Comments Off on Value Investing: An Untold Truth

Value Investing: An Untold Truth

My latest article on …

Value Investing: An Untold Truth

It is the most common Investment style amongst amateur market players. However, it is not as safe and or as simple as it has been made out to be. Read on so that you don’t become a long-term victim of this most misunderstood style of investing.

Article is here: https://www.financialscents.com/value-investing-untold-truth/

Share
Comments Off on Thirty Hours

Thirty Hours

A common query I get is what the life of a “full-time” trader is like. Many are also curious about what kind of life I lead being a trader, a teacher, a mentor, counsellor, consultant and author/writer. But they forget to ask about my life as a father, husband, son and a friend … which is also part of the life of being a Trader.

Firstly, I’d like to dispel any preconceived notions that you might have about this “full-time trader” thing – it is not as glamorous or as nice as many think it is. And it certainly isn’t full-time. I don’t regard myself as a full-time trader because I have a life and several income streams. I’ve had my hand at full-time trading and I hate it. It is stressful not knowing if you will make enough to pay your bills and feed the kids. It is even more stressful when you’re on a losing streak. And when you’re profitable, you’re stressed out for fear of losing it and that can ruin your trading confidence.

During periods between 2011 and 2014, I went through a series of surgical operations that rendered me bed-ridden and all I could do was write and trade. The first solitary confinement almost drove me crazy. I had to get out of the house to regain my sanity so I grabbed my crutches and went for the Pattern Trader’s Monthly Gathering against doctor’s orders. I even refused to cancel any of my classes following the subsequent surgeries. I had to have a life and I needed to be out and about.

You’d have to be a real anti-social loner to be able to trade full-time without any human interaction or external activity in your life. For some, that’s a dream  life but to me, what’s the point? If you’re just trading to make money or pass the time without making a difference to other people’s lives, then why do you exist?

But that’s just my opinion and you don’t have to agree or argue with me about it.

This is a run-down of 30-hours of my life starting on the evening of Wednesday 27 March 2019 to Thursday 28 March 2019;

30-HOURS IN THE LIFE OF A TRADER

•••

WEDNESDAY 27 MARCH 2019

18:45 – Singapore Stock Exchange talking to 60+ investors and traders about Sector Rotation and Global Macro for the U.S., Hong Kong and Singapore markets. These days, I take more joy in sharing what I know for free than when I was in the seminar business. I cannot express the kind of gratification I get out of doing talks like these.

21:35 – Home to catch the market open and monitor my positions. No oil trade today because the Oil Inventory Report will be released in about 50 minutes. The equity market gapped up on weak market internals and doesn’t look like sustaining its gains.

By 23:30, I’m tired and there’s nothing to do in the markets so I am not going to force a trade on a day that’s divergent and directionless with no macroeconomic motivation. DOW seems to be finding support at 25,400 but it’s still on weak internals;

Answered a few queries, rendered some assistance to several Pattern Traders online and did a bit of writing (started writing this article) before retiring for the day at 01:50. Tomorrow is going to be a long day.

THURSDAY 28 MARCH 2019

09:37 – Home at work to answer emails and messages and catch the Asian Breakout on Crude. Equity market closed flat-to-downside last night to vindicate my opinion that it was a directionless and divergent session.

09:52 – WTI broke below my Kill Box for a short but is trading along the 59.10 support that saw it get rejected twice at that level on Tuesday. Volumes are weak and I’m not comfortable with the short given the previous day’s inventory report that crude had a build of only 2.8 mln which was way short of covering the previous week’s draw of almost 10 mln barrels. EIA also reported weekly that the U.S. oil production showed no change with production at 12.1 mln barrels per day. No short this morning and not enough gearing to get the price out of the Kill Box to the upside. Might consider the short again for the European Breakout.

But I’ll be on the move in the afternoon.

11:15 – Scotts Road tim-sum brunch with two of my graduates. She is a graduate from PTT in 2009 who returned from Canada to re-sit the Tutorial in February this year and her husband attended Wealth Academy in 2009 while I was still a Trainer there. She goes back to Toronto on Sunday. Interesting conversation in which I found out a lot about the different cultures in the various parts of Canada. Such a vastly different life there. 

12:45 – Far East Plaza pops me a nostalgic surprise! While shopping for a bouquet for my Mom, I came across a shop with a very familiar signboard I’ve not seen since the early 1980s. The Attic was the shop I bought all my imported vinyl LPs from when I was a teenager when they were at the top floor of Centrepoint. The owner, Bobby Yeo, even recognised me after all these decades. He was formerly a member of a local band, The Survivors back in the 70s. It’s great that vinyl is making a comeback and that CDs are ending their domination because it’s great that Bobby can continue running this business that was once a dying trade. If you’re into vinyl, Bobby is your man at Far East Plaza #03-42.  It’s a much smaller place compared to Attic’s glory days in the 80s but the spirit of vinyl LPs is still alive and very well in this shop.

13:20 – On the road. This is when I do some of my best thinking, while driving or swimming. Sometimes, I wonder what “slowing down” means. I left the seminar business so that I could slow down and focus on the things that are important to me and to have the time to do the things that matter in my life. But I’ve been busier than I’ve ever been since going on my own. I am not complaining because I am doing what I love to do and making the most out of the time I have now. 

13:45 – Tan Tock Seng Hospital with my Mom. She was diagnosed with early stage leukaemia a couple of months ago and has been undergoing “light” chemotherapy and blood transfusions. Now she’s getting fresh platelets and for the first time since being warded a couple of weeks ago, she was given home leave to get some reprieve yesterday. Today, she’s back in the ward and looking much better, up and about and back to her chatty and creative self. Doctors want her closely watched because her other “older”  medical complications may crop up as a result of her weakened state. So far, so good. Mom is a fighter.

15:15 – On the road again. Next appointment is at 16:00 in the East. I actually enjoy not having an office. Moving around keeps me alive and gives me time to think or clear my thoughts. Unless I am taking selfies of myself pretending to be driving while stuck at a traffic light.

Which makes me wonder … how much time do we actually waste waiting for traffic lights/jams, pedestrian crossings, elevators, airline flights and all the various queues? Or even time wasted waiting for tardy friends or appointments? I don’t have a number but I am sure it is a significant percentage of our daily life. I should know because I use that time productively either on my laptop or my phone and I do get a lot of things done while waiting.

Which reminds me … I really need to find time to work on the second group of Analytical Tools. Next trip up to K.L. is less than two months away and I have to get started soon.

Which got me thinking … I need to slow down and not think so much. I am going to burst a vessel at this rate.

SIDE NOTE: At this time of the day on Monday, Wednesday and Thursday/Friday, depending on the weather, I will either be swimming (at least twice a week for a total of at least 4km a week) or at the gym (at least once a week for a 30 minute workout that excludes the treadmill and the stupid cycling thing that goes nowhere). 

