Equity markets acted the way many traders surely feel, which is in fact, unsure. The major equity indices, for the most part closed close to unchanged. Trading ranges were tight, and trading volumes were light. We will get some macro in the morning, which is something that we did not have today, but nothing that will knock your socks off. The Transports had another good day today, this time they were led by the airlines. The REITs did well today also. Utilities had another rough session, and the financial sector was all over the place.
Gold rallied sharply late in the day, Treasuries crept higher, Oil sold off a little but was able to hang onto support, and the Dollar was strong versus the Yen, and a bit weak against almost everything else. Everything else was also strong versus the Yen, by the way. Overall, everything in the financial universe, sort of acted like stocks today, uncommitted.
I really wasn't very active today. I don't take shots just for the heck of it....that's how you lose your lunch money. I'm not really a technical trader, but I did notice the bull flag develop in TSLA, and bot some calls. I did not however, bet the farm. Only playing with house money. The stock did close strong. We shall see.
S&P 500: The index sported a narrow range today. Our 1806 was perfect at the chart's bottom, twice tested. At the top of the chart it was 1811 that survived three tests, which was two points below the level that I had given you.
R2K: We were very sharp here today. This index was sharply repulsed at our 1134, and then our 1129 was very stiff resistance, surviving three tests. Support was found at 1126, which was a point above my level.
We come in this morning at higher price levels after benefiting from Friday's Jobs related rally. Truth be told, the volume on Friday was the lightest of the week, and this potential budget deal that Congress may produce this week probably had as much to do with the rally, as did the sudden oddity of good news really being good news. Let's face it, the pressure really is on both sides in Washington, to produce a deal that looks like a win, and must be done before a shut-down even looks like a possibility. The Republicans ended up looking like a bunch of goons, after the recent shut-down, and the Democrats are either looking like liars, or incompetent (your choice) after the all of the deceit and poor performance surrounding Obama-care's kick-off. So, you, amazingly have everyone in Congress believing that they have to make some kind of a comeback. You also have them going into holiday recess this Friday, because, you know, everyone needs several weeks off from work for Christmas. It is likely that they will all hold hands and get this done. No shut-down (win, win), No tax increase (Republican win), No spending cuts ( Democratic win), and partial repeal of some of the sequester because austerity hurts, and nobody likes pain, especially voters. In eleven months, the mid-term elections loom, and everyone will be looking for some shelter from any possible blame for any possible thing.
There are no key domestic macro data-points on the release schedule today. In fact the whole week is rather light on this front. You will see Retail Sales in a few days. The earnings calendar obviously remains light. What we do have today, are a batch of Central Bankers that you may want to keep tabs on. You'll have to work on that sandwich, as the Bank of England's Mark Carney (12:15), Richmond's Jeffrey Lacker (12:30), and St. Louis' James Bullard (12:50) all speak within a few minutes of each other. Richard Fisher of Dallas will speak today, after markets are closed. These are the guys that could spark the taper tantrum that was missing on Friday. As long as they don't say anything that causes Treasury yields to run wild, stocks should hold their ground, so traders may want to set up some protection going into lunch time. You may not need it, but you don't want to be sorry that you didn't prepare. There are a couple of T-bill auctions today, and tomorrow that probably won't gather much attention, but there will be auctions of 10 year debt on Wednesday, and 30 year debt on Thursday that investors will be watching closely. Have a good day. I'll see you on Twitter, Weibo, and Stock-Twits.....and then I'll catch you on the other side.
Well, that certainly was nice. Like I told you last night, I didn't put on new longs, but I didn't sell anything out of my core either, and the whole book benefited from this broad-based rally. I did however, come in long the Dec 13 AAPL 570 puts, so I actually did get to benefit from one of the few stocks that actually lost ground today. Picking a winning sector today is silly, just spin the wheel, everyone here is a winner.....everyone that is except the Oil Services sector. That group shaded just to the wrong side of flat. Speaking of flat, Treasuries rallied well off of the morning lows to actually gain on the day, at least for the 10 year, and the 7 year. Gold came under pressure and held it's ground. Crude stayed fairly flat as well.
