28 Oct
Media Quotes

Adam Sarhan IBTimes Quote: Madison Square Garden Spinoff Could Reveal How Much Knicks, Rangers Are Worth

IB TIMES
By Jessica Menton
on October 28 2014 7:43 PM
The Madison Square Garden Company announced on Tuesday it is exploring splitting its business into two separate companies, which would spin off the New York Knicks and Rangers from MSG’s entertainment unit. The reasoning for the split could be largely driven by investors who want to unlock the full value of the sports franchises following the recent $2 billion dollar sale of the National Basketball Association’s L.A. Clippers to former Microsoft CEO Steve Ballmer.
“This is a play on leveraging the valuation of the sports franchises that MSG owns,” said Adam Sarhan, CEO of Sarhan Capital. “The activist investors know there is a ton a value locked up, and the best way to extract that value is by breaking the company into two.”
Representatives for MSG didn’t reply to requests for comment.
Following the announcement, shares of The Madison Square Garden Co. soared over 10 percent on Tuesday to close at $72.99 on the Nasdaq.
The possible breakup would move the company’s cable networks and sports franchises into one unit while the other would house its real estate assets and its concert and entertainment business. The company said its entertainment unit would host live events and concerts while its sports and media sector would include the New York Knicks and Rangers, along with MSG’s regional sports TV networks.
Currently, The Madison Square Garden Company is run as three divisions, including MSG Media, which consists of the company’s regional sports networks; MSG Sports, which owns and operates the National Basketball Association’s Knicks, the National Hockey League’s Rangers, the Women’s National Basketball Association’s New York Liberty and the American Hockey League’s Hartford Wolf Pack; and MSG Entertainment, which hosts concerts and events at MSG’s venues. In addition to the Madison Square Garden Arena, MSG Entertainment owns the rights to operate Radio City Music Hall, the Beacon Theatre, the Chicago Theatre and the Forum in Inglewood, California.
One logical reasoning for the split is that MSG’s current market cap of $5.6 billion does not properly reflect what the sports franchises are actually worth.
“I think that all of these splits are driven by a quest for value,” said Laura Martin, senior analyst at Needham & Company, LLC. “If these entities were traded separately as they’re discussing, it would add 20 percent market cap to the combined company after the spinoff.”
Adding 20 percent to MSG’s market cap would add nearly $1 billion to the value of the company’s assets, bringing the total value to around $6 billion, once the two companies are separated, Martin said.
Forbes estimates the Knicks are valued at $1.4 million and the New York Rangers at $850 million —  but the Forbes numbers embed the value of the regional sports network, or RSN. “That’s one of the problems. You end up with a number in the Forbes valuation and you don’t know what’s comprising it effectively,” said Ben Mogil, managing director at Stifel Nicolaus.
Excluding television rights, the value of the Knicks is estimated at $900 million, while the Rangers are valued at $400 million, according to Bret Harriss, analyst at Gabelli & Company. But the teams would still be under a shared umbrella; it’s not clear whether they could or would be sold seperately as the Clippers were.
Meanwhile, MSG’s Media unit is valued at $3.9 million, MSG’s Entertainment unit is valued at 270 million, excluding the value of the Chicago Theater property, and the MSG Sports unit, including both the Knicks ($880 million) and Rangers ($410 million), is valued at $1.29 million, according to estimates from Gabelli & Company.
“I think it’s a terrific idea,” said Martin.“It’s great for shareholders that would be unwilling to buy the conglomerate, but would instead prefer to invest in either in the real estate portion of the asset [the Madison square garden venue] or the sports.”
The company did not announce a timetable for the spinoff, which will be subject to regulatory conditions and approvals. MSG’s board of directors also authorized a buyback of up to $500 million of stock.
 
