Posts by Maxwell Meyers
- Maxwell Meyers at Talking Numbers28 days 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 Numbers3 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.
Fear and greed are both rallying in 2014. Both the VIX, the so called “fear index,” and stocks, let’s call it the “greed index,” are up in 2014. Typically, these two indexes move inversely to each other, which makes sense. Stocks tend to rally when investors feel secure and fall when they’re scared. In simple terms, the VIX measures the cost of insuring stocks. The greater the fear, the more investors are willing to pay to protect their portfolios, which explains why the VIX rises during turbulent times. So what gives? And more importantly, what does that mean for stocks?
Do you want wine with your Frappuccino? Well, you may soon be in luck. That’s because Starbucks announced it will sell beer and wine in thousands of stores after 4 p.m. But will the move caffeinate the stock, which has badly lagged the broader market in 2014?
(Watch: Starbucks to sell wine and beer)
“People who are addicted to Starbucks are addicted to the brand as much as the coffee,” said Gina Sanchez of Chantico Global. “I think sharing a glass of wine with a close companion in a homey Starbucks still works. I think this could be a lucrative move.” Still, the initial shift to adding booze will take some time to roll-out and is expected to have a negligible impact on the company’s near-term bottom-line. And anyone hoping for a quick fix shouldn’t look to the charts either.
You want to know how to freak out a bond trader? Well, if you’re the chairwoman of the Federal Reserve, utter these words: “So I, you know, this is the kind of term it's hard to define. But, you know, probably means something on the order of around six months, that type of thing.” That “type of thing” took traders by surprise and laid a whipping to the ten-year bond yesterday. The yield, which moves inversely to prices, is now trading at the upper end of its recent range.
(Read more: Treasurys flat as investors absorb positive US data)
So did Yellen’s words signal a change in Fed policy, and should bond investors be concerned?
One well known bond watcher says yes. “Going from near total clarity on policy intention to near total uncertainty should have bond investors concerned,” said David Robin, Managing Director at Newedge. “The shift to qualitative guidance increases the uncertainty surrounding policy path determination. While inflation remains generally low, and will insulate the longer end of the curve from inflation premium, the front end of the curve will have to price in an escalating.”
It was all working for gold. And then Janet Yellen spoke. In her first news conference as the Fed chairwoman, Yellen seemed to imply the Fed might raise short-term rates sooner than many market participants expected.
Immediately following those remarks, gold continued to head south, capping off a four-day stretch in which the shiny metal has lost almost 5%. The move also marks quite a reversal for gold, which was in the midst of its best Q1 performance since 1985.
(Read more: Gold settles about 1% lower on Fed, firm US dollar)