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Wkly Round-Up thru Jan 18th 2019; Half Full or Half Empty??

 Weekly Updates  Comments Off on Wkly Round-Up thru Jan 18th 2019; Half Full or Half Empty??
Jan 192019
 

Hey Folks, we have a nice long holiday weekend for the US markets with Equities closed on Monday for Martin Luther King Day. We will see action in the Futures markets with Globex opening normal time Sunday evening at 6 PM ET and then closing the following day at 1 PM ET with a re-open at 6 PM ET on Monday.

All I can say about these markets is WOW! We’ve seen some very wild and crazy market action with Q4 2018 now behind us and a Fast and Furious start to 2019.

Here are a few sound bites as we kick off Q4 Corp Earnings and 2019:

• The numbers are still coming in but we are seeing that earnings grew last year at an estimated 22% yet PE Ratio fell so dramatically that it was the 5th largest since the 1940s…According to analysts at UBS when we’ve seen this much of a large scale drop in PEs found that the median returns the following year were around 16%…For 2019 the consensus estimates for Earnings Growth are 5.7% making the 2019 PE trading for around 15.4 times earnings…so the bar has been set very low and should earnings come in at these levels we’ll see higher market price action…so we will have a battle ground zone in the S&P from 2600 to 2800 with the markets looking to see if the glass is half full or half empty…
• Issues are still present in the markets; US – China Trade although we seem to be getting rumors on that front, both from the White House on suspending all tariffs in order to entice China while they are also offering up $1 Trillion in new spend for US Goods and Services to reduce the massive trade imbalance; FED Monetary Policy; BREXIT; US Political Dissonance with Gov Shutdown will begin to weigh on US Q1 GDP; ECB Growth issues; US Corp Bond Markets[60% of US Investment Grade Bonds are rated BBB; bottom of ladder before becoming junk]

This week’s Weekly Round-Up:

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Round-Up thru Jan 11th 2019; Swing for the Fence!

 Weekly Updates  Comments Off on Wkly Round-Up thru Jan 11th 2019; Swing for the Fence!
Jan 122019
 

Hey Everyone! As we kick off 2019 we are seeing some interesting moves in price action and I am sure most folks would like to see where we are going from here? We need to be very careful with any moves higher off our December lows. Take a look at my take in this week’s weekly round-up.

Market Sound bites:

• Already this year we’ve seen the FEDs do an about face on their forward guidance; –well least verbally they have stating they will be more data dependent not only in future interest rate hikes but also in their $50B per month QT Program…Powell has walked back his “auto pilot” statement regarding QT which rocked the markets last year…As such we’ve seen the market value of the S&P jump over $1.1 T in the first 6 trading days in 2019…

• And speaking of records the largest point swing in the DOW on record was 4,378 in the advance/decline line surpassing the prior record made in Dec 2008 during the great financial recession from the extreme lows in Dec to the highs this early January…looking at this as a statistical standpoint has shown that when the Adv/Dec line had swings of at least 3,000 points in a 10 day period saw the S&P move higher over the next 12 months by 9.8%…(happened only 11 times)

• Issues are still present in the markets; US – China Trade; FED Monetary Policy; BREXIT; US Political Dissonance; ECB Growth issues; US Corp Bond Markets[60% of US Investment Grade Bonds are rated BBB; bottom of ladder before becoming junk]

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

2018 Annual Round-Up; — Wishes are for Rat Brains – Be the Red Stripe Zebra!

 Weekly Updates  Comments Off on 2018 Annual Round-Up; — Wishes are for Rat Brains – Be the Red Stripe Zebra!
Jan 052019
 

Hey Folks, I hope you all had a wonderful year end holidays with family and friends. Now we are back for another new trading year where we prepare for the coming twists and turns price action will no doubt cast upon us!

I wanted to just quickly recap for you my thoughts on 2018 below and then you can enjoy my video update.

• 2018 brought many surprises – it came in very strong and then quickly pulled back over 10% with the VIX briefly seeing the 50 level as Volatility imploded and XIV liquidated and forcing other ETN sensitive instruments to readjust their degree of risks…however little technical damage was done to most stocks and the markets quickly rebounded and moved higher until the end of Sept before pulling back and putting most Indexes into a Bear Market…and this time a lot of technical damage was done…Volatility came back in force this time but not to the elevated levels seen in February, but enough to force margin calls and a complete reallocation of money…2019 could be a year where Return of Capital takes on more priority than Return on Capital…
• For the 4th Qtr. of 2018 many records were set; –we saw the single biggest point gain in the DOW of more than 1,000 points and the S&P but also saw a record December being the worst month since 1931…we also saw over $4 Trillion in value (20% of the US GDP) wiped out! From one week to the next, we’ve seen wicked swings in price action; decades old records set with limited liquidity allows prices to get pushed around to extreme levels…and for the Quarter it is the worst performance since the financial crisis of 2008! And adding to the frenzy was Hedge Fund and Mutual Fund redemptions. Tax Loss Selling and Pension Fund re-balancing…for the 2018 Year End the DOW was off 5.6% (worst since 2008), the S&P was down 6.2% and NASDAQ was off 3.9%…
• Thus far, we are finishing off the worst 20 years for compounded returns since the Great Depression in 1929…The average CAGR since 1928 is about 10.7% but for the past 20 years we’ve seen the markets return 5.52% so we are running below the nominal average rate so investors can view this optimistically…But it will take new innovation and new companies to lead the way forward…and in this era of very cheap capital, Stock Buybacks have accounted for about 1/3 of the total S&P Gains since early 2011 financed by zero interest rates….By reducing the number of shares outstanding stock buybacks have a way of inflating EPS while masking underlying profit growth fundamentals…we should not assume this will continue as the cost of capital increases…
• Even given all this wild craziness in Q4 we must understand what really drives these Volatile moves; — it is simply Economic Uncertainty! From China Trade Tariffs, the appearance of an overly Hawkish Fed Reserve and slowing Global Growth…The S&P Forward PE Ratio now sits at 16.01 which is off over 25.79% from the highs at the end of 2017…many will interpret this as a great opportunity to acquire great stocks at much lower prices and setting up for longer term growth while others feel we can see further downside given the state of Global Play at the moment…
• We do have plenty of worries on the table to keep the Bulls very nervous and the Bears happy; –Global Growth is now projected to be anemic in 2019 with fears heightened of a possible Recession across the 19 countries that make up the ECB (GDPs moving lower and consumers spending less is a toxic cocktail for a massive hangover)…And let’s not forget the China Trade Wars which, if miscalculated, could move the markets another 15% lower…and finally the FEDs could pull the rug out from under the US Economy as well with higher rates and Quantitative Tightening taking more liquidity out of the markets…
• Money has rotated from momentum FAANG Stocks and Technology towards safer harbors like Utilities and higher dividend players, and we’ve seen a good deal of the new sectors like Communication and Real Estate outperform the more traditionally oriented “risk on” sectors like Cyclicals and Technology…