Source: http://www.ibtimes.com/madison-square-garden-spinoff-could-reveal-how-much-knicks-rangers-are-worth-1715115

28 Oct
Media Quotes

Adam Sarhan Reuters: US STOCKS-Wall St flat after last week's big gain; energy weighs

ReutersMon Oct 27, 2014 4:38pm EDT
* Dow up 0.1 pct, S&P down 0.2 pct, Nasdaq up 0.1 pct (Updates to close)
By Caroline Valetkevitch
Oct 27 (Reuters) – U.S. stocks ended near flat on Monday, pausing after the S&P 500’s biggest weekly gain since January 2013, while energy shares fell with another decline in oil prices.
Among the day’s biggest positives, shares of Gilead Sciences rose 1.7 percent to $112.59, a day ahead of its scheduled earnings release. Micron Technology shares jumped 4 percent to $32.30 and was the largest percentage gainer on both the S&P 500 and Nasdaq 100 after it announced a $1 billion stock repurchase.
But energy shares were by far the day’s biggest drag, with the S&P 500 energy index falling 2 percent. U.S. crude oil briefly traded below $80 a barrel after Goldman Sachs slashed its crude price forecasts, citing abundant supply and lackluster demand.
The S&P 500 ended the day down slightly after closing out its best week since early January 2013, a sharp recovery from the market’s recent selloff. The index is now up 5.3 percent from its Oct. 15 low.
“After almost a 10 percent correction on the S&P, the bulls showed up and sent the prices right back up. Now… we’re on track for closing in the upper half of the range for the month, which is a bullish sign,” said Adam Sarhan, chief executive of Sarhan Capital in New York.
Accommodative central bank policies globally should keep “an underlying bid for stocks,” he said.
The Dow Jones industrial average rose 12.53 points, or 0.07 percent, to 16,817.94, the S&P 500 lost 2.95 points, or 0.15 percent, to 1,961.63 and the Nasdaq Composite added 2.22 points, or 0.05 percent, to 4,485.93.
The majority of companies are beating earnings expectations. With results in from 213 of the S&P 500 companies, 71.4 percent beat analysts’ forecasts, which would be highest percentage since the third quarter of 2011, Thomson Reuters data showed.
U.S.-traded shares of Brazilian companies tumbled after President Dilma Rousseff won reelection, defeating market favorite Aecio Neves by a slim margin.
Petrobras ADRs slumped 13.7 percent to $11.16 and Vale lost 5.2 percent to $10.58. A Brazilian exchange-traded fund dropped 5.4 percent.
After the bell, shares of Twitter dropped 9.6 percent to $43.88 after it reported quarterly revenue that surpassed expectations but forecast fourth-quarter sales that may miss targets.
On the S&P 500, the largest decliner was Nabors Industries , down 6.7 percent to $17.48. On the Nasdaq, the largest decliner was Tesla Motors, down 5.8 percent at $221.67.
Declining NYSE issues outnumbered advancers 1,737 to 1,308, for a 1.33-to-1 ratio on the downside; on the Nasdaq, 1,424 issues fell and 1,235 advanced for a 1.15-to-1 ratio.
The benchmark S&P 500 index posted 53 new 52-week highs and one new low; the Nasdaq Composite recorded 45 new highs and 62 new lows.
About 6.1 billion shares changed hands on U.S. exchanges, below the 8 billion average this month, according to data from BATS Global Markets. (Additional reporting by Rodrigo Campos; Editing by Bernadette Baum, Meredith Mazzilli and Nick Zieminski)
Source: http://www.reuters.com/article/2014/10/27/markets-stocks-usa-idUSL1N0SM2GD20141027

25 Oct
Media Quotes

Adam Sarhan MarketWatch Quote: Ebola creeps within 5 miles of the stock market’s hub

