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Weekly Market Recap Apr 15, 2018

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One thing technicals cannot account for are news events, and Tuesday’s relaxation of fears about #TRADEWARS(tm) due to a speech in China drove indexes to a very nice rally that day.  That said we’ve stated that fear has been a bit overblown and emotional as we are in the bluster and trial balloon stage.

Monday, Trump tweeted “China will take down its Trade Barriers because it is the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property.”  Tuesday, Chinese President Xi Jinping made a speech touting plans to give foreign companies greater access to financial and manufacturing sectors. He also talked about a cut in tariffs on car imports and an improvement in protection of intellectual property, among other measures.

“It was a short-term surprise to the risk markets that Xi put out a positive comment saying he’s open to trade negotiations and relaxing trade restrictions. This is going to be an ongoing issue for months, but for today it’s a shot of adrenaline,” said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors.

All that said, more #TRADEWARS(tm) hand waving could be coming as it was reported late in the week the White House plans to step up pressure on China to make trade concessions, via a plan for fresh tariffs and a threat to block Chinese technology investments in the U.S. Details of which Chinese products are on the hit-list of $100 billion in tariffs could be revealed as soon as next week.

For the week the S&P 500 gained 2% and the NASDAQ 2.8%.

Crude oil rallied through the week, hitting the highest levels since late 2014 as the tensions in the Middle East fed concerns over potential supply disruptions in the region.

“With the U.S. oil production set to rise further in the coming months, the global oil market will likely remain amply supplied in the long-term. We therefore think that oil prices will struggle to rise significantly further, although in the short-term price spikes are possible given the heightened possibility of military action in Syria,” Razaqzada wrote.

On the economic front, the consumer-price index fell 0.1% in March, while the core CPI—which excludes food and energy—was up 0.2%. Both readings were in line with analyst forecasts.

The minutes from the Federal Reserve’s latest policy meeting show that policy makers discussed the need to tap on the brakes on the economy.

Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.

Also from Jill, the # of >1% move days on the S&P 500 in 3.5 months is already nearly at levels seen for entire years such as 2013 and 2014.  And you can see just how BORING and unusual 2017 was.

Zillow is getting into the house flipping business!

Trillion dollar deficits are soon here again — but this time during an expansionary period.   And they soon look to be a permanent thing – the real interest now is when the next recession comes and it’s time to “stimulate the economy” is if we can see a $2 trillion deficit.  But no worries – tax cuts pay for themselves!

The Congressional Budget Office on Monday forecast a rising tide of red ink in the coming years, saying that trillion-dollar deficits will return in 2020 in its first report since President Donald Trump signed last year’s tax cut and this year’s big spending bill. The CBO said the budget deficit would be $804 billion for the current fiscal year, which ends Sept. 30, well above the $665 billion shortfall the government notched at the end of fiscal 2017.

The U.S. hasn’t run deficits exceeding a trillion dollars since 2012. From 2009 to 2012, deficits were above $1 trillion as the government grappled with the recession and a financial crisis.  Debt held by the public will rise from 78% of the economy at the end of 2018 to 96% by 2028, the report estimated, and said that would increase the likelihood of a fiscal crisis.

The week ahead…

Earnings season will begin in earnest with the next few weeks bringing most of the big hitters.  Earnings season is expected to very strong – it will be interesting to see how companies guide up the rest of the year due to the tax cuts.  More #TRADEWARS(tm) and political intrigue.  Retail sales for March will be reported Tuesday.

Index charts:

Short term: Things look better than a week ago but some more work is needed over the intermediate term.  The S&P 500 DID hold that 200 day moving average despite testing it quite a few times.  That said breaking over 2800 would be a new “higher high” and would signal and all clear – that is quite a ways away.  Also, breaking over the trendline connecting the 2 recent highs of January and March would be a needed first step.

The Russell 2000 is back over its 50 day moving average.

The NYSE McClellan Oscillator was positive this week so a feather in cap for the bulls, but it’s not aggressively above 0.

Long term: Still very positive for the “buy and never sell” crowd.

Charts of interest / Big Movers:

Monday, in the biotech lottery AveXIs (AVXS) surged 82% after Novartis (NVS)said it would acquire the clinical-stage gene therapy group for $8.7 billion in cash, or $218 per share.

Verifone Systems (PAY) surged 52% Tuesday after the payment and business services provider said it has agreed to a $3.4 billion private-equity acquisition by a group led by Francisco Partners.

Also Tuesday, Sprint (S) surged 17% after The Wall Street Journal reported that the telecommunications company had restarted merger talks with T-Mobile about five months after previous deal talks were abandoned.

Thursday, Bed Bath & Beyond (BBBY) tumbled 20% after the home-goods retailer late Wednesday guided earnings for fiscal 2018 below forecasts.

