Courtesy of Pragmatic Capitalist
The S&P 500 recently slammed through its 200 day moving average and investors cheered this as the beginning of the next bull market, however, the most critical component of this rally has stalled out and appears to have run into a bit of a roadblock. As I mentioned yesterday, the banks have been unable to break through the 200 day since the credit crisis began in 2007 and the divergence between banks and the rest of the market is worrisome to say the least. As the primary culprits of this crisis and the lifeblood of the economy its diffuclt to imagine a scenario in which the banks trade lower and the overall market trades higher.
After a 40% rally and an 80%+ move in bank stocks the overall market could take a breather here for a few weeks. The short sellers appear to be putting up their first real fight in months as something more than contrarian perspective douses the bulls’ green shoots outlook.
Scan FAS, FAZ, XLF, below for FREE!
Last month, the financials were the big winners; this month, it has been the commodities. So it should come of little surprise that some of the best performing ETFs over the past four weeks are tied to commodity plays……
……The Bottom Line
Commodities had been badly beaten down since their extraordinary run-up last summer. It was only a matter of time until the subsequent collapse drew in bargain hunters. Going forward, the prices of these ETFs will likely be tied to factors such as the strength of the dollar and underlying supply and demand fundamentals rather than speculation or bargain hunting. In any event, these funds are on an impressive run and are worth keeping an eye on going forward.
Full Story: http://community.investopedia.com/news/IA/2009/Four-ETFs-On-Fire-Right-Now-KOL-ANR-FCL-MTL-GDX0603.aspx
I have been watching ESLR very closely here. Zachs.com has some interesting thoughts on their progress.
The growth potential of the solar industry as a whole, and Evergreen Solar ESLR in particular with a geographically diversified contractual backlog, remains a compelling story. Positive factors include ongoing expansion programs over the next few years, improving operating efficiencies, and technological upgrades. However, continuing near-term earnings losses due to high start-up costs, significant capital expenditures, oversupply of solar modules, absence of deep pockets unlike its peers, and earnings dilutive stock issuances may present risks to the near-term share price upside potential.
[click to enlarge charts]
From 2003 through 2008, as the company recorded net earnings losses since inception, stockholders suffered from negative annual returns-on-equity (ROE).
The Trend Analysis which is FREE HERE indicates the presence of a very strong trend that is being driven by strong forces and insiders.
Historically, year-over-year, operating profit margins remained volatile, and negative, while sales per dollar of assets and financial leverage exhibited relatively high volatility from one year to the next, where the company’s cost of debt remained within a relatively narrow range of 8.9% to 10.1% over this multi-year period. Continue Reading after you get your free analysis below.
One free tool that I utilize to help me keep on top of my portfolio is called Trend Analysis, from the team that runs MarketClub. Trend Analysis is a daily email analysis tool that gives me insight into exactly what my portfolio is doing.There are only a few quality sites out there that provide FREE high quality trading tools. Hey after all it is called a FREE stock analysis so take advantage of it. Any other question feel free to drop me an e-mail.
I have went through and found a list of 5 stocks that indicate “A triangle indicates the presence of a very strong trend that is being driven by strong forces and insiders”. Use the scan below at no cost to get the full report!
The Stocks that are VERY strong as we speak are AMTD, FORD, QQQQ, CSCO, ALCOA
FREE Trend analysis for AMTD Here
FREE Trend analysis for FORD Here
FREE Trend analysis for QQQQ Here
- The GMAC – American Banker Association rivalry gets mainstream (Fortune)
- The TARP exit checklist and why the stress test was a complete joke [Hey Ben, we dare you to ask for another $50 billion in six months] (Bloomberg)
- Speedy will rule on Friday on Chrysler franchise terminations (AP)
- JP Morgan closing hedge fund, buyout unit (Bloomberg)
- Another anemic TALF subscription at $11.5 billion; at this rate securitization will be back… by 2029 (Reuters)
- A war against organizing (WaPo)
- Gasparino: Another reason to hate Goldman (Daily Beast)
- Coming: the third wave of foreclosures (MSN)
- Where the US would be without monetization: Spain jobless rate at 20% and getting worse (Bloomberg)
Spreads were tighter in the US as all the major indices improved (with HY and IG making new contract tights once again). Indices typically underperformed single-names with skews widening in general as IG’s skew decompressed as the index beat intrinsics, HVOL underperformed but narrowed the skew, ExHVOL outperformed pushing the skew wider, XO underperformed but compressed the skew, and HY’s skew widened as it underperformed.