Market WatchPublished: Oct 24, 2014 3:25 p.m. ET
Fears that the peak travel and shopping season will be affected by Ebola are contained, for now
Wall Street doesn’t seem to be taking the potential collateral damage from the Ebola outbreak very seriously, even though it has hit very close to home.
Maybe after a weekend of hearing and reading about Ebola patient Dr. Craig Spencer at New York City’s Bellevue Hospital, which is within 5 miles from the New York Stock Exchange, investors will start feeling a chill. Especially, with the peak holiday travel and shopping season looming.
As reported in Friday’s “Need to Know” column, Song Seng Wun, head of research at CIMB in Singapore, said: “Anxiety is not good for economic activity, especially coming up to the festive holiday [season].”
It wasn’t that long ago, that concerns over a slowing global economy and other macro factors, highlighted by the Ebola outbreak, helped trigger the biggest pullback in years. Through Oct. 17, the S&P 500 suffered its first four-week losing streak since August 2011.
But just like someone waking up from a nightmare, all those fears seem to have faded in an instant.. The S&P 500 SPX, +0.67%  was up 0.5% in afternoon trade Friday, and was on track to post its biggest weekly gain since the week ending Jan. 4, 2013.
Adam Sarhan, founder and chief executive of Sarhan Capital, said the big worry is that the medical experts aren’t certain exactly what Ebola is, how it spreads and how to contain it. “If the so-called experts don’t have a complete grasp, how can any outsider have an idea,” Sarhan told MarketWatch in a phone interview. “Therein lies the problem for Wall Street.”
No wonder investors are so ho hum about Ebola, because many companies that could be hurt by the contagion of fear haven’t felt any effects…yet.
Executives at both United Continental UAL, -0.04%  and American AirlinesAAL, +3.38%  said on the air carriers’ post-earnings conference calls on Thursday that they have not seen “any meaningful impact” on bookings. Southwest Airlines’LUV, +1.68%  chief financial officer said there has not been “any noticeable negative impact,” and a Delta Air Lines DAL, +4.09%  executive said a week ago that, outside of Africa, he had “not seen any changes,” in booking trends because of Ebola.
The NYSE Arca Airline index XAL, +1.88%  has soared 9.1% on the week, through afternoon trade on Friday, and was on track for the biggest weekly gain in nearly two years.
Meanwhile, Royal Caribbean Cruises’ RCL, +3.64%  chief executive said Thursday the impact from Ebola so far “has been very small,” adding he was “not seeing anything” like what happened during the spread of severe acute respiratory syndrome, or SARS, about a decade ago. The stock was rallying 4.1% on Friday, and had climbed 12% on the week.
The shares of fellow cruise ship operator Carnival Corp. CCL, +1.77%  ran up 10% on the week, even after Ebola fears hit very close to home last week.
And while Ebola’s potential impact on United Parcel Service UPS, +0.07%  and FedEx Corp. FDX, +0.86%  are debatable, since people worried about shopping in crowded malls may do more shopping online, one might expect at least some concern about the potential impact on the consumer psyche.
But UPS said in a conference call Friday it expected to hire up to 12% more seasonal workers than last year, as it anticipates an 11% jump in deliveries during the peak shopping season. What the package-delivery company didn’t say, however, was anything about Ebola.
Maybe after a 4% rally on the week, and a weekend to think about it, investors will start worrying again.
What’s so worrisome about Ebola, is that any speculation about the potential impact, or non-impact, is premature, “simply because it’s unknown,” Sarhan said. “You can’t know what’s going to happen, but you can still manage your risk.”

24 Oct
Daily Market Commentary

Week In Review: Strongest Weekly Gain of 2014!

SPX- 8 percent in 8 daysStrongest Weekly Gain Of 2014!

The major averages soared last week helping the benchmark S&P 500 index soar a whopping +8% in only 8 trading sessions! That is a huge move and speaks volumes to how strong the bulls are right now. Remember, in a non-QE world, a 10% annual rally was considered decent. So 8% in 8 days is very impressive. The small cap Russell 2000 led the way and was the first popular index to bottom on 10/15/14. For weeks, we have told you that our primary concern is what happens when QE 3 ends. Since the March 2009 bottom, the benchmark S&P 500 (SPX) soared when QE has been in effect and fell -17% when QE 1 ended and fell -22% when QE 2 ended. It will be very interesting to see how the market reacts when QE 3 officially ends later this month (unless the Fed decides to extend QE). Even with all the selling and outright ugly action we have seen in recent weeks, at its lowest, the S&P 500 only pulled back -9.86%, just missing the closely watched -10% decline (which defines a correction) and that bodes well for the bulls. The trigger that sparked the huge rally was when several Fed heads came out and said they are willing to extend QE (if needed) and made it clear that the Fed Put is alive and well (meaning more QE is ready, if needed).

