Mid-day Market & Model Update
Wednesday, February 22, 2012
Stocks are down a smidge this morning as traders attempt to weigh a handful of factors. First there is the Flash PMI data (note that the Flash reports are preliminary and do not include all the final report components) from both China and the Eurozone. The reports came in below consensus and also below the all-important 50-line, which is the demarcation line between expansion and contraction. Next, there is the solid existing home sales data here at home. And finally, there is the battle between our two teams for the seemingly magical Dow 13,000 level.
Given the overbought nature of the market and the fact that sentiment indicators are reaching extreme levels, it wasn’t surprising to see the first attempt to blow through important resistance zones fail. However, given that the bulls have been large and in charge lately, we wouldn’t be surprised to see our heroes in horns mount another attempt soon.
Read more...Tuesday, February 21, 2012
With the current Greece bailout deal (the second in what is likely to be a long series of bailout loan deals) finally done, stocks appear to be celebrating the idea that neither a “Lehman moment” or a “messy default” is likely to occur in the near term.
Although the bears are adamant that stocks have to pull back and that the indices simply can’t go any higher, I can say from experience that the type of move we’re seeing now tend to (a) defy logic and (b) go farther than most people think possible. And while the bears could certainly produce a pullback for any number of reasons in the near-term, the bottom line is the trend is your friend right now.
Read more...Weekly Model Reading
Stocks finished higher for the ninth time in the last twelve weeks as the steady march higher that began in mid-December shows no signs of letting up. From a big picture standpoint, it appears that the improving sentiment toward the bailout deal for Greece as well as another round of better-than expected U.S. economic data provided the fuel the bulls needed to propel the major indices to multi-year highs.
Moving on to this week’s reading of the Weekly Timing Model...
Read more...Friday, February 17, 2012
Stocks are mixed so far this morning as the S&P has pulled back to around the breakeven level on news out of Greece (the IMF is saying it may want to pull back on their commitment to the Greek bailout package) while the Dow is up and the NASDAQ is down on some key biotech earnings that missed the mark.
But with the S&P and NASDAQ breaking to new cycle highs yesterday, the bulls have some room to work here. And given that the Greece deal is set to be either done or not done while our market is closed on Monday, some selling today to avoid headline risk makes sense.
Read more...Thursday, February 16, 2012
Stocks are moving a bit higher this morning as the U.S. data (Philly Fed, Jobless Claims, and Housing Starts/Building Permits were all better than expected) appears to be trumping the global macro fears (Moody’s says it is ready to downgrade everything that isn’t nailed down and there is still some uncertainty over the bailout in Greece).
The bottom line is that stocks are now in the midst of a consolidation phase. And so far at least, the action gives us no reason to believe that the consolidation won’t be resolved to the upside. Remember, the textbooks tell us that markets tend to exit a sideways consolidation phase in the same direction the market was heading prior to entering the range.
Read more...Wednesday, February 15, 2012
Stocks are struggling with conflicting headlines this morning. Initially it was positive that a central bank governor in China reiterated that the Chinese remain committed to supporting the Eurozone and that they would do more if the Europeans would provide the proper incentive. However, the reports that Eurozone Finance Ministers are considering delaying approval of the Greek bailout package until after the April elections in Greece caused traders to pull in the reins.
The bottom line is that stocks appear to be consolidating the recent gains during this options-expiration week. So, some volatility back and forth is to be expected.
Read more...Tuesday, February 14, 2012
Traders appear to be struggling this morning with a heapin’ helping of data from both here at home (NFIB Small Business Optimism Index was positive, Retail Sales was a negative, and the report on Business Inventories was neutral) and from across the pond (the downgrade from Moody’s, the surge in German ZEW Confidence, the weak Eurozone Industrial Production, and the positive auctions in Italy and Spain).
The end result is it looks like the same pattern we’ve been seeing lately: a decline at the open which, so far at least, has been followed by a steady stream of dip buying.
Read more...Monday, February 13, 2012
Although Greece’s parliament did pass the austerity measures on Sunday, the fact that the leading candidate for the upcoming PM election (in April) is saying publicly he wants to renegotiate the deal. This is not going to sit well with Germany and the IMF, so… we’re back to uncertainty about Greece – yippee.
In addition, there are reports out of China that Premiere Wen Jiabao will start to ‘fine tune’ the economy in the first quarter. In English, this means that the Chinese are (a) admitting that growth is slowing and (b) ready to start doing something about it.
Read more...Weekly Model Reading
Stocks finished lower for only the second time in the last eight weeks as uncertainty surrounding Greece’s bailout returned to center stage on Friday. However, after the relentless rise stocks have enjoyed this year, a pullback shouldn’t have surprised anyone.
The question of course, is if Friday’s decline was simply a case of traders not wanting exposure to weekend headline risk or the start of something more meaningful. Stocks are overbought, sentiment has started to reach extreme levels, and there is important resistance in this area on the charts of the S&P 500. As such, some additional selling to test support levels would seem to be logical.
Read more...Friday, February 10, 2012
Is anybody besides me tired of hearing about Greece? It is just incredible to me that we have yet another weekend of headline risk due to the new demands and deadline imposed by the Eurozone’s finance ministers. But as they say, you have to play the hand you’ve been dealt and not the one you want.
The bottom line is the current rally, which, despite this morning’s selling remains intact, has become extended and is due for some sort of a pullback – or at least a period of backing and filling. Thus, it is little surprise that the Eurozone has once again provided the impetus for just such a bout of profit taking.
Read more...