Tue, 19 Aug 2014 18:31 GMTOne of my favorite themes headed into this year was the expected recovery in residential and non-residential construction demand. I keep track of a number of factors within the manufacturing segment: ISMs, PMIs, factory orders, new/existing/pending home sales and the Architectural Billings Index. All of these metrics have shown improvement throughout the year. Both the ISM and PMI reports have been comfortably above the expansionary level mark of 50 for more than a year and the most recent ABI report showed inquiries at the highest level since 2005. But more importantly, I listen to company conference calls and in 2Q there were several companies that indicated the environment was showing signs of life.a Companies like Ingersoll-Rand , Lennox Internationala , Armstrong Worlda , United Technologies and Johnson Controlsa all pointed to green shoots. Even the disappointing quarter from Eatona showed improved bookings in each of its electrical divisions, which was confirmation of the trend.a What’s likely helping the trend is the fact that interest rates have stayed low -- much lower than I expected. In fact, if you ask me what’s the biggest surprise year to date, it's the 10-year bond yield at 2.36%, down from 3% seen at the end of last year. There are a lot of factors weighing on bond yields, such as the geopolitical issues, the continuation of QE by the Federal Reserve, the unknown of tapering back some of these QE efforts and the fact that Europe is teetering on going back into recession as Russian sanctions have put pressure on this region. Japan has decelerated from its recent recovery and China remains a wildcard on whether it can grow at its targeted rates. As a result, Treasuries are seeing a flight to safety and that is bidding up bond prices and pressuring yields. While that is putting pressure on the bottom line of financials (and my bullish bank call from earlier this year), it is leading to higher loan growth and the improvement in the overall economy. That's because low interest rates help affordability for the consumer and U.S. corporations. This trend of low rates could last longer than expected given that Europe isn’t likely to see a quick recovery, Japan remains in a malaise following the BOJ’s decision to raise its consumption tax and the geopolitical issues in the Middle East are likely to remain elevated. China remains a wildcard, but the PBOC’s commitment for its 7.5% GDP target will likely continue to lead to targeted stimulus efforts. Still, it’s pretty clear that this region needs to be watched closely.a So, the United States is the best of the lot, showing better manufacturing data and a pretty resilient consumer, with auto sales at new cycle highs, retail sales mixed-to-improving and housing showing signs of life (today’s housing starts showed a nice ramp higher, up 15.7% y/y to an annual rate of 1.09 million). GDP has seen a snap back in 2Q to a 4% rate from the 2.1% decline in 1Q and consensus is looking at 3% growth in the second half (some are calling for higher, at more like a 4% clip).a Corporate earnings for 2Q were strong, seeing 10% bottom-line growth and 4.5% revenue growth and if the economy continues to progress as I expect, earnings could continue to beat -- and on higher revenue growth, which would be the pleasant surprise.a If you think rates stay lower for longer and the U.S. economy continues to show improvement while the rest of the world muddles along, it’s probably worth looking back at some of the housing plays, especially after hearing what Home Depota had to say today on its conference call. The company reported better-than-expected earnings, revenues, same-store sales, average ticket size and transaction and notable strength in HVAC, tools, appliances and lumber. HD posted an acceleration in all three of its U.S. businesses, including the 10th-consecutive quarter of above-average corporate growth in its professional segment. I’ve recommended Toll Brothersa , Stanley Black & Deckera , Weyerhaeusera , Mascoa , Home Depot and Lowe’[...]
Wed, 20 Feb 2013 18:21 GMT
I present the weekly chart of Home Depot first below to illustrate the longer-term RSI divergence (top pane of chart) which has been building. Home Depot has essentially gone flat for the past several weeks. And this divergence is still worth watching as we await the next big move.
Along those lines, the homebuilder ETF daily chart, second below, has been relatively weak over the past few sessions after several quarters of strong market outperformance. Here, again, the top pane shows us a negative RSI divergence to price.
The notion of a resurgent housing market has become increasingly accepted in recent months. With lumber weak the past two days, keeping an open mind that upside may be limited from here for the sector, as good news has been priced in, is important as we watch these divergences play out one way or the other. ...Click to view a price quote on HD. Click to research the Retail industry.
Fri, 15 Feb 2013 17:53 GMT
"Individuals who cannot master their emotions are ill-suited to profit from the investment process." - Benjamin Graham
Remember when stock prices used to change each day?
