INTRODUCTORY SESSION TO PATTERN TRADER TUTORIAL

We’re having another Introductory Session to the Pattern Trader™ Tutorial June 2018 Batch on April 26th.

So book that date early, bring a friend/relative and really do yourself a favour by knowing what you really need in order make it in this business.

After more than 12 years of educating professionals in the arts and sciences of Finance and Economics, I don’t need to bullshit you into knowing that this is the only financial education you should consider.

If you’re looking to make a huge difference in your financial life, consider attending the Pattern Trader Tutorial Introductory Session first.

If you want to know more about the Tutorial, read up everything here: The Pattern Trader Tutorial 2018

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Click here now to make a huge difference in your life:
Pattern Trader Tutorial Introductory Session

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Find out more about the Pattern Trader Tutorial here:
Pattern Trader Tutorial 2018

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The schedule for the June batch is here:
Pattern Trader Tutorial Batch 94 June 2018

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Ten (Trading) Rules I Never Break

As with anything in life, we have rules. We stop at red lights. We do not touch the red “live” wire. We never put our hands in boiling water. We do not leave the baby unattended in the bath.

Rules are meant for our safety. Rules prevent bad things from happening. Rules keep things organized and orderly.

We have rules for trading too but unlike most other rules, we tend to forget them, break them or ignore them when we trade. The fact about trading rules is that if you do not break them, you will find your losses actually getting less. The risk factors are also lowered significantly and your confidence stays untested.

If it is so obvious that trading rules are good for you, why then do people not have rules when they trade or why do they not adhere to them as they are trading?

The answer is a word that most people do not like while others do not even consider … Discipline.

Traders also have a tendency to want to prove to themselves that they are better than they actually are. These traders would like to believe that they have the skill to manage their trades without the need for stifling and restrictive rules. If nothing goes wrong, then it is all fine and dandy. However, when things do go awry (and they often do in this business), they will lack the discipline to do the right thing no matter how skillful they are.

The reason such traders do not feel the need to have rules is simply a matter of Pride. For such traders, having rules is a sign of weakness. Their pride will precede common sense and when something does go wrong, it is that same pride that will keep them from admitting that they have made a mistake. They will then defend that pride by blaming and finding excuses for their misfortune. For their lack of discipline, proud traders will never accept accountability for their losses.

Discipline and Pride … somehow, the two words do not jell well in the same sentence.

It is the humble trader who knows that things can go wrong, that mistakes can happen, that nothing should be taken for granted and that a set of rules will readily keep him safe.

I keep a set of ten simple rules when I trade to keep me disciplined so that my psychology is never tested and my confidence is kept high:

1) I Trade Only When There Is Something To Trade.

This is not the easiest thing to do. Experienced traders will tell you that the most difficult thing in trading is knowing when not to trade. Too often, we look for trades, we find an excuse to want to trade and we jump into trades without fully considering the consequences.

This rule keeps me from doing all that. I trade only because there is a trade to be made because the market is telling me so. If I have to consider my analyses for more than a minute, it simply means that there is no trade yet. If there were a trade to be made, it would be crystal clear.

2) I Never Trade Without R.S.T. (Reason, Strategy and Targets).

I keep a simple guideline about having a reason to trade and they fall into five categories:

  1. Interest Rates (Monetary Policy)
  2. Earnings
  3. Seasons
  4. Cycles (Sector Rotation)
  5. News (Macroeconomics)

If I do not have one of these reasons to take a positional trade, then I really do not have a reason to trade. Interest Rates give me a reason to take a long-term position like an investment. Earnings give me a quarterly reason to hold an equity position for up to three months. Seasons also give me a quarterly reason to hold anything other than equities. Cyclical trades can last between a week to a month or two. News can be a good reason to get a quick profit within a week.

Once you have your reason, you need to strategize that trade in the event that something goes wrong. You will need to have a fix, a hedge or some sort of protection because in this business, things can go very wrong very quickly.

Lastly, I never take the trade without first planning my trading budget, timeframe (duration), price target and stop-loss.

3) I Never Trade Something I Did Not Research Myself.

A common practice among sloth traders is to get a tip from someone else and jump into the trade, hoping for the best. They know little about the trade and definitely have no plan for it. Whether the tip loses or becomes profitable, they will surely not know what to do with it and when to do it.

Researching is a basic part of what good traders do before taking a position. If someone had a tip, I would research that tip thoroughly, have a plan to trade it and have a total understanding of what is about to happen.

Not researching a trade is akin to going on a road trip without first mapping the journey. You are bound to get lost at the first wrong turn.

4) I Never Buy The High

A general reaction to securities on the way up is that if you do not catch it soon, you will miss the ride. The problem with that thinking is that the security has already left you behind. If you do get a position, you will find that you are almost always going to suffer a dip thereafter.

Never buying the high allows me to contemplate my choices, of which there are always three: buy, sell/short or hold/do nothing.

Since the security is at a high, I obviously will not go long on it. I can choose to do nothing or if I am already in a position, I can choose to hold my position. I can also choose to sell what I have for a profit and even consider a possible short position if I do not have anything to sell for a profit (provided the short trade was researched first). Whatever my choice, I will not be buying it.

5) I Never Sell/Short The Low.

Tanking securities generate one of two extreme emotions in a trader – panic or greed. Panic tends to send the price down faster and more irrationally than greed sends the price up. To short an already tanking security is to court unnecessary risk. The security may have already arrived at the bottom where it is likely to consolidate or even bounce as a result of short covering or a short squeeze. To sell (cut loss) in panic at this level would be foolhardy as a bounce could save you some grief.

Of course, due diligence and research needs to be done in order to make a sound decision. Never selling/shorting the low allows me to pick from those three choices again — buy, sell/short or hold/do nothing.

Since the security is at a low, I obviously will not go short on it. I can choose to do nothing or if I am already in a position, I can choose to hold my position. I can also choose to short cover what I have for a profit and even consider a possible long position if I do not have anything to cover for a profit (provided the long trade was researched first). Whatever my choice, I will not be selling it.

But would I buy it? It depends on Rule #6.

6) I Buy On Supports

By using volumes and timing my entries to leverage on seasons and cycles, the lowest risk entry for a long trade is always when the security comes off a significant support level.

Other methods widely used by professionals include MACD, Candlestick Analysis and Breakout Patterns. But one constant remains – the lowest risk entry is when the price breaks out of those patterns as it comes off a significant support level.

Occasionally, the trend breaks down rather than bounces. For this see Rule #7.

7) I Sell/Short On Resistance

If I am looking to short something, I would rather short it at a high where there is a significant resistance to spoil the uptrend. I would also consider a short if a security breaks below a significant support level.

Remember that significant support levels used to be the recent significant resistance levels that are broken to the upside.

If such levels cannot support the security, it is rather common to see the price fall precipitously as it breaks below that support level.

8) I Never Trade In No Man’s Land

When a security is neither at a high near a resistance nor at a low near a support, that security is deemed to be in “No Man’s Land”.

Taking a position in No Man’s Land gives the trader a 50% chance of making or losing. I have been considered a high risk-taker but even a 50-50 chance is too much of a risk for me.

I would rather wait for the security to get up to the resistance again or fall further to the support before I consider my options. Remember rules #6 and #7.

9) I Always Wait For My Setup.

The setup is a familiar pattern that the security regularly performs that prompts me into action. Such patterns tend to repeat themselves thus making entries rather reliable.

One very common setup is the scalping opportunity at the opening hour of the U.S. Market. Certain stocks tend to take a direction in the opening 15 to 20 minutes and promptly reverse into the direction of the market trend. The initial direction is often from profit taking as the previous session could have closed higher. It could also work the other way as traders cover their shorts from the previous day’s drop.

When a security presents such an opening, regular traders of the security will identify an opportunity to make a scalp as the reversal falls into place and all the technical indications look ever so familiar. This is a setup.

All good traders have setups of their own. They will wait patiently for the security to set itself up and if it never happens, they do not trade. However, when it presents itself without any doubt, the trader knows that this is the lowest possible risk trade that he will ever take.

I have various setups for the various securities I trade. Each trading timeframe also comes with its own setup. There have been times in the past when I did not have the patience to wait for my setup. The results were always disappointing. Today, this is still one of my most testing disciplines but I have gotten better at it.

Good habits come from good practice.

10) I Never Break Any Of These Rules.

Now that should go without saying!

Feel free to download this poster and stick it up on the wall where you trade as a visual reminder to stay disciplined to your craft. Take it as my goodwill gift to you so that you may strive to be a mindful trader.

Happy Hunting!!

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This article was featured in the National Best-Selling Book, “Winning Psychology Of Defensive Traders” 

Copyright © Pattern Trader™ by Conrad Alvin Lim. All Rights Reserved 

 

 

 

 

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Pattern Trader Tutorial Introductory Session

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We’re having another Introductory Session to the Pattern Trader™ Tutorial June 2018 Batch on April 26th.

(The schedule for the June batch is here: Pattern Trader™ Tutorial Batch 94 June 2018)

The batch is confirmed to go ahead in June as the minimum take-up has already been achieved. So book that date early, bring a friend/relative and really do yourself a favour by knowing what you really need in order make it in this business.

After more than 12 years of educating professionals in the arts and sciences of Finance and Economics, I don’t need to bullshit you into knowing that this is the only financial education you should consider.

If you’re looking to make a huge difference in your financial life, consider attending the Pattern Trader™ Tutorial Introductory Session first.

