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Stocks Get Set for a Showdown

By

S&P 1115 is the line in the sand.

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It's just another manic Monday as the combination of the reaction to Friday's soft GDP, "stronger"-than-expected HSBC (HBC) results, and the not-as-bad-as expected China PMI combine to give the tape a green tint in the early going.

All the while, we remain embroiled in a technical tetherball that would make Napoleon Dynamite blush.

As measured by the S&P, the fourth lower high remains in tact and the 200-day moving average resides above; both are bearish and both come into play in and around S&P 1115. As discussed last week on the Buzz, however, some stealth positives have been lurking in the shadows:

  • More than 70% of the companies in the MSCI World Index reported better-than-expected profits in the second quarter, according to Bloomberg. That's rear-view -- and the second half will seemingly be entirely tougher -- but it impacts the collective sentiment. It's not what is, it's what's perceived to be.

  • There's a buff tone in corporate credit, which remains the meat of the bull case sandwiched between two layers of concern in the form of sluggish personal consumption below and the sticky sovereign situation above.

  • We've seen an up-tick in M&A, dividend increases, and stock buybacks; all of which are consistent with the above bullet.


For my part, I continue to trade around the S&P (in real-time on the Buzz - free trial) with an eye towards incremental returns. I almost pulled the trigger on a slew of exposure Friday morning but I was still reeling from Sockgate 2010.

Hey, I may be barefoot, but I'm still honest. Always honest.

Some Random Thoughts

  • Do you think the digital revolution has increased the speed of everything, from business cycles to mating rituals? Think about that for a moment. We've seen five booms and busts in the last eleven years and, in the age of BBM and Twitter and Facebook and text messages, an entire generation has lost that loving feeling of blissful anticipation.

  • Remember when we used to vibe on Stagflation*, which was inflation in things you need (food, energy, health care, education) and deflation in things you want (cell phones, plasmas, laptops)? That's been popping into my thoughts all weekend so I wanted to share.

  • As it stands, if you put a water pistol to my keppe, I'm still 75% in the deflation camp as the Internet remains the most deflationary invention in world history.

  • Goldman Sachs (GS) $150 and Morgan Stanley (MS) $26 are big levels for the brokerage giants (the former is previous resistance and current support, the latter is the right shoulder of some reverse dandruff). All the while, BKX 50 remains above and that "churn channel" has served us in such good stead.


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  • The doors to Festivus 2010 are officially open, as is the RP Foundation Facebook page, for those who wanna show the kids some (free) love...

  • I love my new iPhone 4 but I can't help wonder if Apple (AAPL) will be targeted in societal cross-hairs simply because it's SO successful?

  • Think about the companies that fell pray to the Robin Hood Economy -- Goldman Sachs (GS). BP Plc (BP) (for obvious reasons), Toyota (TM) -- the list continues to build.

  • Remember when we weren't allowed to say the word "recession?"

  • Like it was anathema?

  • Or when we weren't "patriotic" if we weren't "bullish" after 9/11?

  • Minyan Alex shares this poem with ye faithful, which his pops shared with him on his 18th birthday way back when.

  • Remember that scene in Airplane when Johhny offered to make a hat or a broach or a pterodactyl? Check out the two charts below of the S&P, albeit with different time horizons. One is potentially bullish and one quite bearish. Point is, you can typically find technical validation regardless of your view; that's why this metric is a better risk context than catalyst.


    Click to enlarge


    Click to enlarge

  • How about the VXO vs. S&P discussion? I've added that chart as well for purposes of perspective. These are all pieces of a much larger puzzle so please treat them as such.


    Click to enlarge

  • Hank Paulson is saying that Fannie (FNM) and Freddie (FRE) have to be scaled back? Ya think, Hank?

  • While I don't know specifics, does this sorta story creep anyone else out?

  • What is it about PJ Clarke's cheeseburgers that make them best in breed?

  • Do you think that Richard Gere story is true?

  • What about Jamie Lee Curtis?

  • Is what we can't see the scariest dynamic currently in the marketplace?

  • Lots to think about, particularly if you're a gerbil. Good luck this week, Minyans. Let's hit 'em hard.


R.P.

Position in S&P

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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