JULY 30, 2013
7 gut checks before the stock market's opening bell
By Shawn Langlois
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Shutterstock
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Good morning.
The Fed meeting starts this morning, but the market doesn't seem quite as exposed to what Ben Bernanke has to say as it has been in the past.
That's because there's just way too much economic and earnings-related stuff to distract us. Yes, the taper is about to happen . We've accepted it and, dare I say, we've moved on? At least until the statement tomorrow.
Meanwhile, a tug-of-war is raging between those convinced this market move is justified by the fundamentals (see below), and those who believe the nonstop advance "has become completely divorced from reality." Fodder for both sides of the argument will be there for the manipulation, as the dense week of data starts to heat up.
Nobody really has the upper hand in the early going. Stocks, with a few notable exceptions like Herbalife and BP, are at a complete standstill.
Key market gauges: The Nikkei snapped its four-day losing streak with a 1.5% rally, leading a mostly upbeat session across Asia . Europe is bouncing in and out of positive territory while futures on the Dow and S&P are leaning higher in the early hours.
The economy: The Case-Shiller 20-city home-price composite for May will be released at 9 a.m. Eastern while the consumer-confidence index will hit an hour later. That number is forecast to fall fractionally to 81.1 from 81.4. Last month, the index reached its highest level in more than five years. Read: Spotlight on economy .
Earnings:Most of the action today takes place before the open, with Merck , Pfizer , Sprint and U.S. Steel providing the highlights. After the market, it's all eyes on Amgen .
Here's a telling chart from Schaeffer's Investment that shows how strong earnings growth has supported this incredible market run . Take a look at where total S&P 500 earnings stood in the fourth-quarter of 2008 ($5.62) compared with where they reached in the first quarter of this year ($26.74). "The market is up a lot, but maybe it is justified," Ryan Detrick wrote.
The buzz: Herbalife shares, dragged into the spotlight by Bill Ackman and kept there by Carl Icahn, are up almost 6% in premarket trading after the company reported double-digit sales growth. The nutritional-supplements peddler also beat bottom-line targets and lifted its view for the full year.
J.P. Morgan is in some hot water after regulators said traders at the firm used eight different strategies to wring "excessive payments" from electricity markets. This marks the first formal allegation in a long-running investigation.
Along with all the earnings-related ticker movement, Qualcomm is trending on word the company took a small stake in Alcatel-Lucent. Others on the StockTwits list include Acadia Pharma and Nvidia .
BP is one of the hardest hit issues in premarket trading, down some 5% after the oil company reported a lower second-quarter profit .
The chart of the day: Avoid Apple , warns Ed Miller of the Charts etc. blog . While acknowledging that the company has shown some encouraging action of late, he says "too many negative signs remain in place" to keep him from leaving the bear camp. One of them is money flow, which "has been negative for AAPL all year, inferring underlying distribution of the stock." He point out that even as the stock price has risen this month, the flow has remained negative. Miller used this chart to show how "it's been prudent to have money flow confirm price action" for Apple. The red line is money flow and the black line is Apple's performance.
The Fed meeting starts this morning, but the market doesn't seem quite as exposed to what Ben Bernanke has to say as it has been in the past.
That's because there's just way too much economic and earnings-related stuff to distract us. Yes, the taper is about to happen . We've accepted it and, dare I say, we've moved on? At least until the statement tomorrow.
Meanwhile, a tug-of-war is raging between those convinced this market move is justified by the fundamentals (see below), and those who believe the nonstop advance "has become completely divorced from reality." Fodder for both sides of the argument will be there for the manipulation, as the dense week of data starts to heat up.
Nobody really has the upper hand in the early going. Stocks, with a few notable exceptions like Herbalife and BP, are at a complete standstill.
Key market gauges: The Nikkei snapped its four-day losing streak with a 1.5% rally, leading a mostly upbeat session across Asia . Europe is bouncing in and out of positive territory while futures on the Dow and S&P are leaning higher in the early hours.
