On the Sunny Side of the Street
ENTERING THE WEEK, Wall Street was primed to look on the bright side, itchy to take stock indexes to new 2005 highs, mindful that in a slow-footed market upside must be seized when the momentum and the news flow combine to produce a fleeting opportunity.
So it was last week, when buyers stayed resolute and the headlines stayed out of the way of the upward march that began in late April and reasserted itself after the July 7 London bombings.
The Standard & Poor's clicked to subsequent four-year highs Thursday and Friday, finishing the week up 16 points, or 1.3%, at 1227, just a couple of points above its previous 2006 peak in March. The Dow Jones industrials added 191, or 1.8%, to reach 10,640, and the Nasdaq Composite rose 43, or 2.1%, to 2156.
Little in the week's data run threatened the growing coziness of investors. Believers in fundamentals could explain the strength by noting a couple of toothless readings on inflation, a robust retail-sales number, a 3% pullback in crude-oil prices, a climb in consumer sentiment and as-expected early earnings reports.
The chart-reading faithful could point to the run to new S&P 500 highs and a purported breakout in the Nasdaq.
Like Rorschach tests, though, a market snapshot can look benign or menacing depending on one's state of mind. Breakouts to new highs can be alternately viewed as blowoff tops. Rising risk appetites can cross the line into investor hubris.
In mid-May, the market seemed poised for what was called a "tradable bounce" based on dark investor sentiment at a time when General Motors' debt troubles were thought to be jeopardizing the financial markets. Since then, the S&P has ramped 6.3% higher, and the mood has swung toward confidence.
While acknowledging the sturdy tone of the markets, here are the sorts of warning signals that forward-looking traders were paying attention to as the rally carried on last week.
The thrust higher had slowed to a grind by midweek, indicating some buyer's fatigue. The number of advancing stocks has been winnowed, with only one-quarter of S&P 500 members making new highs as the index did late last week.
Individual investor polls have rushed to giddy levels. A couple of formerly cautious Wall Street strategists are now pounding the table that the market is a Buy. In the options markets, heavy bullish call buying has been pronounced, while the key measure of expected market volatility, the VIX, slouched to a new 10-year low and is a touch above the all-time low.
All this could merely indicate a proper interpretation of a calm and generous market environment. Strong markets can get stronger still, and the torrent of coming earnings reports could always furnish a neat excuse to do more buying.
But experience shows these elements can coalesce into warning clouds. And everyone knows how quickly a storm can arrive to disturb a still midsummer day.
Generally Stymied
A couple of times this year, it's been pointed out here that, while General Electric (ticker: GE) is performing well as a company, its stock seems chronically stymied. Blame an already-full valuation and a cheery parade of investor bullishness that seems lately to run a half step ahead of the fundamentals.
It might appear gratuitous to hit this theme again, if not for the fact that GE is the largest stock in the universe and observers keep remarking with incredulous alarm that it can't seem to make any headway despite earnings coming through as promised.
Today, as in January (The Trader, Jan. 24), it's fair to say that almost nobody doesn't like GE. (Nobody, that is, except for the legion of investors and traders who seem to throw a wet blanket of selling atop the stock each time it ventures into the high 30s.)
At the time of the earlier mention six months ago, the stock was almost exactly where it is today, at 35 and change. In that span it's lagged the S&P 500 by nearly five percentage points.
Still, 17 out of 18 brokerage analysts rate the stock a Buy. The Street can't fathom that the stock won't rise, with analysts' price targets ranging from 37 to 50, according to Thomson Financial. Short interest is microscopic.
GE's investor-relations effort is so proactive in its earnings guidance and so skillful in cultivating an air of financial transparency, that the buy side is lulled into deep comfort with the profit path, which leaves little room for upside surprises.
Last week, second-quarter results hit the mid-point of the guidance range, at 44 cents a share. GE also snugged up its full year projection to $1.80 to $1.83, the upper end of the previous range, though tweaked the third-quarter expectations slightly below Street estimates.
