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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 Apr 22, 2018

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Strong start to the week; a weaker end – final tally was a modest move up.   #TRADEWARS(tm) dived down this week as earnings took center stage.

Naeem Aslam, chief market analyst at Think Markets U.K., in a note to investors said fears around a potential trade war and geopolitical concerns “have faded very much.”

The yield on 10 year Treasuries rose to about a 4 year high — still low by historical levels but these have been suppressed for ages so any movement up looks gigantic.   Here is one opinion… but inflation has been a non starter for years by government measures at least.

“Had bonds yields risen because the underlying economy is accelerating, then, we would see higher stock prices too. But Friday’s weakness in stocks suggests that investors sold Treasurys because they are concerned that wage pressures and protectionist policies of the White House administration would send inflation higher,” said Kristina Hooper, chief global market strategist at Invesco.

For the week the S&P 500 gained 0.4% and the NASDAQ 0.5%.

On the economic front, sales at U.S. retailers rose 0.6% in March to end a streak of three straight declines, the Commerce Department reported Monday.  Sales rose a smaller 0.3% last month if autos and gas are stripped out.  Auto dealers posted their best month since last September. Sales rose 2%. Internet retailers, pharmacies and stores that sell home furnishings were other big winners.

Across the Pacific, China reported forecast-beating first-quarter economic growth of 6.8% on Tuesday. That growth was lifted by surprisingly strong exports.

Crude oil remained strong for another week.

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

The type of plastic surgery most popular with Americans

Amazon is even hurting (slightly) the most powerful force on Earth – the Kardashians.

“Opening and operating brick-and-mortar stores in this changing retail environment, without multiple distribution channels, is tricky at best,” said Jeff Green, an independent retail consultant based in Phoenix, Ariz. “In the case of Dash, it was tough to build and maintain a brand whose price points were not accessible to the masses.”

The week ahead…

More huge names on the earnings front.

Will Treasury yields bust north of 3% and create some fun?

Government bond yields climbing and a shrinking gap between short-term and long-term Treasury rates have prompted some consternation on Wall Street, driving equity prices lower as investors fret about what these dynamics mean for U.S. economic growth as it enters its ninth year of expansion.

Fears about a so-called flattening yield curve have taken center stage, with investors fixated on the gap between the 2-year and 10-year Treasuries, which on Tuesday touched the narrowest point—41 percentage points—in more than a decade.   The yield curve is often tracked as a measure of sentiment about the economy’s overall health. In a normal environment, the yield curve steepens because investors tend to demand a higher yield for lending further into the future, while a flattening curve is read as a sign that investors are worried about the longer-term outlook. An inverted curve, where shorter-dated yields exceed those for longer-dated debt, a dynamic known as yield-curve inversion, rings alarms because it has faithfully preceded all recessions since 1960. 

Index charts:

Short term: Essentially the same spots we were as last week on these 2 charts.

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:

Tuesday, Netflix (NFLX) shot up 9.2% and closed at a record a day after the streaming-media company reported first-quarter results that blew past Wall Street forecasts.  The stock is up >60% YTD!

Netflix said it added 7.4 million new subscribers in the first quarter, when it had profit of $290.1 million, or 64 cents a share, on revenue of $3.7 billion. Analysts on average expected 6.6 million new subscribers, with earnings of 63 cents a share on revenue of $3.69 billion.  Netflix reported $290.1 million in net income for the first quarter, more profit in three months than the streaming giant had for the entire year of 2016.  Its international segment reached 50% of revenue, and 55% of its total memberships.

Twitter (TWTR) jumped 11% Tuesday after Morgan Stanley analysts upgraded the stock to equal-weight from underweight.

Wednesday, IBM (IBM) fell 7.5%, marking its worst one day decline since April 19, 2013, as analysts noted its earnings beat late Tuesday was driven by a one-time tax gain. In addition, IBM Chief Financial Officer James Kavanaugh told analysts on the tech titan’s conference call that they shouldn’t count on a continued boost from new mainframe sales.

Very rare to see this type of stock tumble as it is considered low volatility, but Philip Morris (PM) tumbled 16% Thursday after the company posted weaker-than-expected revenue, along with a stronger-than-anticipated adjusted profit.

Aceto (ACET) dropped 64% Thursday after the developer of health products and pharmaceutical ingredients maker said it was negotiating credit agreement waivers with its lenders, cutting its dividend, taking a large impairment charge and initiating an evaluation of strategic alternatives.  But other than that….

Friday, Apple (AAPL) tumbled 4.1% after a pair of analysts issued cautious notes ahead of the company’s second-quarter earnings report, due out in early May.

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



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David Burkus Interview with Michael Covel on Trend Following Radio

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David Burkus
David Burkus

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David Burkus is author of “Friend of a Friend: Understanding the Hidden Networks That Can Transform Your Life and Your Career.” David has delivered keynotes to leaders of Fortune 500 companies and future leaders of the United States Naval Academy. His TED talk has been viewed almost 2 million times and he is a regular contributor to Harvard Business Review. What if the advice we have all heard about networking is wrong? David outlines the right way to network in the modern age.

How do you meet people? How do you meet the right people? Once you meet those people, what do you do with the relationship? Maybe you haven’t talked to someone for a few years but you could still call him or her up and have a personal talk with them. This is an example of one of the most useful networking ties, known as a “dormant tie.” David uses UFC founders, Dana White and Lorenzo Lamas, as an example. They went to high school together, hadn’t talked for years, both had a passion for fighting, but lived in different spheres of the fighting community. After reconnecting at a high school get together they realized they had some aligning career aspirations. They ended up buying the UFC and made it the fastest growing sport in history.

When you start taking chances on meeting people and putting yourself out there, that is when your network really expands. David shares another example of a movie producer who got his foot in the door by getting creative, taking some risks, and reaching out to the right people for conversations. Who do you know? Who do your friends know? Where do you know them from? These are basic questions that can get the ball rolling when trying to expand your network.

Knowing a ton of people is not necessary to be successful, you just need to know the right people to give yourself credibility. Shared activities and hobbies are ways to draw in a set of diverse people to build deep relationships. Networking events have become a thing of the past (thank goodness).

In this episode of Trend Following Radio:

  • Curiosity conversations
  • LinkedIn
  • Network science
  • Self observation
  • Dormant ties
  • Robust networks
  • Network science
  • The majority illusion
  • The spread of Facebook

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What Is and Might Be with Michael Covel on Trend Following Radio

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Inspired by this post from Seth Godin… Michael expands it out on today’s podcast:

What is and what might be: They have much less in common than you might expect. The key step in creating a better future is insisting that it not be based on the assumptions, grievances and dead ends of the past. The future won’t be perfect. We won’t be perfect. But we can be kind. We can listen. We can give opportunity the benefit of the doubt. The future won’t always work. We won’t always succeed. But we can be alert and seek out the possible instead of the predicted. The future won’t always be fair. But we can try. We can care. We can choose to connect. It can be better if we let it.”

Michael Covel Books
Michael Covel Books





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