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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 May 18, 2019

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China – U.S. trade talk continued to dominate the week.   A heavy selloff Monday was followed by 3 up days, with Friday moderately down.

On Monday, Chinese officials announced retaliatory tariffs against the U.S., hitting $60 billion in annual exports to China with new or expanded duties that could reach 25%.

Then on Wednesday:

The Trump administration plans to delay a decision on instituting new tariffs on car and auto part imports for up to six months, according to media reports.

Trump also called the most recent news “a little squabble”.

On the economic front, retail sales came in below par Wednesday.

Retail sales figures for April showed that U.S. retailers are seeing decelerating purchases for a second time in three months, declining 0.2% last month, compared with expectations for a 0.1% increase. Excluding autos, retail sales were flat for the month, versus expectations for 0.7% growth.

“The 0.2% [monthly] decline in retail sales in April was weaker than the consensus expectation of a small gain and supports our view that GDP growth is set to slow in the second quarter,” wrote Andrew Hunter, senior U.S. economist with Capital Economics.

For the week, the S&P 500 fell 0.8% and the NASDAQ 1.3%.

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

The week ahead…

Interesting data point:

Trading in fed-fund futures reflect a 74.1% chance of a rate cut this year, with a 32.1% probability of two or more rate cuts by end of 2019, according to CME Group. That is a sharp reversal from just two weeks ago, when the market gave a more than 50% chance that the Fed would hold steady through the remainder of the year.

As a “trade deal has become much less likely [in the near term], what the bond market sees as increasingly likely is the Fed easing policy, a net benefit to stocks,” Gary Pzegeo, head of fixed income at CIBC U.S. Private Wealth Management, said in an interview with MarketWatch.

Wednesday, the Fed will release minutes from its meeting that ended May 1.  A few major earnings reports are on the docket, mostly from retailers.

Index charts:

Short term: Both the S&P 500 and NASDAQ might have double tops in which would be bearish.  That would be erased by the index powering through those highs.

The Russell 2000 has been stuck in a range since February.

The NYSE McClellan Oscillator has been in the red for a few weeks now – that raises caution.

Long term: the S&P 500 actually bounced nicely off this trend lines that connects the lows of 2017 and 2018.

Charts of interest / Big Movers:

Beyond Meat (BYND) continues to impress post IPO.

Thursday, Cisco Systems (CSCO) rallied 6.7% after the networking- and telecom-equipment company reported quarterly results that topped Wall Street forecasts and delivered an upbeat revenue forecast.

Also Thursday, Dillard’s (DDS) slumped 10.5% following an earnings release that showed the department-store chain missing revenue projections for the first quarter, while same-store sales were flat.

Friday, Pininterest (PINS) sunk 14% after the social media company announced first-quarter losses of $41.4 million, which were three times as large as analysts had expected.

Deere (DE) fell 7.7% after the agricultural, construction and turf care equipment maker reported fiscal second-quarter earnings that missed expectations and provided a downbeat outlook.

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



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Thales Teixeria Interview with Michael Covel on Trend Following Radio

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Thales Teixeria
Thales Teixeria

Subscribe to Trend Following Radio on iTunes

Based on eight years of research visiting dozens of startups, tech companies and incumbents, Harvard Business School professor Thales Teixeira shows how and why consumer industries are disrupted, and what established companies can do about it—while highlighting the specific strategies potential startups use to gain a competitive edge.

There is a pattern to digital disruption in an industry, whether the disruptor is Uber, Airbnb, Dollar Shave Club, Pillpack or one of countless other startups that have stolen large portions of market share from industry leaders, often in a matter of a few years.

As Teixeira makes clear, the nature of competition has fundamentally changed. Using innovative new business models, startups are stealing customers by breaking the links in how consumers discover, buy and use products and services. By decoupling the customer value chain, these startups, instead of taking on the Unilevers and Nikes, BMW’s and Sephoras of the world head on, peel away a piece of the consumer purchasing process. Birchbox offered women a new way to sample beauty products from a variety of companies from the convenience of their homes, without having to visit a store. Turo doesn’t compete with GM. Instead, it offers people the benefit of driving without having to own a car themselves.

Illustrated with vivid, indepth and exclusive accounts of both startups, and reigning incumbents like Best Buy and Comcast, as they struggle to respond, Unlocking the Customer Value Chain is an essential guide to demystifying how digital disruption takes place – and what companies can do to defend themselves.

In this episode of Trend Following Radio:

  • Unlocking the Customer Value Chain: How Decoupling Drives Consumer Disruption

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Weekly Market Recap May 12, 2019

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Trade deal worries between China and the U.S. dominated the headlines all week.   A large gap down Monday morning due to some Trump tweets was mostly fended off as buyers came in hot and heavy.   A significant selloff ensued Tuesday.   The rest of the week ended up choppy but without significant end of day moves up or down.

Trump’s tweet Sunday night was:

For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions Dollars….

Then Friday those tariffs were announced as happening although there will be a grace period before they are instituted which market watchers believe is to allow time for the late stages of this trade agreement to continue.

“Goods currently in transit to the U.S. from China aren’t subject to the new 25% tariffs, just the old 10% tariff. That grace period was not included in previous rounds of tariffs and is likely an olive branch of sorts to the Chinese side,” Tom Essaye, president of the Sevens Report wrote. “Given shipping times, goods sent from China today will take two weeks or so to reach the U.S., so if a trade deal is stuck in that time frame, the pain of the 25% tariffs will never be felt.”

It was a poor week for the Chinese market.

Uber (UBER) IPO’d Friday and fell below the initial IPO price of $45.

No major economic news this week.

For the week, the S&P 500 fell 2.2% and the NASDAQ 3% – that broke a 6 week winning streak for the NASDAQ.

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

The week ahead…

We are through the bulk of earnings season but still some heavy hitters such as Walmart (WMT) are due soon.

Wednesday the retail sales report for April will be released, which could give investors a clue as to whether the slump that began in December was a temporary blip or the beginning of a worrisome trend.

Obviously the trade deal will continue to be a central focus.

Index charts:

Short term: The S&P 500 reversed at fall 2018 highs.  Some may call that a double top which is a negative.  But this market has made fools of everyone bearish for a decade.

The Russell 2000 has been stuck in a range really since February.

The NYSE McClellan Oscillator has been in the red for a few weeks now – it finally mattered this week.

Long term: Things are still strong longer term.

Charts of interest / Big Movers:

Monday, Sinclair Broadcast Group (SBGI) soared 35% to a record high, and the biggest one-day gain in 10 years, after the TV broadcasting company’s deal to buy regional sports networks from Walt Disney.

Tuesday, Mylan (MYL) fell more than 23% Tuesday, after the drugmaker reported a revenue shortfall that offset a profit beat.

Lyft (LYFT) slid 11% Wednesday after the ride-hailing company late Tuesday reported quarterly earnings for the first time since its initial public offering in March. The company reported first-quarter losses that were wider than expected, but revenue that topped expectations.

TripAdvisor (TRIP) sank 11% after the company posted first-quarter earnings that beat analysts’ expectations, but revenue that widely missed forecasts.

Thursday, Etsy (ETSY) sank 11% after the online marketplace reported first-quarter earnings Wednesday evening, with the company reporting profit and sales that grew more slowly that analysts had predicted.

Roku (ROKU) popped 28% Thursday following a Wednesday-evening earnings report that showed the streaming platform company beating earnings expectations for the first quarter, while it forecast second-quarter revenue that also beat estimates.

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



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