If you want to know more about the Tutorial, read up everything here: The Pattern Trader™ Tutorial 2018

Click here now to make a huge difference in your life:
Pattern Trader Tutorial Introductory Session

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Weekly Market Update – 16 April 2018 BMO

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WEEK IN REVIEW – 9 to 13 April 2018: Light Volume Overshadows Gains

Wall Street had a good week in terms of gains, but volume was light, pointing to a lack of conviction among investors — who spent the week digesting a steady stream of headlines. The tech-heavy Nasdaq Composite led the major indices higher, adding 2.8%, while the S&P 500 and the Dow Jones Industrial Average advanced 2.0% and 1.8%, respectively.

The stock market began the week on a positive note following weekend interviews from several White House officials, including Treasury Secretary Steven Mnuchin, that helped to alleviate fears that the U.S. is barreling towards a tit-for-tat trade war with China. Chinese President Xi Jinping helped further improve investor sentiment with a speech at the Boao Forum on Tuesday, saying that he plans to “significantly” cut tariffs on imported automobiles, reduce duties on other imported goods, and improve the intellectual property rights of foreign firms.

Moving to the Middle East, geopolitical tensions were heightened following a suspected chemical attack from the Syrian government on the rebel-held town of Douma that killed at least 40 people over the weekend. The situation escalated even further on Wednesday morning when Russia, which supports Syrian President Bashar al-Assad, warned that it would shoot down any missiles fired at Syria — to which U.S. President Donald Trump replied “get ready Russia, because they will be coming.”

As of this writing, the U.S. has yet to strike the Syrian government, but it could happen at any moment. The attack was first thought to be imminent, but President Trump muddled that belief on Thursday by tweeting that it could happen “very soon or not so soon at all!”

In addition to the situation in Syria, a missile attack aimed at Saudi Arabia by pro-Iranian rebels in Yemen served to further escalate tensions in the region. Saudi air defense forces intercepted one missile over the capital Riyadh on Wednesday, while two others were intercepted over the southern areas of Jazan and Najran.

With all the concerning headlines out of the oil-rich Middle East, traders pushed oil prices substantially higher this week, betting that the tensions will eventually lead to a slowdown in production. West Texas Intermediate crude futures surged 8.4% to $67.26 per barrel, closing Friday at their highest level in more than three years. The S&P 500’s energy sector benefited from the jump in oil prices, finishing at the top of the week’s sector standings by a comfortable margin; the group added 6.0%.

In Washington, Facebook (FB) CEO Mark Zuckerberg testified on Capitol Hill this week, answering questions regarding the company’s Cambridge Analytica data scandal and Russia’s alleged use of Facebook to influence the 2016 U.S. presidential election. Mr. Zuckerberg was grilled for 10 hours by nearly 100 lawmakers, but the market seemed satisfied with his answers. Facebook shares climbed 5.3% over the two days of testimony, eventually finishing the week with a gain of 4.7%.

On Friday, big banks kicked off the first quarter earnings season, with JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) all beating profit estimates on in-line revenues. However, shares of the three lenders, and the broader financial sector, sold off in the wake of the reports. The financial sector settled the week with a gain of 1.0%, which placed it in the middle of the sector standings. The lightly-weighted utilities and real estate groups finished at the back of the pack, losing a little more than 1.0% apiece.

Investors received the minutes from the March FOMC meeting this week, but the report contained few surprises. Some key inflationary data was also released this week – namely the CPI readings for March – but was met with a largely muted response from the market. In short, the consumer prices report showed a firming (though not scary) inflation trend that will keep the Federal Reserve wedded to its tightening bias and its belief that at least two more rate hikes are warranted this year.

The CME FedWatch Tool still anticipates that the next rate hike will occur at the June FOMC meeting with an implied probability of 95.0% (up from 85.2% last week). The market also still believes there will be a total of three rate hikes in 2018, but the chances for a fourth hike increased to 36.8% (from 26.3% last week).

Friday 13 April Summary: Stocks Trim Weekly Gains on Friday

Stocks slipped on Friday, ending a positive week on a disappointing note, as some geopolitical angst prompted investors to take some money off the table ahead of the weekend. The S&P 500 declined 0.3%, the Nasdaq Composite lost 0.5%, and the Dow Jones Industrial Average dropped 0.5% – trimming their gains for the week to 1.8%-2.8%.

The major averages started the session modestly higher following better-than-expected first quarter earnings results from financial giants JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C). However, after a short stint in the green, the financial sector moved lower, bringing the broader market with it. Volatility picked up in the final stretch, with the major averages dropping to new lows before bouncing back, as investors contemplated the likelihood of a U.S.-led strike on Syria over the weekend.

President Trump has promised that the U.S. will be striking the Syrian government, which is accused of carrying out a chemical attack against the rebel-held town of Douma last Saturday, but the president has intentionally made the timing of the attack unclear. Adding to the uncertainty, an attack would likely put the U.S. at odds with Russia, who supports Syrian President Bashar al-Assad and has vowed to shoot down any missiles fired at Syria.

The energy sector (+1.1%) helped keep losses in check on Friday, extending its weekly gain to 6.0%, as oil prices rallied for the fifth day in a row. West Texas Intermediate crude futures jumped 0.3% to $67.26 per barrel – their best level in more than three years – benefiting, once again, from the uncertainty surrounding the oil-rich Middle East. The utilities (+0.7%), consumer staples (+0.5%), and real estate (+0.5%) sectors also advanced, but the seven remaining groups finished in the red.

Unsurprisingly, the financial sector (-1.6%) finished at the bottom of the sector standings following the negative reaction to the big bank earnings. The consumer discretionary space (-0.6%) also underperformed, but no other group lost more than 0.3%. Within the top-weighted technology space (-0.3%), chipmaker Broadcom (AVGO) outperformed, adding 3.1%, following news that the company’s board has authorized the repurchase of up to $12 billion of common stock.

In the bond market, U.S. Treasuries finished Friday mixed, flattening the 2s10s spread to 45 basis points – its lowest level since 2007. The yield on the benchmark 10-yr Treasury note slipped one basis point to 2.82%, while the yield on the 2-yr Treasury note climbed two basis points to 2.37%.

Reviewing Friday’s economic data, which was limited to the preliminary reading of the University of Michigan Consumer Sentiment Index for April and the Job Openings and Labor Turnover Survey for February:

On Monday, investors will receive Retail Sales for March, the Empire State Manufacturing Survey for April, Business Inventories for February, and the NAHB Housing Market Index for April.

Market Internals – Friday 13 April

NASDAQ stays positive YTD, Russell 2000 turns positive YTD, DOW and S&P still negative YTD.

(Excerpts from Briefing.com)

Dollar: Dollar Index Holds

The U.S. Dollar Index was little changed at 89.78 on Friday after spending the day inside a razor-thin range. The Dollar Index followed Thursday’s uptick with an early-morning dip, which was reversed in short order. The Index returned to unchanged on Friday morning, but could not climb back above its 50-day moving average (89.85). The Dollar Index surrendered 0.4% for the week.

Bonds: Yield Curve Continues Flattening

U.S. Treasuries ended the week on a mixed note. The final session of the week was very quiet, keeping the 10-yr yield inside a three-basis point range. Treasuries began the day with modest losses, but the 30-yr bond was quick to reclaim its early decline while the 10-yr note followed suit. 10s and 30s hit session highs in mid-morning action, spending the rest of the day inside narrow ranges. The 2-yr note underperformed throughout the day, which resulted in continued pressure on the yield curve. The 2s10s spread compressed three basis points to a new cycle low of 45 bps while the 2s30s spread tightened four basis points to 65 bps, which also marks the flattest level of the current cycle.

The entire yield curve flattened over the week with the shorter maturities rising quickly while the 30-year yield stayed rooted. The spread between the 5s10s narrowed to 15bps from 19bps the previous week as did the 10s30s at 20bps from 24bps the previous week. The 45bps spread between the 2s10s is the narrowest since 2007.

Crude: Brent & WTI break multi-year highs

For the first time since November 2014, Brent closed above $72.00/barrel and WTI closed above $67.00.

OPEC releases monthly oil market report (Thu 12 Apr);

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.3 mln barrels from the previous week. At 428.6 mln barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories increased by 0.5 mln barrels last week, but are in the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 1.0 mln barrels last week but are in the lower half of the average range for this time of year. Propane/propylene inventories decreased by 0.4 mln barrels last week, but are in the lower half of the average range. Total commercial petroleum inventories increased by 6.0 mln barrels last week.

Baker Hughes total U.S. rig count increased by 5 to 1008 following last week’s increase of 10.

Metals: Metals continues gains

Agriculture: Wheat strengthens, Corn corrects, Soy spikes

Commodities measured by the Bloomberg Commodity Index closed at 89.28, higher than 86.94 the previous week.

THE WEEK AHEAD

The sixteenth week of 2018 (wk16) tends to be one of the two most bullish weeks of the year over 15 and 21 year averages. However, in the last 10 and 5 years, the middle of week16 tends to be volatile.

Key Economic Dates

In the coming week, the US will publish retail trade, industrial production, building permits and housing starts. Elsewhere, important releases include: UK inflation, wages data, unemployment and retail sales; China Q1 GDP growth, retail trade and industrial production; Japan inflation and trade balance; Australia employment figures; and Canada interest rate decision.

Mon 16 April

Tue 17 April

Wed 18 April

Thu 19 April

Fri 20 April

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SUMMARY

The coming week will see a lot of central bankers from the US, UK and EU making statement that could move markets. Along with the Syria issue, earnings are going to be the centre of attention over the next few weeks. Early indications show bank stocks all beating Wall Street estimates, but J.P. Morgan, Citigroup, Wells Fargo and PNC were down 2 percent or more. The market pros are anticipating that geopolitical tensions could possibly overshadow an earnings season that is supposed to deliver at least a 17 percent increase in profits.