The names having the largest impact on IG are American International Group, Inc. (-307.85bps) pushing IG 1.67bps tighter, and Nordstrom Inc. (+7bps) adding 0.05bps to IG. HVOL is more sensitive with American International Group, Inc. pushing it 7.31bps tighter, and Nordstrom Inc. contributing 0.24bps to HVOL’s change today. The less volatile ExHVOL’s move today is driven by both Du Pont E.I. de Nemours & Co (-17.5bps) pushing the index 0.19bps tighter, and Amgen Inc (+6.5bps) adding 0.07bps to ExHVOL.
The price of investment grade credit rose 0.32% to around 99.09% of par, while the price of high yield credits rose 1% to around 85% of par. ABX market prices are higher (improving) by 0.12% of par or in absolute terms, 0.44%. Broadly speaking, CMBX market prices are lower by 0.44% of par or in absolute terms, 0.13%. Volatility (VIX) is down -0.41pts to 29.42%, with 10Y TSY rallying (yield falling) 6.1bps to 3.61% and the 2s10s curve flattened by 6.9bps, as the cost of protection on US Treasuries fell 5.5bps to 40bps. 2Y swap spreads tightened 4.3bps to 43.75bps, as the TED Spread tightened by 3.9bps to 0.52% and Libor-OIS deteriorated 0.5bps to 44.4bps.
The Dollar weakened with DXY falling 0.8% to 78.522, Oil falling $0.13 to $68.45 (underperforming the dollar as the value of Oil (rebased to the value of gold) fell by 0.84% today (a 0.99% drop in the relative (dollar adjusted) value of a barrel of oil), and Gold increasing $6.38 to $981.65 as the S&P rallies (941.8 0.29%) outperforming IG credits (121.25bps 0.32%) while IG, which opened tighter at 127.25bps, underperforms HY credits. IG11 and XOver11 are -6.25bps and -25.5bps respectively while ITRX11 is -7.25bps to 105.25bps.
The majority of credit curves steepened as the vol term structure steepened with VIX/VIXV decreasing implying a more bearish/more volatile short-term outlook (normally indicative of short-term spread decompression expectations).
Dispersion fell 21bps in IG. Broad market dispersion is a little greater than historically expected given current spread levels, indicating more general discrimination among credits than on average over the past year, and dispersion increasing more than expected today indicating a less systemic and more idiosyncratic spread widening/tightening at the tails.
62% of IG credits are shifting by more than 3bps and 63% of the CDX universe are also shifting significantly (more than the 5 day average of 57%). The number of names wider than the index increased by 1 to 41 as the day’s range fell to 7.5bps (one-week average 7.55bps), between low bid at 120.5 and high offer at 128 and higher beta credits (-5.27%) outperformed lower beta credits (-4.35%).
In IG, wideners were outpaced by tighteners by around 6-to-1, with around 25 credits wider (worse breadth than in recent days). By sector, CONS saw 19% names wider, ENRGs 19% names wider, FINLs 5% names wider, INDUs 4% names wider, and TMTs 13% names wider. Focusing on non-financials, Europe (ITRX Main exFINLS) outperformed US (IG12 exFINLs) with the former trading at 105.56bps and the latter at 100.39bps.
Cross Market, we are seeing the HY-XOver spread compressing to 279.44bps from 288.37bps, but remains below the short-term average of 339.96bps, with the HY/XOver ratio rising to 1.42x, below its 5-day mean of 1.47x. The IG-Main spread compressed to 16bps from 16.25bps, but remains below the short-term average of 19.13bps, with the IG/Main ratio rising to 1.15x, below its 5-day mean of 1.16x.
