Financials | The Hightower Report

Tag Archives: Financials

Stocks: Weaker to Start, Record Apple Earnings Limits Early Losses

by Dave Hightower on January 25, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

Global equity markets turned lower during the early morning hours as they turned focus to more corporate earnings and the result of a 2-day FOMC meeting. While shares were modestly higher in Japan, the major global indices turned lower in Europe. It seems that lingering Greek debt default fears as well as disappointing quarterly results from Ericsson, which reported a plunge in quarterly demand have undermined sentiment. The German DAX is showing a smaller loss this morning, perhaps helped by German sentiment data that was up for the 3rd month in a row, as that in turn suggests the German economy might be able to stave off a recession. Last night’s State of the Union address from President Obama offered little lasting support to the stock market, but it was seen by some as a campaign speech. US economic data this morning offers up a look into the housing market, with December Pending Home Sales expected to show a slight decline from the November reading. More importantly is today’s verdict of the 2-day FOMC meeting.

S&P 500: The March S&P continues to dance around a short term equilibrium level at the 1311.00 area, with the last four daily settlements falling inside of an extremely tight 1-point range. This coiling-type action suggests that the market is in search of fresh fundamentals for its next direction. Meanwhile, some traders viewed the recent action as “toppy” and did not want to increase risk after the strong start of 2012, especially in front of a FOMC meeting result later in the session. ConocoPhillips was trading higher in early morning action on the hopes that the company can deliver a strong Q4 earnings report. Expectations are for the company to show an 11.5% increase from the year ago quarter. Yesterday’s mid-day weakness breeched swing low support but was able to end on a strong note. Nonetheless, the short term trend for the March S&P looks tired and due for a correction. Uptrend channel support this morning comes in at 1301.50.

DOW: The March E-mini Dow established a higher high during the early morning hours but has since turned into negative territory. It is possible that some of the early lift in the index came from a 1.0% gain in Boeing shares on reports of new business from Norwegian Air Shuttle. Boeing releases their Q4 earnings before the Wall Street open and are expected to show a nearly 10% decline compared to Q4 2010. United Technologies releases their Q4 earnings this morning, which are expected to show earnings growth of nearly 11.0% compared to Q4 2010. While yesterday’s earnings from Dow components McDonalds, J&J and DuPont came in better than expected, they failed to inspire fresh enthusiasm to the upside. This could be a sign of a market that has become tired and overbought. The intermediate term price trend in the March E-mini Dow points up, with support at 12,553. Confirmation of a move below 12,486 could put the bear camp on top.

NASDAQ: The March NASDAQ registered a new contract high overnight helped by Apple earnings. The company posted record sales and profits on the quarter that were supported by very strong holiday demand for its iPhone and iPad. Shares of Apple were up nearly 7.0% in German trading this morning, and that is a force that should limit weakness in the index this morning. Meanwhile, Yahoo’s Q4 revenues and sales fell short of estimates amid weak advertising demand. There was also a pair of warnings from AMD and Altera Corp yesterday that pointed to weaker tech-related sales prospects ahead. The bulls have the advantage this morning and remain in a short term uptrend pattern. Key swing low support for the March NASDAQ stands at 2419.50.

TODAY’S MARKET IDEAS: The major US indices start on a softer note this morning, with the exception of the NASDAQ which is benefiting from new record high prices in Apple. However, recent low trading volumes, growing level of complacency and overbought technicals suggest that the US indices could be ripe for a correction. There also appears to be change in sector leadership, with recent gainers failing to participate on rallies. Some technicians suggest that the current wave pattern in the S&P 500 is nearing the conclusion of its b-wave rally (off the October low), which suggests that next primary leg in the index is down, potentially targeting the 1050.00 area in the March S&P 500. We would like to see a bit more confirmation of a turn before getting short. Aggressive bears might consider buying out-of-the money puts on strength.

