Saturday, June 21, 2014

* 6-22-14: A Propaganda Driven Rally? Review the Past Week & Prepare for The Week to Come

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Last Week: Must Know
All of the major stock indices were up as Crude Oil prices continued to rise on tensions in Iraq, although the finger on the oil panic button seems to be back in the pocket. 

Data provided, Yahoo! Finance, Charles Schwab optionsXpress

What has not left the market is the creeping data that suggests, as Zero Hedge puts it, the possibility of: "A Propaganda Driven Stock Rise". More on that below in the "Earnings News" section (see: ORCL).

Evidence of "Buyback Made 'Propaganda' Rally"
Fact #1: Stock Buybacks grew 50% in Q1, the 3rd largest total since 2005. (Source: Factset)
Fact #2: S&P 500 total volume looks like this:

Data provided by Yahoo! Finance

Data provided by Factset

So overall volume down and stock buyback volume spiking up (literally spiking). Track the SPX performance with the buybacks and note the dropping overall volume from the first chart above. The good news: As long as rates are 0%, executives will borrow to keep their stock (and their compensation) going higher. And rates may be low for a long time.

What also has not left the market is a horribly weak consumer discretionary sector. Lots of data and news on that below.  One thing to note -- if the consumer data & earnings reports come in way off estimates (high or low), the two-month streak of less than 1% moves in the S&P 500 could come to end.

Stats: Must Know
Momentum has re-entered the market on a grand scale and  the number of new highs is jaw dropping. Last Friday alone presented some remarkable data, including:

* 58 News Highs in the S&P 500 & just 2 New Lows
* 209 All-time Inraday Highs & just 14 All-time Intraday Lows

* Wells Fargo (WFC) hit an all-time closing high  and is now the largest bank ever ($279B).
* Exxon Mobil (XOM) hit an all-time closing high  and is now the largest Major Oil company ever ($460B).

But it's not just blue chips; momentum... oh how it has exploded back into this market.

* As of Friday: 73.6% of stocks are now trading above their 50-day MA
* As of 1-month Ago: 40.5% of stocks were trading above their 50-day MA

Provided by

Provided by

Earnings News
* BBRY beat and lives another quarter:
Blog: BlackBerry (BBRY) - We Know that We Don't Know About its Future; That Means Risk, but Risk Just Broke to Multi-year Lows.

* ADBE Beat and broke out to an all-time high.

* ORCL Disappointed and reminded us of a nasty accusation that may hold water:
Blog: Oracle (ORCL) - Earnings News Isn't the News; But a "Propaganda" Driven Stock Rise Might Be. Did You Know This?

Major headlines from last week:
Stocks are ‘dangerously overvalued,’ M&A deals suggest

The Fed's moves could be a warning sign

Janet Yellen’s no more confident than the rest of us

Inflation data give Fed another topic for debate

What will cause the next sell-off

This Week: Must Know; The Week of the Consumer

This is a heavy week for economic data and some very important earnings reports. Quietly (relatively), consumer discretionary stocks are the only sector lower in 2014.  As a Reuters report points out:

"[S]pecialty retailers and apparel makers helped lead the charge off the market's bottom in March 2009 but unraveled this year."

One could say, "a little cooling off is good, get those multiples back in order."  The only problem is this:

"[P]rofit estimates have fallen faster than stock prices in the sector, price-to-earnings multiples have shot higher, making the group the priciest in the S&P 500 at 18.6 times estimated earnings."


"More S&P 500 consumer discretionary companies have warned on the second quarter than any other sector, with 22 negative outlooks - including ones from Bed Bath and Beyond and Carnival - and zero positive ones, Thomson Reuters data showed."

Source: Wall Street Week Ahead: Hoping for a consumer discretionary turnaround, written by Caroline Valetkevitch.

Well, this week two big ones are reporting earnings: BBBY and NKE (see the earnings section further down in article for the longer list).  Bad news from those two could in fact point to a weaker consumer and that means a weaker U.S. and global economy.  Good results could catapult this bull run to yet higher highs.

Below you will find all that we need to prepare for the week to come

All data and images for this report are provided by Charles Schwab optionsXpress

Economic Calendar
New home sales, a final GDP revision, jobs numbers and personal income & spending numbers are all due out.  Combine the personal income data with the earnings due out and we have a busy week.

Partial List of Noteworthy Earnings This Week
The 15 most optionable earnings events; a relatively quiet week as we have moved well out of earnings season.  But, if you have the will to trade, there are company specific events to analyze.  Check out BBBY, NKE and in smaller part, CCL, for the consumer discretionary sector pulse.

This is trade analysis, not a recommendation.

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