What We're Reading

I see no reason why not to stick with Shanghai at this point.  They're behind us at in terms of supporting their economy and it's not an easy ride (as Ben Bernanke will attest). 

According to BusinessInsider, a bunch of data about the state of China's economy came out Tuesday night, and altogether it told us one thing — nothing the government has been doing to save its economy from falling deeper into a slowdown is working.

Since November, China has cut benchmark interest rates three times, including once Saturday. It has also loosened mortgage policies to prop up the housing market.

But none of it's enough. Especially when you look at the data from Tuesday night.

Lets walk through the scariest stuff:

• M0 growth, or just the cold, hard cash floating around the economy, fell to 3.2% from 6.7%.
• Total social financing, a number that measures loans and all credit and debt in the country, fell by 32% since the same time last year and 11% from the previous month.
• And worst of all, fixed-ass

Have you noticed in the last several years that there are an increasingly large number of restaurant related stocks out there?  It seems that every week there is an IPO of some new hot concept stock.  The reason for this influx of restaurant stocks is because Americans are increasingly choosing to eat their meals out rather than cook at home.  Today’s Retail Sales report for the month of April was a perfect case in point.  

While overall sales were unchanged, sales at Bars and Restaurants increased 0.7%, while sales at Food and Beverage Stores declined 0.13% in what has been a continuation of a trend that has been in place for the last several years.

The chart shows the historical share of total sales that both Bars and Restaurants and Food and Beverage Stores have accounted for.  Over time, the two sectors have accounted for around one quarter of total retail sales, but as the chart below illustrates the breakdown in each sector’s share has changed dramatically.  In 1993, Bars and Res

Ready for tomorrow's numbers, gold and IWM are ready to head either way.  Utilities are sitting at support and banks are ready to scream up.

Higher-than-expected claim numbers will mean the economy is not as strong as we believed and the chances of a June rate hike will be off the table until September. 

No support or resistance is broken so we'll wait for the numbers but isn't it grand; how the markets are not rigged.  Sarcasm alert there.  Good luck.

There’s been plenty of chatter about what consumers want from wearables and what they’ll use them for, such as mobile payments and health and fitness tracking. Based on recent research, wearable devices are also set to change the business world.

In a March 2015 study by Salesforce.com, nearly eight in 10 US enterprise wearable adopters agreed that wearables would reshape their companies’ future success. More than three-quarters of users had already seen improvement in their business performance due to wearables, and 86% of adopters intended to increase spending over the next 12 months.

Enterprises were most interested in using wearables to track workplace productivity, but beyond that, improving the customer experience thanks to real-time access to customer data, business analytics and alerts, and customer instruction and coaching were all top use cases.

Salesforce noted that professionals viewed wearables devices as a huge opportunity for data collection—but they’re a long way off fr

The Great Bond Bull Market started in the fourth quarter of 1981, after the 10-yr Treasury yield hit an all-time of almost 16%, and about a year after the year-over-year change in the CPI hit a post-Depression high of almost 15%. It most likely ended 31 years later, in July 2012, when the 10-yr yield fell to 1.4% at the height of the PIIGS crisis, and three years after the CPI hit a post-Depression low of -2.1%.

As the chart above shows, inflation is arguably the principal driver of yields.

By the way, the first bond bear market of the current century started in 1950 and also lasted 31 years. The bear market that is now beginning to unfold will undoubtedly also be many years in the making, and we can only guess at how much yields will eventually rise. I certainly hope they never get as high as they did in the early 1980s, and I don't expec

With 50 years at Berkshire Hathaway, I still read in on articles featuring Mr. Buffett.  You just never know what you'll find..

1. “We are limited, of course, to businesses whose economic prospects we can evaluate. And that’s a serious limitation: Charlie and I have no idea what a great many companies will look like ten years from now.”

“My experience in business helps me as an investor and that my investment experience has made me a better businessman. Each pursuit teaches lessons that are applicable to the other. And some truths can only be fully learned through experience.”

Treat an investment security as a proportional ownership of a business!  A security is not just a piece of paper. Not all businesses can be reasonably valued. That’s OK. Put them in the “too hard pile” and move on. 
 

2. “Periodically, financial markets will become divorced from reality.”

“For those investors who plan to sell within a year or two after their purchase, I can offer no assurances, whatever the entry

The jury's still out on Apples new watch launch, especially it's longer term demand and shortages due to two suppliers have already shown.  I thought though (thanks to SeekingAlpha) we could take a look at it's current suppliers:

• iPhone/iPad combo chip supplier Broadcom (NASDAQ:BRCM) is providing a Wi-Fi/Bluetooth/NFC/FM radio combo chip for the Apple Watch (NASDAQ:AAPL), according to an ABI Research teardown of the Watch's S1 chip module. As expected, NXP supplies a complementary NFC controller.
• The teardown also uncovered a 6-axis STMicroelectronics (NYSE:STM) motion sensor (accelerometer/gyproscope). There has been some debate about whether InvenSense (NYSE:INVN) will be a motion sensor supplier for the Watch, as it is for the iPhone 6.
• Analog Devices (NASDAQ:ADI) supplies a touch controller IC. Barclays reported in March ADI had scored multiple design wins to enable Apple's Force Touch pressure-based response feature (supported by the Watch) on future iPhones/iPads.
• IDT (NASDAQ:ID

