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Weekly Stock Market Recap – Aug 11th 2019

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While the indexes posted modest losses for the weeks, it was a quite volatile week, especially in relation to most of 2019.  Indexes plummeted Monday on trade fears to their worst single day performance of 2019, captured back about half those losses Tuesday, then sunk again at Wednesday’s open before bulls posted a furious comeback during the day to get the market back to near even.  Thursday saw a surge, while Friday morning saw another significant selloff, followed by some buying in the afternoon to reduce losses.  That felt a lot like a typical day in 2008.

Monday, China allowed its currency to fall to a more than 10 year low versus the dollar.  Tuesday, China’s central bank moved to restrain the fall in its currency with a fix Tuesday at 6.9683 yuan. A breach of the 7-to-the dollar level on Monday, interpreted by some as an intentional weakening of its currency, helped to ignite a global stock market selloff and slump in bond yields.  By Friday it was back up to 7.01.

Trump continued to tweet about the Fed being too tight:

“Our problem is a Federal Reserve that is too… proud to admit their mistake of acting too fast and tightening too much (and that I was right!).”  The president said, the central bank “must cut rates bigger and faster, and stop their ridiculous quantitative tightening NOW”

A second week of swooning in 10 year Treasury rates:

China broke it’s 200 day moving average:

Gold also surged again this week as central banks in Asia (India, New Zealand, Thailand) and you can be sure markets will continue to point a gun at the Federal Reserve’s head to continue cutting here.

In economic news ISM Services fell to 53.7 from 55.1, which is both a pretty steep retreat and edging the reading closer to that all important 50 level.  This is the lowest reading since summer 2016.  While ISM Manufacturing has been weak for a while now, Services had held up.  Let’s see if that is a blip or the start of a trend.  The bond market is saying start of trend.

For the week, the S&P 500 fell 0.5% and the NASDAQ 0.6%.

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

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The week ahead..

Fun fact: About 90% of the companies in the S&P 500 have reported actual results for in the second-quarter of 2019 as of Friday, with those earnings on pace for a 0.7% decline in S&P 500 earnings per share, or EPS, marking the first time the index has reported two straight quarters of year-over-year declines in earnings since 2016, wrote John Butters, FactSet analyst.

Most of the major reports are done but we have some like Nike, Walmart, Deere coming out this week.  Retail sales hit Friday.

Apparently we must now watch the China-U.S. currency cross rate each day now.  Until we don’t.

Index charts:

Short term: earlier in the year both the S&P 500 and NASDAQ formed a bearish “double top” – which led to a good bout of selling in May to early June.  That level was broken early July but now we are back below the breakout level.  Interestingly both Thursday and Friday the intraday high was essentially that breakout level!

The Russell 2000 temporarily fell out of the bottom of this range it has been in for almost all of 2019 much as it did 2 months ago.

The NYSE McClellan Oscillator reached rarely seen oversold levels at the worst of this week’s selling.

Long term: a pullback here on the weekly chart but big picture it’s been quite the recovery from late 2018 lows.

Charts of interest / Big Movers:

Tuesday, Dean Foods (DF) plummeted more than 36% after the milk-and-dairy products seller reported a wider-than-expected second-quarter loss and sales that rose less than analyst projections, amid volume pressure and an “accelerated decline” in the conventional white milk category.

Wednesday, home security camera company Arlo Technologies (ARLO) sunk 17.8% after the company reported better-than-expected results for its second quarter but delivered a disappointing outlook for the third quarter.

Roku (ROKU)  jumped 21% Thursday after the company late Wednesday topped expectations with its second-quarter results and issued and encouraging outlook.

Uber (UBER)  retreated 6.8% Friday after the ride-hailing service reported a huge $5.24 billion quarterly loss.

It’s been a heck of a year for Shopify (SHOP) which not only barely blinked this past week, but ended on all time highs!

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



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Strategies & Ideas

Weekly Stock Market Recap – Aug 18th 2019

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All our recaps here at StockTrader.com are of course critical to all our lives.  But this week’s is extremely critical.  Please read on…

This was yet another volatile week for the market – four of the five sessions saw the major indexes move >1%.  Monday and Tuesday saw somewhat offseting moves in opposite directions (Tuesday’s move was due to Trump backing off tariffs to China until the Christmas season is over), while markets swooned Wednesday to the tune of about 3% down.   A rally Friday saw the markets claw back about half those losses. Until volatility dies down, it is not really too “safe to get back into the water” for those with shorter term horizons.

