Ride this market's last-gasp rally

12:00 PM lastgasp, markets, rally No Comments

| By Jim Jubak

With Fed money still rolling in, look for another six weeks of gains as a market that’s already advanced 25% this year melts up. Then get ready: A meltdown could follow.

Are we looking at a yearend "melt up"?

I think the odds are good -- very good indeed -- that we’ll see one of those big, all-animal-spirits-on-deck upward moves in U.S. stocks from now until at least mid-December.

That's assuming the markets get past this week’s Oct. 30 meeting of the Federal Reserve’s Open Market Committee without a move by the U.S. central bank to cut back on its $85 billion a month in monetary stimulus. And I think this is a relatively safe assumption after Monday’s report of a very disappointing 5.6% month-to-month drop in pending home sales in September.

Given that, I think the Standard & Poor’s 500-stock index ($INX) could easily break 1,850 within six weeks; up from a close of 1,760 on Friday, Oct. 25. That would add another 5 percentage points of return to what is already an extraordinary year for U.S. stocks. As of Oct. 25, the year-to-date return for the S&P 500 was 25.4%.

But an end-of-the-year melt up wouldn’t be all good news for traders and investors. Because it could be a last hurrah.

As the term implies, with its echo of “melt down,” stocks can fall hard after a melt up.

Jim Jubak

In a melt up, valuations run far away from any fundamentals in the economy, the market or individual stocks. A melt up is driven by momentum, as investors who have profited from the market’s gains greedily chase more and as investors who have been on the sidelines decide that they can’t take missing out any longer and join the party. Worries about risk go out the window, and often it’s the riskiest assets that climb the fastest. In a melt up, the last of every group of investors except the permanently bearish throws in the towel and finally puts cash into the market.

A melt up can be the last blowoff before a market dive.

“Can be” is, of course, the key problem. Melt ups don’t have to end in corrections or market dives. Best-case fundamental wishes can turn out to be true and provide support for valuations at exactly the right time. Extravagant hopes for the future can yield to even more extravagant hopes. Markets can calmly go through a period of consolidation rather than dropping to support levels.

Let’s start at the beginning and work through the important points one by one:

Why does this look like a melt up to me? What could make the difference between a dive, a consolidation, and a further extension of the rally? And what should you be doing now?

Almost everyone is a bull

Let’s start with sentiment indicators that say it’s very hard to find a bear right now.

The American Association of Individual Investors Sentiment Index for the week ended Oct. 23, for example, shows 49.2% of respondents are bullish -- that’s up 2.9 percentage points from the previous week. More impressively, bearish sentiment is down to just 17.6%, a drop of 7.3 percentage points. The long-term average for bearish sentiment is 30.5%, by the way.

It’s hard for a market to keep climbing when all the bears have already thrown in the towel and put their money to work on the bullish side.

Other indicators of sentiment, along with data on investor cash levels, show a similar picture of investor enthusiasm. Margin debt, money borrowed to buy stocks where the loans are secured by the value of the stock, hit a 54-year high in September at $401 billion. (The New York Stock Exchange only releases data at month’s end, so we don’t know what has happened to the total in October.) Margin debt as a percentage of GDP does not quite match the peak of 2007, but it’s in the neighborhood of previous peaks, according to Deutsche Bank.

You can see signs typical of a melt up by tracking the rise in popularity of riskier assets. For example, mutual funds and ETFs (exchange traded funds) that invest in junk bonds are popular again. Weekly flows into junk-bond funds have tripled to $2 billion, according to Lipper. That has taken total cash flow for the year back into positive territory after investors moved out of the category earlier in 2013.

Or take the willingness of Wall Street to buy what are called covenant lite loans. These corporate loans carry few covenants -- rules, for example, requiring borrowers to meet specific credit ratios or limiting the amount of additional debt borrowers can take on. Covenant lite loans had climbed to 54% of all loans this year as of September, according to Standard & Poor’s. That’s a record.

Can the rally keep rolling?

So what could keep this melt up from ending badly -- that is, in a dive or a correction? (And remember that this market hasn’t seen a 10% correction since December 2011.)

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After the shutdown, a big rally?

1:30 PM after, rally, shutdown No Comments

| By Jim Jubak

Assuming that end the shutdown without disaster, can investors to expect a rally in December. But then old sure how China and the United States will creep back.

