Barron's had a piece this morning from an analyst on the VIX:
One technical analyst contends that the VIX has fallen too far, too fast. In other words, the recent fast drop in the VIX could mean that the rebound rally is on its last legs. Katie Stockton at BTIG notes that the VIX, which effectively measures the price of portfolio insurance using S&P 500 options, slumped to 14 on Friday, down from 28 on Feb. 11. Such a 50% slide indicates points to VIX “downside exhaustion,” she says. Here’s the big picture for the market:
“The price action [for the S&P 500] is reminiscent of last October … when a relief rally took the SPX above its 200-day moving average and short-term overbought conditions were maintained for about a month. The October relief rally lifted the SPX approximately 13% off of its September low before it peaked in November and proceeded to make lower highs. Now with the SPX about 13% above its February low, it is time to be particularly sensitive to any loss of momentum.”
Gambler, I seem to recall that last year around this time we had a very similar rally in oil and energy related stocks. It might have had to do with the refineries changing over to gas production for the summer driving season, but everyone thought the decline in oil price was over and of course oil went on to decline into the $20's. At that time, RIGP made a triple bottom at $10 and rallied to $14 by June/July where it ran into resistance before it fell another 50% to its lows under $6 in Jan. There were a couple of rallies during that slide, but they all ended before RIGP challenged the 200 dma which is now at $9.82. Let's call that $10. I think that 200 dma and that $10 level are significant. If it broke $10, then $14 would be the next level, but I'm just not sure that oil is clear to keep advancing from here.
Well, I got that one wrong. All indications were they were not going to be able to maintain. Will have to wait until they report to see if they earned it. I definitely wouldn't be chasing this from here.
Bullard was out today saying that he thinks they should raise. A few months ago he said they shouldn't go too fast. His views change with the level of the stock market.
Have a great weekend.
Gambler, the BAC repurchase was to soak up all of the stock issued to employees. If the Fed couldn't raise rates in March, I really doubt that things are going to be so much better come June that they will raise then, in fact, things could be worse. The lack of a rate rise is going to be a constant headwind for financials and if the economy continues to soften that will also be a headwind. If the market starts to smell that the Fed is bluffing about a rate increase, the strong dollar trade may start to unwind and that may provide some wind for commodity plays including oil and gold. That may not be enough to save the heavy leveraged oil companies, but it may be enough to start to spill into the inflation figures. The big declines in oil prices will start to come out of the inflation calculations so the question is whether there will be other declines that take its place. So the Fed continues to find itself in a box -- they should have raised rates more earlier if they were truly data dependent, but at the same time, that would put the kebash on the economy and the financials. If they get behind the inflation curve, they will have no choice to hike rates as the market will take long rates up. Or maybe they continue to talk tough and do nothing since it has worked out fairly well up until now.
NYMT is due to announce a divy anytime. I think if they cut it again, the stock falls back to $4. Buying at $4 was a good move, but you have made close to 20% and since the divy payment comes out of the stock on the ex date, I don't see the reason for holding on further. The stock is not overbought but it rallied right to the 50 dma just like it did in Feb before announcing bad earnings.
Pale, there's the p/e based on past earnings and then there's the forward p/e based on earnings projections. Wall Street typically models in 5-10% earnings growth every year at the beginning of the year to come up with their year-end index targets which always seem to predict that the market will go up 5-10%, and then they spend the rest of the year cutting back those earnings estimates. Last year the earnings estimates were over $100 per share and they finished at $90. How do you pay for earnings growth when you get an earnings decline?
Nice buy on Boeing. I read that they are going to be a big dividend grower. Interestingly, the big banks have run into resistance after a bounce. A flatter curve can't help them and if Jefferies is any trend, they are going to have lower trading revenues.
Pale, I don't think any of us "knows" more than anyone. We read what different people write, some of whom have better track records than others. We make observations about historical metrics. There's a debate about whether money has to be in US stocks despite the high p/e's because the alternatives are few, and that's where the historical perspective comes into play. As for the US being the cleanest shirt in the dirty laundry, I don't think that is accurate, but you don't find many people saying that country X has a lower p/e and greater earnings growth because most of the other markets are much smaller than the US and those investing in these other markets want to make sure they get their bets placed before telling everyone else. But I think Huff makes a great point that real money managers who have been investing big pension money for years (not the fly by night kind) using disciplined strategies are finding it hard to just buy US stocks based on the cleanest shirt argument. That doesn't mean that there won't be certain US stocks that can grow no matter what is happening to the overall market.
We will see how much farther this rally goes. The ECB, the Fed and Japan are all done for the next few weeks, so we'll see if the markets can move up without their stimulus. As for oil, I thought we had the same bounce action last year about this time and then it reversed itself. good luck.
Huff, I read that the S&P earnings actually came in quite a bit lower at $85 which puts the multiple at 24. If one searches "S&P 500 earnings" a site comes up with a nice graph that shows the earnings were $90.27 at September 2015 and we know that earnings dropped iin the 4th quarter. Factset shows that earnings are predicted to decline in Q1 by 8% which would mark the 4th consecutive decline in earnings since 2008-2009 and we all know what happened during that period. Which generally gets back to that chart and earlier comments DH made about the Dow always going up. If you look at that chart of earnings, there are several definitive tops in earnings growth even though the general direction of the chart has been up since 1880. It looks like earnings decline about every 7 years or so. Interestingly, earnings were relatively flat from the late 1960's until the early 1980's, no doubt correlating with the increase in leverage and the magic of junk bond issuance. The other time earnings peaked was between 1908 and the late 1940's. During this period, earnings spiked in 1918 at 30, only to plunge in the early 1920's to below 5, before peaking again at 20 in 1929. It took until the late 1940's until earnings surpassed that level again.