I remain bullish given that week 16 and 17 have a strong history of being bullish. But I will play it safe by going with the Syria issue probably rallying the defence industry. The flattening yield curve is getting serious along with the rising price of oil – all indications of a market topping out. I’ll be watching the manufacturing and industrial production data closely for first indications of a possible contraction along with the language of the Fed members this week.

Happy Hunting!

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Don’t forget to catch me this Saturday, 21 April 2018, for this most eye-opening session about what it takes to be the boss and why the little things we ignore can lead us to ruin.

Mark the date, note the destination and don’t miss this session for anything!

Read up on the synopsis here: Why Most Young Entrepreneurs Fail

Download the app to make your booking!

Or book on Eventbrite: http://bit.ly/conradalvinlim

See you on April 21st!!

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Comments Off on Weekly Market Update – 09 April 2018 BMO

Weekly Market Update – 09 April 2018 BMO

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WEEK IN REVIEW – 2 to 6 April 2018: Trade Concerns Drive Friday Fallout

The stock market closed the week on a decidedly lower note, falling victim to fears about potential trade wars, the Federal Reserve’s tightening bias, and the specter of earnings growth not living up to this year’s high expectations.  The Dow, Nasdaq, S&P 500, and Russell 2000 declined between 1.9% and 2.3% in Friday’s trade.

Things got off to a bad start following the news that President Trump ordered the Office of the U.S. Trade Representative to consider whether it would be appropriate to impose an additional $100 billion of tariffs on Chinese imports on top of the proposed $50 billion of tariffs announced on Wednesday.

China quickly responded, saying it would do what is necessary to protect its interests at any cost if the U.S. ultimately pressed ahead with such a tariff plan.

What rattled the stock market, though, was the feistier-sounding nature of administration officials today discussing the new proposal, as well as their seeming lack of concern about the difficulties the stock market has been having on account of the heated trade rhetoric between the U.S. and China.

President Trump noted that the stock market might have to have a little pain as he works to protect the trade interests of the U.S.; meanwhile, Treasury Secretary Mnuchin said in a CNBC interview that he is not focused on short-term market swings and that there is potential of a trade war with China even though that is not the objective.

The major indices rolled over after Mr. Mnuchin’s comments and then cascaded even lower after Fed Chair Powell said he thinks inflation will pick up this Spring and that he sees further gradual rate hikes.

In essence, the stock market didn’t get the verbal support it has been accustomed to receiving from leading officials in periods of uncertainty.  Ironically, that fed a heightened sense of uncertainty about the outlook for the economy and earnings that kept many buyers on the sidelines and Friday’s sellers focusing their efforts on the economically-sensitive sectors.

Every sector ended with a loss.  The industrials sector (-2.7%) suffered the largest decline, but it had ample company.

The information technology (-2.5%), financial (-2.4%), materials (-2.4%), and health care (-2.4%) sectors all underperformed while losses in the consumer discretionary (-2.1%) and energy (-1.8%) sectors also weighed heavily.

The Dow Jones Industrial Average fell as many as 767 points on Friday before paring its losses in late action.  That recovery effort coincided with a bounce in the S&P 500 after it breached its 200-day moving average (2594).  Once again, though, the violation of that key technical level brought out the buyers who succeeded in pushing the S&P 500 back above the 200-day moving average by the closing bell.

The trade issues dominated the market narrative on Friday, but there was more to the story.  The March employment report provided its own twist for the market.

It showed a surprisingly weak 103,000 gain in nonfarm payrolls and a sturdy 0.3% increase in average hourly earnings.  All in all, it was a mixed report, yet it didn’t alter the market’s thinking about monetary policy other than making it think there was a diminished probability of a fourth rate hike in December.

The CME FedWatch Tool now pegs the probability of a fourth rate hike in December at 24.4% versus 32.7% on Thursday.

Reviewing Friday’s economic data, which was limited to the Employment Situation Report for March and the Consumer Credit Report for February:

COMMENTARY

Last week, I wrote that “The fourteenth week of 2018 (wk14) tends to be very bullish on Monday and Tuesday, then moderately bullish on Wednesday and Thursday. Friday becomes quite bearish.

Obviously, Monday was out of sorts but the rest of the week still panned out as it has historically, albeit in a most volatile fashion. On Monday, DOW flirted with its 200DSMA but managed to close above it. For the rest of the week, the DOW steered clear of the critical moving average.

The S&P500, however, had a more eventful week by closing below its 200DSMA on Monday, turning back above it on Tuesday and then making intraday dips below the 200DSMA for the rest of the week, save Thursday. On Friday, it barely closed above it thanks to the last hour that saw an uptick in short-covering.

Amongst all the major indices, NASDAQ is the only one that it still bullish YTD but only by 0.2%.

Friday’s Market Internals looked like a joyride for the Bears:

(Excerpts from Briefing.com)

Dollar: Dollar Index Nears Thursday Low

The U.S. Dollar Index was down 0.4% at 90.14, narrowing the week’s gain to 0.2%. The greenback held its ground through overnight trade, edging to a fresh one-month high in early Friday morning action. However, the dollar backed off that high in European trade, and slid to a fresh session low after the March Employment Situation report missed headline expectations (actual 103K; consensus 175K). The Dollar Index drifted near its low into the afternoon, threatening a run at Thursday’s session low. Friday’s decline in the Index masked underlying dollar strength against minor and exotic currencies.

Bonds: Down Week Ends on Higher Note

U.S. Treasuries ended the week on a higher note, erasing their losses from Thursday. The Treasury market crept higher in overnight action, after President Trump ordered trade officials to consider imposing tariffs on another $100 billion worth of imports from China. The opening advance was extended after the release of a mixed Employment Situation report for March, which missed headline expectations (actual 103K; Briefing.com consensus 175K), but showed a 0.3% increase in average hourly earnings (Briefing.com consensus 0.2%) that lifted the year-over-year growth rate to 2.7%. Fed Chairman Jay Powell spoke at the Economic Club of Chicago in the early afternoon, noting that the still moderate wage gains show that the job market is not excessively tight. Chairman Powell said that gradual rate hikes are warranted to best promote the Fed’s goals and that inflation is expected to accelerate in the spring. Treasuries backed off their session highs in late-morning action, but returned to their best levels of the day during the final hour. The late bid coincided with aggressive selling in the stock market that pressured the S&P 500 back to its 200-day moving average (2594).

The entire yield curve steepened over the week with the 2-year yield staying rooted for another week while the longer maturities’ yields rose. The spread between the 5s10s barely widened to 19bps from 18bps the previous week as did the 10s30s at 24bps from 23bps the previous week. 

Crude: Brent & WTI continue downtrend for another week

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.6 mln barrels from the previous week. At 425.3 mln barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories decreased by 1.1 mln barrels last week, but are in the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 0.5 mln barrels last week but are in the lower half of the average range for this time of year. Propane/propylene inventories increased by 0.6 mln barrels last week, but are in the lower half of the average range. Total commercial petroleum inventories decreased by 3.9 mln barrels last week.

Baker Hughes total U.S. rig count increased by 10 to 1003 following last week’s decline of 2.

Metals: Precious bounce back, Copper continues gains

Agriculture: Corn, Wheat gain, Soy drops

Commodities measured by the Bloomberg Commodity Index closed at 86.9381, lower than 87.4729 the previous week.

THE WEEK AHEAD

The fifteenth week of 2018 (wk15) tends to be bullish all week except on Thursday which can be mildly bearish. Friday is the most bullish day of the week.

Key Economic Dates

In the coming week, the Fed will publish the FOMC minutes. Other important releases include: US inflation rate, the first estimate for Michigan consumer sentiment and JOLTs job openings; UK industrial production and trade balance; China inflation, producer prices and external trade; Japan consumer sentiment; and Australia business and consumer morale.

Mon 09 April

Tue 10 April

Wed 11 April

Thu 12 April

Fri 13 April

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SUMMARY

That 200DSMA is going to be closely watched this coming week. The S&P 500 index has gone 49 trading sessions without notching a new high. With earnings season for Q1 results starting this week (JPM on Fri 13 BMO), the volatility factor is going to go through the roof in the coming weeks.

With all the geopolitical instability rocking the markets these past weeks, earnings, the real market-mover, is going to put some real colour on the US economy. If initial numbers are anything to go by, it looks like it will be a solid season for the bulls.

Next week begins what is expected to be the strongest earnings season in nearly eight years, with potential growth of 18 percent. Early reports are off-the-charts good. A small group of companies – 23 of them, mostly those with quarters that end in February -have already reported including Monsanto, McCormick, FedEx and Oracle. Of the 23, earnings were up 27 percent and revenues were up 11.5 percent.

The scary side of the earnings story is that analysts are keeping estimates sky high for the rest of the year. They are expecting 20% growth every quarter for 2018. With such high expectations, it will only take a few downside surprises and downside guidance to send the market into a tailspin and drag the economy down with it.

Buckle up and hold on tight. If you thought that last two months were wild, I suspect seat-belts won’t suffice for the coming months – we’re going to need air-bags.

Happy Hunting!

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Pattern Trader Tutorial Introductory Session

PTTadBannerGold

We’re having our first Introductory Session to the Pattern Trader™ Tutorial June 2018 Batch on April 11th.

(The schedule for the June batch is here: Pattern Trader™ Tutorial Batch 94 June 2018)

The batch is confirmed to go ahead in June as the minimum take-up has already been achieved. So book that date now, bring a friend/relative and really do yourself a favour by knowing what you really need in order make it in this business.

After more than 12 years of educating professionals in the arts and sciences of Finance and Economics, I don’t need to bullshit you into knowing that this is the only financial education you should consider.

