The Daily Dose: It's a Stock Rally!

 | Oct 11, 2013 | 10:00 AM EDT  | Comments
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Stock quotes in this article:

jpm

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wfc

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pkw

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pkw

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NFO

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wmt

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bby

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lulu

At around 10 a.m. on Thursday with the Dow up a cool triple digits, I didn't think much of it, just a normal programmed BS move amid a heaping ingestion of hopium. Roughly at 2:30 p.m. a producer friend hollered at me on GChat, asking for confirmation that the rally was the best since Jan. 2. I replied, why, yes, and then returned to model building ahead of unleashing fury on foes. By the close of trading, with the Dow rocking a sexy 300 plus point gain, I chuckled and mentally prepared for the onslaught of inquires likely pouring into the email box. However, they didn't pour in as expected, indirectly telling a couple things:

  • Blind trust continues on the part of investors regarding the fumbling jerks in government. When blind trust ensues, nobody, or very few, adjust their portfolios to compensate for increased risk.
  • Those short the market from the Sept. 18 sugar high are not yet willing to toss in the towel on their government failure wagers.

Bottom line is that long or short, there is miniscule trust in Thursday's market orgy. So what does that mean to your life? Beats me as we have never met to discuss your financial goals, but I prefer to maintain cautious. It disturbs me that we will have another debt ceiling "debate" right before Thanksgiving and Black Friday. The tidbits I am extracting from earnings calls are also disturbing, and that excludes thorough reads on the earnings releases from JPMorgan (JPM) and Wells Fargo (WFC) today. But, I am cognizant that the world is full of cowboy traders that perhaps do not share my measured approach to investing. If that is true, at least do yourself a solid and watch the performances of the below ETFs and stocks prior to layering on the leverage to boost the output potential of a long only portfolio.

PowerShares Buyback Achievers (PKW)

With stocks off their highs of 2013, and if we land a debt ceiling deal shortly, you want executives to step to the plate and show confidence. No relative outperformance here and it could be an indication of a quite weak earnings season that eventually overshadows the resolution of heightened DC drama.

Source: Yahoo! Finance

Source: Yahoo! Finance

Guggenheim Insider Sentiment (NFO)

Same basic premise on this as on PowerShares Buyback Achievers: trying to spot true confidence by companies that comprise the stock market. Relative outperformance in both ETFs would signal to me trends in a company's business may not have been that harmed during the government scare, and likely priced into stock valuations.

Source: Yahoo! Finance

Source: Yahoo! Finance

Wal-Mart Stores (WMT)

The stock has outperformed given alleged safehaven status (don't get me started on this tired logic...) but you ideally want to see the gains return to the market...and the stock to trade on fundamentals (I feel weak for third quarter).

Source: Yahoo! Finance

3 Rumors, 3 Seconds

What, you think I hang out on Twitter and inside Microsoft Excel all day? Working the sources baby...

  1. Best Buy (BBY) shares have been buy rated by my firm Belus Capital Advisors since launch on May 20 (second best call of 2013). The stock is now sniffing the rear of our $41.00 price target. On Thursday, shares surged at the open and nicely held gains into the close, no news to be spotted. I have good reason to believe that third quarter sales have continued their sequential improvement and as a result, the profit guidance that was talked down on the last earnings call will prove conservative. Three back pocket future catalysts to keep in mind: (1) upcoming release of PS4 at midnight on Nov. 15 (visuals of people standing outside a Best Buy, not waiting online at Amazon.com (AMZN), a positive); (2) exit of low margin international operations in 2014; and (3) announcement of new shops in 2014 (if you look at the stores, it seems as if they are making room for new shops by clearing out underperforming, low margin sections).
  2. Probability we will be told of the new CEO of Lululemon (LULU) on the next earnings release (prior to year end) is better than 50%.
  3. I am very much concerned with the plunge in shares of Sears (SHLD) the past two days.  The stores look poor, for example stacked with too much inventory being offered at fire sale prices.  Take what you wish from that pre-holiday observation.

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