Morning Note: Historically-Lofty

Only one Asian equity index, of the 16 we track, closed higher last night, Japan. And that was apparently thanks to news that Warren Buffett is snatching up stock ($6 billion worth) in Japanese commodities traders. That, plus his recent foray into gold miners suggests that he sympathizes with the base case that happens to presently have us more in commodities than we've ever been. 

Europe's not much better so far this morning; 13 of the 19 bourses we track are in the red. 

U.S. equities are troubled a bit this morning as well: Dow down 211 points (-0.74%). S&P 500 flat, -0.09%. Nasdaq up 0.55%. Russell 2000 down 0.65%.

The Inefficient Hand of Central Planners -- Or -- Rats and Snakes...

During an insightful discussion featuring macro minds Raoul Pal and Larry McDonald, Larry tells of what inspired, then killed, the short-lived Cobra farming phenomenon of late-1800s India:

The Leaders Are Losing Their Shorts

Each week I track the short-interest (the extent to which traders are betting on a fall) in major averages and select individual securities...

I thought I'd share some of what I added to our research thread this morning. I.e., the more our clients understand what goes on down in the weeds, the more they can put volatility into perspective when it shows up. 

Quote of the Day: The Fed Sees, and Fears, Inflation

Hey, I think I found one!

Yesterday I blogged:

Macro Update: Contextualizing...

Our PWA Macro Index came in unchanged this week at -11.76. 

Morning Note: Vol Is Trying To Tell Us Something...

Asian stocks were mixed overnight; the 16 markets we track split the difference by the close, 8 green/8 red. Japan took the hardest hit on news that the longest-running prime minister in its history is stepping down for health reasons. The yen is our third-best performing core portfolio component this morning. I suspect that's not for defensive reasons (the reason we own it) but out of uncertainty, in that Abe's economic scheme was forever a resoundingly yen-weakening proposition. Europe's messy, with 15 of the 19 bourses we track in the red. The U.S. (save for the Nasdaq) is essentially flat so far this morning: Dow up 24 points (0.08%), S&P 500 flat, +0.05%, Nasdaq up 0.35%, Russell 2000 flat -0.07%.

This Week's Message: Cash-for-Clunker-esque -- AND -- The Fed Fears Success...

Yesterday, Dan, our operations manager and budding tech analyst offered up a smart and relatively bullish short-term case for Apple.

Morning Note: Nuance

Asian equities were the definition of mixed overnight; 8 of the markets we track up, 8 down. Europe's getting hammered this morning; all but two of the 19 indices we track are in the red as I type. U.S. equity traders, on the other hand, are, for the most part, liking what they heard from Fed Chairman Powell this morning (more on that later). Dow up 178 (0.63%), S&P 500 up 0.24%, Nasdaq flat +0.02%, Russell 2000 flat -0.04%.

Afternoon Note: Can't Know the Future, But Can Know the ......

Asian stocks closed mostly higher overnight; 11 of the 16 markets we track in the green. Europe, however, had a rough go of it today; 15 of the 19 indices we follow closed in the red. U.S. equities were mixed, but definitely (price-wise) with a positive tilt: Dow down 60 points (-0.21%), S&P 500 up 0.36%, Nasdaq up 0.76%, Russell 2000 up 0.32%.

Quote of the Day: Cash is King

While we're presently actively exploring safe ways to generate better yields on the historically (for us) high level of cash we're sitting on, I want to reiterate here the point I've been making of late to some of our largest investors: Yes, we're sitting on an atypically for us large chunk of cash, but, like everything else we do -- while, sure, it's defensive too -- it's strategic. 

Morning Note: More Slices Don't Make More Pie...

It was risk-on overnight in Asia, with 14 of the 16 markets we track closing higher. Europe's feeling it as well this morning; 17 of the 19 indices we follow comfortably in the green so far. The U.S. too; Dow up 270 (+0.97%), S&P 500 up 0.69%, Nasdaq up 0.35%, Russell 2000 up 0.84%.

