Always Long?
Usually miserable. We used a common adage on the trading floor of the New York Stock Exchange. Blunt. To the point. "Short weeks are always long." On the Monday of a four day week, this was a warning. This means far more than merely the griping of some employee who really just didn't want to be there. One must understand that in an industry where few actually draw a base salary, and everyone is measured by their ability to produce, that there are no lies. Nowhere to hide poor performance. Everyone has a "number." That number is simply what that individual must make on average in order to meet expenses, pay employees, and feed dependents. Horrendous reality strikes on days, weeks or months where one fails to reach their number. It happens to all of us.
While many salaried employees might welcome a day off, those who survive off of their P/Ls, or commissions earned see days off as lost opportunity, or as the cause behind this number being higher for the week or month than usual. Februaries can be brutal by the way, as vendors that charge by the month don't cut rates when a short month strikes. Efforts to make that weekly or monthly number ratchets up the pressure on making that higher average "daily number." It gets worse late in the day, late in the week, and when behind, especially late in the month.
To understand the impact of this pressure upon trader psyche, this increased stress usually coincides with a market that due to the obvious holiday, involves a bit less participation. That in turns can provoke more risk taking. Thus, at some point today, you will hear some colleague say, probably in anguish... "Short weeks are always long." On the Thursday before a three day weekend, this is no longer a warning, but lament. Also, probably the wrong moment to ask your co-worker if they have anything interesting planned for the holiday.
Sloppy Trade
Major stock market indices traded sideways to slightly lower on Wednesday with significant carnage experienced in spots. Even with simply stellar performance turned in by the transports, the rails in particular, negative political pressure is being felt in an overbearing way on the entire healthcare sector. The Health Care Select SPDR ETF (XLV) gave up 2.88% for the day, and has now backed up more than 6.5% since last week at this time. Nowhere to hide. Biotech, Pharma, Providers, even healthcare equipment suppliers, have all been hit sharply as portfolio managers rotate away from the space in mass, unwilling to test their endurance against a tidal wave of political pressure on pricing being launched against the sector from both sides of the aisle in Washington.
One such equipment manufacturer reports this evening after the closing bell, as most traders prep for whichever holiday they observe. That firm is the high-tech Intuitive Surgical (ISRG) . Closing on Wednesday evening at $525, down 6.5% on the day ahead of the numbers, this $60 billion company that some amongst us may have never heard of, will provide both pleasure and pain to traders who do stick around after the bell.
I don't think I will play this game today, at least not in any kind of size. If you do find yourself behind the eight ball, and do go there, be aware that ISRG has already traded in a range spanning nearly 150 points in 2019, and closed very precariously on Wednesday, close to the lows of March. If this spot in the low $520's does break, this stock could go a long way. A lot depends on what happens should the stock try to retake it's own 200 day SMA. Be careful. Careful enough to walk away.
Worthy of a Look
You guys give a rat's tail about Pinterest (PINS) ? Yeah, me neither. I saw the $19 pricing, the $12.7 billion valuation. I know those on the site are more apt to be looking to spend than maybe elsewhere. Fertile ground for advertisers. For everyone that does care, I wish them well. Just does nothing for me. Revenues are growing. Losses are contracting. There is some merit. Took a look. As a consumer, I felt more interested in mowing my lawn, or checking to see if those lousy birds had bombed my car again. I won't be in this foxhole with you.
As for Zoom (ZOOM) , I'll have to see where the stock opens, and how it trades, but I do have some theoretical interest going in. The $36 pricing did, like with Pinterest, come above the projected range. The firm is at least paper profitable. A unicorn that has made money. Positive cash flow. That's at least of interest to me. I know, the competition for what they do... shared video conferencing is stiff, a space already occupied by Cisco (CSCO) , and Microsoft (MSFT) through Skype. Perhaps this means the firm dies a slow death. Perhaps ZOOM is eventually gobbled up. Either way, I think the stock is at least worthy of a look.
Large Buyer With More Behind
You guys are going to love this one. Because I am one of those weirdos that looks at just about everything. I saw a piece in the Nikkei Asian Review on Wednesday that both made me chuckle, and left me shaking my head in profound sadness. We all know that as the Fed has halted the expansion of it's balance sheet, and worked toward managing down that risk, and as the ECB has less successfully tried to get there, that the Bank of Japan has continued to purchase a targeted $6 trillion worth of yen in new assets per year. What could go wrong?
Once a cornerstone of free market capitalism, Japan has become the global poster child for perverse price discovery skewed by the persistence of the 'BOJ put." You all likely already know that the BOJ has been purchasing ETFs (Exchange Traded Funds) as part of the central bank's quantitative easing program. As of the end of this past March, through these ETF purchases, the Bank of Japan is now likely to be the top shareholder in 23 different companies, and is a top 10 holder in 49.7% of all Tokyo listed enterprises. Wow. The BOJ holds over 28 trillion yen or $250 billion in ETF holdings, amounting to 4.7% of the total market cap of the first section of the Tokyo Stock Exchange. According to what I read, Nikkei calculates that early next year, the BOJ is likely to overtake a state run pension fund as the largest shareholder in Tokyo listed companies. Period.
