Halfway through March, S&P500 is flat on the year and in the middle of its upper/lower ranges winter home. A range that is running into a 5th consecutive month. Hey, winter feels longer to Bostonians, so quit the complaining!.
Seems the consensus sell side positive return for the S&P in ’15 might be a little behind the curve by the time Q1 wraps up in a few weeks. Europe continues to dominate (as it should ) w/ negative interest rate policy running in tandem with QE kick off last week and cheap Oil. A WAYS TO GO! YPT never got excited over the oil swoon as a U.S growth catalyst short term, even if YPT view was “6 months of pain ahead”, following OPEC on November 27th. OPEC 27/11. Instead the premise here was it eventually was going to be a ‘wash’ ST with U.S dollar strength. This wash premise is taking on a whole new flavour with USD recent surge. Earnings are now facing a greater headwind, back-end January Q1 guidance is likely out the window for the multinationals a month and a half later. EARNINGS DRAG
This lacklustre S&P performance in 2015 is really not a concern here, our DAX Europe trade is +20% but most importantly, YPT had a great Q1 with our SMID growth niche stock picks giving us a plethora of large % gainers. This gives us the luxury of sitting quietly into the back end of the Q as the broad market falls off highs and confuses itself with BAD news is GOOD news and vice versa off the deluge of daily global moving parts. (Eco’#’s, USD, IR dates, EUROZONE QE, NIRP etc).
All the noise can be overwhelming, if trying to decide what to do with your money and/or how to invest it. (If you’re in Europe, negative rates on your money is not going too far. Eventually after most options are used up, equities will begin to get their fair share). In U.S equities, YPT prefers to wait it out as another Q of EPS is not far away. Earnings season is 4X a year and with corporations spreading out reports more than in the past it seems, this EPS niche gig is almost 12 months a year now!. At this point, SMIDs are outperforming due to greater domestic exposure and we’re seeing this creep into the major indexes as big and small diverge some last week. Impact of IR hikes on small caps is not playing a role yet as the USD roll takes precedent. In this view there is no reason, we can’t have another strong Q2 in our SMID niche at this point.
We’ll get some light on USD impact as FEB- END Q reports trickle in next week. (ADBE ORCL in tech, NKE). Of course, the highlight this week is the FOMC. We already noted post big rally on Thursday, a sell the move should be in the cards pre-FOMC. It didn’t even wait for Monday, it sold off Friday. Despite the soft retail late last week, bad news is not taking the June Hike off the table despite the market attempts to make bad into good!. The fact this phenomenon and its gains were erased within 24hrs, makes it likely this trade is running thin. The scrap of ‘Patient’ to the FOMC word heap is seemingly inevitable, so there is more in the statement that will be used to deduce what it all means. In all, please erase the word, so markets can get on with it!. We’ll cover ole’ Yeller’s possible statement in more detail with YPT morning calls come Tuesday/ Wednesday.
All in, its not like we are just taking this cautious stance in mid March, YPT highlighted everything wrong with the market going higher at the end of February at its highs and said a revisit to the months long range would be soon. (In ITTW 02.03.15 and almost on a daily basis since).
Still, oppy’s are present in YPY Shadow plays with QNET relative out performance, particularly with a handful of last Q EPS winners hovering near highs. Despite a ~2+% decline in the week, QNET sits the same number in the black for the year. Still as QNET jousts with support in the latter part of week, the herd is starting to exhibit over zealousness in IWM/Nasdaq outperforming vs. SP/DJIA last week. This is not new news to YPT via our QNET gauge recently, but it seems to have garnered social media attention this weekend.
In all, view/a sense is this market is one valuation day puke from a visit to the lower 4 month S&P band. One day will likely become two as the market has not had a MOMO dump in awhile, including little participation in the 2 sell offs last week. The complacency and over confidence in IWM/Nasdaq exhibited end of week may just be the ticket to provoke such a move. Something like one of the last shoes to drop as many markets get obliterated in March.
Onto YPT Shadowlist Plays ~70… <YPTPremium> members only..To receive ‘INTO THE TRADING DAY’, 5 times a week before 8:30 am, follow the link: YPT PREMIUM