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Weekly Market Recap Aug 12, 2018

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Indexes spent the past week churning along as news flow was generally quiet…outside of Turkey and Russia that is.  The NYSE McClellan Oscillator has been in the red for weeks, and breadth has remained pretty weak but the indexes continue to hold up!  A conundrum indeed!  That said keep an eye on foreign markets to see if any “contagion” happens – thus far, the U.S. markets have been acting impervious.

“Despite the gains in the averages last week, fewer stocks hit new 52-week highs and an increasing number of issues reached new lows for the year. Overall, the technical indicators argue on the side of caution,” said William Delwiche, an investment strategist at Baird, in a note.

Trade Wars!! ™ continued but without much affect on markets.

“Things are looking good in the U.S. in terms of earnings and data, but things aren’t as rosy if you look to China, emerging markets or Europe. Weakness in those regions could eventually become a headwind for the U.S.,” said Suzanne Hutchins, senior portfolio manager of the $1.5 billion Dreyfus Global Real Return Fund, which is run out of the investment boutique Newton.

The Turish lira took a hit late in the week (-17% Friday) as Trump and the ECB attacked… boosting the U.S. dollar… and bonds.

The steep decline in the Turkish currency came after the European Central Bank expressed concerns about potential contagion from Turkey’s problems, especially in the banking sector.  The country is struggling with double digit inflation and its reliance on foreign funding. With much of its debt denominated in U.S. dollars, the stronger buck has added weight to its debt burden.  Analysts and investors have also attributed the relentless pressure on the Turkish currency to a growing diplomatic spat between Washington and Ankara over the detention of a U.S. pastor in Turkey.  The lira’s stumble prompted U.S. President Donald Trump to announce a doubling of U.S. tariffs on certain Turkish goods.

Turkey’s currency volatility has recently accelerated and now gotten to the point where it’s beginning to impact global markets as investors worry about European banking exposure,: said Alec Young, managing director of global markets research at FTSE Russell.

Russia also had a rough week as Trump attacked…

Newly announced U.S. sanctions—and the potential for a second round of actions in 90 days—roiled Russia’s currency and blue-chip stocks as the country braced for further economic pain amid uncertainties over the Trump administration’s commitment to enforcement.

Economic news was sparse and not market moving.

For the week the S&P 500 lost 0.3% while the NASDAQ added 0.4%.

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

Everyone thought Snapchat would be the new hip thing but it’s Instagram which is stealing the show!  Another win for Facebook.

For large parts of the past two years, it seemed like Snapchat would be the next platform that no one could afford to ignore. Having quickly gained popularity it only seemed like a matter of time before it would break through to the mainstream and compete with the likes of Facebook, Twitter and Instagram. However, over the past 12 months Snapchat’s growth has slowed significantly and many people are beginning to ask whether the once innovative social media app was nothing more than a passing fad.  In fact, it has been Instagram, not Snapchat, that really had its big breakthrough in the past year. Having implemented, or shamelessly copied as some would argue, Snapchat’s popular Stories feature, Instagram’s simple design appears to be more appealing to the broader public than Snapchat’s sometimes confusing user interface. The platform that Facebook acquired for $1 billion in 2012 recently passed the 1 billion active user mark.

Speaking of which…

Snap (SNAP) stock fell 6.8% Wednesday after the company issued quarterly guidance for the first time as well as reported a user decline.

The week ahead…

Retail sales hit Wednesday.

Will any of the “foreign weakness” matter?

The longest bull market on record hits in about a week!

Index charts:

Short term: The S&P 500 is holding its breakout – is that a double top in the NASDAQ??? Hmm – see the Russell 2000. 😀  A new high negates that thought in the NASDAQ.

This double top in the Russell 2000 continues to hold.

The NYSE McClellan Oscillator stayed in the red for a FOURTH week in a row (a full month).  When this happens it is usually a good idea for short term traders to go cautious but in this case the indexes have held up quite well.

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

Charts of interest / Big Movers:

Monday, SeaWorld Entertainment (SEAS) surged on positive earnings.

Pain Thereapeutics (PAIN) plunged 48% after the drug company said the U.S. Food and Drug Administration rejected its non-opioid drug.

