Opinion: Why this U.S. market rally gives investors good reason to be cautious
Typically reliable measures may be sending misleading signals
Many factors suggest that the U.S. stock market currently is vulnerable to a decline, maybe a big one. The fundamentals are bleak, for starters.
The U.S. economy grew at a dismal 1.2% annual pace in the second quarter, a Commerce Department report released at the end of July showed, and corporate earnings are flat at best. Analysts’ estimates of earnings for the companies in the S&P 500 SPX, +0.47% have declined in each of the last six quarters, according to FactSet Research.
It’s not as if stocks are cheap and can withstand a slowdown in economic growth or business conditions, either. The S&P 500 at the end of July was trading at about 25 times the earnings that constituent companies recorded in the last four quarters. The figure has almost never been that high, and never for very long when it has been.
As for technical indicators, trading volume has shriveled in recent months, a sign of a lack of conviction among traders and investors; a relatively paltry number of stocks are trading at 12-month highs, suggesting a lack of leadership.
In a healthy market, one or a few sectors receive substantial investor interest and carry the broad averages up until new leadership takes over. Plus, momentum is flagging, meaning that the market becomes less overbought with each new high.
I can see why many traders are expecting a decline. The longs are tough and the short side is wrong (for the most part). It’s boring to report the same dull story about new highs without volatility. We all need readers so we publish articles and headlines that get clicked.
The truth is nobody knows what’s going to happen next. And that’s OK because traders only need to know what’s probably going to happen next. But here are two things to consider before you buy those puts or start working your short sale:
- History shows slow grinding markets have a tendency to last a long time.
- One of the oldest cliches in trading is “never short a dull market.”
I’m not sure all-time highs are dull, but lacking volatility is. The correct trade is long. Stop guessing a top. You may not be losing money because of good trade management, but you are losing money because you are missing solid longs.
On the Tape Today...
$NKE, $UA and $FL all solid energy type days. $FL only one that cleared resistance. Buy stop above yesterday's high with $62 target.. (see chart)
$XOM inside day near support. I like the break down short sale, trigger sell stop below $86.
$JPM bull flag and bullish reversal candlestick. One dollar targets on a new long at $66 and $67.
$IBM breakout failed but still a solid long. Look to bid above $163.50 and add above yesterday's high $164.95
$FL 8-12-16 (Click to Enlarge)
U.S. stocks shape up for more gains after record trifecta
J.C. Penney earnings, report on retail sales in focus
U.S. stock futures on Friday pointed to a small push further into uncharted territory, after the stock market’s three main benchmarks all closed at records in the prior session.
July reports on retail sales and producer prices are due at 8:30 a.m. Eastern Time, ahead of the market open. Economists polled by MarketWatch expect 0.4% growth in retail sales and a flat result for the inflation-related data.
“The U.S. session may be impacted by the U.S. retail sales report, particularly amid such strong retailer earnings,” said Colin Cieszynski, chief market strategist at CMC Markets, in a note.Read More — >>
Stock Market Today: Heatmap of the S&P 500
Stock Trading Today 8-12-16 | $JCP Earnings
Stocks Close At Record Highs; Nordstrom, Nvidia Jump After Hours
All three major averages closed at record highs Thursday as oil prices jumped and several retail and apparel stocks posted strong gains.
The Dow Jones industrial average rose 0.7%, as Nike (NKE) climbed 3%. The Nasdaq and the S&P 500 each added 0.5%.
Crude prices spiked 4% to the highest level since July 22 after Saudi Arabia, the world’s top exporter, suggested it would trim output to ease a supply glut and bolster prices.
After the close, Nordstrom (JWN) soared 11% following its quarterly earnings report, capping a banner day for department store stocks.
The high-end retailer reported mixed results, beating Wall Street estimates on profit but falling short on revenue. However, the company’s full-year outlook topped expectations. Nordstrom rose more than 7% during the regular session, approaching resistance at its 200-day moving average.
J.C. Penney (JCP) is among companies scheduled to report quarterly earnings on Friday. Economic reports due Friday include business inventories for June, the producer price index and retail sales for July, and the University of Michigan’s consumer sentiment index for August.Continue Reading — >>
Tape Reading the SPY ETF
$SPY traded above the open price for most of the day on decent volume (not good, not bad).
New all-time highs were recorded and the day ended as well-bid. With the combination of the retail trifecta, and solid price action in the general market, we are looking at a trend day today.
Bid aggressively above the open price, especially above yesterday’s high. Below the open, continue to bid, but with reduced, shares and trade for cash flow.
Stocks in Play: $JCP research on finviz.com
$JCP NEWS: Will J.C. Penney Confirm the Retail Industry’s Recovery?
The discount retailer isn’t expected to make money, but a rebound in sales could point the way to future success.
Investors in discount retailer J.C. Penney (NYSE:JCP) have gone through tough times for years, and the company hasn’t yet been able to find a path to turn around its money-losing business in a convincing fashion. Yet several of Penney’s competitors have recently announced extremely strong results that signal a possible rebound for the hard-hit retail industry.
Coming into the company’s second-quarter financial report on Friday, J.C. Penney investors hope that their company will join the retail recovery and post better-than-expected results. CONTINUE READING — >>
J.C. Penney, Retail Sales Lead Friday’s Investing Action Plan
J.C. Penney (JCP) will report second-quarter financial results before the market opening, the Commerce Department will release its July retail sales report at 8:30 a.m. ET, and an initial reading on the University of Michigan consumer confidence gauge is due at 10 a.m. CONTINUE READING — >>
What to Expect From JC Penney Earnings
J.C. Penney Co. Inc. (NYSE: JCP) is scheduled to release its fiscal second-quarter financial results before the markets open on Friday. Over the past few years this major retailer was on a serious slide, and management was looking for almost any way to turn it around.
Now after a very positive 2016 thus far, J.C. Penney appears to be back in favor with investors. This has also been buoyed by very positive results from both Macy’s and Kohl’s.
The department store chain is forecast for a 1.7% Q2 sales increase to $2.93 billion and a 15 cent per share loss, improved from a 41 cent loss a year earlier. CONTINUE READING — >>
Stocks to Trade 8-12-16 | Friday Edition
Short-Term Trading Momentum:
Positive the last 20 and 5 trading days | closed 2% higher from the open: KSS, TWLO, SM, CLR, DVN, SIG, NFX, WYNN, VLO
Negative last 20 and 5 trading days | closed 2% lower from the open:
Quarterly Order Flow:
Bullish Stocks to Trade: KSS, TWLO, BABA, CLR, DVN, NFX, BIIB, CHTR, PXD, CELG, EOG, IBM, SLB, AMGN, LMT, AMZN, UNH, AVGO, FB, COST, DLTR, AEM
Bearish Stocks to Trade: trip, bmy, gild, fslr,
2x Normal Volume: BABA, M, KSS, LDOS, JWN, LMT, IBM, WPZ, PRGO
Inside days: csco, fb, xom, abx, kmi, dis, dal, prgo, abt, schw, qcom, nem, csx, coh, kors, mgm, ual fslr, wdc, hfc, apa, duk, celg, joy, stx, gis, mar, aet