Sarhan Capital

Stocks Negatively Reverse On A Weekly Basis

Adam Sarhan — Fri, 24 May 2013 20:00:34 +0000

STOCK MARKET COMMENTARY:
FRIDAY, MAY 24, 2013

Stocks negatively reversed on Wednesday after the Fed hinted that they may begin tapering as soon as next month. From our point of view, this marked a significant inflection point in the market as the narrative has shifted. So far, every pullback this year has been very shallow in both size (% decline) and scope (days, not weeks). Needless to say, we will be watching this pullback very closely to see if it is just another shallow pullback or something more severe. For the past few weeks we have noted that “the market is getting extended and a pullback of some sort rises everyday as the S&P 500 keeps getting extended from its 50 DMA line.”

MONDAY-WEDNESDAY’S ACTION: Fed Spooks Markets

Stocks were quiet on Monday as investor’s attention shifted to commodities. Gold and Silver rebounded sharply after falling hard in overnight trade. At one point, Silver plunged over 8% and took out April’s low. By Monday’s opening bell, the bulls quickly showed up and quelled the bearish pressure leading many to question whether or not silver is tracing out a potential double bottom pattern? We are of the mindset that both Gold and Silver are in bear markets and until that changes, the Separately, a slew of oil and gas stocks surged on Monday as the USO (Crude Oil ETF) broke out of a 9-month downtrend.

Stocks rallied for the 19th consecutive Tuesday as this bull market continues unabated. Tim Cook’s CEO testified on Capitol Hill and defended Apple’s tax record. Cook said Apple has paid “Every Single Dollar” owed in taxes and argued that the tax rate for repatriated funds should fall from 35% to something more “reasonable.” Separately St Louis Fed president James Bullard and NY Fed president William Dudley gave dovish comments on QE and defended the Fed’s recent action.

Stocks opened higher on Wednesday but negatively reversed after hitting record highs in nearly all the indices. This is not healthy and could mark a short-term inflection point. This action reminds us of the classic buy the rumor and sell the news as Bernanke testified on the hill. Bernanke waffled back and fourth but opened the door to tapering QE as soon as their June meeting. In the afternoon, the minutes of the Fed’s last meeting were released which showed a split room. Most of the members favored continuing QE until the economy recovered while some favored ending it sooner rather than later. Economic data was positive. Existing home sales jumped +0.6% to an annual rate of 4.97 million units which was the highest level since November 2009.

THURSDAY & FRIDAY’S ACTION: Nikkei Plunges

Overnight, Japan’s Nikkei plunged over 1,000 points or 7% which was the largest single day decline since their tragic earthquake/nuclear mess from two years ago. China said its flash HSBC Purchasing Manager’s index in May slid to 49.6 for the first contraction since October 2012. US Economic data was mixed, largely beating estimates. Initial jobless claims slid to 23k to 340k which bodes well for the ailing jobs market. Meanwhile, housing data showed continued signs of recovery. The Federal Housing Finance Agency (FHFA) said home prices rose 1.3% in March while a separate report showed new home sales rose 2% to 454k in April. Finally, the Markit Manufacturing Purchasing Managers Index For May Fell to 51.9 which was the lowest level since October. Stocks opened lower on Friday after durable goods rose 3.3% in April beating estimates for a gain of 2.7%.

MARKET OUTLOOK: CONFIRMED RALLY

For weeks we have mentioned that the market was over extended to the upside and due for a light volume pullback to shake out the weak/late longs. The bulls would like to see this market pullback in light volume and find support at/near their respective 50 DMA lines. It is important to note that the S&P 500 held its 50 DMA line almost to the penny in the middle of April on a closing basis which was a very healthy event. We will be closely watching these key areas and how they react with respect to their 50 dma lines: The Nasdaq Composite, Nasdaq 100, Housing (XHB), Financials (XLF), Transports (IYT), Health Care (XLV), Utilities (XLU), Small (IWM) and Mid caps (MDY) are all back above their respective 50 DMA lines. For those of you that are new to our work, I keep track of the market status differently than other people. My goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. Looking forward, the bulls remain in control of this market as long as the benchmark S&P 500 holds above its 50 DMA line. As always, keep your losses small and never argue with the tape.

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Adam Sarhan MarketWatch Quote: Market carnage underlines dangers of overcrowding

Adam Sarhan — Thu, 23 May 2013 17:33:59 +0000

Market carnage underlines dangers of overcrowding

May 23, 2013, 1:18 p.m. EDT

By William L. Watts, MarketWatch

NEW YORK (MarketWatch) — Japan’s stock market plunge, a sharp rebound by the yen, and even the temporary whack taken by major U.S. indexes on Thursday all help demonstrate what happens when trades get too crowded.