Now, does the Fed announce tapering on December 18th? I still do not think so. These numbers represent a very positive direction for recent domestic macro, but a trend, it does still not make. We've already seen how cautious this FOMC is. Next week is a little quiet on the macro, but I am sure some of those taper tempers that did not appear today will arise as we close in on the 18th.
S&P 500: Our 1799 level performed well under pressure this morning. It did crack once, but recovered quickly. Our 1807 level turned into a bridge too far, as 1806 topped the chart.
R2K: The small cap index was supported this morning once at 1130, and once at 1128, so we'll call that a solid for our 1129 level. The 1134 level did provide stiff resistance, though you would have maxed at 1135.
There really is no secret about what is in focus for traders today. This is obviously a day where the domestic macro takes center stage for the trading and investing public. Out in front of this data, I would like to say that regardless of what prints today that I would truly be surprised if the FOMC were to decide to start tapering at their meeting in twelve days. I'm sticking with March..... for now.
Today's macro is easily divisible into two areas for the purpose of simplification. We have the Employment Situation for November, which will steal most of the headlines, and we will have some important information released today that will tell us a little something about the American Consumer. So, without wasting more of your time, let's dig in.
08:30 ET: EMPLOYMENT SITUATION (November)
1) Non-Farm Payrolls. This will be the headline print of the day. This item printed at an unexpectedly high 204K for October. That said, the range for November spans from 140K to 200K, with consensus around 183K. I have a sneaky feeling, given the strength of recent data, especially the ADP print, that we may see a number above 200K again this month. Nothing, however would surprise me, given the volatility of this data-point.
2) Unemployment Rate: The expectation among economists is that this item drops from 7.3% to 7.2% today. To be honest, this number is silly, outdated, and inaccurate. Except when used in the context of a Fed target, this number is meaningless to traders. The U-6 rate which is a truer, more complete measure of unemployment in this country, printed at a seasonally adjusted 13.8% in October. Any broker, or advisor who discusses the Unemployment Rate with you as if it is a real number, probably has not done his own homework since at least 2008, and needs to be replaced, unless he is a family friend.
3) Average Hourly Earnings, Average Workweek, and Private Payrolls: These are the nuts and bolts of the data. they don't really stand on their own, but together they certainly matter. Look for small gains today for Earnings, and Workweeks. The consensus for Privates today is around 176K, but the blow-out ADP print has me wanting to take this one higher.
CONSUMER RELATED DATA:
1) Personal Income & Consumer Spending (08:30 ET): This eternal tug of war renews it's rivalry today for October. In September, Income beat Spending by a month over month rate of 05% to 0.2%. This, in the long run is good if it can continue. Savers will save, and when savers save, they feel comfortable, and ultimately....the consumer driven economy can be reborn. I expect this trend to continue for October, but the spread between the two will likely narrow. I expect the month over month prints to look something like 0.3% for Income, and another 0.2% print for Spending.
2) PCE Price Index (08:30 ET): I do not expect to see much if any consumer-based inflation in this print for October today. The Core rate may reflect a 0.1% m/m increase.
3) University of Michigan Consumer Sentiment (09:55 ET): Today's print is the preliminary December number for this twice a month report. First off, we have seen this item trend consistently weaker since May, so it's been rough. I believe this being the holiday season that this item, usually important to traders, will be even more so than usual. We expect to finally see a small up-tick for this item today to something around 75.9. Let's hope.
4) Consumer Credit (15:00 ET): This one is also for October. If all of the other data reported today is released without any big surprises, this one could gather some late focus. The number here has stayed positive at the headline, but when one looks under the hood, one sees that revolving credit (credit card usage) has declined for four consecutive months. The headline data here has been almost entirely supported by student, and auto loans which are non-revolving. The credit cars component is considered something of a measure of consumer aggression, which most think is good for the economy, if not for the individual.
That's a lot of macro, so I won't hit you with a ton of other information, but there are a couple of Fed speakers today, and the BOJ's Haruhiko Kuroda speaks tonight. OK, gang.....go get 'em.
