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Weekly Stock Market Recap – Sep 8th 2019

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A short trading week led to a positive outcome as trade war fears ebbed and a weak employment report gave traders what they want with more Federal Reserve cuts assured.  A quite weak manufacturing reading Tuesday was a 1 day annoyance.  Technical conditions in the S&P 500 chart especially improved; the NASDAQ to a degree – the Russell 2000 still looks poor.

We watch the ISM numbers quite closely in these parts – and the manufacturing number went below 50 Tuesday.   The reading was 49.1 which is the lowest since early 2016, and 2.1 lower than the prior month.  Economists expected a reading of 51.  So of course the market didn’t fall apart in mid 2016 but we are in a different spot of the economic cycle with tariffs hampering manufacturers.  This is now a number people should be watching like a hawk each month in the coming 12-18 months.

The ISM data was “weaker than expected, with the market impact of the 2.1 point drop likely magnified by the level dropping below the 50 mark,” wrote Jim O’Sullivan chief U.S. economists with High Frequency Economics, in a note to clients. Though the reading isn’t enough to signal a coming recession, as manufacturing PMIs usually hit the low 40s during an economic contraction, “the report will undoubtedly add to fears that more weakness is ahead.”

“Grim. No sign of hitting bottom despite better regional surveys,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

ISM Services – a much larger part of the economy – also fell dramatically from 53.0 to 50.7 (!!) but the market ignored it – that was interesting.

While people clap like seals each time Trump says “things are going great” on the trade talks – Bloomberg reports the U.S. and China are finding difficulty in even scheduling any talks.  But no worries – the phone calls are going splendid.

Chinese and U.S. officials are struggling to agree on the schedule for a planned meeting this month to continue trade talks after Washington rejected Beijing’s request to delay tariffs that took effect over the weekend, according to people familiar with the discussions.  Despite efforts by President Donald Trump to soothe financial markets and portray the talks as making progress, the world’s two biggest economic powers have yet to agree on basic terms of re-engagement, with mistrust on both sides.

In conversations over the past week, the two sides have failed to agree on at least two requests — an American appeal to set some parameters for the next round of talks and a Chinese call to delay new tariffs, two of the people said.

That said markets were cheered on by more stimulus apparently coming this time in China.

Reports indicated the People’s Bank of China will soon implement cuts in the reserve requirement ratio for Chinese banks, in a move that analysts predict will boost growth and signals willingness by the government to take steps necessary to combat the effects of higher U.S. tariffs on Chinese imports.

The employment data for August showed a gain of 130,000 jobs.  Quite a few of those jobs were due to the hiring of census takers. The unemployment rate remained at 3.7%.   Employment gains for July and June, meanwhile, were revised down by a combined 20,000.

But what really matters:

“I think this report will be positive for investors in that its going to continue to strengthen the case that the Fed should cut rates at the next meeting” said Michael Arone, chief investment strategist for State Street Global Advisors.

While some overall prospects improved bulls have the “wrong” sectors leading – utilities and consumer staples should not be leaders in a bull move; those are cautionary sectors.

For the week, both the S&P 500 and NASDAQ gained 1.8%.

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

The week ahead..

The European Central Bank is expected to cut rates this week, and the Federal Reserve is expected to follow the week after that!  Not sure if much more matters to markets nowadays.

Index charts:

Short term: the S&P 500 and NASDAQ both jumped over key resistance Thursday – with the S&P 500 in a bit of a stronger position.

The Russell 2000 is back in the range it has been for mos of the year.  That said the chart looks poor.

The NYSE McClellan Oscillator was positive all week, so we seem to be in a good place in the near term!

Long term: a pullback here on the weekly chart but big picture bulls can only be happy. 

Charts of interest / Big Movers:

Tyson Foods (TSN)  fell 7.8% Wednesday after the processed foods manufacturer lowered its earnings-per-share guidance for the full-year 2019 after the markets closed Tuesday.  That said — heck of a move up the past few months!

Coupa Software (COUP)  announced second-quarter earnings results that beat analyst expectations Tuesday evening. The business software provider’s stock rose 8.7% Wednesday.

Michaels (MIK) rallied nearly 12% Wednesday after the arts-and-crafts retailer topped estimates for its fiscal second quarter and offered upbeat guidance.

Signet Jewelry (SIG) rallied 26.7% Thursday, after the jewelry retailer reported second-quarter earnings that beat expectations while raising its full-year outlook. The company’s stock had hit a 10-year low Wednesday.

DocuSign (DOCU) reported earnings after the close of trade Thursday, beating analysts revenue forecasts for the second-quarter providing bullish third-quarter guidance. Shares rose 22% early Friday.