“Whenever one market becomes very crowded, that’s usually when the music ends,” said Adam Sarhan, chief executive at Sarhan Capital.

Since last fall, traders have been playing dollar/yen (ICAPC:USDJPY) as though it were effectively a one-way bet. The dollar earlier this week pushed above ¥103 for the first time since October 2008, and even with Thursday’s 1.6% decline remains up more than 17% versus the yen year-to-date.

Japan’s benchmark Nikkei 225 Index (TYO:JP:NIK) rose more than 70% from its 2012 lows and remains up nearly 67% since November even after Thursday’s drop.

It all comes down to quantitative easing. The yen plunge and Nikkei rally took on the qualities of a force of nature as Shinzo Abe led his party to victory in parliamentary elections last fall, pledging to force the Bank of Japan to aggressively fight deflation and promising fiscal action as well.

In April, the Bank of Japan announced a massive ramping up of its quantitative-easing program, accelerating the yen’s decline. Japanese stocks rallied, in turn, partly on expectations a weaker yen would aid exporters.

The aggressive Bank of Japan moves also fed into the notion of a global hunt for yield, with traders jumping into an array of so-called risky assets on expectations Japan’s efforts would force the nation’s investors to look outside Japan for returns.

But the catalyst for Thursday’s drop came from Federal Reserve Chairman Ben Bernanke, who a day earlier had surprised investors by indicating the central bank could conceivably move to start paring back its own asset-buying program in coming months if the economy begins to improve.

The tone was only reinforced after minutes from the Fed’s latest meeting showed some policy makers were open to tapering the bank’s asset-buying program as early as June.

That knocked U.S. markets down Wednesday and set the plate for Thursday’s Nikkei rout and yen carnage, along with a rise in Japanese government bond yields. Throw in weak Chinese data and the stage was set for trouble in Tokyo.

Adam Cole, head of G-10 FX strategy at RBC Capital Markets in London, said it was “capitulation in to seriously crowded trades” that dominated price action.

He zeroed in on the latest round of weekly flows data from Japan’s Ministry of Finance, which showed that early signs of Japanese investors returning to foreign bond markets had been unwound.

Instead, the data showed investors had unloaded ¥804 billion ($7.910 billion) of foreign bonds in the week to last Friday, Cole noted, more than unwinding purchases over the previous three weeks of around ¥700 billion.

At the same time, foreign investors had plowed around ¥700 billion into Japanese equities and ¥450 billion into Japanese money markets in the latest week, for an overall net capital flow of ¥2.2 trillion into Japan.

“Once again, the rally in dollar/yen (around 2 full yen over the period covered) seems to have been driven by speculative flows, not underlying assets flows. The absence of ‘real’ flow behind moves in dollar/yen makes it difficult to judge how far the correction lower can run, though strong technical support comes in at ¥99.90,” Cole said.

For equity markets, central banks will likely continue to call the tune, strategists said.

It’s possible that markets could end up in an environment where ostensibly positive news on the economy undercuts equities if it heightens fears the Fed will move to cut back on its stimulus efforts, Sarhan said. On the other hand, data that show investors that the economy can grow without QE would reassure investors, though the evidence would likely need to be overwhelming to convince market participants, he said.

Source: http://www.marketwatch.com/Story/story/print?guid=224DCEB0-C3B4-11E2-BA61-002128040CF6

Adam Sarhan Reuters Quote: Hedge funds selling gold after propping market a month ago

Adam Sarhan — Sun, 19 May 2013 22:41:41 +0000

By Barani Krishnan

NEW YORK | Fri May 17, 2013 6:55pm EDT

(Reuters) – Hedge funds and other big speculators in commodities have started selling gold in a big way, trade data showed on Friday, just a month after they had supported the precious metal amid a record tumble in its price.

Money managers, including hedge funds, pulled $1.4 billion from the U.S. gold futures market for the week ended May 14 by trimming their net long positions in the metal, according to Reuters calculations of data released by the Commodity Futures Trading Commission (CFTC).

Just a month ago, CFTC data showed hedge funds had added to their net long positions in U.S. gold futures despite a record loss in bullion prices at that time due to a broad commodities selloff triggered by global economic worries.

The spot price of gold fell to below $1,340 an ounce in mid-April, losing over 8 percent or more than $125 in a single day. The selloff was mitigated by buying support later in the week from consumers attracted to the drop in prices for gold bars, coins, nuggets and jewelry. Gold futures then shot back up, to above $1,400.

Since then, they’ve fallen again, closing on Friday at below $1,365 an ounce.

