I would note that in the low $40s several sell-side research shops downgraded Citigroup (C) .

I believe that will prove untimely.

From Neil The Read Deal:

Neil S • 9 minutes ago

Investors may feel a little more confident after Citi Chief Administrative Officer Karen Peetz spoke at the BofA Future of Financial Services conference on Tuesday, discussing the bank's progress in strengthening its risk control systems.

During the talk, Peetz indicated that a transformation oversight committee and the management steering committee are expected to not only improve Citi's control environment, but also to "help improve both efficiency and their competitive positioning," wrote BofA analyst Erika Najarian, in summing up the presentation.

"While the healing of the stock relative to its regulatory transformation will come in multiple waves, we think her thorough presentation could set a floor for shares," Najarian wrote.

"Just one more thing."

-- Lt Columbo

In response to Josh Brown who made some really uniformed generalizations about the banking industry and the stocks just now on CNBC:

I wanted to end the day with five quotes that have guided me over the decades I have been trading and investing: 

"If you don't study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards." - Peter Lynch, Fidelity

"It's not always easy to do what's not popular, but that's where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognized. " - John Neff, Vanguard

"In investing, what is comfortable is rarely profitable." - Robert Arnott, Research Affiliates

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffett

"To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit." - John Templeton, Templeton Funds

Thanks for reading my Diary and enjoy the evening. 

Be safe.

* My continued mantra is less pontificating and more trading/investing

* Considering a short in SPY and QQQ on further strength

* Breadth disappointing (negative - 1475 advancers, 1565 decliners on the NYSE) relative to +25 S&P and +210 Nasdaq

* I should probably be building up a (SPY) hedge but my conviction is low.

* As I mentioned two days ago, a little mean reversion as growth catches up from the huge gape relative to value earlier in the week. I don't think it continues.

* Refreshing +$90 gain in Amazon (AMZN) after several days of weakness. I have been adding.

* Banks, in particularly Citigroup (C) , trading well after outsized gains this week.

* (PZZA) tasty and so is Smucker (SJM) (having a very nice week!). Added to both in the last few days.

* Speaking of Smucker (with a name like that...),  (KHC) starting to "ketchup." (THS) slow rise.

* (WMT) - my preferred growth/value vehicle is threading the needle.

* Homebuilders starting to fade from early strength.

* Good reduction in Disney (DIS) this week (-$3). Also reduced (VTV) and (VBR) . I want to buy all three on weakness though.

* Gold trade poorly. Glad I reduced from large-sized.

* (DKNG) is "paradise lost" as it traded in my buy level range yesterday. 

On my menu over the balance of the year -- 

1. I will consider a short of SPY, (QQQ) on the next leg higher.
2. Individual candidates to short: FB , (MSFT) , (CAT) , homebuilders, private equity -  (KKR) , (BX) , (HLT) and (H) .
3. Looking to buy: VTV VBR

__________
Long AMZN (large), PZZA, C (large), SJM (large), WMT (large), DIS (small), VTV (small), VBR (small), KHC (large).
Short Homebuilders.

Sir Arthur Cashin updates, and I'm glad he's feeling better!:

Midday Update

The post-vaccine rally appears to be entering a reassessment phase. Russell shoots to record, only to reverse and move lower. Nasdaq reverses and begins to rally after several of the tech favorites have been beaten for a few days.

So, this does not look like a very clear rotation. A lot more like a reassessment after a burst of short covering, etc.

It will be important for the Dow again to try to hold onto plus territory just as it was yesterday afternoon.

Stay safe.

Arthur

The market has done oogatz.

Walmart (WMT) is getting jiggy for the second day in a row. 

I am hopeful that the shares make a new high over the near term. 

WMT, to me, represents a healthy mixture of growth and value.

I will be having lunch with an investor from about 12:30 to 2 pm.

I will be on radio silence.

One of the research projects I have been working on over the last few weeks has been (DKNG) . 

The bottom line is that I am price sensitive - I would be a $36-$38 buyer in the name - it almost got there yesterday morning.

Papa John's (PZZA) share price and chart a week ago looked like death - trading at under $73/share. I received a lot of questions in our Comments Section. 

As posted, I have been steadily adding to the shares which are now +$3 to nearly $83/share.

I wouldn't chase here.

The seven day RSI in SPX now above the red line.

Dragon8888

@SarahPonczek:
86% of stocks in the S&P 500 are trading above their 200-day moving averages, the highest since January and 2nd highest of the last 5 years.
- Not sure if I want to be bullish here.

dougie kass Dragon8888

Very good post.
As ed mcmahon used to say, "I did not know this."
Dougie

Interesting article about Ackman shorting credit.

(Tuesday's comments and update appear at the end.) 

As you can see from the midday update reprinted below, the post-vaccine rally looked like it might be getting into trouble as we swung into afternoon trading.