If you’re looking to make a huge difference in your financial life, consider attending the Pattern Trader™ Tutorial Introductory Session first.

If you want to know more about the Tutorial, read up everything here: The Pattern Trader™ Tutorial 2018

Click here now to make a huge difference in your life:
Pattern Trader Tutorial Introductory Session

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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Comments Off on Weekly Market Update – 02 April 2018 BMO

Weekly Market Update – 02 April 2018 BMO

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~~~

QUARTER ONE 2018 IN REVIEW

Quarter One of 2018 was one major roller-coaster ride when everything we’re used to went out of whack. I’ve not seen divergence like this since 2007 and the number of >1% sessions were more than I have ever seen in such a condensed period of time. I don’t remember 2008 being this violent except in the month of October that year. Even then, the frequency of >1% gyrations weren’t as many. In Q1 of 2018 alone, the total sessions that exceeded 1% was more than double that of the entire year of 2017.

January went smoothly up to give the market hope of a bullish year ahead when the month closed healthily in bullish fashion, triggering the ever-reliable January barometer. Earnings season kicked off in very bullish style giving the bulls more reason to cheer. Unemployment hit a decade low record and even the VIX fell to a decades’ low record of 8.94, levels not seen since December 1993.

Then it all fell apart in February.

Dow Jones Q1; 2 Jan to 29 March 2018

So much happened in the last two months including tax reforms, major political shifts in the Trump administration, a new Fed chief whose first act was to hike rates up to 1.75% from 1.50%, government shutdown (again), investigations against Facebook (Cambridge Analytica), Trump’s metals tariffs, more sanctions against North Korea, the threat of Trade Wars, China’s launch of its own oil futures contracts in Yuan which threatens the Petro-Dollar, the Aramco deal, Trump’s blockade of Broadcom’s acquisition of Qualcomm, increasing tensions between the US and Russia, Kim’s visit to China, Parkland shooting, Stormy Daniels’ revelation … nuts, just nuts.

Even Cryptocurrency’s hype went out the window and out of mind in a hurry. Seems an eternity ago that crypto was all the rave that got everyone talking. Not strangely, it’s fallen silent, leaving a lot of carnage in its wake.

Bitcoin fell from a high of 19,783 in 17 December 2017 to 7,151 by 5 February 2018 for a -63.8% loss – a record capitulation that even exceeds the Tulip Mania – in only a matter of ten weeks!

Friday 29 March’s close of 7,115 registered its lowest close (since its parabolic rise) for a loss of -64% in 16 weeks – also a record capitulation by any stretch.

What a quarter … what a ride. And we still have three more quarters left to run.

WEEK IN REVIEW – 26 to 29 March 2018: Market Rebounds

Equities rebounded this week, ending a two-week skid; the Nasdaq Composite climbed 1.0%, the S&P 500 jumped 2.0%, and the Dow Jones Industrial Average rallied 2.4%. Trading was volatile at times, but smoothed out on Thursday as investors wrapped up the abbreviated week on a positive note. Markets will be closed on March 30 for Good Friday.

Investors kicked off the week with a rally on Monday, pushing the major indices up between 2.7% and 3.3% apiece, following a Wall Street Journal report that the U.S. and China have started negotiating to improve American access to Chinese markets. The news helped ease fears of a trade war, which were elevated after the White House announced tariffs on Chinese imports last week — prompting Beijing to retaliate with tariffs of its own. Microsoft (MSFT) was particularly strong on Monday, spiking around 7.5%, after Morgan Stanley raised its target price from $110 to $130 – a new Street high.

The market reversed course on Tuesday, however, with FAANG names – Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG) – leading the retreat. Market darling NVIDIA (NVDA) tumbled nearly 8.0% after announcing that it has temporarily suspended autonomous driving tests in order to learn more about last week’s fatal collision involving a self-driving Uber car. Tesla (TSLA), which is a leader in autonomous driving technology, also dropped around 8.0%.

Stocks struggled for direction on Wednesday, but then rallied on Thursday ahead of the extended Easter weekend. However, unlike many of its FAANG peers, Amazon (AMZN) continued tumbling after an Axios report on Wednesday that President Trump would like to change Amazon’s tax treatment, as he believes the company has gotten a free ride from taxpayers. The White House initially responded by saying there aren’t any policy changes regarding Amazon at the moment, but the president reiterated his concerns about the company in a tweet on Thursday. AMZN shares lost 3.2% this week in total.

11 of 11 S&P 500 sectors finished the week with gains. Less-risky countercyclical groups like consumer staples (+3.5%), utilities (+3.0%), and telecom services (+3.1%) were the top performers, while the heavily-weighted financial sector (+2.7%) also showed relative strength. The top-weighted technology space lagged with a gain of 1.7%, while the consumer discretionary sector was among the worst performers, thanks largely to Amazon, adding 1.1%.

Investors received the Personal Income and Spending report for February on Thursday, and, for the second month in a row, it was in line with expectations. The PCE Price Index increased 1.8% year-over-year after being up 1.7% year-over-year in January, while the core PCE Price Index rose 1.6% year-over-year after three consecutive months of 1.5% year-over-year growth. The key takeaway from the report is that it won’t influence Fed officials to significantly alter the course of monetary policy.

In the bond market, the yield curve flattened notably this week, with the 2s10s spread dropping seven basis points to 48 bps – its lowest level since 2007. The yield on the benchmark 10-yr note declined seven basis points to 2.74%, while the 2-yr yield held steady at 2.26%. Most of the bond buying took place amid the equity sell off on Tuesday.

(Excerpts from Briefing.com)

Friday Update: Wall Street Ends Abbreviated Week on Positive Note

Technology shares rebounded on Thursday, leading a broad rally on Wall Street, as investors kicked off the extended Easter weekend on a positive note.

The tech-heavy Nasdaq Composite jumped 1.6% to 7063.44, the S&P 500 climbed 1.4% to 2640.87, and the Dow Jones Industrial Average advanced 1.1% to 24103.11. The three major indices finished Thursday with weekly gains between 1.0% and 2.4%, but finished March with monthly losses between 2.7% and 3.7%.

Technology giants Microsoft (MSFT 91.27, +1.88), Facebook (FB 159.79, +6.76), and Alphabet (GOOG 1031.79, +27.23) added between 2.1% and 4.4% on Thursday, while other notable tech names like Intel (INTC 52.08, +2.48), Netflix (NFLX 295.35, +9.58), and NVIDIA (NVDA 231.59, +10.24) advanced between 3.4% and 5.0%. Apple (AAPL 167.78, +1.30) also finished in the green, adding 0.8%, but a late bout of selling pulled the company, and the broader market, from its session high.

Needless to say, the S&P’s most influential sector – information technology – finished at the top of the sector standings, adding 2.2%. Thursday’s positive performance for the tech sector was preceded by disappointing outings on Tuesday and Wednesday, during which the group declined by a total of 4.3%. The sector had a poor month, losing 4.0%, but still remains at the top of the 2018 sector standings with a year-to-date gain of 3.2%; for comparison, the S&P 500 is down 1.2% for the year.

As for the 10 remaining sectors, nine finished Thursday in positive territory, with energy (+2.2%) and materials (+1.9%) showing particular strength. The telecom services (unch) and real estate (-0.1%) sectors were the worst performers, but they didn’t have much of an impact; the two groups represent just 5.0% of the broader market combined. The heavily-weighted financial group finished a step behind the benchmark index, adding 1.3%, as yields declined across the curve; the benchmark 10-yr yield dropped four basis points to 2.74%.

In the consumer discretionary sector (+1.4%), Amazon (AMZN 1447.34, +15.92) fell as much as 4.6% before rebounding to finish with a gain of 1.1%. The early weakness was attributed to a tweet from President Trump, in which he reiterated his concerns about the company, condemning it for paying “little to no taxes to state and local government” and using the U.S. Postal System as its “delivery boy.” The tweet followed a Wednesday report from Axios that said Mr. Trump is looking for ways to regulate the internet giant.

Overseas, the major stock indices in Asia finished Thursday on a higher note, with Japan’s Nikkei adding 0.6%, and the major bourses in Europe also advanced, adding between 0.2% and 1.3% apiece. Russia announced that it will expel 60 U.S. diplomats and order the closure of the U.S. Consulate in St. Petersburg in retaliation to similar measures taken by the U.S. and other countries following the poisoning of a former Russian double agent in England.

Markets in the U.S. and Europe were closed on Friday 30 March for Good Friday.

Reviewing Thursday’s big batch of economic data, which included February Personal Income, Personal Spending, PCE Prices, and core PCE Prices, the weekly Initial Claims report, the Chicago PMI for March, and the final reading of the University of Michigan Consumer Sentiment Index for March:

Dollar: Dollar Index Holds at One-Week High

The U.S. Dollar Index was up 0.1% at 90.15, for its third consecutive advance. The Index ended the week with a gain of 0.8% after reclaiming its decline from Monday. The Thursday session saw limited movement, which made sense, considering most markets will be closed the next day for Good Friday while European markets will remain closed through Easter Monday.

Bonds: Abbreviated Week Ends With Solid Gains

U.S. Treasuries ended the abbreviated week on a higher note with the long bond pacing the day’s advance. The 30-yr bond opened in the green and continued pushing steadily higher into the afternoon. Meanwhile 5s and 10s surrendered their opening gains during the first hour of trade, but support was found just below yesterday’s closing levels, allowing shorter tenors to follow in the footsteps of the long bond. Today’s advance pressured the 10-yr yield to its lowest level since early February while the 2s10s spread tightened by another basis point, dipping to a fresh cycle low of 48 bps.