“I think hedge funds have begun accepting the fact that deflation is a bigger threat to the U.S. economy now than inflation. So, the argument of owning gold as an inflation hedge no longer holds water,” said Adam Sarhan, chief executive at New York-based investment advisory Sarhan Capital.

Open interest, a measure of market liquidity, fell more than 3 percent in the week to May 14 for gold contracts traded by money managers on the COMEX division of the New York Mercantile Exchange, the CFTC data showed.

In terms of actual contracts, the net long position held by money managers fell 10,043 to 39,216. Based on COMEX closing prices for May 14, Reuters calculations showed a net outflow of about $1.4 billion from the drop.

In mid-April, after hedge funds had rushed in to buy gold, open interest for the precious metal on COMEX jumped by a staggering 24 percent.

On Friday, gold fell for a seventh straight session, its longest losing streak in four years, as the dollar rose to the highest since 2008 after some Federal Reserve officials said the central bank should end its stimulus for the U.S. economy.

Ultra low interest rates and hundreds of billions of dollars of Fed stimulus money have fueled higher prices for gold and other commodities over the past 3 years.

This year, gold’s safe-haven lure been dulled by improving U.S. economic data, which included a May reading for consumer sentiment that stood at a near six-year high. Money has also been rotating out of gold into equity markets as U.S. stock prices hit record highs.

Exchange-traded products in gold – investment vehicles that give investors exposure to bullion through issuing securities backed by the physical metal – have seen huge outflows this year.

The largest, New York’s SPDR Gold Trust, reported an outflow of another 5.7 tonnes on Thursday, bringing the drop in its holdings this week to more than 10 tonnes.

Some traders expect the current sell-off in gold to not let up until the market loses between $200 and $300 more. That would push prices to levels last seen in the first quarter of 2010.

“With a few more hard losing sessions, we could be down to between $1,050 and $1,100. It could happen over two weeks or it could happen in a couple of days if the market plunges $100 a dip,” said Frank McGhee, head precious metals trader at Integrated Brokerage Services in Chicago.

(Editing by Andrew Hay and Lisa Shumaker)

URL: http://www.reuters.com/article/2013/05/17/us-hedgefunds-commodities-cftc-idUSBRE94G0XV20130517

Stocks Hit New Record Highs

Adam Sarhan — Fri, 17 May 2013 20:00:42 +0000

STOCK MARKET COMMENTARY:
FRIDAY, MAY 17, 2013

Stocks hit another record high last week as this Central Bank driven rally continues apace. We changed the status from rally under pressure to confirmed rally in our Tuesday 4/23/13 mid-week update and noted that the bulls are back in control of this market. So far, every pullback this year has been very shallow in both size (% decline) and scope (days, not weeks). As long as this healthy action continues we shall continue to err on the long side. At this point the market is getting extended and a pullback of some sort rises everyday as the S&P 500 keeps getting extended from its 50 DMA line.

MONDAY-WEDNESDAY’S ACTION: STOCKS CONTINUE TO RALLY

Stocks were quiet on Monday after the there was little change in the rhetoric from the G7 about Japan’s aggressive easing policies. An article in the Wall Street Journal hinted that the Federal Reserve has begun to discuss a plan to taper off their aggressive QE (asset purchase) program. The article did not provide any additional insight to the details of the plan or the timing of the actual change in policy. The Fed has made it clear that they are going to stay the course until the unemployment rate drops to 6.5% AND inflation hits 2%. Separately, retail sales topped estimates and rose +0.1% in April after falling -0.5% in March.

Stocks rallied for the 18th Tuesday this year after Wall Street titan David Tepper, co-founder of Appaloosa Management, said that he is still bullish on the market and likes the fact that the economy is still growing. in Europe, German investor confidence rose less than expected in May according to the ZEW Center for European Economic Research.In the US, Export prices, excluding agriculture, fell by -0.5% in April after falling -0.2% in March. Excluding oil, import prices slid by -0.2%, which follows last month’s decline of -0.2%.

Stocks opened lower on Wednesday as investors digested a slew of lackluster economic data from across the globe. The Eurozone economy shrank in Q1 by -0.2% which was the 6th consecutive quarter of negative growth and the longest recession since records began in 1995. In the US, the producer price index (PPI) fell -0.7% in April, posting the largest drop in three years which sparked deflation, not inflation, woes. Meanwhile, The New York Federal Reserve’s “Empire State” general business conditions index slid to -1.43 in May from 3.05 in April. Industrial Production fell -0.5% in April, missing expectations for a dip of -0.2%. On the bright side, home builder confidence topped estimates (43) and rose 3 points to 44 in May.

