All-Time Highs on the Table?


Happy Friday!

We're less than a day away from a much-needed weekend, so let's try to go out strong… though I'll settle for making it out alive.

I'm picking Runaway Child, Running Wild by the Temptations as my morning pick-me-up since coffee wasn't enough.

Asian markets are slipping and Europe is slightly green following yesterday's down day in the US.

Japan is down on Governor Kuroda's stated opposition to “helicopter money.”

Markit's euro area PMI hit an 18-month low at 52.7, while its UK PMI showed what they're calling a “dramatic deterioration” in business activity.

This is disappointing because UK economic data has actually been fairly strong relative to low expectations recently.

On the plus side, Germany's PMI was strong, though interestingly, the DAX is the worst performing major market this morning.

Crude oil is off the lows but still down for the week as traders remain concerned about seasonably high gasoline inventory levels.

In earnings, GE (GE) beat expectations despite a sluggish global macro picture, though fellow industrial Honeywell (HON) is off on light guidance.

SPX futures are up fractionally on the boost from GE, so we could see the 7th new all-time high in the past 10 days.

Sentiment continues to lean positive, which is probably best illustrated by the low VIX and steep VIX curve.

However, bulls are not quite leaning “all in.”

The ISE Sentiment Index has read bearish in 2 of the past 3 days and the AAII survey showed neutral sentiment.

On my own personal back-of-the-envelope sentiment meter, I'd say that on a 1-10 scale, we're at about a 7 out of 10 in terms of sentiment. (with 10 being ecstatically bullish)

Near-term, the best course forward for the bulls seems to be a sideways grind like we saw in April-May. That horrendously boring lull tricked the bears into wasting all their money on put options, which ultimate provided the fuel for this recent streak of record highs.

The economic calendar is more or less empty today — we've got just the Markit US Manufacturing PMI and Baker Hughes Rig Count, so odds are the news flow will be pretty light.

I try to stear clear of politics here, but there is chatter that Democratic candidate Hillary Clinton will appoint a running mate today.

If she happens to appoint Massachusetts Senator Elizabeth Warren (I see a less than 25% chance of this myself), the banks could get hit short-term.

I wouldn't mind seeing a modest down day today to digest gains

Good luck out there friends.