Only Sentiment Holding Back Bulls

The markets begin a new week with a huge stream of earnings on tap including Intel, JP Morgan and Goldman Sachs. The European Central Bank is scheduled to meet and there are a number of important economic releases with inflation being front and center. On Friday, it’s April options expiration.

The major indices look neutral to positive as the S&P 400 and Russell 2000 are a whisker away from all-time highs while the S&P 500, NASDAQ 100 and Dow are in the middle of their ranges, but still looking good. New highs should be seen across the board before long.

Stock market internals continue to show strength which should insulate the market from anything more than a single digit pullback. Sentiment on the other hand is stubbornly optimistic and that’s the only short-term concern now which could lead to a pullback. I do like the famed investor Mohamed El Erian publicly spoke about being all in cash and that the Wall Street Journal and USA Today both ran stories about the first earnings decline since 2009. But we still need to see more improvement from the overly bullish options traders and sentiment surveys before another big leg higher can launch.

On the sector front, consumer discretionary and its sub sectors, retail and housing, remain market leaders. Once again, the banks are at the top end of their range and will try to break out. However, over the past year, attempted breakouts have selling opportunities as the bears successfully rejected attempt.

While treasury bonds are stuck in neutral with a lower bias, high yield bonds look constructive and that bodes well for the economy and stocks over the intermediate-term.

Finally, I am going to be on Fox Business’ Making Money with Charles Payne on April 14 from 6-7 pm as well as on CNBC’s Closing Bell at 3 pm on April 16.

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Market Getting Tired

Here is Monday’s segment we did on CNBC which remains our position today.

Stocks have been on a nice little run this week with a dearth of news out of Europe and generally better than expected earnings from bellwether companies.  Keep in mind that the earnings “beats” are after Wall Street cut estimates over the past month and the general sentiment regarding earnings had become so negative that it should not be a surprise to see them bettered.  This is a common game each quarter with companies doing the opposite of what Wall Street does in the weeks leading up to the reports.

The market is beginning to show some signs of tiring as it trades in the upper half of the range from the April peak and June low.  The next few sessions should certainly give us clues what lies ahead the rest of July and which groups offer the best opportunity and the biggest risk.

On a personal note, happy 9th birthday to my favorite girl in the world!  I am not liking the fact that she is growing up so quickly!!

Have a great weekend!


Stocks Slide on Tepid Jobs Growth Number

On Friday’s CNBC segment, I spoke about the range bound market with the potential for a fall swoon before the election.  But in any market, there are always opportunities and this time is no different.

So far this week, stocks have not behaved well, but it’s far from a rout and the trading range continues. On Wednesday, we get a peak at the minutes from the Fed meeting and folks will take any scrap of comments that leads to QE3 coming.  As I have said since QE1 was launched, we will see QE2, 3, 4, 5 with the Fed’s balance sheet approaching $5 trillion.

Europe’s Debt Problems are Here for Many More Years

In my bi-weekly interview with my friends from ET NOW in India, I continue to share my long-term view that Europe’s debt problems are not going away anytime soon.  Although that may seem bad on the surface, markets have a way of discounting known and anticipated news into current prices.

Remember 2008?  Who could forget it?!?!

The stock market turned down long before the economy and news.  And right at THE bottom in March 2009, the news was about as bad as the modern investing generation has ever seen.  For now, Europe’s problems are known and somewhat expected.  Any market can pullback 4-8% at any time, but a complete global, systemic meltdown should not be in the cards here.

In a chat with ET Now, Paul Schatz, President, Heritage Capital LLC, talks about the factors affecting global markets and the Eurozone crisis. Excerpts:

ET Now: What do you want to start with, US economic data, Goldman Sachs earnings or the kind of indications we have got from Citigroup?

Paul Schatz: Going into the earnings season, analysts kept ratcheting down and ratcheting down expectations. So the bar was set so low coming into Q1 earnings, that you have to imagine most companies could exceed the bar pretty easily.

But as we have always learned in the market, it is not what the news is, it’s how the stocks and the companies in the market react to the news. So clearly after the bell today, after a great day for the bulls on Wall Street, Intel and IBM on a natural high.

ET Now: The Spanish bond yield fell and it has been a successful auction at that. Are concerns about what may happen to Spain now receded?

Paul Schatz: No, I think this is almost a daily soap opera. One day we are worried about yields going 6-7% higher, the next day the auction goes well. This news has been with us for more than a year and once we get by Spain, if we get by Spain, it will move to Italy or it will move to France, where we get the French elections.

So these kinds of European sovereign debt woes are going to be with us not just for days, weeks and months but we have got years to deal with this.

The Fed, QE and Earnings Season

I had a great time with the folks at Yahoo! yesterday in New York in their brand spanking new studio.  We tape three fairly controversial segments and Matt Nesto knew exactly how to bait me just right!  Here is the first piece.


In case you missed it, The House of Mirrors has officially taken the place of The Earnings & Fundamental Palace on Wall Street. I say this at a time when the aspirations and way forward for the U.S. stock market appear to be in direct conflict with what is normally perceived as being in the best interest of the country.

Worst unemployment print of the year, stocks rally.

Job creation craters, stocks rally.

Of course, even casual students of the market can see right through this bad-is-good charade and know the answer to this riddle lies right at the feet of Ben Bernanke, the Chairman of the Federal Reserve and key holder to the vault where so-called “QE3” is being stored.

“It is amazing but it seems that people are just going to invest when the Fed is going to stand behind and backstops them,” says Paul Schatz, President of Heritage Capital in the attached video.

But before you get too far ahead of yourself on the QE3 bus, you must realize that it’s going to take a whole lot more drama than a 4% dip to get Bernanke to deliver the goods. By my math, which is based on the prior three rounds of easing, the S&P 500 would have to erase all of the year’s gains, or drop 10 to 12% before the Fed can be expected to act.

Like most investors, Schatz is of the mind that it’s not a matter of ”if” but “when” it’s going to act, and has been calling for multiple QE’s since the first one was floated in 2008.

“We’re well on our way to a $5 trillion Fed balance sheet,” he says.

And it’s not just the Fed, Schatz says, Central banks from around the world are engaging in unprecedented easing programs, so much so that Schatz facetiously calls “ink” his best idea given the amount of it that will be used to print.

“The ECB is just starting. They’re going to go into the trillions and trillions in the next couple of years,” he says, describing the ensuing environment as a ”rent to own” market that will be full of volatility and opportunity.

“Four to eight percent pullbacks can and do occur at any time,” he says, calling them healthy, regular and something that should be bought, as long as the market has the QE-backing it so badly craves.