THURSDAY & FRIDAY’S ACTION: US DOLLAR RALLIES AS COMMODITIES FALL

Stocks were quiet on Thursday as investors digested a slew of mixed to mostly weaker-than-expected economic data. Overnight, Japan said its economy topped estimates in Q1 but said deflation remains a concern. In the US, weekly jobless claims rose by 32,000 to a seasonally adjusted 360,000 which was the fastest pace in six months. Meanwhile, housing starts plunged -16.5% in April to a 853,000-unit annual rate, well below expectations for a 945,000-unit rate. Deflation remains a concern in the US. Consumer prices slid -0.4% in April which was the sharpest decline in more than four years, due to a drop in gasoline costs. Finally, the Philly Fed index slid to -5.2 vs a small gain of 1.3 in the prior month. It also missed the Street’s estimate for a reading of 2.4. This is very weak data. Imagine how much weaker it would be if the Fed wasn’t printing $4B/day! On Friday, stocks rallied after US Consumer Confidence Jumped to a 6-Year High In May. Confidence rose to 83.7 vs estimates of 78. Separately, Leading Indicators rose 0.6% which was the highest level in nearly 5 years and topped the Street’s estimate for a gain of 0.2%.

MARKET OUTLOOK: CONFIRMED RALLY

Stocks are by all normal measures getting extended in the near term and a light volume pullback into their respective 50 dma lines would do wonders for the bulls. It is important to note that the S&P 500 held its 50 DMA line almost to the penny in the middle of April on a closing basis which was a very healthy event. Elsewhere, The Nasdaq Composite, Nasdaq 100, Housing (XHB), Financials (XLF), Transports (IYT), Small (IWM) and Mid caps (MDY) are all back above their respective 50 DMA lines. For those of you that are new to our work, I keep track of the market status differently than other people. My goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. Looking forward, this market looks strong as long as the benchmark S&P 500 holds above its 50 DMA line. As always, keep your losses small and never argue with the tape.

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Another Strong Week On Wall Street

Adam Sarhan — Fri, 10 May 2013 20:05:52 +0000

Stock Market Commentary:
Friday, May 10, 2013

We changed the status from rally under pressure to confirmed rally in our Tuesday 4/23/13 mid-week update and noted that the bulls are back in control of this market. So far, every pullback this year has been very shallow in both size (% decline) and scope (days, not weeks). As long as this healthy action continues we shall continue to err on the long side. At this point the market is getting extended and a pullback of some sort rises everyday as the S&P 500 is getting extended from its 50 DMA line.

Monday-Wednesday’s Action: Stocks Continue To Rally

Stocks opened flat on Monday as investors digested the prior week’s large rally. More tepid economic data was released in Europe. Euro-area services and manufacturing data missed estimates. Euro manufacturing output fell for a 15th consecutive month in April. Meanwhile, European Retail sales fell for a second month in March.

Stocks opened higher on Tuesday as investors digested a slew of economic data from across the globe. The Reserve Bank of Australia lowered its benchmark cash rate at its monthly meeting overnight, shaving a further quarter-point off yields to 2.75%. In Europe, German factory orders beat estimates and French industrial production missed estimates. In the US, consumer credit rose by $8.0 billion in March which was down an upwardly revised $18.6 billion (from $18.1 billion) in February. April’s reading also missed the street’s estimate for a gain of $16.3 billion. Additionally, it was the first time since September 2012 that consumer credit did not increase by at least $10.0 billion.

Stocks and a slew of commodities edged higher on Wednesday after China reported stronger than expected economic data. China reported that its imports and exports grew more than expected which bodes well for the global economy. The stronger than expected data from China helped off set some concern over a slowdown in the world’s second-largest economy. Separately, skepticism remained over the strength of real demand and the accuracy of the figures.

Thursday & Friday’s Action: US Dollar Rallies As Commodities Fall

Stocks were quiet on Thursday as investors digested a slew of economic and earnings data from across the globe. Overnight, South Korea’s Central Bank unexpectedly cut rates in an attempt to stimulate their economy. Separately, China said its consumer price index (CPI) jumped last month which sparked concern that Beijing may tighten monetary policy to curb inflation. In the US, weekly jobless claims fell by 4k to 323k which was the lowest level since 2008 and bodes well for the U.S. economy. The stronger than expected data sparked concern that the Fed may taper off bond purchases sooner rather than later. Stocks slid on Friday as a slew of commodities fell hard after the Aussie Dollar plunged below important support.

