn in highlighting the recent uptrend that the market has been holding since early October.

Today's pullback is testing that uptrend line again and needs to hold. If this support is broken, it could mean a larger correction is in store.

The news that took the market down in the last hour was comments by Fitch that the Eurozone contagion poses a threat to U.S. bank ratings. Umm...is this new news?

Early Look: Dour Sentiment Drives Soft Market Open

2011-11-16T07:53:00.000-08:00

The market is lower again in early trading. Yesterday we saw a weak market open that improved as the day wore on. So far, we have already seen a nice bounce since the open, but there is still a lot of time left in today's session.

Asia and European markets were both lower overnight. Italy's bond yields are higher at 7.13%; Spain's yields are up to 6.41%; and France's yields have drifted higher to 3.68%. The euro is also lower so far today.

The lower euro is weighing on most commodities, but oil prices continue to climb. Oil prices have now topped $100 for the first time in 5 months (currently $101.80). Gold prices are lower today near $1763. Silver and copper prices are also lower.

In corporate news, Target (TGT) reported solid results and its stock is higher. Abercrombie (ANF) disappointed and its stocks is getting whacked. While DELL was mixed and its stocks is down slightly.

In economic news, the CPI fell in October by 0.1%. But year-over-year the overall CPI is up +3.5%, which is pretty high. Inflation is funny right now. Wages, rents, housing prices, and tech products are pretty flat in pricing. But food prices, education, and healthcare costs have all continued to rise.

The 10-year yield is flirting with that 2.00% level again, but holding so far at 2.02%. As for the VIX, it is up another 2% near the 32 level.

Trading comment: The pressures in the credit markets and in Europe have not lifted one bit. So it does feel like our markets are being a bit complacent relative to the troubling signals that continue to come out of the region. The SPX is holding above its uptrend line that has been in place since early October, but the trading ranges are narrowing such that traders expect a breakout soon from this narrowing range. The SPX needs to hold the 1240 level on pullbacks, while a breakout above 1265-1270 could spark additional buying and short covering.

Early Look: Data Better Than Consensus Estimates

2011-11-15T07:56:00.000-08:00

Asian markets were lower overnight, and Europe's markets saw heavy selling again. That had our futures pointing lower at the open, but the economic data that has come out has been for the most part better than expected, and that has tempered the selling in our markets.

The Nasdaq has been flirting with positive territory today, as AAPL is finally having a good day (so far). Along with tech stocks, consumer staples (XLP) are bucking the weakness so far as well.

As for the economic data, the Empire Manuf. Survey rose to 0.6 from -8.5 last month. That's a pretty big jump. Retail sales for October rose +0.5% and +0.6% ex-autos. And producer prices actually declined -0.3% in October.

Of course, all eyes remain fixed on Europe where rising bond yields and rising CDS prices point to the sustained pressure on those markets due to sovereign debt concerns. Italy's yields are back above 7.0%, and yesterday we saw CDS prices rising in France. Currently, France's benchmark bond yields 3.63%. So that's one to keep an eye on. I just saw a notable macro firm reiterating their short call on France.

The lower euro is boosting the dollar, but many commodities are higher nonetheless. Oil prices are knocking on the door of $99, while gold prices are up to $1785. Copper is also slightly higher as are silver prices.

The 10-year yield is lower today near 2.00%; and the VIX is up another +2.5% near the 32 level. So for those hoping that volatility will die down here, it doesn't look like that is in the card near-term.

Trading comment: The trading range on the S&P 500 is narrowing, which usually means some sort of breakout is coming in one direction or the other. Given that the Nasdaq has held above its 200-day average, I think the odds slightly favor a breakout in the SPX to the upside in a catch-up move with the Nazz. Predictions are hard these days with the markets being as event driven as they are. It certainly isn't a time for aggressive bets. If the SPX isn't able to hold the 1220-1225 area, I would likely become less constructive and prepare for a deeper pullback. But so far the market has been hanging in there.

long AAPL

Monday Morning Musings

2011-11-14T07:22:00.000-08:00

Not a lot in the way of market moving news this morning. Earnings reports are slowing down to a trickle, and there were no economic reports today moving markets. With that backdrop, attention falls back on Europe as the driver of sentiment.

