Getting Ready For Earnings Season

There isn't a whole lot in the way of market moving news this morning. After the close today Q4 earnings season will kick off with Alcoa (AA) reporting. I don't know that many people that key off of this report, but it is still the official start to earnings season.

Overnight Asian markets rallied led by China's 3% spurt higher. There were positive comments from Chinese leaders along with rising expectations for easing monetary policy after data showing an increase in lending and money supply. This is somewhat odd given the Premier's cautious comments last week, but nothing is normal when it comes to gauging China.

In early trading, financials (XLF) are leading the way while healthcare (XLV) stocks are lagging.

The euro is getting a little bounce vs. the dollar, and commodities are mixed. Oil prices are lower near $100.90 despite increased rhetoric with Iran. And gold prices are a bit higher to $1620. Silver prices are also higher, while copper looks lower right now.

The 10-year yield is flat around 1.96%. And the VIX is getting a bounce from Friday's low levels, currently 3% higher to 21.30.

Trading comment: Most of the major indexes are now above their respective 200-day averages, and have held those levels for more than a couple of days. I still think this bodes well for another push higher. The market is overbought short-term, which could be a headwind this week. I don't like taking large positions in new stocks ahead of earnings, but we do continue to trade around our long positions with an upward bias. We are still long most of our recent trades, including SCSS, ULTA, and STMP. AAPL shares remain our largest position, and the shares briefly hit a new all-time high this morning. Despite the high price tag, AAPL shares do not yet appear close to being overvalued.

KAM Advisors and/or clients are: long AAPL, SCSS, STMP, ULTA

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Jobs Data Continues To Surpass Consensus

The markets are lower in early trading, despite the better than expected payrolls report that was released before the open. The main weakness this morning likely remains concerns in Europe that are helping drive the euro lower again today. And I don't need to mention the contuining correlation between stocks and the euro.

The December nonfarm payrolls report showed the economy added 200,000 jobs, which is well above the 150,000 estimate. Private payrolls also grew more than expected (212k). Additionally, the unemployment rate ticked down to 8.5%. It was expected to rise to 8.7%.

So this is good news for the U.S. economy, although you wouldn't know it from the action in Treasuries. I would expect to see yields rising today, but instead the 10-year yield briefly rose to 2.0% but has since eased back and is now back to 1.96%. Not exactly an inspiring vote of confidence in the economy.

As we have seen all week, the Nasdaq is outperforming the S&P in early trading and bucking this morning's weakness for the most part. Among sectors, consumer discretionary (XLY) stocks are higher so far, while consumer staples (XLP) are down the most.

Asian markets were lower overnight, and China is not off to a good start to the year already. The dollar is higher, which is weighing on commodities. Oil prices are lower near $101.25. Gold prices are down to $1616. Silver prices are down also, but copper prices (JJC) are higher as of now.

As for the VIX, despite the morning selloff the volatility index is lower on the day. The VIX is currently down -1% near 21.25. This is a pretty bullish sign, as I think many traders expected volatility to pick back up once trading started in earnest in 2012.

Trading comment: The price action continues to be constructive in the major indexes. The Nazz has been outperforming nicely. And if you look at the intraday action in the SPX this week, you can see that most of the days showed weakness in the morning but the market picked up steam and closed flat to up those days. This means investors have been buying the weakness and in most cases augurs well for more upside ahead. Sentiment in yesterday's AAII poll showed too much bullishness, so that is one red flag. Additionally, the market is overbought once again. So I wouldn't load the boat here, but I have to give the market credit for the positive price action.

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Market Shrugs Off Strong Jobs Data

The market is lower in early trading, despite what looks like a very solid ADP Employment report. The data showed private payrolls increased by 325,000 for December, which is well above consensus estimates. We will have to see if the govt. payrolls report confirms this strength.