Market Outlook: Confirmed Rally

It is important to note that the S&P 500 held its 50 DMA line almost to the penny in the middle of April on a closing basis which was a very healthy event. Elsewhere, The Nasdaq Composite, Nasdaq 100, Housing (XHB), Financials (XLF), Transports (IYT), Small (IWM) and Mid caps (MDY) are all back above their respective 50 DMA lines. For those of you that are new to our work, I keep track of the market status differently than other people. My goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae of changing labels on the market status very often. Looking forward, this market looks strong as long as the benchmark S&P 500 holds above its 50 DMA line. As always, keep your losses small and never argue with the tape.

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Adam Sarhan MarketWatch Quote: Goldman: This rally doesn’t need techs

Adam Sarhan — Thu, 09 May 2013 13:53:33 +0000

Goldman: This rally doesn’t need techs

: May 9, 2013, 4:48 AM

As Wall Street continues to break records, the players have been changing. Value-oriented stocks and defensives had been leaders in the bull market, but recently money has been moving into cyclical stocks — technology, financials and energy.

To many, this is a healthy sign for a bull market as investors look increasingly willing to take risks. (Read: Stocks begin a new chapter in this bull market).

“It looks like the bullish trend is alive and we’re continuing to see the great mini-rotation continue within the market, which is very healthy and as long as leadership continues to show up, the bulls clearly remain in control of this market,” said Adam Sarhan, chief executive of Sarhan Capital.

But does this rally really need these leaders to keep going? In a note dated May 8, Dominic Wilson, chief market economist of Global Investment at Goldman Sachs, says equities could keep the rally going without any strong cyclical leadership, such as what was seen in the mid-1990s.

“In particular, if non-U.S. growth remained weak, yields might stay lower for longer. In that case, despite a U.S. recovery, it is plausible that the S&P 500 SPX multiple could rise further, potentially pushing the index beyond 2,000. Our conviction that the U.S. market will climb further is thus higher than our conviction about which sectors will lead it there.”

Wilson notes that many are puzzled by the fact the stock rally has been paired with soft data and underperforming cyclicals — at least until recently — but he says that mystery is a bit exaggerated.

“A post-bust recovery, weakness in non-U.S. growth and falling yields have all helped this pattern since mid-2011. Global data has decelerated, while G4 monetary policy has eased again.”

The case for U.S. equities now is not primarily about strong global growth, nor even strong U.S. growth says Goldman’s Wilson.

“It is mostly about the normalization of the U.S. growth recovery in an environment where the spread between yields on equities and the risk-free rate is unusually large. Our central forecasts are that this gap will close from both sides, with equities rising further and bond yields rising gradually too.

He also reiterated Goldman’s view, as of a few days ago, that cyclical underperformance should begin to reverse.

At Seeking Alpha, Scott Martindale made the point that even better for this stock market run is signs that investors seem to be “broadening into cyclical cycles rather than rotating.” Also check out: Cyclicals: Short-term trade or longer-term theme?

– Barbara Kollmeyer

– Follow this reporter on @bkollmeyer

– Follow The Tell blog on @thetellblog

Source: http://blogs.marketwatch.com/thetell/2013/05/09/goldman-techs-wont-derail-this-rally/

Adam Sarhan Market Watch Quote: U.S. stocks ease after record-setting run

Adam Sarhan — Wed, 08 May 2013 17:57:21 +0000

May 8, 2013, 9:46 a.m. EDT

U.S. stocks ease after record-setting run

By Polya Lesova and Matt Andrejczak, MarketWatchNEW YORK (MarketWatch) — U.S. stocks drifted lower at the open Wednesday as investors took a break after a string of record-setting gains.The Dow Jones Industrial Average (DJI:DJIA) fell 31 points to 15,025 after closing above 15,000 for the first time on Tuesday.

History says Dow will keep climbing

Veteran NYSE trader Teddy Weisberg of Seaport Securities points to the Dow’s history to measure the likelihood of the market pushing even higher.

The S&P 500 Index (SNC:SPX) slid nearly 3 points to 1,623. On Tuesday, it closed at a record for the fourth straight session.

The Nasdaq Composite (NASDAQ:COMP) fell more than 5 points to 3,391.

“We have to expect the market to pull back a little bit, but as long as these pullbacks are very shallow in size and scope that’s very positive for the markets,” said Adam Sarhan, chief executive of Sarhan Capital, in emailed comments.

China swung to a trade surplus in April, data that came in better than economists expected and which could ease some concerns over growth in the country. Of course, the data has also been volatile, and there has been some skepticism over its accuracy. Still, the trade numbers boosted Asian markets, including Japan, which rallied towards five-year highs.

European stocks edged higher.

The Dow industrials touched Tuesday an intraday high of 15,056.67 before closing at a record 15,056.20, a gain of 87.31 points. The S&P 500 index closed at a record for the fourth straight session, up 8.46 points to 1,625.96. Read: Dow’s hitting new highs — but are you?