The entire yield curve flattened over the week with the 2-year yield staying rooted while the longer maturities’ yields fell. The spread between the 5s10s fell to 18bps from 22bps the previous week as did the 10s30s at 23bps from 25bps the previous week. The spread between the 2s30s is now only 71bps.

The last time the yield curve pivoted to flatten along the higher end of the yields was back in December 2006 till January of 2007. It would seems like it is doing it again at a painfully slower pace than eleven years ago. But it is happening nonetheless.

Crude: Brent & WTI close lower in shortened week

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.6 mln barrels from the previous week. At 429.9 mln barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories decreased by 3.5 mln barrels last week, but are in the upper half of the average range. Finished gasoline inventories remained unchanged while blending components inventories decreased last week. Distillate fuel inventories decreased by 2.1 mln barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories decreased by 1.2 mln barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories decreased by 1.6 mln barrels last week.

Baker Hughes total U.S. rig count declined by 2 to 993 following last week’s increase of 5.

Metals: Precious fall back, Copper gains

Agriculture: USDA released two key grain/oilseed reports on Thursday to send corn and soybean prices higher :

Prospective planting report: (Click to download pdf report)

Grain stock report: (Click to download pdf report)

Commodities measured by the Bloomberg Commodity Index closed at 87.4729, higher than 87.4415 the previous week.

THE MONTH AHEAD

April 2018 has twenty-one (21) trading sessions and no public holidays. April is the most bullish month on the DOW since 1950 with an average gain on 1.90%. It is the third best month for S&P500 and fourth best for NASDAQ since 1971. April is the last month of DOW’s and S&P500’s “Best Six Months” and the first month of Quarter Two.

April Trivia

THE WEEK AHEAD

The fourteenth week of 2018 (wk14) tends to be very bullish on Monday and Tuesday, then moderately bullish on Wednesday and Thursday. Friday becomes quite bearish.

Key Economic Dates

The highlight for the coming week will be the US Non-Farm Payroll on Friday, preceded by the ADP employment report on Wednesday. A host of manufacturing data from China (Sunday), US (Monday and Wednesday) and UK (Tuesday) along with Australia’s RBA Rate Statement on Tuesday should make the first week of April rather eventful.

Sun 01 April

Mon 02 April

Tue 03 April

Wed 04 April

Thu 05 April

Fri 06 April

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TEN YEARS AGO IN QUARTER ONE 2008 …

Strange that after ten years, nothing seems to have changed … senseless shootings, plunging markets from record highs after a parabolic bull run, tax cuts, financial shenanigans from the government and Central Bank, espionage (read: selling data) …

Humans, by nature, never change
~ Jesse Livermore

TECHNICALS

The DOW and S&P500 closed out Quarter One YTD in the red and below the low of December 2017’s low. With the January Barometer indicating a bullish year ahead conflicting with the bearish December Low indicator, this usually translates into a year that will either be extremely volatile or very flat. However …

The NASDAQ barely eked out a small 56.5 point (+0.8%) gain to close Q1 in the black to marry well to its bullish January Barometer. This could imply that the tech sector could do well for the rest of the year … technically speaking. This is very divergent from what the other two benchmarks’ are implying.

The real worrying divergence comes from the Transports; 

It is like a summary of what the main benchmarks are also suggesting – tech will be okay but the broader market may not.

The S&P had been flirting with the 200DSMA for the last five sessions of March and for now, is barely staying above that critical technical level and above its 2,600 support. The DOW, likewise is also just above its 200DSMA and above its 23,500 support. The broader market is going to depend on these benchmarks to hold the line and not fall below their critical technical supports nor their respective 200DSMAs. If April performs the way it usually does by being the most bullish month of the year, staying up should not be an issue. 

However, I mentioned in a recent Facebook posting that;

There’s much too much disruptive factors happening to have any confidence that April will perform as it has in the past. Earnings Season begins in a little under two weeks from now and the common consensus is that companies will be hawkish going forward.

Then we have the third FOMC Monetary Policy Meeting for the year. With Powell eager to get rates up, expect more volatility in April as investors and traders grapple with the confusion the Fed has laid down with its higher-rates policies in an environment lacking any inflation.

It would seem like the DOW broke out of its Symmetrical Triangle in March and is finding support on my 38.2% PhiB-Fan. That also happens to be a touch above my upside COP at 23,250. One of two things are expected to happen thereafter …

If the COP holds, then April should see some upside to the OP level of 26.590 where it will encounter the possibility of a Double Top. If that happens, May is going to get real interesting.

Or …

If the break out of the Symmetrical Triangle holds true, then we should see a break below the critical support of 23,500 and a further break below the COP level of 23,250 . If that happens, we’re looking at a 12.5% correction but not yet an officially bear market. The fear level for that classification is at 21,288 (-20%), the support level from June/July 2017.

SUMMARY

The spread between the 10-year yield and the Federal Funds Rate has tightened to 99bps from 113bps since January this year. This is one spread I will be watching closely from now on. The tighter the spreads get, the closer we get to a major economic downturn … well, at least that’s how it has panned out in the past. Every time the FFR crossed over and above the 10-year yield, the market went down and the economy went into recession as was the case in 1997, 2000 and 2006.

Quarter Two beckons! Bring it on and bring on more fireworks!

This is an amazing market and one that I am loving! Let’s get it on!

Happy Hunting!

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Pattern Trader Tutorial Introductory Session

PTTadBannerGold

We’re having our first Introductory Session to the Pattern Trader™ Tutorial June 2018 Batch on April 11th.

(The schedule for the June batch is here: Pattern Trader™ Tutorial Batch 94 June 2018)

The batch is confirmed to go ahead in June as the minimum take-up has already been achieved. So book that date early, bring a friend/relative and really do yourself a favour by knowing what you really need in order make it in this business.

After more than 12 years of educating professionals in the arts and sciences of Finance and Economics, I don’t need to bullshit you into knowing that this is the only financial education you should consider.

If you’re looking to make a huge difference in your financial life, consider attending the Pattern Trader™ Tutorial Introductory Session first.

If you want to know more about the Tutorial, read up everything here: The Pattern Trader™ Tutorial 2018

Click here now to make a huge difference in your life:
Pattern Trader Tutorial Introductory Session

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

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Why Most Young Entrepreneurs Fail

Everyone desires to be their own boss. It is the dream of most employees to one day, run their own business. It is the most common goal that working class people set for themselves when asked about resolutions and plans.

What most don’t consider though, is how they can fail in business. The planning is always to succeed, to be profitable, to grow, expand and to build an empire or a legacy. Very often, the “what ifs” and “plan Bs” are ignored or treated as taboo. No one really plans or prepares for business failure or worst case scenarios. This is one of the many contributing factors as to why so many do fail in the end.

I have been providing counselling and consultation services to quite a few individuals whose businesses have floundered. This has been an increasing trend since 2015 and I am busier now than ever before, advising owners of insolvent companies and business owners who themselves are in financial dire straits. Each case differs in their origins and circumstances that led to the current point of failure. Each will also face a different outcome depending on how they manage the situation from thereon in.

Once constant prevails, however, in that every business failure was the result of a culmination of errors and over-sights that began way before any sign of failure was on the horizon.

The cause of business failures are many and varied but I am able to summarise them into five key discussion points;

  1. Wrong Mindset
  2. Wrong Objectives
  3. Wrong Business Model
  4. Wrong Financial Planning
  5. Wrong Priorities

Join me for an interactive 4-hour session on 21 April 2018 at Lifelong Learning Institute starting at 2pm. This will be an informal session where we are going to discuss;

  1. How an Investment Mindset helps you to operate an effective business
  2. Knowing your “Why” in order to keep your business sustainable
  3. Identifying and tending to your business needs instead of addressing the wants
  4. Why your cash flow can be your worst enemy or greatest asset and how to plan for it
  5. Doing what you know versus Knowing what you do

Who should attend (even employees will gain something valuable from this session);

  1. If you’ve never started a business and need to know what really goes into planning for a successful start-up
  2. If you’ve been running a business for less than three years with no joy and no way back
  3. If you’d like to learn how to identify a good business to invest into
  4. If you’re young and dreaming about being the youngest most successful entrepreneur in your generation
  5. If you’re looking to add value to your job by contributing actionable ideas to improve your position in the business

Mark the date, note the destination and don’t miss this session for anything!

This event is organised by SAPIO – The Quickest Way to Level UpDownload the app and discover truly affordable and beneficial courses and workshops without the hard-selling.

Download the app to make your booking!

Or book on Eventbrite: http://bit.ly/conradalvinlim

See you on April 21st!!

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WEEKEND MOTIVATIONAL MESSAGE – Saturday 31 March 2018

GIVE

(Read before you watch the video – Link at the end)

This three-minute Academy Award winner for Best Animated Movie is not just about a great piece of entertainment. It has so many deeper lying messages but one clear lesson …

It is all too easy to judge and be selfish when we don’t have the bigger picture. We then justify our judgements with our own selfish reasons.

But if we just took a little effort to look deeper, the bigger picture is always going to make the short-sighted judge look and feel like a fool … a selfish fool.

I’ve learnt to be less judgemental since I took on the role of teaching. My students come from all walks of life with various needs and varying objectives. Some come to class dressed like scallywags but are actually pilots, doctors and high-networth individuals. Others come dressed to impress but are in reality, fighting to stay financially afloat.

Some learn quickly but can’t apply as quickly while others take a longer time to learn but eventually become more efficient and proficient than the fast learners.

Then you will get those who struggle and struggle that you’d quickly deem as “stupid” or “slow” when in fact, they’re not … they simply conceptualise things differently, process things differently or even get bogged down with something I didn’t consider – they not technically savvy so they’re struggling with their computers and nothing else.