In the US, non-financials underperformed financials as IG ExFINLs are tighter by 4.4bps to 100.4bps, with 85 of the 104 names tighter. while among US Financials, the CDR Counterparty Risk Index fell 7.18bps to 133.34bps, with Banks (worst) tighter by 3.57bps to 170.44bps, Brokers (best) tighter by 7.25bps to 157.58bps, and Finance names tighter by 29.23bps to 607.79bps. Monolines are trading tighter on average by -184.02bps (8.15%) to 2232.85bps.
In IG, FINLs outperformed non-FINLs (7.72% tighter to 4.24% tighter respectively), with the former (IG FINLs) tighter by 23bps to 275.2bps, with 19 of the 21 names tighter. The IG CDS market (as per CDX) is 11.8bps cheap (we’d expect LQD to underperform TLH) to the LQD-TLH-implied valuation of investment grade credit (109.44bps), with the bond ETFs underperforming the IG CDS market by around 5.99bps.
In Europe, ITRX Main ex-FINLs (outperforming FINLs) rallied 7.32bps to 105.56bps (with ITRX FINLs -trending tighter- better by 7 to 104bps) and is currently trading tight to its week’s range at 0%, between 124.92 to 105.56bps, and is trending tighter. Main LoVOL (trend tighter) is currently trading tight to its week’s range at 0.01%, between 86.91 to 74.38bps. ExHVOL underperformed LoVOL as the differential decompressed to -0.89bps from -3.09bps, but remains below the short-term average of -0.5bps. The Main exFINLS to IG ExHVOL differential compressed to 32.07bps from 35.05bps, but remains below the short-term average of 36.4bps.
Commentary compliments of www.creditresearch.com
One of the quick-and-dirty tools used to technical analysts is to see where a stock or index is compared with its average price over the past 200 days. This is an easy way to get a read of a stock’s momentum.
Yesterday was a big day for the 200DMA world. The S&P 500 closed above its 200DMA for the first time since December 26, 2007. That closed out the index’s longest run below its 200DMA according to my records which go back to 1932.
That streak, however, is still well short of the longest run above the 200DMA which ran from November 1953 all the way to May 1956. Since the index has gone up over the time, the “above” streaks tend to be longer than the “below” streaks.
On November 20, 2008, the S&P was a stunning 39.6% below its 200DMA. That’s the biggest discount on my records. The only thing that comes close is the reading from this past March.
So does the 200DMA work? The evidence suggests that it’s a pretty good indicator of future price performance. When the S&P 500 has been below the 200DMA, it’s dropped a total of about 20% over the equivalent of 27 years. In other words, the S&P 500 has been below its 200DMA about one-third of the time.
Historically, the best time to invest has been when the S&P is less than 1.7% below the 200DMA.
When the index is above the 200DMA, well, then everything looks much brighter. All of the market’s gain and then some have happen when we’re above the 200DMA which occurs about two-thirds of the time.
The market seems to like nearly every point of being above the 200DMA. Danger only clicks in when the S&P 500 is over 17.5% above the 200DMA which is a very high reading.
This post originally appeared at CrossingWallStreet.
Eddy Elfenbein
Trading up +1.56 (+0.37%) at 428.12. Chart confirms that a strong uptrend is in place and that the market remains positive longer term. Strong Uptrend with money management stops. A triangle indicates the presence of a very strong trend that is being driven by strong forces and insiders.
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Strong Uptrend
GOOGLE Inc. (NASDAQ_GOOG)
Smart Scan Chart Analysis confirms that a strong uptrend is in place
Market Club’s Latest “Trade Triangles” Here
From MarketWatch: GM May U.S. vehicle sales drop 29%
GM … reported a 29% drop in May U.S. light vehicle sales … GM posted sales of 190,881 vehicles, down from 268,892 a year ago.
Also from MarketWatch: Toyota U.S. May sales fall 40.7%
Toyota said … May U.S. sales declined 40.7% to 152,583 vehicles from 257,406 a year ago
