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Weekly Market Recap Nov 11, 2018

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This past week was saw another positive move up by bulls – especially in the Dow and S&P 500; the NASDAQ was not quite as enthusiastic.   Wednesday’s rally was on the legs of an election that was seen as market friendly or at least not as bad as it could have been.   Essentially – paying people a lot of money to get nothing done the next 2 years – woo hoo!

The market is interpreting Wedneday’s result as insuring that “no big things will get done,” in Washington between now and 2020, Craig Birk, chief investment officer at Personal Capital told MarketWatch. “The market appreciates the relative certainty of the slow legislative agenda.” he said.

“As President Trump plans his 2020 reelection campaign, a gridlocked Congress is unlikely to deliver any notable wins to help expand his agenda. Therefore, Trump will likely focus on his broad executive powers to affect trade and national security,” wrote Dec Mullarkey, managing director, investment strategy, Sun Life Investment Management, in a research note.

We are still seeing quite a bout of volatility – usually rallies that will last will settle into some sort of “calm” so we are not there yet.   In fact the move to the upside got so extreme mid week that the NYSE McClellan Oscillator actually went to overbought levels for the first time since spring (more on that below).

Nothing of note from the Federal Reserve Thursday – exactly as expected:

In a statement that was largely intact from its September meeting, the Fed said, “The Committee expects further gradual increases in the target range for the federal funds rate.” It also said the risks to the economic outlook “appear roughly balanced” and noted that inflation remains near its 2% target.

The absence of any major changes to its commentary suggests that the central bank plans to raise interest rates in December and plans three hikes next year, in line with market expectations.

Massive drop in oil the past few weeks!  Some contrasting thoughts on the implication of this selling can be found here.

U.S. crude oil prices settled in bear-market territory on Thursday, defined as a drop of at least 20% from a recent peak, and that decline may invite questions about the health of demand and the vitality of economies around the globe. Along with other key commodities, oil has often been used as a gauge of world wide vitality.

Willie Delwiche, investment strategist at R.W. Baird, said in an interview with MarketWatch that the oil’s bear market could be spooking investors. “Oil being down could be a sign that the global economy is in a tough spot,” he said.

For the week the S&P 500 gained 2.1% while the NASDAQ added 0.7%.

In economic news, the ISM services index slipped to 60.3 in October, down from 61.6 in September, but beating the 58.6 average estimate.  Still a very strong reading – anything over 50 marks expansion.

We don’t normally mention this one but Friday the producer-price index for October rose 0.6%, versus the consensus estimate of 0.2%. Excluding volatile food and energy prices, producer prices increased by 0.5%.  That’s a very “hot” number and one the Fed would be interested in.

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

This is a great infographic from Statista about those representatives we just elected.  The number of committee hearings about you know…actual policy… has fallen off a cliff vs 25 years ago.

Over time the legislative process has been breaking down, with less legislation getting into committees. According to Pro Publica, the count of committee hearings dealing directly with legislation has dropped significantly between the 101st Congress, governing between 1989-1990, and the 114th Congress, governing between 2015-2016. The number of Senate committee hearings dealing with legislation has fallen by about 85 percent over this period… the 114th Congress conducted about 72 percent fewer committee hearings dealing with legislation than the 101st Congress did.

The week ahead…

Earnings season is coming to an end and we are in a bit of an impactful economic news drought here aside from retail sales hitting Thursday.  Technical traders should be watching how these recent rally acts – can markets go sideways for a while before a new leg up.  Or was that rally the oversold bounce and can bears – for the first time in eons – impart their will over a sustained period of time.

Index charts:

Short term: The S&P 500 obviously had the better week – both indexes crossed over their 200 day moving averages but only the S&P 500 held it by end of week.  So the question of the week of course is “is this the beginning of the rally or was THAT the oversold bounce?”  These next few weeks will be very interesting as a bullish take can be we have an “inverse head and shoulders” forming (if the market can go sideways for a bit) while a bearish take would require another bout of selling – and then creating a new low below the one seen at end of October.  No one knows today but those are some of the things to watch!

This Russell 2000 continues to act poorly – this long trend line connecting lows of August 2017 and February 2018 served as resistance this week – the index rallied to it and was rejected.  The 200 day moving average is about to get crossed by the 50 day moving average which is seen as a negative in technical terms as well.  This chart reflects the smaller and mid sized public companies in the country – which are far less multi national – so it’s interesting to observe how much weaker it has been this past year.  Especially if you believe markets forecast the future ….

The NYSE McClellan Oscillator is in the black – not only that it hit its first overBOUGHT level since Spring Wednesday.  It’s difficult to quite trust this with the technical damage done on the charts but usually it does signal a positive sign when it’s positive.

Long term: The S&P 500 looks to be in decent shape here but the NASDAQ continues to trail at the bottom end of this long term channel so it’s the one to keep an eye on the next month.  Any reversal back down that sustains would mark a big change in character.

Charts of interest / Big Movers:

CVS (CVS) rose 5.7% Tuesday after the drugstore and health care company announced 6.7% same-store-sales growth for the third-quarter.