Enterprise software company Zuora (ZUO) spiked 43% in its trading debut.  Five things to know about Zuora.

Have a great week and we’ll see you back here Sunday!



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Weekly Market Recap Jan 20, 2019

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After entering the week quite overbought, indexes took a small retreat Monday before hurling back upwards.  This is typical of the “V” shaped moves up after any significant selloff, we’ve seen most of the past decade and watching them unfurl is quite amazing actually.  Thought maybe this time would be “different” but not so much.  So two week’s ago we asked “Has the Fed solved all the market’s problem in 1 speech?” – and thus far the market has answered resoundingly yes.  The word of the year thus far in 2019 is “patience” as that simple insert into a speech change the whole complexion of everything.

China has also been busy stimulating; on Tuesday:

An announcement from the People’s Bank of China that it would increase efforts to spur their economy by improving credit availability for smaller companies and a pledge by the Chinese Ministry of Finance to cut taxes and ramp up infrastructure spending helped to buoy market sentiment.  The comments come a day after China’s trade data came in weaker than expected, underlining worries that the country’s economy was locked in a downturn that could weigh on global expansion amid a protracted tariff spat between China and the U.S.

Thursday, the Wall Street Journal reported that the Trump administration was debating whether to ease tariffs on Chinese imports in a bid to calm markets.  Meanwhile Friday, a Bloomberg report said that Chinese officials have offered to increase imports from the U.S. by $1 trillion over the next six years, a plan that would reportedly bring the U.S. trade deficit with China to zero by 2024.

Not too much on the economic front but it is worth noting the Beige Book for anecdotal commentary:

The Beige Book showed eight out of 12 Federal Reserve districts reporting modest to moderate growth. However, the degree of optimism appears to be waning, in part due to financial-market volatility and rising interest rates.   On prices, “most” districts reported firms were seeing rising input costs, but said firms were “mixed” on whether they could pass these higher costs to customers. High tariffs were seen as one factor in increased expenses, along with higher prices for materials and freight.

For the week the S&P 500 gained 2.9% and the NASDAQ 2.7%.

Is that an inverse head and shoulders formation on the oil chart?

Twilio (TWLO) is already back to new highs.

Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.

The week ahead…

Earnings kicks into gear.  Regurgitating the thought of the prior recap: “We enter the week extremely overbought”.

Index charts:

Short term: No matter how many times you see it, when these 180 degree turns happen in the market, they can take the breath away.

Another very good week for the Russell 2000 – so far 2019 has been excellent for this index which suffered in 2018.

Small capitalization stocks had a miserable final four months of 2018, with the small cap oriented Russell 2000 index falling 27% from its Aug. 31 high to its nadir on Dec. 24, more than doubling the losses produced by the S&P 500 index over the same period.

This chart is startling – rarely do you ever see the the NYSE McClellan Oscillator over 70 for a day; currently it’s been sustained over that level for over a week.  For 70, this is an extended run in the 100s.  Wow.  Here is a 3 year NYMO chart to show how rare this is – last time we can see any action of a similar sort it was 2016.

Long term: The “V” is on…

Charts of interest / Big Movers:

PG&E Corp (PCG) was in last week’s recap, and we’ll repost it this week as it tumbled 52% Monday after the gas and electric company said it plans to file for bankruptcy on or about Jan. 29.

Gannett (GCI) rallied 21% after private equity firm MNG announced an unsolicited bid to buy the owner of USA Today, valuing the company at $1.4 billion.

Netflix (NFLX) jumped 6% Tuesday after the video streaming company said it would raise U.S. prices by 13% to 18%, the biggest rise since launching its streaming service 12 years ago.

Blue Apron Holdings (APRN) surged by more than 45% Tuesday after the meal kit company predicted it would reach profitability on an adjusted-Ebitda basis in the first quarter and full year 2019.

Bank of America (BAC) gained 7.2% Wednesday after the bank reported revenue and profitabove average analysts’ estimates.  Similar spike for Goldman Sachs (GS).

Sears Holdings (SHLDQ) soared 56% Wednesday after Chairman Eddie Lampert prevailed in a bankruptcy auction for the struggling department store chain with an improved takeover bid of roughly $5.2 billion, according to reports.

Tesla (TSLA) slumped 13% Friday after the company announced job cuts and warned on profits.

Have a great week and we’ll see you back here Sunday!



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John Lin Interview with Michael Covel on Trend Following Radio

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John Lin
John Lin

Subscribe to Trend Following Radio on iTunes

John Lin is founder and CEO of Grasshopper, a high frequency trading firm providing liquidity in global markets. Grasshopper was founded in 2006 and is heavily driven by technology and innovation. After graduating with an Engineering degree from Cornell University, John worked his way up from a clerk position in the Chicago Mercantile Exchange. Since then, he’s lived and traded internationally in London and Tokyo, and currently lives in Singapore.

