Contributor Since 2010
Dr. John L. Faessel is a seasoned and respected Wall Street professional with industry-wide recognition for expertise in market strategy and analysis. He is widely recognized for his insights in public companies. For over 25-years Dr. Faessel’s ON THE MARKET reports have been widely distributed to a throughout the world to an extensive list of financial institutions, investment banking firms, brokers, foundations, mutual funds, hedge funds and private high net worth investors.
Monday - 4-30-2012
Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Quote of the Day
"They [young people] were bred and groomed to live as house pets; [now] they are going to have to learn to thrive in the wild."
~ Walter Russell Mead ~
The Market Has Refused to Cave
Earnings are Strong:
To date EPS in Q-1 were up 7.1% in the S&P 500 (SPX) with 275 companies reporting [4.7% without Apple (AAPL)]. Not quite 75% have exceeded analyst expectations - that's above the long-term average of about 66%.
The Economy Slows:
News on Friday's that U.S. GDP grew by 2.2%, less than expectations of 2.5% - and less than the 3% in Q4, was back-burnered by the stock market. Volume rose slightly on the Nasdaq but fell about 10% on the NYSE.
Friday's McClellan Oscillator (favorite overbought / oversold'ness indicator) was a neutral plus 135. (Albeit a high neutral)
Investor sentiment remains decidedly Bearish.
The key channel low trend-line held of December / March channel has held and the technical picture of "price" coming off a double- bottom test of the lows on increasing volume suggests we will at least test the "high's" of April 2nd at (SPX) 1422.
Important channel support i.e. the trend line off the December and March lows held - currently at (SPX) 1369
The S&P 500 (SPX) closed Friday at 1403.36.
Short term 'price' support in the (SPX) is at 1402 and 1397
Longer out it's at 1367 and 1358.
Let's again remember that the pivot point Breakout that occurred on March 16 was at 1369.
The 200-day moving average support is at (SPX) 1274
50-day moving average resistance is at 1383.
Short term 'price' resistance is at Thursdays high of (SPX) 1406.
Move. Stiffer resistance is at the recently posted cycle highs of 1422 established on 4/2/2012.
Of Note; Recall my...
"It's a Turnaround - BUY!" call on 4/12/2012. The McClellan had just ticked a near record minus 314 OVERSOLDNESS. That was the second lowest probe in the last 12-months, only to be exceeded in the 12-month period by the ALL-TIME McClellan lows in oversoldness that was established in July 2011 at a minus 438. I added; "This should be a substantial low. Of the top ten lowest readings, all came at major bottoms. This low post alone suggests that we should be buying today."
The S&P 500 (SPX) closed at 1358.59 on 4-11-2012 - on Friday it closed at 1403.36.
In a bullish sign for the economy the Mendelsohn Affluent Barometer says that wealthy Americans are more optimistic about the economy than any time in the last year.
EuroLand Bond Yields remain well off highs, but have backed off last week's highs.
Greek 10-year yields 19.67%
Italy 10-year (gross) bond yield - 5.60% - off from highs of 7.26% on 11-24.
Spanish 10-year (generic) bond yield - 5.82% - off from highs of 6.7% on 11/24.
Friday's key indicators and metrics:
· McClellan Oscillator is Neutral at minus 140
· Natural Gas (Globex) 2.186
· Copper - 3.8200
· The Treasury 10-year yield 1.933%
· The 30-year Treasury is at 3.115%
· VIX - 16.32
· CBOE Put / Call Volume Ratio - 0.85 (Wednesday's was 0.75)
· 3-month $ LIBOR at 0.466
· Crude oil (NYMEX) $104.93
· Brent Crude $119.27
· Silver (COMEX) 31.347
· Gold (COMEX) $1664.8
· Euro - 1.3262
· US Dollar Index - 78.76
· Aussie Dollar - 1.0426
· Japanese Yen 12445
· Swiss Franc - 1.1045
· Canadian Dollar - 1.0184 highest since 9/16/2011
* Bullish Investor Sentiment remains well off the cycle highs of 6-weeks ago as the market has rallied.
(High BULLISH readings in the Investor Sentiment Readings usually are signs of Market tops; low ones, market bottoms.)
· The Market Vane (Market Letter Survey) slid again to 58% from 61% the prior week. It ticked Bullish cycle highs of 69% six-weeks ago. In 2007 it ticked high of the cycle at 75% BULLISH.
· Consensus Index BULLISH investor sentiment fell another tick to 68% from cycle highs of 78% six-weeks ago. In September 2011 the Index registered cycle lows of 28%.
· The AAII Investor Survey of BEARISHNESS increased to 37.4% from 33.8% the prior week. It was 41.6% three weeks ago. On August 4th 2011 it posted cycle highs of 49.9% in Bearishness. Late December 2010 it was only 16% Bearish.
· The American Association of Individual Investors [AAII] Investor Sentiment Survey of BULLISHNESS fell to recent cycle lows of 27.6% from 31.2% the prior week. It was 42.4% just five-weeks ago. For perspective January 2011 it ticked its highs in Bullishness at 63.3%. It posted absolute lows of the cycle at 25.3% in September 2011.
· The Citigroup "Panic / Euphoria" Model fell to 0.08%. Ten-weeks ago it registered cycle highs of a plus 0.31 - a level not seen in 11-months, yet the model remains in mid-range in the Neutral zone.
The BARRON's Confidence Index posted a 68.5 from 68.3 the previous week. Just over two-months ago the index posted cycle lows of 66.9. One year ago it was 79.4.
The Confidence Index is the premier measure of how the bond markets trillions (total global is around $91 trillion and USA is 39% of that) are allocated: (The bond market is twice the size of the stock market.)
The Index is the High-grade bond index divided by intermediate-grade index. A decline in latter vs. former - generally indicates rising confidence, pointing to higher stocks.
For my Best Ideas for 2012 please send an e-mail request to: Dr.Faessel@onthemar.com