"This might be the most 'Don't Own Anything Going Down, But Buy the Crap Out of Anything Going Up' market that I've ever seen!!"
. . . Doug Kass, Seabreeze Partners (2-2-16)
As many of you know, I was in New York City from Sunday until yesterday seeing institutional accounts and speaking on a panel at the IMCA conference (Investment Management Consultants Association), along with Mary Ann Bartels (Merrill Lynch) and Johnathan MacKay (Morgan Stanley), when I received this email from my pal Dougie Kass, "This might be the most 'Don't Own Anything Going Down, But Buy the Crap Out of Anything Going Up' market that I've ever seen!!" Of course, Doug is also the guy that coined the phrase, "This market has no memory from day to day!" Boy, has that been a correct "call" in the new year with hundred-point gains one day and triple-digit losses the next. The "good" is that the D-J Industrials still have not traveled below their August 25, 2015 closing low of 15666.44, even though the D-J Transports have (read: downside non-confirmation). Also, on the "good" side of the ledger, is this from another friend, namely Tony Dwyer (Canaccord Genuity's Portfolio Strategist), who was quoted as stating:
"Last Monday, Dwyer identified a few historical intermediate-term bottoming signals that suggested the bottoming process had begun, which was confirmed last week by two days with 90% of the NYSE volume being positive. He now finds that since the S&P 500 has been a 500-stock index (1957), when the NYSE was within two weeks of a 52-week low, and up volume was greater than 90% of total volume for the second time in four days, the market was higher every time a year later with a median gain of 22.3%."
The "bad" is the recent weaker-than-expected economic numbers, as written yesterday by our economist Scott Brown Ph.D. about the ISM Non-Manufacturing Index report.
"Weaker than expected in January (median forecast was 55.1), but not horrible. Details remained consistent with moderate growth in the overall economy. Business activity continued to advance, but at a slower pace. New orders and employment each rose more slowly than in January. Input prices fell. Comments from supply managers were mixed."
However, the "ugly" was rumors that some European banks are insolvent, casting a pall on most of the "financial stocks" around the world as Deutsche Bank's stock (DB/$16.65) took out its 2008 "lows" over the past two sessions!
Maybe, that's the "black swan" event, and not China, the Fed, Sovereign Wealth funds, competitive currency devaluations, etc., that have caused the "terrible disturbance in the force" as previously written in this missives. Whatever the reason, I continue to think the "selling stampede," for the S&P 500 (SPX/1912.53), ended last Thursday (1-28-16) at 1873 on session 21 in the typical 17-25 session "selling stampede" timeframe sequence that tends to exhaust such stampedes. If wrong, we will again adjust portfolios accordingly.
Jeffrey D. Saut is chief investment strategist at Raymond James.