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Wkly Market Round-Up thru Nov 16th 2018; Humpty Dumpty Sat on a Wall

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Nov 172018
 

Hey Folks, there is an old nursery rhyme that goes something like this; Humpty Dumpty sat on a wall, Humpty Dumpty had a great fall; All the king’s horses and all the king’s men, couldn’t put Humpty together again! Does this apply this this market? Or to the Tech Sector? Get my take in this week’s Weekly Update.

This week’s Sound bites:

• Trade & Interest Rates continue to dominate these markets…since the Mid Term Elections in the US markets have fallen about 4% taking another 1.3 Trillion of stock wealth out of the markets…price action halted its downward path on a speech by Powell on the fact he recognizes Global Growth is slowing and on Trump’s comments regarding moving closer to a possible trade deal with China…a Fed rate hike still seems in the works for this upcoming Fed Mtg on Dec 18th/19th of 25 bps but going into 2019 the odds have dropped on the Feds being able to play out 3 more hikes with 1 or 2 at best being the favored number..

• The current market Volatility does not seem to be too concerned regarding an upcoming meeting with Trump and Xi at the G20 Summit on Nov 30th…the bet is Trump will announce “progress” and suspend further tariff hikes (this past week he hinted as much)…the markets will respond very bullishly if this is the case…if not, we can expect a much colder Holiday season…

• Thus far Corporate debt has been under control with the High Yield (Junk Bonds) maintaining tight spreads with Corporate Investment Grade Debt, but should this widen the turmoil could surface with the US Corporate Debt standing at over $9 Trillion…

• Theresa May’s issues surfaced again this past week in her efforts to bring about a BREXIT divorce from the European Union…although towards the end of the week things seem to cool a bit the British Pound felt the pain falling to 1.28 to cap the week…the deadline for the U.K. to come to a deal and leave the E.U. is March 2019 so this will play out and get more volatile as we move closer to that date…

• Oil has had a very tough time over the past month with it falling 26% and into a bear market and over 7.1% one day this past week…if you will recall. I had indicated going short Oil a month ago was the play and many of our members did extremely well…now with Oil finding consolidation around the upper 50s folks want to know where to next? Fundamentals vs Perception is where the battle lines are being drawn out…and keep in mind that Fundamentals ALWAYS win out over time…Perceptions are a stimulant to price action but not the cure…I will note that since 2000 there have been 14 times that Oil has fallen over 20% in 20 days and that prices have then risen on average by 1.9% in the following 20 days…The only except was in 2008 and 2014…however, NatGas has soared over 24% for the month on colder weather forecast a lower inventory levels…if the $4 NatGas price levels are sustained we could see this prompts some fuel switching among utilities bringing some coal fired plants back on line…

• And finally there is the Chinese currency, the Yuan which we’ve seen falling to just slightly under 7 to the USD, a key level most international market funds feel are key to keeping China’s capital flight under control…China has hinted they will help control the Yuan to stay at or under this level but most analysts are not convinced…Should it fall lower, then investments in China will slow and this will in turn bring more pain to emerging markets…

My Weekly Round-Up;

 

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

Wkly Market Round-Up thru Nov 9th 2018; Divided Congress!

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Nov 112018
 

Hey Folks, this week saw the Democrats take over the US Congress with the Republicans holding on to the Senate which brings us a divided political body to the US. Opportunities still abound but caution is still the watchword as markets kick off November in a more bullish fashion.

More Market Sound bites:

• This past week we saw now a divided Congress, AG Sessions booted out; Iran Oil Sanctions hitting; and Amazon centering on two new HQ locations (New York and Virginia)…
• For the markets, after the mid-term elections the issues that will still dominate are China trade tariffs and the go forward FED Policy…Favored sectors will be health care and infrastructure spending and defense spending should also hold up well…Trump is known as a “deal maker” and the markets are anticipating more from both Dems and Repubs in 2019…
• China slowdown is also weighing on investors’ minds as they are continuing to slow down with their Q3 GDP coming in at 6% which is a slowdown from previous 6.5%…we are also seeing Global Capital spending plans falling to its lowest levels since 2016…the biggest impact to the global growth story here is and will remain China Tariffs and FEDs interest rate policies…So it is appropriate that 2019 is the Year of the Pig in the Chinese Zodiac and it’s biggest trait is realism…
• And speaking of Chinese Trade Tariffs a couple of key dates are coming up; first is the G-20 meeting on Nov 20th where Trump meets with Xi to discuss a number of issues but all ears will be focused on hearing about any positive news on Trade Tariffs…another round of tariffs are slated to hit the end of this year with current tariffs of 10% on $200 Billion in Chinese goods ratcheting up to 25%…and with Trump talking about another new round early next year of another $200 Billion in imported Chinese goods..
• With the future bringing in the possibly of even more trade tariffs we have seen in Q3 Earning’s calls that a lot of companies are now focusing on their Supply Chains and possibly restructuring…

Get my take in our Weekly Market Round-Up:

 

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

Wkly Market Round-Up thru Nov 2nd 2018; Where to from here?

