The chase by Frances Horodelski:
From the reading pile:
-Goldman Sachs is making a head and shoulders pattern and is vulnerable to $120 (!) (Bottarelli Research)
-FANG stocks are ridiculously overpriced (Facebook, Amazon, Netflix, Google) and require increases in net income of 473%, 5017%, 1752% and 81%, respectively to get p/e levels to market multiple (720 Global)
-Global exposure to USD appreciation is highest ever (at 18% of world GDP, ex-U.S.) and $9.8 trillion (National Bank Financial)
-Beware of Sovereign Wealth Funds (from China to Saudi Arabia) where selling could exacerbate global debt market valuations. Oil country SWF’s total $4.2 trillion. China’s reserves have dropped from $4 trillion to $3.43 trillion (an old number, but still falling) (Financial Times)
-Resistance on the S&P 500 is around 2072 and then about 2100 – will we take another run today (traders)
-Suncor made the front page of options newsletters yesterday as the shares have seen two days of heaving call buying (50:1 over puts) – 9 of 10 most active contracts are all calls especially the January 2016 $25 (U.S.) calls
-Not surprisingly, Caterpillar and Exxon are these most oversold Dow stocks (deeply oversold), the most overbought Dupont and Procter & Gamble (Bespoke)
-CNN’s fear/greed index is in the fearful territory (35)
-But maybe fear is justified – from Walter Murphy, CMT looking at chart patterns notes “the long-standing internal deterioration suggests that in early 2016 the market could be in its most fragile condition since 2007”
In the news cycle we have Cenovus lowering its 2016 capex budget by 19% to $1.6 billion (there will be a call at 11 am); we have a report from CIBC that 80% of millennials have no idea how to invest; there are earnings to asses including Hudson’s Bay Company after the close (watch in particular the impact of the U.S. dollar’s strength on the flagship 5th Avenue store of Saks and commentary about the Christmas selling season), DavidsTea (third earnings release post IPO, first earnings saw the stock collapse and has never recovered trading 41.6% below $19 offering price), and Transat (reported already and outlook shows 15% improvement in first half 2016 bookings).
Sandvine and Lumenpulse have also reported results. Economically, housing starts for Canada (which traders say is unlikely to move the dial on the Canadian dollar which is oil focused) as well as initial claims (the last jobs related number before next week’s Fed meeting). BNN will have more 2016 outlooks, some small cap high tech ideas in the “disruptor” space, we’ll talk about the dollar and the results of an IIROC study into High Frequency Trading. CVE’s CEO will also join BNN.
From the analysts on the street – interesting discussion on Dollarama which had a good quarter and opened higher yesterday got pummeled on what CIBC calls “detailed” guidance that was below their forecasts and admittedly “conservative” according to the company. DOL has a history of beating its own outlook but street worried about stocks trading at about 30x earnings. RBC has a detailed report out on the short interest in specialty pharma companies. The companies with the largest % of float short positions include Insys (82%) and Lannett (36%). Biggest changes higher include Teva (+49%), Perrigo (+24.5%) while Valeant has seen its short position drop modestly.
On the U.S. active list, Men’s Wearhouse missed its Q3 numbers and looks like it will miss the next quarter as well (stock down 21%), Canadian Solar also down 14% while Adobe, Box and GoPro are modestly higher on discussions that they could be targets for Apple.
U.S. futures are higher, European markets are lower, the smart money index is high but rolling over, bonds are getting a little bit of love, gold is up, oil is flat, the Canadian dollar is a little higher.
There isn’t much to read into the action so far. Glencore is a topic of conversation as it looks potentially to IPO is agriculture assets as it pledges to cut debt further (stock up 11% in London), Uni-Select and Cott remain at the top of the performance list in Canada (+109% and 82%, respectively YTD) while the biggest bounces today may come in the mining space.
Remember that there have been three bull market bounces (+20% or more) in oil since the collapse from last June. These quick bounces are very tough to play – we’re probably due for another bounce for the very nimble only. When the turn comes, there will be plenty of time to get one board.
Enjoy the day.
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