John is one of the last traders fortunate enough to have floor experience on the CME. He got a job as a runner on the CME floor in the early 1990’s and from there he learned invaluable lessons on trading, discipline and respecting the market. What made John so interested in trading in the pits? He saw the pits as capitalism ground zero.

Over the years, with technology changing, John has had to adapt his trading style accordingly. John has gone through a gradual transformation in his trading – starting with his 15 year career on the trading floor where he interacted heavily with people to 100% computer driven high frequency trading. He has taken his experience from his early years of trading and poured it into his current companies. As a trader, you are taught you’re never bigger than the market. John knows he is always listening to the market when he trades, not trying to beat it.

In this episode of Trend Following Radio:

  • Trading in the pits
  • Nick Leeson
  • Singapore legal system
  • Barings Bank – 1995
  • High frequency trading
  • Crypto currency
  • Interfacing with technology

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Weekly Market Recap Jan 13, 2019

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In last week’s recap we asked:  “Has the Fed solved all the market’s problems in 1 speech?”

Thus far the market says yes!  As Guns n Roses preached – all we need is a little “patience”.  Four up days followed by a nominal down day Friday had the market following it’s normal pattern the past nearly 30 years – jumping whenever the Federal Reserve hints (or essentially says outright) it is here for the markets.   And in case you missed it the prior Friday, Chairman Powell came back out Thursday to reiterate the news – so…so… so… patient!

Fed Chairman Jerome Powell reinforced that message Thursday during a discussion at the Economic Club of Washington where he said that the central bank will be “flexible” and “patient” on the monetary policy.

The minutes from the recent Federal Reserve meeting were likewise “dovish”:

The release of Fed minutes revealed that some central-bank officials hard reservations about an interest-rate increase last month due to market volatility, though policy makers voted unanimously in favor of the move. They also recommended the Fed should be “patient” and stressed that “a relatively limited amount of additional tightening” is appropriate.

“The backdrop for stocks is positive, with earnings growth still projected to be healthy, while the Fed looks like it is pausing,” Michael Arone, chief investment strategist for State Street Global Advisors, told MarketWatch.

“Stocks are loving that central bank policy appears to be in an ultra-dovish mode,” wrote Edward Moya, chief market strategist at Oanda, in a note. “Inflation is low and under control and the main catalyst for the Fed’s ability to be patient.”

In economic news ISM services slowed much like manufacturing did the prior week with a reading of 57.6 from 60.6 in November – that is still highly expansionary.

For the week the S&P 500 gained 2.5% and the NASDAQ 3.5%.

Here is the 5 day weekly “intraday” chart of the S&P 500 … via Jill Mislinski.

The week ahead…

Earnings season begins anew. While numbers should be hearty, investors will be looking very closely at guidance as signs of global slowdown are in the air.   Retail sales would normally come out on Wednesday but the government shutdown likely will impact that release.

Index charts:

Short term: Some rotation here as the NASDAQ and Russell 2000 outpaced the S&P 500.  The NASDAQ is already back to it’s 50 day moving average.

Finally a very good week for the Russell 2000 – that would certainly be a change if character if this index which has been lagging for over a year took the reigns.

Wow – that is the highest reading I can recall on the the NYSE McClellan Oscillator – over 100!  Usually +70 is an extreme peak.

Long term: Still a lot of work to do but thus far the “V” shape bounce is back….

Charts of interest / Big Movers:

Monday, PG&E Corp (PCG) tumbled 22% on a Reuters report that the utility company was considering filing for bankruptcy protection.

Luxoft Holdings (LXFT) jumped 82% Monday after it was announced the company would be acquired by DXC Technology (DXC) for $2 billion.

Sears Holdings (SHLDQ) had an interesting Tuesday.  By close the stock soared 27% after a Wall Street Journal report that the company could still avoid liquidation via a $4.4 billion buyout plan proposed by billionaire Eddie Lampert. The stock had been down as much as 50% on reports earlier Tuesday that the company will seek liquidation.

Wednesday, Constellation Brands (STZ) slumped 12% after the beer, wine and spirits company issued disappointing guidance for fiscal 2019.

Macy’s (M) tumbled 18% Thursday after the retailer downgraded annual sales and profit estimates for 2018.

Friday, General Motors (GM) rose 7.1% after the auto maker said it expects 2018 earnings and adjusted free cash flow to beat expectations and provided an upbeat 2019 outlook.

Just wanted to note “pot stock” Tilray (TLRY) held up better than almost every equity during the first portion of the wave of – it took nearly a month of market turmoil for it to begin falling hard.  The stock had itself quite a day both Tuesday & Friday.

Have a great week and we’ll see you back here Sunday!



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