All day and every day, some of the stock market's best and
brightest traders and money managers share their ideas, insights,
and analysis in real-time on Minyanville's Buzz & Banter.
Here is a small sampling of this week's activity in the Buzz.
Markets closed in observation of Labor Day.
1660 (50-day and horizontal resistance) and S&P 1675
(downtrend/lower highs) are resistance to the upside if we see a
"gap and go" (if the higher levels hold for the first 30-60 min).
If we "pop and drop," S&P 1640, S&P 1600 and the 200-day at
1560 will come into play through a technical lens.
(NYSEARCA:GLD) has room to $1500 before it collides with the
downtrend (technical resistance). Back-of-the-envelope, I figure
there's $50 worth of Syria angst in the current spot price.
Why? The specter of geopolitical unrest in the Middle East--aside
from it being an unfortunate evolution of social mood--is on the
margin constructive for both gold and crude.
Deflation is the other side of that trade, which makes both risky
investments. See both sides--or should I say, see all sides--as we
edge back into the world's wildest reality show.
Click to enlarge
IWM Train Tracks
There are possible Train Tracks on the 10-minute
iShares Russell 2000 Index
(NYSEARCA:IWM) following this morning's short-term breakout.
See a 10-min IWM chart below.
This week ties to the beginning of the Gann Panic Window counting
from the August 2 S&P 500 high. Of course, that same count was
derailed in early July on the countdown from the May 22 high.
It is worth keeping in mind that on the clock from the August 25,
1987 high to that year's October 14 through October 19 crash, that
early October saw the largest one-day
Dow Jones Industrial Average
(INDEXDJX:DJI) gain to that point in history.
Most players at that time assumed another pullback low had been
Click to enlarge
Negative Real Rates Coming Soon?
I continue to believe that the Fed will either not taper this month
or taper very little to show the market procedurally just how they
would step away from bond buying. Gold and
(NYSEARCA:SLV) may be of the same opinion, given their uptrend and
strong outperformance as of late. As bond yields have spiked in the
face of lackluster inflation expectations, the market automatically
assumed that a postive real rate environment was here to stay,
ignoring the very real underperformance of
(NYSEARCA:XHB) all year, which has not been a vote of confidence
for housing going forward.
With markets wobbly due to Syria, Oil, and Summers (SOS), the Fed
likely will not risk the wealth effect. The yield spike this year
remains a risk that stocks can act to with a lag in a very ugly
way, and it remains to be seen when the after effects may be felt.
That means the Fed probably can't step away that quickly, which in
turn likely keeps the previous metals bid alive. If indeed the
yield spike has been too extreme, a reversal could just as easily
, September 4, 2013
SanDisk Hanging Fire
As I often say, the news breaks with the cycles, not the other way
) ran up to its 50 DMA (on news of a fire at a competitor) before
The news breaks with the moving averages?
Below, see a daily SanDisk chart from June with its 50 DMA.
Click to enlarge
Now, See a 10-min chart of SNDK for today:
Click to enlarge
Friday Payroll Preview
On Friday, the August nonfarm payrolls report will be released. The
current consensus estimate is for a gain of 180K, up from 162K the
prior month. Let's take a look at all of the economic data we've
received this month to get a sense of where NFP might come in.
The current average for the 3 weeks of jobless claims that we've
received this month is 330K. In the week when payrolls are surveyed
(08/15), claims were down to 321K.
This compares to:
- July average: 340.4K vs 162K NFP
- June average: 345.75K vs 188K NFP
- May average: 352.5K vs 176K NFP
- April average: 340K vs 199K NFP
- March average: 355K vs 142K NFP
- February average: 350.5K vs 332K NFP
- January average: 360.2K vs 148K NFP
With the above information on jobless claims compared against this
month's jobless claims, there's no reason not to expect at the very
least an inline report vs the consensus. Let's take a look at other
consumer related info from the month.
- Michigan consumer confidence down to 82.1 from 85.1
- Conference board consumer confidence up to 81.5 from
- ISM manufacturing employment component down to 53.3 from
- Markit US PMI employment component up to 53.1 from 53.0
Beige Book: "For most industries and occupations, hiring held
steady or increased somewhat in most Districts. Hiring in
manufacturing rose modestly." They also note that retail employment
growth was limited.
