Search Results
Results 151–200
of 234 found.
Be On Alert For A Pop Higher in Volatility
by Urban Carmel of The Fat Pitch,
The trend in equities continues to be higher, even a very short term basis. As equity prices move higher, volatility is compressing. That, on its own, is not bearish, as volatility can stay low for months as equities grind higher. But it's noteworthy that volatility has popped higher in each of the past seven Augusts. Combined with an unusually tight trading range in SPX and an extreme in the volatility term structure, short term traders should be on alert for a pop higher in volatility. That may well correspond with SPX approaching its next "round number" milestone at 2200.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
US equities are trading at all-time highs. The trend is higher, supported by strong breadth, resilient economic data and improved corporate financials. Even after the strong advance, longer term measures of sentiment continue to show skepticism among investors. Together, this is a set up for higher equity prices in the month(s) ahead. All of this said, there are reasons to be on the alert for a retracement of recent gains in August. The SPX consistently reacts negatively as it approaches each "round number" milestone (like 2200) for the first time. NDX has returned to its late 2015 resistance level. Some measures of shorter sentiment are heady. And August is seasonally weak and prone to a larger interim drawdown. Importantly, none of this is likely to be trend-ending.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
During the past three weeks, equities have been driven - higher and lower - almost exclusively by the UK referendum on whether to exit the EU. The decision to leave caused the largest one-day sell off since August 2015. Sharp sell offs tend to continue lower in the following day(s). Down momentum normally takes time to dissipate. A lower low is likely still ahead.
Fund Managers Raise Cash As Equities Rally
by Urban Carmel of The Fat Pitch,
Through early June, US equities had risen 17% from their lows in February. Equities outside the US had risen 15%. A tailwind for this rally was the bearish positioning of investors, with fund managers' cash in February at the highest level since 2001. Similarly, their equity allocations in February had only been lower in mid-2011 and mid-2012, periods which were notable lows for equity prices during this bull market. Remarkably, allocations to cash are now even higher than in February, and allocations to equities dropped to a new 4-year low. Fund managers have pushed into bonds, with income allocations rising to a 3 1/2 year high in June. Overall, fund managers' defensive positioning supports higher equity prices in the month(s) ahead.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
SPY has moved nearly 3% higher over the past two weeks. The S&P is now within about 1% of where every rally in the past 16 months has faltered. Is it likely to falter now again? Some short-term measures of sentiment may show excessive bullishness. The seasonal pattern is also a slight headwind. Taken together, it's not hard to imagine upside being limited in the near term. But longer-term measures of sentiment, especially fund flows, suggest that further gains are still ahead. This means that any short term weakness is a set up for higher prices into summer.
Is Today's Poor Employment Data Reflecting Wide-Spread Macro Weakness?
by Urban Carmel of The Fat Pitch,
The macro data from the past month continues to mostly point to positive (but sluggish) growth. On balance, the evidence suggests the imminent onset of a recession is unlikely. Consumption rebounded in April: real retail sales grew 1.8% yoy (to a new all-time high) and personal consumption grew 3%. Better still, new home sales made a new 8 year high. However, employment continued to weaken: employment growth had been 2% yoy during most of 2015. In May, that fell to 1.7% growth. As employment and wages drive future consumption, upcoming employment data will remain the key watch out.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
After gaining 16% from the February low, SPX has been trading in a 2% range during May. A minor 20% of the rally has been retraced, a sign of resilience and consolidation. Despite the recent rally, investors are positioned for weakness, not further gains. There might still be a capitulation low ahead but the set up is for higher prices in the next month(s). End of May and start of June seasonality is possible short-term tailwind for equities.
How Fund Managers Are Currently Positioned
by Urban Carmel of The Fat Pitch,
At the panic low in equities in February, fund managers' cash was at the highest level since 2001, higher than at any time during the 2008-09 bear market. Since 2009, allocations had only been lower in mid-2011 and mid-2012, periods which were notable lows for equity prices during this bull market.Since then, equities around the world have risen an average of 16%. Despite this, both cash and equity allocations are basically unchanged since February. This supports higher equity prices in the month(s) ahead. Allocations to US equities fell to back to their 8-year low in May, a level from which the US should continue to outperform, as it has during the past year.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Over the past year, earnings for the S&P have declined 12%. Earnings have declined 5 quarters in a row. Even excluding the troubled energy sector, valuations now are as high (or higher) than in 2007. It's no wonder that there has been little net gain in the S&P since late 2014. Does the dire state of corporate sales and profit growth signal an imminent recession? This post takes a sector-level view in order to address that question. In all likelihood, the answer is no.
