Things you should know
- Lack of trade talk news raises concerns
- Sector rotation also raises concerns
- Eco data continues to suggest a strong US economy
- What are the Utilities telling us?
Stocks continue to consolidate in what is now a very tight range 2750/2800 which has lasted for more than 2 weeks now. Nothing dramatic happened yesterday and with lack of news flow over trade – the path of least resistance is lower (think caution)….by the end of the day the Dow had lost 13 pts, the S&P -3, Nasdaq -1 and the Russell – 7 while the Transports – 85 continue to lead the way lower -with the XTN (Transport ETF) falling nearly 5% in the last 2 weeks. Financials – XLF, Industrials – XLI and Basic Materials – XLB have also turned down while …Tech – XLK and Utilities – XLU continue to outperform.
And what is really interesting about the Utilities -is that this index has now broken out to new HIGHS – which flies in the face of confidence for the broader mkt – Why? Because Utes (pronounced: Yoooots for Utilities) are more of a safety play – they are staid and boring names that investors flock to that are looking for income, stability or relative safety from the storm. They are not SEXY like that FANG stocks, but then nor do they have all the drama that comes with those names – think AMZN, NFLX, FB, GOOG, AAPL – on days when the headlines are cautious or negative – those sexy growth names tend to get clobbered, and on days when the news cycle is more positive – those same names tend to rally – Utes – don’t react like that at all and tend to be more methodical in their action – action driven by investors looking for safety – so the fact that the ‘Utes’ are now breaking out to new HIGHS is something to keep your eyes on. What is that saying about investor psyche?
Look – I’ve already said that the next 6 weeks could be rocky and drag the mkt lower as TAX day approaches – its an annual thing – just go back and look at the charts at this time going back – it happens – in varying degrees – but the mkt tends to stall right about now – so are institutional investors expecting the same thing this year? Are they discounting a trade deal? I mean with the Utes making new highs – you have to consider the implications – and with the trade news gone relatively quiet over the past 2 days – you have to start to wonder about all of the noise created over the weekend about it. And while most of the news sources over the weekend were all suggesting that a deal is just on the horizon and with Sec of State Mikey Pomp – telling us that ‘he believes that we are on the cusp of a deal’ – rumors late Monday and yesterday seem to suggest that there might be ‘trouble in paradise’ over intellectual property protections and the enforcement of any trade deal – and this is causing the cautiousness that we are seeing. (In the end – I still believe that a deal is closer than not – but am beginning to wonder if it is all but priced in)
Yesterday’s eco data confirmed continued strength in the economy as both the Service PMI’s came in strong (bullish) and the expected weak new home sales was anything but weak – that number came in at 621k vs. the expectation of 600k and that was a surprise – I suppose you can credit falling mortgage rates (on the back of a FED pause) as one of the factors. Today’s eco data includes ADP employment – exp +190k jobs and at 2 pm – the FED releases their latest ‘beige book’ – which is a summary of economic conditions in each of the 12 Federal Reserve districts. I would not expect to hear anything new out of this report – but rather more clarification supporting recent FED comments.
And with the broader mkt in this stall mode – not rising nor really falling and with clear sector rotation – Tech and Utes leading while Industrials, Materials, and Transports falling – you have to recognize that eventually the broader mkt will break one way or the other and if the trade deal stuff continues to drag on without conclusion – the break would most certainly be lower. Sentiment – another indicator – also suggests weakness ahead – bullish sentiment is up – which is a contra indicator – when everyone is bullish – we are usually at the top of the trend – meaning – who is left to buy? All the bulls are in the game…….and look at the VIX – (Fear index) – while still low – it is UP 11% in the last 2 days….suggesting some building concerns….Resistance is at 16.54 – let’s see what happens as we approach that trendline – and so much of that will depend on what happens with trade – any sense of difficulty with the talks will cause the VIX to spike and that will also put pressure on the broader mkt while real progress in the talks will take the pressure off the VIX and allow the broader mkt to stabilize inline.
Overnight – Asian mkts continue to march in line….nothing new or dramatic. China did lower it growth target for 2019 – but this was expected. Australian GDP did miss slightly – but that is not a big deal. Japan -0.6%, Hong Kong +0.26%, China + 0.84%, and ASX +0.75%.
In Europe – those mkt are all trading around the flatline again…..as investors wait on trade. BREXIT has gone quiet today….FTSE +0.33%, CAC 40 -0.15%, DAX – 0.26%, EUROSTOXX -0.14%, SPAIN +0.18% and ITALY +0.36%.
US futs are down 4 pts as the wait continues. We will hear from NY Fed Pres Williams and Cleveland Fed Pres Mester later on – neither is expected to upset the apple cart.
Oil is down 1% at $55.98 – the API (American Petroleum Institute) reported a weekly build of +7.3M barrels late yesterday vs. the expected +1.6M barrels. A build of this size – was unexpected and would largely offset last week’s drawdown and could pressure the energy space – dragging energy names with it….watch this morning’s EIA (Energy Information Administration) report at 10:30 a.m. ET. Oil is struggling to hold the trendline at $55.98 – a failure here would put us back in the $53/$56 range.
Take good care.
Pan Seared Flank Steak w/Red Wine Shallot Sauce
This is easy to make and will present like you spent hours in preparation. For this you need:
A Flank Steak, butter, garlic, s&p, Red Wine, Shallots, Balsamic Vinegar (a good thick one) and olive oil.
Begin by melting a stick of butter – now season the steak with s&p, add chopped garlic and massage. Now pour the melted butter and massage that into the meat as well. Cover and set aside. (now you can use olive oil – but trust me – the butter is so much better!)
In a small pan – melt more butter (½ stick) with some olive oil – so that the butter does not burn. Now toss in sliced shallots – maybe like 4 shallots in total – sauté for 5 mins or so. Now add in ¾ cup of red wine (your choice) and 2 tblsp of the nice thick balsamic vinegar. Bring to a boil and then turn to simmer. Reduce by half – will only take a couple of min. Turn off the heat and whisk in one more tblsp of butter. (Can never have enough butter)
Preheat the oven to 400 degrees.
In a large skillet – add a touch of olive oil and heat up. When ready – add the flank steak to the pan and sear on both sides – 3 – 4 mins per side. Now remove and place in a pyrex dish and put it in the oven for 5 – 8 mins (depending on thickness). Remove and cover – let rest for another 5 mins. (*now you can use this sauce on any type of steak you like…..grilled rib-eyes, filet etc.)
Prepare you serving platter with fresh kale – When ready – slice the flank steak across the grain and arrange on the platter with the kale. Looks good, no? Now you can spoon the Red wine shallot sauce over it all or you can keep it on the side and let your guests serve themselves. Serve this dish with smashed roasted potatoes and a lg mixed salad.
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