16:10 – Starbucks at Tampines Mall to meet up with my IT project partner. Bumped into a fan/follower who has been an ardent reader of my books and articles. (I am so so sorry I forgot your name and didn’t take a picture with you!) This IT project is so close to delivery that it’s getting frustrating. The closer you get, the more you realise needs to be done. Thank goodness my partner is diligent and extremely knowledgeable about this project. Anyone interested in investing? 

19:30 – Jack’s Place at Parkway Parade for dinner and our precious family time. Quality family time has always been my family’s top priority and none more so than our dinner time which we must have at least once a week. It’s a culture that’s become a habit where we talk and catch up and rant (on the odd occasion). No mobile distractions, just good food and good discussions and lots of love and caring attention.

That’s why no pictures here.

SIDE NOTE: If I am not having a lovely dinner with family or friends at this time, then I am in class teaching or in a session doing some talk somewhere.

21:15 – Home and rueing the missed short on Crude between 18:00 and 20:30 … gorgeous $1.00 slide. Damn.

Well, if it’s yours, it’s yours. If it’s not, it’s not. There will always be another opportunity and better circumstances. After all, hindsight is always 20/20 and I will never know if I would have taken the trade at 18:00 in the first place. Such is the nature of trading. *sigh*

21:50 – Home. The market is looking like yesterday’s session, opening to the upside with no strength and no macroeconomic backbone. I’ll give it an hour or two then decide if I am going to do anything. In the meantime, I need to finish up my article on Value Investing: The Untold Truth to be posted in the morning on www.financialscents.com.

The site also needs backend work to clean up dead links left behind by the original site programmers/designers. Facebook refuses to allow the site to use its login facilities as long as we don’t clean up the dead links. What a mess. Probably get some of that done early next week. Plus I have next week’s article to start on; Behavioural Finance in the 21st Century. Gawd … that’s a tacky title. Going to have to think up some other title.

00:35 – Home. The market is not going anywhere. That GDP report really sucked big time and the market has no direction yet again. March has a tendency to end poorly and this is typical of another boring last week of March. Another wasted night. *sigh* Such is the life of a trader.

Guess I’ll pack it up for the night. Tomorrow is another long day with the Pattern Trader™ Options Trading Workshop starting its next batch in the evening. Gotta get some sleep.

•••

That’s my typical 30-hour life which describes how typical my daily routine is not.  And I am sure it isn’t what you thought a full-time trader’s life was supposed to be like. Sorry to disappoint you but the reality is that I do have a life and trading doesn’t rule my life.

There was once when my whole life revolved around trading. That was insane. If trading is ultimately to help you to make money to improve your life, then it shouldn’t enslave you. I know a lot of people who get so caught up with trading that it consumes their lives and leaves little or no time for much else. That’s insane. That’s not what trading is about. That’s an addiction. Yes, trading can become a very unhealthy addiction especially if you find yourself staring at charts for more than a quarter of your waking time. If you find yourself having to trade to pay the bills, you’re in a lot of trouble. If you’re forcing a trade to pay off a debt, you are going to be in a worse world of pain. If you’re trading for the money instead of trading to trade well, you are truly unsuited for the market yet.

Trading should be about another income stream that improves your life with the extra income. It should be about having the freedom to trade when you have a trade and taking the day off if there is nothing to trade. Proper trading should leave you the freedom to do the things you love and still have ample time for the family while the trade works to improve your life. If trading isn’t bringing you joy, you’re not trading well.

Forget about full-time trading. Erase that illusion, that pipe-dream someone sold you. Focus on learning to trade professionally and master the skill to trade to trade well. Even if you’re planning on trading part-time, do it professionally and smartly. Nothing great comes from doing things half-baked. You wouldn’t trust a half-baked surgeon with your life, would you? So why settle for a half baked attitude to trading?

That’s something worth thinking about, right?

Finally, this is me writing this article at 18:20 on Friday 29 March 2019 in the classroom before we start the Options Trading Workshop for Pattern Trader™ Graduates at Singapore Shopping Centre.

Have a great weekend and Happy Hunting always!

Share
Comments Off on Online Trading: The Obvious Lie

Online Trading: The Obvious Lie

This is a three-part article on “Online Trading: The Obvious Lie” which was originally posted at www.financialscents.com.

The market is a pipe-dream to many and an office to others. What’s real and why do some make it while others wipe out?

Part 1: Online Trading: The Obvious Lie – Part 1

The second instalment asks why we spend money and take so much effort to learn what is safe when it is not the safe stuff that kills our trade or investment?

Part 2: Online Trading: The Obvious Lie – Part 2

In the final instalment, we’re going to get a greater understanding of what it means to think, analyse and work as a Global Macro Trader or Macrotrader.

Part 3: Online Trading: The Obvious Lie – Part 3

If you’re trading and getting no joy, you should read this … and get real.

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

Share
Comments Off on Weekly Market Analysis

Weekly Market Analysis

The Weekly Market Analysis is now published at financialscents.com.

Please get your weekly dose of the markets there from now on.

This is the latest update: https://www.financialscents.com/weekly-market-analysis-14-january-2019-bmo-2/

Share
Comments Off on Weekly Market Analysis – 14 January 2019 BMO

Weekly Market Analysis – 14 January 2019 BMO

WEEK IN REVIEW – January 07 to 11 :
Stocks Extend Rally into Earnings Season

The S&P 500 gained 2.5% this week, rising for the third straight week and extending its rally to 10.4% since its Christmas Eve low. The Dow Jones Industrial Average gained 2.4%, the Nasdaq Composite gained 3.5%, and the Russell 2000 gained 4.8%.

All 11 S&P 500 sectors finished higher with industrials (+4.1%), real estate (+4.0%), consumer discretionary (+3.7%), energy (+3.4%), and information technology (+3.4%) outperforming the broader market.

Many have characterized the market’s rally to be a technical rally from a deeply oversold condition. The market, however, has benefited from improved investor sentiment that has been lifted by the stronger than expected December employment report, the assurance from Fed Chair Powell that the Fed will be patient with its policy approach, and reports U.S.-China trade talks among deputy officials went well.  Those developments have fostered a propensity to buy the intraday dips and have made the market resilient to selling efforts.

The buy-the-dip mentality lifted the market whenever it was down and allowed the S&P 500 to flirt with its 2600 level, which approximates the bottom end of the trading range that persisted for most of 2018.

Strikingly, this week’s gains were forged in the face of earnings warnings from Macy’s (M), American Airlines (AAL), Apple (AAPL) supplier Skyworks Solutions (SWKS), and Samsung Electronics.

It was this resilience to selling efforts amid bad news that presumably drew in sidelined participants fearful about missing out on further gains and pushed out weak-handed short sellers expecting a downturn after a 10% increase in the S&P 500 from its December 24 low.

Investors saw some room for trade optimism this week when a scheduled two-day trade meeting in Beijing extended into a third day. In addition, China’s Vice Premier Liu He is reportedly expected to visit Washington for further trade talks at the end of the month.

