July 15, 2014

Ah – I love the smell of New Highs in the Morning!

It really must be hard to keep an old bull down – at least under the guise that the US economy has total immunity from any outside or inside problems that might upset the delicate balance between continued money printing and interest rates.  That seems to be the case as any decline that surfaces or comes to fruition is met with buying that retraces or retakes all that was given up and then pushes higher seemingly as a “I’ll show you” measure.   It doesn’t seem to matter what might be happening in the “real world” but over on Wall Street they just keep passing around the “fairy dust” and continue to drink the “kool aid” either way, there remains a serious lack of capitulation by either the side, thus battle continues with the bears refusing to surrender and the bulls fighting on what seems to be its last breath.

geopolitical If we are to believe that the elusive investor has shrugged off all geo-political problems, then new expanded sanctions being approved by European leaders at their summit on Wednesday being modest or not should not have any bearing on Wall Street – right?  The new expanded sanctions are to cover businesses that are benefiting from or being used to support the unrest in the eastern Ukraine and of course the annexation of Crimea.  Without being specific on which companies will be added to the sanctions list leaving that decision to European diplomats and foreign ministers in the coming days and weeks.  It might be time to pay attention since up to this point sanctions have been targeted mainly towards individuals and in a few cases, the companies they directly control.


tbtfbanksAlthough there haven’t been any real surprises just yet with respect to earnings reports the financial sector’s TBTF banks have seemingly reversed the premise that 2nd quarter results would be on the less than favorable side.  Thus far Citigroup surprised with a good result despite having to pay $7 billion to the government for its part in the mortgage debacle of 2008-2009.  JP Morgan saw their estimates raised going out as far as 2016 after the bank’s better than expected 2nd quarter earnings report.  Goldman Sachs surprised as well on Tuesday with higher quarterly profits from investment banking and investment gains dampened the slump from trading results.  I wonder who is out of job over at GS after the bank’s profits rose 5.5% to $2.04 billion – the stock closed up $2 at $169.  Still hanging out there though is Bank of America, which is still expected to disappoint on declining profits and sales.  We’ll know the results before the market opens on Wednesday, so the financial sector fireworks should continue for a few more days.

INTCIntel goosed their stock price by offering an upbeat revenue forecast and boosted its share buyback plan. Yahoo on the other hand didn’t follow suit and reported lower profit, but to lighten the pain said it cut a deal to let it sell fewer shares of Alibaba when it goes public.  INTC was up $1.10 after hours while YHOO dropped $1.00.

Hey did you hear that AAPL and IBM are getting into bed together – yep that’s right.  The two titans agreed to cooperate to create simple to use business apps and sell iPhones and iPads to IBM’s corporate customers.  APPL was up $1.50 at $96.88 while IBM added $3.50 to $192.

With GOOG and IBM due to report on Thursday and AAPL, AMZN, FB, MSFT, and NFLX due out next week I suspect the fireworks will continue.  It might not be that far of a stretch for the SPX to reach 2050 by August even though our friends over at Goldman Sachs gave the index to year-end.

The rotation of capital that has accompanied earnings season appears to be hitting the RUT this quarter with this index again dropping in excess of 1% intraday.  Gold is back below $1300 reaching near term support at $1293 on Tuesday.  Next support comes in at $1281.  This level basically needs to contain selling if the metal is to hold on to a near term positive outlook.  A break below $1262 would swing the picture back to negative and suggest a retest of $1240 and possibly as deep as $1180 to $1200.

The broader indexes are all within spitting distance of levels mentioned a little over a week ago – those being 18,000 in the DJIA, 2000 in the SPX, and 4000 for the NDX.  I continue to feel the RUT has a better chance of breaking below 1100 before 1200, but stranger things have been happening on a daily basis, so the jury is still out on that one.

opportunityAs far as trading opportunities volumes in the futures picked up today and are likely to continue as the markets move towards Friday’s July (monthly) expiration.  The good news is that more solid 2-way trade has returned keeping me busy within the NDX, SPX, Gold, and Treasury futures.  I continue to prefer day trading over position trading, with the outcome really up in the air at this point and with questionable support holding prices higher the risk of carrying overnight positions outweighs my desire to sleep without waking up in the middle of the night to check positions against Asian and European trading.

Steer the course and don’t compare yourself to everyone else.  You are not they and they are not you.  Remember to trust and believe what makes you unique at this moment in time and in this situation and allow others to choose for themselves.  Don’t be swallowed up by the chaos and false emotions swirling around.  Remember it’s just a number.

Three-keysTrading the number remains key to being able to reduce and separate the “noise” from opportunity.  This takes knowing and executing a well-defined strategy and allows you to see opportunities amongst the “chaos” and by trusting the mechanics of your strategy, be able to take advantage of them.

Opportunity continues to knock on our doors.  While it doesn’t come without risk, risk can be defined and more manageable. Volatility and broad moves are exactly what a day trader desires and being able to respond without questioning is a luxury many are unaware of.