Short weekend notes!

Since we had some weather-related travel hell, just a few short notes on last week.

Duh! The Fed will not be raising rates. Duh! The economy is not accelerating! As we have said for ages, the economy is blah. If not for 0% rates forever, negative rates, the printing of trillions and the buying up of markets, the world would be S.O.L. But that’s for another day!

Markets cannot sell off. Several times last week, markets were way down intraday, only to recover. Until that dynamic changes…

On the other end, markets still cannot break to the upside. Just thinking not enough areas participating yet. Maybe in time.

Because of the fake employment number, the dollar cracked…thus gold/silver soared. Gold stocks came right off the 50 day…perfectly. Still in play on little pullbacks. Other interest rate sensitive plays on the move…reits and utilities. The utility index broke out. As rates come down, they go. On the other end, distribution Friday in big financials but they too reversed some of the ugly.

More to come tomorrow night. Will have thoughts on a lot of stuff including Muhammad Ali!

 

The Closing Look

Stocks opened lower and closed higher on Thursday as investors digested a slew of data. Overnight, Japan’s stock market fell over 2% which put pressure on global equities. Before the open, The European Central Bank (ECB) President Mario Draghi said inflation rates will likely stay low or negative in the near future as global growth remains sluggish. Separately, OPEC concluded its latest meeting, kept their policy unchanged, and did not place an output ceiling. Crude oil initially fell on the news but edged higher throughout the session. In the U.S., ADP said private employers added +173,000 new jobs in May which almost matched estimates for +175,000 new jobs. The April report was revised up to 166,000 from 156,000.

Gary’s Thoughts: Open down…finish at highs of day. Broad market good! Tomoorow, fake job’s number! Market feels like it wants topside…but never jump the gun!

The Morning Look

Market Update:

Stock futures are quiet ahead of Friday’s open as the market waits for the always fun (and fake) jobs report.

Gary’s Thoughts: Blah fake job’s number. Another half million people leave workforce…thus unemployment number at 4.7%. Tired of talking Fed. Just remember, for ever, bad news is good news for markets as central banks continue to up the ante.

Economic Data:

  • Charles Evans Speaks
    3:45 AM ET
  • Employment Situation
    8:30 AM ET
  • International Trade
    8:30 AM ET
  • PMI Services Index
    9:45 AM ET
  • Factory Orders
    10:00 AM ET
  • ISM Non-Mfg Index
    10:00 AM ET
  • Lael Brainard Speaks
    12:30 PM ET
  • Baker-Hughes Rig Count
    1:00 PM ET

Highlights:

  • OPEC Keeps Status Quo After Failing to Agree on Output Cap
    Gary’s Thoughts: Just watch price!
  • Draghi Says Feeble Reforms Hurt Recovery
    Gary’s Thoughts: The man and the rest of the bubble makers do not have a clue to the outcome of their experiment with trillions of dollars of conjured up money, let alone 0% rates, negative rates and the outright buying up of markets by central banks.

The Morning Look

Market Update:

Stock futures are a little lower ahead of Thursday’s open as the market waits for today’s ADP report then Friday’s always fun (and fake) jobs report.

Gary’s Thoughts: Paint drying open…but pay attention here. Something going to give soon. We feel it.

Economic Data:

  • Chain Store Sales
  • Challenger Job-Cut Report 7:30 AM ET
  • ADP Employment Report 8:15 AM ET
  • Jobless Claims 8:30 AM ET
  • Gallup Good Jobs Rate 8:30 AM ET
  • Bloomberg Consumer Comfort Index 9:45 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • EIA Petroleum Status Report 11:00 AM ET
  • Robert Kaplan Speaks 1:00 PM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET

Highlights:

  • Two Dead in UCLA Shooting
    Gary’s Thoughts: What a massive response by officials. San Bernadino changed the playing foeld for reactions.
  • Major Landlord Sends Warning About Rental Markets in NYC, San Francisco
    Gary’s Thoughts: Don’t worry…no bubbles.