Some felt that the anxiety was a result of concerns that personnel shifts, particularly in the Defense Department might presage new considerations by Trump in not having an orderly transfer of power. That concern never took hold completely or, gained enough strength to influence the market.

Comments from Secretary of State Pompeo that the world was watching seemed to mollify many of those fears and, the Dow regrouped and, the rally resumed.

As dawn hits Manhattan, the action in the overnight futures would appear to indicate that the markets are shrugging off an apparent crackdown in China on some of their high-tech players and, also a new push against the independents in Hong Kong.

Markets may be taking solace from President-elect Biden's emphasis that we have one President at a time and, that Trump will still be making the decisions until January 20th. We will see if that continues to work as other foreign diplomacy issues begin to arise.

The post-vaccine rally leg has certainly been good and, the breadth of the market indicates a rather well-rounded sponsorship. The movement in the sectors has everyone and their sibling trying to attribute this to a rotation. There is some of that in the sense of the stay at home/work at home stocks that moved out of high popularity.

Traders will look to see if we can manage to push above recent intraday highs. That would be somewhere around Dow 29,950 and the S&P 3650 and, if they will move further.

Even though yesterday's anxiety about the orderly transfer of power never really took hold, nonetheless, traders will be very alert to any further movement in the personnel in the "outgoing" Trump Administration.

For now, bulls have the ball and the momentum. Let's see how far they want to take it.

Today is Veteran's Day (formerly Armistice Day). The Bond Market is closed as are several banks, and some insurers. That traditionally suggests rather light trading, which by nature brings the possibility of volatility. So, we will be extra sensitive to staying close to the newsticker.

Late reports that Russia has developed a Covid vaccine with 90% efficacy may aid global markets, depending on details. Google has apparently named the vaccine Sputnik in a rather conscious or obvious attempt to tweak the nose of the U.S. More details to follow.

Stay alert and stay safe.

Arthur
__________ 

Monday morning began with an enormous sigh of relief rally after Pfizer announced the development and availability of a vaccine with an amazing 90% indicated efficacy. Most medical types had only hoped for something more in the line of 50 or 60% and 90% is way, way up there.

Later in the day, there was some pullback as people began to realize this particular vaccine requires exceptional storage facilities, including very, very low temperatures and might not, therefore, make it available to certain rural sections and certainly not the less developed countries.

Also, at midday, the market broke out into a beneficiaries of the back to normal and then, profit taking in stocks that had been beneficiaries of a "stay at home/work at home" perception. Despite the late pullback, led by the high techs, that sent Nasdaq into negative territory, overall, the breadth of the market was still good as there was heavy involvement across a broad spectrum of sectors.

The celebration of the vaccine superseded to a large degree any election developments. McConnell's statement indicated that the Republican mainstays will probably allow the President time to file various lawsuits, challenging the results. That led traders to believe we probably won't begin to have a real sense of the things until around December 15th, when the Electoral College will meet so the State Legislatures and Election Officials will have to pick those the electors in the week or so before hand.

Nevertheless, the Senate looks to be not in anybody's pocket and that is good for divided government at least in the markets eyes. The Georgia election for two senators in January may turn out to be the most expensive Senatorial elections in the history of the United States. You should only own a small TV station in Georgia. Santa Claus will arrive a little late.

At dawn this morning, the futures indicate we may continue to see some of the sorting through that appeared Monday afternoon. The stay at home or work at home beneficiaries will likely continue to be pruned back.

Further, Eli Lily's announcement of an antigen infusion treatment raises hopes that the whole Covid problem may be soon become somewhat more workable and, therefore, less concern to the economy. Big question remains, with Trump doing court challenges will he bother for a lame duck stimulus package.

So, for now, a bit of a rerun of yesterday afternoon.

Stay tuned and keep one eye on the newsticker.

Arthur
__________

Update - Midday

Rebound in the averages seems to be grappling with some resistance at the moving averages, particularly the Dow and to a lesser degree, the S&P.

It would not be good if they wound up taking the Dow down and making it all three averages closing in negative territory. That would mean that the bulls were unable to seize what looked to be the vaccine opportunity and, we may go in for a couple of days of rethinking.

Stay wary and watch the Dow, which needs to close in plus territory.

Stay safe.

Arthur

badgolfer22

How you can regain 'conviction' in 20 minutes is simply amazing. I'd be curious to know what the trigger was.

_____ 

dougie kass

Back to medium net long.
Column coming.
Dougie

dougie kass badgolfer22

It is actually very simple.
It is not about "regaining conviction" - actually its the opposite.
I have little conviction in the near term on the Indices/Market. So, when faced with taking a $7 profit/share (in 48 hours) in my SPY hedge it seems to make more sense to me than to you.
However, I have high conviction (maybe misplaced, but high nonetheless) in my individual names - both in the short term and long term.
In my weightings columns I explain medium sized net long is 20% to 50% exposure to me given my risk profile and that of my investors. To many, this sort of exposure is actually quite light.
I hope you now understand.

