Top Gun FP Client Note: New Year Buzz About To Turn Into A Hangover
January 17, 2012 at 11:51 am · Category: Europe, Market Commentary, Seasonality, Stocks, Technical Analysis, Top Gun Financial Planning
NOTE: Every week or two I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive it at the same time as my clients. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time.
Originally sent to clients Tuesday, January 10.
*****
There is something psychological about starting the year afresh, but the truth is corporate profits and macroeconomics trends don’t turn with the calendar.- Adam Parker, Chief US Equity Strategist, Morgan Stanley, quoted in “A New Year, But The Same Ol’ Pessimism”, The Wall Street Journal, January 9, C1After achieving very strong and better than expected sales and earnings growth in the first three quarters of 2011, sales weakened markedly in the United States and Europe during the holiday season.- Michael Kowalski, CEO, Tiffany’s, Press Release, January 10
The US stock market is off to a good start in 2012, up about 3% and at 5-month highs.
However, more will be required than optimism at the start of a new year to continue moving higher. Resistance at the October highs and 1300 suggest the S&P is at a decision point. Either we blow through previous resistance setting up a test of the bull market highs or we fail here. This should play out in the next few weeks.
One important clue to how it will be resolved is the divergence of risk assets and the euro since December. As I have pointed out on a number of previous occasions, the euro tends to be a barometer of risk appetite. When the euro rises, so do stocks, commodities and other risk assets; and vice versa (“Top Gun FP Client Note: Europe Leads”, originally sent December 2, 2010).
However, since December US and European stocks have both risen while the euro has decline. If the relationship holds as I suspect it will, either the euro will start rising to confirm the stock market rally or stocks won’t be long in following the euro south.
Wall Street strategists tend to be mindless cheerleaders but Adam Parker of Morgan Stanley is a refreshing exception. The Wall Street Journal ran a nice profile of him in Monday’s paper. Parker’s year end S&P target is 1167 which would represent a 7% decline for the year and he thinks it could go as low as 944 if earnings disappoint and macroeconomic conditions sour.
In a CNBC interview from the first trading day of the year, Parker cited three reasons for his pessimistic outlook. First, December earnings reports and forecasts were notably weak. This suggests 1st quarter guidance this earnings season could be as well. (Indeed, Tiffany’s (TIF) this morning reported a disappointing holiday season, including -1% comparable sales for November and December at their flagship New York store, and the stock is down almost 12%). Second, economies around the globe are slowing. Third, the US $ is rising putting downward pressure on foreign earnings.
Anybody who has been reading my Client Notes knows that I agree with Parker. I believe we have been in a bear market since last August (“Top Gun FP Client Note: The Bull Market Is Over - But S&P Downgrade Should Mark An Intermediate Bottom”, originally sent August 7, 2011) and 2012 will see the brunt of the selling (“Top Gun FP Client Note: The Bear Market Of 2012″, originally sent November 21, 2011).
Top Gun FP Client Note: Seasonality Versus Technicals
December 6, 2011 at 7:08 pm · Category: Europe, Market Commentary, Seasonality, Technical Analysis, Top Gun Financial Planning
NOTE: Every week or two I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive it at the same time as my clients. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time.
Originally sent to clients Tuesday, December 6.
*****
The wild swings continued the last two weeks with the S&P dropping 4.7% Thanksgiving week on concerns about Europe but reversing course last week (+7.4%) on hopes for a European solution.
December is historically one of the best months for the stock market. The main reason for this is Wall Street’s desire to post a good year for customers. With news flow light and many on vacation for the holidays, the big banks and hedge funds also have greater capacity to move the market and shape perception. Obviously the news flow out of Europe this year is anything but light.
This week everybody is looking forward to the European Summit on Thursday and Friday (Dec 8 and 9). The expectation appears to be an agreement for stronger budget rules for EU members in exchange for increased bond market purchases by the ECB. Of course, the agreement is implicit because the ECB is supposed to be above politics.
Counteracting positive seasonality is a good deal of technical resistance. The market is trading not far from the recent rally highs (1293), 200 DMA (1264) and year break even point (1257).
