Doug Kass shares his views every day on RealMoneyPro. Click here for a real-time look at his insights and musings.
Takeaways and Observations
Originally published April 20 at 4:13 p.m. EST
"The modern mind is in complete disarray. Knowledge has stretched itself to the point where neither the world nor our intelligence can find any foot-hold. It is a fact that we are suffering from nihilism." -- Albert Camus
My core theme Thursday and this week is to be opportunistic and flexible in a market without memory from day to day. Stated simply, for now I have materially shortened my investment horizons.
That is not to say I have abandoned longer-term investing. I have not, and I have not made any changes in my long-term longs and shorts. But my modus operandi in the near term is to be moving my net exposure around more aggressively and with greater frequency--that is, "Trade Opportunistically and Trade More Often."
I moved from market neutral, to slightly net long, to small net long and back to market neutral (wth S&P +22 handles)-- in one day. Phew!
And, for a change, I made good buys and maybe even good sales Thursday.
Am I a Clever Man or a Fool?Time will tell.
The Princess Bride poison scene is a metaphor for this market because the unexpected will continue to occur in a market without memory from day to day. And, another lesson (as it relates to the movie) is that it is not a good time to be a smart aleck in terms of an inflexible market view.
I don't see Thursday as a new bull market leg and maybe not even as a trend--just as I didn't extrapolate the recent market weakness.
From my perch, since Thursday-- like Tuesday-Wednesday--was not a trend-making day, I would not chase strength (just as I didn't short weakness).
My sense is that the market's gyrations will make most (like Vizzini) dizzy in the weeks ahead.
I added to my bond short Thursday--I felt Thursday and Wednesday's fixed-income price action may confirm my notion of a "buying climax" in bonds on Tuesday.
The market benefited from some favorable EPS releases-- Foot Locker (FL) - Get Foot Locker, Inc. Report , CSX (CSX) - Get CSX Corporation Report etc.--polls in France and a better leading economic indicator print. As well, the Fear/Greed Index reading had moved way to the left.
Stocks were up from the "get go"--faltering a bit near the end of the trading day.
* The US Dollar weakened.
* The price of crude oil was down fifteen cents after yesterday's -$2 loss. Closed at $50.26.
* Gold fell small.
* Ag commodities got schmeissed: wheat -13, corn -4.50, soybeans -3.50 and oats+3.50.
* Lumber +4.40.
* Bonds fell in price (rose in yield - by 3 bps) for the second day in a row.
* The 2s/10s curve was flat at 104 basis points.
* Municipals got hit and so did closed end muni funds.
* Banks rallied, as did insurance and brokerages. Hartford Financial Services (HIG) - Get Hartford Financial Services Group, Inc. (HIG) Report lagged its brethren.
* Autos got a bid, finally. Still, value traps, imho.
* Retail did well following the good EPS at Foot Locker. Upside in Nordstrom (JWN) - Get Nordstrom, Inc. (JWN) Report , Macy's (M) - Get Macy's Inc Report , Kohl's (KSS) - Get Kohl's Corporation (KSS) Report and Walmart (WMT) - Get Walmart Inc. Report .
* Big pharma was slightly better bid.
* But biotech was essentially flat--a disappointment. Though, Allergan (AGN) +$2 (I added Wednesday).
* Consumer staples were mixed. KimberlyClark (KMB) - Get Kimberly-Clark Corporation (KMB) Report led the downside. CampbellSoup (CPB) - Get Campbell Soup Company Report , down early (and looking like it might be breaking down) recovered in the afternoon to show a gain on the day.
* Media strong.
* Energy stocks were slightly higher despite a lower crude oil price.
* Media was quite strong.
* Optical stocks failed to rally after Wednesday's schmeissing. Be careful out there in this space--as I cautioned Wednesday.
Here are some value added contributions on our site:
1. Back from the Pacific Northwest Jim "El Capitan" Cramer is singing a sweet song after spending quality time with his daughter.
4. Antonia "The Big 'O'" Oprita on the worrisome outlook for French banks.
5. I am solidly in simpatico with Divine Ms M's blueprint for the markets. Rally and then go down.
Position: LONG CPB large HIG large AGN large TWTR large; SHORT DIS small CAT small TLT large .
Trade Opportunistically and Trade Often
Originally published April 20 at 1:10 p.m. EST
The market without memory from day to day--the theme of a series of columns in my Diary this week--continues in place.
My response? Trade opportunistically and often!
With solid leading economic indicators and a healthcare vote coming as early as next week--the key feature, at least to this observer--is the more than five basis point rise in the 10-year US note yield
This supports my notion that we saw a possible buying climax in bonds on Tuesday.
With the 10-year yield now at 2.255% we are close to resistance at 2.27%.
My guess, is if the French election cooperates over the weekend, that figure will be easily breached.
As to stocks, I have gradually moved to a tactical position of being long (in net exposure terms).
So far, so good.
While I am leaning long--it is my full intention to re-establish shorts, but I plan to give this move (abetted by ETFs and price momentum strategies like risk parity and volatility trending) to exaggerate the upside relative to the fundamentals and extended valuations.
Position: Short TLT .
Action Alerts PLUS, which Cramer manages as a charitable trust, has no positions in the stocks mentioned.