Ain't Pretending...

The good news, as we've been reporting herein of late, is that the credit markets -- while ticking ever-so-slightly tighter last week -- have calmed down markedly since the Feb-March panic. I mentioned in a post yesterday that while another equity market selloff from these levels could come swiftly and invoke fears of another liquidity event (all babies going the way of the bathwater), it's our view that the Fed has the liquidity risk properly attended to. And, therefore, such an event we (PWA) would likely exploit to gain exposure to what we're presently after at more opportune prices.

Macro Update: It's All About Folks -- OR -- How's the Traffic Out There?

Housing permits and starts have nearly recaptured their pre-recession uptrend. 

Morning Note: More Bad Breadth. Plus, The Lately-Rising Dollar and What We're Thinking/Doing About It

Asian equities ended the week on a positive note, with 13 of the 16 markets we track closing higher overnight. Can't quite say the same, however, for Europe, at least so far this morning; 11 of the 19 indices we follow trading lower. U.S. equities, while mostly green, continue to exhibit very concerning breadth (adding the S&P 500 Equal Weight Index herein to illustrate the point): Dow up 84 points (0.30%), S&P 500 up 0.11%, Nasdaq up 0.32%, Russell 2000 down -0.96%, S&P Equal Weight -0.36%.

Quote of the Day: Bad Breadth

Speaking of bad breadth, just after posting this morning's note I saw this from Bloomberg's Andrew Cinko on the details:

Morning Note: Happy to be Patient

Asian equities took a hit overnight, with all 16 markets we track finishing the session lower. Europe's no better this morning; all 19 indices on our radar are in the red. U.S. stocks, on the other hand, are mixed: Dow down 87 points (-0.31%), S&P 500 down -0.15%, Nasdaq up 0.26%, Russell 2000 down -0.74%.

This Week's Message: MUCH More to Play Out...

We'll keep this week's message short, given the rundown I presented in last evening's video.

In said video I mentioned that in all bear markets that occurred during a recession since 1927, only one didn't see the first selloff bottom retested or blown through before it was all said and done. That one occurred in 1949, and it was a bear market (20% off of all-time highs) by merely a hair:

Again, in every other case over the past 93 years, recession bear markets were far from over after the initial decline that made the bear official.

The two analogs to today's setup I've referenced most have been 1929 and the tech bubble. The first retest of the initial low occurred ~9 months later in 1929 and ~5 months later during the tech bubble. 

1929

Tech Bubble

We're presently 5 months removed from the initial low this go-round, and the market hasn't even begun to roll over:

2020 Recession Bear Market

With regard to the tech bubble analog, and to reiterate the present state of market internals I touched on in the video, as Schwab's Liz Ann Saunders points out, yesterday's action, for example, punctuated the point.

"Yesterday’s record close in interesting company ... data compiled by
@Bloomberg reveal that historical days when S&P 500 gained 0.28% or more while 42% or less of members were advancing, were only before & during tech bust (obviously, a small sample size)"

 

Now, when I say "the market" hasn't even begun to roll over, I'm speaking of the S&P 500 Index, which currently is more concentrated in its top 5 positions than I believe it's ever been.

Here's the one-year chart:

Now, if the market is indeed more than, say, the top 5 weightings in a given index, well, then, things aren't quite as robust as they might otherwise appear.

Here's the one-year chart for the S&P 500 Equal Weight Index (i.e., each component weighed the same):

And of course nothing tells that story like a look at the year-to-date results across U.S. sectors.

Of the thirteen featured below, 7 remain in the red on the year:

Of course we should absolutely expect as much given the lousy internals I spoke about in the video.

Yes, as I continue to stress, there's MUCH more to play out before the curtain closes on this particular episode...