E.l.f. Beauty (ELF) rallied 19.2% Tuesday, after its Monday-evening earnings report showed the cosmetics company producing third-quarter projections for revenue and profits that were better than expected. The firm also raised its full-year guidance for 2018.  Now we eagerly await results from Hobbit Beauty….

Generic drug maker Mylan (MYL) rose 16.1%, after the pharmaceutical company announced Monday evening that its profits more than doubled in the third quarter from the year previous.

Michael Kors (KORS) tumbled 14.6%, after the fashion luxury group missed revenue expectations in a Wednesday morning earnings release.

Office Depot (ODP) popped 24% after the company announced revenue and sales figures Wednesday morning that beat analysts’ third-quarter estimates. The office-goods retailer also raised its full year guidance for 2018.

Wynn Resorts (WYNN) sank 13% Thursday after an earnings call late Wednesday during which CEO Matthew Maddox said he anticipates a “soft” market in the fourth quarter for its Macau business line.  Been a rough 6 months for this stock!

TripAdvisor (TRIP) surged 15% Thursday after it released better-than-expected earnings.

Yelp (YELP) tumbled 26.6% Friday, after the companymissed Wall Street sales targets and lowered fourth-quarter guidance, in a Thursday evening release.

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



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Strategies & Ideas

Weekly Market Recap Feb 17, 2019

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The “V” shape bounce continues in unrelenting fashion as bulls are stampeding bears in 2019!  All due to a little “patience” from the Federal Reserve.  It is really quite breathtaking but we have seen it repeatedly the past decade as the Federal Reserve pours gas on the market.  Hopes for a deal with China also spurred the action upward.  Rallies (both with gap ups) on Tuesday and Friday provided the juice this week.   The S&P 500 is back over its 200 day moving average after being below for 46 days – it’s longest period of time below that level since March 2016.

Mat Klody, chief investment officer at Keebeck Wealth Management, told MarketWatch that the major benchmarks’ steady march higher since the beginning of the year is being driven “by the perception that the Fed has done a complete 180” in its apparent dovish turn, after raising rates four times last year.

U.S.-China trade talks wrapped up Friday in Beijing, with reports that negotiators remained deadlocked over key issues, but were set to resume discussions next week in Washington — viewed as a sign that both sides were eager to reach a deal ahead of the March 1 deadline.

In economic news, retail sales plunged 1.2% the largest single-month decline since 2009 and well below the flat growth expected by economists.  That said the market isn’t concerned with such things as it’s all about the Federal Reserve giving out goodies.   It will be interesting to see if there is a big jump next month as a “reversion to mean”.

Sales fell in every retail category except auto dealers and home centers. What’s was surprising was a 3.9% reported decline in sales at internet sellers. That would mark the sharpest drop since November 2008 — the middle of the last recession. Sales also fell at bars, restaurants, apparel stores, grocers, home furnishers, pharmacies and outlets that sell hobby items such as books and sporting goods.

“The consumer is no longer enjoying tax cuts or falling gas prices, but that’s no reason to expect a rollover,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.  “It’s a puzzle. Strong job gains, wage growth, and the drop in gasoline sales should be very supportive of consumer spending growth,” added Scott Brown of Raymond James.

For the week the S&P 500 gained 2.5% and the NASDAQ 2.4%.  That is 8 up weeks in a row!

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

The week ahead…

More talk about the US-China trade talk and seeing if the market can go down for a week.

Index charts:

Short term: the S&P 500 didn’t have much trouble with that 200 day moving average – the low 2800s is the next interest spot.  The NASDAQ is where the S&P 500 was a week ago.

Unlike 2018, the Russell 2000 seems to be patterning itself pretty closely to the S&P 500 and NASDAQ of late.

After 5 weeks in a row at abnormal levels of overbought the NYSE McClellan Oscillator is now just at a normal overbought level!

Long term: The S&P came a touch over our very long term weekly trend line.

Charts of interest / Big Movers:

Tuesday, Coty (COTY) jumped 13% after JAB holdings announced its plans to commence a tender offer to acquire 150 million shares of the company at a price of $11.65 a share, versus Monday’s closing price of $9.66 per share.

Molson Coors Brewing (TAP) slid 9.4% Tuesday after the beer maker reported higher-than-expected, fourth-quarter earnings but missed Wall Street’s revenue forecasts.

Thursday, Coca Cola (KO) fell 8.4% Thursday after the beverage giant reported results that showed the company falling short of fourth-quarter revenue expectations.

Bloomin’ Brands (BLMN) jumped 9% after the parent company of Outback Steakhouse reported fourth-quarter profits and sales that surpassed Wall Street expectations.

Six Flags (SIX) tumbled 13% after the firm reported weaker-than-expected fourth-quarter earnings.

Friday, Newell Brands (NWL) skidded 21% after the consumer-products company beat fourth-quarter earning and revenue expectations, but offered a downbeat outlook for 2019.

Also Friday, Mattel (MAT) tumbled 18.3%, notching its worst daily drop since Oct. 4, 1999, when shares cratered 29.6%. Friday’s decline for the toy maker came after it revealed that sales would remain flat this year.

