CTA Trading Desk Morning Report
[7:00am ET] Good morning.
Hello from the Harvard Faculty Club.
Good morning, Geoff here.
Recent weeks have seen newsletter writers become extremely bullish while the public has jumped into mutual funds with ferver.
While retail bullishness is running rampant, we have seen signs of the “smart” commercial traders becoming very leery of the rally continuing much higher.
Those conditions should warrant concern for stock longs. However, as I mentioned the other day, the market seems to have a destiny with the all-time highs which are only a few percent higher.
In “normal” times, I would expect a test of those highs with a probable throw-over (marginal new highs) as the public throws more money into the market as they listen to talking heads rave about market returns. Then, the market would leave them holding the bag as the “smart” money are the ones selling them the stock and we witness a subsequent decline. I would expect something similar to the following example chart of a topping process:
However, these are not “normal” times.
There are two market sayings that currently ring very true:
“The trend is your friend”.
“Don’t fight the Fed”.
Although we have noted cracks in the dike, there is not enough water breaking through to worry us about a complete breakdown in the market. Liquidity is running at $1 Trillion plus annually and continues to prop up the market, possibly driving it to much higher highs than the “throw-over” mentioned above.
The market continues to buy any dips (if there are any to buy) and until the trend turns from up to down, this will continue. This is why I think there is a good chance that we just witnessed a half-cycle low in the S&P 500 and new highs should be bought:
Of course, we need to be watching those cracks in the dike in case they begin to get larger. Once the public has exhausted their buying there will be no one left to buy so we should expect a correction coming up, but not just yet.
In a nutshell: the market looks like it wants to test the highs, but risk is rising so caution is warranted. People with less risk tolerance that are not watching the tape all day should be thinking of reducing risk.
Traders should watch the following levels:
– If the market exceeds 1564, a test of the highs are likely.
– If the market breaks below 1538, remove risk.
Have a great trading day!
Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.
|Symbol||Name||Last Trade||Change||Related Info|
||28.09 (1.16%)||Components, Chart, More|
||9.80 (0.38%)||Components, Chart, More|
||41.06 (1.07%)||Components, Chart, More|
||70.69 (0.88%)||Components, Chart, More|
||2.72 (0.77%)||Components, Chart, More|
|^OSEAX||OSE All Share||521.23
||0.86 (0.16%)||Components, Chart, More|
||2.50 (0.67%)||Components, Chart, More|
||64.62 (0.82%)||Components, Chart, More|
||45.60 (0.71%)||Components, Chart, More|
||6.41 (0.65%)||Chart, More|
||0.00 (0.00%)||Chart, More|
|GD.AT||Athex Composite Share Price Index||931.81
||1.08 (0.12%)||Chart, More|
The team will check in during the day, reporting in the Discourse when there is a new entry.
Enjoy your day.
Cara 100 Company research notes from Seeking Alpha
Cameron International Corp (CAM)
Mar21: 8:53 AM Cameron (CAM), which manufactured the blowout preventer that was connected to the Deepwater Horizon rig when it exploded in 2010, won’t face punitive damages from the disaster, a federal judge ruled yesterday. CAM had paid BP $250M to settle most of the legal claims arising from the spill, but the agreement didn’t cover fines, penalties or punitive damages.
Mar20: 11:49 AM As Carnival (CCL +1%) works on repairs on a pair of cruise liners which experienced dramatic engines problems mid-cruise, cancellations on future cruises are starting to pile up. The company says it will cancel 10 planned trips for Triumph and two European sojourns for Sunshine. Analysts continue to warn that the misadventures on the high seas may force the company to discount cruise prices in order to boost sales.
Mar20: 9:35 AM Caterpillar’s (CAT -1.5%) retail sales of machines -13% Y/Y in three months to February vs -12% in three months to January, with AsiaPacific -26% in Dec-Feb, North America -12%, EMEA -9%, Latin America +3%. Power Systems sales -7% in February period, as in January period; electric power -8%, industrial -25%, transport +15%, petroleum -8%.
Cisco Systems (CSCO)
Mar21: 8:17 AM Cisco (CSCO) is downgraded to Sell at FBR Capital, which says the company will find it difficult to offset weakening router and switching demand. Negative tech trends “could significantly blur the lines between routers, switches, AND servers.” FBR throws in a downgrade of Juniper Networks (JNPR) as well. Both are down more than 1% premarket.
Mar21: 8:06 AM Coca-Cola (KO) says it will cut 750 jobs in the U.S. The bulk of the positions being eliminated are in the Atlanta area.
25 McDonald’s (MCD)
Mar21: 8:33 AM McDonald’s (MCD) plans to make chicken McWraps a permanent part of its menu after offering the item in other parts of the world to success. The menu at McDonald’s continues to be shifted with a nod to the fresh/healthy mix at Panera and Chipotle as well as the increased menu pressure from Wendy’s and Burger King. National advertising for McWraps begins April 1.
Mar21: 8:59 AM Novartis’ (NVS -1.1%) approved Gilenya treatment cut brain volume loss in multiple sclerosis patients by a third vs a comparator and a placebo and in three large Phase III trials. Brain volume loss is an important indicator of disease progression; data also shows that Gilenya consistently reduces relapse rates across disease activity.
Mar20: 5:19 PM Oracle (ORCL) guides on its FQ3 call (webcast) for -1% to +4% Y/Y revenue growth in FQ4, and EPS of $0.85-$0.91. The former is below a consensus for 5.2% growth, while the latter is in-line with an $0.88 consensus. New software license/cloud subscription growth is expected to be in a range of 1%-11%, and hardware product sales are expected to fall 13%-23%. Oracle blames its FQ3 miss in part on deal push-outs and sales execution issues related to new hires. Oracle insists its win rate remains strong, and that the macro situation is unchanged. Shares -7% AH. 4:24 PM More on Oracle: New software license/cloud subscription sales fell 2% Y/Y, down sharply from FQ2’s +17% and below guidance of +3%-13% (is cloud competition a factor?). Hardware product sales -23%, same as FQ2 and worse than guidance of flat to -10% (plunging UNIX server demand). License update/product support sales +7% (same as FQ2). Cloud software sales (boosted by acquisitions) grew “well over 100%.” $2.1B in buybacks propped up EPS. Opex -2% Y/Y. ORCL -6.6% AH. CC at 5PM ET (webcast), guidance should be provided.
Ross Stores (ROST)
Mar21: 8:40 AM More on Ross Stores’ (ROST) Q4: The retailer says comparable store sales rose 5% during the period and profit improved on higher merchandise gross margin. Store count up to 1,199. ROST +0.8% premarket. 8:35 AM Ross Stores (ROST): Q4 EPS of $1.07 in-line. Revenue of $2.76B (+15% Y/Y) beats by $0.01B.
Vad’s Catch of the Day
Kaimu’s Sound Money