About that tariff delay:

Products that will not be subject tariffs from September include “cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing,” according to the statement.   The delays mean that goods worth $152 billion, or more than half of the original $300 billion list, will now not be hit with tariffs until mid-December.

“The three-month delay to the imposition of tariffs on more than half of the $300bn of Chinese imports, originally scheduled to take effect next month, is obviously designed to avoid a politically-damaging rise in consumer prices ahead of the holiday season,” said Andrew Hunter, senior U.S. economist, at Capital Economics.

Fun fact:  Goldman Sachs said it now expects a 0.6% drag on the U.S. economy due to trade-war developments, up from its earlier estimate of 0.2%.

Yield curve inversion strikes!  Earlier it was 10 year rate below the 3 month yield which is quite bearish. That caused hand wringing for a bit before “THE FED WILL SAVE US ALL” thinking returned to the market.  This time it was the 10 year yield falling below the 2 year yield.   THIS ONE IS BIG.   “Borrowed time” axiom now is in effect.   NONE of us know what this means for markets because there are so many animal spirits and central bank interventions, but it’s a bad sign for the future economy.  That said the market usually still rises for quite a while before the you know what hits the wall.  But as a participant in the economy it needs to be a part of your financial plan to prepare for a slowdown in the coming 1-2 years.  The Russell 2000 (domestic company heavy) has been showcasing this for a while, as has the housing market which began turning down a year ago as we have outlined.  Global international companies have thus far bucked the trend but the average person is not a global S&P 500 company.

An inverted yield curve often serves as a prelude to a recession because it indicates when monetary policy and financial conditions are too tight for the broader economy. A yield curve inversion along the 2-year/10-year spread has come before the last seven recessions.

Interesting data points:

Even as the 2-year/10-year spread inverts, equities do still have room to run higher.

“After an initial post-inversion dip, the S&P 500 index can rally meaningfully prior to a bigger US recession related drawdown,” BAML strategists said.  When they crunched the numbers, they found that the S&P 500 tended to mount a last-gasp rally, peaking on average 7.3 months after an inversion along the 2-year/10-year spread. (That would be February 2020 ON AVERAGE)

“Research from Credit Suisse says a recession occurs 22 months after an inversion in the two-year/10-year rate curve, on average,”  (That would be June 2021 ON AVERAGE) says Arielle O’Shea, investing and retirement specialist at NerdWallet in Charlottesville, Virginia.   The S&P 500 is up, on average, 12% one year after a 2-10 inversion.  But when a recession did eventually hit, the S&P 500 on average lost around 32% of its value.

Safety sectors tend to come back en vogue (vs risk) when these type of things happen – the 2 main ones are Consumer Staples (think things you have to buy every week/month i.e. detergent, soap) and utilities.  These 2 sectors are starting to fulfill their role.

Compare and contrast to say Industrials and Consumer Discretionary (things I like, but don’t need)

A third week of swooning in 10 year Treasury rates:

In economic retail sales did well at 0.7% vs the 0.3% expected.  Sales soared 2.8% at internet retailers, a gain that may have been tied to Amazon Prime Day and competing sales from rivals.

For the week, the S&P 500 fell 1.03%.

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

The week ahead..

The next 6-12 months should see a flurry of global central bankers rush to ease in all forms and function.  Markets love that – and usually it leads to rallies.  This has been the case for 30 years and especially the past 10.  So even if you are bearish on the market at any point, just know a central banker is aiming at you to inflate assets as that’s all they know to do nowadays.

Credit rating agency Fitch noted that more than a third of central banks have loosened monetary policy in the past six months.

Speaking of – Jerome Powell hits Jackson Hole Wyoming this week and markets will now be demanding he soothe markets with dovish words.  Just a few weeks ago he called his rate cut a one off, markets were upset.  They immediately demanded a quarter rate hike in September.  Now some are calling for a half rate cut!  I wouldn’t be surprised to see a massive move Thursday one way or the other based on a sentence or two in his speech!

“We’re the only place on the planet now you can get more than a 2% yield among developed countries,” market researcher James Bianco Bianco said. “Powell should probably open the door for the possibility of a 50 basis point cut at the September meeting.”

Index charts:

Short term: A second week in the row the “breakout level” in the S&P 500 served as resistance.