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



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Weekly Stock Market Recap – Sep 22nd 2019

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An incredibly non volatile week as indexes did next to nothing until Wednesday afternoon when the Federal Reserve delivered the much expected quarter rate cut.    Markets rallied into the close Wednesday, flat lined yet again Thursday and then a small pullback Friday.

While there was some worry about oil supply early in the week after an attack on Saudi facilities, much of that was washed away by mid week.

As for the central bank:

The Fed announced it would cut the benchmark federal funds rate a quarter percentage point to a range of 1.75% to 2% Wednesday afternoon, but said in an accompanying statement that “sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2% objective are the most likely outcomes.”

Three members of the Federal Reserve’s interest-rate setting committee voted against Wednesday’s decision, with Kansas City Fed President Ester George and Boston Fed President Eric Rosengren voting against a rate cut, while St. Louis Fed President James Bullard preferred to cut rates by 50 basis points, rather than 25.

Friday, markets started higher after reports that Trump was exempting hundreds of Chinese products from tariffs.  But then some Chinese officials who were set to visit Montana of all places cancelled.  And markets fell on that.  Yes I am serious.

Economic news was not market moving.

The S&P 500 fell 0.5% for the week.

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

The week ahead..

Not to get all wonky but for those interested there has been some dislocation in the “overnight funding market” – and the Fed has had come to the rescue multiple days in the past week.  It’s something that could or could not be interested when we look back 6 months from now.    If you want to go down the rabbit hole, here is a nice little story on the situation.  Otherwise take the blue pill and nothing happened in the past week – it’s all good!

Other than that the normal normal – the bulls will cry out (demand!) the Fed cuts rate at the October meeting.  The bulls will say the China-US trade deal is happening any second now (as it has been for a year) and the bears will say nope not so much.   We are a week away from the interesting economic data, and the start of earnings season in October.

Index charts:

Short term: the S&P 500 is still battling old highs.  The NASDAQ is a bit weaker.

The Russell 2000 remains in its very long term range (in yellow) – the trendline connecting recent highs remains a constraint.

The NYSE McClellan Oscillator remains positive but is close to the 0 level.

Long term: decent conditions.

Charts of interest / Big Movers:

Tuesday, Corning (GLW) tumbled 6.1% after the glass and ceramics manufacturer reduced its outlook for the full-year 2019.

Fedex (FDX) tumbled 12.9% Wednesday after the transport company missed profit expectations and cut its outlook, citing “increasing trade tensions,” and global economic sluggishness.

Thursday, software company Ping Identity (PING) popped nearly one-third on Thursday after its initial public offering, giving the company a valuation of more than $1 billion.

McDermott (MDR) slid 24% amid heavy trading Thursday, amid fears that the provider of engineering and construction services to the energy industry may be considering a bankruptcy after reports that it hired a turnaround consultant. The company denied that rumor.  Then on Friday morning the company soared 68% before settling at a 23% gain, after the energy-services company said it was exploring a sale of its Lummus Technology business, which has been valued at $2.5 billion.

Netflix (NFLX)  fell 5.9% Friday, putting it on track for its third consecutive loss, after falling 2.4% and 1.7% Wednesday and Thursday, respectively. CEO Reed Hastings warned investors at a conference Friday that “While we’ve been competing with many people in the last decade, it’s a whole new world starting in November . . . It’ll be tough competition.”

Roku (ROKU) slid 19.2% Friday after a research analyst distributed a note asking if the streaming-device maker was “broken.” That follows a string of bad headlines for the company, and brings its two-week decline to over one-third of its September 6 record high.

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



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Paul Gulino Interview with Michael Covel on Trend Following Radio

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Paul Gulino
Paul Gulino

Subscribe to Trend Following Radio on iTunes

Paul Gulino believes in Hitchcock’s adage that “films are made on paper.” Although students may obsess about a film’s look, all of the visual elements, he says, function to enhance the story. And that, ultimately, comes from the mind of the screenwriter.

In spite of the fact that there seems to be a screenwriter behind every corner (in California, at least), screenwriting is something of a lost art, Gulino maintains, having seen hundreds of flat screenplays as a story analyst for Showtime Entertainment.

Honing his own skills through writing for the theater and practicing the craft as taught by Frank Daniel and Milos Forman, Gulino secured an agent with William Morris on the basis of his thesis script. With that “real world” confirmation in hand, Gulino went on to write and see produced features, plays and comedy sketches.

Screenwriting, he says, isn’t a craft you can learn from a book. “The best way is to learn from someone who knows the craft, so you can see how theories can be applied to your own work.” There must be something to that. Or at least it’s worked for screenwriter Paul Gulino.

Paul and Michael go on the film-making journey!