Although Asian markets were higher overnight, Europe opened lower this morning amid concern about new leadership in Greece in Italy and whether officials will be successful in dealing with the precarious fiscal and financial conditions in the region. Italy was able to hold another bond offering, but yields there are at record highs for the euro era.

The euro is also weak, which is boosting the dollar. That is weighing on commodities with oil prices down to $97.35 and gold prices easing back near $1778.

The 10-year yield is higher this morning near 2.08%. As for the VIX, it is +5.5% higher right now back above the 30 level to 31.70. But it has been consolidating below its 50-day and does appear that it could move to lower levels if the focus could move off of Europe for more than a couple of days.

Trading comment: There are individual stories that are working in terms of stocks. I still feel that there is somewhat of a bid under the market, that will be there on pullbacks. The market has been consolidating its recent runup and I think there is a good chance that it gets resolved to the upside into year end. The ongoing risk of headlines out of Europe is something that is too difficult for anyone to handicap accurately. If things stay the same over there for the time being, investors may look past it for now. But if another shoe drops we know that selling can pick up in a hearbeat, just like it did last Wednesday. Stay nimble.

Get Mental

2011-11-11T08:28:00.000-08:00

A good discussion of market sentiment and investor psychology:

http://www.wallstreetallstars.com/psyche-diary/

Bond Yields In Italy Ease Further

2011-11-11T07:37:00.000-08:00

The market is flying in early trading on a further sigh of relief in Italy. The country's Senate passed a new austerity plan and that is being cheered in their markets. Bond yields in the country have eased back to 6.65% from as high as 7.40% earlier in the week.

This has helped Europe's stock markets rally, and has pushed the euro higher as well. With commodities taking their cue from the euro lately, most are higher on the day. Oil prices have rallied all the way up to $99, while gold prices are also higher near $1777.

In economic news, Consumer Sentiment for November (Univ. of Mich.) rose to 64.2 from 60.9 last month. That's a pretty big jump for consumer sentiment at a time when most media reports would have you believe consumer sentiment can only keep going down.

In corporate news, Disney reported better than expected EPS and its stock is nicely higher.

The S&P 500 was set to have second down week, but if today's rally holds it will end with a gain for the week. Not so for the Nasdaq, which will most likely have a second down week. AAPL continues to lag the market pretty badly which has weighed on the Nazz, but I think it will rally again into year-end.

The bond market is closed for Veteran's Day and yesterday the yield on the 10-year rose to finish at 2.05%.

As for the VIX, it is 9% lower today sitting just below the 30 level that I have been keeping an eye on.

Trading comment: I can't remember a time when the market was more driven by Europe and the euro than it is today. While sentiment in the stock market has improved this week, lots of credit gauges are still flashing caution signs. We are trying to stay balanced in our accounts. In recent weeks we have added to some stocks that have been acting better, but we also still have on some of our inverse etf hedges as the S&P 500 has yet to have a convincing close above its 200-day average for more than a day.

long AAPL, SH

Flight-to-Safety Trade Coming Off

2011-11-10T07:29:00.000-08:00

The markets are higher in early trading, though off of their opening highs. Although Asian markets got clobbered overnight, Europe is higher this morning after a successful bond auction was held in Italy.

Italy held an auction of 12-month bills which was successful although they did carry a yield above 6.0%. The yield on their longer-term notes has fallen back below the 7.0% level, which the market is breathing a small sigh of relief over as well. In Greece, a new PM has been named.

In corporate news, tech bellwether Cisco (CSCO) reported an upside surprise and the stock is nicely higher. But AAPL is lagging and weighing on the Nasdaq, which is underperforming the S&P 500 so far.

In economic news, jobless claims were better than expected falling below the key 400k level to 390,000. The trade deficit also came in lower than expected (which is a boost to GDP).