Thanks for reading,
Marty

A Technical Look at the US Equity Market (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Morning Note: Mass Distortion in the Housing Market

Asian stocks were mostly green overnight with 10 of the 16 markets we track closing higher. Europe has pretty much surrendered its gains from the open, as I type 15 of the 19 indices we track are in the red. US equities are mixed: Dow down 87 points (-0.31%), S&P 500 flat, Nasdaq up 0.30%, Russell 2000 down 0.94%.

Morning Note: Fundamentals do matter, just not lately...

Asian equities traded mixed overnight, although China saw a nice rally, as its central bank did more of the central bank stuff that world equity markets are lapping up these days. There's of course the obligatory how long can they keep doing this, and/or, how long will markets continue to buy it? questions come to mind, but we'll continue to explore those in other commentary. Europe's having a nice morning so far, with 16 of the 19 markets we track in the green. US equities are mixed: Dow down 75 points (-0.27%), S&P 500 up 0.29%, Nasdaq up 0.70%, Russell 2000 up 0.38%.

Uncomfortably Comfortable, Or, Getting Tipsy...

Amid all of the fancy fundamental and technical analyses firms like ours perform and peruse, we must never lose sight of the simple fact that what we are truly analyzing -- to repeat the gist of our August 5th message -- under all circumstances, and with no exceptions, are the actions and reactions of human beings; on behalf of themselves and their families, on behalf of their business interests, and on behalf of the political posts/parties they occupy -- the world over.

Macro Update: The Begging Question

Our PWA Macro Index overall score jumped a notable 7.84 points this week to -19.61. Five of our inputs improved enough to warrant positive score changes, while one dropped a notch.

Morning Note: The Crowd

Asian equities traded mostly lower overnight, with 10 of the 16 markets we track closing in the red. Europe's bleeding literally across the board; every one of the 19 equity indices we track is trading lower this morning. U.S. equities are mixed: Dow up 43 points (0.16%), S&P 500 literally flat, Nasdaq down -0.26%, Russell 2000 down -0.19%.

Morning Note: A Lot Has To Go Right

Asian equities traded mostly higher overnight, with 13 of the 16 markets we track closing in the green. No such luck, however, for Europe this morning; only 4 of the 19 indices we track trading higher. U.S. stocks are mixed as I type: Dow down 31 points (-0.11%), S&P 500 up 0.07%, Nasdaq up 0.47%, Russell 2000 up 0.24%.

This Week's Message: Brains to Burn

I'm taking this week's message from my little 2013 book. I'm thinking this essay I penned back in 2010 and featured in Leaving Liberty? is once again timely...

Morning Note: What Investing is About...

Asian equities closed yet again mixed overnight; 7 of the markets we track in the green, 9 in the red. Europe, on the other hand, is yet again beginning the day in impressive fashion; 16 of the 19 markets we track presently trading higher. US equities are nicely higher across the board this morning: Dow up 260 points (+.94%), S&P 500 up 1.27%, Nasdaq up 1.63%, Russell 2000 up 0.79%.

The VIX (SP500 volatility) is getting crushed, -7.78% to 22.22. VXN (Nasdaq vol) is supporting this morning's rally thus far as well, -6.65% to 29.75.

Oil futures are up 1.61%, gold's are up $2, silver's down 1% (futures that is, spot price is up), copper's down -.61% and the ag complex is mostly green as I type.

The 10-year treasury is trading lower (yield higher) and the US dollar index is off by -0.11%.

Our core portfolio is off to a decent start this morning; up 1.05% as I type.

I'll circle back a little later with our weekly message. In the meantime here's Popular Delusion's Dylan Grice on what he thinks investing is "about".

"Everyone thinks investing is about being smart. its more about being different."

I agree, although I'd add objectivity and humility... 

Have a great day!
Marty

Quote of the Day: Like the Spring of 2000...

In client review conversations -- in response to the disbelief our more veteran/tutored clients express about the present state of market affairs -- I often find myself harkening back to those tech bubble days (spring of 2000) when retail traders threw all caution to the wind and bid tech stocks into the proverbial stratosphere.

