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Weekly Market Recap Oct 14, 2018

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Wednesday and Thursday finally brought some fireworks to a very complacent market.   The S&P 500 had not had a 1% move in 74 days until Wednesday’s drawdown.

Rising yields were nailed as the culprit but months of rallying eventually require some sort of shake out – whatever the catalyst.  Wednesday’s sell off was the worst day for the S&P 500 since February and the worst for the NASDAQ since June 2016.

The market losses are “a reaction from investors finally realizing we are in a higher interest-rate environment, and given the elevated level of stocks, market participants were likely looking for a reason to sell,” said Charlie Ripley, senior investment strategist for Allianz Investment Management. “Higher interest rates typically bring on tighter financial conditions which could dampen growth going forward and equity markets are reacting to that.”

Yields on the 10 year fell back to their “breakout” level late in the week.

The Chinese market’s “reversal” was stunted by the selling in U.S. markets – now back to new recent lows.

It was such a rough week even gold got a bid as a “safe haven”.

This selloff in housing stocks continues unabated. Rising mortgage rates and high prices seem to be working together to hurt the sector.

One would think the selling would knock off some of the most speculative stocks but “market leader” Tilray (TLRY) held in amazingly well.

For the week the S&P 500 fell 4.1% while the NASDAQ sunk 3.7%.

Economic news was not market moving.

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

The week ahead…

Markets look quite oversold short term and the start of earnings season may turn attention back to underlying fundamentals.  The bears have constantly been crushed during this bull market run so let’s see if this is yet another case of that.   Retail sales will also be reported.

Third quarter earnings will be a major driver as companies report over the coming weeks. According to FactSet, analysts are looking for earnings growth of about 19% and sales growth of 7%.

Index charts:

Short term: Amazingly both the S&P 500 and NASDAQ closed right on their 200 day moving averages to close out the week.  Obviously both charts now have some damage to them after months of unrelenting rallying.

This Russell 2000 had been the worst performer going into this selloff, and obviously looks poor.  It couldn’t even rally Friday like the other indexes.  That said it’s extremely oversold short term.

The NYSE McClellan Oscillator tipped into the rarely seen -90 range Thursday which usually portends some sort of near term bounce.   Last time we saw this sort of extreme reading was February.

Long term: Finally something to sweat about?  The NASDAQ hit the bottom of it’s channel for the first time since 2016!

Charts of interest / Big Movers:

Tuesday, Affimed (AFMD) sank 24% after the biotech drug developer put two clinical trials on hold following the death of a study participant.

Wednesday, Imperva (IMPV) soared 28% after it announced it would be acquired by private-equity firm Thoma Bravo LLC in a deal valued at $2.1 billion.

The LONG rumored bankruptcy of Sears Holdings (SHLD) finally seems afoot.  The stock skidded 17% Wednesday after the Wall Street Journal reported that the troubled retailer has hired M-III Partners LLC to prepare a bankruptcy filing.  This was confirmed late Sunday.

The Chapter 11 filing to reorganize debts of the parent of Sears, Roebuck and Co and Kmart Corp follows a decade of revenue declines, hundreds of store closures, and years of deals by billionaire Chief Executive Officer Eddie Lampert in an attempt to turn around the company he bought in 2004.  Shares in Illinois based Sears closed at about 41 cents on Friday, down from over $100 in the years after hedge fund star Lampert, once hailed as another Warren Buffett, merged it with discount store Kmart in a $11 billion deal in 2005.

“Pot” themed traders now seem to be looking at Pyxus (PYX) as the next Tilray – note the performance (and explosion of volume) in a terrible week overall!  Again a very highly speculative space – this is a tobacco company with “cannabis plans” announced February.  This reminds one of cryptocurrencies and all the crazy trends of the decades before.  That said, short term speculators can still make money until the music stops playing.

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

Mentions & Resources:



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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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