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Weekly Market Recap May 27, 2018

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The second week in a row of low volatility which is usually advantage bulls.  Monday saw a nice spike up for indexes and then the other four days of the week the range was very narrow.  Monday’s rally was due to the lessening chance of TRADE WARS!!(tm):

Treasury Secretary Steven Mnuchin said over the weekend that the Trump administration would delay implementation of tariffs on Chinese goods and “put the trade war on hold” while working out details of a deal between the countries.  At the end of trade negotiations that weekend, China agreed to buy larger amounts of U.S. goods to help narrow the trade deficit between the two economies, but didn’t agree to the specific U.S. target of $200 billion.

News was generally quiet but we did get the Fed minutes late Wednesday which were considered market positive.

Federal Reserve officials in their meeting in early May confirmed they planned to raise interest rates in June and were not concerned they were behind the curve on inflation.

“Most participants judged that if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation,” the minutes said

Although inflation hit the Fed’s 2% target in the latest reading for March, for the first time in a year, officials were not convinced it would remain there for long.

“It was noted that it was premature to conclude that inflation would remain at levels around 2%, especially after several years in which inflation had persistently run below the Fed’s 2% objective,” the minutes said. Only a “few” officials thought inflation might move “slightly” above the 2% target.

For the week the S&P 500 closed up 0.3% while the NASDAQ added 1.1%.

Outside of some housing reports, economic news was sparse.

Treasury yields dropped back down the 2.9% range this past week after popping to 3.1% the week before.

The dollar chart continues to strengthen.

After FIVE+ weeks of great action in the oil chart we finally saw some stumble Thursday, and then a sharp reversal Friday as there were reports that OPEC and Russia may increase production.

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

Apparently there are 101 people with over $1M in student loans….

Due to escalating tuition and easy credit, the U.S. has 101 people who owe at least $1 million in federal student loans, according to the Education Department. Five years ago, 14 people owed that much.  While the typical student borrower owes $17,000, the number of those who owe at least $100,000 has risen to around 2.5 million, nearly 6% of the borrowing pool, Education Department data show.

Warren Buffet’s empire in one infographic (click to enlarge)

The week ahead…

Markets will be closed Monday in observance of Memorial Day.  Friday brings ISM manufacturing and the May employment report with 190K jobs expected to have been created.

Index charts:

Short term: The S&P 500 is consolidating while the NASDAQ tipped its head over this trend line connecting highs of the year.

The Russell 2000 held its breakout.

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:

Tuesday, home builder Toll Brothers (TOL) slumped 9.6% after the building company posted a 10% fall in second-quarter profit on higher impairment charges, and said gross margin fell.

Micron Technology (MU) rallied 6.4% Tuesday after the company raised its third-quarter outlook and announced a large stock-buyback program.

It was a good week for “luxury” as Tiffany & Co (TIF) jumped 23% Wednesday after it reported first-quarter results that came in above expectations .  Meanwhile Ralph Lauren (RL) rallied 14% after it posted fourth-quarter earnings and revenue that topped analyst forecasts.

Friday, Foot Locker (FL) soared nearly 20.2% after profit and sales for the sportswear maker beat forecasts.

Zoes Kitchen (ZOES) plunged 40% after the restaurant chain posted a bigger-than-expected first-quarter loss.

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



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Strategies & Ideas

“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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