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Weekly Market Recap Jun 3, 2018

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After 2 weeks of low volatility, that variable was introduced back into the holiday shortened week!  Another change from 2017 when almost every week was a low volatility week.   That said, small caps (Russell 2000) and tech stocks held in quite well and we don’t have any major technical change in the indexes – more on that later.

“Political drama in Italy” was what caused some ruckus Tuesday when traders returned from the long break.

“Today’s selling is happening on a larger volume, which is concerning. It means that investors are now worried about contagion from the fallout in Italy,” said Joe Saluzzi, partner and co-head of equity trading at Themis Trading.

And then Wednesday it was “not so much” as indexes rebounded.  With a “gap up” pre market. (A coalition government was formed later in the week).

“The fact that the market is shrugging off Italy’s political drama suggests that maybe it was a crowded trade that was being unwound and not something more serious,” said Michael Antonelli, equity sales trader at Robert W. Baird & Co.

Ah, she is a mercurial beast.

Thursday, TRADER WARS!! ™ were back on the forefront as the U.S. decided to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico.  Canadian Prime Minister Justin Trudeau said Ottawa would impose a 25% tariff on steel imports from the U.S., a 10% tariff on aluminum and other U.S. goods.

Friday, a Trump tweet about the employment data led to a “gap up”.

For the week the S&P 500 closed up 0.5% while the NASDAQ added 1.6%.  Second straight week of big outperformance by the NASDAQ.

Wednesday, the first revision of Q1 gross domestic product  showed the U.S. economy grew a touch softer than originally reported, mainly because of a slower buildup in inventories. GDP was trimmed to an annual 2.2% pace from 2.3%.  The Federal Reserve said in it’s “beige book” that the U.S. grew “moderately” from late April to early May.  ISM Manufacturing rose to 58.7 which is a quite strong number.

Friday’s employment report was a bit more positive than expectations with 223,000 new jobs created in May, while the unemployment rate fell to 3.8%. Wage growth was modest, with the yearly rate of pay rising to 2.7% from 2.6%.

“The market wanted a goldilocks jobs report and that’s exactly what May’s report was. The economy is still adding jobs but wage growth and inflation are not at extreme levels,” said Lisa Erickson, head of traditional investments for U.S. Bank Wealth Management.

“The latest jobs numbers only reaffirm the Fed’s plan to raise interest rates twice more this year — one in June and one in September, with a 50/50 chance of third hike in December,” said Wouter Sturkenboom, senior investment strategist at Russell Investments.

Probably the most interesting part of the report was Trump “front running” the news with a tweet that many read as signaling positive…

Financials had a rough week as the drop in Treasury yields hurt prospects for some fatter margins.

These market favorites just look so strong again….

Here is the 5 day weekly “intraday” chart of the S&P 500 …via Jill Mislinski.  (please note she transposed the words Thursday & Tuesday)

A lot of you folk are borrowing a LOT of money on new cars!

In the first quarter of this year, the average monthly loan payment for a new vehicle climbed $15 compared with last year, hitting an all-time high of $523, according to Experian. The credit analysis company’s review of new and open auto loans for the first three months of this year found buyers of new cars, trucks and SUVs borrowed an average of $31,453 — also a record high.

Experian says the average length of an auto loan in the first quarter was just over five years and nine months.

The week ahead…

Tuesday brings ISM Services but overall it appears not too much eye opening lays ahead outside of TRADE WARS!!(tm) – we’ll see if volatility dies down.

Index charts:

Short term: The S&P 500 remains mostly range bound and has for a few weeks, meanwhile the NASDAQ is looking a bit more spiffy of late.

The Russell 2000 has been the best of the bunch.  So far in 2018, the Russell is up 7.3% to the S&P 500’s 2.3% rise.

The NYSE McClellan Oscillator remains in a positive spot.

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

Charts of interest / Big Movers:

Wednesday, retailer Michael Kors (KORS) skidded 11% after the fashion house posted its results but investors are more concerned with weak sales growth going forward.

Meanwhile, Dick’s Sporting Goods (DKS) jumped 26% after the retailer reported first quarter earnings and revenue that beat expectations and raised its guidance.

Thursday, General Motors (GM) surged 12.9% after the car maker said the SoftBank Vision Fund plans to invest $2.25 billion in its self-driving unit.   Now the company just needs to announce it is using “block chain” to develop the self driving cars and the stock should double overnight.  Or was that a 2017 thing???

Hmmm even the discount retailers are getting hit on earnings – #AMAZON’D

This one has been in a death spiral for years – Sears Holdings (SHLD) fell 12.5% after the department store chain swung to a fiscal first-quarter loss and revenue fell sharply.   Seems like a likely candidate to some day be #TOYSRUS’D.

Yoga pants are still in fashion and Lululemon (LULU) late Thursday reported forecast-beating earnings and issued better than expected guidance.

Zuora (ZUO) soared 21% after the business-subscription software company late Thursday announced results and an outlook that topped expectations.

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



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“One nagging concern I’d like to ask you about…”

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Hi Mike,

Love your work and am a subscriber about to begin trend trading myself. One nagging concern I’d like to ask you about. I’ve read about every piece of material you’ve written and watched computerized trading’s rise to prominence since you started writing. In today’s computer programmed trading environment can a newbie today equipped with your teachings still succeed?

Thanks for your thoughts on this. I’m sure it’s a common question.

My longer answer is here.

Michael Covel and Larry Hite
Michael Covel and Larry Hite





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Weekly Market Recap Jun 17, 2018

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After two weeks of rallies, the S&P 500 mostly consolidated this week – except for Friday the action was very reminiscent of 2017 with almost no volatility at all intraday and modest gains or sideways action.  Friday was the wrench in the mix, with a gap down to open the day but buyers came in during the afternoon and in the end the markets had a week to digest prior gains.  Friday’s action was due to TRADE WARS(tm)!

