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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 Jul 15, 2018

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The NYSE McClellan Oscillator flipped to black late in the week prior to the last, and usually that bodes well short term.  Indeed that foreshadowed a nice week. TRADE WARS ™!!!! certainly seems like a “sell the rumor, buy the news” event.

“Given the rhetoric over the past few weeks, it seems like the probability of a trade war has increased. However, in the short term I still think there’s a relatively low probability that one will actually occur. And in the meantime, U.S. economic data has been good, and the Street knows this will be a good year for earnings,” said Scott Wren, senior global equity strategist for Wells Fargo Investment Institute.

“With the prospect of a positive earnings season ahead of us, investors seem to have forgotten the threat of further trade tensions,” said Konstantinos Anthis, head of research at ADS Securities, in a note Tuesday.

Wednesday was the one day the indexes took a hit (momentarily) after the White House late Tuesday said it would assess 10% tariffs on a further $200 billion in Chinese goods.

The new tariffs won’t take effect for at least two months, administration officials said, giving U.S. industry time to comment on the products selected for levies — and for the two sides to start a new round of talks.

“This is different from the other trade announcements, because the size is significantly larger, and because China is unable to directly reciprocate at $200 billion because they don’t import that much. It’s unclear what it might do next, but it is clearly another step closer to a full-blown trade war,” said David Carter, who oversees about $2 billion as chief investment officer at Lenox Wealth Advisors.

Bloomberg reported late Wednesday that officials from both countries have raised the prospects of restarting a conversation at a high level.

Earnings season began in earnest Friday with financials – earnings are set to explode this quarter on the back of massive tax cuts enacted late last year.   Economic reports for the week were not market moving.

For the week the S&P 500 gained 1.5% (two weeks in a row) and the NASDAQ 1.8% (after a 2.4% increase the prior week)

Oil looked crazy strong a week ago – this was quite a drop but still, sitting on a nice moving average.

Copper continues to look like crud.

FAANG stocks go up, news at 11 – yada yada yada.

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

Per Statista here are the top 10 global apps for iPhone.  This list makes me feel very old… and very American. 🙂  i.e. “what the heck are 7 of these??”

Kylie Jenner is apparently almost a billionaire…. uhhh.

Kylie Cosmetics debuted two years ago with $29 “lip kits” and, according to Forbes, has ballooned into a beauty industry icon valued at nearly $800 million. Forbes wrote that the company has sold more than $630 million worth of makeup, including roughly $330 million in 2017 alone.  For scale, Jenner has 111 million Instagram followers – more than twice as many as Barack and Michelle Obama combined. According to Mintel data, 55 percent of consumers ages 18 to 23 used social media or YouTube to get information on beauty brands.

The week ahead…

Earnings season heads into overdrive the next few weeks – if estimates are any indication, they should be blockbuster.

Retail sales hit Monday with expectations of a 0.5% increase.  Trump – Putin face off in Vegas!! Oh wait, Helsinki.

Federal Reserve Chairman Jerome Powell is set to deliver his semiannual monetary policy report to the Senate Banking Committee on Tuesday and is likely to testify in front of the House Financial Services Committee thereafter (though that hasn’t been confirmed).

The testimony comes a little over a month after the Fed raised interest rates on June 13 for the seventh time since the end of 2015. Powell’s comments are likely to add more dimension and texture to the institution’s monetary-policy strategy, as it looks to bring interest rates to a more normal, precrisis level and delever its asset portfolio, which became bloated to the tune of some $4.5 trillion during the height of the 2007-09 asset-backed fueled blowup.

Index charts:

Short term: Very choppy on the S&P 500 of late but a new “higher high” (a high higher than the previous high – in this case early June) was hit.  NASDAQ same story but now all time highs.

The Russell 2000 is in an interesting spot.  This has been the leader for quite a while – we have a “double top” right now… that doesn’t mean it’s going to confirm.  We could just be in a “sector rotation” away from domestic companies to international ones who have suffered due to trade war fears.  But it’s certainly something to keep a close eye on.  If a new high is not reached here it will be something to note.

The NYSE McClellan Oscillator was in the black all week but just there at the end of the week – watch this one close as well.

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

Charts of interest / Big Movers:

Monday, CTI BioPharma (CTIC) tumbled 14% after it said a late-stage trial of a treatment for the blood cancer non-Hodgkin lymphoma failed to meet its main goals.

Wednesday, Fastenal (FAST) surged by 10% after the company late Tuesday said its board raised the quarterly dividend to 40 cents a share from 37 cents a share. The fastener manufacturer also reported better-than-expected second-quarter earnings of 74 cents a share.

Thursday, software company CA (CA) rallied nearly 19% trade after chip giant Broadcom (AVGO) confirmed late Wednesday it has agreed to take over the software company for $44.50 a share. Broadcom sank 13.7%.

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



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Jerry Muller Interview with Michael Covel on Trend Following Radio

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Jerry Muller
Jerry Muller

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Jerry Muller is a professor of history at The Catholic University of America, where he has taught since 1984. His latest book is “The Tyranny of Metrics.” Quantifying metrics can be a good thing, however, it can easily go too far and have great consequences.

Jerry sees pitfalls of focusing too much on metrics everywhere – schools, hospitals, even venture capital. Children gear their learning toward beating a test rather than intellectually developing their mind. Doctors fixate on standardized performance measures, rewards and punishment, and publicized accountability. The system encourages and sometimes requires doctors to game the system. Venture capitalism, the very field where creativity should prosper, tends to foster an anti-creative atmosphere. Investors want to see data to back up a new product so they can see proof of a future profit. The problem? New innovations don’t have data because they have never been seen before in the marketplace.

Using metrics in schools, hospitals, and business can be extremely useful depending on what context it is used, but alone they are not enough. Human development as well as human experience should be weaved into the equation. Michael and Jerry finish the podcast up talking metrics in China, how it has lead to gaming the system and taken a toll on developing research.

In this episode of Trend Following Radio:

  • Intrinsic motivation
  • Tyranny of metrics
  • Metric fixation
  • Metrics in law enforcement
  • Metrics in health industry
  • Managerial ideology
  • Powerpoint presentations
  • Metrics in China

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Trend Following Mega Fifth Edition with Michael Covel on Trend Following Radio

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New Trend Following
New Trend Following

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Michael plays three epic interviews with Ed Seykota, Martin Lueck and Jean-Philippe Bouchaud profiled in chapter’s 12, 13 and 14 of his newest edition of Trend Following: How to Make a Fortune in Bull, Bear and Black Swan Markets.

Ed Seykota was originally profiled in the classic book “The Market Wizards.” Seykota has played a pivotal role in the growth of trend following trading for 40 years.

Martin Lueck holds an M.A. in Physics from Oxford University and currently is the Research Director and President of Aspect Capital. Lueck was originally with Adam, Harding and Lueck Limited (AHL), which he co-founded with Michael Adam and David Harding.

Jean-Philippe Bouchaud is founder and Chairman of Capital Fund Management (CFM) and professor of physics at École polytechnique.

In this episode of Trend Following Radio:

  • Govopoly
  • Systems trading
  • Diversification
  • Behavioral economics
  • Death of trend following
  • Exploiting vs. exploring
  • Behavioral biases
  • Risk

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