Some Signs of Slowing Growth
by Urban Carmel of The Fat Pitch,
The macro data from the past month continues to point to positive but sluggish growth. On balance, the evidence suggests the imminent onset of a recession is unlikely. That said, recent data was on the weak end. For example, employment growth was 1.9% yoy versus 2% or more during most of 2015. Retail sales was 0.9% yoy versus more than 2% during most of 2015. New home sales growth was 5%, but the peak in monthly sales was more than a year ago (February 2015). We will be watching closely to see if flattening growth persists or expands to other indicators over the next months.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Equities fell this week, led by an 11% drop in the US's largest stock, Apple. For the first time since the February low, the near-term trend in SPY is weak: the current set up normally leads SPY, through price and time, to its 50-dma and lower Bollinger Band, both currently about 3% lower. Overall, breadth, sentiment, macro, commodities and seasonality support higher equities prices in the week(s) ahead. The month of May typically starts strong and the NDX has been down 7 days in a row: combined, these suggest a positive start to the week is likely.
Sell in May And Buy Back Higher In November
by Urban Carmel of The Fat Pitch,
The "summer months" start next week. The period from May through October is known as the "worst 6 months" of the year for stocks. True, the probability of a truly bad month is higher and the probability of a really great stretch of months is lower during the summer than in the winter. But, overall, the expected return over the next 6 months is positive: median returns in winter and summer since 1970 are nearly the same. You might very well sell in May and buy back higher in November.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
SPY made a new all-time high this week. The short and long term trend is higher. Despite a gain of 16% over the past 10 weeks, the majority of evidence indicates that investors largely remain skeptical and defensive. That, together with strong breadth, implies that higher highs still lie ahead. Shorter term, SPY is back to where it failed, repeatedly, to go higher in the spring, summer and fall of 2015. In the best scenario, attaining and then holding significant gains will likely take time.
The New All-Time High in SPY That Was Considered Impossible
by Urban Carmel of The Fat Pitch,
SPY made a new all-time high on Tuesday despite falling margin debt, the end of QE, negative household fund flows, flat profit growth and a host of other reasons. In other words, exactly as a rationale and objective investor should have expected.
Fund Managers' Current Asset Allocation
by Urban Carmel of The Fat Pitch,
At the panic low in equities in February, fund managers' cash was at the highest level since 2001, higher than at any time during the 2008-09 bear market. Global allocations to equities had fallen from 40% overweight to only 5% in just two months. Since then, equities around the world have risen an average of 14%. Despite this, investors remain defensive. Over the past month, cash balances have risen and allocations to equities have declined. This supports higher equity prices in the month(s) ahead.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Equities fell for the first time in six weeks. The intermediate-term uptrend remains healthy, but some minor short-term weakness has crept in. SPY could be setting up a trading range between 200 and 206: fading extremes at these levels is probably the set up going forward. Equities are entering a buyback blackout period, but these have had no consistent bias (positive or negative) in the past. April starts Friday: over the past 10 and 20 years, April has been one of the most consistently positive months of the year for stocks.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Equities rose for a fifth week in a row. In many important ways, the current uptrend does not fit the profile of a bear market rally. That means that further gains lie ahead and a return to the February low is unlikely. On a shorter timeframe, there are several compelling reasons to expect a retracement of recent gains in the days ahead.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Equities rose the fourth week in a row, led by continued strength in oil. SPY has now rallied 11% and is back above a key support level and its 200-dma. Breadth momentum during this rebound has been stronger than nearly every bear market rally in the past 16 years. Moreover, despite the large gains, investors remain mostly skeptical. Turbulence during the upcoming March OpX week would be normal, but this week is seasonally bullish. Below, we outline what to look for before assuming the rally has come to an end.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
SPY has now rallied 10%, back to a level that was major support throughout most of 2015. It would be easy to say that the rally ends here, but strong breadth, persistent investor pessimism and strength in other asset classes suggest that further upside ultimately lies ahead. That said, by the end of the week, the advance showed several signs of being overextended; weakness early next week would be normal. In fact, if equities continue with an uncorrected rally, those gains are likely to be given back in the weeks ahead.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Equities gained nearly 2% for the second week in a row. SPY has now rallied to 197, the lower end of the target range we set in early February. If this is just a countertrend rally within a bear market, then risk/reward is now marginal. Despite the steep gains in recent weeks, investor pessimism persists: it would be remarkable if the rally ended without even a hint of FOMO (fear of missing out). Breadth also suggests further upside in the weeks ahead. Meanwhile, recent macro data strongly refutes the notion that economic weakness is the root cause for the fall in equities.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Equities followed through on last week's reversal, gaining 3-4%. Importantly, the rally came on unusually positive breadth: this has a strong propensity to push equity prices higher in the weeks ahead. Further upside also seems likely given extremes in investor pessimism, with fund manager cash levels rising to a 14 year high this month. Aside from the unpredictable path of oil, the biggest watch out is volatility.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