It is for this reason that I’ve become less judgmental and live life from a different perspective today – I GIVE;

In short, just do GOOD DEEDS instead of judging. Regardless of what an asshole the other person might seem to be, without knowing their side of the story, don’t judge … GIVE … and you can keep it simple by just doing a good deed of not judging.

Have a lovely weekend. Forgive, Give and be Happy that you’re not a judgemental asshole. You’ll find life more beautiful when you do.

Enjoy the video. Share it with your kids and teach them something good today.

 

Happy Easter, Everyone!!

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Comments Off on Weekly Market Update – 26 March 2018 BMO

Weekly Market Update – 26 March 2018 BMO

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Week in Review: Another Negative (and Noisy) Week

Equities dropped sharply this week, giving up ground for the second week in a row, as investors took in the latest policy directive from the Fed, a new round of tariffs from the White House, and cries for greater data regulation following a scandal involving Facebook (FB). The S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average finished with losses between 5.7% and 6.5%, which marks their worst week since the big sell off in early February.

Facebook kicked off the week by declining nearly 7.0% on Monday following reports that research firm Cambridge Analytica mined the data of 50 million Facebook users without their consent, and then used that data to deliver targeted pro-Trump ads during the 2016 presidential campaign. The incident has given new life to proponents of data regulation and, in turn, been a headwind for shares of social media companies, which would likely see a decline in profits due to said regulations.

Investors turned their attention to monetary policy on Wednesday when the Federal Reserve increased the fed funds target range by 25 basis points to 1.50%-1.75%, as widely expected, and left its forecast for a total of three rate hikes this year intact. The latter was a relief for investors, who thought that the central bank might raise its 2018 forecast to include a fourth rate increase. However, the Fed does anticipate that it will need to be somewhat more aggressive in tightening policy over the next two years (2019-2020).

Trade war fears came back into the mix on Thursday after President Trump signed a presidential memorandum that allows for tariffs on up to $60 billion worth of Chinese goods. The tariffs, which the president says are punishment for China’s alleged intellectual property theft against U.S. tech companies, prompted a retaliation response from China, which said it plans to levy duties of up to $3 billion on U.S. imports — a drop in the bucket considering the overall value of imported goods to China.

11 of 11 S&P sectors finished the week in negative territory, with the top-weighted technology (-7.9%), financials (-7.2%), and health care (-6.8%) groups leading the retreat. The energy sector (-0.9%) was the top performer, benefiting from an increase in the price of crude oil; West Texas Intermediate crude futures jumped 5.7% to $65.87 per barrel — their best level since late January. The crude rally was helped by the EIA’s weekly inventory report, which showed that U.S. crude stockpiles declined for the first time in three weeks.

A breakdown of technical support played into this week’s selling after the S&P 500 dropped comfortably below its 50-day simple moving average (2743) at Monday’s opening bell. The benchmark index finished Friday just a tick above its 200-day simple moving average (2585).

(Excerpts from Briefing.com)

Friday Update: Piling on the Losses

Stocks dropped again on Friday, piling on losses for the week; the S&P 500 tumbled 2.1% to 2588.26, the Nasdaq Composite declined 2.4% to 6992.67, and the Dow Jones Industrial Average slid 1.8% to 23533.20 – its worst close since November 2017. The three major indices finished the week with losses between 5.7% and 6.5%.

Tariff talk carried over into Friday’s session after China urged the U.S. to “pull back from the brink” following President Trump’s Thursday decision to implement tariffs of up to $60 billion on Chinese imports — which he says are a response to China’s alleged intellectual property theft against U.S. tech companies. Beijing threatened to retaliate with tariffs on 128 U.S. products – including wine, pork, fresh fruit, ethanol, and steel – but investors took solace in the fact that those products represent a mere $3 billion of total value – barely a drop in the bucket.

While fear of a trade war likely played a role in Friday’s sell off, several other factors also persuaded buyers to stay on the sidelines, including the understanding that the Fed is operating with a tightening bias, the underperformance of the top-weighted technology and financials sectors, and the continued lack of technical support – the S&P 500 has been beneath its 50-day simple moving average (2742) since Monday. It’s worth noting that the benchmark index finished Friday just a tick above its 200-day simple moving average (2585).

All 11 S&P sectors finished in negative territory, with the financials (-3.0%), technology (-2.7%), and health care (-2.1%) sectors leading the retreat. The energy sector was the top performer, benefiting from a 2.4% increase in WTI crude ($65.87/bbl), but still finished with a loss of 0.6%.

In earnings news, Micron (MU 54.21, -4.71) tumbled 8.0% on Friday despite beating profit estimates for its fiscal second quarter and raising its earnings guidance for Q3, while Dow component Nike (NKE 64.63, +0.21) finished with a gain of 0.3% after reporting better-than-expected earnings and revenues for its fiscal third quarter.

Overseas, equity markets in Asia sold off sharply on Friday, with China’s Shanghai Composite and Japan’s Nikkei losing 3.4% and 4.5%, respectively. Meanwhile, the major bourses in Europe also finished the week on a broadly lower note, losing between 0.4% and 1.8%. The Euro Stoxx 50 (-1.3%) closed at its lowest level in more than a year.

Dollar: Dollar Index Nears Thursday Low

The U.S. Dollar Index was down 0.5% at 89.42, approaching Thursday’s overnight low. The Dollar Index had a decent start to the week, overtaking its 50-day moving average (89.83) on Tuesday. That rally was reversed on Wednesday, and while the Index tried to reclaim its 50-day average yesterday, it failed to do so, settling just below that mark. Friday’s session had seen a steady decline that had the Index trading just a touch above Thursday’s low, on course to lose 0.9% for the week.

Bonds: Short End Outperforms

U.S. Treasuries ended the week on a mostly higher note after spending Friday’s session inside a narrow range. The Treasury market followed Thursday’s spike with a mixed open as the long bond displayed relative weakness while shorter tenors flashed early strength. The 2-yr note and the 5-yr note outperformed into the close while the 30-yr bond erased the bulk of its opening loss, but could not make a sustained move into the green. The 2s30s spread expanded three basis points to 82 bps while the 2s10s spread expanded two basis points to 57 bps.

The entire yield steepened over the week with the shorter maturities’ yields falling more than the longer maturities while the 30-year yield remained unchanged. The spread between the 5s10s widened to 22bps from 19bps the previous week as did the 10s30s at 25bps from 24bps the previous week.

Crude: Closes Above 65.00

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.6 mln barrels from the previous week. At 428.3 mln barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories decreased by 1.7 mln barrels last week, but are near the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 2.0 mln barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories decreased by 2.1 mln barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories decreased by 6.9 mln barrels last week.

Baker Hughes total U.S. rig count increased by 5 to 995 following last week’s increase of 6.

Metals: Gold Bounces

Agriculture: Grains Weakness Persists

Commodities measured by the Bloomberg Commodity Index closed at 87.4415, higher than 87.3633 the previous week.

THE WEEK AHEAD

Monday 26 to 30 March (Week 13)

The thirteenth week of 2018 (wk13) is rather conflicting when comparing the 5, 10 and 15 years averages against the 21-year average. The 21-year average usually begins very bearish on Monday, becomes mildly bullish on Tuesday, turns unpredictable or flat on Wednesday and goes bear again on Thursday. (Friday is a public holiday.)

The weekly averages for the 5, 10 and 15 years are bullish with an above average 65% bullish bias. One contributing factor to this divergence in data could be the Good Friday holiday that tends to fall in different weeks depending on how February began (start of the week or end of the week).

Regardless, March is known to end badly.

Key Economic Dates

The coming week 13, the US will be publishing the third estimate for GDP growth, alongside PCE prices, personal spending and income, pending home sales and the final reading of Michigan consumer sentiment. Elsewhere, important data include: UK final Q4 GDP growth and monetary indicators; Eurozone business survey; Japan unemployment, retail trade and industrial output; and China official PMIs.

Mon 26 March

Tue 27 March

Wed 28 March

Thu 29 March

Fri 30 March

TECHNICALS

With four trading sessions remaining, the benchmarks will be fighting hard to stay above and close out the quarter above the low of December 2017. 

In recent decades, when the direction of the January Barometer conflicted with the close of the March (relative to the low of December), the markets became either extremely volatile or very flat, either of which made it a very troublesome year. Thus, if 2018’s January Barometer was bullish but the benchmarks close out the first quarter below December 2017’s low, the rest of the year is likely to be very troublesome. 

The drop on Friday has brought the 200DSMA into play on the DOW and S&P500, with the latter sitting barely 3 points above that critical indicator after testing it in the final hour of trading on Friday.

With the coming week expected to be flat-to-bearish, I will be watching for a DFDM (Down Friday, Down Monday) that could either mark a bottom to this correction or break below the 200DSMA which could tank this market further. Economic conditions have been looking like they’ve seen better days. The absence of any economic data in the coming week will play on the minds of the market players. They will be looking at the language of the Fed Members featured this week along with the all-important GDP report. Any tiny hint of hawkishness will likely make the market react violently.

SUMMARY

Over the last weeks, I have been mentioning that a little softness had crept back into the US economy. This week, the reality of higher rates and the threat of trade wars took a severe toll on the broader market. 

The coming week will reveal exactly how the major economies of the world are projecting these weaknesses as the US and UK announce their GDPs toward the end of the week/month/quarter. We will also get a “feel” of how the fund managers will react to all these conditions in the way the market moves as they Window Dress their portfolios for the coming quarter.