Separately, the Federal Reserve released its minutes from its December policy meeting. The minutes revealed a view that the path of U.S. monetary policy is “less clear” than before, and a contention that the Fed can “afford to be patient” about future rate hikes.

In light of more recent remarks from many Fed officials discussing a more patient-minded approach, including Fed Chair Powell, the view communicated in the minutes wasn’t altogether surprising. Still, it is this rhetoric from the Fed that is contributing to the fed funds futures market’s belief that there won’t be another rate hike in 2019.

U.S. Treasuries lost ground amid the gain in equities, pushing yields higher across the curve. The 2-yr yield increased seven basis points to 2.55%, and the 10-yr yield increased four basis points to 2.70%. The U.S. Dollar Index lost 0.5% to 95.68, and WTI crude rose 7.8% to $51.68/bbl.

The fourth quarter earnings reporting period will get its official start in the coming week and will be closely watched to see if the market got ahead of itself with concerns about an earnings slowdown in 2019.  Additionally, there will be a key Brexit vote in the UK Parliament and continued attention to the partial government shutdown in the U.S., which is about to become the longest on record.

U.S. ECONOMIC UPDATE
(Economic Excerpts from Briefing.com)

Monday 07 January:

ISM Non-Manufacturing Index decelerates in December 

The ISM Non-Manufacturing Index slipped to 57.6% in December (consensus 58.8%) from 60.7% in November.  The dividing line between expansion and contraction is 50.0%, so the December reading reflects a deceleration in non-manufacturing business activity in the final month of 2018.

The key takeaway from the report is that it follows form with the ISM Manufacturing Index in showing a slowdown in activity in December.  That is in keeping with the market’s perception of economic matters and threatens to bleed into a slowdown in earnings growth.

Tuesday 08 January:

Consumer Credit sees nice expansion in November 

Total outstanding consumer credit increased by $22.2 billion in November after increasing a downwardly revised $24.9 billion (from $25.4 billion) in October.

The key takeaway from the report is that the healthy expansion in consumer credit is a good portent for consumer spending activity when matched with good feelings about job security and income growth.

Thursday 10 January:

Initial claims keep toeing solid labor market line

Initial claims decreased by 17,000 to 216,000 (consensus 225,000) for the week ending January 5. Continuing claims for the week ending December 29 decreased by 28,000 to 1.722 million.

The key takeaway from the report is that it fits neatly with the market’s latest awareness that the labor market has held up fine despite the burgeoning concerns about the economy slowing.

Friday 11 January:

December CPI supports Fed’s patient-minded stance 

The Consumer Price Index (CPI) for December was right in-line with the consensus estimates that called for a 0.1% month-over-month decline in total CPI and a 0.2% increase in core CPI, which excludes food and energy.

The key takeaway from the report is that it supports the Fed’s born-again belief that it can be patient with its policy approach given that the core inflation trend is stable around the longer-run target at a time when data here and abroad is revealing some softening in economic activity.

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

FOMC minutes for December meeting released

Key Excerpts :

FOMC Minutes:

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

KEY ECONOMIC DATA UPDATE
FOR ASIA-PAC & EUROPE

Asia-Pacific

Europe

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

Friday 11 January 2019
Stocks Close Mixed Ahead of Earnings Season

The S&P 500 (-0.01%) finished just a hair below its flat line on Friday. The benchmark index never traded in positive territory but did close at its session high. It also finished the week with a gain of 2.5%.

The Dow Jones Industrial Average (unch), the Nasdaq Composite (-0.2%), and the Russell 2000 (+0.1%) closed mixed, finishing with weekly gains of 2.4%, 3.5%, and 4.8%, respectively.

The S&P 500 sectors also finished mixed with energy (-0.6%), utilities (-0.4%), and materials (-0.4%) weighing on the broader market. Conversely, the consumer staples (+0.3%) and health care (+0.3%) sectors finished atop the standings.

The benchmark index came into the session up 10.4% from its Christmas Eve low, suggesting to many that the broader market had gotten overbought on a short-term basis and was due for a pullback. The S&P 500 was down 0.7% in the early going with weakness presumably being a function of profit-taking as opposed to any news-driven catalyst.

In addition, given the number of earnings warnings already announced this week, and with earnings season set to kick off next week, some took this as another reason to take some profits. Nevertheless, some buying interest throughout the session slowly recouped the broader market’s losses.

General Motors (GM) for its part jumped 7.1% after it increased its adjusted fiscal 2018 and 2019 earnings above consensus. Its strength, however, was not enough to lift the consumer discretionary space (unch).

The lack of a distinctly positive reaction in the market to GM’s upbeat earnings news, in light of the market overcoming prior earnings warnings this week, was reflective of a tired market preferring to take a breather.

U.S. Treasuries closed out the week on a higher note, pushing the 2-yr yield down two basis points to 2.55% and the 10-yr yield down three basis points to 2.70% in the wake of a market-friendly consumer inflation report. The U.S. Dollar Index gained 0.1% to 95.67. WTI crude, meanwhile, snapped its nine-day winning streak, losing 1.9% to $51.68/bbl.

Market Internals – Friday 11 January 2019

Dollar: Weakness Persists

The U.S. Dollar closed lower yet again for the week at $95.66 from $96.20 the previous week. 

Other currency pairs;

Bonds: Sideways Week Ends on Higher Note

US Treasuries ended the week on a higher note, but intraday action featured a modest pullback from highs that were notched two hours after the start of the cash session. The early gains took place after economic data from Europe showed a decline in November industrial production in the UK (-1.5% year-over-year), Italy (-2.6% yr/yr), and Spain (-2.6% yr/yr) on top of contracting output in Germany (-4.7% yr/yr) and France (-2.1% yr/yr), which was reported earlier in the week. Treasuries extended their opening gains as the stock market struggled at the start of the session, but it wasn’t long before equities climbed off their opening lows while Treasuries backed off their highs and spent the remainder of the session near the midpoint of the day’s trading range. The 2s10s spread tightened by three basis points to 15 bps since last Friday while the 2s30s spread remained unchanged at 49 bps. The yield curve remains kinked at the front end with the 52-week bill yield (2.59%) sitting higher than the 2-yr yield (2.55%), the 3-yr yield (2.51%), and the 5-yr yield (2.53%).

The flanks of the yield curve rose to flatten the curve somewhat while inverting the 2yr against the 5yr. The spread on the 2s5s inverted to -2bpsThe spread between the 5s10s narrowed to 17bps from 18bps the previous week while the 10s30s widened to 34bps from 31bps the previous week. The spread that matters most, the 2s10s, narrowed by 3bps to 15bps from 18bps the previous week.

Commodities 

The Bloomberg Commodity Index settled at 79.66, higher than 78.34 the previous week as Energy and Gold settled higher.

WTI oil closed at $51.59 p/b, higher than the week before at $47.96. The spread between WTI and Brent narrowed to $8.89 from $9.10 the previous week as Brent settled at $60.48 p/b.