The move into the perceived safe havens of treasuries and gold in 2016 appears to have reached a point of short-term exhaustion. That trend might resume, but odds suggest a pause is ahead. If optimism reached a peak in safe havens, pessimism likely reached a trough for equities. None of this will matter if oil and equities continue to be highly correlated and oil is unable to stop falling. A strong 2-day rally still left oil lower than it was on Tuesday. Unlike last week, equities now have a bottom to trade against.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
NDX undercut its January low this week, and Friday's sell off was extreme enough that it is unlikely to mark the low. Negative investor sentiment seems to be feeding on itself, with sell offs leading to historic fund outflows and further sell offs. These extremes have reached a point where they most often reverse. Even if US equities are in a bear market, a rally of 7-10% is likely close at hand. Importantly, there has been no price action that yet suggests a reversal in the short-term trend.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
A more than 20% rebound in oil the past 10 days helped equities close higher a second week in a row. Importantly, there were two positive breadth thrusts this week: equities have strong tendency to add to gains over the following weeks. Despite equity's gains, investors remain very bearish, and this is also a tailwind into February. After a powerful move Friday, a giveback early in the week would be unsurprising.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Equities fell to their August/September lows this week and then reversed higher. A retest of the low would be normal, something to keep in mind in the event of an uncorrected rise from here. Any number of breadth and sentiment indicators strongly suggest that prices should rise further in the weeks ahead. The risk comes from oil prices, which remain too volatile to predict and which have been highly correlated to equities for several weeks.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
US equites have dropped some 10% in the past two weeks, returning to their August/September lows. This has triggered a bearish technical pattern. Is the stock market signaling a recession and the start of a bear market? Risk has clearly increased, but on balance, the evidence suggests the answer remains no.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Momentum should carry equities lower, at least intra-week. Important support levels have been broken; these are now first resistance. Breadth is washed out, similar to past lows, and investor sentiment is now very bearish. It's time to be on the lookout for the formation of a base and at least a temporary bounce higher.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
The selling on Friday was extreme; there is typically some follow through downward momentum in the day(s) ahead. SPY and NDX are near support and breadth is either washed out or close to being so. Volatility experienced an extreme spike; mean reversion usually follows. Seasonality, especially with December OpEx up next, is very bullish. All things being equal, risk/reward should be skewed higher. The wild card is oil: equity markets are being driven lower by falling oil prices and their impact on high-yield.
Mid-Week Update
by Urban Carmel of The Fat Pitch,
SPY will have a golden cross tomorrow. It follows NDX which had a golden cross in mid-November and is now near a 15-year high. Equity-only put/call ratios jumped on Tuesday; this has preceded upside in the past. Also, some updated views on breadth, macro and valuation.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Aside from the upcoming FOMC meeting, there do not appear to be many strong impediments to further gains by year-end for US equities. Three scenarios seem possible. One: a breakout higher now is likely to be a failed move, especially if it occurs prior to the December 16 FOMC meeting. Two: If seasonality drops the market ahead of the FOMC, there is likely to attractive upside into year-end. Three: The most frustrating scenario would be if stocks chop up and down both into and following the FOMC meeting; unfortunately, that has most often been the case at other times the Fed was initiating rat
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
The trend is up: equities ended the week about 1% from their highs. Breadth is improving and outperformance from small caps will further bolster participation. Sentiment remains a tailwind, especially for US equities. There's no compelling short term edge, but further upside into year end remains the most likely outcome. Equities have a tendency to give a good entry on weakness during the next 6 weeks; that would likely provide attractive upside potential into year-end.
The Truths And Myths of Buybacks
by Urban Carmel of The Fat Pitch,
It's true that corporations buying their own shares (buybacks) have helped push asset prices higher. But much of what is believed about buybacks is a myth. There is much more to share appreciation than buybacks. EPS growth is overwhelmingly driven by higher profits, not share reduction. Buybacks are not a result of ZIRP or QE. Companies are not, as a whole, under investing in manufacturing or R&D or other sources of future growth because of buybacks.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
After rising 6 weeks in a row, equities fell hard this week. SPY has returned to the bottom of its former trading range. NDX, which is leading, closed an important open gap that should now provide initial support. So far, no foul for either. A number of studies suggest an upside edge in the short term. Overall, however, risk is rising, as the market now has a potentially bearish technical pattern that it didn't have in August.