Tuesday, Elon Musk tweeted Tesla (TSLA) was going to go private @ $420 a share – a pretty interesting (but legal) way to announce corporate news!

Zillow (Z) sank 15% after the company late Monday posted earnings and announced its acquisition of a mortgage lender.

Rite Aid (RAD) sank 12% Thursday after a merger between the retailer and Albertsons Cos. was called off.

Yelp (YELP) surged 27% after the review website late Wednesday reported better-than-expected earnings and raised its full-year profit outlook.

Roku (ROKU) jumped 21% a day after it reported better-than-expected revenue and unexpectedly swung to a narrow profit.

Friday, Redfin (RDFN) tumbled 22.4% a day after it forecast slower revenue growth in the third quarter.

TradeDesk (TTD) for the win… that’s TWO massive gap ups the past 2 earnings seasons and well ove 100% GAINS since May!!!

The fast-growing provider of programmatic solutions is hitting new all-time highs after posting strong second-quarter results following Thursday’s market close.   Revenue surged 54% to hit a record $112.3 million for the quarter. The Trade Desk’s own guidance three months ago was calling for just $103 million on the top line, 41% growth.  Marketers are taking to The Trade Desk’s algorithmic solutions, and several of its categories including connected TV, audio, mobile video, and mobile in-app saw their numbers more than double. Advertisers that come to the company tend to stick around. Customer retention has now clocked in north of 95% for 19 consecutive quarters.

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



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Strategies & Ideas

Jonathan Tepper Interview with Michael Covel on Trend Following Radio

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Jonathan Tepper
Jonathan Tepper

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Jonathan Tepper is co-author of “The Myth of Capitalism: Monopolies and the Death of Competition.” He is chairman of Variant Perception, a macroeconomic research group catering to asset managers and co-founded Demotix, a citizen-journalism photo newswire.

Tepper notes — Google and Facebook control over 70% of all search and linkage within the internet. Their algorithms are biased and guide users to go where they want them to go. Most need Google or Facebook to login to certain websites. So on a platform as vast as the internet, where is the competition?

There’s a lot of smart, wealthy, entrepreneurial focused people around the world – why are they not fighting back? There is virtually no interest by people in Silicon Valley to get into the search engine game. Any small competitor that tries to insert themselves into the industry gets bought out by their larger sized competitors. Jonathan encourages capitalism and companies becoming monopolies because of organic growth. Unfortunately, this is rarely how companies grow. Monopolies are usually formed due to political advantages and strong economic footholds. Jonathan describes the economy right now as “fake capitalism.”

What will it take to overturn a Google or Facebook or Amazon? Will they be dominating for the next 30 years? The central point of evolution is competition – the struggle for survival. In a perfect world, companies with the best and strongest traits would survive while the old and fat companies would die off rather than continue to thrive because of crony capitalism. Only time will tell if these mammoth sized companies will continue to push boundaries and prosper or if a younger more creative company will overthrow them.

In this episode of Trend Following Radio:

  • Technology monopolies
  • Capitalism
  • Airline monopolies
  • Anti trust laws
  • Federal Reserve
  • The banking system
  • Fake capitalism
  • The Antitrust Paradox
  • Patents

“Economic freedom is essentially a per-requisite to political freedom.” – Jonathan Tepper

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Weekly Market Recap Dec 09, 2018

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Bears are certainly showing the type of strength we haven’t seen in a long time.   A week ago at this time futures were surging on news of a “truce” for 90 days between China and the U.S. in their trade spat.  But the charts were still not saying lovely things despite a major rally the week prior.   And by Tuesday, darkness had descended back on the indexes, with another gut punch Friday.    A lot of emphasis was put on a long term Treasury yield dropping below a shorter term Treasury.

On Monday, the yield on five year government debt slid below the yield on three year debt, a phenomenon which has preceded previous recessions, and a sign that investors are more confident about current than future economic growth as the Federal Reserve raises rates.

The “two year” vs the “ten year” Treasury yield a lot of people like to watch and that hit its narrowest spread in 11 years.

