Hindenburg Omen? Someone's Got a FAT Finger!

The summer doldrums are here…..it’s painful really (for the brokers) as asset managers sit back and wait….no reason to make any major moves either way –unless it is stock specific – and apparently – investors are not moving out of stocks just yet either….….. Volumes remain a bit pathetic and the VIX (fear index) traded lower – breaking 10 for the first time since June 9th.  

Stocks continued to show a lack of direction as the major indexes closed mixed for a 5th  consecutive session as the month of June comes to a close. Now looking at the ytd performances - it isn't all so bad - Dow + 8.3%, S&P + 8.9%, Nasdaq + 16.05%, Russell +4.8% -  but remember- the mkt of late has been supported by fewer and fewer stocks.....and this will become more and more of an issue as the economy continues to slow down....Note yesterdays very disappointing macro data....Durable Goods (1.1%) and Capital Goods (0.2%) - both missed the mark miserably........but hey...Unemployment is at a record low of 4.5%......(You're killing me!).

Despite the efforts of the FED to inject liquidity and keep equity prices up for the benefit of their 'argument' (that the economy is robust and healthy) You can see the technical divergences that now  suggest a continued narrowing of breadth.   It is then that we get 'an event' - it could be a benign event or it could be more serious - either way - it forces a change in mind set....maybe short term or maybe more long term....depends on the event.....and it is exactly that event that you try to prepare for - 

Enter stage left - the Hindeburg Omen - here is a subject we have not heard about since the depth of the GFC (Great Financial Crisis).  The Hindenburg Omen is 

"A technical indicator named after the famous crash of the German airship of the late 1930s. The Hindenburg omen was developed to predict the potential for a financial market crash. It is created by monitoring the number of securities that form new 52-week highs relative to the number of securities that form new 52-week lows - the number of securities must be abnormally large. This criteria is deemed to be met when both numbers are greater than 2.2% of the total number of issues that trade on the NYSE (for that specific day)" (investopedia). 

In the past couple of weeks - we have seen this omen repeat itself in the analysis......couple that with the many tech indicators of late that are waving the caution flag......MACD (Is a momentum indicator) and it has been in decline for months now, the Relative Strength (RSI - is another tech indicator that charts the historical strength or weakness in the mkts) and it has also been in decline for months now.....the difference between new hi's and new lows has also been increasing - These are all measures of mkt breadth that should cause some concern.

Remember - The S&P, The Dow, the Nasdaq have all shown steady price advances since the elections as investors celebrated the coming reforms - none of which we got yet...... But during that same time, breadth has continued to weaken and we now see some strong divergence signals......now this doesn’t mean a crash is imminent, it just means that mkt conditions are 'unusual' and out of balance for the bullish outlook that so many continue to shove up our (fill in the blank).   It simply means that real risk remains elevated .

Now the energy sector has been by far the worst performing sector to date....the XLE (Energy ETF) is down 17% ytd...individual names like XOM, CVX, RDS/A, TOT, HAL, BHI, SLB have all been under pressure -most of them down double digits as the price of oil plunges.......

Retailers represented by the XLP (+ 7.8%) have done ok up till now.... but  have been getting punched in the face more than once as Amazon looks to bust up  their century old business model - traditional brick and mortar - M, JCP, DDS, SSI, BONT are all down better than 40% ytd.....REITS that specialize in shopping malls - BRS, WRI, DDR, AKR, RPAI have gotten crushed as they become 'ghost towns'......  

AMZN and Jeff Bezos continue to shake up the world of retail... the recent announcement of their acquisition of Whole Foods just the latest example of what is to come...Over the weekend - AMZN made another announcement - this time with  NKE  - as they announced a direct partnership with each other - NKE to create their own landing page on AMZN to sell their products - this will ELIMINATE both the licensed and unlicensed middlemen that have been enjoying the benefits of repping NKE products online. This is not a new idea - AMZN already does this with other retailers...but it is just another step closer to the elimination of life as we knew it.....and all of this continues to eliminate jobs as technology - while efficient - destroys lives.

Financials - XLF -  have been ok (+3%) but remain hostage to the LACK of any of the real reform that was promised - Dodd Frank or economic........JPM, C, GS, BAC, WFC, PNC, PBCT etc.....are + 3% or - 10%......

Tech - XLK + 18%  has been the outperformer as this sector continues to change the world on an almost daily basis...No need to point out the names....you know them as the FAANG stocks...(FB, AMZN, AAPL, NFLX, GOOG).  Cyber Security and Artificial Intelligence names also rocketing to the forefront of performance...PANW, SYM, FTNT, PFPT. FEYE are all up better than 25% ytd.... And it will be these names that come under pressure when investors/traders run for the door.....as they try to lock in profits on these outperformers....Just sayin....

