Buzz on the Street: Gold Caught In a Bubble?
Some of this week's most insightful and timely vibes.
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Monday, November 16, 2009
Battle of the Indexes
After dwelling on the NASDAQ for the past many days, it is time for a change. Let me share, what I believe, is the most significant thing on my trading radar.
If we have been in sync, you know what it is - the Russell 2000 which is still below its recent highs. Continued lack of participation from the small caps would signal the first important change in market action.
Even though the Russell has recaptured the 50-dma in intraday action, and remains a star performer today, it would be much more comforting to see reclamation of the recent highs of 623.9 and get this all important sign of conformation of market health.
Click to enlarge
Editor's note: Smita had positions in IWM at the time this Buzz was published.
After watching a football game that featured the Patriots calling a pass play from inside their own 30 with 2 minutes to go on 4th down up by 6, I watched 60 Minutes (dvr'ed) to learn dinosaurs are coming back in chicken eggs. Waking up to see futures in dark green must have felt just as confusing to many who see nothing but bad news all around.
As the District Attorney said in the movie JFK, "We are through the looking glass here people, black is white and white is black." And sure enough, before drifting off I think I saw Leon Black playing a white CPA on Curb Your Enthusiasm.
Instead of over-playing the sentiment card (although is this not the ultimate "wall of worry" you've always heard markets climb?) I wanted to simply share a few much needed simple facts after earnings season.
Let us go past the headlines that more than two-thirds of companies beat expectations. Among the bear's favorite points is how they are doing it through deflationary cost cuts and layoffs only, and that point was challenged in surprising fashion. More than half of reports beat top line sales expectations.
And as for peak profits before double-dipping? Well, for the first time in five quarters more companies raised guidance than lowered it. Maybe they are all Belichick'ing it but almost twice as many companies raised guidance which is a ratio not seen in any of the past five years.
Agree or disagree with stocks move, or a coach's call, I will humbly submit that in each case the competition was and perhaps still is under-estimated. For capital looking to back one team in this fourth quarter, stocks are staring across the field at 3-month T bills of 0.05%.
Tuesday, November 17, 2009
Despite the red on the screen today
All of the major sector groups finished yesterday with gains. Energy and industrial stocks were the top performers: The Energy SPDR (XLE) gained 2.6% and the Industrial SPDR (XLI) gained 2.3%. The move among the big industrial stocks is notable since it's the first breakout move in these issues in more than two months. It also takes a lot of firepower to move the mega-cap issues that make up the XLI including Boeing (BA), Caterpillar (CAT), and General Electric (GE).
These aren't speculative issues that can be pushed around by small-time operators. Investors from sovereign wealth fund, state pensions, and corporate retirement plans are providing the impetus here. Translation: For the first time since September, serious money is being put to work in the big companies at the heart of the U.S. economy. This is a big vote of confidence.
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