Imagine a bunch of helium balloons in a room. The balloons rise up to the ceiling where they remain until the helium starts to leak out. The helium is seasonality and the ceiling is technical resistance.
I don’t see much additional upside here for the market into year end. In my opinion, investors should start positioning themselves for what I expect to be a bear market in 2012 (“Top Gun FP Client Note: The Bear Market of 2012″, November 21).
*****
November returns were as follows:
Top Gun: +4.28%
S&P: -0.51%
DJ Total: -0.65%
YTD (through November 30th) returns are as follows:
Top Gun: +5.12%
S&P: -0.85%
DJ Total: -1.89%
To put Top Gun’s performance in context, consider that none of the relevant hedge fund indexes are in the black through November (“At Hedge Funds, Breakeven Is The New Black”, The Big Picture, December 5).
NOW IS THE TIME TO INVEST WITH TOP GUN OR ADD FUNDS IF YOU ARE ALREADY A CLIENT.
CALL OR E-MAIL ME TO GET THINGS STARTED!
Greg Feirman
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
9700 Village Center Dr. #50H
Granite Bay CA 95746
(916) 224-0113
More on this topic
(What's this?)
Prepare for Europe – "It's Going to Be Ugly"
(Money Morning, 1/16/12)
S&P to Eurozone: Fix It or Else…
(Money Morning, 12/7/11)
European Central Bank Makes EU Summit Irrelevant
(Investment U, 12/13/11)
Top Gun FP Client Note: The Bear Market Of 2012
November 21, 2011 at 9:49 pm · Category: Europe, Macro Economics, Market Commentary, Politics, Technical Analysis, Top Gun Financial Planning
NOTE: Every week or two I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive it at the same time as my clients. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time.
Originally sent to clients Monday, November 21.
*****
If Italy goes down, the European dream is over.- “Ignore Egan-Jones at Your Peril”, The Absolute Return Letter, November 2011- Front Page Headline, The Wall Street Journal, Monday, November 21, A1
In “The Road Map Into Year End” (November 7), I highlighted two things to keep our eye on: Europe and The Debt Super Committee. Unfortunately, in the intervening two weeks negative developments on both fronts have broken the back of a budding year end rally.
“Europe will continue to be in the headlines. Greece is at the forefront and I am hearing more and more chatter about Italy the last few days”, I wrote. Two days later, the yield on Italian 10-year bonds broke above the closely watched 7% level causing the S&P to drop 47 points (-3.7%) (“Italy Fears Rattle World’s Investor’s”, The Wall Street Journal, Thursday, November 10, A1).
The European Sovereign Debt Crisis is now progressing toward its climax as larger and more systematically important countries become the focus of concern. Italy’s government bond market is Europe’s largest at €1.6 trillion. €200 billion of it comes due in the next six months. “A country is bust when the markets decide”, Societe Generale’s Albert Edwards wrote three weeks ago. Should Italy have trouble rolling over this debt, all of Europe will be staring into the abyss.
Yields on Spanish and French debt are also rising. Only Germany remains a safe haven in the mind of investors. But can Germany carry all of Europe on its shoulders? Will it submit to do so if asked?
In this context, it is worth reflecting on the failure of the Debt Super Committee. The United States has important advantages over Europe such as the dollar’s role as the reserve currency in the global financial system and our ability to print money. But make no mistake: we are travelling down the same path as Europe and the Committee’s failure to reach a compromise to begin putting our finances in order only moves the day of reckoning closer.
Short term traders are pointing to support around 1185 which represents a 50% retracement of the October rally.
Take the last six weeks of 2011 to put your portfolio in order because the escalation of the European Sovereign Debt Crisis is likely to precipitate a nasty bear market in 2012.
Remember: Top Gun returned +14.4% in 2008 compared to -38.5% for the S&P 500. At the beginning of 2008, I wrote a report titled “How To Invest In The Coming Bear Market” (Jan 9, 2008). I am attaching that report for those who care to review how that forecast played out.