Enjoy my Year-End Summary:

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Merry Christmas Greeting 2018 “The Tree Slaughter”

 Holiday  Comments Off on Merry Christmas Greeting 2018 “The Tree Slaughter”
Dec 242018
 

 

Hey, everyone, Preston Brent here, you know as we approach the end of 2018 I wanted to take a pause; and to thank all the many thousands of you that enjoy our weekly Roundup series that we put out every week. All of us here at the Trader User Group would like to wish all of you a season decked out with Holiday joy and Glee. And of course the best wishes for the New Year, but with family and friends first and foremost, and of course, let’s not forget the best for the coming New Year in the financial markets, which I’m sure are going to offer up twists and turns but together our user group members will navigate them successfully as we did this year. So we hope to see you on the inside for 2019. Have a Season’s Greetings everyone of you and a safe and very Happy New Years.

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb

Wkly Market Round-Up thru Dec 21 2018; Santa got Mauled by a Bear!

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Dec 21 2018; Santa got Mauled by a Bear!
Dec 222018
 

Hey Folks, lots of records being set in this crazy financial environment but not the kind we like; –worst week performance since 2008 and worst December going all the way back to 1931 US Great Depression is not what everyone was expecting for the year-end rally! But now that we’re here, what next? Get my take below;

Market Sound Bites:

• Holiday Reminder – Monday Equity Markets in US will close at 1 PM ET and for the full day on Tuesday, Christmas day…Most all other major Country markets will also be closed on Tuesday as well…entering the month of December the S&P, DOW and NASDAQ were in the Green YTD…Now, for the month so the S&P is down 13.4%, the DOW is down 12% and NASDAQ is down 15.4%…we are on pace to have the worst December going all the way back to 1931…on a bright note this large Q4 pullback (about 17% in the S&P) has increased US Corp Stock buybacks and looking into 2019 the forecast is for more of the same; $1 Trillion + in buy backs…
• Folks, we know I have been pounding the table that the years of easy money and credit leads to very large expansion of asset valuations…this was not just a US phenomenon but globally, Central banks were all in concert in injecting a lot of liquidity into the financial markets…and now, Central Banks begin to “undue” or reduce their bloated Balance Sheets we will see less market liquidity and in doing so company valuations will come back down more in alignment with longer term averages…we are going thru that process at this time…now cash is sitting on top of the mountain…the average dividend yield for the S&P is 2.31% and as of this past Friday’s close the 13 Week T Bill interest rate was sitting at 2.42%! (no risk to own so money flows there vs to Equities)
• Santa’s year-end rally got mauled by a Bear…US Stocks lost about $2.05 trillion in market value this past week as the selling intensified after a FED Policy Statement and Misstep by Powell in my opinion…Hiking the rates by 25 bps to 2.25% – 2.5% was built into the market but when he seemed oblivious to Global market forces, US slowdown and his Balance Sheet reduction (QT) running on “Auto Pilot” at $50 Billion monthly set the markets on fire for more downside action…This past week also saw a widening in the Credit Markets with the spread between Junk & High Yields widening…
• Most analysts don’t forecast a recession in 2019 but most all agree in a slowdown in US Economic Growth but there are a few wild cards that could either tip the Global Growth story off the rails or provide more lift; China Trade Tariffs are the biggest issues that could impact Corp earnings/margins and capex spending plans…so there is a higher degree of risk in these forecasts at the moment and hence this adds to the headline risk of good or bad news…the other big issue facing the markets in 2019 is the impact of the BREIXT negotiations. This will clearly impact the U.K. but all of Europe as well since each are their respective biggest trading partners…again, another known unknown outcome adds to the head line risk and large market price fluctuations based on perceived outcomes.
• Keep in mind that most institutional analysts for 2018 got most of their stock rating calls wrong; –for example of the 100 least popular stocks at the beginning of 2018 had just 17% of analysts covering them with a buy rating finishing the year up on average 3.6%…and those top 100 stocks that had over a 77% buy rating finished the year on average down about 3.6%…herd mentality and contrarian views work as well with Rat Brain Traders as they do with professional analysts…

Weekly Market Round-Up Update:

 

Don’t Be A Rat Brain Trader — Trade Smart !!
hpb