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Client Talking Points

Red Light, Green Market

Using the VIX as a way to gauge the market works well...if you understand how to utilize it correctly. Right now, we're waiting for two things to happen before we start going into the market on volatility signals:

 

1) We need the S&P 500 to be oversold

 

2) We need the VIX to be overbought

 

Both of these things need to occur on an immediate-term TRADE basis. When these signals hit, we'll be comfortable buying the SPX. But until then, we have to wait. If we revisit last Friday you'll find that:

 

1) On Friday morning, the SP500 was immediate-term TRADE oversold at 1540


2) On Friday morning, the VIX was immediate-term TRADE overbought at 15.23

 

You can't just go around randomly jumping in and out of the market without a process; you might as well hit the craps table if that's what you want to do. 

The Effects of Japan

The Bank of Japan's stimulus announcement from last week has done all sorts of crazy things to the global markets. We suppose that people get riled up over news of a $1.4 trillion stimulus that's unprecedented. Despite the Japanese government saying (and to paraphrase Kyle Bass from his interview on Bloomberg yesterday) "We've got your back!", investors ran away from JGBs. Meanwhile, the Nikkei 225 looked like it spent too much time at the gym and has tacked on a +7.1% gain over the last five trading days. As for the US, we rallied and then went back to business as usual: trying to reach new highs in the S&P 500

Asset Allocation

CASH 26% US EQUITIES 26%
INTL EQUITIES 22% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 26%

Top Long Ideas

Company Ticker Sector Duration
DRI

Darden stands to be a beneficiary from a housing recovery and an improved employment picture, which boosts casual dining trends. The company's net income declined on its recent earnings report but beat the Street's expectations.

FDX

With FedEx Express margins at a 30+ year low and 4-7 percentage points behind competitors, the opportunity for effective cost reductions appears significant. FedEx Ground is using its structural advantages to take market share from UPS. FDX competes in a highly consolidated industry with rational pricing. Both the Ground and Express divisions could be separately worth more than FDX’s current market value, in our view.

HOLX

HOLX remains one of our favorite longer-term fundamental growth companies given growing penetration of its 3D Tomo platform and high leverage to the 2014 Insurance Expansion from the Affordable Care Act.

Three for the Road

TWEET OF THE DAY

"It is possible to trade this rally w/o that hate/love thing. Just mind noise. Also very nearly possible to trade it w/o CNBC." -@Daytrend

QUOTE OF THE DAY

"All movements go too far." -Bertrand Russell

STAT OF THE DAY

China posts surprising trade deficit of $880 million for March as imports surge by +14.1% year-over-year.