OK, I'm exaggerating...but not by much. Bespoke Investment Group notes that the average daily spread between the high and the low on the Dow Jones is at a 26-year low. Stocks simply ain't moving around very much these days. ...Click to view a price quote on BBBY. Click to research the Retail industry.
Thu, 14 Feb 2013 18:38 GMT
This is a big question that I ask myself when I walk into work every morning. What are we going to do with Treasury Bonds? I mean, they've been a short since they broke down late last year. But what about now?
Here is a chart of US Treasury 10-year note yields. The rally in yields continued through the end of January in this nice clean uptrend channel stalling right around the 61.8% Fibonacci Retracement of last year's decline. Notice the RSI divergence in the summer that helped kick-start the move.
...Click to view a price quote on TLT. Click to research the Financial Services industry.
Wed, 13 Feb 2013 16:37 GMT
Decision time! Prepare for a pullback! I am so bullish, I can't wait to go all in on a correction!
Some of you know I have been listening to a little bit of Taylor Swift lately, and maybe it has been influencing me. But what if it never happens? Well not never, but say all of 2013? Are you ready for that? For all those waiting for a top based on sentiment, your cabbie or barber showing interest, or what ever, consider this simple 21 year monthly chart of the S&P 500. The Triple Top rejection you are waiting for may never occur. The evidence? The momentum indicators Relative Strength Index (RSI) and Moving Average Convergence Divergence indicator (MACD). The RSI is an oscillator and moves back and forth between 0 and 100. Caution flags get raised at 70 as technically overbought ...Click to view a price quote on ^GSPC.
Tue, 12 Feb 2013 17:52 GMT
With a positive reaction to earnings, Michael Kors remains a strong chart on virtually all timeframes. Obviously, if you did not play earnings it is tough to chase the stock this morning. But turning $60 into support is the main issue I am observing to plan an entry in the coming days or weeks.
As I wrote on January 13th:
Ever since KORS IPO'd in late-2011, the chart has been far more orderly than many other popular IPO's we have seen in this cyclical bull market. On the weekly chart below, you will note what is known as the "base over base" pattern, indicating a steady ebb and flow to the price action with an inherent bullish bias literally since the IPO-A huge move higher followed by a long, mild basing period. ...Click to view a price quote on KORS. Click to research the Specialty Retail industry.
Fri, 08 Feb 2013 19:04 GMT
The three main slot-machine makers in the gaming industry, BYI IGT WMS, have all sporting strong charts lately. IGT is considered the best, but the other two have interesting growth prospect as well, particularly with the emergence of server-based gaming. I have been looking for these three to get a nice move going for a while now, but they had teased. ...Click to view a price quote on BYI. Click to research the Leisure industry.
Wed, 06 Feb 2013 15:36 GMT
Here's something that worries me about the stock market today. The swings are getting bigger, not smaller. So volatility is expanding. The S&P 500, therefore, is putting in somewhat of a broadening formation. Definitely not a check mark for the bulls.
And if it was just that, then maybe it could be brushed off. But it's where it's happening that gives it validity. As you can see in the daily bar chart below, we're at the upper end of this multi-month trend channel:
...Click to view a price quote on ^GSPC.
Fri, 01 Feb 2013 18:45 GMT
"There are two times in a man's life when he shouldn't speculate: when he can afford to and when he can't." - Mark Twain
Remember the panic about the Fiscal Cliff? And the Debt Ceiling? And the Sequester? And about a dozen other things the financial media told us -- insisted -- that we simply had to worry about?
Well, here we are a few weeks later. The Dow Jones Industrial Average just closed out its best January in 19 years. The Wilshire 5000, the broadest measure of the U.S. stock market, is just below its all-time high. ...Click to view a price quote on F. Click to research the Automotive industry.
Wed, 30 Jan 2013 15:32 GMT
I have heard that a lot lately. And Treasury Bonds are looking weak. The daily chart of the Treasury Bond ETF (TLT) is showing a break of a support area from 117.50 to 118.50 with Tuesday's closing price. Price levels not seen since May 2012. And all of the Simple moving Averages (SMA) are pointing lower. In fact there was a Death Cross on Friday. Ominous right? The next gap area
lower forms between 111.70 and 112.70. $5 is some good coin. But the monthly chart may temper your enthusiasm to bet on the demise of Bonds. The bullish Andrew's Pitchfork that has been in control since the ETF started shows that all that has happened is the Median Line attracting price and then a slight overshoot. This happened back in May 2012 as well before it launched higher, and boy does that 10+ year uptrend look strong. But there are some cracks in the story. The Relative Strength Index (RSI) is making a new lower low from the last touch at the Median Line and ...Click to view a price quote on TLT. Click to research the Financial Services industry.
