What We're Reading

The chart above tracks the broad stock market against the spread of lowest-rated investment-grade corporate bond yields. They normally track each other very closely as they both reflect broad investor risk appetites.

When investors are hungry for risk stock prices move higher and corporate spreads get narrower. When risk aversion takes over, however, stock prices fall and spreads widen.

Another reason they closely track each other is corporations’ ability to access credit is very closely tied to the overall demand for equities. When it’s very cheap for companies to borrow, it’s very easy for them to fund stock buybacks and acquisitions of other companies.

Certainly, these two factors have been very important to the bull market of the past six years or so. Ray Dalio recently said he estimates that buybacks and M&A have roughly amounted to 70% of the total demand for equities.

As spreads widen, it becomes more expensive for companies to borrow and thus more difficult to fund stock bu

Although US equities are overbought on short term (daily) time frames, long live Japan equities after BoJ announced they will ramp up more of theiir own QE last Friday.  Will Abenomics work?  Who knows, but it's easy to see where money is flowing. 

Just like a civil courts case, the market is now guilty until it can prove itself innocent.  Just as in January/February 2014, we are trading below a falling 20d, which to many, represents sellers there.

As the cases of Ebola continue in Africa, residents down here in Dallas are nervously watching the news for any indication of further spread from the Dallas infected.  It's tragic and unsettling.  While I prepare to fly to Chicago tomorrow for my daughters wedding, I must admit to already having thoughts "what if the infection spreads further here while I am gone?".  I've never been an alarmist however those in voluntary quarantine continue to take risks, going on airplanes and cruise ships, placing others at risk.  If more Ebola cases spout up in other cities, will people begin to stay in their homes and venture out less to theaters, malls, restaurants, bars, etc.?

The ECB announced they will begin their asset purchase program much sooner than expected after a raft of grim eurozone

Pro-democracy protesters in Hong Kong have set a Wednesday deadline for a response from the government to meet their demands for reforms, threatening wider actions if Hong Kong's top leader does not meet with them.  Reports are that the protestors were considering various options, including widening the protests, pushing for a labor strike and possibly occupying a government building if the deadline is not met.

The protesters want a reversal of a decision by China's government in August that a pro-Beijing panel will screen all candidates in the territory's first direct elections, scheduled for 2017 — a move they view as reneging on a promise that the chief executive will be chosen through "universal suffrage."

The Economist took a look at other such protests which have transpired since the credit crisis.

Are the protests truly affecting global stock markets and overall risk appetite or it is just one more log thrown on the (possibly growing) fire?

(click on image to enlarge)

It was a charting kind of weekend, or as Sadiq's girlfriend would say "drawing on the computer with markers".  *lol*  I have uploads in our chart section of seven (7)  different sectors for long ideas.  Merely look within those sectors, define your risk and go for it.   All I ask is that you "pay with a tweet" and mention Stockbuz.net any time you browse our charts.

Yes, we're still at all-time new highs however some sectors have not broken out to new highs (yet).  Yellen slightly tapered the taper and rates are still expected low.  Iraq and Putin tensions the only real headlines but they do not appear to be affecting risk appetite heavily.  Volume is light = no volume selling overall and you know the old saying; never short a dull market.  Personally I'm staying away from many areas of tech and retail with some offering weakened guidance of late.  It's a stock pickers market in that arena if you ask me.