The economy: The Case-Shiller 20-city home-price composite for May will be released at 9 a.m. Eastern while the consumer-confidence index will hit an hour later. That number is forecast to fall fractionally to 81.1 from 81.4. Last month, the index reached its highest level in more than five years. Read: Spotlight on economy .
Earnings:Most of the action today takes place before the open, with Merck , Pfizer , Sprint and U.S. Steel providing the highlights. After the market, it's all eyes on Amgen .
Here's a telling chart from Schaeffer's Investment that shows how strong earnings growth has supported this incredible market run . Take a look at where total S&P 500 earnings stood in the fourth-quarter of 2008 ($5.62) compared with where they reached in the first quarter of this year ($26.74). "The market is up a lot, but maybe it is justified," Ryan Detrick wrote.
The buzz: Herbalife shares, dragged into the spotlight by Bill Ackman and kept there by Carl Icahn, are up almost 6% in premarket trading after the company reported double-digit sales growth. The nutritional-supplements peddler also beat bottom-line targets and lifted its view for the full year.
J.P. Morgan is in some hot water after regulators said traders at the firm used eight different strategies to wring "excessive payments" from electricity markets. This marks the first formal allegation in a long-running investigation.
Along with all the earnings-related ticker movement, Qualcomm is trending on word the company took a small stake in Alcatel-Lucent. Others on the StockTwits list include Acadia Pharma and Nvidia .
BP is one of the hardest hit issues in premarket trading, down some 5% after the oil company reported a lower second-quarter profit .
The chart of the day: Avoid Apple , warns Ed Miller of the Charts etc. blog . While acknowledging that the company has shown some encouraging action of late, he says "too many negative signs remain in place" to keep him from leaving the bear camp. One of them is money flow, which "has been negative for AAPL all year, inferring underlying distribution of the stock." He point out that even as the stock price has risen this month, the flow has remained negative. Miller used this chart to show how "it's been prudent to have money flow confirm price action" for Apple. The red line is money flow and the black line is Apple's performance.
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Bloomberg
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The call of the
day: For some reason, the debate over passive vs. active
investing rages on even as hedge funds continue to gouge investors with one
hand while underperforming with the other. Jack Bogle's "Forget the
needle, buy the haystack" has never been more appropriate. Within that
approach, there's some wiggle room. Dan Banaszak of the Market Fade blog says
it's time to consider the CBOE S&P 500 PutWrite Index , "a better mousetrap" for broad
market exposure.
The index sells at-the-money options on the S&P and invests the cash in Treasurys. "The concept is simple," he wrote. "Systematically selling put options on the S&P gives you the same long delta position as owning the underlying asset, with the added benefit of being short theta and adding the collection of option premium each month." This chart shows the strategy's outperformance dating back to 1988.
The index sells at-the-money options on the S&P and invests the cash in Treasurys. "The concept is simple," he wrote. "Systematically selling put options on the S&P gives you the same long delta position as owning the underlying asset, with the added benefit of being short theta and adding the collection of option premium each month." This chart shows the strategy's outperformance dating back to 1988.
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Random
reads: Google Glass, just less
creepy . Still ridiculously nerdy. Speaking of crowdfunding, let's
not forget about (clears throat) Vibease .
Now for something really scary ... swimming with river otters .
Bottled water; end the insanity !
"Who am I to judge?" God bless Pope Francis , and, while we're at it, God bless the 31 most sinfully sexy nuns in movie history. Whoopi Goldberg? Really?
"You mad bro?" A look inside the mind of the dreaded Internet troll .
The boss and his prenuptial agreement. Also, two postnuptial agreements .
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.
Now for something really scary ... swimming with river otters .
Bottled water; end the insanity !
"Who am I to judge?" God bless Pope Francis , and, while we're at it, God bless the 31 most sinfully sexy nuns in movie history. Whoopi Goldberg? Really?
"You mad bro?" A look inside the mind of the dreaded Internet troll .
The boss and his prenuptial agreement. Also, two postnuptial agreements .
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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