Equities are in a “sweet spot and we continue to see no reason why global markets can’t go higher from here in the medium term, especially as the deepest pullback in the S&P 500 since the November lows has been 3.8%,” said Chris Weston, chief market strategist at IG, in a note.

In a note to investors dated May 7, analysts at Morgan Stanley predicted the S&P 500 will end the year at 1,600. New York University economics professor Nouriel Roubini said late the following day that the market is not looking at a bubble, but markets could be setting up for a major selloff due to a “huge rally in risk assets” over the next two years.

Dow component Walt Disney Co. (NYSE:DIS) said late Tuesday its fiscal second-quarter profit rose a better-than-expected 32%.

AOL Inc. (NYSE:AOL) said its first-quarter earnings rose 23%. Shares fell 5% to $39.13.

Shares of Whole Foods Market Inc. (NASDAQ:WFM) jumped 9% to $101.05. The upmarket supermarket chain announced a two-for-one stock split and raised its outlook for the year, as it reported a rise in second-quarter earnings on Tuesday.

Shares of Electronics Arts Inc. (NASDAQ:EA) surged 10% to $20 after the video game maker issued a strong fiscal 2014 year outlook after the market closed Thursday. EA also posted fiscal fourth-quarter earnings, which were in line with reduced expectations

Tesla Motors (NASDAQ:TSLA) and Groupon Inc. (NASDAQ:GRPN) are among firms reporting results after the bell.

Source:

http://www.marketwatch.com/story/us-stocks-ease-after-record-setting-run-2013-05-08

Adam Sarhan Reuters Quote: COMMODITIES-Futures pull back after early rally, await China data

Adam Sarhan — Wed, 08 May 2013 17:56:04 +0000

COMMODITIES-Futures pull back after early rally, await China data

Tue May 7, 2013 5:35pm EDT
* China April trade data expected on Wednesday
* Brent crude closes below $105 after nearing $106 earlier
* Copper consolidates early run to 3-week high
* Gold down as Australia cuts rates, ECB open to more easing

(Updates with closing prices, new analyst quote)
By Barani Krishnan
NEW YORK, May 7 (Reuters) – Oil fell on Tuesday after
initially rallying on optimism about a recovery in Europe and
worry over growing Middle East tensions, while copper
consolidated from a 3-week high as commodity investors turned
cautious ahead of trade data from China.
Gold fell for a second straight session. Its appeal as an
alternative investment faded as U.S. stocks remained near
Monday’s record highs on prospects of more central bank
stimulus. Australia cut rates to record lows on Tuesday,
shadowing last week’s move by the European Central Bank, which
said it could trim rates again.
In other markets, natural gas fell to a one-month
low, while corn struggled to rebound from its worst
sell-off in 5 weeks in the previous session.
Activity in commodities was restrained somewhat by anxiety
over what China’s preliminary trade data for April will show on
Wednesday.
China’s imports of crude oil, iron ore and soybeans are all
likely to have increased for a second month, although copper
arrivals might ease slightly due to port strikes in top exporter
Chile, traders said.
A Reuters poll, meanwhile, showed China’s import growth for
April probably eased, suggesting the underlying momentum for
both the domestic and global economies remains tepid.

“For many investors, one reason to even be in commodities
has been the growth in China,” said Adam Sarhan, founder of
Sarhan Capital, a boutique investment advisory in New York.
“But these days, we’re increasingly seeing the narrative
change from better-than-expected economic growth in China to
weaker-than-expected.”
The 19-commodity Thomson Reuters-Jefferies CRB index
settled down 0.4 percent after losses in 14 of the 19
futures markets it tracked.
In crude oil, the benchmark Brent grade out of
Europe’s North Sea closed down 1 percent at $104.40 a barrel. It
had rallied toward $106 earlier on data showing a second
straight month of growth in German industrial orders and fears
of oil supply disruption after Israeli air strikes on Syria
close to Damascus.
With Tuesday’s close, Brent is up nearly $6 a barrel from a
low of under $99 on April 1. Traders said the market looked ripe
for profit-taking as the rebound was built over just three
sessions, despite little positive change in global economic data
or oil demand.
“We’re getting into an area where we’ve had such a strong
run-up in price over the past few days, when really from a
fundamental standpoint it’s hard to justify. We got up here on a
lot of froth,” said Stephen Schork, editor of The Schork Report
in Pennsylvania.
Three-month copper on the London Metal Exchange
closed flat at $7,265 a tonne after running up to a 3 week-high
of $7,374. Traders said the market gave up gains mainly on
concerns about Wednesday’s trade data due from China, the
world’s biggest buyer of copper and other base metals.
The spot price of gold fell more than 1 percent to
hover at around $1,450 an ounce. It had soared to a mid-April
high of nearly $1,488 on Friday.

