Posts by Maxwell Meyers
- Maxwell Meyers at Talking Numbers18 days ago
The Bond King doesn’t appear to be too keen on bonds these days, or at least those issued by the U.S. government.
Pimco’s Bill Gross reduced his exposure to government-related bonds in his $222 billion Pimco Total Return Fund in August, while slightly increasing the amount of corporate bonds in his fund, according data posted on Pimco’s website.
Gross’ timing may have been off, but the move appears to be working out. Initially, U.S. bonds enjoyed a strong rally in August, but they’ve since been selling off sharply in September on expectations that the Fed may raise rates sooner than expected. So should you follow the Bond King out of bonds?
According to some traders, the answer is yes.
“We expect the Fed to raise rates in the second quarter of next year,” said Chad Morganlander of Stifel’s Washington Crossing Advisors. “And the ten year should move way run advance of that,” added Morganlander, who also said he expects the yield on the 10- year bond to approach 3 percent by next year. Morganlander advised investors to buy bonds with shorter maturities and higher credit ratings.
- Maxwell Meyers at Talking Numbers20 days ago
As if this record-setting rally needed another superlative, a new statistic is now making the rounds on Wall Street and getting traders to scratch their heads in disbelief.
According to Jonathan Krinsky, chief market technician at MKM Partners, the S&P 500 has gone 14 consecutive days without a move of 0.50 percent on a closing basis, the longest streak since 1995. To find a longer streak, you have to look to 1969, which saw 20 consecutive trading days without such a move. Back then, Nixon was president, “Butch Cassidy and the Sundance Kid” was the top film at the box office, and the Beatles gave the last public performance in London.
Note, the streak was broken by Tuesday's 0.65 percent decline, but the market moves have still been very muted of late. So what does this lack of volatility all mean for a market that hasn’t seen a correction of 10 percent or more since 2011?
Well, if history is any indication, perhaps more gains.
“The takeaway is this result to more upside,” Krinsky said. “At least a couple percent higher.”
- Maxwell Meyers at Talking Numbers21 days ago
Could too much of a bad thing actually be good? That appears to be the case with U.S. equities, which continue to rally despite a preponderance of bad news.
In the past month, The Dow Jones industrial average has jumped almost 4 percent despite a number of events (sluggish U.S. job growth, a depressed European economy, a surging dollar, Russia, ISIS) that would typically have investors running for the exits.
So what gives?
“I call it the TINA Phenomenon,” said Enis Tanner, global editor for RiskReversal.com. “There Is No Alternative (TINA) for U.S. stocks, which are once again outperforming their global peers in 2014.”
Tanner points out that a number of factors that would seemingly be bad for stocks have actually created an environment where stocks can flourish. Europe’s economic problems (and tacit backstop by the European Central Bank) have led to historically low rates across Europe.
That has helped keep rates here at home low as many European sovereign nations now sport bond yields well below those of U.S. Treasurys.
And the geopolitical turmoil in Ukraine and the Middle East has only helped suppress those low rates, as Treasurys have enjoyed a so-called fear bid.
- Maxwell Meyers at Talking Numbers25 days ago
Think the market has reached a top? Well one very old and widely followed market theory is signaling more gains to come.
Transports, which consist of stocks like railroad companies, airlines and truckers, are at record levels and are up 16 percent year to date. In fact, the group on Thursday hit a new all-time intraday high for the third straight session. and that has some bulls getting even more bullish.
“Dow theory is still good,” said Chad Morganlander of Stifel’s Washington Crossing Advisors. “It’s a good barometer for the health of the economy.”
Dow theorists contend that when transports do well, the overall market should follow. The logic is simple. As economic activity picks up, people tend to consume more, which requires people to ship, fly and truck objects around the world. In other words, these stocks are taking the pulse of the global consumer, and right now that pulse is strong, something that should hearten the bulls.
“You’re seeing it in the economic indicators,” added Morganlander. “Auto sales are strong. All the ISMs are strong. That’s a reason to stay long.”
- Maxwell Meyers at Talking Numbers1 mth ago
It’s been the investment equivalent of Pavlov’s dog. The VIX spikes, and soon after, a rally in stocks quickly ensues.
In fact in the past year, the VIX, or so-called “fear index” has moved 50 percent or more off its lows four times, and each time the S&P has made meaningful moves higher.
So as the VIX now flirts with four-month highs, investors are asking a very simple question: Is all this volatility a buying opportunity, or will things be different this time?
