I have heard that a lot lately. And Treasury Bonds are looking weak. The daily chart of the Treasury Bond ETF ( TLT) is showing a break of a support area from 117.50 to 118.50 with Tuesday's closing price. Price levels not seen since May 2012. And all of the Simple moving Averages (SMA) are pointing lower. In fact there was a Death Cross on Friday. Ominous right? The next gap area
Did some surfing of the financial blogosphere along with quite a few mainstream financial publications yesterday and the social mood has made a massive 180 from where it was even 30 days ago. One thing about markets is the humans left (ex machines) never change. After a stellar January everyone is pointing to the bright skies ahead as Europe is contained, China has accelerated and the U.S. surges to... well 2%-2.5% growth. Heck even bond yields are going up -- granted to areas once considered recessionary and would be associated with a calamity. Awesome move right? Almost back to 2% on the 10 year...
Given that markets have been ripping higher, we thought it a prudent time to check in with market strategist Jeff Saut. His latest investment outlook is entitled "For All the Sad Words of Tongue and Pen" where he looks at how market rallies can last longer than one would think.He highlights how at around the 18th day of a typical 17-25 day buying stampede, certain investors will start to question whether or not they've missed "the bottom." This then leads to a new round of buying from people who don't want to miss the big move, and thus the rally extends. So when might this rally cease? Saut mentions rallies can typically last up to 30 sessions while today is session 18. He points out some of the cautious signals he is seeing: "The S&P 500 (SPX/1502.96) remains overbought with 92.6% of its stocks above their respective 50-day moving averages (DMAs), as well the NYSE McClellan Oscillator is still overbought in the short-term. However, the stock markets can remain overbought for longer than most think in a bull move. Further, the Volatility Index (VIX/12.89) is not confirming the renewed stock strength and some of the hitherto leading stocks are not acting well."
"Most investors want to do today what they should have done yesterday." - Larry SummersIn the CWS Market Review from two months ago, I wrote: "But with the election behind us, the clouds have cleared, and I see a strong year-end rally ahead of us. In fact, I think the S&P 500 can break 1,500 by the early part of 2013." Well, it took the index just 24 days into 2013 to vindicate our prediction. On Thursday, the S&P 500 indeed broke through the 1,500 barrier for the first time since December 12, 2007. The index has now risen for seven days in a row, which is its longest winning streak since 2006. The Dow is off to its best start in more than a quarter of a century.
Springsteen had it about right.This morning, Apple (AAPL) is gapping down to multi-year lows, headed solidly into Jeff Gundlach's target territory in the low $400s, it would seem. It's one of the most widely held stocks in the world, by individuals and pros, and had briefly become the largest stock by market value as well. Selling the stock had become something of a heresy by early 2012 and those who were not at least equal-weight the name were condemned, by basic arithmetic, to under-performance purgatory. But nothing lasts forever. Apple had never been a recommendation of ours, but we've liked the stock (and certainly the company). We've got some clients who had transferred in Apple shares from elsewhere, with cost averages all over the map. Last October, we trimmed those AAPL positions by a third to a half, owing to the technical breakdown below $600. But the rest of it we were compelled to keep for the much longer term. The way the stock's being treated of late, I find myself pining for a time machine. ... While the business of Apple is in great shape and the company remains incredibly healthy, the stock itself is in the throes of a major event -- the realization that nothing lasts forever. This blog has always been about taking lessons from both good and bad market events. For those who got Apple right toward the top and were short, this is a great validation of a very contrarian call. For those who've held on to the stock or bought any of the false bottoms in the $500s and $600s, this is a tough day but one in which several things can be learned. Here are what I believe to be the seven most important lessons: 1. A fairly minor change in fundamentals for a company can occur subtly, but have a major impact on share price. In this case, Apple's growth rate. The company did not slam on the brakes, nor did its customers, and has not hit The Street with a jaw-dropping susprise loss or anything like that. (See Rolfe Winkler at the WSJ for the actual growth numbers this quarter.) But this growth rate was unimpressive relative to expectations, and expectations are everything in the short term. 2. There is no King of All Stocks -- we merely elect a temporary king, who then serves an indeterminate term at the top. Sooner or later, he is deposed -- and frequently beheaded. For a great corollary, please see the charts below from Justin and Paul at Bespoke comparing the rise and fall of Apple to the rise and fall of Microsoft (MSFT).
This past weekend in my Macro Week in Review/Preview for clients I noted that for the second week in a row the markets looked bullish but with the Nasdaq 100 ( QQQ) lagging the S&P 500 ( SPY), and Russell 2000 ( IWM). In fact it is also lagging the Dow 30 ( DIA) and Dow Transports ( TRAN). If you take a look at the performance chart below since January 2nd the Nasdaq has been moving sideways while every other index has been rising. There is no rule that says that this
The monthly chart of Las Vegas Sands is one that i have referred to periodically in this blog over the years. The jaw-dropping crash from roughly $150 down to a $1 handle during the 2007-2009 bear market had many thinking the major casino operator was on the brink of going out of business. However, a sharp snapback off the March 2009 lows put those fears on the backburner.Over the next few years, we saw a textbook psychologically progression after a crash and subsequent snapback -- a flattening out period where each bit of bad news was absorbed increasingly better. As a result, Sands is still holding the lion's share of its bear market bottom snapback rally. Plowing through $60 is sure to get bulls increasingly giddy for a multi-year base breakout. Earnings are coming up soon, but as long as $36 holds the double-dip Vegas bears are caught in a rundown here regardless.
After a spectacular 2012, the biotechs as a whole are holding up rather well in the first few weeks of 2013. However, as a bull run matures we inevitably seen leadership narrow and rotations emerge. Two of the larger components of the biotech sector, AMGN and REGN, have flashed some blinking yellow lights over the past few weeks. Note the uptick in selling volume accompanying each recent sell-off. Amgen bulls likely need to hold $83 to avoid confirming a nasty head and shoulders topping pattern, while you can bet Regeneron bears are playing for a breakdown below $164.Make no mistake, there are other biotechs exuding resiliency here. However, there are indeed two sides to every rotation.
After the twin good news items today premarket there was a stinker at 10 AM in the Philly Fed. The S&P 500 came in but only very briefly and did not even fill the morning gap up. So all in all, we can say today the good news was embraced and the bad news ignored. That's a bullish sign near term. Also after the first hour the gap up is holding, a good technical sign. The longer the morning gap up holds, the better the bull case for today. As for the daily picture we finally see a clearance of that mid 1470s area which has been a headache aka Sep 2012 intraday highs. All this quicksand action has also helped work off the overbought conditions the market has been dealing with since the big gap up Jan 2. Here is an update on the channel the SPX has been traveling since mid November (with the exception of the massive headfake down late December) If you are a Tom DeMark fan the top end of the channel is roughly where he said this move would end.
We learned recently from Yum Brands, YUM, that the Chinese are not eating enough Kentucky Fried Chicken and the stock took a nose dive. Many thought that fast food was the problem broadly. But I recall a wise man once saying, I'll gladly pay you Tuesday for a hamburger today. That man, Whimpie of Popeye fame, must have been buying the hamburger stocks with his money as he was asking his friends for a handout. For now it is Tuesday and a look at the charts of the burger joints shows they have had some great moves and look ready for more. Smart man that Whimpie.Burger King Worldwide, BKW