NOW IS A GOOD TIME TO BECOME A TOP GUN CLIENT OR ADD TO YOUR ACCOUNT IF YOU ALREADY ARE.
CALL NOW FOR A FREE CONSULTATION BY PHONE OR IN PERSON!
Greg Feirman
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
9700 Village Center Dr. #50H
Granite Bay CA 95746
(916) 224-0113
More on this topic
(What's this?)
Prepare for Europe – "It's Going to Be Ugly"
(Money Morning, 1/16/12)
The Five Stocks You Have to Own in 2012
(Money Morning, 12/23/11)
2012 Stock Market Forecast
(Wealth Daily, 11/29/11)
Top Gun FP Client Note: The Road Map Into Year End
November 8, 2011 at 1:05 pm · Category: Europe, Market Commentary, Politics, Seasonality, Stocks, Technical Analysis, Top Gun Financial Planning
NOTE: Every week or two I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive it at the same time as my clients. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time.
Originally sent to clients Monday, November 7.
*****
The take-away for both liberals and conservatives is repugnant: They need to identify the most justifiable spending cuts - lots of them - and the least damaging tax increases, which will still be sizable.They need to come clean with reality. For years, they’ve exuded self-serving platitudes. Conservatives should acknowledge that Big Government is a permanent part of the social fabric and that much of what it does is popular. It needs to be financed. Liberals should concede that Big Government can become so big that its crushing taxes weaken the middle class and economic growth. Government then promotes conflict and degrades social justice.
The supercommittee cannot solve America’s budget problems with one sweeping plan…. But it can elevate popular understanding by proposing a plan justified by a vision of government’s collective responsibilities and the public’s reciprocal obligations.- Robert Samuelson, “Let’s Banish The Budget Fictions Of Left And Right”, The Washington Post, Monday November 7
Most of the significant stock market action for 2011 is in the rear view mirror. There are a few significant events on the calendar but seasonality and the performance chase will condition the market for the remainder of the year.
Europe will continue to be in the headlines. Greece is at the forefront and I am hearing more and more chatter about Italy the last few days as well. All of us in the investment business are having to educate ourselves about European politics. “You can’t ignore the power of politics when you invest in Thailand, Brazil or Argentina. But I have to say it now has become an important factor in all markets,” said Didier Saint-Georges, a member of French investor Carmignac Gestion’s investment committee (“‘Papandemonium’ shakes investors”, Richard Milne, The Financial Times, Friday November 4).
Starting this week focus will shift to the Debt Super Committee. Congress is supposed to pass a deal for $1.5 trillion in deficit reduction over the next 10 years by Thanksgiving. As the deadline approaches, “Our backs are finally against the wall”, said Jeb Hensarling, Republican co-chairman of the 12 member committee (“A Look Inside the Super Committee”, Stephen Moore, The Wall Street Journal, November 7). Let’s hope a compromise in the long term interests of the country can be worked out.
3rd quarter earnings are mostly in and continue to be excellent. Last week, Qualcomm (QCOM) reported 40% top line growth and Starbucks (SBUX) a 10% increase in US same store sales. There are still a trickle of reports in the next few weeks from companies whose fiscal quarter ends a month later such as Cisco, Disney, Walmart and Hewlett Packard.
The last Fed Meeting of the year on December 13 looks like a non-event.
Technically, the correction over the last week puts in place overhead resistance at the recent rally highs around 1300 and the 200 DMA around 1275.
I still expect a solid close to the year but am waiting for a better entry before putting more money to work.
*****
October was a great month for the stock market and Top Gun also performed well:
Top Gun: +4.15%
S&P: +10.77%
DJ Total: +11.48%
Here is the performance Year-To-Date (YTD) through October 31:
Top Gun: +0.80%
S&P: -0.35%
DJ Total: -1.25%
Over the last 6 months (May-Oct) Top Gun has begun to outperform again:
Top Gun: +3.81%
S&P: -8.09%
DJ Total: -9.07%
My sense is that this will continue to be the case in 2012 so now is a good time to get in contact with me if you have been thinking about becoming a client and for existing clients to add additional funds.
