Morning Thoughts June 20

  • Great move in Brokers yesterday (after previous day’s underperformance) with BofA (BAC +4.5%) back above key $8 as BarCap made positive comments on BAC citing reports the FHFA could be considering assisting banks in purchases of mortgages. Credit Card plays rallied behind Discover Fincl (DFS +2.3%) after reported better #s….Q2 came at $1 vs cons $0.97 and revenues came at $1.85b vs. cons $1.52b. Life Insurers (S15LIFE) rallied 2.9% as a group with Metlife (MET +4.9%) leading after headlines MET receives extension to resubmit capital plan to Fed.
  • TRANsports index rallied another +1.1% (and now comfortable above 50 and its 100day) after FedEx (FDX) rallied 2.8% despite guiding lower (stock was down 2.5% pre-open) – reported EPS of $1.99 (cons was $1.92) but guided Q1 EPS to $1.45~1.60 (vs. cons $1.69).
  • As a reminder, note the federal funds target rate chart below and see how quickly rates rose and plummeted again…

  •  There is lots of talk (and i have pointed it out in recent days) of the inverse head and shoulders pattern on charts from indices to stocks.  If they work out stocks have 4-5% to rise from here.  But note there is good resistance here too…so leaning out of windows on an fomc decision day is not a good strategy.

  •  The dollar keeps on sliding and the chart needs to be watched even more so now that Bernanke is back with an important decision.

  • The MSCI emerging markets index is still displaying much upside resistance and a head and shoulders formation.  I don’t see much leadership there, which is cause for concern over the medium term.

  •  I remain in cash trading intraday but should we hold up in equities into tomorrow I may add some long-side risk via SPY for a bucket 2 trade



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