Yes, we know that the GDP print was revised higher on an even higher revision to inventory building. Yes, we know that the Jobless Claims print was admittedly skewed by the shortened workweek last week. Those headlines numbers were rather gaudy though, were they not? Just don't think of the market as selling off on tapering timing fears. Think of it as an orderly market retreat that is a very healthy way for markets to price in the possibility of an eventual reduction in asset purchases by the Federal Reserve. There now, doesn't that sound, and feel better? Now, if the Non-Farm Payroll number in the morning prints at something crazy level, I make no promises, but if you're going to reprice the market, slow and steady sure beats the way we did it back on 19 Oct 1987. Trust me. Then again, I am not selling my core holdings, I am just not putting on new longs. Call it a sort of "Prevent Defense".... yeah, that always works.
Utilities, and REITs unpaired today, after moving together yesterday. Utilities resumed their recent place as a market under-performer. The REITs were comfortably in the green today. The Banks had a rough day as well, with the coming of the Volcker Rule's exclusion of portfolio hedging weighing on sentiment. The U.S. Dollar, U.S. Treasuries, and Gold were all weak today. So much for Gold's bounce. Maybe tomorrow. Maybe not. Crude sold off of it's highs to finish about where it started the day. Jobs day is on the way......get enough sleep tonight, I will.
S&P 500: 1788 turned out to be a perfect pivot today. Unfortunately it was a point higher than the 1787 I gave you. The index never reached the 1794 or 1779 levels.
R2K: The range for this index was 1119 / 1125. I gave you 1119 / 1124. Not perfect on both ends, but I'll take it.
It looks like that AAPL, CHL deal has finally been signed. CHL is holding an investor conference on 18 December in Guangzhou, where rumors had it that this deal would be announced, but the news appears to be hard news at this point. This deal greatly broadens AAPL's potential customer base for it's i-phones, and those rumors had been a fantastic item for traders to trade in and out on. I have never played CHL, but unfortunately I took my profits in AAPL on Monday. The stock is up significantly this morning on this news. Profits are profits, though, and we don't cry when we're on the plus side. That said, this "easy" play will be sorely missed.
Today is a big day. To start things off, we'll hear from the Bank of England, and the European Central Bank this morning. I think it would be taken as a huge surprise to see policy changes made at these announcements today. The BOE, though leaving their interest rates, and asset purchasing program in tact, is expected to raise it's GDP forecast for this year. The ECB is another story. Don't forget that they cut their benchmark rate last month. We do not expect actual policy changes here, but we do know that they considered taking their over-night interest rate negative due to fears that disinflation could turn into outright deflation. Last week's Euro-Zone Flash CPI showed a small increase, and likely gave ECB Pres. Mario Draghi some breathing room. Mr. Draghi may drag his feet on such a move, but he has never been afraid to use words as weapons, and the ECB Press Conference at 08:30 ET, where he spells out projections for growth, and inflation may be more important than the actual announcement made at 07:45 ET.
Here in the U.S., we have a couple of significant macro data-points to look at today. At 08:30 ET, we'll get our second look at Q3 GDP. We expect that number to be revised even higher from that 2.8% that surprised to the high side last month, to 3.0%. These numbers, btw are quarter over quarter, annualized. Bear in mind that this "lofty" quarter was supported by inventory building which only increases how interesting Q4 becomes. Initial Jobless Claims are expected to increase slightly this week from last week's 316K to something near 324K. That would keep the trend in tact. Be cognizant though, that the range for this one is wider than usual, spanning from 315K to 345K. The range for this data-point is usually only about 15k to 20K wide, so the wider span indicates to me that economists in general, are less sure. There could be a surprise here. October Factory Orders, released at 10am ET, are likely to show another month over month decline, but will not gather much attention form traders.
There are actually a few earnings releases out there today, the heaviest day of the week for such data. This morning, you can look out for DG (.70), JOSB (.50), KR (.53), RY (1.37), and TD (1.99). RY was spoken about on Cramer last night. COO (1.80) releases after the close. By the way, I have no positions in any stock mentioned in this note today.