EIA petroleum data for the week ended January 04

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.7 mln barrels from the previous week. At 439.7 mln barrels, U.S. crude oil inventories are about 8% above the five year average for this time of year. Total motor gasoline inventories increased by 8.1 mln barrels last week and are about 5% above the five year average for this time of year. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 10.6 mln barrels last week and are about 5% below the five year average for this time of year. Propane/propylene inventories decreased by 1.9 mln barrels last week and are about 3% below the five year average for this time of year. Total commercial petroleum inventories increased last week by 13.3 mln barrels last week.

Natural gas inventory showed a draw of 91 bcf vs a draw of 20 bcf in the prior week. Working gas in storage was 2,614 Bcf as of Friday, January 4, 2019, according to EIA estimates. This represents a net decrease of 91 Bcf from the previous week. Stocks were 204 Bcf less than last year at this time and 464 Bcf below the five-year average of 3,078 Bcf. At 2,614 Bcf, total working gas is below the five-year historical range.

Baker Hughes total U.S. rig count remained unchanged at 1075 following last week’s decrease of -8.

Metals: Gold and Copper gain, Silver corrects

Agriculture: Soy and Corn correct, Wheat strengthens

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

THE WEEK AHEAD
Week 03 (14 to 18 
January 2019)

According to our 5, 10 and 15 year seasonal models:

Benchmarks Indices (21 year average) for wk03:

Week 03 Key Economic Dates

Important releases in the coming week include US preliminary reading of Michigan consumer sentiment, industrial output, and producer and foreign trade prices; UK inflation; China trade figures; and Japan inflation. Investors will also react to UK parliamentary vote on Brexit deal and OPEC’s monthly report.

Sun 13 January

Mon 14 January

Tue 15 January

Wed 16 January

Thu 17 January

Fri 18 January

EARNINGS

It looks like the securities have switch their earnings dates for 2019 with four DOW components featured in the first week of Quarter 4 Earnings Season. This is because the SEC allows companies a larger window to file their annual reports relative to quarterly updates. As a result, we will see pre-announcements throughout January and fourth quarter earnings season will drag on into March. Notable earnings out next week include:

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

COMMENTARY

January is normally a very bullish month. But we’ve had a few horrible Januarys in the last half decade to knock that confidence off. So be cautious, stay hedged and get ready to be very nimble.

The “First Five Days” indicator has spoken:

Apparently, if the first five days are up, the year is likely to finish up with an 83% reliability over the last 66 years when 35 out of 42 first-five-days finished up. Then again, how much credence would you put on it? This is like the lowest form of analysis but it does have a high probability, doesn’t it? There are those that will rubbish it and those who will swear by it.

Me? I never discount anything. But I never take any one thing wholesale either. This is just one part of a multi-layered risk management technique. So there’s much more to this than just a five day indicator. So stick around till the end of the month and the end of the quarter when more of such indications should make it clearer to read the market’s intention for the rest of the year.

This has been the best opening two weeks since before the sub-prime (2006) and has dragged the DOW and S&P500 out of Correction Territory. But before we get ahead of ourselves, be reminded that Earnings Season begins in the coming week and this bullish open to 2019 could be nothing more than the market pricing-in some protection/buffer ahead of earnings.

And although it isn’t likely, I am not discounting the possibility that this mini rally was also prompted by short-covering after selling down more than 15% in December. After all, if you’re pricing-in upwards to buffer a bearish earnings season ahead, it would make sense to cover shorts that are massively profitable, wouldn’t it? The market internals haven’t been all that convincing when the market was running up. More than half of the opening eight days have been largely divergent with one of the convergent sessions being the 3rd of January when the market sold down.

The bond market is not suggesting anything new even if it did steepen a tad this week. More ominous is the closing of the spread between the Fed Funds Rate and the 10-year bond yield to only 24bps, indicating that any bull run may be near its end.

Happy Hunting!

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

PATTERN TRADER™ TUTORIAL 
INTRODUCTORY WORKSHOP

Date: 24th January 2019, Thursday
Time: 07:00PM to 10:00PM
(Registration starts at 06:30PM)

…..

With 14 years of educating, mentoring and supporting hundreds of participants (annually) in the arts and sciences of Finance and Economics, the Pattern Trader™ Tutorial has evolved to become the most sought-after boutique-styled class that caters to retail individuals, institutional professionals, businesses and families that are serious about their finances and their prospects as we move into the future.

The small class environment and tutorial-styled approach gives the Tutorial a conducive environment that allows for close communication and interaction between the mentor and the participants.

The hands-on style makes the Tutorial very practical for anyone who requires a start from the ground up. It is the perfect beginning for anyone who wishes to take that first step in improving their financial and economic literacy.

If you’re looking to make a huge difference in your financial life and get the most value for your education investment, there’s no better choice than the time-tested and well reputed Pattern Trader™ Tutorial.

Register for the Introductory Workshop NOW!

Download our promo slides here:
The Pattern Trader™ Tutorial 2019

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

The schedule for the FEBRUARY 2019 Batch is here:
Pattern Trader™ Tutorial – February 2019

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

Screen Shot 2017-10-01 at 1.38.39 PM

Connect with me at LinkedIn

Share
Comments Off on Weekly Market Analysis – 07 January 2019 BMO

Weekly Market Analysis – 07 January 2019 BMO

WEEK IN REVIEW – December 31 to January 04 :
Fed Chair Powell, Strong Jobs Data Help Lift Stocks from Growth Concern Angst

Wall Street kicked off the first week of 2019 on a higher note, as robust jobs data and soothing commentary from Fed Chair Jerome Powell helped press pause on global growth concerns.

The S&P 500 gained 1.9%, the Dow Jones Industrial Average gained 1.6%, the Nasdaq Composite gained 2.3%, and the Russell 2000 gained 3.2%.

Headline payroll growth in the Employment Situation Report for December was comfortably ahead of estimates while average hourly earnings (+0.4%) increased more than expected, lifting the year-over-year growth rate to 3.2%.

There were some concerns, though, about how the central bank would react to stronger-than-expected jobs data.

Fed Chair Powell eased those concerns when he said the Fed will remain patient given muted inflation readings. He added monetary policy will be nimble and shift if necessary, and he also softened his previous comments regarding the Fed’s balance sheet reduction path being on autopilot.

The stock market liked what it heard from Mr. Powell, and his comments helped solidify an equity rebound from previous angst over economic growth.

A rare revenue cut from Apple (AAPL) and disappointing manufacturing data from the U.S. and China had exacerbated fears that economic growth might be slowing more quickly than anticipated, which would present a headwind to corporate earnings.

The market is not free and clear from economic growth concerns, but with strong U.S. jobs growth and a friendlier-sounding Fed, the market saw renewed buying interest.

U.S. Treasuries underwent wild swings this week amid the fragility in investor sentiment. At the end of the week, the 2-yr yield declined four basis points to 2.48%, and the 10-yr yield declined eight basis points to 2.66%. The U.S. Dollar Index lost 0.2% to 96.17. WTI crude rose 6.0% to $48.03/bbl.