Dougie

I am calling an audible and have eliminated my (SPY) short hedge in premarket trading. 

I initially shorted SPY at $363-$365 a two days ago - SPY is currently at $356.75.

I am now medium-sized net long in exposure which I define as between 20% and 50%. 

A large portion of my long exposure is value-based.

As discussed yesterday, my conviction level is low on the very near term market outlook.

I purchased some S&P futures late last evening, as futures began to rise, to move from small net short in exposure to market neutral.

Peter on China, commodities prices and other stuff:

I included a chart in the CRB food index yesterday morning and during the trading day after the USDA ending stocks data came out (and were less than expected) corn rallied 3.8% to the highest since July 2019, soybeans by 3% to the highest since July 2016 and wheat by 1.8%. Strong Chinese imports has been a key catalyst here. Separately, aluminum is trading at the highest since March 2019. Crude oil has been the last commodity not to have joined the rally but that might be about to change as today it's trading at a level last seen in September 1st. I repeat my belief that energy stocks will outperform FAANGM in the next two years.

CRUDE OIL Dec contract



SOYBEANS

Another new record low mortgage rate of 2.98% was again not enough to lift purchase applications which continue to moderate. They fell 2.6% w/o/w and that is the 6th week in the past 7 of declines and they now sit at the lowest level since May. They are still up 16.5% y/o/y but that pace is slowing down too. I'm sure the lack of inventory is a factor, but I believe that price increases got too aggressive and some buyers are calling a time out, particularly the 1st time buyer. Refi's were up by .6% w/o/w and 67% y/o/y.

PURCHASE APPLICATIONS

China's loan growth data for October was about as expected. Aggregate financing totaled 1.42T yuan vs the estimate of 1.4T of which bank loans were 690b. This is s sharp slowdown from the prior two months and is the smallest total since last October not including the Lunar New Yr holiday distortion in February. This said, October usually sees a cyclical moderation due to Golden Week. M2 money supply growth was 10.5% y/o/y vs 10.9% in September. Because of its success in containing Covid, along with other Asian nations, life in many ways has recovered in China to pre Covid levels and the PBOC has hinted at slowing the monetary spigot in response. We'll see. Chinese stocks for a 2nd day traded weak because of worries about possible anti-trust (their version of it) moves against Chinese big tech. The yuan is also weaker.

Knowledge@Wharton 

Wharton presents an interesting analysis of productivity going higher but innovation moving lower.

* What a Biden win means for your money. 

* Both the economy and the virus have momentum.

* Wildfires are hurting the insurance industry.

A very good discussion of VIX Et al. by an extremely knowledgeable observer:

Seth Golden @SethCL

Replying to @SethCL @DougKass and 2 others

Assets Under Management (AUM) for UVXY are VIX Futures; as they go UVXY goes. Futures have avg. 30-day cycle. If trading UVXY, better strategy is to employ duration as part of strategy (Futures life cycle), holding, not day-trading which again nothing but gambling.

Seth Golden @SethCL

Replying to @SethCL @DougKass and 2 others

Therefore never a good idea to go long UVXY, bad discipline, gambling more than anything else. Instruments were not intended to be used from the long-VOL construct. Not intended to day trade despite some popular belief. Prospectus written as it is in order to pass regs.

Seth Golden @SethCL

Replying to @SethCL @DougKass and 2 others

VIX-ETPs (UVXY/VXX) are 4th degree derivatives of VIX. Further one travels from the primer (SPX options), less correlation to the primer. Trading vs. Gambling: Never a good idea to go long-VOL, not even as a hedge. CoT data cites more than 80% of hedges fail.

Seth Golden @SethCL

Replying to @getgaryc @DougKass @BigCheds

Yes VIX isnt leading indicator. By its definition it's a stochastic oscillating process calculating SPX option activity to sum a 30-day IV, it is a derivative, therefore defying any leading indicator notions. From time-2-time it can suggest this or that about SPX, but unreliable.