Stocks: Bulls Start Off In Control. Will Need More Support to Hold

by Dave Hightower on January 3, 2012

Global equity markets have started out on a positive footing overnight in the wake of mostly positive international economic readings and seemingly because of upbeat comments from Chinese leadership. However, the Chinese situation wasn’t overly upbeat, as Chinese officials suggested that softer growth in that country ahead might prompt an easing of policies and some in the trade might have hoped that China was already in an easing posture. On the other hand, world equity markets saw favorable German unemployment readings and for the time being, that seems to have papered over the fears toward Euro zone sovereign debt. Some bulls might be partially off balance as a result of fears of soaring oil prices but to start today that issue seems to be sitting on a back burner. In fact, with Indian equities trading higher, European stocks showing early gains and early indications of a 20 to 23 point higher opening in the US S&P contract, the bull camp looks to have a solid edge to start. Furthermore the trade is also expecting to see something positive from the US scheduled report slate this morning and that might give the bull camp an added measure of bullish psychology.

S&P 500: A huge gap up opening seems to have established a rather lofty ambition by the S&P bulls this morning. With the opening rally posting the highest trade since the October 27th spike high, the bull camp probably needs to see mostly positive US scheduled data just to add to the early gains. In fact, the 1282.40 level might be seen as an extremely critical pivot point in the first two trading sessions of this week. However, the bull camp does seem to have the benefit of several merger/buyout stories overnight but the fear of turmoil in the Middle East might keep some would-be bulls on the sidelines. The Commitments of Traders Futures and Options report as of December 27th for S&P 500 Stock Index showed Non-Commercial traders were net long 8,722 contracts, an increase of 6,998 contracts. The Commercial traders were net short 14,913 contracts, an increase of 2,164 contracts. The Non-reportable traders were net long 6,190 contracts, a decrease of 4,836 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 14,912 contracts. This represents an increase of 2,162 contracts in the net long position held by these traders. The bulls have control as long as the March S&P manages to hold above 1270.00 this morning.

DOW: After some extremely volatile action last week, the March Dow contract looks to start the holiday shortened week on a very positive track. In addition to a small measure of catch up buying action, the Dow might be cheered by the prospect of a more supportive PBOC policy stance ahead and the index is also likely to draft favorably off a quasi risk-on vibe. A key resistance point in the March Dow contract was seemingly violated early this morning at 12,346, with yet another critical pivot point seen up at 12,381. In fact, the bull camp has to feel confident in their position, as long as the March Dow manages to hold above 12,340 through the flow of scheduled US data later this morning. The Commitments of Traders Futures and Options report as of December 27th for Dow Jones Index $5 showed Non-Commercial traders were net long 17,834 contracts, a decrease of 4,223 contracts. The Commercial traders were net short 20,208 contracts, a decrease of 4,030 contracts. The Non-reportable traders were net long 2,373 contracts, an increase of 193 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 20,207 contracts. This represents a decrease of 4,030 contracts in the net long position held by these traders.

NASDAQ: With a big range up extension forged this morning that would seem to confirm the moderately bullish bias from the overnight action will be extended into the US Tuesday trade action. However, the tech sector appears to be catching a ride from big picture macro economic developments instead of from the tech sector news and therefore the bulls have to hope that scheduled US data adds to the bullish vibe later this morning. The Commitments of Traders Futures and Options report as of December 27th for Nasdaq Mini showed Non-Commercial traders were net long 14,628 contracts, a decrease of 7,678 contracts. The Commercial traders were net short 30,195 contracts a decrease of 6,122 contracts. The Non-reportable traders were net long 15,567 contracts, an increase of 1,557 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 30,195 contracts. This represents a decrease of 6,121 contracts in the net long position held by these traders.

TODAY’S MARKET IDEAS: The bulls have control to start but to add markedly to the impressive initial pulse up in prices might require favorable US numbers, more merger and acquisition news and quiet on the Euro debt front into their close later this morning.