U.S. ECONOMIC UPDATE
(Economic Excerpts from Briefing.com)

Wednesday 02 January:

December U.S. Markit Manufacturing PMI- Revision 53.8, Prelim 53.9

Thursday 03 January:

Initial Claims Increase in Final Week of December

Initial claims for the week ending December 29 increased by 10,000 to 231,000 (consensus 220,000) from last week’s revised reading of 221,000 (from 216,000). Continuing claims for the week ending December 22 increased by 32,000 to 1.740 million from last week’s revised reading of 1.708 million (from 1.701 million).

The key takeaway from the report is that claims continue hovering within a sideways range that has been maintained since mid-2018.

ISM Manufacturing Index Decreases in December

The ISM Manufacturing Index for December decreased to 54.1% (consensus 57.8%) from 59.3% in November.

The key takeaway from the report is that the December decrease was fueled by a sharp pullback in the New Orders component, which is the same element that lifted the November ISM Manufacturing Index into the neighborhood of its high from 2018.

Friday 04 January:

December Payroll Growth Soars Past Estimates

The Employment Situation Report for December produced an upside surprise on most fronts. Headline payroll growth was comfortably ahead of estimates while average hourly earnings (+0.4%) increased more than expected, lifting the year-over-year growth rate to 3.2%. In addition, job gains in October and November saw notable upward revisions.

The key takeaway from the report is that employment data are unlikely to deter the Federal Reserve from its tightening path, especially if average hourly earnings growth remains on its current trajectory.

December U.S. Markit Services PMI- Revision 54.4, Prelim 53.4, November 54.7

Fed Chair Monetary Policy Roundtable

KEY ECONOMIC DATA UPDATE
FOR ASIA-PAC & EUROPE

Asia-Pacific

Europe

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

Friday 04 January 2019
Wall Street Jumps on Strong Jobs Report,
Soothing Powell Commentary

The S&P 500 gained 3.4% on Friday, as Fed Chairman Jerome Powell signaled patience and flexibility on rates in light of stronger-than-expected jobs data. Friday’s gains helped the benchmark index secure a weekly gain of 1.9%.

The Dow Jones Industrial Average (+3.3%), the Nasdaq Composite (+4.3%), and the Russell 2000 (+3.8%) also sported sizable gains to finish the week up 1.6%, 2.3%, and 3.2%, respectively.

All 11 S&P 500 sectors closed the session in the green, with gains ranging from 1.0% (real estate) to 4.4% (information technology). Apple (AAPL), for its part, recouped nearly half of its losses from Thursday.

The major averages began the day on a higher note, helped by optimism surrounding upcoming trade talks with China next week and a robust Employment Situation Report for December.

Specifically, nonfarm payrolls (consensus 180,000) exceeded expectations with an increase of 312,000, while average hourly earnings (consensus +0.2%) increased 0.4%, lifting the year-over-year growth rate to 3.2%.

There were some market concerns about how the Federal Reserve would respond to the strong jobs report. The latest comments from Fed Chair Powell, however, eased those concerns, evident from stocks soaring to session highs — and maintaining their gains.

Some talking points from the Fed Chair that soothed the market included (1) the Fed will remain patient given the muted reading on inflation, (2) monetary policy will be nimble and shift if necessary, and (3) his softer tone regarding previous comments on the Fed’s balance sheet reduction path being on autopilot.

The CBOE Volatility Index (VIX) fell 4.1 points to 21.38, reaching its lowest level since mid-December.

U.S. Treasuries ended the week sharply lower, surrendering their gains from Thursday. The 2-yr yield dropped 10 basis points to 2.48%, and the 10-yr yield dropped 11 basis points to 2.66%. The U.S. Dollar Index lost 0.1% to 96.17.

Market Internals – Friday 04 January 2019

Dollar: Weakens Again

The U.S. Dollar closed lower for the week at $96.20 from $96.39 the previous week. 

Other currency pairs;

Bonds: Treasuries Surrender Thursday’s Gains

US Treasuries ended  the week on a sharply lower note, surrendering their gains from Thursday. The pullback in the Treasury market began taking shape in overnight action and continued into midday trade. The overnight selling was accompanied by a rebound in growth-sensitive commodities like copper and crude oil while the news of an upcoming reserve requirement ratio cut in China was also welcomed by the market. In addition, China’s Ministry of Commerce confirmed that trade talks with U.S. officials will take place on Monday and Tuesday of next week, injecting additional optimism into capital markets. However, it remains to be seen if that optimism is warranted, considering U.S. Trade Representative Robert Lighthizer has reportedly said that more tariffs may be needed in order to secure concessions from China.

Friday Morning action saw the release of a much stronger than expected Employment Situation report, which was later followed by comments from Fed Chairman Jay Powell, who took part in a panel discussion with former Fed Chairs Yellen and Bernanke. Market participants locked in on Chairman Powell’s acknowledgement that the policy course can be altered swiftly, but it should be noted that the Fed Chair has said on multiple occasions that monetary policy is not on a pre-set course. The Fed Chairman also reiterated that the Fed’s economic outlook has not changed significantly, but today, the market was more focused on comments that could be categorized as dovish. Recall that just yesterday, the fed funds futures market entertained the prospect of a rate cut in December. Today, the implied probability of a December cut declined to 30.8% from yesterday’s 49.3%.

The belly of the yield curve rose as investors ran their money into medium term safety. The spread on the 2s5s flattened to 0bpsThe spread between the 5s10s widened to 18bps from 17bps the previous week while the 10s30s widened to 31bps from 30bps the previous week. The spread that matters most, the 2s10s, narrowed by 4bps to 18bps from 22bps the previous week.

Commodities 

The Bloomberg Commodity Index settled at 78.34, higher than 77.59 the previous week as Energy, Precious and Grains rallied.

WTI oil closed at $47.96 p/b, higher than the week before at $45.33. The spread between WTI and Brent widened to $9.10 from $6.87 the previous week as Brent settled at $57.06 p/b.

EIA petroleum data for the week ended December 28

Natural gas inventory showed a draw of 20 bcf vs a draw of 48 bcf in the prior week. Working gas in storage was 2,705 Bcf as of Friday, December 28, 2018, according to EIA estimates. This represents a net decrease of 20 Bcf from the previous week. Stocks were 450 Bcf less than last year at this time and 560 Bcf below the five-year average of 3,265 Bcf. At 2,705 Bcf, total working gas is below the five-year historical range.

Baker Hughes total U.S. rig count decreased by -8 to 1075 following last week’s increase of +3.

Metals: Precious Rise, Copper Falls

Agriculture: Grains Gain Again

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

THE WEEK AHEAD
Week 02 (07 to 11 
January 2019)

According to our 5, 10 and 15 year seasonal models:

Benchmarks Indices (21 year average) for wk02:

Week 02 Key Economic Dates

Next week will be a busy week in US with FOMC minutes, inflation, ISM Non-Manufacturing PMI, trade balance, factory orders and US-China trade talks. Elsewhere in the spotlight will be: UK monthly GDP, industrial output and foreign trade; ECB meeting accounts; Eurozone business survey, retail trade and jobless rate; Germany trade balance; China inflation and producer prices and Japan consumer confidence.