Overall concerns remain in Europe, where bond yields continue to creep higher and recent deposit data from the ECB shows a continuation of recent trends. Europes markets are lower, as is the euro. And we know that when the euro is down our markets are down.

In other US economic data, the ISM Services Index rose to 52.6 in December from 52.0 the previous month. Nonetheless December's reading was slightly below consensus estimates.

Also, December same-store sales are coming out and are a mixed back. Despite some solid results, the retail etf (XRT) is lower on the day by -1.5% so far.

The Nasdaq is outperforming the SPX so far for a second day. Energy and industrial stocks are early laggards, while healthcare and tech are down the least.

Commodities are mostly lower. Oil prices are down near $102.75, gold prices are only slightly lower to $1608, and copper and silver prices are down as well.

The 10-year yield is lower to 1.95% after trying to get above the 2.0% level yesterday. And the VIX is up 2.3% but still relatively low at 22.75.

Trading comment: Yesterday's price action was pretty constructive as the market was lower for most of the day buy rallied late to finish up slightly. Today the market has already bounced from its early lows and we will see if buyers come back into the picture late in the day. I would have thought we would have bounced more from that strong ADP report, but with the euro down a lot I understand the concerns. Growth stocks look good in early trading. One of our recent trades ULTA is spiking back above its 50-day average, which is a good sign. And the surprise stock of the week SODA is up another 6% in early trading and up 23% for the week. Not bad.

KAM Advisors and/or its clients are long QQQ, SODA, ULTA, XRT

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'In The Money' Poll - 2011 results

Congratulations to Andy Bell (hedgie in NY) for winning our 2011 forecasting poll. Andy had the SPX finishing the year at 1245, which was the closest guess to the actual finish of 1257.60. Andy will be receiving a gift card for his fearless forecast.

Overall, the In The Money pollsters average forecast for 2011 was for a 5.9% gain to 1332. This seemed like a relatively conservative forecast for the first half of the year but things changed markedly in 2H11.

For the 10-year Treasury yield forecast, the winner was Gary Smith (aka "The Internet"). Although Gary's prediction of 3.00% was well bullish of the closing level at 1.87%, it was the most conservative guess in the group. The average forecast for the 10-yr yield was 4.34% last year.

This year (2012) will be our 8th annual year for the poll. With nearly all of the tallies in, the average forecast for this year is for the S&P 500 to gain 8.5% (1364) on the year. That's only slightly more bullish than the Wall St. bigwigs polled by Bloomberg who are looking for SPX 1348 (+7.2%). Our gang also has the 10-year yield finishing 2012 at 2.77%.

Good luck to everyone in 2012!!

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Taking Our Cues From Overseas

There isn't a lot in the way of market moving news this morning, which leaves the market taking its cues from abroad. Yesterday's session proved to be the biggest up move in two weeks, so its normal to see a pullback. But there were also some developments overseas.

Yields are creeping back up in Spain, which is rekindling concerns in Europe. Also, the financial health of Hungary is now surfacing. These are weighing on the euro, and we know whenever the euro is down U.S. stocks are also down.

Asian markets were mixed overnight with Japan higher but China lower again. Premier Wen Jiabo made cautious comments about the country's economic outlook, which is never a good sign for one of the worlds largest and fastest growing economies.

All of the above had led folks to the safety of the dollar, which is hurting most commodities. Gold prices are adding to yesterday's gains near $1610. And oil prices are only down fractionally after hitting $103 yesterday. But copper, silver, and most other commodities are weaker on the day.

The 10-year yield is down slightly to 1.95%. You sure don't get the sense that the U.S. economy is picking up steam with a yield below 2.0%. Where's the love? As for the VIX, it is up 3% so far back to 23.65.

Trading comment: I was fairly impressed with yesterday's action. Volume picked up to its highest level in 7 trading sessions. And technically the SPX put considerable distance from its 200-day moving average, which should now act as support. Bullish sentiment among investors is rising, but not yet at alarming levels. So I think that this rally can push higher before we have another correction. I wouldn't be surprised to see the runup continue into Q1 earnings season.