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Nov 032018
 

Hey Folks, remember for our US Members (and many others world wide) to adjust your time back 1-hour this Sunday morning. For the financial markets time does not stand still nor move backwards; rather market price action is always attempting to adjust to the perceived economic state 6 months from now. This often times explains why market prices are falling while economic data promises and shows continued strength. Now the big question on most investors minds is where to from here? Get my take below in this week’s Weekly Round-Up.

Short Market Sound Bites:

• Some say the biggest risk is the Feds….since Powell’s statement on Oct 3rd when he said that they had a way to go before reaching a neutral fed-funds as evidenced by the market reaction to his comments back then we saw the large move lower for the past month taking over 2.4 Trillion of dollar value out of the US markets…This past Friday’s dip followed a 3 day rally of 3.84%, the best in a few years…on the good news front we are also in the strongest seasonal period for the US markets as we move thru to the end of the year…
• We are currently seeing more Volatility in individual stocks vs market indexes yes on bigger moves higher in markets are not showing many stocks participating in the moves…this all suggest more downside can be expected as overall market breadth remains weak…
• On Friday we got very good Labor and Jobs Data showing a 250K rise in payrolls with employment remaining at 3.7%, numbers showing solid results…this put the “Good News is Bad News” back on the forefront on the fear this could force the Feds to continue in their interest rate tightening process…The Feds are expected to raise rates 4 more times thru 2019 while the Bond market is only pricing in 2 more rate hikes…going forward US Economic Data will create the potential need for more or less hikes and thus price action will react accordingly…current rates are 2% to 2.25% with a greater than 85% chance of a rate hike at the DEC 18-19 Fed mtg…
• For the past week we’ve seen the Asian markets finish up higher on potential news of a US/China trade deal or at least positive movement forward…we’ve seen markets move over 500+ DOW points intra day on on/off/back on again China & US Trade Tariff news…
• Often there are no clear explanations for price action behavior which simply reflects day to day Fear & Greed…this is similar to the statement made an eminent 19th Century Diplomat aboard who sent a cable back to his Monarch that said, “Situation Hopeless, but not serious”…
• Consumer Confidence hits 18-year highs despite market drop showing there is not as much fear in markets as this past Feb drop…keep in mind that before the 2007 market implosion Consumer Confidence was also at highs…

Here is my current take on market price action:

 

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

Wkly Market Round-Up thru Oct 26th 2018; Trick or Treat!!

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Oct 272018
 

Halloween is marked by times when cute little kids come to your door and you give them treats, mostly in the form of candies and send them on their way; –everybody is happy! But now when you hear a knock on your door, it is market price action, and in this case there are no treats! Only Tricks, financial tricks, mostly to the downside. Have we put in a low? Can it go lower? Check out my take on the current market turmoil below in this week’s Weekly Round-Up

Market Sound-bites

• Some say the biggest risk is the Feds….since Powell’s statement on Oct 3rd when he said that they had a way to go before reaching a neutral fed-funds rate from the extremely accommodative current range of 2% to 2.25%…markets interpreted this as a more Hawkish tone from the Feds and the markets sold off accordingly…current the Feds seem still committed to 4 more rate hikes thru 2019 with a 69% chance of a rate hike this coming Dec and 3 more for 2019…most market participants believe this is too aggressive and have forecasted only a sigle hike in 2019…with the Q3 GDP numbers coming in at 3.5% but slowing inflation seems to indicate the Feds can slow down their rate hike mentality….however Consumer spending is still very high at 4% which is the fastest rate in about 4 years…
• In US Dollar terms the markets suffered a loss of over $1.2 Trillion dollars and over $3.3 Trillion in Equity Values evaporating in October…a bigger part of this sell-off can also be attributed to a larger overall allocation of money in Technology and Momentum stocks…
• Q3 US Corp Earnings on track for a 22.5% rise in Earnings YoY yet companies are being punished when they miss or lower forward guidance…current earnings have thus far not acted as a circuit breaker to stop downside equity onslaught…almost half of S&P 500 companies down more than 20%…the fear of Corp Earnings peaking is forcing price action lower…trade tariffs also starting to show up in Corp Earnings calls like from Caterpillar, Lennox and Honeywell…