Interest Rates: Markets Hopeful EU Will Figure Something Out

by Dave Hightower on November 30, 2011

While the Euro zone situation doesn’t seem to be markedly improved as a result of the latest EU Ministers decision to expand the EFSF, the market continues to be hopeful that something constructive will eventually be patched together (within the coming ten days) which in turn will meet the current liquidity requirements of troubled EU members. In other words, the EU seems to be inclined to take a case by case approach and so far they don’t seem to be poised to implement a Euro bond or an overly aggressively leveraged EFSF fund. With the German November jobless rate overnight falling to the lowest level in 20 years, the Germans aren’t seeing the urgency of the situation and they also seem deaf to the threat of a Euro zone contagion and that might be why their leadership is generally against writing a blank check to put down the speculation against weak EU members. Somewhat surprisingly, a widespread bank downgrade move by S&P overnight didn’t rekindle macro economic anxiety, which in turn left US Treasuries flat footed to start the Wednesday US trade action. In looking forward, the US trade will see an extremely active US scheduled report flow today with a sampling of private jobs/employment estimates, a Pending home sales report, an ISM manufacturing report, a PMI reading and in the early afternoon action, the market will also be presented with a Fed Beige book release. With the Euro zone situation this morning relatively calm, that could allow for a more significant reaction to the private jobs surveys, especially if the employment situation improves, as is generally expected by the trade. While the ADP payroll figure rarely tracks the monthly US official reading, seeing estimates for the report today, calling for a jobs gain that is 40,000 to 50,000 above the prior month’s US non farm payroll gain, it is possible that Treasuries could see a bit of macro-economic pressure early today. With the trade also expecting a minor improvement in the ISM and in the Pending home sales figures, that could give the bear camp some added resolve. However, news that the Euro zone jobless figure touched the highest level since records began and news that the ECB was seeing heavy use of its deposit facility, should mean that concern for the Euro zone will remain a supportive force, even if the economic news from the US gets most of the markets attention this morning. In the event that both private US job sector reports point to US growth today and with the trade still hopeful of something constructive from the EU summit, before the deadline 10 days out, the bear camp might feel like they have a slight measure of control in the trade today.

Stocks: Lots of Headwinds for Stocks Ahead.

by Dave Hightower on November 30, 2011

Global equity markets were facing a number of negative headwinds overnight, including an S&P ratings downgrade of 15 banks, some disappointment with the Euro rescue fund efforts and further signs that China might be slowing. After yesterday’s close, S&P lowered their ratings for 15 major global banks by one notch, and that pressured global equity markets in the overnight action. Asian equity markets were considerably lower, led by weakness in the Chinese Shanghai Composite. While there is evidence that export growth to Europe has slowed, this morning’s unexpected move by China’s Central Bank to cut bank reserve requirement ratios has helped to turn the early tone positive. Meanwhile, global equity markets maybe holding up better than might be expected given general disappointment over the latest Euro zone rescue fund developments. Some analysts indicate that the size of the fund has fallen short of the 1-trillion mark, forcing EU ministers to pursue other more creative funding options, like the IMF. Perhaps the trade is hopeful that the EU will eventually do what is necessary and perhaps the trade is simply anticipating favorable private US payroll data this morning, which is expected to show gains to levels not seen since April. The markets also appear to be anticipating a positive read on Chicago ISM and pending home sales figures.

S&P 500: Overnight and early morning action in the December S&P 500 has formed a bullish outside day reversal that reflects a positive shift in sentiment. While the index came under overnight pressure following the S&P ratings downgrade of 15 major global banks, action taken by the PBOC this morning to ease monetary policy has helped to shift the tide in favor of the bulls. Meanwhile, the December S&P 500 showed a level of vulnerability yesterday, held back by underperformance in the financial sector. Shares of Tiffany & Co were down nearly 9.0% yesterday, following weaker than expected earnings and holiday sales warnings. The December S&P 500 is on a bullish track this morning after taking out yesterday’s high (1203.00), which leaves the next level of resistance at last week’s gap of 1209.00 to 1214.00.

DOW: The December E-mini Dow had a gap lower opening Tuesday evening in the wake of a surprise banking sector downgrade from S&P. While this might help explain the relative underperformance of the banking sector during yesterday’s trade, it did pressure shares of Bank of America below $5.00 in after-hours trade. Yesterday’s bankruptcy filing of AMR has the potential to provide an added drag on the shares of Boeing today, and also that could put recent Airbus sales in jeopardy. The short term trend in the December E-mini Dow offers the bull camp the advantage, with 11,615 as resistance. Near term support for the index comes in at 11,436.

