Markets Struggle To Hold 50-day Averages

The market is under pressure again in early trading, led by a bounce in the dollar and continued weakness in commodities.

The major indexes are now struggling to hold above their respective 50-day moving averages. The S&P 500 needs to close above 1325, while the Nasdaq needs to hold 2771.

In economic news, both housing starts and building permits came in weaker than expected. The housing market continues to bump along a long bottom without making much progress.

In corporate news, HPQ reported solid earnings but issued downside guidance for next quarter which really hit the stock hard. Wal-Mart also reported solid earnings and gave in-line guidance, but it's stock is slightly lower so far as well.

In early trading, materials and industrials stocks are leading on the downside, while defensive consumer staples and utilities are bucking the weakness and showing small gains.

Asian markets were mixed overnight, while Europe is mostly weaker this morning. A bounce in the dollar is weighing on commodities, with oil prices down to $96.50 and gold prices lower to $1482.

The 10-year yield is sliding further to 3.11%. It's funny that with QE2 ending, the fear was that bond yields would rise but the exact opposite is occurring.

The volatility index is up 1.5% to 18.51.

Trading comment: Volume accelerated during yesterday's selloff, making for another distribution day. The market is in a correction now, so it's prudent to space out your buys a little wider, and hold a higher cash cushion to take advantage of further dips. Emerging markets look broken, with the BRIC countries lagging most other parts of the world in relative performance. In the US, leading growth stocks continue to break down, signaling a more cautious stance is warranted. Ideally, this will just be another brief correction like many of the others, but you never know when something deeper is in the cards, so just be careful.

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Monday Morning Musings

The market is slightly week this morning, while newsflow is relatively light to start the week. The big news over the weekend was the head of the IMF getting arrested in NY ahead of a eurozone ministers meeting today. While I would have expected that to weigh on the euro, the euro is higher today against the dollar.

Commodities are flattish, with oil prices slightly lower to $98.85 and gold prices also down a bit near $1494.

Among the sector funds, financials are strongest out of the gate so far while tech is mostly lagging.

Asian markets were lower overnight; the 10-year yield is steady near 3.18%; and the VIX is flat at 17.09.

Trading comment: The S&P 500 is still hovering in that 1335-1340 range that I have watching for support following the late April breakout and subsequent pullback. I expect the market to remain choppy around these levels, but so far the downside has been contained.

Among leadership, if you look at the defensive sectors like consumer staples (XLP) and healthcare (XLV), you can see that they have just experienced a period of significant outperformance. I would expect this bout of relative outperformance to give way to some sector rotation, but it remains to be seen which group with be the beneficiary of said rotation. It could be energy and materials once again, it could be tech, and there is an outside chance that financials catch a bid - but mostly just because sentiment is so negative for the group. Stay tuned.

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Stocks Close Out The Week On A Down Note

My apologies for no posts yesterday and this morning. It was not for lack of effort, but the Blogger site that I use was down.

Stocks finished the week on a down note, with the S&P 500 declining 0.2% for the week.

The volatility in commodities continued this week as well. Oil prices closed at 99.50 for the week, and gold prices were lower at $1493.

Concerns in Europe finally led to a breakdown in the euro, which plunged this week to close at $140.52. (It figures the euro waited to fall until after I made my final payment for my golf trip with my dad to Ireland)

The 10-year yield continues to hover at low levels, currently 3.18%. And the volatility index jumped 6% today to finish at 17.07.

Trading comment: The SPX remains above its 50-day average, and within that 1335-1340 area where I was looking for the recent breakout to find some support. So on the bullish side, those are good indications.

On the bearish side, the action hasn't been very strong. Rallies have come on lighter volume, and the number of new highs has contracted. Also, many leading stocks remain under pressure. AAPL closed below its 50-day this week. And the emerging markets etf (EEM) sold off sharply today, closing below its respective 50-day for the third straight day.