Monday-Wed’s Action: Stocks Bounce Hard

Stocks rallied on Monday helping the S&P 500 rally into its 200 DMA line. Consumer staples led the way higher followed by utilities and materials. Interestingly, the S&P 500 closed at 1904 or support of its large topping pattern. After the close, Apple Inc. (AAPL) blowout analyst estimates and reported another blowout quarter. In a surprising turn of events, the company did not lower guidance for future quarters which is their standard modus operandi around earnings. The company has a long history of reporting a stellar quarter but lowering guidance. Then blowing past guidance when they report in future quarters…but lowering guidance every time.

Stocks soared on Tuesday helping the major averages enjoy their single largest gain of 2014. The big rally came after Reuters reported that the European Central Bank (ECB) was preparing to purchase corporate bonds as soon as December in addition to its existing covered, and planned asset-backed security purchases next year (their version of QE). Meanwhile, Existing home sales rose to a 5.17 million annualized rate in September from 5.05 million in the month prior. This was better than the 5.10 million expected by economists. The report showed that home prices continued to fall with the average selling price falling to $255,500 from $263,800 in the prior month.
Stocks negatively reversed on Wednesday (opened higher but closed lower) after news spread of three separate shootings in its Parliament building. In the U.S., consumer prices rose by 0.1% in September to a 1.7% annual rate, topping estimates for a gain of 1.6%. The market was way overdue for a breather, as the benchmark S&P 500 soared 6% in the past 5 trading days! Remember in the non-QE world, a 10% annual gain was considered decent, so 6% in 5 days is not an insignificant sum.

Thurs & Fri’s Action: Bulls Remain In Control

Stocks edged higher on Thursday after healthy economic and earnings data was announced from China, Europe and Caterpillar Inc (CAT). The preliminary October manufacturing PMI’s for China and the eurozone came in better than expected. The HSBC gauge for China manufacturing rose to 50.4 from 50.2, matching estimates. Eurozone manufacturing remained in expansionary territory at 50.7 (versus last month’s 50.3) and the central engine of growth, Germany, which had been a cause for concern to market participants lately, jumped up to 51.8 from 49.9. All this helped allay fears of a global economic slowdown. Stocks sold off before the close after a report showed that NYC experienced its first case of Ebola. After Thursday’s close, it was confirmed that a NYC doctor contracted Ebola in West Africa and was being treated for the disease. Stocks rallied on Friday as investors digested the recent and very strong rally.

Market Outlook: Bears Getting Stronger

Remember, in bull markets surprises happen to the upside. We have also noted that the bull market is aging and may be in the process of forming a large topping pattern. At this point, the bulls are not going down without a fight. Keep in mind that the bull market is aging (turned 5 in March 2014 and the last two major bull markets ended shortly after their 5th anniversary; 1994-March 2000 & Oct 2002-Oct 2007). Furthermore, the S&P 500 has not experienced a 10% correction since 2012 which means that each day we get closer to that correction, not farther away from it. Remember a 10% decline from the recent high of 2019 would bring the S&P 500 down to 1817. The low last week was 1820. As always, keep your losses small and never argue with the tape.
 

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21 Oct
Blog

The Bounce Continues On Wall Street

The following is an excerpt from a FindLeadingStocks.com Intra-Week Update:

RUTFLS Update:

10.21.14
The Bounce Continues

Russell Soars 7% In 5 Days!

