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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

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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