URL: http://www.reuters.com/article/2013/05/07/markets-commodities-idUSL2N0DO2B020130507

8 Trading Mistakes You Must Avoid

Adam Sarhan — Wed, 08 May 2013 13:45:44 +0000

8 Trading Mistakes You Must Avoid

This Week’s Trading Lesson

Here is a list of eight mistakes that most of us do as we work our way through the learning process it takes to be a successful stock trader. Avoid these and you will be well on your way.

1. Fail to Limit Losses
I have not yet met someone who is always right in the stock market. That means you and I are going to be wrong some of the time. What is important is what we do when we are wrong. When the stock market shows that your analysis was incorrect, sell! Move on, get out, forget about it. Small losses won’t hurt you, using hope to justify holding a loser will.

2. Averaging Down
Averaging down on a loser is buying more at a lower price, expecting the inevitable bounce that gets you out without a loss. This strategy will actually work a lot of the time, you just keep averaging down until the market reverses. However, when it fails to work, and you keep buying in to a stock’s bungee jump that fails to bounce, you can lose everything. Without capital preservation, you are just a spectator.

3. Buying in to Emotion
It is tempting to buy more of a stock that is moving quickly higher. It is important to remember that when everyone is doing this, investors will inevitably pay too much. A simple rule is to not buy stocks that have run away from their trend line. You can buy stocks that have momentum, just wait for them to pull back to the trend line and buy them on short term weakness. Never chase.

4. Believing in Public Information
The stock market is efficient, it prices in all available information. That means the news release that you are reading has no value. The annual report has no value. So long as the general public has the same information as you, your decisions based on that information will provide random results.

5. Selling on Pull Backs
It is easy to be nervous with our winners because the feeling of having a winner turn in to a loser is not a nice one. So, we tend to sell our winners too early, getting out at the first sign of weakness to lock in the profit and give ourselves the congratulatory “you never go broke making a profit” speech. You have to maximize gains and learn to distinguish between the minor pull backs that are part of long term, money making trends and actual trend reversals. A trade is not successful until you have doubled your risk.

6. Taking Too Much Risk
Emotion is the enemy of the trader. Cold hearted people, or at least those who do not care about the risk of the trade, are the best traders. To make sound decisions, you can not risk more on a trade than you are willing to lose. If you do, you will break your trading discipline and avoid selling losers when you are wrong or sell your winners too early.

7. Going Against the Mood of the Market
It is not easy to paddle a canoe up a river, against the current. It is also not easy making money on a stock when the mood of the market is against you. When considering a stock, I always first assess who is in control of the stock, buyers or sellers. To make money, you either have to trade with the group that is in control or pick the point where control changes from one group to another. Don’t go against the mood of the market.

8. Trade Possibility, not Probability
I remember an advertisement for a lottery, it said, “Think of the Possibilities!.” What if the lottery company suggested we think of the probabilities? We have all heard that we have a better chance of getting struck by lightning than picking the right numbers to win the lottery, but because we think of the possibilities, we continue to buy tickets. A lot of people approach the market the same way. They may look at a stock and describe all of the things that could happen, how the company could find gold on a long shot mining exploration and how the stock could go rocketing higher. However, when you trade against probability, you are on the path to poverty.

Which mistakes are you making?
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Source: Stockscores.com Perspectives for the week ending May 7, 2013

Central Banks Continue To Flood The System With Liquidity

Adam Sarhan — Sat, 04 May 2013 12:15:49 +0000

Stock Market Commentary:
Friday, May 3, 2013

We changed the status from rally under pressure to confirmed rally in our Tuesday 4/23/13 update and noted that the bulls are back in control of this market. So far, every pullback this year has been very small in both size (% decline) and scope (days, not weeks). As long as this healthy action continues we shall continue to err on the long side. As we have noted before, the market bent but did break…yet.

Monday-Wednesday’s Action: Stocks Edge Higher Into Fed & ECB Meetings

Stocks were quiet on Monday after Italy announced a new recovery plan and the latest round of mixed economic and earnings data was released. Personal income rose +0.2% in March which missed the Street’s estimate for a gain of +0.3%. Elsewhere, personal spending rose +0.2% which beat the Street’s forecast for a gain of +0.1%. Pending home sales rose 1.5% which was better than the Street’s estimate for a gain of +1%.