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To Succeed in 2012, Get Engaged: #7 in the Top 10 Small Business Marketing Ideas for 2012

#7 in my top 10 marketing ideas for small business in 2012 is this: 

To succeed in 2012, you're going to have to get engaged. And as in any good love story, unless you’re part of an arranged marriage, you’ll never get engaged if you don’t ever meet so you need to ‘be’ where your customers ‘are.’

 Once you’ve found them, you need to engage them.To do that, you need to know how to engage them.To engage them, you need to understand what it means:

en-gage: v.

1. To involve oneself or become occupied; participate: engage in conversation.
2. To assume an obligation; agree.
3. To enter into conflict or battle: The armies engaged at dawn.
4. To become meshed or interlocked: The gears engaged.

Look at the definition,
it’s almost a picture of the customer life cycle.

• One, become involved (prospect finds you, or you find them, and an interaction occurs).
• Two, assume an obligation (they agree to pay, you agree to provide services and/or products in return).
• Three, to enter into conflict or battle (sure, it’s a stretch, but I’m going to liken this to the customer, becoming involved in your battle – to grow your business – by telling others about you or choosing to purchase from you again).
• And four, to become meshed or interlocked: based on 1-3, you now have developed customer loyalty and even brand advocacy.

To do any of that, you need to know them (both your current and desired/ideal customers).

You need to have an idea of the shared interests, values and passions of your current customers, and you need to have an idea of those of your ideal client types (those you most want to attract, or want to be able to attract in the future) as well.

Engagement – and the potential to move someone through to the next level of engagement – occurs any time you come into contact with a prospect or customer. That means that opportunities for engagement will occur both within your business and without.

The interactions that will engage people – get them to want to do business with you, to want to do business with you again, to want to tell others about you, and to want to do business only with you (when it comes to the products and services you provide) – these types of interactions will be those where alignment of emotional connection and relevance (what you have is actually something they need) occurs.

Make 2012 the year that you truly connect with your customers. Find out where they live, what they truly want and need, what stirs their passions, what things they believe in, what they value in and about your community, and so on. Make 2012 the year that you truly engage with people on behalf of your business. Get engaged – it’s going to be a great year!

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Bulls Cheer The Start To The New Year

The markets are sharply higher in early trading as the bulls cheer in the New Year. This buying interest was absent late last week as the market fell in the latter half of the week and pushed the SPX to close exactly flat for 2011.

Asian markets were strong overnight. India reported its best manufacturing reading in six months. Europe's markets are also strong this morning, with another meeting scheduled for Merkel and Sarkozy.

The euro is up and the dollar is lower, helping to boost commodities. Gold prices are rallying back up to nearly $1600 (+2%). And oil prices are up even more ($102.55) amid threats from Iran regarding Hormuz and blocking shipping lanes.

In the U.S., the December ISM Manufacturing index rose to 53.9 from 52.7 last month. But the market was already nicely higher before this data came out. Recent economic data has been strong, and I wouldn't be surprised to see upward revisions to Q4 GDP estimates soon.

The 10-year yield is also rallying up to 1.96%, but still below the 2.0% level that has been resistance of late. As for the VIX, it is down +3.5% so far near the 22.50 level. It will be interesting to see if the recent trend towards lower volatility persists, or if rhetoric out of Europe heats up again and drives volatility higher like in 2011.

Trading comment: The SPX is staging a strong breakout this morning. As you can see from the chart below, the SPX has been consolidating right at its 200-day moving average for the last 5 days. Today, it is spiking higher and putting some distance between what should now be support at that key moving average. This is a bullish sign and should lead to more short-covering if it holds into the close. As earnings season approaches, I also hope that we don't get any big preannouncements to the downside. We have already heard about some disappointments in the semi space, so reports related to those companies should be discounted already.

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