And the Roller Coaster Continues

So much is happening - the moves are quick and decisive - Mkts around the world are all higher - US futures are surging +6 in pre-mkt trade this morning as Ukraine/Gaza/Israel/MH17 all fade from gray to black......

Yesterday - the mkts were once again dominated by the action in Ukraine and Israel/Gaza – weakening by 1% in early trade only to claw its way back to end the day down only marginally. The geo-political events continued to steal the thunder from what has been so far a decent earnings season

But remember – like I said yesterday – the lifespan of the geo-political events is short lived and any dislocation suffered as a result of this news is usually in hindsight a ‘gift’. And while it does not appear that the tensions will subside today or tomorrow – the fact is that a resolution does exist so therefore in my view – these events will not prove to be the catalyst to a mkt correction.

This morning we wake up to a WSJ headline –

“US Demands Immediate Gaza Cease-Fire” as the Palestinian death toll reaches 570."

The mkt hates uncertainty on the world stage - so as long as the headlines create anxiety and uncertainty then investor/trader psyche will be impacted. Selling becomes emotional based on fear – thus providing the opportunity for the investor who realizes the mispricing. As soon as investors can see ‘the light’ then the focus will return squarely to the economics and the macro data.

Investors/traders must ask a couple of questions concerning the latest geo-political events. First – will another round of US/EU sanctions force Russia to abandon their support of the rebel separatists? The sense is just maybe – a look at the comments by the UK Foreign Secretary sum it up –

“Russia risks becoming a pariah state if it does not behave properly.”

This morning’s headline give further evidence –

“Putin Risks Isolation Over MH17 as Rebels Release Victims”

Vlad is becoming increasingly isolated – the pictures of mass body bags being loaded onto trains and transported to ‘who knows where’ along with the accusations that the rebels have tampered with a crime scene are not helping him out at all.

Next – How long will the international community sit by as the death toll increases in both Gaza and Israel? The increasing death toll in Gaza – now more than 500 people cannot be allowed to go on – BUT Israel does have the right to defend herself – yet nobody wants to see the death toll mount and so I think a cease fire will be close at hand. This morning we wake up to a WSJ headline –

“US Demands Immediate Gaza Cease-Fire”

In the end – investors/traders will have to battle it out as the geo-political events continue to unfold. Who is benefitting now?

Gold. Surged once again ending the day at $1315/oz – as investors sought that ‘flight to safety play’. This morning due to the renewed excitement around equties and subsiding global tensions - Gold is backing off - currently lower by $6.

For Gold to confirm a leg up - we will need to see Gold to pierce the $1330 on increasing volumes......if it does then look for $1400.

What will cause the move? Will it be global tensions or will it be the unprecedented stimulus by the FED and every other major central bank? The fact is – if it looks like it is breaking out – then the momo guys will jump on board to confirm the move. Remember when you 10th grade science teacher told you – ‘You can never do just one thing – every action creates a reaction’….and so it is. The question is what will be the reaction to this confluence of events? Will the surge in Gold be because all of the easy money that will ignite the inflation monster or is it in fact the rising global tensions or is it a combination of the two?

Ok….so what else happened yesterday? Earnings and will the wonders never cease? HAL reported a 20% increase in operating profit, AGN – the maker of Botox also surprised to the upside as they frantically cut costs – laying off 13% of its workforce as they fight a takeover by Valeant.

Today we are going to get 7 DOW stocks – Coca-Cola, Traveler’s, DuPont, McDonalds, United Technologies, Verizon, and Microsoft – and don’t forget the Non Dow stock – Apple (both AAPL and MSFT are after the closing bell.) Can we keep the party going –with 75% of reported S&P stocks beating the estimates? As the clock ticks – investors await.

