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Wkly Market Round-Up thru Feb 8th 2019; Landmines Everywhere!

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Feb 092019
 

Hey everyone, what price action we are seeing. Clearly the sentiment is more bullish in Q1 2019 vs Q4 2018…but we have a lot of things to watch out for.

My Weekly Sound Bites!

• The S&P 500 edged up and finished the week essentially flat finishing 0.05% higher. The Dow slumped 63.2 points on Friday but managed to finish up 0.2% for the week and Nasdaq Composite was 0.5% higher compared with last Friday.

• And despite a flat week, there are still a lot of potential landmines to watch out for in the coming weeks. Of course we have the trade negotiations with China and the White House Officials are set to be in Beijing next week to kick off another round of talks. And we got the March 1st dead line looming on whether Trump will institute 25% tariffs on over $250 Billion in imports. This is weighing very heavy on current price action.

• We have a possible US government shutdown coming up with the temporary funding deal due to expire Feb. 15. All eyes will again be on President Trump to see whether he and Democrats can make a deal to avoid another partial closure, or if Trump will declare a National Emergency.

• And across the pond in the U.K. we have British Prime Minister Theresa May and European Union leaders slated to meet again by the end of February to reopen talks to resolve the Brexit impasse. My guess is they will punt the ball further down the field.

• And finally we are seeing weakness all across the eurozone with Germany showing significantly lower retail sales in December, while purchasing managers’ indexes in both France and Italy declining for the month.

• Oh, and let’s not forget the US Feds. Remember they have changed course and now are on the sidelines regarding any future rate hikes for at least the next 6 months. But they still have not offered much clarity on their Quantitative Tightening. Yes they are still doing QT but have indicated they could pause or stop if necessary. So any miscalculation here can also drive price action much lower.

Enjoy this week’s Weekly Round-Up:

 

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

Wkly Market Round-Up thru Feb 1st 2019; Gummy Bear Yoga!

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Feb 022019
 

Hey Folks, as we round off the first month of 2019 we saw records breaking everywhere and mostly to the upside! Remember the old adage, “So goes January, so goes the Year” did not work well in 2018 as we saw markets open up with a flourish only to falter big time in the fourth quarter. So where does that leave us for this year? I would say in one word; –stretched! It does not mean we cannot stretch even more but at some point, even a Gummy Bear will snap!

Market Sound bites:

• This January turned out to be the best start for the S&P since 1987 with a 7.95 gain; but it followed the month of Dec that saw a plunge of 9.18% which was the worst Dec performance since 1931…helping boost prices to the upside was a reversal in commentary from the US Feds, from discussing future rate hikes to backing off to a “wait and see” type approach and going off the “auto pilot” comments regarding Quantitative Tightening…from the Dec 26th lows to end of January we’ve seen stocks move up over 15.9% representing about $4 Trillion in market value…But the saying “As January goes, so goes the rest of the year” did not work last year with markets seeing declines for the full year after a strong January 2018 start…and headwinds sill persist in this market so now it not the time to be complacent.
• Keep in mind the S&P 500 has delivered a blistering avg annual returns of 12% since 2008, which is almost double its normal run rate so we can expect over the next several years for these returns to abate somewhat…the Feds expect 2019 growth to come in around 2.3% which is reduced from their estimates made last year for 2019 growth of 3%…and with the forward PEs sitting around 16 valuations are not stretched with interest rates still with the 10 Yr US Treasury sitting around 2.7% so we clearly have the back drop for higher price action…
• From the White House we are getting encouraging news on the progress of US – China Trade talks and it is my belief Trump will get this deal done…the markets seem to be factoring in a more favorable result and the sentiment to kick off 2019 is more positive vs negative…even with slowing Corp Growth we are seeing price action in the US being solid; but headwinds could come from slowing Growth in China or across the pond in Europe.
• We also have that issue facing the Feds of QT (Quantitative Tightening)…how much more can they draw down the US Balance Sheets without upsetting market liquidity which can force interest rates higher and equity prices lower…thus far the Feds are not offering much guidance; merely a comment regarding “wait and see”….This can be a very big cloud hanging over the US Markets along with the dramatic increase in Corp. Debt…in their meeting this past week they left rates unchanged and also introduced more Dovish approach to monetary policies stating “patient and flexible” but we should not confuse these words with “done”…

My Take on Market Action:

 

Don’t Be A Rat Brain Trader —
Be the Red Striped Zebra and Trade Smart !!

Wkly Market Round-Up thru Jan 25th 2019; -What Goes Up ……?

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Jan 262019
 

Hey Folks, I hope you are all having a great start to the 2019 Trading Year! Granted, I am sure many of you missed a good deal of the run off the Dec 26th lows for fear of another roll over in price action but those that were able to climb aboard have done very well. Now we have moved up a good deal (over 14% in a short 3 week time span) and markets appear to be resting for the upcoming market data due to hit this week; -and it will be a big week indeed!

Here are my Sound Bites for the week:

• This last week of January will be very busy — on the trade front, a Chinese delegation led by Vice Premier Liu He sits down with U.S. Trade Rep. Robert Lighthizer from January 30-31 which will be crucial to avoid the March 1 deadline where Trump talked of further Tax Hikes in imports…also the FOMC is expected to hold the federal funds rate in a target range of 2.25% to 2.50% when it meets on January 29-30…the Fed Fund Futures indicates a 0.5% chance of a rate increase in the meeting next week, a 5.7% chance at the meeting in March, and a 9.4% probability in May and 24.5% odds for a hike in June….this is a complete reversal from what we saw from Powell in Dec….Now that the government shutdown is over for at least a few weeks, economic data should start rolling in again with the Labor Dept scheduled to post the January jobs report on Feb 1, with economists expecting a solid gain of 185K jobs and an unemployment rate of 3.9%…
• On the Corp Earnings Front we will see Mega-cap tech companies Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Facebook, (NASDAQ:FB), Alibaba (NYSE:BABA) and Amazon (NASDAQ:AMZN) are all in line to report earnings with the Tech sector having been under pressure over the last few months….however we did see the semiconductor stocks heating up over the last week with the Philadelphia Semiconductor Index up 4.4%…
• And the 2020 US Presidential campaigns are heating up with most of the Dems showing a preference for the “Willie Sutton Tax Plan” a famous bank robber who said, I rob banks ‘cause that’s where the money is! And the Dems want to go after the rich in much the same fashion…so while early in the campaigns, we can expect a good deal of fireworks as all of this heats up…or to quote that Rhodes Scholar, Ocasio-Cortez, the “tippy top” plan….
• I think the real Global Challenge personally is not Global Warming, the China-US Trade Tiff – or even Monetary Policy mistakes from the FEDs/other Central Banks – no, the real challenge are the idiot Rat Brains elected to run our countries, most of them tied down to pandering to their own respective idiot constituencies…so I guess in the long run you could say I would Short the Politicians and Go Long Turmoil! Or Viva Volatility!
• Speaking of Volatility, remember, those of you currently trading VXX need to shut down the trade by Jan 30th and switch over to VXXB…I will work exactly like VXX as it is retired by Barclays since it is a ETN with a limited life.

Now get my take on the current price action in this week’s Weekly Round-Up

 

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

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

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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!

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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