NOW IS THE TIME TO INVEST WITH TOP GUN: If you have been thinking about investing with Top Gun, now is a good time to give me a call or send me an e-mail.
Greg Feirman
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
9700 Village Center Dr. #50H
Granite Bay CA 95746
(916) 224-0113
CALL NOW FOR A FREE CONSULTATION BY PHONE OR IN PERSON!
Top Gun FP Client Note: After Euro-Phoria
October 31, 2011 at 10:23 pm · Category: Market Commentary, Seasonality, Sentiment Analysis, Technical Analysis, Top Gun Financial Planning
NOTE: Every week or two I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive it at the same time as my clients. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time.
Originally sent to clients Monday, October 31.
*****
As we close out a spectacular October, it’s a good time to take stock and consider the trading environment heading into year end.
In “The Case For A 4th Quarter Rally”, I listed three reasons to be bullish. The first and most important was seasonal: the 4th quarter is historically the best for stocks. The second was technical: 1100 represented solid support for the S&P. The third was valuation but the better one was sentiment. At that point in time, the market was quite bearish.
I argued that if we could squeak through earnings season and the Europeans could patch something together, those three factors had a high probability of resulting in a strong year end rally.
Four weeks later, it is clear that everything went according to plan. An oversold, overbearish market found technical support just below 1100. Seasonal tail winds aided a dawning rally. 3rd quarter earnings exceeded lowered expectations. Finally, the Europeans agreed on the broad outlines of a bailout package leading to a blowout move higher last Thursday.
At this point, the forces underpinning the case for a 4th quarter rally seem mostly spent. Technically, we are no longer at the bottom of the range. In fact, we broke out of the two-month range between 1100-1230 to new highs. At these levels, there is a lot of congestion on the charts. We are right around the 200 DMA and just above the year’s breakeven point. Indeed, it is only 100 points (8%) to the bull market highs of May.
Sentiment has reversed course along with the market with most now focusing on positive seasonality and the underperformance of mutual and hedge funds and their consequent need to catch up into year end.
Lastly, with 3rd quarter earnings winding down and the headline of the much anticipated European bailout, we have exhausted our two key catalysts.
While the market should hold up okay into year end as professional investors try to patch together a presentable year, significant additional upside seems unlikely.
NOW IS THE TIME TO INVEST WITH TOP GUN: If you have been thinking about investing with Top Gun, now is a good time to give me a call or send me an e-mail.
Greg Feirman
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
9700 Village Center Dr. #50H
Granite Bay CA 95746
(916) 224-0113
CALL NOW FOR A FREE CONSULTATION BY PHONE OR IN PERSON!
Top Gun FP Client Note: From Oversold To Overbought In 2 Weeks
October 17, 2011 at 5:30 pm · Category: Market Commentary, Seasonality, Stocks, Technical Analysis, Top Gun Financial Planning
NOTE: Every week or two I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive it at the same time as my clients. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time.
Originally sent to clients Monday, October 17.
*****
How things have changed since I wrote “The Case For A 4th Quarter Rally” less than two weeks ago. At that time, the S&P had just closed at a new low for the year and many were predicting an imminent breakdown in the market. Instead, the market reversed powerfully two Tuesdays ago and has levitated since with the S&P up 150 points (14%) from its intraday low.
At this point, things may have moved a little too far too fast. Technically, we are back at the top of the range that has snuffed out all rallies since August. Further, volume dropped off notably last week with NYSE Composite volume down 27% from the week before. In fact, not a single day’s volume last week was above the 50 DMA and 4 days were more than 20% below it. That is a thin market susceptible to being pushed higher by momentum traders and hedge funds trying to wring every last point out of the rally.
I am still constructive on the market through year end for the technical and seasonal reasons I outlined in “The Case For A 4th Quarter Rally”, but I would wait for a better entry. If and when it presents itself, I like tech as a way to play any year end rally. While financials are the most oversold and cheapest, they are also the riskiest. By contrast, the tech sector has very little debt and a higher quality of earnings.