We have some key speakers to be alert to, on this side of the Atlantic Ocean today. You can keep at least one ear open for Dennis Lockhart (08:15 ET from Ft. Lauderdale, Fla.), Jack Lew (08:30 ET from Washington, D.C.), and Richard Fisher (13:15 ET from College Station, TX).
There's a lot on your plate today, tomorrow it won't let up, but next week is light, at least here in the U.S., so get out there, and make it happen. Good luck, and I'll catch you on Twitter.
Most indices, and sectors finished this day close enough to unchanged for the nonchalant to call it a non-event. Nothing could be further from the truth. This day had everything, from an early rally, to a sharp mid-day sell-off, to a sharp late day recovery, to an even later spout of weakness on the close. By the way, trading volume was even heavier than yesterday's "heavier than normal" volume. The weakest sectors out there today were Health Care, and Insurance stocks.... How's that website working? Strength was seen in the Tech names, and interest rate sensitive sectors such as Utilities, and the REITs.
Now that we're on interest rates.....yields on the U.S. 10 year soared in the wake of a much better than anticipated ADP Employment Report this morning. Oddly enough, the ISM Non-Manufacturing Index for November was weaker than expected, and Employment was the cause for much of that weakness. The Dollar was volatile today, but finished close to where it started, and Gold finally, after finding support over the last couple of days, actually had a good day, rising 1.8% today.
That's a lot of moving parts, and markets certainly acted like it. Tomorrow, there are less domestic macro data-points to dig into, but we do get our second look at Q3 GDP, which is always a headline event. We will also have news out of the Bank of England, and the European Central Bank, as well as a few Fed speakers. So, the action leading up to Friday's NFP print should remain interesting. Have a good night, gang. Carry on.
S&P 500: This was one of those rare days, where my levels didn't work the way they usually do. The chart's top came early at 1799, the bottom, mid-afternoon at 1779. There were spot spins and turns at six different price points in the 1780's, and 1790's, without the index using the same one twice. We'll adjust, and be ready when the index behaves in a more recognizable pattern.
R2K: The there was the Russell 2000, where our levels were about as precise as it gets today. We were perfect at the 1129 top, and the 1112 bottom. Our 1119, and 1124 levels were also precise, early, and late, respectively.
There's a lot to look at this morning, so let's get right to work. Crude prices continue to climb in early trade, in spite of OPEC meetings over the intention of Iran, and Iraq to add to production. I believe that this surge in price is more due to an expectation that today's weekly Inventories print at 10:30 ET will show the first decline in supply that we have seen in a couple of months, and the price will return to lower prices in the near future. Ukrainian riots are also having an impact, raising fears of regional disruptions in that part of the world.
European equity markets are trading sideways this morning, with the exception of several banks that are reacting to fines levied by the EU in response to past rate setting issues. European service sector PMI's for November were released today. The numbers represent almost an utter collapse in this space for France, and Italy, while Germany, and Spain surprised to the upside. I think it possible that European investors are afraid to get too far out on a limb in front of tomorrow's ECB pow-wow, although it is probable that last week's Euro-zone Flash CPI did buy Mario Draghi some time, and it is likely that they will hold off, for now, on taking over-night rates negative.
For those of us trading here in the US, we'll be on the watch for a dramatic increase in the ADP Employment Report at 08:15 ET. October's number for this data-point was a mere 130K, which is below the low end of November's consensus range of 145K to 210K. The expectation for today's November print is 177K. A surprisingly high number here would cause at the least some kind of knee-jerk reaction in the futures market. The idea, although it does not always work that way, is that this number helps predict the private payrolls component of non-farm payrolls. At 08:30 ET. the October Trade Balance will be released. The expectation is for something near $-40.1B. This number is interesting, and significant economically, but will not impact you as a trader.