There is no rush to be involved heavily in this market until this volatility sorts itself.    The obvious near term “upside drivers” now would be (a) a real trade peace between U.S. and China and (b) the market’s favorite thing – an easier Fed; in this case that would entail signals to the market that the rate hikes forecast for 2019 are no longer in the cards.   The latter is ALREADY being floated out to the investing community as the Fed has become a lackey for the market the past 20 years.

It’s always helpful to watch what major sectors are “strong” – in this case the type of sectors that institutional money flees into – utilities and consumer staples are holding up.

Meanwhile “growthy” areas like tech and industrials are sagging.

This whole move down was started by a spike in yields such as the 10 year – even with a big retreat this past week, the market did not respond positively.

This week was almost the exact opposite of the week prior with ~5% moves in the indexes either way week to week!  Now that’s some good ole volatility.  This week it was downward with the S&P 500 sinking 4.6% and the NASDAQ 4.9%.

On the economic front, ISM Services still came in a very healthy 60.7.  Readings over 60 aren’t too common; anything over 50 signals expansion.  Of course the market is a forward looking indicator.

As to the November employment data, the Labor Department estimated a gain of 155,000 vs expectations closer to 190,000.  The unemployment rate held steady at 3.7%, as expected. Average hourly earnings grew 6 cents per hour from October, or 0.2%, just shy of expectations, and grew by 3.1% year-over-year, their highest rate since 2009.

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

The week ahead…

Fun fact – there have been 57 1% moves in the S&P 500 in 2018 vs the very strange year of 2017 where the snoozer market only offered up 8 such days!  In terms of 2% moves, there were 0 in 2017, while there have been 16 in 2018.

The last Fed meeting comes the week after this (Dec 18-19) and one would expect more “leaks” about how 2019 is going to be more dovish than people expect.

Other than waiting for the leaks, watching the “flattening” yield curve will preoccupy the minds of many.

Index charts:

Short term: The S&P 500 spent exactly 1 session over our trend line (and the 200 day moving average) before getting crushed.  NASDAQ didn’t even try to go above the 200 day.  Looking at recent lows now becomes important – if those break, it would not be a positive.

The Russell 2000 still looks putrid.  It is now facing lows of February!

The NYSE McClellan Oscillator spent much of last week in the black actually – but for now this is not an indicator we are going to focus on a ton as the charts are saying negative things for now.

Long term: The NASDAQ is the chart that interests me as it has such a well defined channel.  Last week we said “So it appears 7500 is a good number to watch as a rally up and through that level would signal the index getting back in a channel it has been in for years!”

That didn’t happen – in fact the index got within a few points of 7500 – then was soundly rejected.  This is why charts are fun to evaluate.

Charts of interest / Big Movers:

Another rough week in brick & mortar retail:

Thursday, Children’s Place (PLCE) plunged 13%, hitting 13-month lows, after the retailer cut its earnings and margin outlook for the full year.

Friday Big Lots (BIG) traded down 23.1%, after a wider-than-expected third-quarter loss.

Also Friday, Ulta Beauty (ULTA) slumped more than 13%, after a Thursday evening earnings release that predicted weaker holiday sales that analysts hoped.

Altria announced it would take a 45% ownership stake in the cannabis firm Cronos Group (CRON).

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



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Follow the Opportunity with Michael Covel on Trend Following Radio

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Michael Covel
Michael Covel

Subscribe to Trend Following Radio on iTunes

Trust but verify. Do you listen to media, teachers, etc. and blindly trust the information given? When listening to information or insight it is ok to trust, but you must verify. The vast majority of people choose to never second guess the source.

Michael’s first aha moment with looking outside the box was discovering the turtle story. There were a few things that caught his interest about the story–the trading experiment was seemingly repeatable, that systematic kind of trading was teachable and doable for anyone, and many of those involved in the experiment had moved on and made fortunes. Discovering trend following through the turtles led to many other avenues for Michael, including this podcast. Michael shares some of those insights learned over the years, including what he has learned during the evolution of this podcast.

In this episode of Trend Following Radio:

  • Turtle story
  • Bayesian mindset
  • Going with the flow
  • Open to new opportunities
  • Trend following philosophy
  • Holy grails

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