What To Expect From The Stock Market in 2016
by Urban Carmel of The Fat Pitch,
3Q financials have been predictably poor, and 4Q won't be much better. All else equal, 2016 should see a return to growth as the impact from lower oil and a higher dollar may become negligible. Especially for their rate of growth, S&P valuations are high. Even if sales and EPS growth start to pick up, valuations are likely to remain a considerable headwind to equity appreciation in 2016.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Equities have risen strongly after the first sell off of more than 10% in 3 years. They are doing so into the seasonally strongest months of the year for equities. Sentiment has not yet become overly bullish. Macro is supportive. Normally, this combination would be a set up for higher prices ahead. That said, after a 12% gain in one month, the normal pattern is for at least a minor retrace. Post-NFP and into the often soft mid-month period, that pattern might well be next.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Equities have risen 8% off their lows. Price is now near the prior trading range from which the waterfall collapse began in August. It would be normal to see selling pressure increase, as trapped longs finally achieve breakeven. But fund managers are overweight cash; they’ll want to be more fully invested before year-end. Upward momentum is therefore likely to prevail in the months ahead.
International Economic Week in Review for Sept. 28-Oct.2; Japan Flashing Yellow, Edition
by Urban Carmel of Hale Stewart,
Overall, the tone of news continues to lean negative. China continues to slow. Japan is clearly having problems regaining momentum after last year’s sales tax increase and Canada just missed being in a technical recession. The EU and UK are growing moderately, but not impressively. And it appears even the US is starting to import some of the global weakness.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
The first drop in equities was more than a month ago, yet price has not come within even 2% of the original low since then. Despite this, bearish sentiment continues to rise as if new lows were being formed. This is a strong positive. The infamous month of October arrives this week: volatility is likely to remain high, but our view is the risk/reward of buying sell-offs is very attractive on a year-end basis.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
It's never perfect in equity markets; when price patterns and breadth look healthy, sentiment is overly bullish and further appreciation becomes limited. When price falls, the price pattern looks scary and breadth looks terrible but sentiment becomes too bearish. These are when longer term lows form. More likely than not, that is where equity markets are now.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Waterfall events like the current one tend to most often reverberate into the weeks ahead. Indices will often jump 10% or more higher and also attempt to retest the lows. Volatility will likely remain elevated for several months. But the fall in equity prices, which has knocked investor sentiment to its knees, opens up an attractive risk/reward opportunity for investors. Further weakness, which is quite possible, is an opportunity to accumulate with an eye toward year-end. However, a quick, uncorrected rally in the next week or two would likely fail.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Strong downward momentum usually has follow through. US indices are mostly within a few percent of significant support levels. The selling this week registered noteworthy extremes in breadth, volatility and sentiment. Friday probably will not mark the low, but risk/reward over the next month looks favorable.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
Price action in US equities is weak. Two potential opportunities to kick off a rally failed this week. Despite this, short term sentiment and seasonality support a move to the upper end of the range. Ultimately, lower lows are still ahead over the coming weeks.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
What looked like the promising start of a new uptrend reversed hard this week. There's a plausible scenario for SPX to fall under 1980 in the weeks ahead. Most of the indices ended the week oversold and on support. For now, it's reasonable to assume that the multi-month trading range pattern will predominate, but a bigger correction very likely still lies ahead.
The Current Sideways Trading Pattern Could Go On Much Longer
by Urban Carmel of The Fat Pitch,
Long periods where the S&P trades sideways in a range is not unusual. There have been at least 15 similar situations in the past 35 years, about one every two years. Some of these have lasted as long as two years. Most of these have resolved with the S&P moving higher. We've been in a trading range for 7 months; settle in, this could go on much longer.
How Investors Are Positioned Heading Into Mid-Year
by Urban Carmel of The Fat Pitch,
The latest data from the Federal Reserve and ICI, a company that measures equity money flows, show that US households have been aggressively adding to their equity exposure and reducing their cash. As the bull market has matured and investor confidence has increased, money has increasingly flowed to foreign equity markets, especially in 2015.
Weekly Market Summary
by Urban Carmel of The Fat Pitch,
US equities have refused to become either oversold or overbought during the past several months. They are now down two weeks in a row and at point similar to where there has recently been a bounce higher. Failure to do so now would mark a change in character for this rangebound market. Ultimately, the washout low probably still lies ahead.
Employment, Wages and Housing Leading The Economy Higher
by Urban Carmel of The Fat Pitch,
The majority of US economic data points to strength. Employment growth is the best since the 1990s. Wages and compensation are growing at the highest rates since the recession ended. And housing, both new construction and sales, are the best in 8 years. The overall economic trend remains positive.
GDP Seasonal Adjustment: There's No Smoking Gun
by Urban Carmel of The Fat Pitch,
First quarter GDP growth was stronger than originally estimated. When adjusted for seasonality, the economy grew 1.8%, which is consistent with the average growth rate over the past three years. It is also consistent with a wide variety of economic data (employment, wages, housing, consumption) released in the past several months. And, finally, it is consistent with the message being sent by the treasury market.
Results 151–200
of 234 found.
