So we started September in an ugly way. With the markets down 2% across the board, and oil and bond yields also falling. Forgive me for thinking this is a bad sign, but selling on good news doesn’t sound very bullish.
And the ISM data definitely was bullish. Production 61.9 – Yay! New orders 64.9 – Hurrah! What’s not to like? But the Dow was down 185 points – Boo! What gives?
Well, for one, bank shares were decimated (see the sea of red in the chart [below]?). But, there’s more to it than that; Wal-mart was the only stock to rise in the Dow. For the S&P, we had breadth of 16-1 for decliners to advancers. This was a broad-based selloff – and one that took place with the backdrop of positive economic data from manufacturing and housing.
To me, that is a very worrying sign. Now, obviously I expect a market correction (see posts here and here). But, I neither expect nor want a crash (I do think this is a possibility, however, given how far stocks have run without a correction).
It is now September, the month of market jitters, and the financial services industry is headed back from their long slumber. Things get serious in September. Let’s hope they don’t get too serious or Paul Tudor Jones is looking like a financial prophet yet again.
The housing market 'recovery' has provided substantial support to the U.S. economic growth. The housing-related activities, which Guggenheim's Scott Minerd defines as private residential investment, personal expenditures on household durable goods, and utilities, as well as consumption wealth effect from home price appreciation, have positively contributed to real GDP growth for five consecutive quarters. In the first quarter of 2013, housing-related activities contributed more than half of the growth in the real GDP. That seems a significant burden to be carrying for a sector now seeing da...
Bloomberg reports China Swaps Surge as Cash Squeeze Sees Demand Wane at Debt Sale. China’s one-year interest-rate swap rose by the most in 22 months as the central bank refrained from adding funds to the financial system to ease a cash squeeze, causing demand to fall at a government debt auction.
“The cash shortage may get even worse before the quarter-end because banks will have to hoard cash to meet loan-to-deposit ratio requirements,” said Chen Qi, a strategist at UBS Securities Co. in Shanghai. “The central bank probably won’t come out to intervene unless there is a sharp decline in economic growth and large capital outflows.”
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Futures Tick Higher Ahead of Fed
U.S. equity futures traded slightly higher ahead of the much anticipated Federal Reserve meeting Wednesday. With rumors of tapering, not tapering, and Chairman Bernanke stepping down, all eyes will be on the policy statement, the revised forecast, and the chairman's press conference.
LZB - La-Z-Boy, Inc. – Shares in furniture producer, La-Z-Boy, Inc., increased as much as 3.9% to $19.80 at the start of the session, the highest level since 2004, ahead of the company’s fourth-quarter earnings report after the closing bell today. Options volume is up ahead of the report, with roughly 400 contracts in play this afternoon versus average daily volume of around 80 contracts. Trading in La-Z-Boy call options is outpacing puts, with the call/put ratio up above 4.3 as of the time of this writing. Some traders appear to be p...
Today's market meme was "pleasant trading ahead of the Fed." The recently troublesome and highly volatile Nikkei finished the day with a minor slip of -0.20%, and the eurozone was on hold with the EURO STOXX 50 closing a hair below flat at -0.07%. On the home front, the June CPI report for May offered no surprises and the housing numbers (permits and starts) were a bit light but not statistically significant. With no news from June FOMC until tomorrow afternoon, the S&P 500 opened at its intraday low, 0.04% above yesterday's close, and traded with no drama to its intraday high, up 0.92%, in the mid-afternoon. The buying eased in the last 45 minutes of trading and the index closed with a modestly trimmed gain of 0.78%.
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After the volatile session yesterday, the S&P 500 has broken back above the channel we have been discussing for a few weeks and now the Russell 2000 and NASDAQ appear to be joining (was not the case yesterday). If not for the focus on the FOMC presser tomorrow you'd have a nice clean breakout starting here. Tomorrow is of course a major wildcard.
On a related note – the 50 day moving average has been quite the support in 2013. In fact no year other than 1995 in the past 30 comes close to what we are seeing this year. ...
The market responded well today to good economic news and to the positive and somewhat surprising response to the election of a moderate Iranian President. Some moderation in Turkey didn’t hurt either, and overnight positive markets in Asia and Europe gave bullish investors enough encouragement to buy equities broadly.
This drove all three major domestic indices up about 1% before a late small selloff left the S&P 500 Index up nearly 1% and the Nasdaq and Dow Jones Industrial Average both up well over 0.5%. We think it likely this week that the market will challenge highs set in late May.
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Click here for the latest Stock World Weekly. Sign in with your PSW user name and password, or sign up for a free trial. There's an interesting option trade on LULU presented in the newsletter this week.
Trivia on lululemon via Paul Price, article found in NYTimes.
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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
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By Craigzooka
I am going to share with you how I manage my IRA and the power of reducing your cost basis. My goal each year is a 20% return in my IRA. Sometimes I make it and sometimes I don't, but I believe that all of my success is due to reducing my cost basis. To illustrate the power of reducing your cost basis here are some trades we did last year. These trades are taken from an educational portfolio we ran in a paper-trading account for a little more than a year.
We bought RIG on 5/15/2012 for $44.13, sold it on 1/18/2013 for $46 but booked a profit of $1,154.
We bought MT on 1/4/2012 for $19.24, sold it on 12/21/2012 for $15 but booked a profit of $454.
We bought CHK on 1/27/2012 for $21.93, sold it on 10/19/2012 for $18 b...
Stock market posts another record setting week, but the big news came after Friday’s close.
Courtesy of NASA
The stock market put on another record setting show with the Dow Jones Industrial Average (NYSEARCA:DIA) closing at a record high 15,118 and the S&P 500 (NYSEARCA:SPY) closing at 1633.70, another all time closing high.
For the week, the Dow Jones Industrial Average (NYSEARCA:DIA) gained 1%, the S&P 500 (NYSEARCA:SPY) climbed 1.2%, the Nasdaq Composite (NYSEARCA:...
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Well, well, well....it is good to know that there are others in the scientific arena who believed that YMI Bioscience's data (cough - Gilead) is a better drug than Incyte's Jakafi. Now, the definitive data are still unknown, but there was enough evidence from a Phase 2 trial to take a small risk for a huge reward. So, let's forget about Apple (AAPL), and do nothing but biotechs from now until Congress passes universal health care coverage for prescriptions....and drive the prices down so that research and development is no longer feasible to conduct in the US. Even Seattle Genetics (SGEN) has been on a tear as of late...
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So we started September in an ugly way. With the markets down 2% across the board, and oil and bond yields also falling. Forgive me for thinking this is a bad sign, but selling on good news doesn’t sound very bullish.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(
