Global equity markets have a slightly positive tone to start the week. This is a little surprising in light of Germany’s ruling party being dealt a political setback, and the uncertainty in Japan. Important USDA report due out this week which will influence the grain markets. Rebels in Libya are attempting to negotiate the sale of some oil.
Tag Archives: Equities
Equities: Bulls Have the Early Edge; Overbought?
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Global equity markets are higher to start this morning, helped by favorable corporate earnings and a net positive result in global economic data overnight that overshadowed tensions in Egypt. The improving economic data trend was complimented by Germany’s Unemployment Rate that reached the lowest level in 19 years, with a January reading of 7.4%. The favorable data seemed to bolster hopes of a further rebound in consumer spending ahead and that helped to lift shares of the DAX. While Euro zone unemployment also ticked lower in January, it remained at elevated levels of 10.0%. UK Manufacturing PMI data surged in January at the fastest clip on record and that was accompanied with a boost in factory input prices, which is likely to put more pressure on the Bank of England to boost short-term interest rates. Meanwhile, China’s January PMI reached a new five-month low on reduced factory output and higher input prices that are being passed on down to consumers. A global bank report earlier this morning estimated that Chinese inflation would average around 5% during 2011. The net result appears to be ideas that recent tightening measures have begun to restrain growth, but that does not appear to be a limiting factor this morning. Egypt unrest could expand However, the Egyptian military has agreed to avoid heavy handed action with the protestors and that could be a sign of compromise. US economic data today includes January Vehicle Sales data that is expected to decline from December’s pace, December Construction Spending that is expected to be flat on the month and January Manufacturing PMI. Earnings this morning in the US include Pfizer, which is expected to show cost-cutting, ADM and United Parcel Service after the close.
S&P 500: The March S&P 500 continued to extend gains from Monday’s positive reversal and it has worked its way back toward last week’s high of 1299.50. While BP reported earnings this morning that fell short of expectations, they did reinstitute their quarterly dividend, which seemed to limit the downside action this morning. It is also possible that the S&P 500 has factored in positive results from UPS this afternoon, that are expected to report a 40% increase in quarterly profits, supported by a jump in consumer spending. These results are also expected to be watched closely, as an economic indicator as the company represents freight transports to the tune of 6.0% of US GDP. Near term targeting for the S&P 500 comes in at 1292.00.
DOW: The March E-mini Dow Jones Index is off to a positive start this morning and sits under 100 points away from new contract highs. It appeared that blow out earnings from ExxonMobil during the previous session that showed a surge in quarterly profits of over 50% served to bolster the index higher. While there was disappointing news from Intel Monday, that highlighted a design error with one of their chips that news seems to be at least partially countervailed by positive tech news elsewhere. Looking ahead, the market will be on the watch for results from Pfizer this morning that are expected to reveal a boost in bottom line results after recent cost cutting measures. Next upside targeting for the March E-mini Dow comes in at 11,920.
NASDAQ: Shares of the March NASDAQ are also higher to start this morning and appeared to be drafting off of positive tech earnings earlier from Infineon. The company raised their full-year outlook and anticipates stronger industrial demand ahead. Perhaps the NASDAQ drafted some support from strong earnings data from Baidu after yesterday’s close, that sent its shares nearly 8% higher in overnight action. This should be supportive for the tech sector as it has large fund interest and represents the key player within the Chinese Internet market. The March NASDAQ has a key upside pivot level at 2300.00 that is likely to challenge the bulls resolve this morning.
TODAY’S MARKET IDEAS: US equity markets continue to build on Monday’s bullish reversal and seemed to embrace net positive economic data this morning and somewhat favorable corporate results. The major US indices have rebounded from Friday’s downdraft and have now worked their way back toward last week’s high area, which should provide a key test for the bull camp today. While both economic and corporate data continue to foster higher pricing, there remains concern that the market has become overbought, with over 80% of the S&P 500 trading above their 200 day moving average. The last time this happened was during April of 2010 that led to a 10% plus correction. The bulls have the early edge with key challenge area at 1292.00 for the S&P 500 and 11,920 for the March E-mini Dow.
