On the Trading of Monday, January 26, 2015
Monday saw stock prices selloff slightly near the opening, only to rebound with strength all throughout the rest of the trading day, finishing up mostly across the board. See the below graphic on the indices and their change. Look how volatility has imploded, down another six point eight percent today alone. What’s most notable to me is that the S&PMidCap400 outperformed the rest of the major U.S. Stock indices Monday, and I’ll admit, I’m biased, I love midcap equities. I feel as though roughly $2 to $14 billion dollar market capitalization companies make for great investments, when compared to super-caps, largecaps, and small caps. I’d base this on the empirical evidence of higher annualized returns over the long run, a better PE ratio historically, higher growth rates, and a lower volatility; the last time I checked the standard deviation between the annual returns of the S&PMidCap400 versus the other major U.S. Stock indices really was compelling, because it was rated significantly better, when I calculated it last. Surely, the Sharpe Ratio is better as well. Also, I really like the performance of this index (the S&PMidCap400) through both the recession of late 2007 through early 2009, and especially the way it plowed right through the recession and bubble which began on March 10, 2000. Remember Nasdaq 5,134?! Me too, gee, look at those hyped up tech stocks now, nearly 15 years later!!! Just joking. I think Nasdaq stocks, all with four letter ticker symbols, are like “four letter words.” Perhaps I’ll blog on this topic later? LOL! So, I must admit, I like S&PMidCap400 etfs, predominately ticker MDY, and etf and index options on the S&PMidCap400.
In other news Russia, as measured by RSX was down nearly -7.39 percent today alone, RSX is now trading about 46% off its high reached in the past 12 months. Its debt markets were downgraded yet again, to junk status, for the first time in nearly 10 years. The etf CUBA was also off nearly 6%, trading down -5.93%. I guess the trading, commerce, embargo and sanctions lift probability has been perceived to be taking too long, or that it may not possibly happen. Did people think the Congress would act on a whim, really quick or something?! Look how that etf has traded! Regardless, I believe it shouldn’t happen. The etf USO traded down -.76%. Financials as measured by etf XLF traded up +0.50%, and energy shares as measured by XLE traded up +1.43%, despite oil’s decline. Long term maturity Treasury Securities traded down -0.30% as measured by the etf TLT, and intermediate Treasury Securities traded down -0.23% as measured by the etf IEF. Sovereign high yield fixed income traded down, as measured by the etfs EMB (down -93%), and PCY (down -0.73%). U.S. Corporate high yield traded higher, etf JNK was up +0.59%, and HYG was up +0.46%, and QLTC (an etf matching the performance of a CCC rated U.S. corporate junk bond index) traded up +0.11%.
AAPL shares traded up +0.11%, the day before its EPS release, due tomorrow (Tuesday) after the close. Rumor has it that China actually has more iphones now than the USA, or maybe it was that they’ve recently bought more than was bought in the USA? I can’t even recall, nor do I care. What hype! Surely, the shares will SPAZZ(!!!) once their EPS are released, they nearly always do. For some fun speculation investors could gobble up some shares just before the close tomorrow, or to gamble further, with this “four letter word” one could purchase a very dangerous vertical bull call debit spread for some excitement, which might payoff over triple digit returns in one trading day, if the stock were to rise in Wednesday’s trading, and you initiated a very dangerous vertical bull call debit spread just before the close Tuesday; e.g. go long an at-the-money call option for this week’s Friday expiration, and short a call (or “write” another call with the same expiration) about seven dollars out-of-the-money (THIS IS AN EXAMPLE OF A VERY DANGEROUS VERTICAL BULL CALL DEBIT SPREAD, WHICH COULD LITERALLY LOSE 100% IF THE STOCK WERE TO DECLINE WEDNESDAY! This example is for educational and informational purposes. “Swim at your own risk!”). The option chain analysis tells me that tomorrow, or certainly by the end of this week by Friday, that AAPL stock could move by 6.90 to 7.00 per share upwards or downwards. It currently trades at 113.10 per share, with a PE multiple of 17.53.
MSFT released its EPS today (Monday) after the close, and shares are not reacting well to the news, and are trading down by -2.01 per share or -4.28% to 45.00 per share in the afterhours market.
The Euro traded around unchanged for Monday’s trading, but finished up. As of approximately 1:20amCT it trades at 1.1248 versus the U.S. Dollar; Oil is currently trading at approximately 46.74 per barrel; and the Russian Ruble traded significantly lower to the U.S. Dollar during Monday’s trading, currently the U.S. Dollar can buy 67.6625 rubles (a year ago just 34 rubles). [Click here for a Ruble Quote versus the U.S. Dollar, Rubles per Dollar] [Click here (makes for a good chart) to see a chart of how many Dollars you get per Ruble]. The U.S. Dollar strength versus the Chinese Rinimbi/Yuan has been noted as well. I think the Euro has the chance to trade at parity against the U.S Dollar later this year.
Also, I just want to reiterate my belief that cheap oil is good for the USA! It acts like a tax cut for drivers, saving them some mad money. It should bode well for all economic data releases for a while, while consumers adjust to the significantly lower and lower prices since roughly June 30, 2014.
Lastly, In other news the DEA and DOJ may be spying on your car’s location, in an effort to bust drug dealers and their drug trafficking; Plus get ready for a major blizzard in the North East! I find it bizarre that a drone crashed on the grounds of the White House today as well. Secret Service Agents are telegraphing via the news, that they’re worried about surveillance video transmitted live off any potential drone, of things seen through windows at the White House; They also mentioned the concept and/or risk of a drone with an explosive device attached to it. Scary scary; TECHNOLOGY! Know that all of the District of Columbia is a no fly zone, so flying anything, even a kite, or a paper airplane, may be prohibited in Washington! Keep that in mind, next time you fly to or through Reagan International Airport.
Here’s a list of some of the stocks and etfs I mentioned in this post: http://finance.yahoo.com/quotes/XLE,XLF,USO,RSX,CUBA,TLT,IEF,TIP,EMB,PCY,HYG,JNK,QLTC,MSFT,AAPL/view/v1
Happy trading!
By Andrew G. Bernhardt
Bernhardt Capital Management LLC 