Tue, 29 Jan 2013 17:57 GMT
Did some surfing of the financial blogosphere along with quite a few mainstream financial publications yesterday and the social mood has made a massive 180 from where it was even 30 days ago. One thing about markets is the humans left (ex machines) never change. After a stellar January everyone is pointing to the bright skies ahead as Europe is contained, China has accelerated and the U.S. surges to... well 2%-2.5% growth. Heck even bond yields are going up -- granted to areas once considered recessionary and would be associated with a calamity. Awesome move right? Almost back to 2% on the 10 year...
Well even in the context of the past 3 years... not so impressive. But this is another bullish thesis -- the beginning of "the great rotation" out of bonds and into stocks. For real this time? We won't know without the benefit of hindsight of course... ...Click to view a price quote on ^GSPC.
Mon, 28 Jan 2013 19:56 GMT
Given that markets have been ripping higher, we thought it a prudent time to check in with market strategist Jeff Saut. His latest investment outlook is entitled "For All the Sad Words of Tongue and Pen" where he looks at how market rallies can last longer than one would think.
He highlights how at around the 18th day of a typical 17-25 day buying stampede, certain investors will start to question whether or not they've missed "the bottom." This then leads to a new round of buying from people who don't want to miss the big move, and thus the rally extends.
So when might this rally cease? Saut mentions rallies can typically last up to 30 sessions while today is session 18. He points out some of the cautious signals he is seeing: ...Click to view a price quote on ALTR. Click to research the Electronics industry.
Fri, 25 Jan 2013 17:00 GMT
"Most investors want to do today what they should have done yesterday." - Larry Summers
In the CWS Market Review from two months ago, I wrote: "But with the election behind us, the clouds have cleared, and I see a strong year-end rally ahead of us. In fact, I think the S&P 500 can break 1,500 by the early part of 2013." Well, it took the index just 24 days into 2013 to vindicate our prediction.
On Thursday, the S&P 500 indeed broke through the 1,500 barrier for the first time since December 12, 2007. The index has now risen for seven days in a row, which is its longest winning streak since 2006. The Dow is off to its best start in more than a quarter of a century. ...Click to view a price quote on WFC. Click to research the Banking industry.
Wed, 23 Jan 2013 15:53 GMT
This past weekend in my Macro Week in Review/Preview for clients I noted that for the second week in a row the markets looked bullish but with the Nasdaq 100 (QQQ) lagging the S&P 500 (SPY), and Russell 2000 (IWM). In fact it is also lagging the Dow 30 (DIA) and Dow Transports (TRAN). If you take a look at the performance chart below since January 2nd the Nasdaq has been moving sideways while every other index has been rising. There is no rule that says that this
cannot persist, but like the stubborn little kid that does not want to follow the rest of the family, when left alone long enough it will likely try to catch up. So how do you prepare for this to happen? Well there are several ways. The simplest is to just prepare to buy the ETF $QQQ when it breaks the range over 67.50. But you could also reduce some risk and play it as a pairs trade. Sell one of the indexes that has been a high performer on a dollar for dollar basis against a long position in the ...Click to view a price quote on QQQ. Click to research the Financial Services industry.
Tue, 22 Jan 2013 19:13 GMT
The monthly chart of Las Vegas Sands is one that i have referred to periodically in this blog over the years. The jaw-dropping crash from roughly $150 down to a $1 handle during the 2007-2009 bear market had many thinking the major casino operator was on the brink of going out of business. However, a sharp snapback off the March 2009 lows put those fears on the backburner.
Over the next few years, we saw a textbook psychologically progression after a crash and subsequent snapback -- a flattening out period where each bit of bad news was absorbed increasingly better. As a result, Sands is still holding the lion's share of its bear market bottom snapback rally. Plowing through $60 is sure to get bulls increasingly giddy for a multi-year base breakout. ...Click to view a price quote on LVS. Click to research the Leisure industry.
