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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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Strategies & Ideas

Weekly Market Recap Mar 17, 2019

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A very good week for market bulls as the prior week’s selling was all reversed.  Last week we asked how many times can we rally on the same Federal Reserve juice.  It seems indefinitely.  Jerome Powell went on ’60 Minutes’ and talked dovish – that sparked a big rally Monday and it continued all week.  The only down day all week was Thursday when the progress on the U.S. – China trade deal seemed to hit a delay.

A meeting between President Donald Trump and Chinese President Xi Jinping will be delayed until at least April, Bloomberg News reported, indicating that a bilateral trade deal will not be finalized this month.  The news comes after Trump told reporters in the White House on Wednesday that he was in no rush to strike a trade agreement.

For the week, the S&P 500 added 2.9% and the NASDAQ rocketed 3.8%.

There had been a massive reversal a week ago Friday in the Chinese market, but it held in pretty well this week after a big move up.  This is an interesting chart to watch as all signs point to a slowdown in their economy but their central regulators are trying to juice the system as well.

Investors digested comments from Chinese Premier Li Keqiang, Beijing’s No. 2 leader after President Xi Jinping, who expressed optimism that a trade deal between China and the U.S. can be achieved that suits both parties.  Li also addressed weakness in the world’s second-largest economy and pledged to maintain strong stimulus measures, such as lowering interest rates, cutting bank reserve ratios, and slashing taxes for consumers and businesses.

Here is the 5 day weekly intraday chart of the S&P 500 … not via Jill Mislinski.

The week ahead…

The Federal Reserve’s two-day meeting hits March 19-20 – nothing but cheering for markets going up and more “patience” expected.

“The Fed is on pause and we don’t expect any major change to Fed Policy next week,” Ryan Detrick, senior market strategist for LPL Financial. “But we do wonder if they will follow Europe’s lead and lower GDP expectations as the global slowdown continues.”

Index charts:

Short term: The S&P 500 is once again touching our trendline from below – that’s the third time since mid February.

The Russell 2000 is starting to show signs of relative weakness vs the other 2 indexes.  That was a theme for almost all of 2018 although had not been the case the past few months.

The NYSE McClellan Oscillator was red all week – yet a massive rally.  Interesting.

Long term: The S&P 500 made a massive reversal after looking like bears may have made a stand on the long term chart.  Not so much.

Charts of interest / Big Movers:

Monday, Boeing (BA) had its worst day in nearly five months, falling 5.3%, after one of the company’s 737 Max 8 planes crashed.  It fell another 6.2% Tuesday as countries across the world began grounding those jets.

It was another rough week for brick & mortar retail.  Tuesday, Dick’s Sporting Goods (DKS) skidded 11% after the retailer reported a 6.3% decline in fourth-quarter sales.

Express (EXPR) sank 10% Wednesday after the fashion apparel retailer beat fourth-quarter profit expectations but missed on net sales and provided first-quarter outlook that was worse than forecasts.

Dollar General (DG) sank 7.5% after the discount retailer reported a fiscal fourth-quarter profit that missed expectations and provided a downbeat earnings and sales outlook.

Friday, Bioscrip (BIOS) sank 20% after the company announced a deal to merge with privately held Option Care Enterprises Inc.

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



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Dana Cavalea Interview with Michael Covel on Trend Following Radio

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Dana Cavalea and Mariano Rivera
Dana Cavalea and Mariano Rivera

Subscribe to Trend Following Radio on iTunes

Dana Cavalea is the former strength, conditioning and performance coach for the New York Yankees and author of, “Habits of a Champion, Nobody Becomes a Champion By Accident.” He started in baseball as an underperforming player, knowing he would never make it to the major leagues. In 2002, at 19 years old, he was given the opportunity to be a towel/weight room cleanup guy for the Yankee’s – he quickly jumped at the chance.

How did Dana make the move from towel guy to strength and conditioning coach? Core and functional training was just taking off in the world of sports. He committed himself to learning everything he could in that sports niche. Players would give him the chance to teach them different stretching techniques (on the side of their other training). His tips were working and players confidence in him and his confidence in himself snowballed.

Dana gave players two things other trainers weren’t providing: 1. He could find immediate ways to locate and alleviate pain. He took players like Jorge Posada and Derek Jeter and found where their pain was and gave them tips and tricks to help relieve some pain to get them on the field for their next game. 2. He built relationships with players outside of the stadium. Dana would go to breakfast, lunch and dinner with players and gain comradeship. When players know, like and trust you, you win them over.

As a New York native Dana grew up loving the game of baseball. And as a player himself, he always wanted to know what the pros “edge” was. His new book (and this podcast) is packed full of how players like Derek Jeter, Alex Rodriguez, Mariano Rivera, Mark Teixeira, Andy Pettitte, and Jorge Posada think. He shares what gives baseball’s elite players the edge needed to be a winner–lessons we can all use baseball players or not.