It's hard to take your eyes off the Government shutdown/ceiling debt crisis in Washington, for the same reason, that we in a car accident rubber corner:

Disaster is fascinating.

But let us for the time being to snatch way our eyes and look further down the road.

Solved provided, this crisis is behind financial Armageddon--get and I believe that it, although probably only with a debt of U.S. bad global financial markets - then clatters what?

Even let me to forward to look at the rest of the year, and in 2014, what probably is on the markets.

First, and I think we can all agree, we get a relief rally, when this mess is over. (This almost universal belief in a relief rally may be of course the reason stocks declined yet not very far and that the markets have created very many bargains.)

We have already seen a good example at the end of last week, if the optimism, the White House and House Republicans were close to a deal in the amount soared. We have a very impressive 2.2% rally in the standard & poor's 500 ($INX) on Thursday, the 10th October, and a decent 11 follow 0.63% on Friday, Oct.

Recovered even more strongly than the U.S. markets, the markets and stocks, which was harder hit by the fear of a US default and the resulting flight to safety. This applied in particular to emerging markets, which had suffered from their usual relatively larger decline, if anxiety among the Anlegern--increases, even if they are not the source of fear. iShares MSCI Indonesia ETF (EIDO), for example, 3.6% increase on Oct. The iShares MSCI India ETF (INDA) climbed 3.2% and iShares ETF MSCI Turkey (TUR) increased by 2.8%.

How long the relief rally is and how big it is, depends on it, how quickly the economic anxieties that mind were preying on the market at the forefront of investors think back. Keep in mind, back against the US budget and debt ceiling? The fears were pointed tapered from its $85 billion in monthly buying of US Treasury obligationen 1) as inevitably get you start with slow growth in China and 2) of the US Federal Reserve, and mortgage-backed securities?

Over the weekend, the Chinese Government announced exports fell unexpectedly in September. Exports fell by 0.3% from September 2012. economists survey by Bloomberg 5.5% had expected export growth. In August exports had increased by an annual rate of 7.2%. (Imports climbed 7.4% in September more than economists had predicted.)

Jim Jubak

You will recall, is the concern that China's economic growth below the Government target of 7.5% for the year will fall. Last week, China's Prime Minister Li Keqiang, that China's GDP grew up by more than 7.5% in the first nine months said 2013.

It is unlikely that China's official any deviation from the target of the Government in the run-up to the November meeting of the Central Committee of the Communist Party, the economic policies used and discuss are devoted to how the economic policy of the country and of the socialism with Chinese characteristics to integrate. The official data is extremely unlikely to rock the boat before this meeting, but whether this data is reliable is another question. And if it is not, the real growth of the Chinese economy what is evident in the performance of the world economy say the official Chinese figures. A forecast that growth in China will miss the Government ' goal was a key reason that the International Monetary Fund its forecast for the economic growth of the world 2014 to 3.6% in 2014 from a July forecast of 3.1% in the year of 2013 and 2014 3.8% and 2.9% in 2013 cut.

On the evidence of what happened this year fears of Chinese economic growth lower than I expected, if emerging economies hard hit, believe a return on emerging markets would cut by these fears in a. Worries about the speed of growth China would also downward pressure on their stocks and raw materials management, as well as and could revive doubts about the speed of economic recovery in the euro area.

Second back at markets some time to try to predict when the Federal Reserve of their cone starts. Markets moved strongly in September as markets ever more convinced that the US economy was weak enough and uncertain enough to each candle on the Fed purchases in October pushed the situation in Washington or higher.

This view has been confirmed, if the Fed surprise at its meeting Sept. 18 cone does not.

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Skepticism high amid the market rally

10:00 AM market, rally, skepticism No Comments

The confidence of investors in shares despite market remains shaky relentless prevailing trend records.

Investors lack confidence in the stock market during this four-year rally to record highs can be found in two data points: to finance flows and volumes.

From 2008 to 2012 crack private investors around 153 billion $ US equity funds and exchange traded funds, according to data from investment Fund Tracker Lipper, while much, put that cash in the bond market to work. Recently have MOM and pop started diving her toes back into shares.

Meanwhile, the equity has been trading in decline for years. It reached in the spring of 2009, right, as the market of its financial crisis lows hit was. Despite a few blips higher here and there (i.e., summer 2011) the trading volume has been low running.