The Title of Last Thursday’s FLS intra-week update was “Time For A Bounce.” We made the case that the market was ripe for a bounce and that is exactly what has happened over the past 5 trading days. It is important to note that the Fed is still printing money and the”bounce” has been exceptionally strong. In fact, the Russell 2000 soared nearly +7% since last Wednesday’s low! That is a huge amount for less than a week. Be very careful chasing after a big move. But that is also consistent with what we have seen over the past 5.5 years as the easy money stance from global central banks has caused a surprisingly strong “bid” in the market. Remember, we are still in a bull market and surprises in bull markets tend to be on the upside. The bulls are doing their best to “repair” a lot of technical damage. It is bullish to see several of the popular indices trade back above support of their large topping patterns (effectively negating the topping pattern…for now). The S&P 500 is back above 1904-1905, the Russell 2000 is back of 1082 and the DJIA is back above 16,333- all encouraging signs. More time is needed to see if this is just an oversold bounce or a normal pullback within this very strong bull market.  We have had a very good year and do not want to get caught in this wild back-and-fourth/sloppy action. We want to let the dust settle and look to get back in when favorable risk/reward entries develop. We are still in the heart of earnings season and that will dictate a lot of the near term action for individual stocks.  Put simply, the bull market bent (hard), but did not break (yet). At its deepest last week, the S&P 500 pulled back -9.86%, missing the closely watched -10% level.

Bull & Bear Traps:

A quick note on bull and bear traps. There is a concept on Wall Street known as a bull or bear trap. The idea is simple, in a bull market there are big shakeouts (pullbacks/corrections) that occur which or normal or healthy but shake out the weaker hands. Then cooler heads prevail and the market (or stock) hits new highs again. In downtrends (bear markets) the opposite is true. Be very careful if this is the start of a larger downtrend (All depends on what happens with QE, in our opinion) then you will see several large “big rallies” that are seem very strong and attractive but they are followed by new lows shortly thereafter. That is the nature of markets (reflection of human nature) and this phenomenon will continue to play out as long as human’s continue to trade stocks. The largest rallies in history tend to occur during bear markets (not bull markets) for this exact reason. So be very careful to avoid getting whipsawed in and out of markets/stocks during volatile times.

FLS Portfolio:

The FLS portfolio locked in several large gains (+18%, +16%, +5%) &  last week and is in cash at the moment. Keep in mind, the market is not going anywhere, the tide is rough right now (large swings up and down). Thankfully, we have earned the right to sit back and let the market calm down before getting involved heavily again. Right now, patience is king.

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SPX- up 6.4 percent in under 5 days

17 Oct
Daily Market Commentary

Week In Review: Bulls Not Going Down Without A Fight

SPX- Support Becomes ResistanceOversold Bounce Finally Arrives

The major averages opened the week lower but closed the week near their highs which signals a near-term low may be in place. The small-cap Russell 2000 continues to lead the other popular indexes, both up and down. The RUT actually closed higher for the week and is back above 1082 which was support of its latest base. This is a healthy sign and signals the bulls are doing their best to regain control of this market. For weeks, we have told you that our primary concern is what happens when QE 3 ends. Since the March 2009 bottom, the benchmark S&P 500 (SPX) soared when QE has been in effect and fell -17% when QE 1 ended and fell -22% when QE 2 ended. It will be very interesting to see how the market reacts when QE 3 officially ends later this month (unless the Fed decides to extend QE). Since September 15, a slew of leading stocks, and the major averages, have been acting somewhat sloppy (erratic price swings). Even with all the selling and outright ugly action we have seen in recent weeks, at its lowest, the S&P 500 only pulled back -9.86%, just missing the closely watched -10% decline (which defines a correction) which bodes well for the bulls.

Monday-Wed’s Action: Stocks Hammered

Stocks fell for a third straight session on Monday as investors returned from the weekend still concerned regarding the overall health of the global economy and that Ebola is spreading in the western world. The Dow Jones Industrial Average erased its gains for the year and now joined the Russell 2000 in negative territory for 2014. The S&P 500 and Nasdaq are barely in positive territory. The S&P 500 sliced, and closed, below its 200 DMA line for the first time since November 2012! It also took out support of its large flat top pattern (1904)- Both are not healthy signs.