NASDAQ: December NASDAQ reversed overnight losses this morning in the wake of China’s Central bank decision to reduce reserve requirement ratios. While this should inject a level of optimism into tech-related shares this morning, there are also positive headlines involving Yahoo. Reports that a private-equity group has offered $16.70 for a minority stake in Yahoo should provide an added lift. That offer is a little more than 6.0% above Tuesday’s settlement price. The bull camp gets the early nod, with resistance at 2245.00, then at the November 21st gap up to 2249.75.

TODAY’S MARKET IDEAS: With the month of November drawing to a close, there is the potential for end-of-month volatility today. Some traders note signs of institutional buying in the futures market, and that is a force that could gain more traction toady and in coming week’s as funds wind down for the year. In the meantime, US equity markets face growing negativity surrounding the European debt crisis (slow on specifics) and slow-growth concerns in India and China. These negative forces have been put at bay to start this morning’s, but they present headwinds to any meaningful upside attempt. This morning’s flow of US economic data is expected to come in positive, and disappointment there could leave the bull drive vulnerable. Given the prevailing intermediate down trending patterns in the December E-mini Dow and S&P 500, we continue to view rallies as selling opportunities.

Interest Rates: Euro Zone Concerns

by Dave Hightower on November 15, 2011

Despite generally weak world equity markets and softer than expected German economic expectations, US Treasuries initially started the early Tuesday US trade on a slightly weaker footing. Some suggest that Treasuries saw some support from dialogue from the Chinese Investment Corporation overnight which discounted China’s capacity to “dispose” of Treasury holdings of big countries because of the adverse impact such action would have on their holdings. With the ZEW suggesting there will be negative growth in Germany in the 1st quarter of 2012 and hinting that the US debt situation is also weighing on business activity, one might have expected US Treasuries to have taken on a much more positive track early today. In looking ahead, the market will see a moderate measure of US data released today, with the Retail sales figures probably taking precedence over the Empire State Manufacturing report and the PPI. Some in the market think the Fed is moving toward more easing action ahead, but a portion of the Fed is still concerned with the threat of inflation and therefore the bull camp in Treasuries would probably like to see a muted PPI reading today. The market will also be presented with an avalanche of Fed speeches today and that could collide periodically with the flow of scheduled US data for a noted increase in volatility today. Expectations for US retail sales call for a modest gain over the prior month and it might take a softer than expected retail sales reading to firm up support under a market that wasn’t initially in favor overnight. On the other hand, other than a slight lull in troubling headlines from the Euro zone, there doesn’t seem to be anything definitively positive unfolding from the euro zone, unless one takes the Euro zone trade surplus figures released overnight as a positive. While the US economic report slate is extremely active over the coming trading sessions and there are a number of Fed speeches on the docket, it is possible that news from the Special committee will begin to gain some added traction in the markets focus. With Italian yields creeping back up above 7% into the US trade action this morning that clearly returned a positive bid to US Treasuries and that in turn also highlights the importance of the Italian situation in the grand scheme of things. In fact, it is possible that the importance of the US scheduled dataflow today will be downgraded to a partial sideline status, as concerns of another Euro zone meltdown steps up and takes the attention away from the US economy. The Commitments of Traders Futures and Options report as of November 8th for U.S. Treasury Bonds showed Non-Commercial traders were net short 36,853 contracts, an increase of 1,868 contracts. The Commercial traders were net long 22,558 contracts, an increase of 314 contracts. The Non-reportable traders were net long 14,295 contracts, an increase of 1,555 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 22,558 contracts. This represents an increase of 313 contracts in the net short position held by these traders. The Commitments of Traders Futures and Options report as of November 8th for US Treasury 10Yr Notes showed Non-Commercial traders were net short 93,006 contracts, a decrease of 26,130 contracts. The Commercial traders were net long 121,027 contracts, a decrease of 9,768 contracts. The Non-reportable traders were net short 28,021 contracts, an increase of 16,361 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 121,027 contracts. This represents a decrease of 9,769 contracts in the net short position held by these traders.