Stocks rallied on Tuesday helping the benchmark S&P 500 hit a new record high as investors digested mixed earnings and economic data. The S&P/Case-Shiller composite index of 20 metropolitan cities surged +9.3%, enjoying its largest annual gain in seven years. Separately, consumer confidence rebounded to 68.1 in April as Americans felt more optimistic about the economy, housing and the jobs market. The report topped estimates for a reading of 60.8. On a negative note, the Chicago manufacturing index unexpectedly fell to 49 in April which was below the boom/bust level of 50.

Before Wednesday’s open, China said its Purchasing Managers’ Index (PMI) fell to 50.6 in April. This was the latest in a series of weaker-than-expected economic data from China and led many to question the health of the global economy. In the US, ADP, the country’s largest private payrolls company, said US employers only added 119k new jobs in April which missed the Street’s estimate for a gain of 155k. This was the lowest reading since September 2012 and was below March’s downwardly revised 131k reading. The ISM Manufacturing index fell to 50.7 in April which missed the street’s estimate for 50.9. Elsewhere, March Construction spending tumbled -1.7% vs +1.5% in February. The Fed held rates steady and largely reiterated their recent stance of keeping rates artificially low until the unemployment rate falls to 6.5% and inflation hits 2%. Looking at earnings, so far, over 60% of stocks in the S&P 500 have reported Q1 results and 70% have topped very low estimates.

Thursday & Friday’s Action: All Eyes On April’s Jobs Report

Before Thursday’s open, the ECB lowered rates to help stimulate their tepid economy. ECB president Mario Draghi said that the ECB was open to negative deposit rates which sent the Euro and a slew of European stock markets lower. In the US, weekly jobless claims fell by 18k to 324k which was below the Street’s estimate for 345k and fell to a 5 year low. Before Friday’s open, the Labor Department said US employers added 165k new jobs and the unemployment rate slid to 7.5% which is a four year low.

Market Outlook: Confirmed Rally

It is important to note that the S&P 500 held its 50 DMA line almost to the penny in the middle of April on a closing basis which was a very healthy event. Elsewhere, The Nasdaq Composite, Nasdaq 100, Housing (XHB), Financials (XLF), Transports (IYT), Small (IWM) and Mid caps (MDY) are all back above their respective 50 DMA lines. For those of you that are new to our work, I keep track of the market status differently than other people. My goal is to remain in sync with the broader trend of the market (up or down) and not get caught up with the minutiae. Looking forward, this market looks strong as long as the benchmark S&P 500 holds above its 50 DMA line. As always, keep your losses small and never argue with the tape.

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Stocks Negatively Reverse On A Weekly Basis

STOCK MARKET COMMENTARY: FRIDAY, MAY 24, 2013

MONDAY-WEDNESDAY’S ACTION: Fed Spooks Markets

THURSDAY & FRIDAY’S ACTION: Nikkei Plunges

MARKET OUTLOOK: CONFIRMED RALLY

Adam Sarhan MarketWatch Quote: Market carnage underlines dangers of overcrowding

Adam Sarhan Reuters Quote: Hedge funds selling gold after propping market a month ago

Stocks Hit New Record Highs

STOCK MARKET COMMENTARY: FRIDAY, MAY 17, 2013

MONDAY-WEDNESDAY’S ACTION: STOCKS CONTINUE TO RALLY

THURSDAY & FRIDAY’S ACTION: US DOLLAR RALLIES AS COMMODITIES FALL

MARKET OUTLOOK: CONFIRMED RALLY

Another Strong Week On Wall Street

Stock Market Commentary: Friday, May 10, 2013

Monday-Wednesday’s Action: Stocks Continue To Rally

Thursday & Friday’s Action: US Dollar Rallies As Commodities Fall

Market Outlook: Confirmed Rally

Adam Sarhan MarketWatch Quote: Goldman: This rally doesn’t need techs

Goldman: This rally doesn’t need techs

Adam Sarhan Market Watch Quote: U.S. stocks ease after record-setting run

U.S. stocks ease after record-setting run

History says Dow will keep climbing

Adam Sarhan Reuters Quote: COMMODITIES-Futures pull back after early rally, await China data

8 Trading Mistakes You Must Avoid

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Central Banks Continue To Flood The System With Liquidity

Stock Market Commentary: Friday, May 3, 2013

Monday-Wednesday’s Action: Stocks Edge Higher Into Fed & ECB Meetings

Thursday & Friday’s Action: All Eyes On April’s Jobs Report

Market Outlook: Confirmed Rally

STOCK MARKET COMMENTARY:
FRIDAY, MAY 24, 2013

STOCK MARKET COMMENTARY:
FRIDAY, MAY 17, 2013

Stock Market Commentary:
Friday, May 10, 2013

Which mistakes are you making?
Find out how our advisory service can help you overcome these common mistakes and much more!

Stock Market Commentary:
Friday, May 3, 2013