Technically, tech has had excellent relative strength of late. Indeed, the S&P Tech sector is flat since July 1 compared to -8% for the S&P 500 as a whole and -20% for the S&P Financials.
Cramer was persuasive in pounding the table for tech over the financials on last Thursday’s Mad Money.
My personal favorites in the tech space to play a 4th quarter rally are Cisco (CSCO) and Hewlett Packard (HPQ). Fundamentally, both of these stocks are extremely cheap with Cisco trading at 7 and HP 5 times trailing earnings. Technically, both have put in solid lows in the last couple months. As a result, they offer a compelling way to play the seasonal tailwinds into year end with a nice margin of safety.
*****
Here is the performance for the 3rd quarter:
Top Gun: +1.17%
S&P: -14.33%
DJ Total: -15.72%
And Year-To-Date (through Sept 30):
Top Gun: -3.21%
S&P: -10.04%
DJ Total: -11.42%
NOW IS THE TIME TO INVEST WITH TOP GUN: If you have been thinking about investing with Top Gun, now is a good time to give me a call or send me an e-mail.
Greg Feirman
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
9700 Village Center Dr. #50H
Granite Bay CA 95746
(916) 224-0113
CALL NOW FOR A FREE CONSULTATION BY PHONE OR IN PERSON!
More on this topic
(What's this?)
10 Reasons Stocks Will Enjoy a Year-End Rally (Part 2)
(Wall Street Daily, 10/13/11)
3 Commercial REITs That Will Make You Money, 2 That Won’t
(Investment Underground » Page n..., 10/12/11)
Newsletter Announcement
(Expected Returns, 11/11/11)
Top Gun FP Client Note: The Case For A 4th Quarter Rally
October 3, 2011 at 5:45 pm · Category: Europe, Market Commentary, Seasonality, Technical Analysis, Top Gun Financial Planning
NOTE: Every week or two I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive it at the same time as my clients. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time.Originally sent to clients Monday October 3rd.
*****
I am going to go out on a limb and predict a 4th quarter rally for a number of reasons.
First, historically the 4th quarter is the best for stocks. In the last 20 years, the S&P has returned an average of 4.57% in the 4Q compared to -0.37% in the 3Q, 2.30% in the 2Q and 1.02% in the 1Q.
This might not seem like a good reason to be bullish but there is an important cause of this seasonality. The stock market is controlled by the big money on Wall Street. These guys are judged and paid based on their performance. Therefore, they have a huge incentive to move the market higher at year end to pad their performance and bonuses. In my opinion, this bias towards a year end rally has become even more pronounced as hedge funds - who take 20% of the profits - have become more and more important players in the market in recent years.
Indeed, there have been Santa Claus rallies in each of the four full years I have been managing money professionally and the pattern seems evident on the charts for many years preceding as well.
The one thing you can count on from Wall Street is that every stratagem to move money from your pocket to theirs will be utilized.
The second bullish factor is technical. As I have noted in previous Client Notes, 1100 on the S&P is solid intermediate term support. That was the low established in the wake of the S&P downgrade in early August when fear was high and volume heavy.
With today’s close (Mon 10/3) at 1099, we are in the midst of a crucial test of that level. Many traders have surely placed their stops just below 1100 setting up the possibility of a washout should they be triggered.
We saw something similar on Tuesday August 9th when traders had placed their stops below 1120 - the low from the previous day. When that level was taken out in the wake of the FOMC Statement, the S&P plummetted all the way down to 1100. However, having cleaned out all those stops, it quickly rebounded and finished the day much higher. 1100 has been support since.
Third, valuations are supportive at these levels. S&P 500 operating earnings over the previous 4 quarters were $91. At 1100, that’s a 12.1 trailing multiple. Many high quality, blue chip stocks are trading at even lower multiples. Even if we enter a recession and earnings decline, my guess is that the real hit won’t come until 2012.
There are two scenarios that could derail a 4th quarter rally. The first is the sovereign debt crisis in Europe. If Greece defaults or there is some unforeseen adverse event, all bets are off. For the moment, however, it appears that crisis has been averted. Most of the 17 euro members parliaments have passed the EFSF expansion and Greece seems set to receive the €8 billion installment it needs to get through year end.