Both developments show crumbling confidence in stocks despite the market's relentless prevailing trend records. The volatile swings attached to the housing and the tech booms and busts translated in the past 12 years in a broader loss of confidence in the stock market. Recently crash, Facebook (FB) IPO debacle and the trade null and void, which should sharply brokerage firm Knight Capital Group have made the May 2010 skeptical flash people compared to the way, the markets work.

Only recently private investors back to stocks, the little guy has started "buy high." Although the concern with the market is record highs, could potentially

Investors poured $34.2 billion to equities funds and ETFs in the four weeks through Jan. 30, its biggest four-week inflow of cash since 1996, according to Lipper. The net is more than the pick-up for all 2012.

For the week end February 27 was about 800 million $ injected into old fashion US of equity fund, a proxy for individual investor relations activities. Tagged an eighth straight week of inflows, the longest routes since March 2011, according to Lipper.

But as money constantly was moving into mutual funds this year, inflows into Exchange traded funds have initially after a strong year of beginning of show.

That could may be explained by the fact that ETFs will often attract a high dose of "hot" money, a - and flows of traders and hedge funds. However, mutual funds, receive more of MOM and pop.

Investors $3.4 billion from domestic ETFs last week data withdrew, Lipper says.

Meanwhile, the volume of trade remains still anemic. This year New York Stock Exchange, average daily trading volume is approximately 3.6 billion shares, according to the WSJ market data group. Only 3.4 billion shares hand changed in NYSE Composite volume on Monday.

Indications are that the little guy is coming back to stocks pick up. With the Dow to new highs is the question of whether MOM and pop too late to the party arrived.

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Stocks rally on hopes of fed stimulus

10:00 PM hopes, rally, stimulus, stocks No Comments

Shares rose Tuesday hoping that the Federal Reserve will agree to politician, on the extension of the stimulus as the economy struggles to recover.

A sharp decline in the German sentiment indicators, in addition to stubbornly high Spanish bond yields, raised expectations for market-friendly ideas from European decision-makers as well.

"Went to the heights of the day, and we have the Fed tomorrow." This is a rescue mission, Central Bank generosity bounce and we will see what follow through (admission) after the Fed morning and what is always from the ESM ", said Peter Boockvar, equity strategist at Miller tobacco & co in New York."

British media earlier, German Chancellor Angela Merkel was balanced had said the reports, to Europe's dual use bailout funds, known as the European facility for financial stability and the European stability mechanism or the EFSF, the ESM, the debts of the countries buying up such as Italy and Spain, and had discussed the plans at the Summit. But a German Government official told Reuters that there was no discussion at a G20 Summit in Mexico this week about the use of Europe's rescue purchase means the bonds of the affected members of the euro zone.

The Dow Jones industrial average closed the day up to 96 points, more than 157 points have increased, earlier in the session. The S & P 500 has gained a five-month low hit earlier in June more than 7 percent. But the strong gains also leave the market vulnerable, if the outcome of the Fed meeting Wednesday does not meet the expectations of the market.

On Tuesday began the Federal open market Committee the first day of a two-day meeting on interest rate policy. The meeting began with expectations that the Fed can expand their "operation twist" program, their efforts to reduce the long-term borrowing costs.

"Some are people expect answer on the Fed morning and are buying or cover shorts in anticipation of that," said Paul Zemsky, Director of asset allocation at ING investment management in New York. "There is a risk that the market gets disappointed."

Spanish Government bond yields facilitated sale, which tempted investors raise higher yields slightly after the 3 billion euro in a short-term debt. However survive his 10-year bonds and bonds over 7 percent, investors concerned about how long fourth largest economy of the eurozone without outside help can.

In Greece lender of the country on a rigorous program that keeps both promised the country from bankruptcy soon to form a coalition government parties and concessions from the EU and IMF and plug into a very long recession to search.

Oracle Corp. rose a day after the results of three days earlier than planned release it stronger than expected quarterly profit, reported, after news of the pending departure of senior concerns the sale was heated, that business is stagnant.

Walgreen Co. fell after the pharmacy chain quarterly results reported and said that it would buy a 45-percent stake in Alliance Boots for $6,70 billion in a bar and floor business.

FedEx Corp. rose after the package delivery company achieved in the fourth quarter and provided an Outlook for the first quarter and 2013.