The big 10am print will be the ISM Service Sector release for November. I expect to number to print at 55.2, which would be close to the pace of October's 55.4. The range for this one is a fairly tight 53 to 57. You'll also get a double dose of New Home Sales data at 10am. This data will represent both September, and October. My expectation for both months is for an annualized pace in high 420K's. August printed at 421K.
As for Central Bankers, the Bank of Canada will make their policy decision at 10am ET. I don't expect any policy changes here. I do expect the BOC to maintain their bias toward cutting rates, rather than raising them. The Fed's Beige Book will be released to the media today at 14:00 ET. We just saw blow-out November numbers for auto sales, so we know that household spending might look strong in this report. The ISM Manufacturing numbers just keep growing.... I think that there's a chance that the Beige Book is more upbeat on the economy than it has been in quite a while. What this does to equities......could be a case of good news is bad news. Then again, I'm not always right. I am a Mets fan.
Equities, although they did sell-off again today, also did rally late to sort of save the day. That's just not the big story today. The big story today was the soaring price of Crude Oil. The expectation that tomorrow's weekly Inventories print will show the first decline that we've seen in a couple of months, coupled with Ukrainian riots that sparked regional fears of a disruption sent the price of oil northward. This in turn propped up Energy stocks, particularly the Oil Service names. Those names, as well as the recently battered Utility sector were among the few that were able to stay in the green on this day. Your worst performers today were the Banks, and obviously the Transports in the face of that surge for Crude. Trading Volume, by the way, was well above average today.
Sliding back over to the commodities arena.....Gold hung in there today, finishing the day near to where it started it, and Corn ramped up impressively toward the day's end. Don't mention corn all that much. In their never ending tug of war, the U.S. Dollar weakened on the day, while U.S. Treasuries strengthened. Get fired up, gang. The rest of the week is going to be chock full of our true loves, macro-economic data and central banking, so this is only going to get even more interesting. It's good for the intellect, so let's enjoy it.
S&P 500: This index really had two pivots today. Until 11:30 or so, 1797 worked that way, then once the sell-off hit, our 1791 worked like an ace as support. Once the market got mushier and then rallied, this level morphed into another pivot. The 1783 level was never approached.
R2K: Our 1124 level worked early as support. At the high, resistance appeared at 1130 as opposed to the 1128 gave you. I was pinched at the bottom as well, as late support.showed at 1119, a point above my level.
Not completely out of left field comes another surprise concerning American consumers. They are not quite dead just yest. They have just gotten a little lazier, or perhaps a little smarter. Early Cyber Monday results are far cheerier than were similar data for Black Friday. Americans are indeed buying goods, just not bothering to look for parking, and battle crowds in order to do it. I know that my family is certainly part of this trend. That's a good thing. The lasting effect on retail level jobs, and the impact on seasonal hiring in future years?? Well, that's a talk for another time, but will be a talk that will eventually be unavoidable.
Speaking on the retail sector, that's really all we have to deal with today, as there are almost no earnings releases, nor central bankers out there to push numbers around this morning. The macro is fairly hot for the rest of the week, but not today. We will see Total, and Domestic Vehicle Sales for November released by the auto makers throughout the day. We will also see our two weekly retail sector prints, as we do nearly every Tuesday. Today's Goldman Store Sales (07:45 ET), and the Redbook (08:55 ET) are for the week ending 30 November, and therefore, will include Black Friday data.
What are we to do this morning? Well, when I have a morning such as this, where I come in flat in my day trading account, and I don't really have the motivation to change the allocations in my core holdings at this point, I have to come up with something, right? After all, I'm not hear to watch Sports Center all day. When in doubt, or without a truly convicted idea, I fall back on my trading levels. They are clearly easier to trade for those who trade equity index futures, just figure in the current cash to future discount. The levels easily convert from cash to futures. When trading solely within the equities/options space, then I am going to have to act, and react as the indices meet, and approach certain levels. This is far easier to do with stocks (or their options) that are currently out of the news cycle, and have a beta at or near one, indicating performance in line with the general market. That said, I would expect that trading volume might remain light, at least for today. Have a good day, and I'll see you on the other side.