Wow – we made it through the weekend!
Yet another day where I wake up and almost regret my insurance but then I realize I don't have that attitude about my life insurance not cashing in every day, so I shouldn't cry over my virtual portfolio insurance not being triggered either.
While I'm not surprised to wake up every day (I'm not that old yet!), I am surprised to wake up to find the markets up 3 out of 4 days since mid-March. We've had 14 down days since March 14th vs. 38 up days and 4 of those down days came last week otherwise it would be a 4:1 trend. As I said last week, I expect consolidation into the June 15th expiration at this point so we will check in on my predicted range between 13,400 and 13,600.
What we didn't have much of last week was market data but we will be making that up in spades this week as the Briefing.com calendar looks very active:
| Date | ET | Release | For | Actual | Briefing.com | Consensus | Prior |
|---|---|---|---|---|---|---|---|
| May 29 | 10:00 | Consumer Confidence | May | 105.0 | 104.5 | 104.0 | |
| May 30 | 10:30 | Crude Inventories | 05/25 | NA | NA | 1969K | |
| May 30 | 14:00 | FOMC Minutes | May 9 | ||||
| May 31 | 08:30 | GDP-Prel. | Q1 | 0.7% | 0.7% | 1.3% | |
| May 31 | 08:30 | Chain Deflator-Prel. | Q1 | 4.0% | 4.0% | 4.0% | |
| May 31 | 08:30 | Initial Claims | 05/26 | 315K | NA | 311K | |
| May 31 | 09:45 | Chicago PMI | May | 54.5 | 54.3 | 52.9 | |
| May 31 | 10:00 | Construction Spending | Apr | -0.2% | 0.0% | 0.2% | |
| May 31 | 10:00 | Help-Wanted Index | Apr | 30 | 30 | ||
| Jun 01 | 08:30 | Nonfarm Payrolls | May | 130K | 140K | 88K | |
| Jun 01 | 08:30 | Unemployment Rate | May | 4.5% | 4.5% | 4.5% | |
| Jun 01 | 08:30 | Hourly Earnings | May | 0.4% | 0.3% | 0.2% | |
| Jun 01 | 08:30 | Average Workweek | May | 33.8 | 33.8 | 33.8 | |
| Jun 01 | 08:30 | Personal Income | Apr | 0.5% | 0.4% | 0.7% | |
| Jun 01 | 08:30 | Personal Spending | Apr | 0.3% | 0.4% | 0.3% | |
| Jun 01 | 08:30 | Core PCE Inflation | Apr | 0.2% | 0.2% | 0.0% | |
| Jun 01 | 10:00 | ISM Index | May | 53.5 | 54.0 | 54.7 | |
| Jun 01 | 10:00 | Mich Sentiment-Rev. | May | 88.7 | 88.5 | 88.7 | |
| Jun 01 | 10:00 | Pending Home Sales | Apr | 0.0% | -4.9% | ||
| Jun 01 | 17:00 | Auto Sales | May | 5.1M | 5.2M | 5.0M | |
| Jun 01 | 17:00 | Truck Sales | May | 7.6M | 7.4M | 7.5M |
The big data last week was not so much the drop in existing home sales to an annual pace of 6M but the 10% decrease in prices it took to sell them. At an average of $250,000 per home (and that's not true as very old, low value homes trade less often), that's a 10% loss of $1.5T in sales or $150,000,000,000 LESS in the hands of homeowners who are selling this year. For existing homeowners, if they get similar values that's $2.3T less equity value to borrow against this year, not a trend you want to see continuing…
We get consumer confidence this morning and I don't see us hitting 104.5 but it's entirely possible that people still expect the stock market to trickle down on them and we have good job growth is good, which is a big help, but they'd better not be talking to people who have sold or are trying to sell their homes (the good thing about these polls is people who recently sell are no longer there to be polled and too new at their new address to be called).
Looking down the road to expiration week (June 15th) we have the Treasury Budget, Retail Sales, the Beige Book, CPI, PPI, Net Foreign Purchases, Cap Utilization and Industrial Production. Holy Cow – if it doesn't hit the fan by then it never will!
Let's try to get through this week first, of course but we do need to keep this in mind as we establish new positions, which is why I have been shy about picking up July positions so far. We also have some significant earnings reports this week from:
- ALKS, BGP, HNZ and STP today
- CHS, DBRN, JOYG, NOVL, RL, TIVO and WSM on Wednesday
- BIG, COST, DELL, DG, HOV, MOV, RSTO, SHLD and TTWO on Thursday
- Nothing big on Friday
So we should come out of the week with a pretty good picture of retail and I see lots of possible plays here but let's try to get through our day first!. TSO and POT are splitting today and we will be watching TSO with great interest. Oil is indeed falling as nothing blew up over the weekend so hopefully that gamble will pay off for us as well.