In this episode of Trend Following Radio:

  • Importance of routine
  • Derek Jeter
  • Talent vs. work ethic in pro sports
  • Science behind training
  • Yoga
  • Mindfulness
  • Meditation
  • Downshifting the nervous system

“Focus on the process and let the results create themselves.” – Dana Cavalea

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Weekly Market Recap Mar 10, 2019

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The non stop rally of 2019 finally hit some road blocks this past week.  The utter glee of a potential China-U.S. trade deal wasn’t enough for the market to rally on the same old news for yet another week; it has essentially rallied on that news for nearly a month.  “Patience” still makes everyone happy – but a dismal employment report Friday, the European Central Bank talking about more stimulus, along with horrid export data out of China had people a tad worried.

The ECB announced new measures to support a slowing economy, including a round of long-term loans to European financial institutions, while issuing a surprise pledge to hold off on any interest-rate increases until at least the end of the year.

China reported a 20% drop in February exports after a 9.1% gain in January. Officials blamed the plunge on sagging demand and some distortions from the Lunar New Year holiday. But economists said that even if those two months are added together, the data looked weak.

As we have been saying for about 6 months (lead by housing) it does seem the economic data is starting to get more sluggish and one wonders when the market sees that as a negative vs a positive i.e. the Fed will push up stock prices if we slow.  Looking out 2 years it does appear we are about to get hit with another flood of liquidity from central banks!

An avalanche of economic news this week – some of the highlights:

The Beige Book’s showed 10 of the central bank’s 12 districts seeing “slight-to-moderate” growth in late January and February. The partial government resulted in slower activity in about half of the districts, affecting a range of sectors, including retail, auto sales, real estate, restaurants, and manufacturing, according to the central bank.

“Trade wars are easy” and such….

The annual U.S. trade deficit soared to a 10-year high in 2018 of $621 billion, the Commerce Department said.  The deficit jumped nearly 19% in December to a seasonally adjusted $59.8 billion, according to a government report that was delayed by the government shutdown earlier in the year. That’s the single biggest monthly gap since October 2008.

The trade deficit with China shows no sign of shrinking. The U.S. ran a $419 billion deficit in goods with China in 2018, up almost 12% from a year earlier, based on U.S. Census figures. China accounted for almost half of the U.S. deficit in goods in 2018.

The Labor Department announced the U.S. economy added just 20,000 new jobs in February, well below the 178,000 forecast by economists.  Obviously a bit of a shock number but with the government shutdown, and wacky random outcomes month to month we will see what the revisions are down the road.   Construction was a big outlier to the downside which could be weather related.  The unemployment rate fell to 3.8% from 4%, while workers saw an 11 cent-an-hour increase in average hourly earnings, the largest gain since the end of the 2009 recession.

For the week, the S&P 500 shed 2.2% and the NASDAQ 2.5%.

We mentioned the breakout in Chinese stocks in last week’s recap – that continued…until Friday’s tragic reversal.

Here is the 5 day weekly intraday chart of the S&P 500 … not via Jill Mislinski.

The week ahead…

The market rally of the Federal Reserve (“patience”) has ripped off the heads of poor bears yet again.   Just in time for a pullback.  So we will see if this is some modest consolidation or one of those “the biggest rallies often occur within the context of downturns”.  Put another way, how many more times can we rally on Federal Reserve juice and the impending China-U.S. trade deal in the face of a very obvious slowing global economy.

Retail sales will be released this week – considering the dismal report last month, expect an upward revision and the short term oversold market can rally on that!

A lot of talk of the 10 year bull market will also ensue this week!

Index charts:

Short term: The S&P 500 at this point topped at our trend line which connected major lows in the index.  That’s pretty fascinating.

The Russell 2000 is was rejected by the 200 day moving average.

The NYSE McClellan Oscillator now calls for a cautious stance.  In fact we are short term oversold to begin the week.

Long term: If the S&P 500 is rejected at this level it might be the first long term stand bears have made in years.

Charts of interest / Big Movers:

Monday, shares of Children’s Place (PLCE) sank 10% after the children’s-apparel retailer reported fiscal fourth-quarter earnings and sales that were well below expectations.   The stock did recover decently the remainder of the week.

Wednesday, General Electric (GE) slumped 7.9% after Chief Executive Larry Culp told a broker-sponsored investor conference Tuesday that free cash flow in the industrial business would be negative in 2019.

Abercrombie & Fitch (ANF) rallied 20% after the apparel retailer beat fiscal fourth-quarter earnings and sales expectations and provided an upbeat outlook.

Thursday, Kroger (KR) sank 10% after the food-and-drug retailer announced fourth-quarter earnings that fell short of Wall Street expectations.

Friday, Big Lots (BIG) rallied 14% after the retailer reported fiscal fourth-quarter sales and profits that beat Wall Street estimates.

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



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