Financial Review

Monday, June 09, 2014 – Record Highs and a Few Crumbs

Record Highs and a Few Crumbs by Sinclair Noe DOW + 18 = 16,943 SPX + 1 = 1951 NAS + 14 = 4336 10 YR YLD + .02 = 2.61% OIL + 1.73 = 104.39 GOLD – .30 = 1253.00 SILV + .05 = 19.16   The major indices are now up for 4 consecutive sessions. The Dow Industrials hit a record high close for the 10th time this year. The S&P is now up 14 of the last 17 trading sessions. The last time the Dow experienced a 10% correction was back in October 2011; since then, the Dow has gained almost 60% over 32 months without a 10% correction. Typically, you can expect a correction about every 12 months on average. The longest period without at least a 10% pullback was an 82 month run from 1990-1997. The S&P 500 hit a record high close for the 19th time this year. The S&P bull market is now at 62 months and counting, the best run since 1994 to 2000.   The CBOE Volatility Index moved a little higher today to 11.34. On Friday, the VIX hit a low of 10.73, the lowest level since January 2007. The VIX can go low and stay low for an extended period of time. In 2007, after hitting a low, the VIX steadily rose for the remainder of the year but stock prices didn’t peak until the end of 2007. The VIX measures options trades, but does it really mean investors …

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Financial Review

Monday, June 02, 2014 – Clean Power Plan

Clean Power Plan by Sinclair Noe DOW + 26 = 16,743 SPX + 1 = 1924 NAS – 5 = 4237 10 YR YLD + .07 = 2.53% OIL – .31 = 102.40 GOLD – 7.80 = 1244.50 SILV – .05 = 18.86   The ISM got it wrong this morning. The Institute for Supply Management reported its May manufacturing index came in at a weaker than expected 53.2, but there was a software problem that didn’t properly reflect season adjustments; the ISM issued a revision; the May index was 56.0; but for some reason, that wasn’t correct, so they issued another revision. The May manufacturing index was 55.4; that’s the number and they’re sticking with it. Embarrassing? Yes.   Meanwhile, stocks and bonds were all over the board. Stocks fell into negative territory early on, but bounced back as revisions were issued. Bonds are hyper sensitive to economic growth, and the yield on the 10 year note moved higher and stayed higher, despite the initial numbers and the revisions. And if you look past the revisions, and you should, because it appears to be nothing more than an honest mistake, caught quick and corrected; the bottom line is a pretty strong number for manufacturing, more or less in line with the idea of a second quarter bounce in the economy.   The bigger story this week will be the jobs report on Friday. It is widely expected the economy added about 200,000 to 215,000 jobs in May, which would …

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Monday, February 24, 2014 – Wine and Neurosis

Wine and Neurosis by Sinclair Noe DOW + 103 = 16,207SPX + 11 = 1847NAS + 29 = 429210 YR YLD + .01 = 2.75%OIL + .64 = 102.84GOLD + 10.50 = 1337.60SILV + .11 = 22.07 The S&P 500 hit a new high today; topping out at 1858; surpassing the intraday high of 1850 set back January 15th, and finishing at 1847.61, just below the record high close of 1848.38, again from January 15. So, we couldn’t hold on to a record close, but it was tempting. The S&P was banging up against resistance, briefly floating above the ceiling and into new, rarified air. And we would all love to be on that rocket, if it really is going to soar. Patience, patience. Now, we know that fundamentals, the news of the day, only offers justification for movement, and we know that the fundamentals can also prove to be contrary indicators. Still, the best explanation I’ve heard today for the enthusiasm is the recent M&A activity has created something of a halo effect. There has been quite a bit of merger action. Consider: RF Micro Devices will merge with Triquint Semiconductor in an all stock deal announced this morning, last week was news of Men’s Warehouse upping its offer for Joseph A. Bank conditioned on Bank dropping its bid for Eddie Bauer, Actavis is buying Forest Laboratories, Comcast buying Time Warner Cable in a deal to create the world’s biggest consumer complaint, and Facebook buying WhatsApp. And suddenly everybody …

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Friday, November 22, 2013 – Big Round Numbers

Big Round Numbers by Sinclair Noe DOW + 54 = 16,064SPX + 8 = 1804NAS + 22 = 399110 YR YLD – .04 = 7.74%OIL – .60 = 94.84GOLD + 1.30 = 1244.70SILV – .16 = 19.93 Record highs for the Dow Industrials and the S&P 500; we also have Dow Transports confirming the movement of the industrials, and small caps, as represented by the Russell 2000 are looking strong, pricey but strong. This was the 41st record high close for the Dow Industrials this year. The S&P 500 is above 1800 and that round number now becomes support. The 1800 level is 17% above the record highs from the Spring of 2000. So, if you just followed the buy and hold, you made 17% over 13 ½ years; which is lousy; and even worse if you dig into the numbers. Adjusted for inflation, the 1800 level is 14% lower than the highs of 2000. Then you should also consider the S&P 500 is a capitalization weighted index, meaning the bigger companies have a bigger impact on the index. Back in 2000 there were 25 companies that accounted for 45% of the value of the 500 stock index; so, really back then it was more like a 25 stock index, and a 475 stock index. And really, the S&P is a dynamic index; meaning, the companies change. Back in the day, the high flyers were Lucent, MCI Worldcom, AIG, Sun Micro, Dell. This year, we’re seeing about 450 of the …

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Thursday, November 21, 2012 – Size and Composition

Size and Composition by Sinclair Noe DOW + 109 = 16,009SPX + 14 = 1795NAS + 47 = 396910 YR YLD – .01 = 2.78%OIL + 1.59 = 95.44GOLD – .40 = 1243.40SILV + .14 = 20.09 Intraday, the Dow industrials were higher last Friday and last Monday, but this was a record high close, and that is what we look at – the close. The reason we look at the close is largely arbitrary, and the reason we celebrate the Dow record high close as opposed to the S&P 500 record high close, is again arbitrary. The significance of a close above 16,000 is not a big deal; it’s just a number. Earlier in the week the market looked at the round number and could not close above; there was a pause; then today, a move above. Test, retracement, breakout; that’s bullish. We have discussed that there is a disconnect between the markets and the broader economy. We have discussed that the trickle down effect or the wealth effect has been less than satisfying for. Still, some of that money will filter into the broader economy; and the bottom line is that it’s better than a poke in the eye with a sharp stick. At some point the Fed will taper; the easy money party will end; until then, well, enjoy the milk and cookies. Initial claims for state unemployment benefits fell 21,000 to a seasonally adjusted 323,000. Meanwhile, prices at the wholesale level dropped 0.2%. The PPI core …

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