STTG Market Recap August 29, 2014

A spike in the closing moments of the day helped cap off a strong August as the S&P 500 finished up 0.33% and the NASDAQ 0.50%.  Volume was very light ahead of the holiday weekend.  The Thomson Reuters/University of Michigan’s final take on consumer sentiment rose to 82.5 in August from 81.8 the month before.  Consumer spending, which accounts for more than two-thirds of U.S. economic activity dipped 0.1 percent last month after rising 0.4 percent in June, the Commerce Department said. Economists had expected a 0.2 percent gain.  We will return next week to some key economic reports – the two ISM reports and the monthly employment data.

The tiny pullback mid week helped us work off an extreme overbought condition and allowed the 10 day moving average to catch up to prices.  Until we see a high volume pullback or some sort of parabolic rise that peters out and the NYSE McClellan Indicator staying negative for a sustained period it will be time to remain in bullish mode.



Tesla Motors (TSLA) rose to a record after the electric-car maker said it would join Chinese mobile carrier China Unicom to construct charging stations across China.


GoPro (GPRO) followed up on yesterday’s big day – when a momentum stock gets going, it can really fly.


We don’t focus too much on foreign markets here, but one area where a lot of names are moving the past two weeks is Brazil.  There are not many of these stocks which trade on U.S. indexes but we have a few ETFs such as Brazil iShares (EWZ).



SentinmenTrader has this fascinating charts which show risk tolerance at extremes; but it certainly is not a precise indicator.  This condition can persist for years and with the Federal Reserve easy money policies at never seen before levels for a very long period of time, using this type of measure for anything other than educational value will probably cost you some gains.  But it shows you a lot of cheap money is chasing a set amount of assets.

The number of money-losing companies coming to the public market via IPOs has exceeded the number of money-making companies by more than 100. Only the peak of the 2000 bubble saw a greater risk tolerance among investors.

… This is simply the net number of money-making companies announcing an IPO minus the number of money-losing companies doing so. If the blue line is above zero, then bankers have been bringing more money-making companies to market; when it’s below zero, then investors are in a period of extreme risk tolerance.
… We’ve been in the “extreme risk tolerance” zone for a couple of years, obviously with no negative impact on stocks. Given the number of money-losers, it seems as though this should be a longer-term negative once risk appetite begins to ebb. There is simply no telling when that will be.
Have a great holiday weekend and we’ll see you back here Tuesday.

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