Given all of the above information, it's reasonable to expect we
see at least an in-line to better-than-expected report on Friday.
The one outlier for me is the subdued growth in retail jobs per the
Beige Book. 90% of the jobs growth this year have been from that
sector, so that is a negative outlier.
The most clarity will be from tomorrow's ADP private payrolls
report and the employment component of the ISM services index,
which have the highest correlation to NFP. In July, ADP rose to
200K vs 162K NFP and ISM services employment fell to 53.2 from
54.7. With the US economy being predominantly service-based, it
usually gives the best tell.
SDS: Pullback Within An Incomplete Recovery Rally?
From my pattern perspective, all of the action in the
ProShares UltraShort S&P500
(NYSEARCA:SDS) off of its Aug 28 high at 39.33, into yesterday's
low at 38.11 -- and so far today, into an intraday low at 38.13--
represents a complex correction of the prior upleg from the Aug 2
low at 35.85 to the Aug 28 high at 39.33.
Key support resides at 38.10 to 38.00, which should contain the
If not, then the SDS should press towards a test of more important
support at the Aug 26 low of 37.37.
In any case, my overall work argues that the Aug 2 to Aug 28
advance is the initial upleg of an incomplete, larger counter-trend
advance that points to a 41.00-42.00 target zone after the current
pullback runs its course.
It is with the foregoing in mind that I remain 50% long on the SDS
from 48.90/95 on Aug 30, looking to add to the position either
against 38.00, or into downside follow-through towards 37.37.
Click to enlarge
Thursday, September 5
"The news is even more positive than the overall numbers imply,
as individual car buyers, not fleet sales, are behind the
-Michelle Krebs, Edmunds.com's senior auto analyst
Michelle went on to write, "And sales incentives of all kinds were
down 3% from July to $2,374, Edmunds.com estimates, though were up
3% from last August. … Even more positive than the overall numbers
imply;" indeed, for GM sales improved by 15%, while Ford and
Chrysler rose by 12%. The biggest winners, however, were some of
the foreign brands (although most of those cars are manufactured in
the US) with luxury model sales at BMW up a stunning ~45%, causing
one savvy seer to remark, "What recession?!" According to Autodata,
the annualized industry sales pace in August puts the 2013 sales
pace at a cool 16.1 million units, which is the highest this year
(and the highest rate since 2007) and portends for further strength
into 2014. Despite such sales' numbers, the average age of a car in
remains at 11 years
, implying demand should continue to be robust. The result is that
auto manufacturing plants are running flat-out, 24/7, and still
don't seem capable of keeping up with the burgeoning demand. I
think that bodes well for a capital equipment cycle to begin that
should give another boost to our economy. And evidently, that's
what the equity markets thought yesterday as the
S&P 500 (SPX/1653.08) gained some 13 points in an attempt to
recapture its 50-day moving average (DMA) at 1663.13. Whether that
happens or not, I don't think the SPX can surmount my long-standing
"pivot point" of 1684 that served us so well on the upside. Verily,
1684 acted like an "attractor" on the downside and now should act
as a repeller on the upside. Further, the NYSE McClellan Oscillator
(see chart) has gone from profoundly oversold to currently neutral,
and the SPX has only been able to modestly rally. This is NOT good!
I have a number of negative stock market convergences into next
week. If those convergences come on the downside, with a "print
low" into my long envisioned 1530 - 1560 zone (near 1530 was last
April's reaction low and 1560 was last June's reaction low), I
think the correction is over and another rally will begin. There
are also a plethora of catalysts for a potential downside
capitulation move from here including a tense G-20 meeting, Syria,
tapering, a dollar dive, sequestration, the debt ceiling/continuing
resolution, Obamacare, IRS gate, Benghazi, Rosengate, Holdergate,
Fast and Furious, GSA scandal, Solyndra, Lisa Jackson, etc. On the
surface yesterday's rally looked good with 78% of the volume coming
in on the upside. But, beneath the surface the Demand indicator
"stunk" (read: few buyers). I remain cautious...
