Need to Know
MAY 09, 2013
7 gut checks before the stock market's opening bell
By Shawn Langlois
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Flickr/ladybugbkt
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Good morning.
Identifying trends is at the core of stock-market analysis. Every day, we pore over historical data and charts, looking for those little nuggets that will give us a leg up on the next guy.
"Sell in May," and offshoots like "bluff in May, sell in June," have provided plenty of trend-spotting fodder during the past couple of weeks. At the same time, the lagging performance of cyclicals has the experts flipping through past patterns for clues as to whether the buying can continue. Goldman Sachs says it can, with or without tech participation .
And in our "chart of the day," we join Ed Yardeni in taking a look at margin debt and what the most recent spike, using trends as a guide, could mean for the market.
But perhaps the most compelling trend comes from Anthony Garner of Harriman Intelligence. His take, essentially, is that trends are growing increasingly inaccurate . "Markets as a whole have become less trend friendly/more noisy over time and ... the last two years look particularly inefficient and trendless," he wrote.
A trend indicating we should rely less on trends. I like that.
Key market gauges: A surprising rise in China consumer prices led to a lackluster day in Asia . That weakness combined with a red-soaked start in Europe has futures on the Dow and the S&P stuck in neutral. If the trend holds, though, another up day is on tap.
The economy: The number of people who applied for unemployment benefits dropped 4,000 to 323,000 in the week ending May 4, hitting the lowest level since January 2008. Economists had expected initial claims to rise slightly to 335,000 from an original estimate of 324,000 for the prior week, echoing softness in other recent labor-market data. Separately, Richmond Fed President Jeff Lacker delivered a speech on financial stability, while the Philly Fed's Charles Plosser said he'd like the Fed to slow its asset purchase program .
Earnings: After another busy week of quarterly results, the noise starts to die down a bit. But investors will still get a look at Apache in the morning and Priceline.com , which is hovering around all-time highs, in the afternoon. Read why Priceline.com is "vulnerable to even the slightest missteps."
The buzz: A short-squeeze of epic proportions awaits those who have placed bets against Tesla . The shares are up some 24% premarket after the company posted its first-ever profit . Meanwhile Ferrari, which vows never to make an all-electric vehicle, is cutting production. Not because of any demand issues -- of course not -- but the corporate line is that the brand needs to maintain its exclusivity .
McDonald's is catching some major flack for this timely tweet about getting in touch with hero and Internet star Charles Ramsey. Was it just good business or some bad taste news-jacking? I'm in the former camp.
We salute the courage of Ohio kidnap victims & respect their privacy. Way to go Charles Ramsey- we'll be in touch.
— McDonald's Corp. (@McDonaldsCorp) May 7, 2013
Manchester United is still trending on Market IQ after the soccer giant's legendary manager Alex Ferguson announced his retirement, sending the stock down 1.8% by the end of the day. The declines could have been worse, seeing as the shares lost more than 4% in the immediate aftermath. See who is in the running to take over the top job. Smart money is on Everton boss David Moyes.
Electronic Arts , Groupon and Green Mountain Coffee Roasters are also drawing clicks, with shares of all three enjoying some big gains yesterday. See: Stocks to watch .
Barnes & Noble shares are blowing up in premarket action, surging some 30% on a TechCrunch report that Microsoft is considering a $1-billion offer to buy all of Nook Media's digital assets.
The chart of the day: Margin debt is hovering around all-time levels, having soared to $380 billion in March, a 28% jump from a year ago. That typically means investors are feeling aggressive about stocks. It could also mean the end is near. Ed Yardeni says it "certainly supports the charge that the Fed is once again inflating asset bubbles," though "valuation multiples aren't flashing irrational exuberance yet." But that could change quickly, the Yardeni Research strategist warns , and a "debt-financed melt up of stock prices" could be followed by "a meltdown" of up to 20% later this year.
Identifying trends is at the core of stock-market analysis. Every day, we pore over historical data and charts, looking for those little nuggets that will give us a leg up on the next guy.
"Sell in May," and offshoots like "bluff in May, sell in June," have provided plenty of trend-spotting fodder during the past couple of weeks. At the same time, the lagging performance of cyclicals has the experts flipping through past patterns for clues as to whether the buying can continue. Goldman Sachs says it can, with or without tech participation .
And in our "chart of the day," we join Ed Yardeni in taking a look at margin debt and what the most recent spike, using trends as a guide, could mean for the market.
But perhaps the most compelling trend comes from Anthony Garner of Harriman Intelligence. His take, essentially, is that trends are growing increasingly inaccurate . "Markets as a whole have become less trend friendly/more noisy over time and ... the last two years look particularly inefficient and trendless," he wrote.
A trend indicating we should rely less on trends. I like that.
Key market gauges: A surprising rise in China consumer prices led to a lackluster day in Asia . That weakness combined with a red-soaked start in Europe has futures on the Dow and the S&P stuck in neutral. If the trend holds, though, another up day is on tap.