As such, I want to keep some powder dry and see if we get more of a pullback. It's very likely we could bounce first, just to keep investors on their toes, but it still looks like volatility is heating up a bit as we near the summer doldrums.

Have a good weekend, and rest up.

long AAPL

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Stocks Pause After Three Day Run

The market is lower in early trading after putting together a nice three day run. The rub on the recent rally is that volume has been very light. You really want to see the opposite. You want to see markets rally on strong volume and pullback on lighter volume.

There isn't much in the way of market moving economic data this morning, so most of this is just profit taking.

The dollar is up a bit this morning, which could be weighing on commodities. Oil prices have pulled back below $101, and gold prices are also down, near $1506. Silver prices are down sharply as well.

Macy's (M) reported very strong earnings and raised guidance, and its stock is sharply higher today. I think the general public thinks retailers are hurting since consumers are strapped for cash, but many retailers have reported better-than-expected earnings. Although we can't count Disney (DIS) among them, as they reported disappointing earnings and the stock is lower.

Asian markets were mixed overnight, with China reporting another increase in inflation. The 10-year yield is higher to 3.21%; and the VIX is up 2% to 16.33.

Trading comment: Energy and material stocks are seeing the most selling pressure this morning, as are the related commodities (oil, gas, etc). These stocks have been volatile lately, and I think their recent leadership in the market is likely to pause for awhile while other sectors take the lead. I think tech still looks good, and the one sector that could be a wildcard is financials, since sentiment is so bearish there and no one is looking for anything good from financials right now.

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Will Microsoft Make Money From Skype?

The market is higher again in early trading, after Europe breathes a sigh of relief with respect to Greece. Greece completed a successful debt offering, issuing 1.625 billion euros of 26-week bills that drew an average yield of 4.88%.

This helped push European markets higher this morning, which likely aided sentiment here when our markets opened. Asian markets were mixed overnight.

Also in the news is a deal by Microsoft (MSFT) to buy Skype for $8.5 billion in cash. Considering eBay couldn't make any real money with Skype, I highly doubt MSFT will do any better. I love using Skype on my iPad, but I don't think it will move the needle for MSFT. And with a price tag of $8.5 billion, it looks like they significantly overpaid for this asset. Silver Lake Partners bought the company from eBay a few years back for closer to $3.5 billion.

Among the sectors, utilities and financials are leading the action, which is an odd pair. Healthcare is lagging the action so far.

The dollar is flat; gold prices are higher to $1515; and oil prices are up slightly to $103. The CME raised margin requirements in oil futures to help curb speculation. When they did this to silver, it killed the momentum in that commodity. I doubt it will have the same effect on oil, but it might help a bit at the margin (no pun intended).

The 10-year yield is fractionally higher at 3.16%, but has basically been on a one-month slide lower. The volatility index (VIX) is -5% lower today to 16.25.

Trading comment: Color me surprised by the strength in the market this morning. Of course, its still early, so it needs to hold. But overall things look good here. Stocks that sold off after earnings are bouncing back, and energy stocks that were hit last week are rebounding nicely as well. AAPL has been coiling in a consolidating fashion for nearly three weeks now, which makes me think an upside breakout could be in the works.

long AAPL

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Monday Morning Musings

The market is a touch lower in early trading, after mixed action overnight in Asia but much weaker action this morning in Europe.

Spain fell 1.9% and Greece was down 1.4% after S&P downgraded Greece's debt again amid concerns the country would need more bailout funds.

This also has led to a slide in the euro relative to the dollar. But the bounce in the dollar isn't keeping commodities from bouncing also. Oil prices are up near $99.50, after falling more than 14% last week. Silver prices are up 5% after plummeting 27% last week. And gold is also getting a little bounce to $1505. The action in commodities was so vicious last week that I think at best they are going to be in multi-month trading ranges from here.

There is not a lot of action in the way of corporate earnings this morning. Energy and materials stocks are leading the action so far, while financials are lagging.