In the Industrial Revolution of the late 18th and early 19th centuries, one new force changed everything. Today our world is undergoing an even more dramatic transition due to the confluence of four fundamental disruptive forces—any of which would rank among the greatest changes the global economy has ever seen. Compared with the Industrial Revolution, we estimate that this change is happening ten times faster and at 300 times the scale, or roughly 3,000 times the impact. Although we all know that these disruptions are happening, most of us fail to comprehend their full magnitude and the second- and third-order effects that will result. Much as waves can amplify one another, these trends are gaining strength, magnitude, and influence as they interact with, coincide with, and feed upon one another. Together, these four fundamental disruptive trends are producing monumental change.

1. Beyond Shanghai: The age of urbanization

The first trend is the shifting of the locus of economic activi

Damn ugly, especially the high volume selling in healthcare and biotech.

More Americans who do not currently own a home say they do not think they will buy a home in "the foreseeable future," 41%, vs. 31% two years ago. Non-homeowners' expectations of buying a house in the next year or five years have stayed essentially the same, suggesting little change in the short-term housing market. As a result, what may have been a longer-term goal for many may now not be a goal at all, and this could have an effect on the longer-term housing market.

One of the long-running facets of the "American Dream" has been the ability to buy a house. Yet seven years after the housing market crashed in 2007-2008, it appears that a renewal of zeal for home buying may not yet be evident in the United States. Two years ago, Gallup asked those who did not own a home in the U.S. whether they thought they would buy a house in various time periods in the future. The current Gallup poll shows little movement in Americans' opinions since 2013, except in the sentiment that those who do n

Things rising now are for the most part due to those (few) who see better earnings ahead, an earnings beat or rising on the struggling dollar........while peers get a definitely smaller bid....or none.  It's a struggle.  You'll notice more losing trades recently as markets are searching out the "good".  Some are talking recession (I don't buy that) while others struggle to find a way to get "through" the soft patch; waiting for 2016.  

In futures, volume has dropped off the cliff overnight.  It's amazing (and worth noting).

One things that's stood out for me is the increase in dividends and buybacks.  Yes, there's been an increase and new ones begun while O&G cut theirs.  Isn't it interesting how the market will do whatever it can to keep people in stocks.  Just sayin'.

AMZN is leading the Nasdaq with AAPL reporting this week but MRVL just announced a much lower 2015 than previously believed so computers seem a weak area.  Spot plays remain such as SNE who just raised their guidance ag

The majority of sector ETFs closed their week below their 50d with energy having filled the gap.....and found sellers waiting there.

SPX itself found sellers at $2100 (clearly we weren't the only ones selling) which is 17x earnings.  More and more are accepting reality that earnings have dropped the most in six years and the Fed (with no QE) will most likely begin to slowly raise interest rates in September.  Don't believe me, just ask Barclays.

• US dollar found buyers at the 10week sma, prior support.  Yes, they're taking profits.  Will it continue?  It's nonetheless weighing on U.S. earnings.
• China allowed further stocks to be shorted and talked of tightening margin lending.  They hit the sell button.
• Utilities are being held by their 50d - won't raise much if rates are going up.
• Transports are being held by their 20d bu the 50d is just overhead; waiting.
• For months money has been flowing into overseas markets searching for yield.
• Not to Greece though (although Putin le

Traders dumped high fliers and the broader stock market was slammed amid worries about the first profit decline in six years and more signs of nagging weakness in the U.S. economy.

Stocks fell sharply, as the VIX [ .VIX 15.44  +1.82 (+13.36%) ] jumped more than 13 percent. The Dow [ .DJI 17718.54  -292.60 (-1.62%) ] was off 292 points at 17,718 Wednesday, and the S&P 500 [ .INX 2061.05  -30.45 (-1.46%) ] fell nearly 1.5 percent to 2061. The Nasdaq [ .IXIC 4876.52  -118.21 (-2.37%) ], affected by selling in tech and biotech, lost 2.4 percent.

"It had a big run. It's only natural to see a correction," said Steve Massocca, Wedbush managing director. "We had excessive ebullience and some of that is burning off. I think that durable goods numbers weren't particularly good today. I think people are starting to get concerned that king dollar is going to cause earnings issues. A lot of companies are in their quiet periods so the stock buybacks are halted."

Stocks tanked in late morning but had

As global central banks continue their race to devalue their currency in hopes of supporting their own weak economies (most recently Bank of Israel unexpectedly cutting their base interest rate overnight by 15bps from 25bp to 10bp) global money flows continue to seek safe haven in the U.S. dollar.  And everyone agrees there is no end in sight near term.

