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Daily State of the Markets Good Morning. It seems that the only folks left in the stock market game these days are professional traders. Gone are the soccer moms that decided to take up day-trading in the late 1990’s. Gone are the guys that decided to quit their jobs and trade futures in their pajamas. Also gone are the millions of Americans who used to dabble in the stock market trading Apple (AAPL), Microsoft (MSFT), Oracle (ORCL) or Google (GOOG) at lunch and then spending their weekends pouring over Barron’s and plotting their next purchases. No, the two brutal bear markets seen in this secular cycle coupled with the insane volatility of the past two years has pushed the public to the sidelines. What’s left are fund managers, institutions, home offices, the computers, and the pure traders; those who trade the UPRO’s (ProShares UltraPro S&P 500 ETF), the S&P futures and hundreds of options contracts at a time. You know the type; the guys and gals who can actually explain how the VIX works and why the VXX (the iPath S&P 500 Short-Term VIX ETF) went into a free-fall recently. And frankly, it is this crowd that everyone in the media seems to be writing to these days. Be honest now and raise your hand if you’d really like to find a way to make a couple winning trades each and every day. Who wouldn’t like to pop into a WFR (MEMC Electronic Materials) or a DVR (Cal Dive) for a quick gain of +11% or +13%? Heck, an entire cottage industry teaching folks how to find these big winners cropped up a decade ago. Just in time to get most of those eager seminar attendees crushed. But the bottom line is that the media still yammers on each and every day about “the trade.” I find it terribly amusing when a guest on CNBC or Bloomberg is offering up some decent macro analysis (rare, I know) only to be interrupted by the Barbie doll interviewer wanting to know how to “trade” the thesis being offered. Just once, I’d like to hear an analyst respond with something along the lines of, “Well, if you will give me more than 18 seconds, I just might be able to tell you how best to play the current environment.” Which brings me to my point this fine Thursday morning. The bottom line is I think it just might be time to take a break from the hyper-trading mode for a while. With the S&P 500 up +29.04% during the October 3 through April 2 run (and those leveraged SSO’s are up a cool +65.3%), I’m going to suggest that the bulls might also be taking a break for at least the foreseeable future – meaning the next two to three months. As long-time readers of my morning missive know, I’m not big on making “market calls.” In fact, I abhor them since making a prediction tends to be diametrically opposed to the idea of just staying in line with what the market IS doing. But at this particular time, history is on the side of anyone deciding to take a break. As the fine analysts at Ned Davis Research have pointed out on multiple occasions recently, bull markets tend to take a break after the indices have run for six months or so from an important bottom. And for those of you keeping score at home, the six-month mark from the October 2011 low was hit on Monday, April 2nd (which also just happens to correspond with the high point of the current joyride to the upside). Granted, history isn’t always the best guide for trading the stock market. In my experience, this type of data is great right up until the time it isn’t. So, how do we play this information? Should we get ready to buy the dip to play for the inevitable oversold bounce? Or should one be looking to jump on the bear bandwagon if the SPYDR (SPY) breaks below 136? In case my title and my point are not clear, I’m thinking that it may be best to simply take a break for a while. You see, unless the bulls can recapture their lost mojo in a great big hurry, I’d be willing to bet that things might just go sideways as the traders on each team battle it out. Turning to this morning… Expectations that the Chinese will take more stimulative action tomorrow helped lift Asian shares overnight. On the other hand, Europe’s bourses are mostly lower this morning. However, U.S. futures are pointing to more upside at the open. On the Economic front… Initial Claims for Unemployment Insurance for the week ending 4/7 rose 10,000 to 367K, which was above the consensus estimate for 359K and last week’s revised total of 367k (from 357k). Continuing Claims for the week ending 3/31 came in at 3.251M vs. consensus of 3.347M. Next up, the Labor Department reported the Producer Price Index (an indication of inflation at the wholesale level) for March was unchanged, which was below the consensus estimate for a rise of +0.3%. When you strip out food and energy, the so-called Core PPI came in at +0.3%, which above the consensus for +0.2% and last month’s +0.2%. In addition, we’ll get a report on Bloomberg Consumer Comfort later this morning. Thought for the day… Try sending positive thoughts to someone who could use an lift – you never know, it just might help… Pre-Game Indicators Here are the Pre-Market indicators we review each morning before the opening bell… !========>
Positions in stocks mentioned: AAPL For more of Mr. Moenning’s thoughts and research, visit StateoftheMarkets.com !========> The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of StateoftheMarkets.com and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. One should always consult an investment professional before making any investment. Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided. The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed. The information contained in this report is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer. Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice. Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results. !========> |
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