Mon 07 January

Tue 08 January

Wed 09 January

Thu 10 January

Fri 11 January

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

COMMENTARY

I am still bullish in the long term, albeit very cautiously bullish while holding a short-term bearish attitude until this correction is done and dusted. I will be sticking with my usual oil trades and seasonal portfolios but they will be hedged until I get an “all-clear” from the market and economic data.

Over the week, another indication that this bull-run could be ending soon is the convergence of the Federal Funds Rate and the 10 year bond yield.

With the Fed releasing more information about their intentions this week, I will be looking for hints or confirmation whether the benchmark rate will continue hiking. With the spread between the FFR and 10yr only 24bps apart, another Fed hike coupled with more flight-to-safety on the 10yr will surely invert this spread. Thereafter, we can expect the Yield Curve to flatten on the 2/10 and possibly invert before the end of the month. 

And that will be all she wrote … for the bulls.

Singapore’s GDP contracted QonQ from 3.5% in Q3 2018 to 1.6% in Q4. The Inflation Rate also fell from 0.7% to 0.3% in spite of the CPI and Core CPI holding at their highs. The benchmark index remained mired in red and still stays rooted below its 50/200DSMA Death Cross in Correction Territory, -15.5% from its May 2018 high. The index closed the first week of the year in the red.

While the U.S. economic numbers continue to look healthy, parts of Asia and Europe are falling onto troubled times. GDPs in Japan, Hong Kong, Thailand, Germany, Italy, Switzerland and Sweden have contracted with some already in a technical recession. Manufacturing and production numbers have also fallen in several East-Asian economies.

The coming week will be light on economic data that matters but will be full of key indications for where the U.S. Fed, BOE and ECB think their economies will be heading. If the early part of the coming week shows more divergence from the usual historical performance, I will be expecting a huge swing to the downside before the week is done.

January is normally a very bullish month. But we’ve had a few horrible Januarys in the last half decade to knock that confidence off. So be cautious, stay hedged and get ready to be very nimble.

Happy Hunting!

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

PATTERN TRADER™ TUTORIAL 
INTRODUCTORY WORKSHOP

Date: 9th January 2019, Wednesday
Time: 07:00PM to 10:00PM
(Registration starts at 06:30PM)

…..

For more than 13 years of educating, mentoring and supporting hundreds of participants (annually) in the arts and sciences of Finance and Economics, the Pattern Trader™ Tutorial has evolved to become the most sought-after boutique-styled class that caters to individuals, professionals and families that are serious about their finances and their prospects as we move into the future.

The small class environment and tutorial-styled approach gives the Tutorial a conducive environment that allows for close communication and interaction between the mentor and the participants.

The hands-on style makes the Tutorial very practical for anyone who requires a start from the ground up. It is the perfect beginning for anyone who wishes to take that first step in improving their financial and economic literacy.

If you’re looking to make a huge difference in your financial life and get the most value our of your education investment, there’s no better choice than the time-tested and well reputed Pattern Trader™ Tutorial.

Register for the Introductory Workshop NOW!

Download our promo slides here:
The Pattern Trader™ Tutorial 2019

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

The schedule for the FEBRUARY 2019 Batch is here:
Pattern Trader™ Tutorial – February 2019

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

Screen Shot 2017-10-01 at 1.38.39 PM

Connect with me at LinkedIn

Share
Comments Off on PATTERN TRADER™ TUTORIAL 2019

PATTERN TRADER™ TUTORIAL 2019

It is a brand new year
with lots to look forward to
and much to aim for.

Are you financially equipped
to face the coming year?

 

Do you have what it takes to
ride out a storm and still be profitable?

 

Make Financial Literacy your TOP PRIORITY
of “must-haves” on your 2019 list of Resolutions.

 

PATTERN TRADER™ TUTORIAL 
INTRODUCTORY WORKSHOP

Date: 9th January 2019, Wednesday
Time: 07:00PM to 10:00PM
(Registration starts at 06:30PM)

…..

For more than 13 years of educating, mentoring and supporting hundreds of participants (annually) in the arts and sciences of Finance and Economics, the Pattern Trader™ Tutorial has evolved to become the most sought-after boutique-styled class that caters to individuals, professionals and families that are serious about their finances and their prospects as we move into the future.

The small class environment and tutorial-styled approach gives the Tutorial a conducive environment that allows for close communication and interaction between the mentor and the participants.

The hands-on style makes the Tutorial very practical for anyone who requires a start from the ground up. It is the perfect beginning for anyone who wishes to take that first step in improving their financial and economic literacy.

If you’re looking to make a huge difference in your financial life and get the most value our of your education investment, there’s no better choice than the time-tested and well reputed Pattern Trader™ Tutorial.

Register for the Introductory Workshop NOW!

Download our promo slides here:
The Pattern Trader™ Tutorial 2019

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

The schedule for the FEBRUARY 2019 Batch is here:
Pattern Trader™ Tutorial – February 2019

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

Screen Shot 2017-10-01 at 1.38.39 PM

Connect with me at LinkedIn

Share
Comments Off on Weekly Market Analysis – 31 December 2018 BMO

Weekly Market Analysis – 31 December 2018 BMO

WEEK IN REVIEW – 24 to 28 DECEMBER 2018 :
Stocks Bounce in Wild Roller Coaster Ride

The S&P 500 rallied 2.9% during a week that featured its worst Christmas Eve in history, a historic rally, and a stunning reversal in late trading action. Wall Street’s end-of-the-year Santa Claus rally, which began taking shape on Wednesday, has pared the benchmark index’s monthly decline to 9.9%.

The Dow Jones Industrial Average (+2.8%), the Nasdaq Composite (+4.0%), and the Russell 2000 (+3.6%) also cut their monthly losses to 9.7%, 10.2%, and 12.7%, respectively.

Nine of the eleven S&P 500 sectors finished the week with gains with consumer discretionary (+4.7%), information technology (+3.7%), communication services (+3.6%), and financials (+3.3%) leading the advance. The utilities (-1.9%) and real estate (-0.1%) sectors were the lone groups to finish with losses.

Investors had to wait for the rally, though. The holiday-shortened trading week began with a continued effort to reduce exposure to risk, which left Wall Street with little Christmas joy.

Nevertheless, the belief that the market had become deeply oversold, in conjunction with rebounding oil prices, strong holiday sales, and some short covering, helped drive the S&P 500 to its best one-day gain (+5.0%) since March 2009.

What ensued was an unsurprising inclination to sell into strength. What surprised many, however, was the reemergence of the buy-the-dip mentality that carried stocks from steep losses to notable gains in the same session. Many attributed the late reversal to pension fund rebalancing activity, but short-covering and a rush of speculative buying interest likely played a contributing role in turning things around in such a hurry.