Many of the money managers whose newsletters I have read make reference to this period in which global stock markets did not advance due to the debt that had to be reduced and the effect that deleveraging had on corporate earnings. That's why when people like Stagg say that the market always goes up, they don't seem to have an understanding of history.
This is so funny Helmet, I just posted about the spo for DFT and I was looking at DLR to see how it compares on the metrics. DLR will probably follow with an spo of their own. I think I read that both companies are expanding into Europe. I agree with you that the demand for data centers can only increase.
I took a quick look and the metrics appear to be similar for both. DLR's chart didn't seem to have much of any hiccups, but it is now overbought.
Ed has made the point that the storage REITs have also turned in some great performances.
Just goes to show you that something in demand can keep increasing despite all of the noise about interest rates etc.and that you don't have to chase high yield to have a winning stock.
I just saw this. DFT is one of those REITs that own data centers. The stock has increased from $25 to 38 from October 2015 and it didn't really decline much during the Dec to Feb period when the market was selling off. It is slightly overbought but the spo should take care of that tomorrow. I think there are a few other REITs in this business so it might make sense to compare their metrics. But an spo usually presents an opportunity to buy.
I think DH has to be the only one who focuses on the Dow. The Dow traded above its 200 dma several times in Nov, Dec and at the end of the year, before it rolled over and declined. Each time the top was around 17,900 +/-. The S&P just pierced its 200 dma, but it also traded above that level in Nov, Dec and at the end of 2015. The Russell 2000 is still some 7% below its 200 dma and it has been going sideways to down since Mar 7. Finally, the NYSE is about 0.5% below from its 200 dma. During the Nov, Dec and end of year period, the NYSE never broke through its 200 dma. I would think that the NYSE, because it is the broadest of the averages, would be important because it would show greater breadth in a rally.
Someone posted Credit Suisse's piece on MLP valuation metrics on the i.v. board. They go through the different valuation metrics, yield, spread to Treasuries, EV/EBITDA etc. Their top picks are EQM, TEP and GEL for those not sick of doing K-1's.
BTW, for those that owned APL last year, was anyone surprised by the amount of the basis adjustments?
Was tempted to buy some more in my IRA, but then I remembered that its options week (triple or quadruple?) and decided to hold off in case they try to run the market up past resistance into Friday. I can't remember when the index options roll over to the next month, but that might be earlier than the close of trading on Friday.
jamoll, on their website, AVACF has a nice chart of the spot prices for charters. The spot price has declined significantly since the 4th quarter, having declined from $48k on Jan 1 to its present level at $21k. In the 4th q, the range was from $71k to $48k and the average for the 4Q was $61k. One could probably figure out the average for the current quarter, but from the back of the envelope, it looks like their average for Jan was around $48k, then 32k in Feb and at best for March 24k (with half of the month still remaining and the spot close to $21k). That would work out to an average for the quarter of around $34k, or nearly 50% less than for the 4th q. Based on these rough calculations, I would expect a divy cut of near the same amount. The stock could drop big if this happens.
Chad, for me, trading TVIX is a short term strategy. While some of these double and triple inverse ETFs have gone on for huge gains (see what happened to DWTI when oil started to plunge) they also can reverse pretty quickly. If the market were to undergo a sustained slow drop, then I suppose holding TVIX might make for a good strategy. I note that TVIX has undergone a prolonged decline since 2012 correlating with the market's slow rise (I think there have been three 1- for -10 reverse splits which means this traded at over 1000 times its current level, and it looks like it was even higher than that). I will take a couple of points. With my luck, I'll sell for a 3 point profit and then watch it go up 100 points.
If nothing else, this may be a good way to hedge your long portfolio in case the market does correct again. Good luck.
Kudos to you Kee for being honest about your cost basis. Some posters are always bragging about their dollar-cost averaging, without any evidence or support, even if it isn't verifiable at any rate. I just don't know why anyone would want to be in AVACF when the spot rates are down 50% in the quarter and show no signs of stabilizing, judging from the chart that they put on their website.
Stagg, I prefer to think of it as keeping you honest. Up 34k means nothing to anyone because there is no reference point. We don't care. You could still be down 100k for the year or since last year. There is simple no way to verify and it doesn't matter to most. What matters is your judgment about the stocks that you mention. You made a nice bottom pick of NRZ, which many of us own, but most of us aren't that happy with its performance over the last year and you are not likely to convince us that it is a "daisy" until it rallies much more. Similarly, PSEC has now sold off about 10% since topping out at $7.60 (now 6.86) and not an update from you (although to be fair, you did say you were thinking about selling some for portfolio balance).
We will see how AVACF does, but you have been saying it has a bright future since it was over $15 and stocks don't fall 50% if they have a great future. Your calling for a "bright future" simply does not square with the drop in spot rates and the divy cut that will likely come its way. But the same thing happened to you with SDRL, AWLCF and NMM.
Finally, you probably forgot but do you remember when I bought NUGT about 4 weeks ago at $46. Today it hit $68.