The Last Chance for the Bear Case
I've been relatively silent the last three trading days. I got spun
around twice last week as I would venture to say it was one of the
most difficult weeks to trade in recent memory. When I get spun
around like that, I shut things down and watch for a couple of
reasons. 1) I feel like my thesis is wrong, so I want more data. 2)
My confidence is damaged so I do less
I am a big fan of Paul Tudor Jones, so these two quotes ring out in
"Decrease your trading volume when you are trading poorly;
increase your volume when you are trading well."
"Always maintain your sense of confidence, but keep it in
-Paul Tudor Jones
I am sticking with my plan of staying light underneath the 50-day
moving average. We are tickling that from below this morning, but
we are also hitting the declining trendline from the recent tops.
It seems that most were expecting a waterfall type decline, and
when we only got one day of it, it confused everyone. I am
certainly confused as this would be one of the weirdest bottoms I
have ever seen.
Click to enlarge
I remain 30% long and keeping it light, but I will add on a close
over the 50-day moving average.
) Pullback Nearing Short-Term Support
GLD continued its pullback from secondary resistance today and is
now nearing important short-term uptrend support. Watch the price
action around $131-$132. A sustained break below $130 would
neutralize the setup.
Click to enlarge
Friday, September 6, 2013
Clear & Present Markets: 9/6/2013
1. China continues to move toward more open markets, and it
introduced trading futures contracts on government bonds.
Currencies and interest rates are linked, so this is a significant
step toward a freely floating currency and market driven interest
rates. I am not saying we are at the point yet, when China allows
its currency to float, but the government is putting the proper
infrastructure in place. The question is if the Fed ends QE and
China floats its currency (negating the need to purchase treasuries
to peg the currency), who is left to buy Treasuries? Rates could
move faster than people think, but more important than the level of
rates is the volatility we could see in fixed income markets.
The New York Times
is reporting that the G-20 is expected to enact new tax laws that
limit the ability of multinational corporations to avoid paying
taxes by operating subsidiaries in certain countries. It will be
interesting to see if this agreement to coordinate tax policy ever
becomes more than talk. Tax discrepancies are a major point of
contention in the EU, and the implication is that governments even
aim to curb discrepancies in tax rules at the state level. I don't
know how this is enacted without shifting tax authority to a new
entity, but sovereigns are calling attention to the problems of
oversight related to multinational corporations.
3. Looking over my fundamental screens, I am struck by the number
of consumer discretionary stocks that are down more than 25% this
year in a market up double digits. A few years ago, many analysts
were talking about a "fundamental change" in consumer behavior, and
it appears we continue finding evidence of that shift. Notably, the
number of teen apparel retailers on the "biggest losers" list
indicates that those most "connected" with new technology and less
connected to the traditional retail strategy aimed at their
demographic. Part of the reason I think the luxury segment has
performed better is that their customers are less connected through
technology, resulting in slower disintermediation. I am playing the
sector through specialty retailer
) and discounter
), which engage their customers in a unique manner that limits the
ability of on-line competitors to disrupt the model.
Mood Dictates Price
As I was tying my tie for temple (day two!), I pulled up the chart
below to see if the NFP reaction triggered a breakout through the
down-trend (the 50-day is at S&P 1665). As I was squinting at
pixels, I noticed a one-liner come across my third screen; Russian
President Vladimir Putin, and by extension Russia, is backing Syria
with military force.
Click to enlarge
Coincidence? Perhaps, but as Peter Atwater has been drilling into
our heads for the last few years, it's not necessarily "if-then."
The "other side" of the stateside policy -- printing money to
purchase toxic debt -- has been
manifesting via social mood for some time
this article is also relevant
The rest of the world is none-too-pleased with the USA; now,
seemingly, they have a channel to vent it.
(last week lows) is a level to monitor if and when, and the banks
(along with high beta) will help tell the tale.
Oil and the Drums of War
It's Friday afternoon and the drums of war are beating a bit louder
now that Putin literally dared the US to step into the ring. Is he
misreading Obama, or actually wants war?
(crude futures) are back above 110; a close above that level could
usher in a run to 122.86, 78.6% 2008. That market is taking war
talk a lot more seriously than equity fund managers chasing
bonuses. I do not need to remind readers that oil above 110
preceded 10% and 20% corrections in equities in 2011 and 2012.
Click to enlarge
Trade with caution into the weekend.