It was another dull day in the market but all the major indexes managed to close at new highs.

Market Statistics

The Dow fought sellers all day but it was never down more than 29 points. A mid-morning spurt of buying pushed it up +24 points but it could not hold the gains. Another flurry of orders at the close kept it from closing negative. It was a very boring day for the Dow with a range of only 54 points.

The Nasdaq was the hot index in a slow market with a gain of +9 points. I know you are laughing that I called the Nasdaq hot with a 9 point gain. That was the kind of day it was.

The S&P managed to close barely positive with a +1 point gain.

Today is Veterans Day and the banks and bond markets were closed. Without an active bond market the equity market typically wanders aimlessly and today was a prime example.

There was a serious lack of headlines and almost no economic reports. The only one of note was the NFIB Small Business Survey. The headline rose from 95.3 to 96.1 for the October period. That lifted it back to the August levels after losing ground in September. Of the respondents a net 10% said they were planning on increasing employment. That is about average for the last 6 months. Of those surveyed 24% said they had unfilled job openings. Also, 26% said they were planning on making capital expenditures to grow their business. That was the second highest reading in the last 7 months with August the highest at 27%. The report is not wildly followed and it was ignored.

The calendar for Wednesday is also lacking any material reports. Wholesale Trade and the U.S. Budget rarely stimulate investor interest. The biggest report for the rest of the week is the Retail Sales for October on Friday.


In stock news Alibaba (BABA) may have had a record day for sales on Monday but the stock collapsed today. The singles holiday that Alibaba started about 5 years ago is now the biggest shopping day of the year in China. Alibaba posted $9.39 billion in sales for the 24 hour Singles Day event. The first event in 2009 had sales of $7 million. That grew to $5.8 billion last year and today $9.39 billion. By comparison Black Friday online sales in 2013 were $1.2 billion. Cyber Monday sales were $1.84 billion according to ComScore. Last year more than 150 million packages were shipped from Singles Day sales. This year more than 250,000 temporary workers were hired to manage the expected sales volume. The scale here is simply mind boggling and fewer than 20% of the 600 million people online in China actually shop online.

Shares sold off on what could have been a sell the new event. The big day came and sales were posted. Now there is no immediate catalyst. Another factor could have been Jack Ma's comments that the stock price was very high and he was feeling pressured to perform. Ma may be channeling his inner Elon Musk since Musk also tanked his stock on two occasions by talking about its high price. Whatever the reason I hope it drops another $10-$15 to relieve some of those monster gains since earnings when it was just under $100. I really want to own this stock but not until the current feeding frenzy has subsided.


Fossil (FOSL) reported earnings after the close and the stock exploded higher. Earnings of $1.96 easily beat estimates of $1.82 and well above the year ago quarter at $1.58. Revenue rose +10% to $894 million also beating estimates of $879 million. The board also announced a $1 billion share repurchase program. Since their market cap is only $5 billion that is a huge buyback program. For the current quarter the company expects sales to rise 3-6% with operating margins in the range of 19.8% to 21.3%. Shares rallied +15.5% in afterhours.


Vivint Solar (VSLR) fell -22% after reporting horrible earnings. The company reported an adjusted loss of -66 cents. There were no analyst estimates. Revenue rose +266% to $8.3 million. This was the first quarterly report since VSLR went public in September. Hoovers is projecting a -47 cent loss in Q4, -$1.55 loss for the year and -$2.53 loss for 2015. VSLR is a competitor to SolarCity (SCTY). I am sure you are wondering as I am why anyone would have bought this IPO.


Homebuilder DR Horton (DHI) reported earnings of 45 cents compared to estimates of 48 cents. Revenue rose +33% to $2.4 billion and slightly above estimates at $2.38 billion. The number of homes sold in the quarter rose +25% to 8,612. Order backlogs rose +29% and October sales were up more than 20%. Apparently home sales in their market are very strong. Shares of DHI rallied +2.2% despite the earnings miss.

Toll Brothers (TOL) preannounced a +29% spike in sales on Monday.


Insys Therapeutics (INSY) reported earnings of 63 cents compared to estimates of 35 cents. That was a +28 cent beat! Revenues rose +99.7% to $58.3 million. Shares of INSY rallied +12% on the news.


Rackspace Hosting (RAX) saw its shares rally +13% after reporting earnings of 18 cents that beat estimates by 2 cents. Revenue rose +18% to $459 million. They also announced a $500 million stock buyback program. This is quite a turnaround for a company that put itself up for sale earlier in the year and then cancelled that plan in September after failing to find any buyers.


There are some decent earnings on tap for Wednesday with Dow component Cisco, JC Penny, Macy's, NetApp and others. Thursday has Dow component Walmart plus Tyco, Applied Materials, Dillards and Nordstrom.


Yahoo (YHOO) announced after the bell that it would pay $640 million for automated advertising service BrightRoll in order to improve its ability to sell video ads in real-time. BrightRoll is profitable and is expected to have revenues of more than $100 million in 2014. This will make Yahoo's video advertising platform the largest in the USA.


Crude oil did not go down today. Well, at least West Texas Intermediate (WTI) did not decline. Brent crude, the benchmark for waterborne crude around the world, broke below support at $82 to close at a five year low. This is really spooking some people in the energy sector but the farther it drops before the OPEC meeting on November 27th the better the chance they will announce a production cut.