Fri, 18 Jan 2013 18:17 GMT
After a spectacular 2012, the biotechs as a whole are holding up rather well in the first few weeks of 2013. However, as a bull run matures we inevitably seen leadership narrow and rotations emerge. Two of the larger components of the biotech sector, AMGN and REGN, have flashed some blinking yellow lights over the past few weeks. Note the uptick in selling volume accompanying each recent sell-off. Amgen bulls likely need to hold $83 to avoid confirming a nasty head and shoulders topping pattern, while you can bet Regeneron bears are playing for a breakdown below $164.
Make no mistake, there are other biotechs exuding resiliency here. However, there are indeed two sides to every rotation. ...Click to view a price quote on AMGN. Click to research the Drugs industry.
Thu, 17 Jan 2013 19:25 GMT
After the twin good news items today premarket there was a stinker at 10 AM in the Philly Fed. The S&P 500 came in but only very briefly and did not even fill the morning gap up. So all in all, we can say today the good news was embraced and the bad news ignored. That's a bullish sign near term. Also after the first hour the gap up is holding, a good technical sign. The longer the morning gap up holds, the better the bull case for today. As for the daily picture we finally see a clearance of that mid 1470s area which has been a headache aka Sep 2012 intraday highs. All this quicksand action has also helped work off the overbought conditions the market has been dealing with since the big gap up Jan 2. Here is an update on the channel the SPX has been traveling since mid November (with the exception of the massive headfake down late December) If you are a Tom DeMark fan the top end of the channel is roughly where he said this move would end.
Wed, 16 Jan 2013 15:59 GMT
We learned recently from Yum Brands, YUM, that the Chinese are not eating enough Kentucky Fried Chicken and the stock took a nose dive. Many thought that fast food was the problem broadly. But I recall a wise man once saying, I'll gladly pay you Tuesday for a hamburger today. That man, Whimpie of Popeye fame, must have been buying the hamburger stocks with his money as he was asking his friends for a handout. For now it is Tuesday and a look at the charts of the burger joints shows they have had some great moves and look ready for more. Smart man that Whimpie.
Burger King Worldwide, BKW
...Click to view a price quote on YUM. Click to research the Leisure industry.
Fri, 11 Jan 2013 17:14 GMT
In addition to emerging markets, namely China, seeing strong inflows of late, the developed economies are showing promising signs of attracting rotations as well.
...consider the EFA ETF. This particular ETF concentrates on multinational firms with heavy exposure to the developed economies in Europe, Japan, Australia, and developed parts of Asia. ...Click to view a price quote on EFA. Click to research the Financial Services industry.
Thu, 10 Jan 2013 17:42 GMT
Let the battle begin. Dan Loeb's hedge fund Third Point has started a long position in Herbalife (HLF), he revealed in his Q4 letter to investors. He also filed a 13G with the SEC disclosing that Third Point owns 8.24% of the company as of January 3rd. Loeb Long Herbalife Readers will recall that we recently posted up Bill Ackman's short presentation on HLF where he called it a pyramid scheme. Brian Sullivan tweeted that Andrew Ross Sorkin spoke with Third Point, who believe there's no evidence HLF is a pyramid scheme in their research.
Third Point believes in the compounder thesis that the stock was trading at an attractive discount (after Ackman's short presentation). Third Point writes,
"Applying a modest 10-12x earnings multiple suggests Herbalife's shares are worth $55-68, offering 40-70% upside from here and making the company a compelling long investment ... Given that the company has historically traded more in the 12-14x range (and traded at 16-20x earnings through much of 2011 and early 2012), the opportunity for the company to tell its side of the story tomorrow at its Analyst Day in New York, and the significant short interest, we believe shares could even trade well about our current price target." ...Click to view a price quote on HLF. Click to research the Consumer Non-Durables industry.
Fri, 19 Aug 2011 11:35 GMT
After several technical problems yesterday, we're happy to announce the launch of Real Money Pro. Starting today, Silver subscribers can access new content being posted to realmoneypro.thestreet.com as well as Real Money columns at realmoney.thestreet.com. ...
Thu, 18 Aug 2011 22:23 GMT
To read Ben Thomas' preview of the Hewlett-Packard earnings call, click here.
Hewlett-Packard reported mostly in-line results, but the company's execution and vision are completely off the map.
For the quarter just ended, the company posted third-quarter earnings per share of $1.08 on revenue of $31.2 billion. However, the company is guiding fourth-quarter EPS to a range of $1.12 to $1.16 on revenue of $32.1 billion to $32.5 billion vs. Street estimates of $1.31 in EPS on revenue of $34 billion. ...Click to view a price quote on HPQ. Click to research the Computer Hardware industry.