Get my take for current market price action;

 

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

Wkly Market Round-Up thru Oct 19th 2018; Interest Rates vs Valuations

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Oct 202018
 

Hey Folks in one corner we have Interest Rates, which are rising; and in the other corner we have Forward PE Ratios (Corporate Valuations) falling. When an equilibrium is reached we can expect to see consolidation in the US Equity markets and money start to flow back into Equities. The key question is where is this level located as it is reflected in prices of US Indexes? Always remember, when Corporate Earnings are strong (and they are) and forecast guidance, while lower is still strong (and they are) then money will see that price point where owning US Equities is a fair value vs the inherent risks of even lower prices…get my take on the current market price action and what we could possibly expect from here;

Here are some more short takes on the current markets:

• Fed Reserve still committed to 4 more rate hikes thru 2019 with a 70%+ chance of a rate hike this coming Dec and 3 more for 2019…even through in real terms the current rates or below zero in real terms when taking into account the current CPI reading of 2.3%…the valuation gap between the US and the rest of the major economies is the widest it’s been in 20 years
• Many cracks showing in the current US Economy; Rising Interest rates (Fed Monetary Policy) reduces forward PE Ratios in S&P to 15.9 from 16.9 just about 3 weeks ago and down from 18.6 from January this year (15 is long term average)….as Forward PE Ratios move lower it allows money to better justify Equity investments vs. equally compelling Fixed Income Investments…; Falling Home Sector and its associated Supply chains (ITB [Home Construction], XHB [Homebuilders], HD [Home Depot], and Lowe’s [LOW]; Saudi Investment Risk [technology, infrastructure, Defense and oil],
• 72% of Companies that have reported Earnings topped forecasts near highest rate in 20 years but only 58% have topped revenue forecasts and have fallen about 5.7% on average if top line missed…
• Hard BREXIT would be a mess; Contracts (banking); Clearinghouses (derivatives); Data (data protection); Immigration (Cross Border rules)

Here is my take on the current market with this week’s Weekly Round-Up;

 

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

Wkly Market Round-Up thru Oct 12th 2018; Goldilocks and the 3 Bears!

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Oct 132018
 

Hey everyone, this market reminds me of Goldilocks and the 3 Bears. How many of you remember that story? Well check out my Weekly Round-Up this week to get a glimpse into what is going on in the current markets.

• Q3 Earnings expected to come in at 21% YoY growth which follows 24% / 26% for Q1/Q2 this year…Underlying growth is expected to slow its ascent but to a still strong 12%…rising rates could further dampen and compress margins/EPS… So far JPM fell 1.1%, C was up 2.1% and WFC up 1.3%…
• It is now all about Interest Rates – Goldilocks and not 1 but 3 Bears! (Rising Rates – Trade Tariffs – Regime change – Deflation to Inflationary markets…since the dot com bust thru the financial crisis in 2008 stocks and bonds have been inversely correlated…this happens in a deflationary environment – now as the markets shift more towards an inflationary one, this correlation could change – this would change investment models of most all pension and endowment/retirement funds…we saw some of this in Q1 of 2018 when both Bonds and Equities had a down 1st Qtr…
• Both the Dow and the S&P have fallen for three straight weeks, while the Nasdaq has dropped for two… For Q3 Earnings analysts are looking for earnings growth of about 19% and sales growth of 7%. There are also concerns that expectations have gotten too optimistic, or that the quarter could represent peak earnings, as much of the earnings growth can be credited to the tax bill passed late in 2017…
• This past Thursday’s downdraft was marked by the 4th volume, with 11.3 billion shares changing hands, since Feb. 9, amid a sizable sell order around 2:30 p.m. that added to the downswing and had traders buzzing…the Dow lost 300 points between 2:30 and 2:45 on that larger order distribution…
• When the large-cap index drops 5% or more during the first 10 trading days of a quarter, it falls 79% of the time for an average quarterly decline of 11.3%, according to the Dow Jones Data Group…Since 1928, the S&P 500 has logged a 5% decline about every two months and a 10% drop every six months…On average the S&P 500 has experienced intra-year declines of almost 14% since 1980 despite going on to post annual gains in over 75% of those 38 years
• Oct is a strange month for the US Financial markets…it is also generally the last month of the year that Mutual Funds can sell their losing stock positions to off set gains in their portfolio for tax reasons…

Get my take on this week’s Weekly Round-Up:

 

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