The euro is bouncing a bit, which is helping some commodities. Oil prices are higher to 96.52, but gold prices are down big back near $1741.

Gold has benefited from the flight-to-safety trade of late. So have Treasury securities, with yields moving back below 2.00% on the 10-year. But today, the flight-to-safety trade is coming off a bit with gold selling off, bonds moving lower, and the dollar under a little pressure as well.

Trading comment: The Nasdaq is heavy today with growth stocks lagging the market. Yesterday's outsized selloff was a surprise to most people, as it was certainly a delayed reaction to the rise in Italy's bond yields and the concerns over European sovereign debt. Bond yields are beginning to rise in France too, so it doesn't look like this episode is about to go away very quickly. The troika needs to step up quick with the bazooka, or markets could grow increasingly spooked. I want to be bullish here, but I can't ignore the gravity of the situation in Europe, so I am keeping things small and balanced for the time being.

long AAPL

Early Look: Delayed Reaction By The Market

2011-11-09T07:41:00.000-08:00

As the S&P 500 closed above the 200-day yesterday, I was speaking to another trader and saying that the market doesn't seem to be overly concerned with the spiking Italian yields. His answer was that the market always has a delayed reaction and then wham! Prescient comments as today it looks like investors can no longer ignore spiking Italian yields.

Bond yields in Italy have surged above 7.40% today, a level many strategists cite as the market indicating dwindling confidence with the ability of leaders to get their arms around the financial conditions in the country. Italy is far bigger than Greece, so this is a different story now.

Asian markets were actually higher overnight as China's latest CPI reading cooled to 5.5% from 6.1% last month. That led to a rally across the board in Asian markets, but the enthusiasm did not spill over into this morning's market.

On the earnings front, disappointing reaction in GM. Also PSMT (the Costco of Latin America). On the positive side is SODA, which is bucking today's weakness.

The dollar is higher as the euro is getting hit. This is weighing on most commodities. Oil prices are down near $96, while gold prices are only off slightly to $1795.

The 10-year yield has plunged back below the 2.0% level, now at 1.96%. And the VIX, after closing nicely below that 30 level yesterday, is surging +15% back to 31.65.

Trading comment: The surge in yields in Italy, and most of Europe in general, is very troubling. Italy is much bigger than the other countries involved, and the EFSF has nowhere near the firepower currently to tackle the problem itself. I have been saying that I felt portfolio managers were in dip buying mode, unless there was another shoe to drop in Europe. I'm not sure yet if this warning sign is big enough to change the equation. We will have to see how the EU officials step up their response to this latest development and if it calms the markets. Until then, continue to manage risk closely and resist the temptation to make any outsized bets.

Italy's PM Hangs On By A Thread

2011-11-08T07:48:00.000-08:00

Funny action in Italy this morning. The European markets were higher this morning on the rumors that Italy's PM might lose his post. When the news came out that he won the vote, the markets sold off. Not much of a vote of confidence for Berlusconi, who lost the majority vote within his party. Italian yields continue to hover near the 6.7% range which is uncomfortable territory for the market.

Our markets are still higher, but not as much as they were in early trading. A handful of earnings reports have continued to roll in, but they are mostly secondary names. One standout was Priceline (PCLN), which topped estimates and gave conservative guidance. The Street is acting like management is lowballing the guidance and has bid the stock up +5% today above $535.

Financials are leading the early action, while consumer discretionary stocks are lagging. Weekly retail sales were positive at +3.1% but that is lower than recent figures.

The dollar is slightly lower, which is helping most commodities. Oil prices are higher near $96, while gold prices are flat right now around $1791.

The 10-year yield is struggling to stay above its 50-day average, and is currently trading at 2.01%. As for the VIX, the battle at 30 continues. The VIX had broken below that level earlier, but has since reversed higher at is just below that key level. I'm keeping an eye on the VIX.