The other concern is 3rd quarter earnings. If these come in much worse than expected, we may very well break 1100 on the downside. However, analysts have already taken down numbers and expectations are muted.
Both the decision regarding Greece’s €8 billion installment and 3rd quarter earnings will occur in October. Even though we are in a bear market and I expect us to go lower in 2012, if we can get through this scariest of stock market months I think we are setting up for a reprieve through year end.
NOW IS THE TIME TO INVEST WITH TOP GUN: If you have been thinking about investing with Top Gun, now is a good time to give me a call or send me an e-mail.
Greg Feirman
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
9700 Village Center Dr. #50H
Granite Bay CA 95746
(916) 224-0113
CALL NOW FOR A FREE CONSULTATION BY PHONE OR IN PERSON!
Top Gun FP Client Note: An Overview Of The European Situation
September 13, 2011 at 8:42 pm · Category: Europe, Market Commentary, Technical Analysis, Top Gun Financial Planning
NOTE: Every week or two I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive it at the same time as my clients. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time.
Originally sent to clients Tuesday, September 13.
*****
There can be no real bottom - just an emotional bounce - without some resolution to the European issues in general and to Greece in particular.- Jim Cramer Monday (Sept 12) on Mad MoneyBNP, Societe Generale and Credit Agricole together hold nearly $57 billion in Greek sovereign and private debt…. French banks also held more than €140 billion in total Spanish debt and almost €400 billion in Italian debt as of December, according to the latest figures from the Bank for International Settlements. If either of these latter two governments were to default, their banking systems could collapse and take the French system with them.- Nicolas Lecaussin, “The Trouble With French Banks”, The Wall Street Journal, September 13
Fears about Europe are again dominating markets. The basic problem is simple: Greece and the other PIIGS - Portugal, Ireland, Italy and Spain - have too much debt. They are dependent on new bond buyers in order to pay off old ones and continue operating. As investors key in on the issue, they sell the bonds and demand higher interest rates which intensifies the problem by increasing interest costs.
The concern is the impact on European banks which own a lot of this sovereign debt and have additional exposure to these troubled countries. The big three French banks - BNP Paribas, Societe Generale and Credit Agricole - are currently in the spotlight due to concern about their exposure to Greece. Ireland and the banks exposed to it were the focus last November (“Top Gun FP Client Note: Europe Leads”, December 2, 2010). Greece is a small economy and a default there would likely be contained. The real fear seems to be the much bigger economies of Italy and Spain.
The European Central Bank last month expanded its support for European bond markets by buying Italian and Spanish sovereign debt (ECB Govt Bond Purchases Chart Attached). This move was opposed by Germany’s top ECB representative, Jurgen Stark, whose resignation last Friday rattled financial markets (“Banker’s Exit Rattles Markets”, The Wall Street Journal, Saturday, September 10, A1). Germany is the economic backbone of the EU which probably cannot survive without its support. The European Financial Stability Facility (EFSF) is the other option for bailing out troubled countries.
The situation is analogous to the subprime crisis which played out in the US in 2007 and 2008. The banks were sitting on huge amounts of subprime mortgages and mortgage backed securities. When the housing market started to tank, so did the value of these mortgages and mortgage backed securities. The banks had to take huge writedowns which impaired their capital. Investors worried if the banks were solvent which further intensified pressure on their business.
*****
The last few years have been the most volatile for all of recorded history.- Andrew Lo, Professor of Finance, M.I.T., quoted in “Market Swings Are Becoming New Standard”, The New York Times, September 12, A1
On Monday, The New York Times ran a front page story on increasing stock market volatility in recent years. The charts below show the increase in 2% and especially 4% intraday and closing price swings compared to previous decades. Since the start of the century (2000), intraday price swings of greater than 4% have happened 6 times more frequently than they did in the previous 4 decades.