Window Dressing often rallies the market at the close of the first quarter. Failure to rally implies that minimal adjustments have been made. This usually translates into a conservative outlook on the part of the big players. And that is never a bullish sign.

With the Dow Industrials, S&P500, Russell2000, Russell1000 and Dow Transports in negative territory YTD, the benchmarks have only four sessions to fight back up into the black again. FYI, the market has never done well then Q1 closed in the red. Going back to 1997 (for all the years that closed Q1 in the red);

So unless the market pulls some stimulus out of the bag or goes on a major stock buy-back spree, it looks like this might just be the start of a troublesome year (as far as the bulls are concerned).

I am going from Cautiously Bullish to Conservatively Bearish starting next week if Q1 closes in the red.

Happy Hunting!

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Comments Off on Weekly Market Update – 19 March 2018 BMO

Weekly Market Update – 19 March 2018 BMO

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Week in Review: Three Steps Forward, Two Steps Back

Equities reversed course this week, undoing about a third of last week’s rally, as investors continued to search for equilibrium following the abrupt sell off in early February. Since that drop, the S&P 500 has had three up weeks and two down weeks, reclaiming around 60% of its nearly 300-point plunge. The S&P 500 lost 1.2% this week, while the Nasdaq Composite and the Dow Jones Industrial Average declined 1.0% and 1.5%, respectively.

Trade war talk continued this week following reports that President Trump is seeking to hit China with steep tariffs and investment restrictions as early as next week. Those tariffs, which are expected to total as much as $60 billion, would initially be targeted towards information technology, telecommunications, and consumer electronic products as punishment for alleged intellectual property theft, but could eventually expand to a broader range of products.

The proposed tariffs were cited as the primary driver of this week’s sell off, as many believe they could lead to a tit-for-tat trade war between the world’s two largest economies. Peter Navarro, Director of the White House National Trade Council, attempted to ease the tariff-induced fears in a CNBC interview on Thursday, assuring viewers that the U.S. can implement tariffs “in a way that is peaceful and will improve and strengthen the trading system.”

In other political developments, the White House made some notable personnel changes this week–CIA Director Mike Pompeo replaced Rex Tillerson as Secretary of State, and longtime CNBCpersonality Larry Kudlow replaced Gary Cohn, who resigned last week, as the president’s top economic advisor–and the New York Times reported on Thursday that Special Counsel Robert Mueller has subpoenaed the Trump Organization for documents, some of which relate to Russia.

Nine of eleven S&P sectors finished the week in negative territory, with materials (-3.2%) being the weakest performer. Materials giant Monsanto (MON) dropped 4.8% on Thursday following news that its pending merger with Bayer will likely face additional hurdles from antitrust officials.

Meanwhile, the consumer staples (-2.1%), industrials (-2.0%), and financials (-2.4%) sectors also showed particular weakness. Financials suffered amid a flattening of the yield curve, which doesn’t bode well for lenders, as they rely on the difference between what they spend on deposits and what they charge for loans. The yield on the 2-yr note climbed three basis points to 2.29%, while the benchmark 10-yr yield dropped six basis points to 2.84%, cutting the 10-2 spread to 55 bps–its lowest level since late January.

On a positive note, the rate-sensitive utilities (+2.6%) and real estate (+1.3%) sectors finished the week in the green.

Investors received several influential economic reports this week, including the February readings for the Consumer Price Index, the Producer Price Index, Retail Sales, Housing Starts, and Building Permits. In short, the data didn’t really give investors a reason to adjust their rate-hike expectations; it’s all but certain that the Fed will hike rates at its meeting next week, and the Fed funds futures market is still pointing towards a total of three rate hikes this year–although the chances for a fourth hike are sitting at 34.3%.

(Excerpts from Briefing.com)

Friday Update: Upbeat Finish to Disappointing Week

Wall Street wrapped up a disappointing week on a positive note on Friday, in what was a quiet and fairly range-bound session. The S&P 500 advanced 0.2%, breaking a four-session losing streak, while the Dow and the small-cap Russell 2000 added 0.3% and 0.6%, respectively. The tech-heavy Nasdaq underperformed, closing a tick higher.

Gains were modest, but broad, with nine of eleven S&P sectors closing in the green. The energy group (+1.0%) was the top performer, benefiting from a jump in the price of crude oil; WTI crude futures rallied 2.0% to $62.35 per barrel. Conversely, the top-weighted technology sector (-0.1%) finished at the bottom of the leaderboard.

The technology group struggled for much of the session, keeping the broader market’s gain in check, with Broadcom (AVGO 254.87, -12.89) showing particular weakness; the chipmaker dropped 4.8% even though it beat quarterly profit estimates. Tech-giant Alphabet (GOOGL 1134.42, -16.19) also struggled, losing 1.4%, but Adobe Systems (ADBE 225.55, +6.68) bucked the trend, rallying 3.1% after beating both earnings and revenue estimates for its fiscal first quarter.

Overseas, equity indices in the Asia-Pacific region ended Friday broadly lower, with Japan’s Nikkei losing 0.6%, while the major bourses in Europe finished with gains of around 0.3% apiece. The U.S. dollar climbed 0.2% against the euro to 1.2287, but dropped 0.2% against the yen to 106.08.

In the bond market, U.S. Treasuries closed the week on a lower note, sending yields higher across the curve. The benchmark 10-yr yield climbed two basis points to 2.84%, while the 2-yr yield ticked up one basis point to 2.29%, which is its highest level since September 2008.

The relative weakness in the 10-yr note steepened the yield curve a bit, pushing the 10-2 spread to 55 basis points. This steepening helped underpin the financial sector (+0.2%) on Friday, but a decline in shares of Wells Fargo (WFC 55.90, -0.93) weighed on the group, leaving it roughly in line with the broader market. WFC shares lost 1.6% following a Wall Street Journal report that a federal investigation into the bank’s sales practices now includes its wealth-management unit.

Investors received several pieces of economic data on Friday, including February Housing Starts and Building Permits, February Industrial Production and Capacity Utilization, the preliminary reading of the University of Michigan Consumer Sentiment Index for March, and the Job Openings and Labor Turnover Survey for January:

Market Internals – Friday 16 March – AMC

Dollar: Small Gains

The U.S. Dollar Index had a weaker skew in overnight action, but it bounced back during regular trading following Friday’s economic releases, a few of which contributed to the inflation expectations narrative.  In particular, industrial capacity utilization hit its highest level since January 2015 and the University of Michigan Consumer Sentiment Report indicated near-term inflation expectations had increased to their highest level in several years.  Notably, the U.S. Dollar Index (90.23) and long-term rates moved up in tandem following the data.

Bonds: 

The Treasury market closed the week on a soft note, with yields up across the curve.  In most cases, there was little change in overnight trade, yet longer-dated securities succumbed to selling interest during U.S. trading in the wake of some economic releases that stirred the pot of inflation expectations.  As yields moved up, there was a simultaneous rebound in the U.S. Dollar Index, which had been a bit weak in overnight action.  The 10-2 spread ended the week at 55 basis points, down from 61 basis points at the end of the prior week.  Market participants also had an anxious eye on next week’s FOMC meeting (March 20-21).  The Federal Reserve is expected to raise the target range for the fed funds rate by 25 basis points, yet everyone is interested to see if the accompanying interest rate projections show a median estimate of four rate hikes this year versus three currently.

The entire yield flattened over the week with the longer maturities’ yields falling more than the shorter maturities while the 2-year yield rose. The spread between the 5s10s tightened to 19bps from 24bps the previous week as did the 10s30s at 24bps from 27bps the previous week.

Crude: Falls, Recovers, Closes Above 62.00 For Second Week

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.0 mln barrels from the previous week. At 430.9 mln barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories decreased by 6.3 mln barrels last week, and are in the upper half of the average range. Finished gasoline and blending components inventories both decreased last week. Distillate fuel inventories decreased by 4.4 mln barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories decreased by 2.3 mln barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories decreased last week.

Baker Hughes total U.S. rig count increased by 6 to 990 following last week’s increase of 3.

Metals: Downtrend Continues

Agriculture: Corn and Wheat Fall, Soy Bounces

Commodities measured by the Bloomberg Commodity Index closed at 87.3633, lower than 87.9546 the previous week.

THE WEEK AHEAD

Monday 19 to 23 March (Week 12)

The twelfth week of 2018 (wk12) usually swings up and down wildly on the SPY and DIA over all three time averages. Monday starts off bearish, turns bullish on Tuesday and bearish again on Wednesday with higher than 70% averages. Thursday and Friday ends the week in divergent fashion and both index ETFs.

 

Key Economic Dates

The coming week 12, the most important events will be the Fed and the BoE monetary policy decisions. Key economic data include: US durable goods orders; existing and new home sales; UK inflation, retail trade and unemployment; Japan trade and inflation; Australia employment; and flash PMIs for the US, the Eurozone and Japan.

Mon 19 March

Tue 20 March

Wed 21 March

Thu 22 March

Fri 23 March

SUMMARY

After breaking above its 50DSMA the previous week, the DOW found itself trading below the 50DSMA for the whole past week and even closed below its 20DSMA again. 

The economic front showed a little softness creeping into the US economy with retail sales in the red for the third straight month while housing data also slowed down. Capacity Utilisation also gave cause for concern with regard to the edgy inflation watch.

For the coming week, my focus will be on Japan as I suspect they will be providing some market moving news. With “trade wars” being the watchword these days, Japan’s Trade Balance Report for February could sway things starting on Monday. 

From Briefing.com;

Japan’s Trade Balance Report for February is due for release on Sunday, March 18, at 7:50 p.m. (ET) (Mon 19/3 @ 7:50am SG)

Happy Hunting!