I have questions. The Bank of Japan, like the Fed, has targeted 2% consumer inflation. Year over year headline inflation in Japan, by the way has been running at less than half of one percent. Is there maybe a point where one accepts that what they are doing is just not working? I have more. Now, as you know I often criticize the Fed. At least the Fed, if it finds the marketplace too rough, can ride it's holdings to maturity. The Fed holds bonds. Now, if a central bank holds ETFs, and ETFs only trade in the secondary marketplace, while bearing no maturity... would it not stand to reason that the only way to ever unwind the portfolio would be to make extremely large sales outright to the open market? Hmm? Did this cross BOJ Governor Haruhiko Kuroda's mind? I'm sure it has. There musty be a plan in place to never unwind these positions. Ever. Talk about a nationalized marketplace. Still shaking my head.
One last question. Why would a Japanese investor, or someone who invests in Japanese stocks ever risk capital by putting money in smaller names, or start-ups? Answer is, they wouldn't. At least that's how I see it.
Grandma
Many decades ago, in my mind's eye, I can still see it. My grandma's apartment in Manhattan. Grandma had a closet door that when opened, had a series of pencil marks, each with a date, and a name. How tall we all were as we grew up. My siblings. My cousins. How cool it would be to see the back of that door one more time.
The Atlanta Fed upped their Q1 GDP snapshot to 2.4% on Wednesday in response to the February Trade Balance. Today, probably a couple of hours after we see March Retail Sales, Atlanta will adjust that picture for Q1 growth yet again. One thing is certain. This domestic slowdown that we have so far experienced was manufactured by the Federal Reserve's four 2018 rate hikes, the Fed's aggressive pace of quantitative tightening, and the yield curve that the Fed flattened. Hey, we can blame them (we clearly are blaming the Fed), but at least the FOMC realized these errors in real time.
As the Fed has cooled it, the data has improved. I told you coming into this week that the transports, most notably the rails, would tell us more about the economy than the banks. I would say I feel pretty good about having had said that. Cargo is clearly moving from point A to point B, and the rails are transporting this cargo. Last night, another name that tells us a growth-based story reported. United Rentals (URI) . United Rentals rents out equipment, big, construction type equipment for those who don't know. We're not talking plastic chairs for your back yard party. We're talking bulldozers.
Big Machines
URI crushed expectations for both EPS and revenue on revenue growth of 22.5% year over year. Not just that, the firm reaffirmed full year guidance for revenue, EBITDA, and free cash flow. The shares are trading almost 7% higher overnight. This firm trades at just six times forward looking earnings. It would be hard though to call the shares cheap. Total debt just dwarfs cash on hand. Both Current and Quick ratios remain at troubling levels for investors who base decision making on basic fundamental analysis. Still, the name sports healthy margins, and a very, very attractive PEG ratio. I have been flat this stock for a good while, but this one was a serious winner for me in the wake of the 2016 presidential election.
If one sees the formation of this cup with handle (Sorry, but the market has handed us a lot of these lately. I will get back to my beloved Pitchfork models just as soon as that is what the market gives me.), then the pivot would be just about $125, and the breakout came over night. I would only place a target of $140 on the stock, Trading close to $135 overnight, I don't know if the risk/reward is there for the short term trader. The investor probably wants to wait for the gap that this morning's open creates to fill.
Personally, if tempted, I am not likely to spend my hard earned dough, unless I see the name fail on a test of the 200 day SMA from the upside. Only there does the name start to interest me again. The high $130's could present opportunity for short sellers. That said, I don't like carrying trading shorts (investment shorts are different) over weekends, mush less so three day weekends.
Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Expecting 206K, Last 196K.
08:30 - Retail Sales (March): Expecting 0.9% m/m, Last -0.2% m/m.
08:30 - ex-Autos (March): Expecting 0.6% m/m, Last -0.4% m/m.
08:30 - Philadelphia Fed Manufacturing Index (April) Expecting 10.5, Last 13.7.
09:45 - Markit Manufacturing PMI Flash (April): Expecting 52.6, Last 52.4.
09:45 - Markit Services PMI Flash (April): Expecting 55.0, Last 55.3.
10:00 - Leading Indicators (March): Expecting 0.4% m/m, Last 0.2% m/m.
10:00 - Business Inventories (Feb) Expecting 0.3% m/m, Last 0.8% m/m.
10:30 - Natural Gas Inventories (Weekly): Last +25B cf.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (AXP) (.79), (DHR) (1.02), (HON) (1.84), (KEY) (.42), (PM) (.99), (SLB) (.30), (UNP) (1.89)
After the Close: ISRG (2.71)
(Cisco, Microsoft, Honeywell and Schlumberger are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells CSCO, MSFT, HON or SLB? Learn more now.)