This has certainly been the case the last few weeks with stock markets regularly reversing intraday as they did, for example, yesterday when the S&P surged 20 points in the last two hours to finish in the black on rumors of Chinese interest in buying Italian bonds.
As far as I am concerned, any trading between 1100 and 1230 on the S&P is just noise. 1100 is the intermediate low (August 9) established in the wake of the S&P downgrade and 1230 is the high of the reaction rally (August 31). We have been lurching up and down in that range on average volume for the last month. In my opinion, things won’t get interesting again until one or the other of those levels is tested.
NOW IS THE TIME TO INVEST WITH TOP GUN: If you have been thinking about investing with Top Gun, now is a good time to give me a call or send me an e-mail.
Greg Feirman
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
9700 Village Center Dr. #50H
Granite Bay CA 95746
(916) 224-0113
CALL NOW FOR A FREE CONSULTATION BY PHONE OR IN PERSON!
More on this topic
(What's this?)
Prepare for Europe – "It's Going to Be Ugly"
(Money Morning, 1/16/12)
It’s Time to Go Dumpster Diving (Again) in Europe
(Wall Street Daily, 9/13/11)
Crisis in the Eurozone: The Reality of the European Downgrades
(Money Morning, 1/20/12)
Top Gun FP Client Note: Hanging On His Every Word
August 25, 2011 at 8:42 pm · Category: Federal Reserve, Gold, Market Commentary, Technical Analysis, Top Gun Financial Planning
NOTE: Every week or two I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive it at the same time as my clients. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time.
Originally sent to clients Thursday, August 25.
*****
There’s definitely a tint of optimism that he’ll pull a rabbit out of his hat.- Michael Church, President, Addison Capital, quoted in “Market Bets On Fed Miracle”, The Wall Street Journal, August 24, A1Neither Mr. Bernanke nor officials close to him have said anything to encourage the speculation that he will succumb to pressure from markets to say something - anything - that suggests imminent Fed action.- David Wessel, “Bernanke Is Unlikely To Promise New Action By The Fed”, The Wall Street Journal, August 25, A7
The market is in a state of high anticipation ahead of Ben Bernanke’s Jackson Hole speech tomorrow morning. Investors haven’t forgotten the rally he ignited last year.
Unfortunately, they are likely to be disappointed as Bernanke probably does not have the political capital to do enough right now to spur risk assets. Two weeks ago, the Fed fired one of its remaining bullets by changing the language in the Fed statement promising exceptionally low interest rates for “an extended period” to “at least through mid-2013″ (FOMC Statement, August 9). Notably, however, three of the ten voting Fed governors dissented from the decision.
There was an odd little article on page A7 of today’s Wall Street Journal by David Wessel which I excerpted above. What is strange about it is the assured tone in which Wessel argues that Bernanke won’t be announcing anything big tomorrow. Wessel goes on to enumerate what Bernanke will talk about. That follows a similar story by Neil Irwin in yesterday’s Washington Post titled “Ben Won’t ‘Shock and Awe’ From Jackson Hole”. How are these reporters so sure? My gut feeling is that the Fed is getting word out in advance in order to tamp down market expectations.
*****
Since the panic selling two weeks ago, markets have calmed down. NYSE Composite Volume has averaged 4.9 billion shares the last 10 trading days compared to 8.3 billion the previous 6 - a 41% drop.
1100 represents solid support on the S&P and we should expect traders to defend it if tested. 1200 - the top of the relief rally from last week - is now resistance.
*****
The most important development this week has been the breakdown in the gold market. Gold had been on a tear since the beginning of July rising about $400. But it gave back $150 on heavy volume Tuesday and Wednesday.
While I think this correction has a ways to run, I do not think the bull market in gold is over. Clearly the market got ahead of itself but all of the trends that have propelled gold over the last few years remain in place.
Oppenheimer’s superb technician Carter Worth did a good job analyzing the technicals on Fast Money last Friday - when he suggested selling gold - and again Wednesday when he made the case for support at the 150 DMA. The attached chart of the GLD shows that the 150 DMA has provided solid support on a number of occasions over the last two years.
