The Daily Read

New title, same stuff - just not twice a day anymore. Here's what I'm reading tonight.

• Stocks tumble; Dow drops over 200 points - WSJ
• Cotton traders wonder: how high is too high? - WSJ
• Is the PBOC driving up the euro? - Alphaville 
• Distributed generation: devolving power - Economist 

"I am certain, however, that nothing has done so much to destroy the juridical safeguards of individual freedom as the striving after this mirage of social justice."

- Friedrich Hayek

If you have read the papers (that word almost demands quotations nowadays), you have undoubtedly read that concerns over China, the next US catalyst, and persistent emerging market fears are to blame for today's sell-off. Poppycock, all of it.

Today the S&P 500 let go of 21.86 points to settle at 1,846 - a decline of 1.17%. This is hardly "fear" or "panic" selling. In fact, traders are taking some profits. In my weekly research note (written and distributed every Sunday), I warned traders to be cautious in initiating new long positions. I did this simply because it is time for a breather - no one sprints a marathon.

Today's action saw steady and persistent selling, after a slight gap-up open, on solid volume. There were no "come to Jesus" moments; no 15-handle 5-minute candles on the charts - just a slow, steady move lower. Consider the chart below.

The upward trend in the SPY is in tact. I will not start to become worried until we see a test of the 180 level and a move lower (accompanied by some volume).

In terms of my current positions, I am cash-heavy at the moment. My TSLA and SCTY positions were stopped out for a small loss yesterday, and I removed my APR calls in POT on Monday. The only trade I have on at the moment is my GDX synthetic covered call and it is working out quite nicely, in no small part due to the upside seen in spot gold. To avoid getting whipsawed around, I am going to refrain from adding long exposure (at least in the near-term) until we see some support. The 50-day moving average in SPY is around 183 - I would like to see that level (at least) reached and held before I start snooping around for longs again.

In the meantime, maybe there is a short or two waiting to be found. More on that tomorrow.

Heads, ignore the pundits. Tails, ignore the pundits.

The Morning Read

I apologize for the brief absence. Here's the morning read - let's get back to it.

• NYSE, Nasdaq join to push for trading rule - WSJ
• China to establish five private banks - WSJ
• Don't celebrate this anniversary - WSJ
• Bubble watch: growth is good - Alphaville
• Richest Scandinavians lose jobs as exporters fight for trade - Bloomberg

"The four most dangerous words in investing are: 'this time is different.'"

- Sir John Templeton

Good morning, ladies and gents. After a brief hiatus yesterday, I am back to the printing presses so to speak. Let's take a look at where the markets are shaking out this morning, shall we?

Asian markets were slightly higher overnight - the Nikkei added 0.69%, Hong Kong's Seng index was flat, and the Shanghai Shenzen 300 added 0.52%. European markets are mixed this morning. The FTSE is down 0.35%, while the DAX is up 0.20%. Not a whole lot of excitement to speak of this morning.

US futures are basically flat this morning - /ES -1.00, /YM -2.00, and /NQ up 1.75.

Yesterday, we saw markets open lower and continue the selloff during the early part of the day. Surprisingly, the trade from late-morning was higher into the close. Treasuries have sold off from recent strength - a trade I was a little early on, and subsequently missed the move - with the TLT falling from a recent high of 109.18 to settle at 106 yesterday.

It is getting old saying it, but there is no use in shorting the market. The profitable trade is higher still. Think about what most portfolio managers, analysts, institutional investors, et al are thinking. "We cannot possible see another strong year after the performance equities put in last year."

Equities are trading on the back of the largest scale central bank liquidity experiment in modern history. The incredibly invasive actions that the Fed, the ECB, and a litany of other central banks have participated in are likely to create very unusual and extraordinary times. It feels like Alan Greenspan all over again, just without the "new era" rhetoric.

Someday, the reckoning will be upon us. That day is not today, and is unlikely to show its face this year. If markets do take a breather and sell off, be wary of the pundits pounding the table, saying "this is it! This is the big correction!" They've been wrong since last summer.

Heads or tails, "this time" is never different.

The Morning Read

I hope everyone has had a great week. Here's what I'm reading this morning.

