web analytics

Wkly Market Round-Up thru Dec 7th 2018; Rudolph or the Grinch?

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Dec 7th 2018; Rudolph or the Grinch?
Dec 082018
 

Hey Folks, to say the markets have been a bit schizophrenic would be an understatement. We have a lot of turmoil underneath price action as we move into what is historically the most bullish time of the year for US Indexes. Now the question is who will come calling as we round out this year; Rudolph or the Grinch?

This week’s Sound bites:

• This past week we saw over $1.4 Trillion be lost in US Stock Portfolios making this the worst start to December (historically the best month of the year) since 2008…Signs of Economic slowdowns are showing in falling commodity prices, along with weakening Corp profit projections, housing and auto sales, trade uncertainty and possibility of higher interest rates…and this past Friday’s Jobs Data, while still north of 150K came in at 155K thru November showing signs of slowdown here as well…thru the first 8 months of the year the average was about 200K and now for Q4 the average is 170k showing a slowdown in non-farm payrolls data…
• The Feds are now taking note with most Fed Govs. (and Powell as well) stating the idea of a hike on Dec 18th and then a wait and see approach…the Bond markets so far have gotten it right with a forecast of 1 hike in 2019 while the Feds had a dot plot forecast from its last meeting at 3 hikes for 2019…
• On another interesting note, Challenger Gray shows Corp layoffs for 2018 total 495K which is up 28% from 2017 and the highest since 2015 showing cost cutting now on the minds of many Corp CEOs which support more of a deflationary affect…
• One interesting Factoid; the US Feds issued a research paper indicating that an average of 80% of the S&P Returns above the risk free rate (30 Day T-Bill) occurred the 3 days around the FOMC meeting (day before thru a day after)…meaning you could have beaten the S&P by simply over-weighting US Stocks the day before an FOMC meeting and going back to neutral weight the day after the Policy Statement…the next Fed meeting is Dec 18th-19th…

Get my take on this past week’s market action.

 

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

Wkly Market Round-Up thru Nov 30th 2018; Godzilla vs Megaladon!

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Nov 30th 2018; Godzilla vs Megaladon!
Dec 022018
 

Hey Folks, as this update is posted we get word of a positive outcome for the Trump/Xi meeting at the G-20. We can expect more news this coming week regarding market implications but at the very least we can anticipate more upside momentum in price action. On a sad note this coming Wednesday the markets will honor tradition here in the US and be closed with a National Day of Mourning for our 41st President, George Bush Sr.

This past week’s market sound bites:

• Markets are still guided by Trade and Monetary Policy by the FEDs…this past weekend, both the U.S. and China said they would launch negotiations to ease trade tensions, with the U.S. postponing plans to increase tariffs on $200 billion in Chinese goods…Trade uncertainty leaves large companies uncertain where to invest and the easiest out has been in the form of share buybacks and dividends to help elevate share price…the two sides would discuss forced technology transfer, intellectual-property protection, non-tariff barriers, cyber-intrusions and cyber theft, services and agriculture and China agreeing to buy a substantial amount of US AG, Industrial and energy goods…
• Current spend on share buy-backs has exceeded Corporate CapEx spending in both Q2 and Q3 this year…Share buy-backs are estimated to come in this year at $1.2 Trillion…for context it is important to understand that US Stocks are up 14.5% annually over the past decade, which is about 2 times what is the normal annualized rate and US Bonds are up over 9% annually which is over 3 times their normal rate so the implications are for a return to a more normalized growth trajectory which means this normalization process slows things down going forward…
• Analysts are already starting to cut Q4 earnings estimates for S&P 500 companies with EPS falling 2.5% to $41.45…that is the largest decline over the first 2 months of a Qtr. since early 2017…In addition analysts are cutting full year 2019 earnings estimates hitting $170, from 2018 full year estimates at $164 EPS up just 3.9% for the full year…
• Feds Powell helped boost the markets this past week with his speech in NY when he indicated that the current interest rates are just under current neutral rates…this indicated a more Dovish view from Powell’s prior statements made in early Oct when he indicated we are not even close to the neutral interest rates which set off the larger move lower in Global Equity markets…
• With rising interest rates markets are also paying attention to the rising Corp Bond markets with the majority of the bottom of the investment grade bonds (Triple B’s) needing to be rolled over…should many of these Triple B’s get reduced into Junk debt then their respective interest rates will explode higher and could cause some degree of contagion…The spread between interest rates of Investment grade and US Treasuries has widened a bit this past month but not alarmingly so…
• According to Deutsche Bank over 89% of the Global Financial Indexes it tracks were negative for the year in US Dollar terms…in 2017 a dart throwing monkey could have made money but with Central Banks Globally talking about Balance Sheet reductions we will see that not all asset classes move together…This current phase across all Global markets, with liquidity being drained by Central Banks and the Feds look at further rate hikes, which leads to a stronger US Dollar, this will pressure emerging markets and prices for most commodities, such as Oil, Steel, raw materials and even the Ag markets being affected by Trade Policy issues or the threat of pending policy issues are making all market assets more difficult to navigate…

Get my take in this past week’s market action.

 

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

Wkly Market Round-Up thru Nov 23rd 2018; A Big Fat Turkey!

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Nov 23rd 2018; A Big Fat Turkey!
Nov 252018
 

Hey Folks, for those of you in the US I sure hope you were able to enjoy this holiday shortened week with family and friends. The markets sure put on a show but not the kind most participants expect this time of year! A Big Fat Turkey of a week. Get my take of this week’s market action below;

Market Sound Bites for this Turkey Week:

• Investors will be paying attention this coming week to two key events; Fed Chairman Powell address the Economic Club n NYC and on Saturday Trump meets Xi to discuss the current status of US/China Trade…Regarding Powell’s speech, investors want to gain a measure of the degree to Feds commitment to further rate hikes…the markets have only priced in 2 more rate hikes thru the end of 2019 while the Feds have discussed 4 more hikes…a December 19th rate hike of 25 bps has been priced into current market prices…this leaves a big wide gap between expectations and reality for 2019…
• Another area of focus by investors, which thus far in my opinion has escaped discussion, it the FEDs current US Balance Sheet reductions…this ongoing process has seen the Feds reducing US Balance sheet at about $50 Billion monthly to a total of about $300 Billion…this process has the same effect as raising interest rates as it reduces total money supply from markets…the US Dollar is the anchor currency that accounts for about 70% of the World’s GDP…this will cause tighter money supply Globally as well…
• The Oil markets are seeing very large price reductions across the entire Energy Complex being down about 30% from the highs made only a month ago and this past week Oil moved down over 11% the biggest weekly drop in years…OPEC will hold its bi-annual meeting this coming Dec 6th and many market participants are expecting a production cut to get inventory levels down reducing supply…
• Since our big push lower only 2 Sectors have moved higher; XLP and XLU, both doing their jobs as risk off sectors…the S&P now trades at its lowest valuation since the market drop in 2016 at 15 PE..and half-way thru the 4th Qtr. the S&P returns are the 3rd worst since 1946…while these large slumps on a historical average point to end of year moves of over 5% on average 81% of the time…

Here is my current Market Recap

 

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

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

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Nov 16th 2018; Humpty Dumpty Sat on a Wall
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!

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Nov 9th 2018; Divided Congress!
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?

 Weekly Updates  Comments Off on Wkly Market Round-Up thru Nov 2nd 2018; Where to from here?
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