Stocks fell in heavy trade on Tuesday as energy prices continued to implode and ebola related fear continued to spread. After Tuesday’s close, Intel (INTC) and CSX (CSX) were among two well-known companies that beat estimates. The fear index (a.ka. The VIX) continued to surge as stocks were hit hard. Volatility surged as stocks fell which is typically not a healthy sign.
On Wednesday, stocks opened in what felt like an almost panic-low sending S&P 500 futures in a 68 point range (2x-3x larger than normal).  At one point on Wednesday, the S&P 500 and Nasdaq 100 erased their gains for the year and the small-cap Russell 2000 continued to get hammered. Retail sales slid by -0.3% in September which missed estimates for a decline of -0.1%. The decline was largely due to falling gasoline prices. At one point the DJIA was down more than 400 points (a very large amount for a single trading day) and then the bulls showed up and started buying stocks. By the end of the day, the Russell 2000 actually closed higher and the other popular averages closed near their respective highs. As long as Wednesday’s lows are defended one should expect this “bounce” to continue.

Thurs & Fri’s Action: Stocks Bounce After Fed Says “Easy Money” Here To Stay

Stock rallied on Thursday and Friday as the market bounced from deeply oversold levels. The market turned sharply higher after the Fed made it clear that they are willing to print more money if needed. Jim Bullard, St. Louis Fed President, told Bloomberg News that it might be necessary for the Fed to delay the ending of the asset purchase program (QE) due to the drop in inflation expectations. The comments sparked an immediate jump of 25 points in the S&P 500 (SPX) set the stage for Friday’s large rally. Stocks rallied hard on Friday but the S&P 500 failed to trade above resistance (formerly support). Going forward, the next level to watch is the 200 DMA line and the old chart lows of 1904.

Market Outlook: Bears Getting Stronger

We have been writing for weeks that the market is getting weaker, not stronger. That is exactly what has been happening. We have also noted that the bull market is aging and is now in the process of forming a large topping pattern. At this point, the bulls are not going down without a fight. Keep in mind that the bull market is aging (turned 5 in March 2014 and the last two major bull markets ended shortly after their 5th anniversary; 1994-March 2000 & Oct 2002-Oct 2007). Furthermore, the S&P 500 has not experienced a 10% correction since 2012 which means that each day we get closer to that correction, not farther away from it. Remember a 10% decline from the recent high of 2019 would bring the S&P 500 down to 1817. The low last week was 1820. As always, keep your losses small and never argue with the tape.

17 Oct
Best Trading Tips, Technical Signals

3 Ways A Market Can Move

SPX- Support Becomes ResistanceThere are only three ways a market can move: up, down, or sideways.

Trending Markets: Up & Down

Uptrends are known as bull markets. In the simplest sense uptrends occur when markets are moving up. The definition, of an uptrend varies depending on your time frame. A day trader tends to look at short intra-day time frames (10 min, 30min, 60 min etc). Swing traders (a.k.a. intermediate term traders) tend to look at daily or weekly charts. While, Long-term traders look at monthly, quarterly or annual charts. The beauty about Wall Street is that you are free to look at any time frame you want. The key is to find something that works for you and learn how the market reacts in that time-frame.

Sideways: Trading Ranges

Markets do not go straight up or down. They spend a lot of time moving sideways within uptrends and downtrends. The sideways action is important to understand because that is the market’s way of “setting” up for the next move (up or down). When a market moves sideways it is also known as a trading range (or base). Trading ranges are very common in the market and happen all the time. Moreover, they come in all different shapes and sizes. Once you learn how to identify trading ranges it gives you a huge edge on your competition because most people spend time analyzing a company’s sales and earnings but not how the stock actually trades.

Support and Resistance:

During these sideways moves, markets form two key areas: support and resistance. Support is known as the bottom of the trading range, while resistance is the top of the trading range. These areas are important because once resistance is broken a new uptrend forms and ideally the bulls want to see resistance become support. Conversely, once support is broken, a new downtrend forms, and the bears want to see support become resistance. As with any “rule” there are exceptions but the broader concept happens more often than not and is important for you to understand.

Putting This In Action:

So how does apply in real-time? As mentioned in prior articles, the market spent most of the summer forming a large topping pattern (after a big move). The S&P 500 sliced below support (1904-1905 area) of its large top pattern and, as of this writing, has yet to recover. The bears want to see support become resistance and a new trading range develop below the old one. So as long as the S&P 500 continues trading below 1905, by definition, a new downtrend has emerged and the path of least resistance is lower.