Stocks: Euro Debt Concerns and Weak Data Pressure

by Dave Hightower on November 15, 2011

The stress level in global equity markets has picked up in early morning action, fueled by growing European debt concerns and a round of disappointing economic data pointing to a tough slog to come. Italian bond yields have rallied back above the 7.0% handle this morning and this morning’s Spanish Bill auction drew yields that were more than 1.0% above October levels and that auction also saw less participation than the prior offering. The higher yields highlight the growing concern that Euro zone leaders have in tackling their debt crisis, not to mention unsustainable debt service costs. Credit spreads in France are also on the rise from mounting fears that French banks hold a significant share of Italy’s 2 trillion in debt. Adding to the weakness this morning was a round of disappointing Euro zone economic data. While Q3 Euro zone GDP matched expectations, the more forward looking German ZEW sentiment gauge came in much weaker than expected and fell to levels not seen since the fall of 2008. This underscores the negative impact that election/debt proceedings in the region have had on investor psychology. Weak European trade early this morning has also pressured US shares, and that is expected to continue into this today’s active US economic data calendar. While the clock ticks on the US Super Committee debt-reduction talks, there appears to be a growing consensus that leaders may pass the buck under the guise of a more definitive change in tax policy. US economic data this morning includes October Producer Prices, October retail sales and September business inventories.

S&P 500: The December S&P 500 enters the early US trading hours off 2.7% from Monday’s high, struggling under the pressure of mounting European debt concerns. An increase in Italian, French, Spanish and Greek borrowing costs highlight the level of concern in the market. These concerns have taken Greek banks shares down by more than 7.0% this morning, hamstrung by disappointing GDP data and mounting concerns whether new leadership can fix the nation’s debt problem. The weak financial backdrop this morning is expected to exert added downside force on the US financial sector. The Commitments of Traders Futures and Options report as of November 8th for S&P 500 Stock Index showed non-commercial traders were net long 12,119 contracts, an increase of 7,692. Non-commercial and non-reportable traders combined held a net long position of 16,986 contracts, down 1,499 contracts on the week. This reflects a selling on strength mentality from speculators, and that is viewed as a negative short term force. After yesterday’s failed attempt to break through the upper end of the recent trading range, the December S&P 500 looks poised for a test of 1224.00, and then at the November low of 1208.00.

DOW: The December E-mini Dow established a lower low during the early morning hours, as it extended the downdraft from yesterday’s high to 220 points. While the index may have drafted a level of support from yesterday from gains in Boeing, Caterpillar and reports that Berkshire took on a more than 5.0% stake in IBM, this morning’s tone has shifted back to Europe. Dow Jones Index components Home Depot and Wal-Mart report their quarterly results prior to the Wall Street open, and that could shed further insight into the health of the US consumer. The Commitments of Traders Futures and Options report as of November 8th for Dow Jones Index $5 showed non-commercial traders were net long 5,712 contracts, a decrease of 1,696. Non-commercial and non-reportable traders combined held a net long position of 8,705 contracts, for a decrease of 2,580 in their net long positioning. This selling pressure took place as the index rallied more than 400 points and that is seen as a negative. The bear camp has control to start this morning, with support entering at 11,910 and then at last week’s low of 11,661.

NASDAQ: The December NASDAQ enters the US trading session with losses of more than 1.0%, pressured by renewed Euro zone debt concerns and fears that global growth could be slowing. Earnings late Monday from Urban Outfitters showed the company falling short of Q3 sales forecasts, and that seems to be offering an added negative this morning. The NASDAQ will be keeping a close watch on Amazon today, as the company begins shipping its $199 Fire designed to capture the lower end of the tablet market. Dell reports their quarterly results after the bell this afternoon and is expected to show a more than 4.0% increase in earnings compared to the year ago quarter. The Commitments of Traders Futures and Options report as of November 8th for NASDAQ Mini showed non-commercial traders were net long 45,021 contracts, a decrease of 9,200. Non-commercial and non-reportable traders combined held a net short position of 1,038 contracts. These traders have gone from a net long to a net short position. The early morning tone in the December NASDAQ is negative, with 200 day moving average support at 2290.50.