• Companies rush to list shares - WSJ
• Jobs data shouldn't be cause for alarm - WSJ
• Crowdfunding rules arrive: angry face, sad face - Alphaville
• The face behind the Euro - Alphaville
• Emerge, splurge, purge - Economist

"I have yet to see any problem, however complicated, which, when looked at in the right way did not become still more complicated."

- Poul Anderson

Well, folks, it is the first Friday of the month. Non-farm Friday, as goes the popular sobriquet. To the surprise of many, the S&P 500 has held its ground after Tuesday's major move higher - I, too, might have expected some more profit taking during the middle of the week.

I am of the thought that today's NFP data will only matter if it varies widely from already-muted expectations. I could be wrong, though. Today could be the day it all comes crashing down - I highly doubt it, however.

Asian markets settled somewhat mixed overnight, as the Nikkei added 0.92%, while Chinese markets drifted lower (Hong Kong -0.19%, Shanghai -0.4%). European markets, as of this writing, are slightly lower as well - FTSE -0.28% and the DAX -0.78%. Mario Draghi "disappointed" yesterday by making not a single policy move in the face of what many consider increasing deflationary pressure.

US futures are all barely higher - S&P 500 e-minis are sitting at +1.75, Dow +14, and Nasdaq +1.50. They will continue to tread water until employment data is released at 8:30am EDT.

My present stance in the market is still bullish. I have closed several positions this week, to include BAC and XHB. I have sold some March premium in TSLA and SCTY, and have a couple of long-call positions in some other names. Additionally, my GDX Jan/Mar (rolling front-month) 24.5/27 diagonal spread has been performing nicely. Barring any major shift in sentiment today, I will continue to trade around current positions - taking profits when granted and adjusting any "difficult" positions accordingly.

Here's to closing out the week on a good note.

Put the odds in your favor today.

The Morning Read

Good morning, folks. Lots to do today, but here are some reads.

• A quiet trend that may be boosting stocks - Barron's
• Should you buy BlackBerry? - StreetAuthority
• The trouble with relentless bid theories - TheReformedBroker
• ECB Thursday - stick or twist? - WSJ
• Deutsche Telekom says T-Mobile can survive on its own - Bloomberg

"Stock market bubbles don’t grow out of thin air. They have a solid basis in reality — but reality as distorted by a misconception.”

- George Soros

Today's note will be short - I got a late start to things and have a fair amount to do before the opening bell rings. And to be honest, yesterday's action was quiet - US markets traded in the tightest range I have seen for a while.

Today, Mario Draghi at the ECB will update the world on whether or not they will sterilize SMP (Securities Market Program) purchases. In other words, whether or not the ECB will continue to buy bank assets as a form of QE.

Asian trading saw markets move slightly higher - the Nikkei was the outperformer, tacking on 1.59%; Hong Kong added 0.55% and Shanghai picked up 0.45%. Euro-markets are trading quietly ahead of the ECB's announcment - the FTSE is up 0.20%, with the DAX trading up 0.22%. I imagine we will continue to see tight-ish trading in the US also, as traders position themselves ahead of tomorrow's NFP data.

My quick take on tomorrow's payroll numbers: the only way I see equities sell off considerably is if jobs data comes in much firmer than expected. Consensus expectations are for a 140k increase in payrolls, so anything above 175k or so I feel would be "too good." If the number comes in within a 10-15% range in either direction of expectations, I am willing to wager that you will see stocks get bid up. Everyone is discounting recent economic data due to the weather, anyway.

Put the odds in your favor today, my friends.

The Morning Read

Here are some interesting reads to start the day.

• Beijing signals new worry on growth - WSJ
• Why is Ukraine's economy in such a mess? - Economist
• Deflation risk, UK edition - Alphaville
• China solar credit does not equal gold - Alphaville
• Marijuana decriminalization approved by Washington D.C. - Bloomberg

"Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do."

-Steve Jobs

This Friday is "non-farms Friday," meaning non-farm payroll data for February is due to be released at 8:30am. After the volatile start to this week, I would expect things to quiet down ahead of this Friday's number.