Trading comment: The chart below shows how the S&P 500 rallied right up to its overhead 200-day average this morning. But this is key resistance and it might take a little longer to build up the momentum to break through it convincingly. I expect the SPX to consolidate its recent gains a little more before eventually breaking above this key moving average. I also would expect a close above those levels to attract some additional buying interest and short covering among technicians (which most hedgies are). In the meantime, more growth stocks are acting better. Names we have added to recently include: TSCO, SCSS, and ULTA.

long PCLN, TSCO, SCSS, ULTA

Monday Morning Musings

2011-11-07T07:25:00.000-08:00

The malaise remains the same this morning, with all eyes on Europe while corporate news reports in the U.S. take a back seat to the drama across the pond. Greece's prime minister has stepped down, so now the country has to deal with political restructuring at the same time its financial and economic conditions are in trouble.

There are also rumors now swirling that Italy's prime minister is considering a resignation. All of this helped push Asian markets lower overnight and European bourses in the red this morning.

Commodities are mixed, with copper lower and oil and gold higher. Oil prices have risen to $94.90, which seems odd in the face of all of the economic concern but there are also fears of escalating tensions between Israel and Iran. Gold prices are also higher near $1780.

The 10-year yield is moving back below its 50-day average to 2.03%; and the VIX is still above that 30 level I keep mentioning, up 4% today to 31.45 right now.

Trading comment: It's very difficult to figure out which days the European backdrop will take center stage with investors versus when the market seems to focus more on company fundamentals. Of the two, I think the former is harder to forecast, so I fall back on focusing on those companies that are still growing nicely and executing well despite the lumpy economy. Ultimately share prices should follow earnings growth higher, even as the multiple we pay for those earnings fluctuates with the sentiment yo-yo.

Italian Bond Yields Front And Center

2011-11-04T08:13:00.000-07:00

The market is lower in early trading on some softer economic data as well as continued concerns out of Europe. The Greek PM faces his vote of confidence today, and there has been rumors out of the G20 meeting that members are not all on the same page in terms of IMF resources and potential role in the bailout.

While Greece has been front and center, Italian bond yields have continue to rise, and I believe they are not at the highest levels since the creation of the euro. Italy is a much bigger problem in terms of the size of its debt relative to Greece, so it is normal that this would unnerve the markets. Hopefully the ECB and IMF act quickly. Also, one thing Italy has going for it is that it funds a lot of its debt internally and rising yields may entire domestic buyers.

In economic news, the monthly jobs report showed the economy added 80,000 payrolls. That figure was slightly less than the 85k consensus, but the revisions to both the September and August figures were revised nicely higher with a net +102k jobs added to the prior figures. Also, the unemployment rate ticked lower to 9.0%.

In corporate news, Groupon (GRPN) priced its IPO a little above the expected range at $20. Last I saw it was trading near $27. That's a great first day showing, but I am not too positive on the long-term fundamentals for this company.

Asian markets were higher overnight; the 10-year yield is lower to 2.03%; and the VIX is +5% higher at 32.10.

Trading comment: Tough juncture. I think investors are getting their arms around the European problems and trying to price it in. But the possibility of Italy flaring up would be another shoe to drop. The VIX stubbornly above 30 means that angst is still elevated, and the pu/call ratio has been above 1.0 for a long time now. That said, I still think dips can be bought as a bid should surface under the market for the near-future. I'm watching SPX 1220-1225 to start legging in.

Draghi Starts ECB Off With A Rate Cut

2011-11-03T08:02:00.000-07:00

The market is higher in early trading after a surprise rate cut by the ECB. In Mario Draghi's first ECB meeting after taking over from Trichet, the ECB trimmed rates 25 basis points to 1.25%. This has helped boost European markets, and even boost the euro a bit which is odd when you're cutting interest rates.

Pressure has continued to grow on Greece to abandon its referendum, which it looks likely that they will. But Greece's PM may have lost favor among party members and the vote of confidence later this week could prompt a change in leadership. The situation in Greece remains fluid.