More so, the ability to hold up this week in the face of bad news, which included the partial government shutdown, softening economic data, and the European Central Bank highlighting an expectation for slower global growth in 2019, added to the bull case for a sustainable rebound heading into 2019.

The bond market, though, signaled a more cautious-minded mentality with risk-free U.S. Treasuries remaining resilient to selling efforts. The 2-yr yield declined nine basis points to 2.52%, and the 10-yr yield declined five basis points to 2.74%. The U.S. Dollar Index fell 0.6% to 96.34.

Investors will not receive any notable economic data on Monday, which will be a full day of trading on Wall Street.

U.S. ECONOMIC UPDATE
(Economic Excerpts from Briefing.com)

Wednesday 26 December:

Analysis delayed due to partial government shutdown 

October Case Schiller Home Price Index 5.0% vs consensus of 5.0%; September was revised to 5.2% from 5.1%

Thursday 27 December:

Initial claims print better than expected

Initial claims for the week ending December 22 decreased by 1,000 to 216,000 (consensus 225,000) while continuing claims for the week ending December 15 decreased by 4,000 to 1.701 million.

The key takeaway from the report is that initial claims continue to print at low levels that don’t suggest any meaningful softening has occurred in the labor market despite the concerns about a slower growth outlook.

October FHFA Housing Price Index grew 0.3% M/M vs. +0.2% in September 

Consumer Confidence Registers Another Pullback in December

The Conference Board’s Consumer Confidence Index decreased to 128.1 in December (consensus 133.7) from a revised 136.4 (from 135.7) in November.

The key takeaway from the report is that consecutive declines in the Expectations Index point to a growing belief that the pace of economic growth will decelerate in the first half of 2019.

Friday 28 December:

Chicago PMI Ticks Lower in December

The MNI Chicago Business Barometer, colloquially known as the Chicago PMI, decreased to 65.4 in December from 66.4 in November. The December pullback took place after the Index soared by nearly eight points in November.

The key takeaway from the report is that the overall reading remained elevated thanks to strong order backlogs and an increase in the Production Index.

KEY ECONOMIC DATA UPDATE
FOR ASIA-PAC & EUROPE

Asia-Pacific

Europe

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

Friday 28 December
Stocks Trade Mixed to Close Volatile Week

The S&P 500 lost 0.1% on Friday in what was another whipsaw day of trading that saw the S&P 500 up as much 1.3% at its high and down as much as 0.6% at its low. The benchmark index finished a remarkably volatile, and history-setting, week with a gain of 2.9%.

The Dow Jones Industrial Average (-0.3%), the Nasdaq Composite (+0.1%), and the Russell 2000 (+0.5%) also experienced roller-coaster action on Friday and finished with weekly gains of 2.8%, 4.0%, and 3.6%, respectively.

Price action was relatively tame (for this week anyway) after the S&P 500 fumbled an early rally effort shortly after the start of trading. However, at around 1:30 p.m. ET, the benchmark index climbed from a loss of 0.2% to as high as 1.3% without any news to account for the move.

All sectors were up and all major indices were higher.

Nevertheless, stocks would retreat just as quickly as they had climbed with no news catalysts to account for the subsequent downturn either.  It was perhaps fitting that the S&P 500 ended the session close to where it started as that was an accurate reflection of the lack of conviction that characterized today’s trading action.

Efforts to flatten out positions in front of the weekend, which could be a four-day weekend for many (the market is open December 31 and closed January 1) were likely responsible for some of the late-day selling.

The S&P 500 sectors finished mixed with energy (-0.9%) and materials (-0.6%) underperforming the broader market. Conversely, the consumer discretionary (+0.3%) and real estate (+0.2%) sectors outperformed.

U.S. Treasuries remained resilient to selling pressure with the 2-yr yield and 10-yr yield decreasing one basis point each to 2.52% and 2.74%, respectively. The U.S. Dollar Index lost 0.1% to 96.34.

Market Internals – Friday 28 December 2018

Dollar: Lower for the week, up for the year

The U.S. Dollar closed lower for the week at $96.39 from $96.95 the previous week. For the year, the Dollar gained 4.92%.

Other currency pairs;

Bonds: Treasuries Edge Higher, but Long Bond Lags

US Treasuries ended the week on a mixed note as most tenors recorded slim gains while the long bond settled in the red. The Treasury complex started the day in negative territory, but the lower open was followed by a swift rebound that had 10s and 5s trading in the green just two hours into the cash session. The long bond also made a brief appearance in the green, but that’s where resistance was found, pressuring the 30-yr bond back to its starting level. Shorter tenors, meanwhile, continued their advance into the early afternoon, hitting fresh highs for the week in the process. The 10-yr note finished at its best level since early February while 2s and 5s settled at their best levels since the start of June. The slope of the yield curve was little changed today, but it steepened during the week. The 2s10s spread ended the week six basis points wider at 22 bps while the 2s30s spread widened by 12 bps to 52 bps.

The yield curve steepened as shorter maturities rallied to send their yields down while the 30 year yield popped 1bps. The spread on the 2s5s is 5bpsThe spread between the 5s10s widened to 17bps from 15bps the previous week while the 10s30s narrowed to 30bps from 24bps the previous week. The spread that matters most, the 2s10s, widened 6bps to 22bps from 16bps the previous week.

Looks like we’re holding off an any sort of inversion the curve for a while more, thus theoretically giving the risk markets more headroom in the months to come. 

Commodities 

The Bloomberg Commodity Index settled at 77.59, lower than 78.70 the previous week as Energy and Grains lost more ground.

WTI oil closed at $45.33 p/b, lower than the week before at $45.59. The spread between WTI and Brent widened to $6.87 from $8.23 the previous week as Brent settled at $52.20 p/b.

EIA petroleum data for the week ended December 21

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) remained virtually unchanged from the previous week. At 441.4 mln barrels, U.S. crude oil inventories are about 7% above the five year average for this time of year. Total motor gasoline inventories increased by 3.0 mln barrels last week and are about 4% above the five year average for this time of year. Finished gasoline remained the same, but blending components inventories increased last week. Distillate fuel inventories remained unchanged last week and are about 11% below the five year average for this time of year. Propane/propylene inventories decreased by 1.0 mln barrels last week and are about 5% below the five year average for this time of year. Total commercial petroleum inventories decreased last week by 2.0 mln barrels last week.

Natural gas inventory showed a draw of 48 bcf vs a draw of 141 bcf in the prior week. Working gas in storage was 2,725 Bcf as of Friday, December 21, 2018, according to EIA estimates. This represents a net decrease of 48 Bcf from the previous week. Stocks were 623 Bcf less than last year at this time and 647 Bcf below the five-year average of 3,372 Bcf. At 2,725 Bcf, total working gas is below the five-year historical range.

Baker Hughes total U.S. rig count increased by +3 to 1083 following last week’s increase of +9.

