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Weekly Market Recap Jul 01, 2018

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In last week’s recap we noted the NYSE McClellan Oscillator has been negative all that week, which was a caution flag for short term traders.  Higher volatility and a downward skew did indeed follow.  Monday and Wednesday were big down days, offset a bit by a moderate rally Thursday.   Monday’s weakness was mostly triggered by TRADE WARS!!(tm):

In a Twitter post Sunday, Trump called on trading partners to remove their “trade barriers and tariffs or be met with more reciprocity by the U.S.”

On Friday, Trump’s threatened to impose 20% tariffs on European cars in response to the EU’s decision to impose 25% tariffs on more than $3 billion worth of U.S. goods as retaliation for U.S. tariffs on steel and aluminum that the Trump administration put into effect on June 1.  On Saturday, EU Commission Vice President Jyrki Katainen told the French newspaper Le Monde that “If they decide to raise their import tariffs, we’ll have no choice, again, but to react,” according to Reuters. “We don’t want to fight (over trade) in public via Twitter. We should end the escalation.”

For the week the S&P 500 closed down 1.3% while the NASDAQ retreated 2.4%.  Keep in mind the NASDAQ was well ahead of the S&P 500 the past few weeks so some “reversion to mean”.  For the quarter the S&P 500 gained 2.9% and is up 1.7% year to date.  Meanwhile the NASDAQ was up 6.3% for the quarter while it is up 8.8% year to date.

Most economic data was not market moving but it is worth noting orders for durable goods fell 0.6% in May following a revised 1% decline in April, driven by a drop in new orders for trucks and cars.  Stripping out planes and cars, orders fell 0.3%. Transportation often exaggerates the ups and downs in orders because of lumpy demand from one month to the next.

GDP in Q1 was revised down to 2% from 2.2%.

We mentioned the divergence between small caps in the Russell 2000 and the multi national giants in the Dow Jones Industrial Average in last week’s recap.  It is worth noting again that chart for the DJIA as it’s the weakest of the bunch (by good margin) and actually fell below it’s 200 day moving average this past week.

Oil was VERY strong all week as the U.S. threatened to sanction countries who do not cut their imports of Iranian oil to “zero”.  Prices are at levels last seen in 2014!

A “total stop [of Iranian exports] is unlikely to happen but the more aggressive tone [from the U.S.] suggests there may be a much bigger reduction in Iranian flows than the market has so far priced in,” analysts at consultancy JBC Energy wrote in a note Wednesday.  Iran currently exports around 2.4 million barrels a day of crude. Analysts had estimated that anywhere between 400,000 to a 1 million barrels could be at risk once sanctions are fully reinstated in six months.

About that Bitcoin…. ouch.

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

Another great infographic from the Visual Capitalist on the world’s largest exporters.  I bet many people would have some difficulty guessing who is #3 after China and the U.S. and almost no one would guess #5!

The week ahead…

Economic data comes back to light with ISM Manufactuirng Monday, and non manufacturing Thursday.  June employment data hits Friday with expectations of 195K jobs created and 3.8% as the unemployment rate.  Let’s see if TRADE WARS!!! ™ continues to weigh.

Index charts:

Short term: We mentioned last week to “watch 2740” on the S&P 500 which was the breakout level to hold; that failed immediately Monday which would be another sign to be near term cautious.   The NASDAQ had sprinted ahead of the S&P 500 but was not immune last week and indeed fell to its own 50 day moving average Thursday before bouncing a bit.

The Russell 2000 remains impressive.

Still significantly in the red on the NYSE McClellan Oscillator so another week of remaining cautious (having more cash than normal) if your timeframe is shorter term.

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

Charts of interest / Big Movers:

Trump spent much of the week belittling Harley Davidson (HOG) which announced that EU tariffs on the company’s motorcycles increased to 31% from 6%, and will raise the cost of the average motorcycle shipped to the EU from the U.S. by about $2,200.

Tuesday, General Electric (GE) rose 7.8%; it’s biggest one day pop since April 2015. The gain came after the industrial conglomerate said it plans to spin off its health-care business and unload its ownership in oil-services company Baker Hughes.  Been a rough year for this stock as it’s fallen off about 50% in the past 12 months!

This week in the biotech lottery, Aquinox Pharma (AQXP) Wednesday fell a cool 85% after the company’s cystitis drug trial failed to meet its main goal.

Another lottery loser – Arsansis (ASNS) plummeted 78% Thursday after it said it was discontinuing a Phase 2 trial of a treatment for pneumonia in high-risk, mechanically ventilated patients after determining that it was unlikely to meet its main goals.

What’s old is new again?  BJ’s Wholesale Club (BJ) surged 29% in it’s trading debut Thursday. The operator of 215 warehouse clubs in 16 states, largely along the eastern seaboard, is returning to the public markets after a seven-year spell as a private company.

Friday, Nike (NKE) soared 11% to a record high, after the athletic apparel company reported upbeat results and announced a $15 billion share buyback plan.

Not big movers but note the charts holding up in volatility – they usually rally the best once market conditions return to positive.

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



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Markets and Profit with Michael Covel on Trend Following Radio

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Do people really buy that many books? Yes!
Do people really buy that many books? Yes!

Michael dives into markets, profit and critics.

***

It might sound pedantic or perhaps that I am focusing on the extraneous, I am not: A speculator’s ability to receive a price they can count on as fact—is the foundation of markets. Said another way, with no price, humanity is back to cavemen beating each other with clubs. Austrian economist Ludwig von Mises puts price discovery’s value in perspective: “It is the very essence of prices that they are the offshoot of the actions of individuals and groups of individuals acting on their own behalf. The catallactic concept of exchange ratios and prices precludes anything that is the effect of actions of a central authority, of people resorting to violence and threats in the name of society or the state or of an armed pressure group. In declaring that it is not the business of the government to determine prices, we do not step beyond the borders of logical thinking. A government can no more determine prices than a goose can lay hen’s eggs.”





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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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