The stock was spongy Friday following the report, dipping on the day, though it rose 1.5% on the week, making up a slim portion of its performance gap with the S&P. Bigger picture: GE has spent most of the last year between 33 and 37.
On some level the analysts' enthusiasm is understandable. GE has a fabulous group of businesses and it can be argued that its one unifying product among 11 diverse divisions is good management.
Scott Davis of Morgan Stanley calls GE his top pick, figuring that the 2.5% dividend yield, 1.4% of market cap GE will return via stock buybacks each year and 9% to 11% earnings growth can deliver a 13% to 15% total return to his $40 target.
Maybe. But with the stock fetching 19-times forecast 2005 earnings and behaving sluggishly in the face of universal acclaim, it might just as likely take a huge run in the broader market to pull GE out of its sticky range.
阳光灿烂华尔街
上周一开始，华尔街就已准备好要著重关注股市乐观的一面，跃跃然要将主要股指推向年内新高，而且心下时时提醒著自己，面对一个步履迟缓的市场，当动能和消息面共同创造出一个千载难逢、转瞬即逝的升机时，一定要抓住这个机会而不能让它错过。
这一周的情况的确是如此。买方意志坚决，始于4月末的此轮涨升行情没有受到任何消息面的影响，并于7月7日伦敦爆炸案发生后进一步得到了确立。
标准普尔500指数于周四创下4年新高，并于周五再次刷新了刚刚创下的纪录，本周收盘上涨16点至1227点，涨幅1.3%。道琼斯工业股票平均价格指数全周上涨191点至10,640点，涨幅1.8%，那斯达克综合指数涨43点至2156点，涨幅2.1%。
一周内发布的经济数据无一威胁到投资者日感愉悦的心情。关注基本面的投资者可以列出一系列乐观数据来解释股市的强势，例如根本无须担忧的通货膨胀数据、强劲的零售额、原油价格回落3%、消费者信心指数大幅攀升、首批公布季度报表的公司业绩大都达到预期等等等等。
关注技术面的投资者也可从图形上看出，标准普尔500指数将轻松创下新高，那斯达克综合指数也有望取得突破。
但是恰如罗夏测试(Rorschach test)理论所指，同样的技术图形在不同的人看来会有不同的意味，主要取决于一个人看图时的心态。一个突破新高的征兆同时也可能被视为新的顶部的即将形成。冒险情绪过了头就会变成狂妄自大。
5月中旬时，市场人气一片黯淡，通用汽车(General Motors)的债务问题也被认为随时会危及整个金融市场。在此基础上，市场似乎正在酝酿出现一种所谓的“超卖反弹”。自那时起至今，标准普尔500指数已累计上涨6.3%，市场人气也随之由衰转盛。
眼下，在承认市场走势强劲的同时，我们也不应该忽视一些警示性信号，眼光长远的交易员在上周股市反弹的同时已经开始注意到了这一点。
市场的强劲上扬走势到上周中期开始放缓，表明部分投资者的买盘兴趣已经开始出现疲态。继续盘升的股票数量已逐渐减少，到上周末时，标普成份股中只有四分之一左右的股票像总体指数一样创出新高。
对个人投资者的民意调查结果已经到了让人眼花缭乱的程度。一些从前态度向来谨慎的华尔街策略师开始拍著桌子大喊“买进”。期权市场大量的看涨期权买盘明确表明了投资者的看涨倾向。衡量市场预期波幅的主要指标VIX已创下10年低点，距历史最低点仅有一步之遥。
所有这一切只是恰如其分地表明了目前市场人气平稳和资金充裕的现况。强劲的升势当然还可能进一步加强，而即将滚滚而来的收益报告也总会成为投资者继续买入的现成理由。
但过去的经验告诉我们，这些因素随时可能演变成笼罩市场的阴云。大概所有人都知道，仲夏日的暴风雨会来得多么突然。
