Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings.
Originally published March 7 at 2:36 p.m. EST
- Nice move off of the lows for Allergan (AGN) - Get Allergan plc Report . (More than +$3 for the homegamers!)
- My Generational Bottom in Bond Yields (last July) looks very much intact. Two basis points higher in yield Tuesday
- Today's three-year US note auction was soft. This is not surprising as historically it is quite sensitive to expectations of Fed policy. At 1.63% yield, it was above the when-issued market, the bid to cover (2.74) was below the one year average of 2.80 and dealers got stuck with 42% of the auction (vs. 12-month average of 39%). The yield is the highest in seven years.
- Let's begin to focus on high yield bonds--the space is starting to lose steam. (If you are in Blackstone/GSO Strategic Credit Fund (BGB) - Get Blackstone / GSO Strategic Credit Fund Report , reconsider the position).
- Let's also keep an eye on the S&P (cash)undefined level of 2363. That's last Tuesday's close, the day before the President's speech to Congress that everyone got excited about ... but then, arguably, has been diluted by weekend and weekday tweets. The Russell 2000 RUX and the Transportation Indices have already given back that rally. The DJIA (DIA) - Get SPDR Dow Jones Industrial Average ETF Trust Report is still 115 points above and the NasdaqI:IXIC is 23 points above that level.
- Again, the market "action" seems to be different than over the past two months.
- Gold continues its schmeissing, for the sixth day in a row (and since we sold SPDR Gold Trust (GLD) - Get SPDR Gold Trust Report above $119). Phew! But I would note, leveraged junior gold mining ETFs [Dx Dl Jr Gld Min 3X (JNUG) - Get Direxion Daily Junior Gold Miners Index Bull 3X Shares Report and [Market Vectors Junior Gold Miners ETF (GDXJ) - Get VanEck Vectors Junior Gold Miners ETF Report are holding up--so I wouldn't be surprised if a reversal (higher) is imminent. GLD is within $1 of my correction target!
- Broad based decline in agricultural commodities today--me no likey. And I would continue to avoid fertilizers--they're crap (and the commodity price recovery is far away)
- Retail stocks? Fuhgettaboutit! Non playable.
- President Trump put a smackdown on pharma and biotech Tuesday morning. Gilead Sciences (GILD) - Get Gilead Sciences, Inc. (GILD) Report is still a value trap.
- Share price action in VRX, CMG--seem to be exclamation points to the notion of "Peak Ackman."
- FANG battling--but my guess they are ready to be defanged.
- SNAP's (SNAP) - Get Snap, Inc. Class A Report 10% drop is causing collateral damage to Twitter (TWTR) - Get Twitter, Inc. Report --and I am adding more aggressively.
- Next week, "Three Steps and a Stumble?"
- I have added to ProShares Trust UltraPro Short QQQ ETF (SQQQ) - Get ProShares UltraPro Short QQQ Report and ProShares UltraShort S&P500 (SDS) - Get ProShares UltraShort S&P500 Report Tuesday--further raising my net short exposure back up.
Position: Long SDS SQQQ AGN TWTR; Short SPY QQQ .
Takeaways and Observations
Originally published March 6 at 5:00 p.m. EST
Perhaps we can make a parallel between the S&P Index and Snap SNAP. Today SNAP just fell (by nearly 15%), maybe the S&P will follow! Hey, a guy can hope.
Remember, risk happens fast.
I have done a good job in depicting the possible SNAP price action after the IPO last week. I thought shares would soar out of the box, moving into the high $20s. At $29, late last week, I wrote to sell, Mortimer. SNAP closed down $3.54 to $23.77. Here is why I would avoid SNAP and here is why I would (and have!) purchase Twitter (TWTR) - Get Twitter, Inc. Report (it's my "Trade of the Week").
So far so good on the gold call. And there is a lesson in leveraged ETFs here!
By the way, the price of gold declined for the fifth day in a row--for the first time since late November.
Financials, uncharacteristically, declined in the face of lower bond prices and higher yields. It might be the most crowded trade. Avoid the crowd now. I am net short the sector.