The Closing Look

Stocks opened lower but closed near their highs on Wednesday as investors digested the latest round of economic data.Auto sales fell which hurt sentiment. GM said sales plunged -18% last month and Ford (F) said sales tanked -5.9%. In the afternoon, the Fed’s Beige Book showed a decent picture of economic growth across the 12 districts. The fact that it was not a big miss, helped the market.

Gary’s Thoughts: Quiet but better action in the smalls and good reversal in the financials after ugliness early. Continued contracted volatility at the tips for Dow and S&P. Something will give soon.

The Morning Look

Market Update:

Stock futures are lower ahead of Wednesday’s open. Stocks fell on Tuesday which was the last trading day for May. It is normal to see the market pullback a little after the recent and strong rally we saw over the past week and half.

Gary’s Thoughts: Yuck open. End of month, pre-holiday over. Let’s see how they pull this back. Just noting a few dow stocks not acting well…NKE,MCD,HD,DIS,BA come to mind.

Economic Data:

  • Motor Vehicle Sales
  • MBA Mortgage Applications 7:00 AM ET
  • Gallup U.S. Job Creation Index 8:30 AM ET
  • Redbook 8:55 AM ET
  • PMI Manufacturing Index 9:45 AM ET
  • ISM Mfg Index 10:00 AM ET
  • Construction Spending 10:00 AM ET
  • Beige Book 2:00 PM ET

Highlights:

  • Carl Icahn Says He Bought ‘Large Position’ in Allergan
    Gary’s Thoughts: Based on history, we are going to watch this closely! Keep in mind, Icahn knows this CEO as he put him into the CEO slot at Forest Labs before it was bought.
  • Heartbreaking! Nearly 46 Million People Trapped in Modern Slavery, Report Finds
    Gary’s Thoughts: Criminal!

The Closing Look

Stocks were closed on Monday for Memorial Day. Stocks ended mixed on Tuesday as investors digested a slew of economic data. Tuesday was also the last trading day of the month and stocks rallied for the month of May. On the economic front, personal income and outlays rose 0.4% which matched consensus. The S&P Case-Shiller Housing Price Index rose 0.9%, beating estimates for 0.7%.Elsewhere, Chicago PMI rose to 49.3, missing estimates for 50.7.  Consumer confidence came in at 92.6, missing estimates for 97.0. The Dallas Fed Manufacturing index plunged into negative territory, falling to -13.1 from a positive 5.8. Finally, the State Street Investor Confidence Index fell to 106.6, lower than the last reading of 108.6.

Gary’s Thoughts: Dow does not reflect the day as other indices did not budge but beware the massive resistance overhead and a few important big name Dow stocks acting blah!

The Morning Look

Market Update:

Stock futures are quiet ahead of Tuesday’s open. Stocks in the U.S. were closed on Monday for Memorial Day.  Today is the last trading day of the month and investors then have the always fun jobs report coming out on Friday.

Gary’s Thoughts: QUIET IS A GOOD THING AFTER A MOVE UP LAST WEEK.

Economic Data:

  • Personal Income and Outlays 8:30 AM ET
  • S&P Case-Shiller HPI 9:00 AM ET
  • Chicago PMI 9:45 AM ET
  • Consumer Confidence 10:00 AM ET
  • State Street Investor Confidence Index 10:00 AM ET
  • Dallas Fed Mfg Survey 10:30 AM ET
  • Farm Prices 3:00 PM ET

Highlights:

  • Japan puts military on alert for possible North Korea missile launch
    Gary’s Thoughts: Nothing will come of it but leave no doubt, that beany baby running North Korea is insane.
  • China’s Slowdown Hits Nearby Economies Hardest
    Gary’s Thoughts: Wait! Hold on! Didn’t we just hear China was fine?

The market and a little more!