Danielle DiMartino Booth on sales expectations trailing inventory growth:

• Per the National Federation of Independent Business' (NFIB) October report, small business inventory plans rose to a net 12%, besting last month's record 11% print; optimistic future supply is a positive sign for future demand and presents upside to Q4 GDP growth
• Via the Fed's Senior Loan Officer Opinion Survey, 31.3% of lenders report tightening standards for small business loans in Q4 vs. 70% in Q3; small borrowers faced wider spreads over the banks' cost of funds for the third straight quarter amidst continued sales concerns
• Despite October's net +11% improved reading over September's and Q3's respective net +8% and +5%, sales expectations were well below February's net +19%; moreover, real sales expectations trailed inventory plans and were exacerbated by supply chain disruptions

Why stake claim to tour-wheel hydraulic automobile brake and first successful parking meter when your name can live on in perpetuity associated with the yo-yo? Though we'd like Donald Franklin Duncan Sr. to have legitimate credit to the latter, rather than the utilitarian formers, we're afraid the beloved toy's origins were closer to Rome (the original, albeit across the Adriatic in a place called Greece) rather than Rome, Ohio, where he was born in 1893. Back in the ancient day, the locals decorated two halves of wood, metal or terra cotta with pictures of their gods and placed them on a family altar to pay homage. But what fun was that? After several innovations throughout the millennia, Duncan seized on a design flaw - replacing the traditional knot on the axle with the slip string, a sliding loop which allowed the yo-yo to "sleep" for the first time. Just one deal with William Randolph Hearst for free newspaper advertising in exchange for subscription-sale-offs to earn entry into competitions later, and commercial success was finally achieved.

From small business purveyor of parking meters in 1936 to yo-yo magnate, Duncan's productive capacity became that of legend, with a capacity of 3,600 toys every hour from the factory floor in Luck, Wisconsin. Annual sales peaked in 1962 at 45 million units. While the toy has never regained its allure of past glory days, it's concept applicability to all things in life grows to this day. Take business cycles arrested by shocks. Demand-supply imbalances thrust supply down in trailing fashion followed by businesses rushing to replenish depleted stocks following the worst part of the downturn.

The black swan of the coronavirus culminated in a record 31.4% annualized quarterly drop in 2020's second quarter GDP followed by the largest ever 33.1% annualized quarter-over-quarter gain in U.S. history. Sensing the worst had passed, small businesses grabbed the opportunity to replenish stock.

September's NFIB data placed on full display inventory expectations on steroids - they matched November 2004's record net +11%. October kept the train in motion with a net +12% (red line). At QI, optimistic future supply portends positively for current demand: "If you want to build it tomorrow, you have to order today." In the past, we've proxied ISM's coveted New Orders index via a proxy of future inventories derived from regional Fed surveys. Surprise, surprise - the NFIB's inventory plans fits the mold of the regional Fed data, a leading indicator of a leading indicator.

The green light flashed in October will compel the forecasting community to mark-up fourth quarter growth forecasts. As per cherished QI friend and NFIB Chief Economist Bill "Dunk" Dunkelberg, "Momentum going into the 4th quarter is quite strong. The inventory build alone could add several percentage points to the growth rate."

While there's no denying the red-hot inventory signal, we contextualized it by adding the yellow line, also via the NFIB - small business higher sales volume expectations. We found that despite October's net +11% moderate and material improvement over September's and the third-quarter's respective readings of a net +8% and +5%, sales expectations still trailed that of February's net +19%. Moreover, real sales expectations were below inventory plans.

The "what gives" was evident in the Fed's fourth-quarter Senior Loan Officer Opinion Survey, a lending conditions gauge. In the fourth quarter, the tightness of lending standards abated to a net +31.3%, a serious improvement from the third-quarter's net +70.0% (dark blue line). Bless entrepreneurs' hearts, stingy loan officers noted that for the third consecutive quarter, small business borrowers had to contend with wider spreads for loan rates over the banks' cost of funds.

Looking ahead, yesterday, COVID-19 crossed the grim U.S. milestone of record nationwide hospitalizations. While we embrace the enthusiasm advertised by the NFIB's October headline, at 104.0, a scant half-point shy of February's print, we can't escape the fact that retailers made up the largest cohort of respondents. It goes without saying that most of them don't have an online presence. Sadly, some have decided to make this holiday season their last. The following is a sampling we've compiled in the last 48 hours:

• After 25 proud years plying women's clothing, shoes and accessories, State College, Pennsylvania, AJ Fine's Sample Sale has succumbed to the pandemic, bereft of the weddings and reunions that were its lifeblood
• More than 30 years after it opened doors, Riverside Family Pharmacy in Kankakee, Illinois will close its doors on December 31st, a victim of, "larger retail pharmacy chains (that) offer significant advantages to customers, including extended hours, easy-access technologies and nationwide connectedness."
• And finally, citing the pandemic having put a "lot of things into perspective," Sioux City, Iowa's Thorpe and Company jewelers will close after 120 years in operation. A 'Going Out of Business' sale begins today

In the insult to injury department, the NFIB reported an, "inability to receive new deliveries of inventories due to supply chain problems." You can't sell it, if you don't have it. Even those blocks that do have the financial wherewithal to stock up are challenged by impediments beyond their control. In the end, D.F. Duncan Sr's parking meter patent allowed him to cut the strings with his yo-yo division which went bankrupt in the end. For Main Street's retail survivors, their yo-yo existence promises to continue into the new year.