One risk for future oil prices is the November 24th deadline for the nuclear negotiations with Iran. While the 7 countries are far from an agreement we all know nothing important ever happens until the last minute. John Kerry said there are still "big gaps" remaining in any potential deal. There is no agreement on any of the fundamental issues.

The biggest is the enrichment process for uranium. Initially the Obama administration and international negotiators were willing to let them have 1,500 centrifuges for research purposes. They currently have over 19,000. In the most recent talking points the President has raised his limit to 4,000 but only the older models and only if Iran gets rid of its existing stockpile of enriched uranium. Iran is not accepting any limits. They have 9,000 of a newer IR2m version that can enrich uranium much faster and to much higher levels. This is another source of contention. Iran has said it will not dismantle its existing enrichment facilities but the P5+1 nations want the equipment rendered inoperable so that Iran can't secretly enrich uranium when the IAEA is not watching.

Another sticking point is how and when to remove the sanctions if a deal is reached. Iran wants all sanctions removed before they will agree to any deal. The P5+1 nations only want to remove the sanctions in measured steps over time after they verify Iran's compliance with the terms of the deal. Also, there is disagreement on how long Iran will have to remain under the watchful eye of the IAEA. Of course Iran wants the observation to end immediately after they have complied with the terms. The other nations are talking in terms of 20 years in order to prevent Iran from immediately reverting back to a nuclear weapons program.

Iran still refuses to let the IAEA inspectors into closely guarded research sites where it was thought Iran had secretly tested explosive component for nuclear weapons. Iran claims they never did but if that was the case then why not let the inspectors inspect.

President Obama has sent four previously secret letters to Ayatollah Ali Khamenei trying to appeal to him to be reasonable and enter into an agreement. He did this without the knowledge of any of the other five nations. Khamenei has never respond to any of them.

The reason this agreement deadline is so important is the sanctions. If no agreement is reached the full sanctions go back into effect and Iranian oil sales will plunge again from their current 1.25 mbpd. If an agreement is reached and oil sanctions are lifted we could see exports double to 2.5 mbpd very quickly. That would put extra pressure on an already oversupplied oil market. Saudi Arabia would like to see the full sanctions reinstated on Iran not just because they are enemies but it would remove oil from the market and the rest of OPEC would not have to cut production at the November 27th meeting in Vienna.

There is a meeting with Iran this weekend in Oman and then again next week in Vienna. Former U.S. negotiator Robert Einhorn said it will be "virtually impossible" for the two sides to reach an agreement by November 24th. The P5+1 nations have said there will be no extension and that date is final. There have already been multiple extensions and Iran is trying to run out the clock by continuing its crash enrichment program while delaying the negotiations for years at this point. This has been going on for the last ten years.

Markets

I could just repost the market commentary for the last several days and I doubt nobody would notice. The lack of movement has seen the markets gain only a handful of points for the week. The S&P gained +1 point to close at 2,039 and a new high. While I would be happy with a couple weeks of steady gains the lack of any bullish emotion is troubling. When traders are passively holding on to their current positions it suggests everybody is "all in" on the market and there is nobody left to push it higher. There are no buyers or sellers and that makes me uncomfortable.

Of course this was a holiday for all practical purposes and Tuesday's volume of 5.4 billion shares was the lowest since September 26th. Advancers and decliners were almost tied at 3525 to 3323.

The S&P has risen to uptrend resistance at 2,040 and the index may be getting tired without a rest since the bottom on October 15th. We have seen almost a month of solid gains with no material bouts of profit taking.

Support should be 2,015 with resistance 2,040.


The Dow is creeping very slowly to new highs and the +1 point gain today accomplished that. However, that is like going to a football game that ends with only a field goal on the board. There was a lot of action but it was all in slow motion. Like the S&P the Dow is very overbought and very much in need of a temporary dip. It is almost inconceivable that we could continue to climb until Thanksgiving without a dip. I would consider it a buying opportunity but given the length of the rebound I would not want to buy the dip on the first day. A three day drop would be perfect.

No Dow component gained or lost a dollar on Tuesday.



All the good news today came from the Nasdaq. The +9 point gain may have been minimal but it was a new 14 year high and it suggests the consolidation from last week may finally be over. I was really encouraged by the Nasdaq gains for that reason. All we need now is for the shorts to begin covering and we could be off to the races.

You have heard the term never short a dull market. The last week has been exceedingly dull and everyone that shorted the Halloween breakout should be very nervous today.

There is really nothing else to say since the index is now well over the 4,600 support from the last week and making new highs. As long as we can avoid any negative headlines we should see fund managers chasing prices on any future gains.



The Russell 2000 is also starting to move higher from last week's consolidation phase. The 1,180 range is now resistance and once through that level it should target the old highs at 1,208. The Russell is not showing any excitement but it is moving higher. We should be happy as long as that continues.


I think this week is the equivalent of tip toeing through a minefield. There is nothing on the calendar to provide a headline boost and the negative headlines always appear unexpectedly. Cisco's earnings Wednesday evening could be a catalyst but hopefully not a negative one.

I would welcome a 2-3 day bout of profit taking but I would not complain if we just continue higher into Thanksgiving. I just don't believe we will continue higher without a short term dip.

Enter passively, exit aggressively!

Jim Brown

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