President Donald Trump approved tariffs on about $50 billion of Chinese goods, marking the latest escalation in the trade spat between the two countries. Beijing has said it intends to assess tariffs on a corresponding amount of U.S. goods, while Trump said the U.S. would pursue more tariffs if China retaliates. Subsequently, Trump said there was no trade war with China.

The Federal Reserve did what it had telegraphed what it would do:

The Federal Reserve voted to raise its benchmark federal funds rate by a quarter percentage point to a range of 1.75% to 2%. Eight of 15 Fed officials now expect at least four rate hikes will be needed this year, up from seven at the March meeting.

The Fed’s dot plot, a projection by the members of the central bank’s expectations for rates in the future, shows the policy-setting Federal Open Market Committee penciling in two additional rate increases in 2018 for a total of four increases in the year. That is up from expectations from three in the March Fed rate estimates.

More interesting this week was the European Central Bank which Thursday left interest rates unchanged and laid out plans to taper its program of monthly bond purchases later this year. The central bank is aiming to bring them to a halt by the end of 2018.   There was no “taper tantrum” by markets, as we saw in the Bernanke era.

“The ECB did a pretty good job telegraphing what it’s planning to do. [ECB President Mario] Draghi is following Ben Bernanke’s playbook, with a zero-interest-rate policy, bond buying, and then eventually shrinking the central bank’s balance sheet. When we did all that, our market continued to move higher, which gives investors confidence that the blueprint they’re following is the correct one,” said Phil Orlando, chief equity market strategist at Federated Investors.

For the week the S&P 500 closed up fractionally while the NASDAQ added yet another 1.3%!

On the economic front the consumer price index popped 0.2% in May; some funny headlines out there about that being the “hottest in 6 years!” – it’s an annualized rate of 2.4%… woo hoo.

The increase in the cost of living last month was spearheaded by the rising cost of gasoline, medical care and shelter — rent and home prices.  The cost of medical care has accelerated again after a slowdown toward the end of 2017. Ditto for rents and home prices.

Meanwhile the producer price index did surge 0.5% in May on the back of the big jump in oil.  Core producer prices that exclude food, energy and trade rose a much smaller 0.1% last month.

Retail sales jumped 0.8%, double expectations.

“U.S. households are back to their free spending ways, with the strength of May’s retail sales figures implying that second-quarter real consumption growth (and GDP growth for that matter) will now be more than 4% annualized. With the benefit of the tax cuts, strong employment growth and a slow acceleration in hourly wage growth, consumption growth should remain strong going into the second half of this year,” said Paul Ashworth, chief U.S. economist at Capital Economics.

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

Speaking of oil, the chart has a bit of a “bear flag” look to it which should make consumers happy if it fulfills.  Turn the chart upside down and looking at the most recent period you’d love to see that chart action if you were a bull – i.e. a breakout, consolidation with a minor pullback, then a push forward Friday.  Of course we are not looking at the chart upside down so it might bode well for bears – we shall see.

The week ahead…

No major economic news – trade war concerns certainly could pop up again.

Index charts:

Short term: The S&P 500 was quiet while the NASDAQ continued to churn up.

The Russell 2000 was steady as a rock in a consolidation phase after a huge run.

The NYSE McClellan Oscillator went slightly negative late in the week but not enough to raise eyebrows yet.

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

Charts of interest / Big Movers:

Monday, Sempra Energy (SE) jumped nearly 16% after activist investors Elliott Management and Bluescape Resources revealed a “value creation” strategy for the company.

Tuesday, Lands’ End (LE) soared 27% after the retailer said its first-quarter sales got a 12% boost from sales of uniforms to Delta Air Lines.

In this week’s biotech lottery, Galmed Therapeutics (GLMD) surged 151% Wednesday after successful trial results of its drug to treat nonalcoholic steatohepatitis.  You can say that again.

Thursday, Tailored Brands (TLRD) tanked 22% after the retailer late Wednesday reported comparable sales below analyst forecasts.

Also Thursday, Etsy (ETSY) jumped 26% after the company raised its 2018 revenue growth guidance range to 32% to 34% from the range provided last month of 22% to 24%.   Etsy said the increased guidance comes as it plans to increase the transaction fee it charges when a seller makes a sale. The fee was previously 3.5%, but will increase to 5.0% on July 16.

Go Twitter (TWTR) go!

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



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“I assured him it’s part of your raw charm…”

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Hola Michael,

Here’s a fun comment to brighten your day. I often drive to pick up my son from School in Singapore and we listen to Trend Following Radio. Today you dropped a few F-Bombs and I explained to Vaughan (age 10 named after Stevie) that you’re a little rough around the edges at times; to which he responded, “Maybe we should sand him.” But I assured him it’s part of your raw charm and no need.

Great stuff on the podcast as always. As a like minded American on year 12 of my expat adventure in Singapore, I too enjoy the “low noise” and high excitement in Asia. Look forward to catching up for a great Vietnam coffee at the Hyatt one day (no crappy clear Asian beer for me either). I know we’ll have a lot of cool stuff to chat about as I’m a crazy serial entrepreneur trying to live the dream. Actually not trying, Doing. Got no complaints.

Keep up the awesome podcasts and if Jim isn’t in town your next trip to Singapore just give a shout and we’ll chew the fat, literally. The American club just opened a proper Texas BBQ restaurant poolside and as a native Texan I give it my full approval.

Cheers
[Name]

Thanks!

My early baseball career forever burdened me with some occasional raw language.

The Trend Following Team
The Trend Following Team





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