MorningWord: 3/2/12

MorningWord: 3/2/12:  U.S. equities continue their resilient tone, closing yesterday at new 52 highs after shaking off the previous day’s late afternoon jitters.  Gold rebounded slightly, as crude rallied a touch along with the U.S. dollar.   The biggest take away for me from equities yesterday was that for the first time in a while it didn’t seem like AAPL was the “tail wagging the dog”.  U.S. banks were driving train for the first time in weeks.  Goldman’s more than 5% surge yesterday on big volume, breaking out of a well defined month long base was nothing short of impressive and when you look at the chart below, it appears that $130 is now a massive target, even with the stock up about 34% ytd.

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MorningWord: 3/1/12:  Well people, we almost had it yesterday…..IT being a real sell off.  Yesterday’s action in Gold down almost 5.5% was its worst day since late September and almost unerved the entire market.  The SPX closed 90bps off of the morning highs, near the lows of the day, and we actually started to feel a little panicky.  Key word being little.

Waking up this morning though, all is well in the world again, European equities are up across the board, with the DAX near the highs of the day up close to 1%, Euro down a tad, Gold bouncing a bit, crude practically unchanged and our futures rebounding 30bps.  

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MorningWord: 2/29/12: Doug Kass kind of nailed it on Fast Money a couple weeks back, “We are seeing a market that is far too focused on a few names – most importantly Apple – it’s an NBA market – nothing but Apple.    The SPX was up 34 bps yesterday while AAPL was up 1.84% and I think it is safe to say without AAPL’s out-performance and signaling the all clear for other large cap tech names like MSFT up 1.66% on the day and GOOG up 1.49% on the day that there is a good chance the broad market would have been down.   But the financial press loves round numbers and AAPL closing the day a billion shy of $500b in market cap and the Dow Jones closing above 13k for the first time since mid 2008 was like Christmas come early for those charged with telling us why the markets did what they did.

You guys know where I stand on this, I presume that you are not a frequent reader of this space because you are looking for the conventional consensus view, you won’t find that here.  I keep getting questions from friends, colleagues, readers, oh and perfect strangers whether I am just swimming up stream?? Well of course I am for now and the truth is I would be an absolute monkey if I just threw in the towel and reversed course.  Throughout my career I have never nailed a top (or a bottom for that matter) within 1% , it’s almost impossible and if one did it would likely have to do more with luck then skill.  The point here is that I have always been early and always will, and as a rule I tend to be contrairian, so I won’t be part of the herd.  Here is the thing, I don’t run a hedge fund or mutual fund, I don’t have a benchmark, like a lot of you, I just have my wife or husband looking over the monthly pnl reports!  But the name of the game is capital preservation, and as I have said here for most of the year, when wrong on direction, you need to be even more mindful of sizing…..my positions have become smaller and smaller so no one wrong bet puts me on the sidelines for a bit……and when the time is right, when most of the inputs that you use to inform your trading/investing decisions signal to pounce, then you do, with defined risk…….this is what I am in business to do is look for the most cost/risk effective ways to make bets in the market, I am not here to sell some BS long only mutual fund that after fees will likely lag its benchmark, or try to sell some hedge fund that promises great riches in a good markets and “less bad” returns in bad markets.   So if you want to hear the bull case pounded on an hourly basis, just turn the tv on, or read most financial press, and this wouldn’t be the site for u unless u want a little bit of skepticism to water down all the fluff out there.

So I think the important thing is to recognize the ideas that we speak about on the site are not meant to be an investment portfolio.  I look for situations where the market under or over-appreciates a situation and look for a defined risk way to play, or look to reduce exiting risk.  Think of RiskReversal as on add on to your existing reading that is not likely to follow the herd. There I got that off my chest.  IN the next couple weeks we will be introducing a new full time writer to the site who will hopefully be able to balance a lot of my stubbornness, stay tuned.

As for the “NBA market” I think at the multi year highs AAPL now serves as a bigger impediment than a catalyst for higher highs.  Next week (march 7th) the company will hold their iPad3 event, and if the product launch is disappointing I can only imagine this stock re-tests $500 quickly and possibly back the lows made in the mid $480s from that reversal mid month.  This is the most crowded to trade the planet has ever seen, and trust me we have seen this movie before, I can’t tell you when it is going to end but I sure Know How It Will.  Just remember people, when you start hearing daily that it is “different this time” it may be time to “Think Different”.

 

MorningWord: 2/28/12:  Yesterday’s reversal was just downright nasty if you were short and looking to finally press a move that appeared to be coinciding with a “risk off” opening.  Crude, Gold, Euro, equities the world over were all down, with bonds up and the VIX up 10%……… it appeared for the first time all year we would have a little sell off reminiscent of summer/fall 2011.  The combination of a New Home Sales number that was better than expected and the German Parliaments vote in favor of funding the 2nd Greek Bailout after the European close and BAM, the lows were in……the SPX closed at new 52 week highs, while the DAX closed almost 1.5% off of it’s lows.  Equities clearly have a bid to them as they approach levels not seen since the pre 2008 financial crisis, and it appears that it will take a bit more than some tough talk from the G-20 to get equities down and keep them down.  This morning our futures and European equity markets have reversed on the one two punch of the worst Durable Goods Orders print in almost 3 yrs, coupled with weaker than expected housing data from Case Schiller.  Our futures are down about 50 bps from earlier highs while the DAX is down about 1% from the morning highs.

Yesterday I posted on the IWM appearing at least on the open to be losing a bit of momentum relative to large cap stocks (read here) and breaking below its 20 day moving average.  This was  massive head fake and similar to that of Dec 19th, a date in which it made a similar move below the short term momentum indicator, and since then the index has been up a little more than 24% (not exactly proving the point).  I am going to keep a close eye on momentum, breadth and volume as we approach multi year highs, with out a single pullback this year of more than 57 bps, something has to give and soon, the whole rally feels a bit bubbly to me.  

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