The 10-year is still weak near 3.14%; and the VIX is down 2% today to 18.0.

Trading comment: So far the S&P 500 has successfully tested that 1335-1340 support levels. The market is also getting back to oversold levels, but has a little more work to do. I don't get the sense the market is ready to rally yet in any meaningful way, but I still want to be a buyer on weakness as I feel the downside is limited as well.

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The Marketing Operations Role: Where To, From Here?

Looking Back, Briefly:

Marketing Operations has been the fastest growing job role in tech marketing over the past few years. When IDC first started its surveys of marketing spend and staffing back in 2003, Marketing Operations wasn't even on the job roster at most organizations. Today, the "MO" role represents about 6.5% of the total staff and it is the fourth largest job "category" for a large marketing department. So, what happened? The rise of this role was the response of the CMO to the general condemnation that marketing was not acting like a business. The Marketing area was perceived as offering up no accounting, and no accountability... but also offering no end to the pleas for more budget. And so Marketing Operations as the "staff accountant" role started to turn up at the larger and more complex marketing organizations. As the MO role really took off, the general job description would include four areas: budgeting and planning; measurement and reporting; technology deployment (marketing automation technology); and process improvement.

Looking at Today:

Of the four job areas described above, the most problematic, right now, is technology. There is a vast new set of IT tools available for marketing organizations: Marketing Resource Management; Content Management; Performance measurement; Analytics; Social Media Platforms and Monitoring; and the list goes on. The problem is that in general, marketing organizations do not have the staff skill sets to effectively evaluate, deploy and use these tools. In our 2011 Role Survey of Marketing Operations professionals, respondents said that their number one problem today is the sorry state of the "Automation Infrastructure" and that their number one goal is "Finding the People that know how to fix this". There is an equally large and underlying issue "below" the technology level, and this is the database and data management issue. With so much marketing automation now in place, the first output that this new technology is producing is crystal-clear visibility to the fact that: "Wow, we have REALLY POOR customer records". And so a very major issue for the Marketing Operations role is finding the database-savvy personnel who can help with this challenge.

Looking Forward:

Given how fast the MO role has grown and given the significant challenges of today, I want to offer three areas of "Essential Guidance" for CMO's and their MO "lieutenants". The first step is to re-visit the job description. In a series of executive interviews that I recently completed, many MO professionals complained that "Our Marketing Operations area has become the dumping-ground for all the unwanted marketing tasks that no one else wants to do!". Now, whose fault is that?

Job number one, therefore, is for the CMO with the MO team to define and then re-articulate its role to other parts of marketing; so that it does NOT become the dumping-ground! Job number two is to then conduct an "Activity assessment" of what the MO personnel are actually doing, as held against that job description This may all sound like a junior league management exercise but my strong suspicion is that because the role has grown SO fast over the past four years that it MAY be the case that role clarity and scope are due for a closer look. This assessment should also include the organizational placement of the MO role. Why are so many of our MO staff at corporate headquarters? Why are these staff not within our product lines and in the field? These are questions worth asking. Job number three is then to ask "Where do we go from here?" regarding the role and staffing. I believe that the "future" of MO role effectiveness and impact is not in more staff as measured by headcount. In fact, the MO role as a percentage of staff is likely reaching an upper limit at this point. My hunch is that it may "cap out" at perhaps 8 to 10% of staff. However, the MO roles of tomorrow will be more strategic than they are today. The nature of the role will evolve. While today's MO staff are largely involved with individual execution (within the job description mentioned previously), the MO role of the future will be more about educating and infusing other parts of the marketing organization with a marketing process-excellence mentality, skills, and tools. In this way, the MO staff will become a more "leveraged" function. This leverage will include improving the influence and impact of MO across the entire marketing organization, not just at the corporate marketing location(s). As you further deploy the MO role, think about not hiring more Marketing Operations staff....think about driving the existing "smarts" and influence of MO down and through your entire marketing organization.

-- Rich Vancil

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