The Russell 2000 range has been broken for the 2nd time since February.

The NYSE McClellan Oscillator is well in the red – caution signs

Long term: a pullback here on the weekly chart but big picture bulls can only be happy.  That said… keep a watch on this long term.

Charts of interest / Big Movers:

Macy’s (M) tumbled Wednesday morning, after the department-store retailer reported second-quarter earnings that badly missed expectations after heavy spring discounting failed to clear inventories and it lowered its outlook.

The Walmart, Amazon, Target economy (and dollar stores) economy carries on as Walmart reported better-than-expected, second-quarter earnings and same-store sales growth, while projecting that it would grow sales at already existing stores by between 2.5% and 3% in 2020.

General Electric (GE) tumbled to a more than six-month low, after a research report from Madoff whistleblower Harry Markopolos posted a research report online accusing the conglomerate of inaccurate and fraudulent filings with regulators.   CEO Larry Culp called the accusation “market manipulation” and bought nearly $2 million worth of the company’s stock, sending shares back up 10% Friday.  I have my popcorn out.

Chinese ecommerce giant Alibaba (BABA) advanced, after reporting fiscal first-quarter results Thursday morning.

Nvidia (NVDA) issued second-quarter earnings after the close Thursday that beat Wall Street expectations for the second quarter. The company surpassed estimates for both earnings and revenue for the quarter following several quarters of weak performance for the company and the chip-making industry more broadly

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



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Scott Kupor Interview with Michael Covel on Trend Following Radio

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Scott Kupor
Scott Kupor

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Scott Kupor is the managing partner of Andreessen Horowitz. He has overseen the firm’s rapid growth to one hundred fifty employees and more than $7 billion in assets under management.

What are venture capitalists saying about your startup behind closed doors? And what can you do to influence that conversation?

If Silicon Valley is the greatest wealth-generating machine in the world, Sand Hill Road is its humming engine. That’s where you’ll find the biggest names in venture capital, including famed VC firm Andreessen Horowitz, where lawyer-turned-entrepreneur-turned-VC Scott Kupor serves as managing partner.

Whether you’re trying to get a new company off the ground or scale an existing business to the next level, you need to understand how VCs think. In Secrets of Sand Hill Road, Kupor explains exactly how VCs decide where and how much to invest, and how entrepreneurs can get the best possible deal and make the most of their relationships with VCs. Kupor explains, for instance:

Why most VCs typically invest in only one startup in a given business category.

Why the skill you need most when raising venture capital is the ability to tell a compelling story.

How to handle a “down round,” when startups have to raise funds at a lower valuation than in the previous round.

What to do when VCs get too entangled in the day-to-day operations of the business.

Why you need to build relationships with potential acquirers long before you decide to sell.

Michael digs into Kupor’s firsthand experiences, insider advice, and practical takeaways. His book Secrets of Sand Hill Road is the guide every entrepreneur needs to turn their startup into the next unicorn.

In this episode of Trend Following Radio:

  • Secrets of Sand Hill Road: Venture Capital and How to Get It

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Matt Kepnes Interview with Michael Covel on Trend Following Radio

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Matt Kepnes
Matt Kepnes

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Ten Years a Nomad is author Matt Kepnes’ poignant exploration of wanderlust and what it truly means to be a nomad. Part travel memoir and part philosophical look at why we travel, it is filled with aspirational stories of Kepnes’ many adventures.

Kepnes knows what it feels like to get the travel bug. After meeting some travelers on a trip to Thailand in 2005, he realized that living life meant more than simply meeting society’s traditional milestones, such as buying a car, paying a mortgage, and moving up the career ladder. Inspired by them, he set off for a year-long trip around the world before he started his career. He finally came home after ten years. Over 500,000 miles, 1,000 hostels, and 90 different countries later, Matt has compiled his favorite stories, experiences, and insights into this travel manifesto. Filled with the color and perspective that only hindsight and self-reflection can offer, these stories get to the real questions at the heart of wanderlust. Travel questions that transcend the basic “how-to,” and plumb the depths of what drives us to travel ― and what extended travel around the world can teach us about life, ourselves, and our place in the world.

Ten Years a Nomad is for travel junkies, the travel-curious, and anyone interested in what you can learn about the world when you don’t have a cable bill for a decade or spend a month not wearing shoes living on the beach in Thailand.

In this episode of Trend Following Radio:

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