In economic news here, the ISM Services Index came in a little below expectations at 52.9, but still above the 50 level that marks the line between expansion and contraction.

In corporate news, there were a few more earnings reports to trickle in, but there was also the same-store sales reports for retailers today that it driving some big moves in retail stocks. ANF is getting hit pretty hard. On the earnings plus side, see: ANR, QCOM, VRX, ATK. On the downside are K and RIG to highlight a couple.

Commodities are mostly higher again, with oil prices rising to $93.50 and gold prices topping $1765. Judging by the ETFs, copper looks lower today while silver is a tad higher.

The 10-year yield is a touch higher to 2.05%; and despite the gains this morning the VIX has remained stubbornly in positive territory hugging the 33 level.

Trading comment: No real change to my recent comments on the short-term outlook. The SPX still needs to get above its 200-day before real stock chasing begins. That key moving average is currently sitting near 1275. But the market could digest its recent run-up for a bit longer before staging another stab at higher levels. Greece and Europe remain a wildcard, but the longer it drags on the more likely it is that the market has simply priced it in and investors need to look beyond the current scenario. We are in the seasonally strongest part of the year for the market, and I still expect upcoming dips to be bought.

long SLV, VRX

Follow The Bouncing Euro

2011-11-02T08:09:00.000-07:00

The market is getting a nice bounce in early trading after some very heave selling the last 2 days. Although we have had fairly good economic data and continued positive earnings reports, market sentiment continues to be driven by the latest headlines out of Europe.

You can pretty much tell which way the market is going by following the euro itself. Yesterday, the drama about a referendum in Greece unnerved the markets. It looks as of now like the referendum will indeed take place, but the situation is fluid and could change at any time. Go figure. The Greek sideshow is really stealing the spotlight from the real concern, which is rising yields and debt loads in Italy.

We also have the FOMC making its statement later today, and comments from Bernanke. I don't think he'll change his tune all that much. Recent economic data hasn't been that bad. If anything, I think he'll hint at the Fed standing ready to use additional policy tools if conditions deteriorate.

In corporate news, there was a raft of better than expected earnings reports last night and this morning, including: MA, CTSH, JDSU, CLX, CLH, WCG, and CF to name a few.

In economic news, the ADP Employment report came in above expectations at +110,000 payrolls added in October. This report doesn't always correlate to Fridays govt. jobs report, but hopefully it is hinting at a positive report.

The lower dollar is helping commodities. Gold is back near $1750, oil prices are above $93, and copper and silver prices are higher as well.

The 10-year yield is higher to 2.04%; and the VIX is down -6% currently to 32.59. The VIX has broken below its 50-day average, but is still above that key psychological 30 level that traders watch.

Trading comment: The market seems to have these 2-day pullbacks but then buyers step back in. I still think that many folks will be in dip buying mode into year-end, barring another big shoe to drop out of Europe. But earnings reports continue to come in strong, and economic data is not deteriorating at the moment. So that is a backdrop in which stocks should be able to make some headway and more leading growth stocks should start to surface.

long CLX, CTSH

Debt Concerns Flaring Up In Italy

2011-11-01T07:46:00.000-07:00

The market is down sharply again in early trading. After breathing a huge sigh of relief last week after the news of Europe's bailout plan was announced, investors seem to be back in sell mode in Europe after Greece says it may seek a referendum on the recent plan. Also, bond yields in Italy have been spiking higher this week indicating continued concerns about conditions there.

All of the above has led to sharp selling in the European bounces (down 3-4%) which has also spread to U.S. markets this morning. Asian markets were lower overnight as well.

In economic news, the ISM Manufacturing Index for October came in below expectations at 50.8, which is also below last month's reading of 51.6. China's PMI reading was also disappointing at 50.4 (from 51.2).

The euro is lower today while the dollar is higher. This is weighing on commodities, with oil prices down to $91.25 and gold prices testing the $1700 levels (currently $1711).