Despite a $1 billion buy program on the close, the market uncharacteristically declined in the last few minutes. S&P lost three to four handles near the close instead of rising three or four (or more) handles!
* The dollar strengthened.
* The price of crude oil dropped by a dime.
* Gold gave up a small amount.
* Ag commodities: wheat +6, corn -2, soybeans flat and oats +10 (that's a big move).
* Lumber +$1.40
* Bonds continue to fall--as yields rose by about two basis points.
* Municipals and high-yield markets traded lower, too. Closed-end muni bond funds were mixed and GSO Strategic Credit Fund (BGB) - Get Blackstone / GSO Strategic Credit Fund Report +$0.05 (I would be selling this ETF).
* Banks hit with profit-taking.
* Life insurance conspicuously weak, again. Hartford Financial (HIG) - Get Hartford Financial Services Group, Inc. (HIG) Report almost bucked the sector's weakness. I took off some of my Lincoln National (LNC) - Get Lincoln National Corporation (LNC) Report short, as I got too large.
* Brokerages lower, but not by that much.
* Autos suffered, despite the good news on the sale of European operations (GM). I am substantially in the peak autos pew. Incentives are high and rising, dealer inventory/sales in dangerous ground, auto paper delinquency rates eroding post haste. I expect second half EPS for OEMs to be guided lower.
* Old tech showed little price change.
* Ag equipment was flat.
* Media was mixed, with Disney (DIS) - Get Walt Disney Company Report weakening (though a lot of technical support being voiced). I don't like the fundamentals and the news on ESPN layoffs.
* Transports gained with CSX (CSX) - Get CSX Corporation Report and Union Pacific (UNP) - Get Union Pacific Corporation Report higher.
* Retail was horrific--I would continue to avoid the entire sector, which faces regulatory and macroeconomic headwinds. On top of that, the channel changes are accelerating. Target (TGT) - Get Target Corporation Report , Macy's (M) - Get Macy's Inc Report , Nordstrom (JWN) - Get Nordstrom, Inc. (JWN) Report and J.C. Penney (JCP) - Get J. C. Penney Company, Inc. Report downside features.
* Big pharma was mixed.
* Energy mixed also.
* Consumer staples down on our strengthening currency.
* Biotech was sold (-1%). Allergan (AGN) - Get Allergan plc Report and Gilead (GILD) - Get Gilead Sciences, Inc. (GILD) Report downside leaders. Speculative biotech continues to trade poorly.
* (T)FANG showed very little price movement with Netflix (NFLX) - Get Netflix, Inc. (NFLX) Report up on a research call but Amazon (AMZN) - Get Amazon.com, Inc. Report and Alphabet (GOOGL) - Get Alphabet Inc. Class A Report slighty lower.
* In individual stocks, Starbucks ( (SBUX) - Get Starbucks Corporation Report continues to underperform (I have been adding on the short side), Apple (AAPL) - Get Apple Inc. (AAPL) Report lower (but well off the lows of the day), DuPont (DD) - Get DuPont de Nemours, Inc. Report up small on a sell-side upgrade (I am a sub-$75 buyer after having recently reduced my long position further).
Here are some value-added contributions on our site:
Jim "El Capitan" Cramer on the state of the market. Though I respectfully disagree with his statement that there is a lot of skepticism. When I look at the CNN Fear/Greed, the inflows into bullish ETFs and the strength and optimism in the investor surveys--I see it differently.
Bob Lang likes fangs.
Rev Shark on afternoon delights.
Guy "From" Ortmann on bullish and bearish reversals. Where's Mindy (McConnell)? (Did you know Pam Dawber, a.k.a. Mindy, is married to Mark Harmon?
Martin Baccardax on Deutsche Bank .
Position: Long CPB large, TWTR, SDS, SQQQ, DD small, AGN, HIG large; short SBUX, DIS small, AAPL small, CAT, L .
Action Alerts PLUS, which Cramer manages as a charitable trust, is long AGN, AAPL, GOOGL and SBUX.