Stock Market Commentary – 2010.12.30
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Global equity markets experienced a mixed trade overnight that turned fractionally lower during European hours. The Japanese Nikkei index ended the final trading day of 2010 with a negative performance with export companies feeling the pinch of a rising Japanese Yen. Strong export growth seemed to be a key factor behind this morning’s action from Taiwan to hike their short term interest rates to help temper growth. While Chinese manufacturing activity showed signs of moderating in a report overnight, it does suggest that the PBOC is likely to stick to its gradual attack on inflation. Copper and other precious metals established new contract highs overnight, and that suggests that world demand remains unaffected by the latest attempts by China and Taiwan to hike rates to rein in inflation. Chinese officials responded to their decision to reduce export quotas of rare-earth minerals saying that they meet with World Trade Organization rules which provided a little retracement in related shares after strong upside Wednesday. There is a heavy slate of US economic data this morning with weekly jobless claims expected to post a slight decrease and that could be the focal point of the early trade.
S&P 500: More positive signs for the 2010 holiday shopping season lends support to the March S&P 500 to start this morning. Early reports this morning showed that 2010 online shopping reached a new record high this season, and that could provide further support to the retail sector, while also bolstering the case for improving growth in 2011. Positive action within the retail sector during Wednesday’s session was seen as contributing factor behind the index’s push to new contract highs. The next upside in the March S&P comes in at 1260.00.
DOW: The March E-mini Dow reached new contract highs during yesterday’s session supported by solid gains within energy related companies and optimistic growth outlooks for 2011. Meanwhile, there could be some concern during this morning’s trade after an early morning report showed global air freight in November backed off from October’s brisk pace, and that could be taken as a sign that global growth may be showing signs of leveling off. Near term upside targeting for the March E-mini Dow comes in at 11,574 in the day ahead.
NASDAQ: The March NASDAQ comes into today’s session fractionally higher after a narrow inside day trade Wednesday. Some traders have expressed concern with the index’s inability to establish new highs for the move, and that might be taken as a sign of weakness within the small to mid cap stocks. There is upside resistance above at 2236.75, then at last week’s highs of 2239.00.
TODAY’S MARKET IDEAS: US equity markets continue on their path of higher highs and higher lows in the face of a number of overextended sentiment readings. While the bears look to the advance decline ratio reaching the highest level in 10-years and short interest in the S&P 500 at the lowest level in four years, the bulls have embraced positive holiday shopping and sales expectations for more economic expansion in 2011. It may take a positive sweep with this morning’s flow of economic data to continue to fuel the drive higher.
Stock Market Commentary – 2010.10.29
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From the reversal Thursday morning, the market seems to have lost its bullish buzz. Even more surprising is the fact that some in the Treasury markets have renewed their expectations for an aggressive easing move from the Fed and yet that hasn’t seemed to benefit securities much over the last 18 hours of trade. It is also possible that equities are balancing books ahead of the series of volatility events next week. Some suggest that the better than expected US claims figures yesterday served to lower the expectation of aggressive easing and that would suggest that good economic readings are currently being viewed as negative by the equity markets. On the other hand, disappointing earnings from a key US cyclical consumer products company also seemed to dampen the expectations for growth ahead, especially since that company (3M) offered somewhat disappointing forward guidance. At least from the early action today, the bear camp seems to have an edge but a series of drug sector earnings today, could become the focal point of the trade.
S&P 500: The December S&P in the early Friday morning trade has according to some, forged some partially negative technical action on the charts. To this morning’s early low, from this week’s high, the December S&P was down by as much as 21 points. After the slide yesterday in the wake of decent US claims readings, some players are wondering it positive economic readings have become a negative influence to the market because those type of numbers are thought to be discouraging the Fed from taking aggressive action. There might be little in the way of definitive support in the December S&P until the market falls back to the consolidation low zone around 1167.80.
DOW: The December Mini Dow in the early Friday action has already fallen below the Thursday lows and that has given the bear camp some initial confidence. Surprisingly the market wasn’t lifted by the return of hopes for a more aggressive Fed and it also doesn’t seem as if the markets in general are getting much of a lift from renewed buy out news in the drug/medical sector. In fact, despite favorable earnings from Potash, that bellwether stock has declined because of ideas that the price for the buyout might slide. Therefore, the market seems to be in need of a supportive theme this morning and into the Friday morning US trade that theme isn’t apparent. A return to this week’s lows could be in the cards unless a gain in GDP quarter over quarter is seen as a positive by the market.