Treasuries are the only thing rising this morning, with the yield on the 10-year back near that 2.0% level. As for the VIX, it is seeing a huge spike this morning up nearly 16% right now back to 34.50.

Trading comment: While the last 2 days have seen a renewed flare-up in Europe, I don't think the wheels are coming back off that quick. October saw an enormous outized rally, and its normal to see some pullback, even if it is sharper that most would like. That doesn't negate the fact that many PMs remain underinvested and will be back in dip buying mode as we head into the final 2 months of the year. The S&P 500 has fallen back to support levels around 1225-1230, an area that had been acting as resistance during the last few months. Let's see if things can calm down and entice buyers to step up.

Monday Morning Musings

2011-10-31T07:39:00.000-07:00

The market is lower this morning after some reverberations spreading through the market after MF Global has moved into a bankruptcy filing. It looks like the trading firm took on some big sovereign debt risks that ultimately turned out bad. Whenever a financial firm is liquidated it can rattle the market, but this should in no way be compared to what happened to Lehman Bros.

In foreign markets, officials in Japan have intervened in the Yen to try to push the currently lower after its recent runup to multi-decade highs. The lower yen is boosting the dollar and weighing on commodity markets. Oil prices are lower near $92.15 and gold prices are also down to $1725.

Earnings season will begin to slow this week, but it was another good showing for corporate profits. It will be interesting to see how 2012 estimates are adjusted in the coming weeks after forward guidance seems to have come in better than many analysts were bracing for.

The 10-year yield is lower to 2.21% after reaching as high as 2.40% last week; as for the VIX, it is +11% higher right now to 27.25, but still nicely below that 30 level.

Trading comment: After last week's outsized rally, capping off an enormous month for the markets, some profit taking today is not surprising. The chart below shows that the S&P 500 rallied all the way up to its overhead 200-day moving average, which is a natural area of resistance. This should be a battleground in the near-term. I would expect there to be some consolidation around this level for a bit. But if the market is able to get back above it, that would continue to put pressure on investors to put risk back on and chase stocks higher.

Do You Believe The European Solution Will Work?

2011-10-27T07:50:00.000-07:00

The markets are flying this morning on the news that the EU leaders have agreed to a plan to deal with the debt crisis in the region. Although this deal was for the most part well telegraphed by the market, I think there was still some skepticism that the various parties would agree on all of the various pieces.

As it has been announced, the negotiations on the Greek debt agreed on a 50% haircut, the EFSF stability fund is planned to be able to leverage up to $1.4 trillion, and the banks in Europe will be recapitalized. Of course, there is a lot of skepticism as to how the whole thing will actually be implemented and if it will work long-term, but those aren't today's issues.

Financials here in the U.S. are leading the early action, with the sector fully 4% higher, as the concerns about exposure to European banks dissipates. Corporate earnings have continued to come in better than expected, and investment managers seem to be scrambling to cover short positions and add long exposure as performance anxiety sets in.

Additionally, Q3 GDP came in above expectations at +2.5%. That is both well above last quarter's figure and also makes the debate about recession more of a 2012 issue as opposed to the imminent economic collapse some where predicting.

Asian markets were up sharply overnight, and Europe is nicely higher this morning. It is also a good sign to see CDS prices dropping in Europe. The euro is also higher vs. the dollar, which is boosting commodities. Oil prices are all the way up near $93, gold is up a bit to $1727, and silver and copper are rallying nicely as well.

The 10-year yield has broken above its recent trading range and is at 2.29%; as for the VIX, it fell all the way down to the 25 level, and is currently -13% lower on the day to 25.92.

Trading comment: I admit it hurts not having more long exposure during this record rally we have seen since the Oct. 4th lows. I am glad we didn't press our shorts or add to hedges as we felt a bounce was certainly in order after investor sentiment had reached bearish extremes. The question is what to do now? With earnings holding up, the economy slow but steady, and Europe less bad now that plans are in place, I think everyone will be in dip buying mode. I want to look for stocks that reported good earnings and can play catch-up with the averages, as well as looking for new leadership. The SPX is at resistance at its overhead 200-day average near 1275, so I do expect some consolidation in the markets first, but probably not all that much.