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



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Ethan Kross Interview with Michael Covel on Trend Following Radio

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Ethan Kross
Ethan Kross

Subscribe to Trend Following Radio on iTunes

Ethan Kross is a professor of psychology at the University of Michigan. His research seeks to “Understand factors enabling people to adaptively regulate triggered impulses and emotions that undermine their goals and compromise their health.” He wants to resolve a key paradox in coping literature by finding insights and translating those insights to the rest of the world.

What got Ethan into studying behavior and how the mind works? Around the age of 4 or 5, whenever Ethan would get upset, his dad would ask him to “go inside” and look within himself to figure out why he was feeling how he was feeling. For years Ethan would do this as a positive coping mechanism. When he got to college he learned that when most look inside themselves to dig deeper, this takes them to a negative place. Introspection seemed to only prolong their negative feelings. This resonated with him and started him down his current path of asking “Why?”

Much of his work is focused on social media. In early 2010 Ethan became increasingly interested in Facebook. He found himself looking around his classroom and in the hallway–relentlessly seeing students with open Facebook windows on their phone. He wondered: “Are these students happier now that they have social media in their lives?” Ethan started digging and found research that was all over the place. Some studies would say, “People who are on Facebook are more happy” and then he would come across another study saying the complete opposite. He concluded that the methods in which those studies were using to gather data were grossly inefficient.

In this episode of Trend Following Radio:

  • Thinking objectively
  • Passive and interactive activities on social media
  • Experian sampling
  • Regulation on social media
  • LeBron James move from the Cavaliers
  • Self talk
  • Dealing with problems under stressed.

Mentions & Resources:





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Weekly Market Recap Feb 10, 2019

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A good week for the bulls once again as a very overbought market essentially went sideways to help work off some of those near term extreme conditions.  The S&P 500 stalled exactly at the 200 day moving average after a frantic rally the past month and a half.  It was generally a quiet week with lowered volatility as the word “patience” continues to have the investor class in a happy daze.

In economic news, ISM Services fell from 58.0 in December to 56.7 last month, below economists’ expectations of a 57.4 reading. A reading above 50 indicates an expansion in activity.

For the week the S&P 500 gained 0.1% and the NASDAQ 0.5%.  That is 7 up weeks in a row.

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

A couple of interesting infographics in regard to Facebook (FB) from Statista.  First the growth of employees – 2018 was pretty amazing growth for an already large company.

Second is how Facebook properties are dominating the newest area in social media: stories.

First introduced on Instagram in August 2016, the Stories format was heavily “inspired” by one of Snapchat’s most popular features and gradually found its way to all of Facebook’s social media and messaging apps.  All of Facebook’s stories features, i.e. Instagram Stories, WhatsApp Status (which might as well have been named Stories too) and Facebook Stories have surpassed Snapchat in terms of daily active users by now, regardless of whose idea it originally was. The ongoing shift towards stories at the expense of feeds in social media poses a new challenge for Facebook, because it’s unclear whether the new format can be monetized as effectively as the news feed.

The week ahead…

Earnings will begin to slow down, and move to the smaller type of companies.  The Fed remains on hold for half a year at minimum it seems.  News flow seems like it will be light with perhaps a nod to China-US trade talks.

Index charts:

Short term: the S&P 500 rallied exactly to the 200 day moving average.

Unlike 2018, the Russell 2000 seems to be patterning itself pretty closely to the S&P 500 and NASDAQ of late.

This is the 5th week in a row the NYSE McClellan Oscillator remains ABOVE the level it usually stalls out at: +55 to +65.

Long term: The S&P rallied exactly to our trend line which connects the major lows of 2017 and 2018, before stalling a tad.

Charts of interest / Big Movers:

Monday, Ultimate Software Group (ULTI) soared 20% after it agreed to be bought by an investor group led by Hellman & Friedman in an all-cash dealvalued at about $11 billion.

Tuesday, Estee Lauder (EL) rallied 12% after the cosmetics company posted fiscal second quarter earnings and sales beats and raised its full-year outlook.

Ralph Lauren (RL) jumped 8.4% Tuesday after the luxury lifestyle brand reported fiscal third quarter earnings and revenue that beat expectations.

Wednesday, Snap (SNAP) surged 22% after posting record quarterly revenue and narrowing its loss on the back of a boom in online advertising.  This one has been a massive disappointment since its IPO.

The power of Fortnite!  Electronic Arts (EA) sunk 13% Wednesday after the company missed holiday-season sales estimates and issued a downbeat outlook.  Apparently this was due to it’s major gaming release not having a “battle royale” component in initial release – i.e a copycat to Fortnite.  However Friday the company announced that battle royale game Apex Legends drew 10 million players in its first 72 hours.

Thursday, Chipotle (CMG) soared 11% after the restaurant chain reported adjusted quarterly earnings above expectations.

Twitter (TWTR) skidded 9.8% after the firm issued a downbeat outlook for the current quarter, while announcing it would stop reporting the monthly average user metric.

Mattel (MAT) shares were up 23% after beating Wall Street revenue and earnings forecasts.

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



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