Did you know that San Francisco is becoming the first US city to require health warnings on ads for soda and other sugar-added drinks? What about Snickers bars, Hershey bars, every dessert at The Cheesecake Factory, Yodels, Hostess Twinklies, Red Vines, all non sugar-free gum, Twix, Reeses Peanut Butter Cups, Haagen Daas, the buffett at Wynn’s Las Vegas, Ghiradelli Chocolates (basically started in San Francisco), Dunkin Donuts, Krispy Kreme, Cinnabon, Hydrox (darn, they stopped making Hydrox), Oreos, Chips Ahoy, every breakfast cereal on the aisle, smores, Nilla Wafers, marshmallows, KitKat, Nestles Crunch, Almond Joy, Butterfinger, Mike &Ike, Milky Way, Good and Plenty, Skittles, Twizzlers, bananas foster, Rolos, Scooter Pies, Tootsie Roll, Tootsie Roll Pops, Dove Bars, Toblerone, Junior Mints (great Seinfeld episode), Famous Amos, Nutella, all non-sugar-free muffins, gummy bears, sour gummy bears, Jelly Belly, M&Ms, Hersheys Kisses, candy canes, Starburst, candy corn, candy dots, dipping dots, Now & Later, Charms, Three Musketeers, Life Savers, Sour Patch candy, Oh Henry, Chunky, Reeses Pieces…ok…as you can see, we overdid it but our bigger point is simple…the regulatory nutjobs continue to take over, picking and choosing friends and enemies. Where does it stop?
Did you know that now Wells Fargo is launching a 3% down payment mortgage to moderate and low-income buyers? What’s that line about repeating mistakes?
Did you know that a former Mcdonalds USA CEO said that $35,000 robots are cheaper than paying $15 an hour? This will surely end well. Remember what we have told you…when you mandate higher costs to business owners without commensurate productivity gains, they are going to react.
Did you know that The International Business Times reported that while Secretary of State, Hillary Clinton cleared arms deals with 20 foreign countries worth over $165 billion…WHO ALSO DONATED TO THE CLINTON FOUNDATION! Imagine if she was a Republican!
The markets:
First off, we have one more stat about the “sell in May and go away” theory. According to the Stock Trader’s Almanac, over the last 65 years, the period from November to April gained 18,000 Dow points while the May through October period lost 1,000 points. Just saying!
We harken back to our first words from last week’s report:
“First off, this week is end of month (almost) and into a holiday weekend. Typically, typically, the bias is positive.” On top of that, we highlighted the SEMICONDUCTORS for you as that Friday showed them emerging.
The bias wasn’t just positive…it was damn positive…and it was led by the SEMICONDUCTORS. We are typically good at whining and complaining but after last week’s action, we do not have much to complain about…but am sure we will find something.
We start by saying just about all the major investment banks are bearish on the market. This normally happens after the market is already down 25% so the fact there is so much bearishness, gets us scratching our head.
There are two important parts of the equation, one good and one not so good. We now can pay attention to the highs of the loooong trading range that started in November of 2014. We know the real high was hit in May 2015 but for us, the range is longer. Let us be clear, in spite of debt, deficits, elections, terror attacks, Isis, Venezuela, Puerto Rico, earnings growth negative, sales growth negative and all that crap, if the range is taken out on the upside, it is best not to argue with it.  Long range breakouts of major indices usually work for a time. Watch the S&P 2116 and the big enchilada at 2134. The Dow would be at 18,167 and much more importantly at 18,351.
The problem is other major indices are not even close, especially the NYSE and Russell 2000 so you are going to have to be area specific and stock specific. Any move above would not nearly as strong as the breakout in 2013. Just keep in mind, we are in no way predicting a breakout but pointing out we are getting closer.
The other problem is leadership. Even with this move higher, new yearly highs are still low, although improving. We suspect if major indices do go topside, more will show up but so far, nothing doing. If a June swoon decides to show up, watch the 50 day average at  2066 S&P and 17,737 Dow.
The big strength last week was indeed the Semiconductors.  Big financials are also better. These are the two main areas we watch.  We have told you for years that nothing bad happens if the semis and financials have a bid. Semis have had a huge bid…financials just recovering.