According to one well-regarded technician, the VIX is flashing a big “buy” sign.
“Spikes in the VIX tend to indicate heightened investor fear,” said Ari Wald, head of technical analysis at Oppenheimer. “From a contrarian standpoint we use that as ‘buy’ signals, and the numbers agree.” According to Wald, since 1990, when the VIX spikes more than 50 percent off its 63-day low, and the S&P 500 is above its 200-day moving average, as it is now, the S&P 500’s performance has been more than “twice its average performance over the next one and two quarters.”
- Maxwell Meyers at Talking Numbers4 mths ago
Cal Ripken’s 2,632 consecutive starts. DiMaggio’s 56 straight games with a hit. Those streaks pale in comparison to what’s happening in the market right now.
That’s because the S&P has gone 468 days since experiencing a correction of 10 percent or more. That’s the fourth longest streak on record, according to Newedge.
Still not impressed? How about this: The S&P hasn’t closed below its 200-day moving average in over 18 months. Waiting for the correction has become an absurdist activity, the financial equivalent of “Waiting for Godot.”
“We’ve been above trend for far too long. It’s been four years since we’ve had a close below the 150-day moving average. We have to go back to 2003 – 2007 to find a similar run,” said Rich Ross of Auerbach Grayson. “The stage is set for a serious 10 percent correction. Maybe even 20 percent”
Of course, identifying the catalyst for said correction has been a near impossible task for most market participants. But some are starting to point to the composition of the recent leg of the run as a warning sign.
We all know about the Marc Fabers, Peter Schiffs and Nouriel Roubinis of the world, endlessly calling for the mother of all crashes. But now a different source is sounding the alarm: the charts.
Despite the Dow Jones industrial average reaching a new record high, Richard Ross, global technical strategist at Auerbach Grayson, says certain technical indicators are calling for a serious correction.
"I'm going to be completely clear here: I'm quite bearish and I think the market's going significantly lower," said Ross, a "Talking Numbers" contributor.
Ross sees a big problem with the S&P 500's chart—a 20 percent problem to be exact. In 2011, the index corrected by about that much to its 150-week moving average after making moves very similar to its most recent price action.
Apple’s moment of truth arrives today after the close when the world’s largest company reports second-quarter results.
Interestingly enough, it was earnings a year ago that sent Apple shares on a torrid run, rising 33 percent in the past 52 weeks as the company increased its stock repurchase program and stirred renewed optimism among investors about a refresh for its iPad and iPhone products.
But 2014 has not been kind to the tech giant. Shares have fallen 5 percent year-to-date and have badly trailed the market.
So will results change all that for Apple?
According to Tavis McCourt of Raymond James, there are three things investors will learn from Apple’s earnings tonight.
First: Is Apple’s business slowing, or is it declining? That may seem like semantics, but according to McCourt, it’s a subtle but important distinction. “The guidance is for modest growth, and if they can achieve that, it’ll be good for the stock,” McCourt told Talking Numbers. “The risk is that this business is in slow decline because of the commoditization of high-end cell phones.”
If filling up your car seems more expensive, that’s probably because it is more expensive.
Quietly, wholesale gasoline prices have been on a tear, hitting an eight-month high as a combination of higher oil prices and refinery outages have conspired to cause more pain at the pump.
So what could this mean for the stock market given that, at least according to some economists, each penny increase in gasoline prices equals $1 billion dollars less spent on other parts of the economy?
Curiously, it may not be such a bad thing.
“Gas prices have largely been a proxy for the broader economy. Strength in the economy filters down to higher gas prices, and we are seeing that,” said Richard Ross of Auyerbach Grayson and a Talking Numbers contributor.
Its cars inspire envy in auto enthusiasts all over the world. But recently, Tesla Motors’ stock performance has elicited a different emotion: despair. That’s because the company’s stock price has fallen nearly 30 percent since hitting its February high. The move has come on relatively little news, which is not that surprising given the confusion among the analyst community about exactly how to value electric automaker.
(Read: Wall St falls as momentum shares sink again) Of the 16 analysts that cover the stock, five have a positive rating, eight list it as a “hold,” and three have it as either an “underweight” or a “sell,” according to Factset, “There is no strong consensus here, and that contributes to its volatility,” said Andy Busch, editor of the Busch Update and a CNBC contributor. “Is it an auto company or a technology company? All we really know is that it’s the poster child for momentum,” Busch added. With few fundamentals to rely on, many traders have turned to the charts for help. But unfortunately, they aren’t looking much better, at least according to some technicians.