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Comments Off on Weekly Market Update – 12 March 2018 BMO

Weekly Market Update – 12 March 2018 BMO

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Week in Review: Bulls Bounce Back, Nasdaq Navigates to New Records

U.S. equities rallied this week, more than reclaiming last week’s losses, as investors navigated their way through a host of happenings, including a battle over tariffs in Washington, the latest European Central Bank policy meeting, and the release of the Employment Situation Report for February. The tech-heavy Nasdaq Composite led the charge with a weekly gain of 4.2%, closing Friday at a new all-time high, while the S&P 500 and the Dow Jones Industrial Average advanced 3.5% and 3.3%, respectively.

The tariff saga continued this week as some congressional Republicans and officials within the White House urged President Trump to reconsider the duties on steel and aluminum imports that he proposed last week, fearing that they could cause a trade war. The president refused to back down though, leading to the resignation of his top economic advisor Gary Cohn on Tuesday.

Mr. Trump signed a proclamation to implement the tariffs on Thursday afternoon, but, to the market’s delight, exempted Canada and Mexico. The president also left open the possibility of exemptions for other countries depending on their willingness to renegotiate trade deals. The tariffs will take effect on March 23.

Overseas, the European Central Bank left its key policy rates unchanged on Thursday, as expected, and removed from its policy statement a promise to increase its bond purchases if needed. The latter move was seen as a small step towards normalization following years of ultra-accommodative policy. In addition, the ECB reaffirmed that its net asset purchases will remain at a monthly pace of EUR30 billion until the end of September 2018, or beyond, if necessary.

In Asia, North Korean leader Kim Jong Un on Thursday extended an invitation to meet with President Trump, which Mr. Trump accepted. The summit, which will reportedly take place by the end of May, would mark the first face-to-face meeting between a sitting U.S. president and a sitting North Korean leader.

The Employment Situation Report for February was released on Friday morning, showing robust job growth and a deceleration in the year-over-year change in average hourly earnings. Nonfarm payrolls increased by 313,000 (consensus 210K), while average hourly earnings increased 0.2%, as expected, and the unemployment rate stayed at 4.1% (consensus 4.0%). The report helped Wall Street close out the week on a positive note, boosting the major averages more than 1.5% apiece on Friday.

11 of 11 S&P sectors finished with weekly gains. Economically-sensitive groups like financials (+4.4%), technology (+4.3%), industrials (+4.4%), and materials (+4.1%) were the top-performing sectors, while countercyclical spaces like consumer staples (+1.7%), utilities (+0.8%), and telecom services (+1.8%) showed relative weakness.

Following this week’s rally, the S&P 500 is about 3.0% below its record high (2873), which is a big improvement from -10.1% at the bottom of the February sell off.

(Excerpts from Briefing.com)

Friday Update: Nasdaq Hits New Record Following February Jobs Report

Stocks advanced on Friday, climbing steadily over the course of the session, as investors cheered the Employment Situation Report for February, which showed strong jobs growth while keeping inflation concerns at bay. The Nasdaq Composite climbed 1.8% to finish at a new record high (7560.81), its first record finish since before a volatile round of selling at the beginning of February. Meanwhile, the S&P 500 and the Dow Jones Industrial Average advanced 1.7% and 1.8%, respectively.

Nonfarm payrolls increased by 313,000 in February, blowing past the consensus estimate of 210,000, and the January increase was revised upward to 239,000 (from 200,000). Meanwhile, average hourly earnings increased 0.2%, as expected, which brought the year-over-year increase down to 2.6% from 2.8% in January. The unemployment rate stayed at 4.1%, which is slightly higher than the Briefing consensus estimate of 4.0%, but still good enough for a 17-year low, and the average workweek ticked up to 34.5 from a revised 34.4 in January (consensus 34.4).

In short, it was another ‘Goldilocks’ report, pointing to strong economic growth via the impressive nonfarm payroll additions while at the same time giving the market no reason to believe that the Fed will need to be more aggressive in its path to normalization–evidenced by the deceleration in year-over-year wage growth.

U.S. Treasuries sold off in reaction to the jobs report, pushing yields back towards the multi-year highs they hit a couple of weeks ago; the benchmark 10-yr yield advanced to 2.89% after finishing Thursday at 2.87%. The uptick in yields helped underpin the financial sector (+2.5%), which finished at the top of the sector standings.

Within the financial space, Goldman Sachs (GS) settled behind its peers following reports that its CEO Lloyd Blankfein is preparing to step down after serving at the helm for more than 12 years. Co-presidents Harvey Schwartz and David Solomon are the two front runners to replace Mr. Blankfein.

10 of 11 S&P groups finished Friday in the green, with the lightly-weighted telecom services space (-0.1%) being the lone laggard. In addition to financials, industrials (+2.2%), technology (+2.0%), materials (+1.9%), and energy (+1.9%) outperformed, while the consumer staples (+0.6%), real estate (+0.7%), and utilities (+0.3%) groups were relatively week. The energy space was helped by an increase in the price of crude oil, with West Texas Intermediate crude futures climbing 3.1% to $62.05 per barrel following a two-day skid.

News that President Trump accepted an invitation to meet with North Korean leader Kim Jong Un helped underpin Wall Street on Friday. The meeting, which will reportedly take place by the end of May, would mark the first meeting between a sitting U.S. president and a member of the Kim dynasty.

In addition, investors were still chewing on President Trump’s tariff announcement on Friday, which went better than many were expecting. The president officially approved tariffs on steel and aluminum imports shortly before Thursday’s closing bell, but gave Canada and Mexico an exemption and said that other countries might also receive an exemption depending on their willingness to renegotiate trade deals with the U.S.

Market Internals – Friday 9 March – AMC

Goldilocks Born Again in February Employment Report

The February employment report resuscitated the Goldilocks narrative. Specifically, it was highlighted by robust job growth and a deceleration in the year-over-year change in average hourly earnings, which helped temper the angst about increasing wage-based inflation pressures that were borne out of the January employment report.

The notable headlines from the Employment Situation Report are as follows:

Dollar: Dollar Index Finds Resistance

The U.S. Dollar Index was off 0.1% at 90.11, narrowing the week’s gain to 0.2%. The Dollar Index made a run at its third consecutive advance after the release of a much stronger than expected February jobs report, but the Friday morning rally ran out of steam just above the descending 50-day moving average at 90.25. The greenback has seen limited movement against the euro, but it has shown strength against the yen. The rally versus the yen took place Friday night, after President Trump agreed to meet with North Korea’s Supreme Leader Kim Jong-un by May. This will be the first meeting between a sitting U.S. president and a member of the Kim dynasty, but the site of the meeting has yet to be announced. Switzerland has reportedly expressed willingness to host the parley.

Bonds: February Jobs Report Weighs on Treasuries

U.S. Treasuries ended the week on a modestly lower note, though the market climbed off its worst levels of the day. Treasury futures inched lower in overnight action after last night’s surprise news from Washington boosted global risk appetite. A couple hours after President Trump signed an order on tariffs on imports of steel and aluminum, it was revealed that he has agreed to meet with North Korea’s Supreme Leader Kim Jong-un by May. This will be the first meeting between a sitting U.S. president and a member of the Kim dynasty, but the site of the meeting has yet to be announced. Switzerland has reportedly expressed willingness to host the parley. Treasuries began the cash session with modest losses, sliding to new lows in response to the February Employment Situation report (actual 313,000; consensus 210,000), which soared past headline estimates, but showed a slowdown in average hourly earnings growth (2.6% year-over-year versus 2.8% in January). Treasuries found support near levels from February 27, trimming their losses in afternoon action.

The entire yield curve rose over the week. The spread between the 5s10s remained unchanged at 24bps from the previous week as did the 10s30s at 27bps from the previous week.

Crude: Bounces Back, Closes Above 62.00

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.4 mln barrels from the previous week. At 425.9 mln barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories decreased by 0.8 mln barrels last week, and are in the upper half of the average range. Finished gasoline inventories decreased and blending components inventories remained unchanged last week. Distillate fuel inventories decreased by 0.6 mln barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories decreased by 1.6 mln barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories remained virtually unchanged last week.

Baker Hughes total U.S. rig count increased by 3 to 984 following last week’s increase of 3.

Metals: Downtrend Persists on Gold

Agriculture: Corn Gains, Wheat and Soy Fall Back

Commodities measured by the Bloomberg Commodity Index closed at 87.9546, lower than 88.1477 the previous week.

THE WEEK AHEAD

Monday 12 to 16 March (Week 11)

The eleventh week of 2018 (wk11) usually swings up and down unreliably on the SPY and DIA over the 5 and 10 year averages while the 15 year average tends to be bullish for most of the week. Monday is supposed to be the most bullish day of the week for both benchmarks.

Key Economic Dates

In the US, the most important releases will be inflation rate, retail trade, industrial production, housing data and the preliminary reading of Michigan consumer sentiment. Elsewhere, the UK government will publish its Spring Statement.

Other important economic data include: China retail trade, industrial production and fixed asset investment; Australia business and consumer morale; and India inflation rate and industrial production.

Mon 12 March

Tue 13 March

Wed 14 March

Thu 15 March

Fri 16 March

SUMMARY

The DOW broke above its 50DSMA on Friday for some respite, joining the other benchmarks above their respective 50DSMAs in a show of resilience in spite of the scares from Powell and Trump the previous week. 

I still think that the US economy remains buoyant with little or no fear of any economic threat on the horizon. The broader market should drive itself out of the funk that February brought and should break higher highs in the months of March and April. Commodities could also see a nice run upwards as we get into the final weeks of quarter one.

For now, I remain cautiously bullish.

Happy Hunting!

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