Thu, 18 Aug 2011 21:56 GMT
Aeropostale reported diluted earnings per share (EPS) of $0.04 per share on net sales of $468.2 million.
Total sales declined 5% year over year, and same-store sales declined 14%. Men's ("guys") sales declined 6%, while girls fell 18%. Units per transaction increased 6%, while total transactions declined 4%, and average ticket declined 16%.
During the period, seven Aeropostale and 10 PS stores opened, while two Aeropostale stores closed. The company ended the quarter with 1,042 stores....Click to view a price quote on ARO. Click to research the Retail industry.
Thu, 18 Aug 2011 21:36 GMT
To read Brian Gilmartin's preview of the Gap Stores earnings call, click here.
Gap Stores reported earnings per share of $0.35 (vs. the $0.33 consensus estimate) on $3.38 billion in revenue (vs. the consensus estimate of $3.34 billion) for actual year-over-year growth of -3% in EPS on 1% growth in revenue.
Expectations were pretty poor coming into the earnings report, so even the slight beat was welcome news, particularly on revenue. ...Click to view a price quote on GPS. Click to research the Retail industry.
Thu, 18 Aug 2011 21:22 GMT
Tim Collins' content is now being featured on the new Real Money site.
Thu, 18 Aug 2011 15:37 GMT
I'd love to wax eloquent on Gap with a pithy missive about the retailer, but the story hasn't changed very much for most of the past decade as the chart below details.
Gap (GPS) - WeeklySource: TeleChart Gold
Since peaking in the year 2000, around the time growth stocks and tech stocks were coming apart, Gap has retooled and become more productive and generated more cash flow, but the company has shown little ability to grow square footage or comps, which has been a problem. ...Click to view a price quote on GPS. Click to research the Retail industry.
Thu, 18 Aug 2011 11:50 GMT
Are gold bugs about to get stomped on?
Early Wednesday morning on Columnist Conversation there were some comments made regarding gold and whether or not its momentum was beginning to fade. As I mentioned on CC, I believe one can lean short on Gc futures -- or the SPDR Gold (GLD) ETF -- as long as prices remain beneath 1795-1800. Any hint that traders are beginning to accept prices above that 5-point zone should send short-sellers back to their hidey holes. Short-term sellers need to see support near 1781 fail, this would likely allow for continued selling through 1765 and toward 1740-1743. As you can see on the chart below, the real fun for short-sellers begins beneath 1740.
...Click to view a price quote on GLD. Click to research the Financial Services industry.
Thu, 18 Aug 2011 11:26 GMT
We're currently migrating login information for Silver subscribers over to the new Real Money Pro site. The new site will be available later today.
Until then, Silver/Pro subscribers can access the new Real Money site. ...
Thu, 18 Aug 2011 04:00 GMT
We've very excited to announce the relaunch of Real Money and the launch of Real Money Pro. Starting tonight, all new content will be posted to realmoney.thestreet.com and realmoneypro.thestreet.com. ...
Wed, 17 Aug 2011 23:55 GMT
Investors love "beat and raise," but, the story this earnings season for most tech stocks has been "miss and lower". JDS Uniphase continued the pattern, reporting fiscal fourth-quarter results that were basically in line, but offering guidance for the September quarter that is materially below the Street's expectations. Unlike a SodaStream International , a stock that was destroyed on the surprise guide down, JDSU is down only 3% in after-hours trade, as investors had already braced for the worst.
Earnings per share (EPS) of $0.23 was in line with the Street, and revenue of $472 million actually bested the $466 Street view. The Communications Test segment grew 11.6% sequentially, but gross margin was down 160 basis points on mix and inventory write-offs. Growth was driven by typical seasonal demand from U.S. carriers. Despite the decline in gross margin, operating margin was up sequentially to 14.4%, but below the target range as the company spent heavily on R&D for new high growth products.
The Commercial Optical Products (CCOP) segment, in contrast, declined 3.4% sequentially, in line with guidance. Lower demand hit the segment in Europe and the Americas, while demand in Asia grew. Lasers were particularly strong with 12% sequential growth, as the Q series and new fiber laser rolled out. Gross margin was down mainly on less absorption due to slower sales. Finally, the small Advanced Optical Technologies (AOT) segment grew 3.3% on strong transmission card and currency product sales. Gross margin expanded 100 basis points on mix....Click to view a price quote on JDSU. Click to research the Telecommunications industry.