The economy: The number of people who applied for unemployment benefits dropped 4,000 to 323,000 in the week ending May 4, hitting the lowest level since January 2008. Economists had expected initial claims to rise slightly to 335,000 from an original estimate of 324,000 for the prior week, echoing softness in other recent labor-market data. Separately, Richmond Fed President Jeff Lacker delivered a speech on financial stability, while the Philly Fed's Charles Plosser said he'd like the Fed to slow its asset purchase program .
Earnings: After another busy week of quarterly results, the noise starts to die down a bit. But investors will still get a look at Apache in the morning and Priceline.com , which is hovering around all-time highs, in the afternoon. Read why Priceline.com is "vulnerable to even the slightest missteps."
The buzz: A short-squeeze of epic proportions awaits those who have placed bets against Tesla . The shares are up some 24% premarket after the company posted its first-ever profit . Meanwhile Ferrari, which vows never to make an all-electric vehicle, is cutting production. Not because of any demand issues -- of course not -- but the corporate line is that the brand needs to maintain its exclusivity .
McDonald's is catching some major flack for this timely tweet about getting in touch with hero and Internet star Charles Ramsey. Was it just good business or some bad taste news-jacking? I'm in the former camp.
We salute the courage of Ohio kidnap victims & respect their privacy. Way to go Charles Ramsey- we'll be in touch.
— McDonald's Corp. (@McDonaldsCorp) May 7, 2013
Manchester United is still trending on Market IQ after the soccer giant's legendary manager Alex Ferguson announced his retirement, sending the stock down 1.8% by the end of the day. The declines could have been worse, seeing as the shares lost more than 4% in the immediate aftermath. See who is in the running to take over the top job. Smart money is on Everton boss David Moyes.
Electronic Arts , Groupon and Green Mountain Coffee Roasters are also drawing clicks, with shares of all three enjoying some big gains yesterday. See: Stocks to watch .
Barnes & Noble shares are blowing up in premarket action, surging some 30% on a TechCrunch report that Microsoft is considering a $1-billion offer to buy all of Nook Media's digital assets.
The chart of the day: Margin debt is hovering around all-time levels, having soared to $380 billion in March, a 28% jump from a year ago. That typically means investors are feeling aggressive about stocks. It could also mean the end is near. Ed Yardeni says it "certainly supports the charge that the Fed is once again inflating asset bubbles," though "valuation multiples aren't flashing irrational exuberance yet." But that could change quickly, the Yardeni Research strategist warns , and a "debt-financed melt up of stock prices" could be followed by "a meltdown" of up to 20% later this year.
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Yardeni.com
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The call(s) of
the day: The Ira Sohn Conference in New York
last night delivered an orgy of investment ideas from some
financial heavyweights, but we'll just cherry pick two of them. First up,
Jeffrey Gundlach tore into Chipotle as a short candidate. Why? A
"gourmet burrito" is an oxymoron and the chart is a mess, the
Doubleline Capital founder said . And, closing the show, Greenlight Capital's
David Einhorn predicted that Oil States International could be worth $155
if it would just spin off its accommodations unit. These guys are ballers, so
it's a safe bet both stocks will see some reaction when the opening bell rings.
Random reads: Bygones be bygones as disgraced former Enron chief Jeff Skilling is on track to get out of the pen early, barring "victim outrage."
Reversing the traditional flow, "Wall Street hires Washington."
Using Wikipedia clicks to help craft your investment strategy can be lucrative, apparently. By one measurement, this approach beats random investing by 141%.
"It's drugs and drink and beautiful [$40,000 a night] women," and it's been that way for 60 years at the Cannes Film Festival. Snoop and his bus would have fit right in .
Proof that "South Korea is worse at Photoshop than the North."
The Onion sticks it to Jim Cramer . And Chris Cuomo sticks it to Amanda Knox .
Need to Know starts early and is updated as needed until the opening bell, but sign up here to get it delivered once to your e-mail box. Be sure to check the Need to Know item. The e-mailed version will be sent out at approximately 8:45 a.m. Eastern. Follow @slangwise on Twitter.
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Random reads: Bygones be bygones as disgraced former Enron chief Jeff Skilling is on track to get out of the pen early, barring "victim outrage."
Reversing the traditional flow, "Wall Street hires Washington."
Using Wikipedia clicks to help craft your investment strategy can be lucrative, apparently. By one measurement, this approach beats random investing by 141%.
"It's drugs and drink and beautiful [$40,000 a night] women," and it's been that way for 60 years at the Cannes Film Festival. Snoop and his bus would have fit right in .
Proof that "South Korea is worse at Photoshop than the North."
The Onion sticks it to Jim Cramer . And Chris Cuomo sticks it to Amanda Knox .
Need to Know starts early and is updated as needed until the opening bell, but sign up here to get it delivered once to your e-mail box. Be sure to check the Need to Know item. The e-mailed version will be sent out at approximately 8:45 a.m. Eastern. Follow @slangwise on Twitter.
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