And what is going on with the small caps? While the broader mkt – the Dow making news highs and the S&P holding its own and moving sideways for the past 7 weeks – both remain well above their 50 DMA – the small caps have not been so fortunate (Was Yellen prescient or was Yellen the reason for the weakness?) And in fact is teasing with support at the 200 DMA - 1141 - a KEY test. If it fails to hold here – then look for a selloff to really begin in the small cap (Russell) space.

A test of the May lows -1090- would be the next logical level of real support – that would be a 5% move to the downside from here but would represent a 10% move lower from the July highs of 1210. Will a break in the small caps cause a break in the broader mkt – or will it cause investors to run for the safety of the mid cap/large cap names?

A look at the S&P reveals an index that is churning (or struggling?) right here at the 1975 level on low volume.
In order to break up and through we need to challenge it on increasing volumes. This is also KEY – especially when the small caps are testing to the downside….this is no time to remain complacent. A decisive thrust up and through will likely take this index to the magic number (2000) as you can feel the pressure build.

And this brings up another question - Is the weakness in the Russell an omen about 2Q GDP? Have the Goldman’s , FBC’s, C and MS’s been too optimistic? Remember – GS – was calling for a 4% 2Q GDP – while the rest of the street was more reasonable at around 3% GDP – Consensus in the street is now moving quietly to the 1.7% range – while the FED still sees 2.2% growth. And the world turns….

US futures are now +6 trading at 1973 – will this be a Friday repeat trade? Yesterday – investors focused on global tensions – today not so much as investors take this ‘wait and see’ approach. Earnings continue to be strong and the international community is working hard to broker a cease-fire in the Mid-East and a resolution to Ukraine/MH17. Headlines detail the tone around the world –

“Japan, China Stocks Lead Asia Higher As Ukraine, Gaza Worries Ebb”

“EU Shares Higher As Investors Shrug Off Concerns”

“European Stocks Gain After Three Day Drop”

Eco data today includes CPI exp of +0.3%, ex food and energy of +0.2%. Existing home sales of 4.99 mil or +1.9% m/m. Richmond Fed Survey of 5.

Overnight In Asia – investors/traders brushed aside the geopolitical tensions from Ukraine and Gaza, with equities broadly higher across the region. The breakthrough concerning MH17 is helping to stabilize investor psyche. The ying and yang between earnings and politics continues to play out – but as the pressure eases – stocks will benefit. Japan +0.84%, China +1%, Hong Kong +1.7% and ASX +0.06%

In Europe – stocks there are also higher as the focus turns to earnings. EU Foreign ministers meeting today to discuss further sanctions on Putin (Russia) to force him back in line. All of this causing some bargain hunting in beaten up stocks. Credit Suisse posts a larger loss than expected taking that stock down ¾’s of 1% - loss be credited to litigation costs – not new news. FTSE +0.72%, CAC 40 + 0.71%, DAX +0.71%, EUROSTOXX +0.92%, SPAIN +0.96% and Italy + 1.24%

Prosciutto Sorpresa

This is such an easy and wonderful appetizer for your next get together. It is Ricotta, Mascarpone and Grana Padano* cheeses mixed with crushed walnuts all rolled up in a slice of prosciutto…..Delish.

*Grana Padano is one of the most popular cheeses in all of Italy. The name – Grana means grain – and this refers to the grainy texture of the cheese. Padano refers to the region (the valley of Pianura Padana – in the northern part of Italy running from the western Alps to the Adriatic Sea).

For this you need: 12 thin slices of Prosciutto di Parma, fresh ricotta, mascarpone and grana padano cheeses, crushed or chopped walnuts – you do not want to pulverize them, just rough chop or rough crush.

So – first crush your walnuts – set aside.

Now – take 1 cup of ricotta and add ½ cup of Mascarpone and ½ cup of grated Grana Padano cheese. Fold in the walnuts and mix well. Now – spread a layer of cheese on the prosciutto di parma and then roll it up.

Place on a wooden serving board and serve to your guests. You can also include garlic crostini with fresh ricotta and honeycombs – if you never tried this – you don’t know what you are missing.


Buon Appetito.