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Weekly Market Recap Oct 21, 2018

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After the heavy selling the week prior there was sure to be an oversold bounce and indeed last Tuesday brought much of that.  It is always interesting to see what happens after that bounce – often in this bull market, once the indexes turn back up they move like a freight train.  This time – thus far at least – the action has been less aggressive.  Selling on Thursday took the S&P 500 right back down to the 200 day moving average and rally attempts Friday were fruitless.  In whole the S&P 500 barely budged for the week.

Yields on the 10 year have thus far held their own “breakout” level:

The Chinese market had an interesting Friday with an “outside reversal” day to the upside – that is a day where the price went both below the low of the prior day, as well as the high.  This happened the day after the index notched a new 4 year low.  This week’s action in that country’s market will be a tad interesting to watch.

China’s GDP grew 6.5% between July and September from the same quarter a year earlier, down slightly from 6.7% growth in the previous quarter and falling short of analysts’ expectations of 6.6% growth. However, the disappointing results were shaken off after officials said they were focused on supporting the stock market.

Yet a new low in these home builder stocks – one wonders if they are telegraphing an end to the housing boom.  Existing-home sales fell 3.4% in August, the lowest level since November 2015.

“Recent sluggishness seems increasingly driven by softer demand from would-be home buyers in the face of two emerging trends: falling rents and rising mortgage interest rates,” said Zillow Senior Economist Aaron Terrazas. “It all adds up to a situation in which supply-side factors are becoming less critical in driving home sales as they give way to softening demand. There’s still a lot of energy left in the housing market, but the rapid rise of the past few years has clearly begun to level off.”

For the week the S&P 500 rose fractionally while the NASDAQ fell 0.6%.

Retail sales rose just 0.1% for the second month in a row, the government said Monday. Wall Street had expected a 0.6% increase.  After a string of strong sales, bars and restaurants saw a big dropoff. Sales sank 1.8% in September to mark the biggest decline since the end of 2016.

“The underlying strength and confidence of the consumer still appear to have legs, and consumer spending should remain robust in the coming quarters,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors. “As such, we expect retail sales should bounce back in the coming months.”

“The hurricane in the Carolinas may have been responsible for some of the headline weakness,” wrote economists at CIBC World Markets.

The minutes of the Fed’s September meeting, released Wednesday, showed that a majority of policy makers believe interest rates must continue to rise until policy becomes restrictive.

“The market is interpreting the Fed minutes as slightly hawkish,” said Lindsey Bell, investment strategist with CFRA. For a while the market didn’t believe the Fed was serious about raising rates four times this year and three times in 2019, she said. But that changed after hawkish comments from Fed Chairman Powell earlier this month.

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

Remarkably there are countries out there where less than 5% of the population is connected to the internet.

The week ahead…

Earnings season will continue in earnest and we have some interesting charts to watch both here in the U.S. and China!

On the earnings front, 17% of companies in the S&P 500 have delivered third-quarter results so far. More companies are beating estimates than average, but the magnitude of the beats is smaller than average, said John Butters, senior earnings analyst at FactSet.

Index charts:

Short term: A lot of work to do to fix some of this damage in both charts.

This Russell 2000 is just in rough shape.

The NYSE McClellan Oscillator was at a very extreme level so we said watch for an oversold bounce last week.  That happened.  Now some of that selling pressure is relieved – but we are still in the red and hence it’s signaling caution.

Long term: So far both these support lines are holding – sure would be interesting to see what happens if they broke.

Charts of interest / Big Movers:

Netflix (NFLX) rose 5.8% Wednesday after it reported better-than-expected quarterly results.  But you can see those gains evaporated in the weak action to close the week.  Interesting to see how international the company has become.

International Business Machines (IBM) announced a revenue miss following the close on Tuesday. Shares fell 7.63% Wednesday.

Thursday, Endocyte (ECYT) soared 50% after Novartis said it would buy the cancer-drug maker for $2.1 billion.

Friday, PayPal (PYPL) surged 9.4% after the company boosted its outlook for the fourth quarter.

Ebay (EBAY) tumbled 8.9% Friday after analysts at Stifel Nicolaus downgraded the stock from buy to hold, citing PayPal’s earnings release, which suggested that the online retail would post disappointing gross merchandise volume when it reports on Oct. 30.

Procter & Gamble (PG) jumped 8.8% after reporting it’s best quarterly sales numbers in five years Thursday.

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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