Overnight, Asian markets were mixed as China is facing its first onshore corporate bond default (see "China solar credit does not equal gold" above). The Shanghai lost 0.93%, while Hong Kong trading saw a modest decline of 0.34%. In Japan, all was well - the Nikkei added 1.20% to finish at 14,897.

As of 7:30am, European markets are all taking very modest haircuts. The FTSE is down 0.60% and the German DAX is off by 0.31%. US futures are flat this morning - not a whole lot of excitement to note.

In terms of what I'm doing today - may continue to look for some more long exposure, but in the way of selling premium (i.e. selling out-of-the-money put spreads). There are not a whole lot of names "on sale" - that don't deserve to be - with the broad market printing new highs.

See anything interesting? Let me know. Have a great day.

The Evening Read

I hope you are having a great day. Here's what we're reading tonight.

• Bull market's five-year anniversary, in five charts - WSJ
• Merkel eye for Russian Empress shows Putin ties are complex - Bloomberg
• Obama budget predicts strongest U.S. growth since 2005 - Bloomberg
• RadioShack's woes: dead brand walking - Economist
• Falcons in the gyre, or something. A second coming and how Pimco works - Alphaville

"Be fearful when others are greedy, and greedy when others are fearful."

- Warren Buffett

The above quote is strategically placed - by way of PostIt note - right next to my monitors. And when we have days like yesterday, I am quite pleased with its placement.

After yesterday's all-day selling pressure, brought on by Mr. Putin's military "exercise" (a.k.a. invasion) in Ukraine, the S&P 500 raced to new highs today (on volume). Monday proved to be a buy-one-get-one-like sale for the nimble. The closing print on the SPX was 1,873, while the Dow and Nasdaq (largest percentage gainer at +1.75%) finished at 16,395 and 4,351, respectively.

It is nearly impossible to accurately gauge where markets might end up months or years into the future. Even in the near-term, it is a challenging task - especially if you have skin in the game. All one can do is formulate an idea on where the odds lie, and attempt to trade with those odds. 

With that said, Jeffrey Kleintop of LPL Financial has made some bold predictions. Borrowing from the article above, "Bull market's five year - you get the idea - I have posted a couple charts Mr. Kleintop provided the WSJ.

Keep in mind, the only thing that separated 2008-2013 from looking more like 1929-1934 was an incredibly different (and much more accurate) approach to monetary policy. If you see Hank Paulson, make sure you pat him on the back and give him a heartfelt "'atta boy!"

 

So, since the end of WWII, the current bull market is the second strongest on record. Again, this seems absolutely nuts unless one understands how truly awful 2008-2009 really was. Note that the strongest bull market since WWII ended with the crash of 1987. Hmmm...

 

                           

This chart is the interesting one (I wish it went back to net inflows pre-2009). The retail money - to be kind - has not participated in this rally. The halved 401(k)s and delayed retirements brought on by 2008-2009 still resonate with many "mom and pop" investors. With that said, persistently low rates are causing some to go on the hunt for returns again.

If nothing else (because it certainly isn't consistently profitable), prognosticating is fun. Retail money is getting close (if not on it already) to the "buy" button. Everyone knows what happens next.

Heads, this time is different. Tails, this time is never different.

The Morning Read

Good morning, folks. Here are some reads to start the day.

• Russia orders soldiers in military drills back to their bases - WSJ
• China's currency move leads to liquidity boost - WSJ
• President Xi's anti-corruption campaign biggest since Mao - Bloomberg
• Insurers will destroy themselves to nudge us into robot utopia - Alphaville

"If a man will begin with certainties, he shall end in doubts; but if he will be content to begin with doubts, he shall end in certainties."

-Francis Bacon

"Just kidding, guys! It was only a military exercise that we've been planning for months; it had nothing to do with our horse losing power in Ukraine. But we're staying in Crimea. That's ours."

 That's the message the world received from Vladimir Putin early this morning. I don't think that anyone believes a single word of it - I definitely do not.