In fact the daily chart is in a beautifully, tight bollinger band squeeze which I feel is going to break even higher.

Pressure looks to continue for large cap multinationals as currency strength will continue to pressure balance sheets with overseas sales.  A great time for the consumer to take a vacation across the pond however as your greenback outperforms every currency out there.

Bragging rights in a weak economic recovery.  You have to take it when you can get it.

Life has intervened of late however I felt I would post my random thoughts viewing my port yesterday:

• Russia is still working. RSX at it’s 100d today. I will add more if it comes back to the 50d http://screencast.com/t/Eh88iqLP   Long hold, definitely.  Throw it in a drawer and forget about it.

• Buffet lowered his XOM stake and bought DE.  DE Monthly sure looks like its coiled up for something. Buffet obviously thinks new all time highs http://screencast.com/t/rlyFa0yzLeb  DE earnings this Friday bmo. I'd be long common and get put protection.  Buy or add on any selloff.  Daily view, bouncing off that 50% fib (to me) equals good chance it wants to challenge/break the high http://screencast.com/t/oEgnCfo0SJg 

• I still like the consumer stapes sector here. XLP or one of its components. They come into seasonal demand next month thru Summer.   I'm already long PEP and KMB as mentioned here previously in Chat.  For a list of XLP components, visit http://etfinvestmentoutlook.com/etf_hold

Depending on the condition of your home, the list of upgrades required to make it the home of your dreams might seem daunting and impossible to complete on your own.  Hiring a professional is not always a bad idea, especially when major work needs to be done to make a home safe to reside in.  But many times hiring a professional is not necessary if all the home needs is some tender love and care from its owners.  So before scouring the internet for the best contractor in your area, first determine how many of the upgrades you can complete on your own.
 
Why do-it-yourself projects are worth the time
 
You might have the skills to complete home improvement projects on your own, but have little time to do so.  You might have even heard rumors that do-it-yourself projects can be even more costly than hiring a professional to complete the projects.  You might be limited on time, so hiring a professional seems ideal. So why should you even bother trying to do the upgrade projects on your own?

I'm back from Illinois after "life intervened" and I rushed out the door and gold has done exactly what I felt it would do.  In this previous post I felt that the 100 week SMA would pose a resistance and if you think about it, it makes complete sense.

• From a season standpoint, gold doesn't have much demand until last Summer when Indian festival and wedding season kicks in followed by jewelry gift giving as the Winter holidays approach.  (see seasonal chart)
• Inflation is very low = no need to hedge with gold
• The stock market is challenging new highs.  When equities are doing well, not to mention the killer strong U.S. dollar, again there's no need to hedge risk with gold.

For all you gold bugs out there, dude, be a patient investor and wait for smart entries.

My guess is that gold will take out the low which has been tested three times and we'll see lower pricing.  For those who want to place bets on gold falling, I would recommend $GLL or $DGZ however beware; they are thinl

As discussed yesterday in Chat, small caps appear to be forming a diamond which can represent a "top" or merely taking a rest or consolidation before resuming it's trek higher.

Theory is to trade the direction of the break higher or lower.  IWM would work for a bullish breakout and TWM for a bearish break down for those who are unable to short.

fwiw we recently traded TWM on market weakness.  Looks as though it may be setting up again.

For more information on diamonds, I would suggest you browse through Thomas Bulkowski's pages at ThePatternSite.

For a technical analysis trader or investor, you need to be able to properly identify stock patterns his book Encyclopedia of Stock Patterns is a must have.

In December I pointed out cyber security firm Vasco Cyber Security VDSI and scratched my head as it certainly seemed to these eyes seems one that is pumped up in a scramble for yield and then plummet as markets experienced mean reversion after 2000  and 2007.  As we all know from experience, parabolic moves, very often correct violently.  On a 10 year monthly chart, VDSI certainly seemed parabolic.

They target banks and financial services customers.  After JPM, Visa and Mastercard were all hacked the last few years, is there trouble in paradise?  Did this laggard deserve the run up?

Historically it generally traded very thin, under 100k shares per day but suddenly in 2014, volume ramped up and traders were piling in.  Was a laggard being pumped?  "Who doesn't love cyber security?  Let's buy them all." but are all cyber security firms alike?  Shares of rivals FTNT, PANW and PFPT have performed better while FEYE has lagged while CUDA has seen recent weakness.  Why the sudden interest i

As the latest Baker Hughes rig count continues to plummet with the collapse in oil pricing some are still trying to catch a bottom.

Total Rigs down to 1633
Down -43 or -2.6% compared to last week
Down -144 or -8.1% year-over-year

Gas seems to be shuttering more than oil and inland waters more than land or offshore.

With many pundits forecasting crude to remain low for a few years (barring disruption in supply) this will be interesting to monitor going forward.

With Schlumberger (SLB) to layoff 9000 and Baker Hughes (BHI) to layoff another 7000, this is only the tip of the iceberg.

Data courtesy of Baker Hughes

Click charts to enlarge