NASDAQ: The Nasdaq has managed to hold up relatively better than other sectors of the market over the last 18 hours of trade, perhaps because of favorable news from Microsoft and perhaps because of lingering optimism toward the tech sector in general. In fact, the Microsoft earnings jumped very sharply over the prior quarter and that in turn led to speculation that Microsoft was poised to take some market share from Apple. In short, it would seem like the Nasdaq is generally trying to buck the negative bias from the broad market early today. The December Nasdaq in the early Friday trade has come down to an uptrend channel support line that has generally been respected since late August. That up trend channel support line is seen at 2118.00 and that would seem to leave the reaction to the GDP report this morning as some form of key pivot point.
TODAY’S MARKET IDEAS: The bear camp has a slight edge this morning, as the earnings window seems to have lost its capacity to lift prices. It also seems as if some renewed aggressive Fed easing speculation is being lost on the equity markets. With the market also not responding positively to favorable Microsoft earnings and instead reacting negatively to news from 3M, one gets the feeling that the market is in a mood to embrace the negatives. However, we don’t get the sense that the market is poised to ratchet up anxiety aggressive and in turn pound prices sharply. An ongoing measure of profit taking looks to be ahead and that could send many market measures down to consolidation support, which equates to 1167 in the December S&P, 2116 in the December Nasdaq and at 10,970 in the December Mini Dow.
Stock Market Commentary – 2010.04.28
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The stock market is still facing a number of big picture negatives and because of those negatives, signs of recovery, favorable earnings and even the promise of low rates for an extended period of time won’t be given much credence. In other words, the bears have a “cause” and the positives will likely be discounted, or ignored in the short term. Nothing of significant seems to have changed overnight with the EU seemingly set to let events take their own course and that could result in the next country coming under attack. Favorable confidence readings and the first year over year house price rise in years from a private survey was totally lost in the Euro shuffle. With the added negative sentiment flowing from heated and hateful Congressional testimony, the bear camp clearly has an environment to their favor. Ordinarily we would expect the US equity market to get a lift from the type of statement we expect to see from the FOMC early this afternoon, but in the current environment, the positives are going to have limited or no impact. We suspect that prices are set to work lower early this morning, but if there is the slightly fresh negative from the Euro zone, or the credit rating agencies on the Euro zone problem, the selling could intensify again.
S&P 500: With the European debt crisis showing no sign of coming under control and commodity prices serving to unhinge natural resource and oil sector shares, the S&P would seem to remain vulnerable to more selling pressure. In our book the failure to forge an exhaustion washout and recovery attempt in the action yesterday, suggests that the selling hasn’t run its course yet. We also don’t see the development yet that can effectively truncate or shut off the negative speculation against other EU debt issues. Initial support is seen at 1176.80 but that level clearly won’t hold and that would put the next downside target at the April 8th low of 1171.30.
DOW: After the big range down extension and no recovery effort at all into the close yesterday, the path of least resistance remains down. In looking ahead it would seem like the debt situation is seemingly cemented into a front row seat. Critical support in the June Mini Dow is seen at 10,915 today but we can’t rule out a further decline to 10,875 in the coming trading sessions. To even think about turning the trend away from the downside today would require a close back above up trend channel support line of 10,941 today.
NASDAQ: The June Nasdaq seems to have found some measure of support around the 2000 level, with the bull/bear line today seen at 2002.75 into the close. While the market might see a fleeting bounce off the US Fed’s promise to leave rates low, any bounce off that issue might simply be seen as an opportunity to get short at a slightly higher level on the charts. Keep in mind, the Nasdaq was one of the more overbought markets in the stock index sector in the last COT report. If the 2000 level fails to hold today that would set up the next downside target of 1985.50, which is only the mid April low!
TODAY’S MARKET IDEAS: The EU is leaving its fate with the markets and the markets are registering their disdain for a total lack of budgetary restraint. We would be very surprised to see the sell-off in stocks end today.
Stock Market Commentary – 2010.04.12
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The S&P has already managed a fresh new high for the year this morning and has seemingly engineered that pulse up move on the back of news of a $40 billion Greek aid package. While the market will see the Alcoa earnings later today, we don’t get the sense that the market is being driven higher because of favorable corporate earnings expectations. Nonetheless, we think that the market needs something positive from Alcoa and then from Intel on Tuesday to extend the pattern of strength, as these reports cover cyclical as well as tech sector conditions and after the rather stellar run up over the last 2 1/2 months, we get the sense that the market needs bullish news to justify and feed the up trend pattern. At least in the early action today, it would appear that sentiment is set to start the week on a positive track and given the gains in energy, metals and other physical commodity markets, it is possible that Natural resource stocks are going to help the overall market move to even higher levels early this week.