TODAY’S MARKET IDEAS: Disappointing German Sentiment readings, Spanish Bill sale and sluggish Euro zone periphery GDP readings fuel the bear earlier this morning. Escalating borrowing costs also reflect a negative vote of confidence on new leadership changes in Italy and Greece. Sentiment is quite negative to start this morning, and it probably takes a bullish result from this morning’s US scheduled data to begin to neutralize the selling. Yesterday’s failed attempt to break through resistance and subsequent downdraft points to a downside test of 11,750 in the December E-mini Dow and 1224 in the December S&P 500.

Euro-Zone Optimism Keeps Equities Up Overnight

by Dave Hightower on October 26, 2011

Stocks seems to believe the EU will get its act together. Gold however, is acting like a flight-to-quality investment.

A “Buy The Rumor” Mentality Lending Support the Market

by Dave Hightower on October 24, 2011

Bit of a “risk-on” feeling to the markets this morning. Reasons why are unclear with things being uncertain as the size and type of the EU package. Good numbers out of China and Europe and a better than last month Chicago Fed’s National Activity index also helping support the markets.

Corn showing strength this morning off strong ethanol production and export sales. Also, some news there are some problems with rice production and some damage to warehouse stocks.

Interest Rates: EU Optimism Keeps Bonds Under Pressure

by Research on October 10, 2011

U.S. Treasury markets are on a lower track during the initial morning hours, partially from a better than expected September Non-Farm Payroll data Friday as well as from optimism surrounding last night’s meeting between Sarkozy and Merkel. The French and German leaders announced more “fresh steps” to resolve the region’s debt crisis that are expected to be released by the end of October. The goal remains the same, to address the Greek debt situation and establish a viable approach to recapitalize European banks but continues to lack details. However, December German Bunds slumped throughout the early morning hours as did US Treasuries. Despite the positive talk last night, overnight lending from the European Central Bank remained at elevated levels, and that is expected to continue ahead of re-funding operations this week. Meanwhile, it is possible that the December Treasury markets face a low-volume trade today as US Government offices and cash bond markets are closed for Columbus Day holiday. Friday’s better-than-expected Non-farm payrolls data seemed to go a long way in tamping down double dip recession fears, and that prompted a number of large Wall Street firms of raise their Q3 growth targets. Some portions of the market seemed to doubt the calculation behind Friday’s number, and that provided a level of support throughout the balance of the session. December Bonds and Notes also drafted a level of support following credit downgrades for Italy and France. Still, some traders view last week’s improved Consumer Confidence and ISM Non-manufacturing activity readings as a positive sign and one indicating that the US economy could be on the mend. Economic data this morning that showed October Eurozone sentiment falling to its lowest level in 2 years, failed to inspire much of a safety bid in government debt markets. Perhaps the rally in global equity markets, rally in commodities and sell off in the US Dollar support a risk-on attitude to start this morning. Other negatives weighing on the Treasury market this morning could be the denial of funding rumors by BNP Paribas and Societe General earlier this morning. Additionally, Dexia agreed to the nationalization of its Belgian banking division, and that might be reducing some of the fear premium in the market. The US economic calendar is quiet this morning but presents $66 billion in supply this week ($32 billion 3-Year Notes, $21 billion in 10-Year Notes and $13 billion in 30-Year Bonds) and September FOMC meeting minutes Tuesday, which is expected to offer more clues on the debate around operation twist. The Commitments of Traders Futures and Options report as of October 4th for U.S. Treasury Bonds showed non-commercial traders were net short 23,052 contracts, a decrease of 1,731. Non-commercial and nonreportable traders combined held a net short position of 25,680 contracts, an increase of 9,735. The Commitments of Traders Futures and Options report as of October 4th for US Treasury 10Yr Notes showed non-commercial traders were net short 111,406 contracts, an increase of 13,056. Non-commercial and nonreportable traders combined held a net short position of 118,671 contracts, up 4,202 on the week.

Plans Out of the EU Providing a Lift

by Dave Hightower on September 27, 2011

Quite a change over the last 24 hours. It seems that the September wash-out in commodities has, at least temporarily, run its course.

← Older posts

Newer posts →

Free Trial

The Hightower Report