Key bit from AAII: Optimism among individual investors about the short-term direction of stock prices fell to an unusually low level, one not seen since last June. The latest AAII Sentiment Survey also shows an increase in pessimism and a decrease in the percentage of investors describing their outlook as neutral.
Bullish sentiment, expectations that stock prices will rise over the next six months, declined 1.7 percentage points to 23.7%. Optimism was last lower on June 22, 2016 (22.0%). This week’s drop puts optimism below its historical average of 38.5% for the 50th consecutive week and the 83rd out of the past 85 weeks.
As contrarians we view this extensive negativity as potential catalyst for higher equity prices.
American Express posted its largest gain since the summer of 2009 today after reporting very impressive earnings results:
We are long AXP in most managed accounts and will be adding on weakness. More here from thestreet.com: https://www.thestreet.com/story/13860970/1/american-express-tops-the-dow.html
About 75% of the time we use Mental Stops instead of Hard Stops.
Why? Because Hard Stops (orders placed that are resting orders) become a target. IOW – traders will run the stops to take investors/traders out of the position only to watch price reverse and go higher. This is shown in the example below with AAPL today.
A Mental Stop is not a resting order placed into the accounts. Therefore a Mental Stop (a number in your head or that you are watching) is not triggered. If breached on a close – you then need to make a decision as to where to exit.
The advantage of a Hard Stop is if price continues to fall, – you were hopefully out at, or near the hard stop price. In the end – it all boils down to discipline. Stick with and hold true to the system that works for you. Learn from what you did right and acknowledge what you did wrong.
A losing trade does not mean you did it wrong and a winning trade does not mean you did it right. The worst case in when you do something wrong or break your rules – and it’s a winner. That’s not discipline – that’s closer to luck.
Housing data is weak again. The August numbers were bad but September is even worse. Key bit:
Following August’s disappointing dump in Housing Starts (and Permits), September data is an utter disaster. Against expectations of a 2.9% rise, Housing Starts plunged 9.0% in September to 1.047mm – the weakest since March 2015. Year-over-year, Starts have crashed almost 12% – the most since April 2011, driven by a collapse in multi-family housing. Permits offered some hope for the future (although current starts suggests historical permits were a weak indicator).
For the first time since June 2014, Housing Starts fell for 2 months in a row, crashing 12% YoY…
The disconnect continues…
Hat tip Zerohedge.com
The Federal Reserve Bank of New York says its Empire State Index fell to a reading of -6.8 in October. This was the third straight monthly contraction. More here from Zerohedge.com:
Following September’s mixed bag of disappointing regional Fed surveys, October has started off poorly with a big miss for Empire Fed (-6.8 vs +1.0 exp). June’s dead cat bounce is officially over with the index sliding to 5 month lows led by continued deterioration in New Orders and workweek. Hope rose modestlywith new orders expected to pick up.
Unequivocally not great…
The Empire Index, explained: An index based on the monthly survey of manufacturers in New York State – known as the Empire State Manufacturing Survey – conducted by the Federal Reserve Bank of New York. The headline number for the NY Empire State Index refers to the survey’s main index, which summarizes general business conditions in New York State.
The index is based on survey responses to a questionnaire sent out on the first day of each month to an unchanged pool of about 200 top manufacturing executives, generally the president or CEO. The questionnaire seeks their opinion on the change in a number of business indicators from the previous month, and also the likely direction of these indicators six months into the future. Also known as the Empire State Manufacturing Index.
Hat tip Investopedia.com
The lede: For the 13th straight month US Industrial Production contracted year-over-year. The 1.00% annual drop extends the weakness to the longest non-recessionary streak in US history. Aerospace and Home Electronics saw the biggest drops in production with motor vehicles managing a modest increase as manufacturing beat expectations MoM.
It sure doesn’t appear to be the proper backdrop for raising rates:
Hat tip Zerohedge.com