S&P 500: The June S&P managed a big range up move this morning but the trade seems to have questioned that move by giving up a large portion of that move into the NYSE opening. In looking at the charts, the June S&P has mounted some fairly aggressive gains over prior two trading sessions and seeing the favorable EU debt developments should have given the market a bigger sustained lift. The Commitments of Traders Futures and Options report as of April 6th for S&P 500 Stock Index showed Non-Commercial traders were net short 8,531 contracts, a decrease of 855 contracts. The Commercial traders were net short 7,164 contracts, an increase of -6,689 contracts. The Non-reportable traders were net long 15,694 contracts, an increase of 5,833 contracts. Non-Commercial and Non-reportable combined traders held a net long position of only 7,163 contracts. While the COT positioning is probably understated due to the rally that was forged in the wake of the COT mark off early last week, the S&P would seem to have more classic technical buying capacity than either the Nasdaq or the Mini Dow. We would be bullish as long as the June S&P manages to hold above 1192.60 today.
DOW: Like the S&P, the Mini Dow has managed a fresh new high for the move this morning, but prices have seemingly given back a large portion of that pulse up ahead of the NYSE opening. The bias looks to be pointing upward today off an improvement in the EU debt situation and also because of hopes for an earnings lift later this week. Critical support in the June Mini Dow contract is seen at the prior close of 10,953, with up trend channel support today not seen until all the way down at 10,838. The Commitments of Traders Futures and Options report as of April 6th for Dow Jones Index $5 showed Non-Commercial traders were net long 25,762 contracts, an increase of 5,563 contracts. The Commercial traders were net short 28,660 contracts, an increase of -8,577 contracts. The Non-reportable traders were net long 2,897 contracts, an increase of 3,014 contracts which represents a change from a net short to net long position. Non-Commercial and Non-reportable combined traders held a net long position of 28,659 contracts, which means the market is only marginally overbought.
NASDAQ: The June Nasdaq actually managed a gap up trade overnight but seemed to be unable to hold much of that gap up move. Given the significant 2 1/2 month rally in the Nasdaq, we would suggest that the Nasdaq needs something definitively positive from Intel earnings on Tuesday to give the market the capacity to extend on the upside. The middle of the up trend channel in the June Nasdaq is seen at 1981.50 today and we would remain bullish as long as the June Nasdaq manages to hold above 1992. The Commitments of Traders Futures and Options report as of April 6th for Nasdaq Mini showed Non-Commercial traders were net long 56,582 contracts, an increase of 838 contracts. The Commercial traders were net short 62,859 contracts, a decrease of 3,258 contracts. The Non-reportable traders were net long 6,276 contracts, a decrease of -4,097 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 62,858 contracts. As we suggested last week, the Nasdaq continues to hold the longest spec position of the Mini Dow, S&P and Nasdaq futures.
TODAY’S MARKET IDEAS: The bulls have the early edge but we get the impression that the market needs constant headline assistance or the market might see profit taking.
Inflation Coming?
A number of physical commodities have managed impressive recovery moves in the first half of 2009, and in most cases those gains were justified by improved demand expectations. However, some markets saw the early seeds of inflation-based buying, and that might have temporarily pushed them into an overbought condition. In fact, the COT positioning reports pegged the net spec position in the gold market to be long 222,215 contracts as of May 26th, and after that report August gold prices managed an additional rally of almost $40 per ounce. The crude oil market showed a net spec long positioning of 117,389 contracts and then managed to add another $6.50 per barrel before that market topped out. In addition to crude oil and gold, copper, silver, unleaded, cocoa, the Canadian Dollar, Pound, Euro and the stock market also caught a ride off the recovery angle. Therefore seeing a number of those markets correct last week wasn’t surprising, as the trade was justified in fearing residual damage to the economy in the employment sector. However, markets like copper, sugar, coffee, cotton and natural gas still look to have bullish potential in the coming quarters, even if some of them might face some near term corrective action. Markets like crude oil, gasoline and soybeans might have priced in fairly upbeat demand expectations, so it could take real proof of an economic recovery to prompt them to resume their recent uptrends. Markets like gold and silver seem to already be looking beyond mere recovery action to the prospects of inflation.
