The Daily Dose: Derailment Coming?

 | Mar 17, 2014 | 12:00 PM EDT
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Sniff, Sniff! Smell that? Try harder if you don't smell anything other than a fast-food burnt egg white wrap. It's the smell of market bulls being scorched.

While I am not one of these freaks screaming stock bubbles are approaching just to snag a few quotes (yes, stock valuations are extended relative to historical norms, but we are not witnessing the last moments of a crazed stock bubble), this week has all the makings of setting the tone for trading until earnings begin in early April.

Here is what's on my analytical platter.


No argument from me, small-cap stocks are in fact overvalued. If a General Mills and CSX could issue mild earnings warnings, you should believe that smaller companies are trying frantically to reach their numbers for a quarter that ends soon. The leading of the Russell 2000 in the latest market downturn is worthy of particular attention, and it will be interesting to see how the index acts as a key transport in FedEx (FDX) announces earnings on Wednesday.

Source: Yahoo Finance


Tough backdrop for KB Home (KBH) and Lennar (LEN) to be announcing earnings with a Federal Reserve meeting that could certainly finally bring some yield creep. Within the reports of these homebuilders, you want to be looking into the quarter-to-date trends that will be offered, and how the stocks react. This information is of more relevance than this week's February housing data.

Start researching the California housing market as I have done. Price appreciation has hit a level that is knocking many out of the market. That is upsetting, and has economic implications. There are 5,000 startups in San Francisco, all contributing to the city's surge in home prices.

Source: Yahoo Finance

The Yellen Show

Part of me wants to believe Federal Reserve Chairwoman Janet Yellen will deliver a new threshold for future changes in Fed policy (likely a broader view of the employment market other than the unemployment rate), and clearly communicate near-term intentions, without a hiccup. Should she pull these things off with ease and grace, the markets could rocket as they did during her first testimony to policymakers.

There is at least a better-than-average chance that Yellen could stumble this week and upset markets. That's because she is human and reporters are trained to ask questions that cause a stir (unlike policymakers).

Not exactly what you want to be exposed to as we get subpar readings on the Empire State and Philly Fed for March.

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we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
Large-cap, high-quality McKesson (MCK) is too cheap now, at $147.51 or so. The stock hit $243.60 more than 2.5...



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