Morning Note: Rotation or Harbinger?

Asian equities traded in mixed, by definition, fashion overnight: 8 of the markets we track closed higher, 8 lower. European markets this morning, however, possess no such ambiguity; 18 of the 19 bourses we follow are solidly in the green as I type. US equities are once again starting the day in let's call it confused fashion; Dow up 296 points (+1.07%), S&P 500 up .21%, Nasdaq down -.80%, Russell 2000 up .94%.

Morning Note: Explosion of #4s

Asian equities traded mostly in the green overnight; 12 of the 16 markets we track closed higher. Same for Europe this morning; 16 of 19 indices presently in the green. U.S. equities are mixed as I type, with the Dow up 244 points (.91%), the S&P 500 up .18%, the Nasdaq down -0.53% and the Russell 2000 up 1.5%. 

Quotes of the Day: A Time To Look Silly

As I continue to stress as the stock market continues to seem to defy economic reality; while much indeed changes over time, there's much about human nature that indeed doesn't seem to.

Macro Update: Assessing the Risk/Reward Setup

Our PWA Macro Index continued its climb out of the abyss this week; coming in at -27.45, a notable improvement of 5.88 points. Three components saw their scores increase, none decreased.

Morning Note: Dollar Rising -- And -- Maybe The Quote of the Year

Asian equities had a rough go of it overnight, with all but 3 of the 16 markets we track trading lower; US moves against select Chinese-owned companies inspired an instant wave of selling. Europe's trading mixed this morning, while U.S. major averages are, save for smallcaps, trading modestly negative: Dow down 100 points (-.36%), S&P 500 down -0.18%, Nasdaq down -0.17%, Russell 2000 up 0.12%.

Quick Update: Core Portfolio YTD (video)

Once playing, click the icon in the lower right corner for full screen. Focus should occur after a few seconds; if not, click the wheel to the left of the YouTube icon to adjust:

Morning Note: Stay Tuned, And Stay Hedged...

Asian stocks closed mostly (10 of 16 markets we track) in the green overnight, Europe, however, is not following suit this morning; with 17 of the 19 indices we track trading lower. U.S. equities are essentially flat as I type: Dow up 6 points (+0.02%), S&P 500 down -.14%, Nasdaq down -.10%, Russell 2000 down -0.12%.

This Week's Message: What We're Actually Measuring...

Lately, on Wednesdays, I'm finding myself staring for longer than usual at a blank page on my computer screen, shuffling through thoughts on what I might offer up in a "weekly message" that is more than just some regurgitation of the regurgitations I've been offering up on a daily basis.

Morning Note

Asian equities traded higher virtually across the board overnight, Europe's following suit this morning, with only 2 of the 19 indices we track in the red, and the US certainly won't be left out; Dow up 285 points (1.1%), the S&P 500 up .59%, Nasdaq up .28% and the Russell 2000 up .66%.

Evening Note

A good friend just sent me Merrill Lynch's latest market narrative. I'm thinking my reply can serve nicely as this evening's note:

Quote of the Day: Who's Selling?

So who's selling their shares into this extended rally off of the March bottom?

Well, not who you'd hope:

Morning Note: Wow! Those Top 5!!

Asian equities were nicely green nearly (with only China's Shenzhen Index closing lower) across the board overnight. Europe's mixed this morning, with 9 of the 19 bourses we track currently in the red. U.S. major averages are on the rise (although barely for the Nasdaq): Dow up 128 points (.48%), S&P 500 up .21%, Nasdaq up 0.02% and the Russell 2000 up .43%.

Morning Note: What A Price-Moving Cohort Has Yet To Appreciate

Asian stocks traded mostly lower overnight, with only 6 of the 10 indices we track in the green. European equities, on the other hand (save for Greece and Hungary) are rallying this morning. The major U.S. averages are trading nicely higher as well; Dow up 200 points, S&P 500 up .72%, Nasdaq up 1.23%, Russell 2000 up .95%.