NOW IS THE TIME TO INVEST WITH TOP GUN: If you have been thinking about investing with Top Gun, now is a good time to give me a call or send me an e-mail.
Greg Feirman
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
9700 Village Center Dr. #50H
Granite Bay CA 95746
(916) 224-0113
CALL NOW FOR A FREE CONSULTATION BY PHONE OR IN PERSON
More on this topic
(What's this?)
How Presidential Candidate Ron Paul's Campaign Could End the Fed
(Money Morning, 1/27/12)
Actually, the Fed IS Going to Start QE3
(Learn Mining News, 8/26/11)
Another Bernanke Market Rally
(Money Morning, 1/26/12)
Top Gun FP Client Note: The Bull Market Is Over - But S&P Downgrade Should Mark An Intermediate Bottom
August 15, 2011 at 10:31 am · Category: Market Commentary, Technical Analysis, Top Gun Financial Planning
NOTE: Every week or two I write a Client Note for my clients. For a limited time, I am allowing non-clients to sign up and receive it at the same time as my clients. You can sign up at the top right hand corner of the website. I will also be posting the notes on my blog with a time delay from time to time.
Originally sent to clients late Sunday night, August 7.
*****
Last Thursday and Friday, the S&P plunged through year to date support at 1250 on enormous volume. NYSE Composite Volume was 7.5 billion shares on Thursday and 8.6 billion shares on Friday. Those are the two highest volume days of the year and about twice the year’s average volume. The investment herd bailed out of stocks en masse and that kind of selling suggests to me that the bull market is over.
The news for the week was actually positive. Congress got a debt deal passed and the July Jobs Report was better than expected. But relief rallies at the open on Monday and Friday were quickly sold.
As if last week’s market action wasn’t bad enough, on Friday night S&P downgraded the US’s debt from AAA to AA+. The investment world has been talking of nothing else all weekend as everybody tries to handicap the open Monday morning. As I write (10pm PST), Asian stock markets are in the middle of their trading days with markets in Australia, China, Hong Kong, India, Japan and Taiwan down between 2% and 5%. US Futures are signalling a nasty open with Dow Futures 300 and S&P Futures 30 points below Friday’s close, respectively.
Despite what looks to me like the end of the bull market, we may be setting up for an intermediate low on Monday. Consider that almost a quarter of the entire gain for the bull market since March 2009 has been wiped out as of Friday close - 170 of about 700 S&P points. Incredibly, the S&P has dropped 146 points (10.8%) in just the last two weeks. On Friday March 6, 2009, 827 of 3194 NYSE stocks closed at 52-week low. This last Friday, 828 of 3101 NYSE stocks closed at 52-week lows.
Combined with an extremely oversold market, governments are starting to react providing potential catalysts for a reversal. The European Central Bank signalled to markets that it will buy Spanish and Italian government bonds. The Fed is meeting on Tuesday and they could whisper sweet nothings to the market should things deteriorate in the interim. If there is one thing we all should have learned in the last few years, it is that governments will not sit idly by while the market crashes. And when they inevitably come to the rescue, the investment herd will panic buy the same way they panic sold the last few days.
NOW IS THE TIME TO INVEST WITH TOP GUN: If you have been thinking about investing with Top Gun, now is a good time to give me a call or send me an e-mail.
Greg Feirman
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
9700 Village Center Dr. #50H
Granite Bay CA 95746
(916) 224-0113
CALL NOW FOR A FREE CONSULTATION BY PHONE OR IN PERSON!
More on this topic
(What's this?)
S&P's Ill-Advised Downgrade Ushers in Buying Opportunities
(Money Morning, 8/9/11)
Four Signs the S&P 500 Index is Headed to 1,790
(Wall Street Daily, 8/31/11)
U.S. Debt Downgrade Impacts Stocks More Than Debt
(Investment U, 8/9/11)
Top Gun Financial
is an official member of the
Roseville Chamber in
Roseville, CA.
Find more Roseville businesses, coupons, and other finance at the Roseville Business Directory.
Find more Roseville businesses, coupons, and other finance at the Roseville Business Directory.