Is Recession Being Priced Off The Table?

2011-10-26T08:11:00.000-07:00

The market opened higher this morning, but quickly turned tail and traded into negative territory. Earnings reports have been mostly positive, with a few negative reactions in the associated stocks. And optimism still seems somewhat lofty that EU leaders will emerge from this summit with some concrete solutions.

In economic news, durable goods for September slid 0.8%, but actually rose +1.7% ex-transportation. That's a fairly good number. Also, new home sales for September also rose more than expected by 5.7%. Recent economic data has not been nearly as soft as the market had been expecting, and it seems that a few weeks ago recession was being fully priced into this market but now is definitely coming into question and at least partly explains the lift we have seen in stock prices.

In earnings news, we are seeing positive action in names like PNRA, ESRX, FFIV, and MHS to name a few. Negative reactions include AGN, LMT, F, and of course AMZN which missed its numbers and is taking it on the chin.

We should hear this morning from EU leaders about the details of their summit. The market is expecting something near a 50% haircut on Greek debt, and word that the EFSF bailout fund can be leveraged up somehow to at least $1 trillion. I don't think we are going to get a firm figure on the size of bank recapitalizations. Investors have been saying that the bank recap figure needs to exceed $100 billion. So depending on how much details we get, we will see if sentiment in the market has become too bullish. I would also not be surprised to see them say that more details will be given in November ahead of the G20 meeting.

The euro is higher today at the expense of the dollar. Commodities are mixed. Oil prices are lower near $91.20, while gold prices have broken out over the $1700 level and are currently around $1718.

The 10-year yield is slightly higher to 2.13%; and the VIX is also higher and still stubbornly above that 30 level (currently 32.68). We still need to see this come down.

Trading comment: Tough juncture as we are somewhat held hostage to political decisions out of Europe. But with solid earnings reports coming in, and economic data this isn't as bad as feared, I still feel like underinvested portfolio managers will look to put money to work and buy dips in the near-term. Barring another shoe to drop in Europe, I would look to add to those stocks that recently reported good earnings and are beginning to break out.

long ESRX, MHS, PNRA

Earnings Reactions A Mixed Bag Today

2011-10-25T07:55:00.000-07:00

The market is lower in early trading, which shouldn't be much of a surprise given the outsized rally we have seen since the early October lows. There are reports coming out now that leaders in Europe are having some difficulty agreeing on some components of the proposed plan, and we are supposed to hear tomorrow what they have come up with.

Earnings reports continue to roll in, and the reactions in stocks have been a mixed bag this morning.

On the positive side, stocks that are seeing a bounce include: NUS, NOV, COH, BP, UA, COLM, and ILMN.

On the negative side, stocks dropping on earnings reports include: ITW, X, UPS, DB, TROW, CMI, X, and the poster child NFLX. But the most talked about downside guidance is coming from MMM which expects slower growth in 2012 and talked about specific weakness in Europe.

In economic news, the Consumer Confidence number for October dropped more than expected (no surprise) to 39.8 from 45.4 in the prior month. Also, the Case-Shiller Housing Price Index fell -3.8% in August.

Commodities continue to rally, with oil prices now all the way back to $94, and gold inching higher to $1685.

The 10-year yield has eased back to 2.16%; and the VIX has bounced 5% back above the 30 level to 30.75 currently. This is still an elevated level, and really needs to get back down into the 20s before we can expect a noticeable drop in the big market swings of late.

Trading comment: Investors are certainly feeling better after the last week of up days in the market. I sense that a lot of portfolio managers remain underinvested, and will be looking to add to stocks on a pullback. The wildcard of course is that we are still being held hostage to political decisions coming out of Europe about how they are dealing with this debt crisis. But unless there is another big shoe to drop in Europe, I think the market has pretty much priced in a lot of the issues for the near-term, and a continued unwind of investor pessimism should provide some support to the market.