Earnings In Play

Right now, the short term focus is on earnings and how the market and leading stocks react to earnings.

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10 Oct
Daily Market Commentary

Stocks Smacked As Volatility Surges

SPX-3Stocks Smacked In Heavy Volume

The major averages fell hard last week as the sellers remain in control of this market. Stocks fell in September and are down hard again in October. Volatility is spiking which is another bearish sign. The action is outright bearish and we would not be surprised to see the market crash or experience a very large sell off in the very near future. The bigger concern from where we sit is something virtually no-one is talking about- What will happen when QE 3 Ends? So far, the action is bearish. Remember the S&P 500 (SPX) soared when QE has been in effect and fell -17% when QE 1 ended and fell -22% when QE 2 ended. It will be very interesting to see how the market reacts when QE 3 officially ends later this month. Since September 15, a slew of leading stocks, and the major averages, have been acting somewhat sloppy (erratic price swings). The small cap Russell 2000 (RUT) remains the weakest index and continues to woefully under-perform its peers which remains a concern. The last time all this happened was in March/April and that preceded the deepest pullback of the year (-6% decline in the S&P 500). So far this pullback is -5.60% under two weeks which is just about the normal depth of all the pullbacks this year.

Monday-Wed’s Action: Volatility Spikes

The market opened higher on Monday but quickly rolled over and closed modestly lower. One of the big headlines of the day came from a surprise announcement from Hewlett-Packard (HPQ) that it is going to split into two companies in an effort to bolster shareholder value. Another “surprise” came from GT Advanced Technologies (GTAT), which supplies sapphire glass to Apple (AAPL). Separately, the World Bank cut its 2014 and 2015 GDP views for China and industrial production slid 5.7% in Germany.

Stocks opened sharply lower on Tuesday after more weakness spread regarding the health of the global economy. The International Monetary Fund lowered its global growth forecast for this year and 2015. The IMF represents 188 countries and now believes that the global economy will grow at 3.3% in 2014, down 0.1% from its July forecast. They also lowered their 2015 forecast to 3.8%. Elsewhere, German industrial output fell by -4% in August, with the worse-than-expected and bodes well for Europe, since Germany is Europe’s largest and strongest economy.
Stocks rallied hard on Wednesday after the Fed released dovish (a.k.a. easy money) minutes from their last meeting. The market is focusing on when the Fed will raise rates. The minutes showed the internal discussion within the Fed shows they want to err on the side of caution and wait for further progress towards the committee’s inflation and employment goals. The global economy remains lackluster at best which is not ideal for the Fed’s outlook. Overseas, Australia lost a lot of jobs last month, missing estimates which bodes poorly for their economy. Also energy prices are virtually in free-fall as global demand continues to wane.

Thurs & Fri’s Action: Sellers Smack Stocks

Stocks plunged in heavy volume on Thursday, completely erasing Wednesday’s 274 point rally in the DJIA, as fear returned concerning the health of the global economy. The Dow fell over 330 points on Thursday which was the third straight triple digit move this week. This huge spike in volatility is bearish, not bullish action and is another signal that the market is forming a large topping pattern. Stocks furthered their losses after European Central Bank President Mario Draghi said there are indications that the euro zone’s economic growth is slowing and that central bankers should strive to boost inflation. Stocks were smacked again on Friday which bodes poorly for the market. The market looks very similar (not exactly the same, but the close) to how it did in 1987 and other huge declines.

Market Outlook: Bears Getting Stronger

We have been writing for weeks that the market is getting weaker, not stronger. That is exactly what is happening. We have also noted that the bull market is aging and is now in the process of forming a large topping pattern. Keep in mind that the bull market is aging (turned 5 in March 2014 and the last two major bull markets ended shortly after their 5th anniversary; 1994-March 2000 & Oct 2002-Oct 2007). Furthermore, the S&P 500 has not experienced a 10% correction since 2012 which means that each day we get closer to that correction, not farther away from it. Remember a 10% decline from the recent high of 2019 would bring the S&P 500 down to 1817. As always, keep your losses small and never argue with the tape.

12