In this episode of Trend Following Radio:

  • Screenwriting
  • Screenwriting Theory
  • The Science of Screenwriting

Mentions & Resources:





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Weekly Stock Market Recap – Sep 15th 2019

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A decent week here as the S&P 500 stopped just short of record highs; almost all the action was on Wednesday.  Quantitative easing is back on again in Europe and easy money traders across the globe rejoice.

The European Central Bank delved deep into its tool box on Thursday, cutting its deposit interest rate further into negative territory, launching a new round of monthly bond purchases and taking other steps to stimulate a flagging eurozone economy.  The ECB said it would begin buying 20 billion euros a month worth of securities beginning Nov. 1.

“Today’s decisions have anchored and enshrined the Draghi legacy in future ECB decisions. ‘Whatever it takes’ has just been extended by ‘as long as it takes,’ said Carsten Brzeski, chief economist at ING Germany, referring to Draghi’s famous 2012 pronouncement at the height of the eurozone debt crisis that the ECB would do “whatever it takes” to preserve the euro.

Some vague nation of trade talks resuming between China and the U.S. in October appeased many as did some blinking on both sides.

China has reportedly offered to buy more American agricultural products in exchange for a delay in upcoming tariffs and the easing of a ban against doing business with Chinese telecommunications giant Huawei Technologies, according to the South China Morning Post.

Retail sales grew faster than expected in August, up 0.4%, and were up 4.1% year-on-year, the U.S. Commerce Department said on Friday. The rise was driven entirely by purchases of new cars and trucks though, as retail sales ex-autos were flat.

“This morning’s number was above expectations but more importantly it’s the sixth straight month of positive growth for retail sales which is a really encouraging,” wrote Mike Loewengart, vice president of investment strategy at E-Trade Financial in an email. “With holiday spending on the horizon and inflation at bay, we could continue to see momentum in the retail sector. A healthy consumer can help inject some energy into other sectors of the economy.”

“It’s been good news all around for the markets this week. You have thawing of trade tensions. You have more central bank easing, and you have Goldilocks economic data. Investors are thrilled…and that’s why you have markets just fractionally below all-time highs,” said Michael Arone, chief investment strategist at State Street Global Advisors.

Interesting spike in Treasury yields last this past week; this was the largest weekly move since 2013!

“The bond market may have been a bit overbought on the long-end last month, but this sudden shift into optimism on the prospect of a trade deal getting struck and the ability of the Fed to create a steeper curve — I don’t think that’s sustainable. It’s got to take much better data for long-end Treasury yields to break out of this range,” said Karissa McDonough, chief fixed income strategist at People’s United Advisors.

… also this is an interesting sector to see a rally in.  Part of that could be rotation as momentum stocks seem to be on the outs with traders right now.

For the week, the S&P 500 added 1% and the NASDAQ advanced 0.9%.

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

The week ahead..

All that will matter to markets is the rate cut coming this week!

“The question is will the Fed signal a willingness to keep going with rate cuts, or will they suggest this mid-cycle adjustment is nearing its end. My view is they’re not going to back themselves into a corner, and they’re going to give themselves plenty of room to cut again at some point,” Arone said. “That’s going to be the biggest risk right now. The markets are pricing in a number of rate cuts in the next few quarters and will the Fed deliver on that…That will be a friction point.”

And again… and again… and again.  Would not be surprised to see the U.S. quantitative easing in 18 months if the market dares to drop 15% one of these days!

Index charts:

Short term: the S&P 500 rallied to right below it’s old highs.

The Russell 2000 had a huge Wednesday but was stopped at week highs by this resistance line created by connecting the highs of May and August.

The NYSE McClellan Oscillator was positive all week, so we seem to be in a good place in the near term!

Long term: decent conditions.

Charts of interest / Big Movers:

Monday, both Fannie Mae (FNMA) and Freddie Mac (FMCC) rallied by more than 43%, after U.S. Treasury Secretary Steven Mnuchin said on Fox Business that an agreement between the Treasury and the Federal Housing Finance Agency soon ends the Fannie and Freddie profit sweep. Mnuchin said the deal would allow the government-sponsored enterprises to begin retaining earnings.

Wendy’s (WEN) fell 10.2% Tuesday after announcing a $20 million plan to serve breakfast nationwide from 2020.  The fast-food chain said it will update its 2019 guidance to take the one-time investment into account though “all other elements of the company’s 2019 outlook remain unchanged.”  Wendy’s expects 2019 adjusted earnings per share to be down 3.5% to 6.5%.

SmileDirectClub (SDC) tumbled nearly 28% in its debut at as public company Thursday. The company, which sells clear teeth aligners, finished at $16.67 after pricing its initial public offering Wednesday afternoon at $23 apiece.

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



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