 Yesterday morning it was the European mkts  that created the buzz......they  were already up nearly 1% across the board when the sun began to rise over Wall St -  US futures were pointing higher at 6 am….. better German macro data and news that the Italian gov’t had reached a deal to save both Banco Populare di Vicenza and Veneto Banca – both regional banks in Italy, but ones that have been causing some concern of late.  When this news hit the tape – Institutional European asset managers hit the BUY button on their computers…sending the algos into overdrive and those mkts higher……..and as my good friend Dr. Quincy Krosby – Chief Mkt Strategist at Prudential told us:

"The bailout of the Italian banks was very positive, in addition to the stress test results from U.S. banks,"

You see -that is just one more issue that investors do not need to consider any longer – so that removes any ‘fear’ or concerns about the state of the Italian banks…. throw in the news that the US banks all passed the latest stress tests and that the US gov’t is about to ‘reform’ the standards for the US bank stress tests and BOOM – financials take off as traders and investors went shopping. 

As I said yesterday - I expected the mkt to test the recent highs of 2450...and then fail - and that is exactly what happened...by 10:00 am - the mkt tested and failed and traded a bit lower all day..... See my interview at TheStreet.com  

(https://twitter.com/TheStreet/status/879402127692632064)
This morning - US futures are off by 2 pts...Overnight Uncle Mario (Draghi) of the ECB was seen as less accommodative in a speech he gave  - this caused the Euro and European Gov't bonds to spike putting pressure on European mkts....Cousin Mark (Carney) of the BoE - also spoke and made comments that he is raising the 'capital buffer' to 1% by November....this is putting a bit of pressure on the banks.... FTSE -0.11%, CAC 40 -0.68%, DAX  -0.51%, EUROSTOXX  -0.50%,  SPAIN -0.29% and ITALY -0.33%.

Janet Yellen is due to speak at 1 pm est at a conference in London and San Fran's Johnny Williams continues to entertain audiences in Australia - where he is detailing US monetary policy.....
Here at home we will hear from Philly's Patty Harker at 11:15 Minnesota's Neil Khashkari will take the podium at 5:30 pm - so he is a non-event. 

Mkts will continue to focus on healthcare reform which gets uglier by the hour - at least 5 GOP Senators are saying - NO..........the CBO projects that 22 mil people will be without healthcare by 2026...and Kelly Anne (Conway) suggested that they could always go out and get a job......Hey - Kelly Anne - part time employees do not get health benefits...and since that is all the jobs we are creating it's an issue.....

Oil continues to rally a bit...currently up 0.44 cts at $43.82.....and Gold is up $5.....but  - recall how yesterday I commented on the fact that Gold was off by 13 pts in early trading…well – it turns out that some poor bastard has a FAT FINGER…..sending a trade of ‘18,149 lots’ or to be more exact -  1.8 mil oz of gold into the mktplace – electronically…..

Now this could have been legit – but chances are that this was an ‘erroneous order’…but thanks to the speed of technology by the time the poor bastard realized he made a mistake – the trade already happened…and BOOM!!!!  Gold trades down$13 pts in a split second as the mkt absorbed the supply……Clearly someone has an error – and you can be sure there will be hell to pay – Isn’t speed and automation GREAT!  (last century – that would never have happened…. but hey – it’s the 21st century and as Dorothy said to Toto – “We’re are not in Kansas anymore…..” )

 

Take Good Care
KP

Summer Risotto 

It's all about the fresh summer veggies that make this dish so great.  A range of green/yellow veggies add depth and great flavor - give it a try, won't you? 

For risotto you need some basics......Arborio rice, some white wine, chicken stock, fresh grated parmegiana cheese, Vidalia onion, butter and a splash of olive oil.  In addition - you need some of your favorite green veggies..... peas, asparagus tips, leeks, baby zucchini both yellow and green (yellow complements the green -sliced lengthwise and sautéed quickly) and artichoke hearts.....you can even add cut, blanched broccolini. 
  
Begin by sautéing the Vidalia onion, and the chopped leeks in a bit of butter and splash of olive oil.....now add in the rice and stir until coated.  Next add about 1/2 cup of white wine and allow it to absorb.  Next as usual - add one ladle of hot chicken stock and stir...until almost absorbed....repeat and repeat again...until the chicken stock is absorbed.  Taste for doneness - when ready - add the peas, asparagus, artichokes, zucchini, broccolini (if you used it) stir to mix so that the veggies heat up.....add in a 'squeeze' of lemon juice (not too much) and the fresh grated cheese..... Serve as a starter or as a side dish....either way - it is a celebration of summer. 

 
 
Buon Appetito.