February's First Friday Finds Futures Fairly Frothy

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The S&P finished January up 5.1% and, as I noted yesterday, we have simply done too well to risk blowing it now so we're getting a little more cautious as we start the new month.  In yesterday's Morning Alert to Members, we raised our index stops (3 of 5 fails flips us bearish) to Dow 13,600, S&P 1,480, Nas 3,150, NYSE 8,800 and Russell 880 and I commented:

Hopefully, they won't come into play but really, these are ridiculous one-month gains so let's protect them.  You could say, to be fair, we should give the Nas 1.1% but, without AAPL down over 30%, the Nas would be 6% higher at about 3,350 so we shouldn't cut them a break because – if this rally is real – then AAPL must come off the bottom and the Nas should be the BEST performer of the next round – not the laggard.

First, most data points, especially the industrial earnings, have been pointing to an impressive recovery. Second, the private HSBC PMI, which is a better proxy for smaller enterprises, rose to 51.9 in Jan from 51.5 in Dec. Third, PMI data are heavily seasonally adjusted, especially during the year ends and beginnings. As there is big room of freedom regarding seasonal adjustment during the CNY holiday, it's likely that the NBS statisticians intentionally reported a conservative estimate within the allowable range to save better data for rainy days. Finally, new orders rose to 51.6 in Jan from 51.2 in Dec despite new export orders falling to 48.5 in Jan from 50.0 in Dec, suggesting domestic orders jumped in Jan.

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