European markets have rejoiced at the easing of tensions - the Euro STOXX 50 is up 2.25% this morning, led higher by the FTSE (+1.52%) and the DAX (+2.11%). The relief has trickled into the US as well. S&P futures are currently trading 21.00 points higher, with Dow futures higher by +179 and Nasdaq rounding out the action at +43.25. I very much hope you were able to buy the dip yesterday; I am very pleased by the latest developments.

I apologize for the abbreviated nature of today's morning read. I have some non-market related appointments to tend to this morning, so I will spend much of the early part of the day away from the desk.

The shorts still cannot win at present. I will be keeping my exposure to the long-side of things. Heads, I'm right on the money. Tails, I'm not, but I'll get there anyway. Put the odds in your favor, my friends.

The Evening Read

And March is off to the races. Here's what I'm reading tonight.

• Ukraine troubles Europe's banks - WSJ
• Carry on conduits: deteriorating credit on MBS again? - Alphaville
• Peer-to-peer lending: banking without banks - Economist
• Modell's CEO poses as Dick's Sporting Goods executive, spies - DealBreaker
• Hedge funds most bullish on Gold rally in 14 months - Bloomberg

"If stupidity got us into this mess, then why can't it get us out?"

- Will Rogers

If you are reading this, and also happen to be an active market participant, I do hope that you were not too badly hurt today. Around noon, it looked as though the sky was falling; however, US markets found a bid and traded higher off of the lows of the day. Volume on SPY was 167m - the most we have seen since February 7. Given the the significant "risk off" mood seen 'round the world overnight, I think today's action is somewhat bullish.

I added long positions in BAC and TSLA (the relative strength in the electric car-maker was unreal), and I will continue the hunt this evening for other names that held up well during today's barrage of geopolitical-inspired selling.

US Treasuries continued to move higher today, understandable considering traders' nervous jitters over the Ukraine/Russia saga. Thinking a little longer-term, however, this seems like somewhat of a juxtaposition in my opinion. The recovery in the US is still on track (and I believe it will likely pick up steam heading into the summer), ergo, the Fed will continue with the taper and eventually the discussion will change about rates. Instead of "sometime in late 2015," the rate-hike rhetoric will become much less, well, rhetorical and more based on an actual date that falls on a calendar.

What will happen to equities when the powers-that-be at the Fed decide that the good 'ole USofA's economy is done with the training wheels? I can imagine what would happen to treasuries, and let's just say I am not a buyer.

Heads, I might even be a seller. Tails, perhaps not just yet.

The Morning Read

Russia had a busy weekend. Here's what I'm reading on this busy morning.

• Ukraine crisis roils global markets - WSJ
• "Hopeless, but not serious" Up and down wall street - Barron's
• ECB rate-cut momentum seen ebbing as decision day looms - Bloomberg
• Does Pimco know something we don't? - Alphaville
• The economic consequences of geopolitics - Alphaville

"I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said."
- Alan Greenspan

Vladimir Putin certainly ate his Wheaties on Saturday. As I was writing up my weekly research note yesterday afternoon, I noticed US futures nose-dive (Odd for 6:00pm on a Sunday). It did not take long to see an article in the WSJ reporting that Russian airborne and naval forces had indeed invaded and taken operational control of Crimea. That's enough to spoil anyone's Sunday evening.

Taking a quick look at overseas markets shows a lot of selling - in Asia, the Nikkei is off 1.27%, while Hong Kong lost 1.47%. European markets have fared even worse: the FTSE is down 1.95% and the German DAX is down 3.06% as of this writing. Considering Ukraine is primarily a "European" problem, this makes sense.

US futures were under pressure all night, and this morning have yet to find any reprieve. S&P futures are down 18 handles, Dow -132, and Nasdaq futures off by 35 points. Treasuries, Gold, Crude oil, and Wheat are all trading higher as of this writing. My first inclination is buy the dip, but it would be wise to see where markets find a bid this morning.

I am going to refrain from beating a dead horse and talk about something non-Russia/Ukraine related this morning. Over the weekend, Bespoke Investment Group put out an interesting note on the most heavily shorted stocks in the S&P 1500. Of note, the average performance of these 27 or so names was better than that of the S&P 1500 year-to-date. I have included the complete list below.

Candidates that interest me? I thought you would never ask. They include JCP, GME and ARO.