Certainly, unprecedented borrowing by the US government to head off the crisis and the historical easing efforts by a large number of central banks leaves the prospect of inflation on the table. Germany’s Chancellor Merkel recently called for global central bankers to “return to reason” in their to monetary policies, and that seems to give the prospect of inflation some credibility! However, it has long been our opinion that in order to return to inflationary conditions, the economy would have to be entrenched in a recovery mode, and as of the first week of June, that recovery was hardly assured. We would suggest that the recovery action in most commodity markets over the past five months is indeed an early warning sign of what might be in store in the event that the world economy actually gets back on its feet. Robust physical commodity buying by China and a surprising 5.4% growth rate from India suggests that areas outside of the US are capable of getting back to some semblance of normality more quickly than the US.
For those who maintain that high oil prices are the result of speculative fervor or that ultra high oil prices were some form of contrived condition, seeing oil prices quickly return to the vicinity of $70 per barrel has to be a very troubling development. While energy prices are likely overvalued for the near term, we look for them continue to move in sync with global equity prices. Prior to the sub-prime crisis, high energy prices were the feedstock of inflation. We expect to see energy prices contributing to “reflation” in the second half of 2009.
The financial crisis appears to have passed, but the economic slowing threat has yet to be reversed. Therefore, traders need to be long markets with favorable fundamentals, but they also need to protect those positions with options for the coming weeks and perhaps months.
Stocks: Disappointing Retail Sales or US Housing Could Pressure
by Dave Hightower on February 15, 2011
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World equity markets maintained tight trading ranges overnight and a flat trade, as they reconciled the latest inflation data from China and the UK. The closely watched inflation gauge out of China came in slightly under expectations, but continued to show signs of price pressures that are likely to keep their central bank with a tightening bias. Meanwhile, strong growth in China was supportive to fourth-quarter GDP data out of the Eurozone, but the headline number matched third quarter rates. Inflation data out of the UK came in nearly double the size of the BOE’s target rate, which seemed to reignite ideas of tightening in the country. There was also a report out from a major global bank earlier this morning that noted the appeal of developed market economies, as emerging market inflation, along with the threat of higher interest rates could limit upside potential. US budget talks continue, as Obama’s latest plan meets opposition from House Republicans who want greater spending cuts. While clean energy companies appear to have the most to gain from the proposed plan, major drug makers face increased competition from generic products. The US economic calendar picks up this morning with the latest January Retail Sales data that is expected to show a slight up tick from December levels, followed by January Import and Export Prices, December Business Inventories and the February Housing Market Index. Technology bellwether, Dell reports their latest quarterly results after the close today, which are expected to show a 32% gain from year ago levels.
S&P 500: Shares of the March S&P spent most of early morning trade waffling around unchanged levels, as they digest Monday’s late-day sell-off. However, it is possible that the index garners modest upside support from the potential merger between Deutsche Boerse and the New York Stock Exchange, which is expected to be finalized today. Another potentially supportive factor this morning comes from General Motors, with its plans to increase the number of models for sale in China in an attempt to expand its market share. Meanwhile, some traders indicate that the March S&P 500 has doubled in value from the April 2009 lows of 666 (1332.00), which could become a pivot level in the session ahead. The short term trend continues to favor the bull camp with downside support below at 1322.00.
DOW: The March E-mini Dow established a lower low during the early evening hours and has since recovered near the highs of the session. While the index established another new contract high during Monday’s session, some traders expressed concern over the light trading volumes and lack of upside participation within the Dow Transports index. This morning’s US Retail Sales data is expected to be a closely watched data point, especially after recent weakness in the shares of Walmart. Meanwhile, shares of index component Merck, were also seen as a drag during Monday’s session on the prospect of increased generic-drug competition from Obama’s budget proposal. The March E-mini Dow has trendline resistance above today at 12,270, with short term support below at 12,180 and 12,130.
NASDAQ: The March NASDAQ remained inside an extremely tight trading range after the index reached new contract highs Monday. There appears to be concerns over the weak volume levels during the latest rally, which is seen as a divergent indicator that has failed to confirm the charge higher. It is likely that further delays with the Sanofi-Aventis and Genzyme merger has become a bit of a drag as both companies continue to hash out details on a final price.
TODAY’S MARKET IDEAS: The major US indices reached new contract highs Monday in the face of sluggish volume, which has become a concern for the bull camp and provides another indication of a market rally that could be running out of steam. However, it appears that recent declines have been met with eager buyers, and that remains a bullish factor in the short term. This morning’s active pace of economic data presents a challenge for the major indices, and disappointment from Retail Sales or US Housing has the potential to pressure the prices down to short term support levels: 1322.00 in the March S&P 500, 12,130 in the E-mini Dow.