We are coming to another end of quarter and after last weeks drubbing, markets are looking for any reason to rally. As such, stocks are once again up today nearly 100 points on the DJIA in the early going and the SNP and NASDAQ are up as well. We gave back 150 pts of gain on the DJIA yesterday and today we may get it all back! The headlines will say we are up on "European hopes" but we know better...it's because of window dressing!
After flying yesterday, European stocks have settled down a bit mostly in the red by modest amounts. London was down almost 1%, Frankfurt was up with a marginal gain and Paris was down by .4%. Gold remains near yesterday's closing price and seems to be stabilizing and silver is down a small amount. Oil is down almost 1%. The euro is rallying once again up a third of a percent.
Across South America, the Brazilian Bovespa is up over 1% and the Argentina Merval is not open but was up 2% yesterday. Asian shares were mixed with Tokyo up and Hong Kong down.
Economic DataIn a bit of good news on the economic front, durable goods orders came in worse than expected but internals were nice. The Commerce Department said durable goods orders dropped .1% in August on slower sales of automobiles. Economists had expected durable goods orders to remain unchanged from July.
Meanwhile business spending was higher in August easing fears that the economy will fall off a cliff.
"Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, increased 1.1 percent last month after a 0.2 percent fall in July," said a Reuters article.
Well, we didn't get any window dressing today! Early on the markets were up over 100 pts on the DJIA but sold off all day and finished down 180 pts. This action is very bearish. This market is being driven by headlines and any bad news out of Europe causes the market to go down and any good news causes the market to go up. Today, we got bad news in the form of dithering about a Greek bailout payment. Apparently, the Greeks are not meeting their budget cutting targets which is irritating the German's to no end.
From Yahoo Daily Ticker...
"Ultimately, they're looking to build a 'ring of fire' around Greece," says Axel Merk, president and CIO of Merk Investments and manager of the Merk Funds. "They'll do whatever it takes — they'll give free money at some point -- but it has to be on German terms and they're not coming easily."
Further, governments and bondholders(european banks) are arguing over who going to take the bigger hit. Right now, the bondholders have agreed to take a 21% hit on their Greek bond holdings but with market prices for Greek bonds implying a much bigger haircut, governments want the banks to renegotiate their terms to reflect the current market values of Greek bonds more accurately.
Apple is holding above my stop right now and hopefully we get a bounce soon. It is the end of the quarter markup time and with AAPL up 18% this year, portfolio managers want to show AAPL in their portfolios. As such, AAPL was outperforming the market today down only .5% when the NASDAQ was down 2%.
I went ahead and put on a spec trade with XLE today at the end of the day. I saw XLE drop into the 50's recently and thought the drop was way overdone. It turned out to be true as it bounced back almost 10% over the past two days back to 63. Today, it sold off hard again down below 60 so I decided to put on a quick trade with XLE and set a stop just below the recent lows. Commodities including oil, gold and copper have been hammered recently contributing to the underperformance of energy and materials stocks compared to the overall market. I believe that people are throwing the baby out with the bathwater and these stocks are way undervalued. We'll see what happens...
I picked some up near the lows of the day today at 59.70 and set a stop at 57.80 near the recent low. I will sell on another pop to 63-65.
Disclaimer: Nothing in this blog should be construed as a recommendation to buy or sell any securities! Please do your own due dilligence before buying any stocks or bonds!