The Department store operator was shares of j.c Penney a day after its President abruptly after a botched campaign.

Housing starts fell in may from a 3-1/2 year high, but allowed to build new houses strongly increased, suggesting that the housing recovery on track remains showed U.S. economic data.

Reuters contributed to this report.

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Wall Street rally continues; Dow closes up 23 points

7:15 AM closes, continues, points, rally, Street No Comments

CNBC's Bertha Coombs reports on the week's biggest winners and losers, including shares of Apple rallying post earnings.

U.S. stocks advanced for a fourth day on Friday, led by gains in technology after stronger-than-expected earnings from Amazon.com and Expedia offset a weaker-than-expected reading on economic growth.

Expedia shares surged 26.7 percent to $41.33 and was the top percentage gainer on Nasdaq, followed by Amazon, which climbed 15.5 percent to $226.30.

The gains follow a week of mostly robust earnings results, which have boosted the S&P 500 earnings growth rate to 7.2 percent this week from 3.2 percent at the start of the month, according to Thomson Reuters data. So far about 73 percent of the companies have beaten expectations.

At the same time, economic data has been mixed, with Friday's data showing first-quarter gross domestic product expanded at a 2.2 percent annual rate, below the forecast of 2.5 percent.

"The news is getting worse and worse, and the markets aren't really responding to that," said David James, senior vice president of James Investment Research in Alpha, Ohio. He noted the market is paying closer attention to corporate earnings.

"I tend to think as far as going forward, the big key for people especially looking at tech is what happens with the dollar. I think the dollar will probably be stronger than people expect on a relative basis. Historically that usually means tech is the sector that gets hit the hardest."

According to preliminary calculations, the Dow Jones industrial average closed the day up 23.62 points, or 0.18 percent, at 13,229.22. The Standard & Poor's 500 Index was up 3.41 points, or 0.24 percent, at 1,403.39. The Nasdaq Composite Index was up 18.59 points, or 0.61 percent, at 3,069.20.

The S&P 500 and Nasdaq both recorded their best weeks in a month. A blowout quarter from Apple gave the Nasdaq its best day of the year earlier this week.

The moves in the indexes have wiped out much of April's losses. After three days of gains, the S&P is well above its 50-day moving average.

On the downside, Procter & Gamble Co shares fell 4.2 percent to $64.05 after it cut its full-year profit view and posted lower earnings.

Starbucks fell 5.4 percent to $57.41 and was one of the biggest percentage decliners on the Nasdaq 100 as weakness in Europe pressured global sales.

Reuters contributed to this report.

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Stocks set to rally as earnings pick up

2:55 AM earnings, rally, stocks No Comments

By msnbc.com news services

Stocks are set to rally Tuesday as investors look to corporate profits as earnings season picks up and Chinese data fuel the belief the government may move to stimulate growth.

China's economy grew slightly more than expected but at the weakest pace in 2-1/2 years, suggesting the government may act to increase growth in the near future.

Corporate earnings are due from Citigroup Inc , Forest Laboratories Inc , Linear Technology Corp , M&T Bank Corp , and Wells Fargo & Co . Profit outlooks will be monitored for insight on how the euro zone debt crisis affected multinational companies.

Investors appear set to shrug off a cut in the credit rating of the euro zone's rescue fund by Standard & Poor's by one notch, apparently relieved the downgrade was not more severe. The move comes after Friday's widely expected downgrade of a number of euro zone countries.

S&P 500 futures rose 11.7 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures climbed 118 points, and Nasdaq 100 futures added 26 points.

Carnival Corp slumped 16.6 percent to $28.60 in premarket trade after its Italian unit, Costa Crociere, attempted to locate missing passengers after its cruise liner capsized.

France's EDF SA agreed to drop its opposition to power group Exelon Corp's purchase of Constellation Energy Group Inc after reaching a deal to protect the operating independence of a nuclear joint venture with Constellation.

AIA Group Ltd, Asia's No. 3 insurer that is about one-third owned by American International Group Inc, may bid for the $6 billion Asian insurance operations of ING Groep, sources said.

European stock indexes broke through key technical levels to hit five-month highs in early Tuesday trade, with miners among the biggest gainers after economic growth data from top metals user China topped forecasts.

Reuters contributed to this report.

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