The Asian markets were pretty strong today but Hong Kong slipped 60 points on Bubble talk. My favorite story of the day is that the former head of China's FDA was sentanced to DEATH for taking bribes to speed the approval process – now that's enforcement! The court justified the death sentence by the "huge amount of bribes involved ($850,00) and the great damage inflicted on the country and the public by Zheng's dereliction of duty," according to the Xinhua report. This will prove interesting as China expands their influence around the globe.
Shanghai B shares gave back half of Friday's bounce this morning, coupled with the move in the Hang Seng we can conclude that the irrational exuberance on the part of foreign investors is waning in China but the nation celebrated the opening of thier 100 millionth brokerage account today so there should be enough local interest to keep the markets afloat for quite some time barring any major disaster. 362,719 new accounts were opened on Thursday alone with 20.9M new accounts opened this year and we still haven't put a dent in the People's $2.5T in cash savings. My prediction for the year is that the top growth performing brokerages will be the ones with the highest percentage of Chinese speakers on staff.
Over in Europe, the ABN offer is now up to 95.6Bn as RBS "makes it happen." RTP may be making a $27Bn bid for A and what's amazing about this is how little press a $27Bn deal gets these days. Our European indices look good this morning (7am) but the FTSE is still below 6,600 and will continue to bother me until it gets back over that mark.
Back in the states, LEH and Tishman-Speyer Properties went apartment hunting together and found a lovely 430,000 room multiplex with views of most major cities for just over $12.3Bn at they take over ASN. The 86,000 unit apartment company has a pipeline of $1.8 billion worth of new apartments under construction, with an additional $2.6 billion worth in the planning stages. It recently has begun to operate abroad, something that could appeal to Tishman Speyer, which is active internationally. Last year Archstone acquired German apartment owner DeWAG, enlarging Archstone's German virtual portfolio to more than 7,600 units. CDWC also looks to be in play.
We'll be looking for a positive open and anything down will send a strong warning sign but let's just try to get through these last few days of May without seeing too much money going away:
|
|
|
Day's |
Must |
Comfort |
Break |
Next |
|
Index |
Current |
Move |
Hold |
Zone |
Out |
Goal |
|
13,507 |
66 |
12,468 |
12,600 |
13,000 |
13,500 |
|
|
2,880 |
5 |
2,825 |
2,900 |
3,000 |
3,250 |
|
|
1,515 |
8 |
1,430 |
1,460 |
1,500 |
1,550 |
|
|
9,876 |
63 |
9,218 |
9,465 |
9,600 |
10,000 |
|
|
2,557 |
19 |
2,454 |
2,500 |
2,600 |
2,750 |
|
|
480 |
1 |
477 |
490 |
500 |
560 |
|
|
829 |
6 |
803 |
820 |
850 |
900 |
|
| Hang Seng | 20,469 | -60 | 20,200 | 20,600 | 21,000 | 22,000 |
| Nikkei | 17,672 | 84 | 17,400 | 17,500 | 18,300 | 18,500 |
| BSE (India) | 14,508 | 35 | 13,200 | 14,000 | 14,725 | 15,000 |
| DAX | 7,771 | 32 | 6,900 | 7,000 | 7,400 | 8,000 |
| CAC 40 | 6,067 | -4 | 5,650 | 5,800 | 6,000 | 7,000 |
| FTSE | 6,593 |
22 |
6,325 | 6,450 | 6,600 | 7,000 |
Hopefully the Transports will get a boost this morning as oil backs off both here and in Europe but it's the SOX we will worry about, as they are perilously close to disaster at 477, where it bounced off last Thursday. Notice that 477 is not the 200 dma, not the 50 dma and not a recent high or a recent low but it is the point I predicted to hold over a month ago when we broke out this chart. The Hang Seng already gave us a test of 20,200 at the end of April and let's just hope the other indices can remain in our comfort zones…
It's all about the data this week, especially the demand data and the crude inventory reports so we'll keep a close eye on that sector and especially the $65 mark, which we need to stay under to get the Transports back on their feet. Keep in mind that the house-selling consumer has $150Bn less dollars to waste on fuel this year and increased demand sensitivity can send oil tumbling faster than a Nigerian Rebel's motor boat can get to an oil platform. (note the "Texas" bandana)
The dollar has the potential to chip in with a move over 82.50 and a 20% drop in Shanghai B shares in the past 7 days makes me think at least some of that money may convert to dollars. Gold is holding the $650 line and we will be judging it based on the strength of the bounce it takes from here. Anything less than $666 (why do we keep coming back to that level?) will be a failure and the real test will come at the 50 dma at $675 with needs to be covered by mid-June or we will be shorting gold for the summer.
Looks like another exciting week ahead!