Metals: Gains across the board

Agriculture:  Grains lose more ground

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

THE MONTH AHEAD
January 2019

January 2019 has 21 trading days and two public holidays. January is the first month of Quarter 1 that sees the start of Earnings Season for Q4 Results beginning on the second week of the month. January is the third month of DOW’s and S&P’s “Best Six Months” of the trading calendar and the last month of the year’s best three month for S&P gains.

January usually starts out mildly bullish but becomes very bullish mid-month and ends rather flat and sometimes bearish. The month is famous for its January Barometer Indicator where “As January goes, so goes the year” with an 87% accuracy. Every down January on the S&P500 has preceded a new or extended Bear Market, a flat market or a 10% correction without exception since 1950. January’s “First Five Days” have indicated a full year of gains 84% of the time.

TRIVIA

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

THE WEEK AHEAD
Week 01 (December 31 to January 04)

According to our 5, 10 and 15 year seasonal models (Tuesday 01 January 2019 is a Holiday);

Benchmarks Indices (21 year average) for wk01:

Week 01 Key Economic Dates

Another week that’s light on data but Friday will be a hive of activity as the New Year kicks into gear with the January Non-Farms Payroll number and Fed Speak.

Sun 30 December

Mon 31 December

Tue 01 January

Wed 02 January

Thu 03 January

Fri 04 January

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

COMMENTARY
2019 PREVIEW

I am holding to the opinion that this is still only a correction, the one that was long overdue and expected. All the talk of an economic slowdown or recession have been nothing more than speculative projections by Wall Street and some cautious corporations … But for now, the numbers don’t say it. For now, this is just another correction.

The market made a valiant effort – albeit on much lower volumes –  to recover its losses for the year. However, it seem very highly unlikely that the DOW can recover 1,657 points (6.7%) in the single remaining session on Monday. Neither will the S&P500 regain its 188 points (7.1%). It might be possible for the NASDAQ to claim 319 points (4.6%) in a single session but …

The index that really matters to me, the Transports, need to recover 9.7% on Monday to breakeven for the year. I doubt that will happen seeing that it struggles to make 10% in a single quarter under normal conditions.

SELF-FULFILLING PROPHECIES, YIELDS AND FFR

The Bulls are hanging on the hope that a Santa Claus Rally could bring the market out of this funk. I have to say, it is looking hopeful at this rate. If it happens by 3rd January, then another bullish prophecy will be in play; that the third year of the President’s term is a bullish year. This adds to the (skeptical) bullish Black Friday/Cyber Monday  sales that points to a bullish year ahead. The only downer is that the market didn’t sell off in May – that usually means that greed suffers the following year.

Now that the Yield Curve seems to be steepening again after that brief false alarm, the market should be good for more upside until the curve says otherwise. The spread between the 10yr bond yield and the Fed Funds Rate is 24bps wide and converging quite a bit. If the Fed hikes the benchmark rate up to 2.75% in January and the 10yr maintains the status quo, this could be an early warning signal that everything is about to change again. If the spread remains, then we can still look forward to more upside … or at worst, not see more downside.

Oil remains my bread-and-butter and I think it should range between $42 and $55 for most of the coming year unless we get confirmation of a recession that will send the black stuff lower.

Gold should make higher highs. Resistance for now is at $1,320 with a higher 52week high just below $1,400. Should the metal rise, I’ll be counting the months (up to five) in anticipation of a market capitulation if the macros are convergent. Check back with this in May 2019.

BTC (Disclaimer: I am highly prejudiced about this) should see more downside to break below $3,000 within the first half of 2019. Support should hold above $2,500 but a break below that in the second half of the year should see it get down to $1,200. Remember, there is no way to value BTC fundamentally. I don’t trade this so this is my license to be irresponsible about my call on BTC. But I still hold my call for BTC to be no higher than $300 in the long term. So far, I’ve not been wrong about crypto since it popped up above $1,000 in January of 2017.

SINGAPORE UPDATE

The STI looks set to finish another disappointing year for the 8th year running since 2010. The local benchmark index looks set to close out the year -10% down in Correction Territory and under its 50/200 DSMA Death Cross, having breached its critical 3,100 support in October. Macro-economic numbers are suggesting that the island-state is heading for a slowdown/recession in the coming year in spite of a seemingly healthy GDP. Interest rates keep rising in spite of the lower Inflation Rate while Manufacturing and Retail Sales keep falling. The Government Budget is practically non-existent, Government Spending has decreased and Consumer Spending increased only because of higher transportation costs, utility costs and fuel costs. This, as I’ve said before, is going to be a long haul pain ride.

SUMMARY

At the start of 2018, I said that I was expecting a “troublesome year” ahead that was going to either be very volatile or very flat – we got both at different times of 2018. But I never saw that year-end sell-off coming. That was a bonus! It might be too soon to say this but we finally got that correction we’ve waited so long for. Are we there yet? Maybe, but I’d rather wait for a clearer picture before I commit to making bullish calls.

For now, I reckon 2019 will see some upside by the end of the year but not without some major rocking and rolling before we get there. Recession? That’s something we’ll just have to wait and see because there’s nothing on the six-month horizon to suggest it yet. All in all, I am still bullish in the long term, albeit very cautiously bullish while holding a short-term bearish attitude until this correction is done and dusted. I will be sticking with my usual oil trades and seasonal portfolios but they will be hedged until I get an “all-clear” from the market and economic data. 

In the meantime, I’d like to wish all my readers a very Happy and Profitable 2019 ahead. 

Happy Hunting!

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

PATTERN TRADER™ TUTORIAL 
INTRODUCTORY WORKSHOP

Date: 9th January 2019, Wednesday
Time: 07:00PM to 10:00PM
(Registration starts at 06:30PM)

…..

For more than 13 years of educating, mentoring and supporting hundreds of participants (annually) in the arts and sciences of Finance and Economics, the Pattern Trader™ Tutorial has evolved to become the most sought-after boutique-styled class that caters to individuals, professionals and families that are serious about their finances and their prospects as we move into the future.

The small class environment and tutorial-styled approach gives the Tutorial a conducive environment that allows for close communication and interaction between the mentor and the participants.

The hands-on style makes the Tutorial very practical for anyone who requires a start from the ground up. It is the perfect beginning for anyone who wishes to take that first step in improving their financial and economic literacy.

If you’re looking to make a huge difference in your financial life and get the most value our of your education investment, there’s no better choice than the time-tested and well reputed Pattern Trader™ Tutorial.

Register for the Introductory Workshop NOW!

Download our promo slides here:
The Pattern Trader™ Tutorial 2019

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

The schedule for the FEBRUARY 2019 Batch is here:
Pattern Trader™ Tutorial – February 2019

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

Screen Shot 2017-10-01 at 1.38.39 PM

Connect with me at LinkedIn

Share
Comments Off on Merry Christmas 2018!

Merry Christmas 2018!

Share
Comments Off on Weekly Market Analysis – 24 December 2018 BMO

Weekly Market Analysis – 24 December 2018 BMO

WEEK IN REVIEW – 17 to 21 DECEMBER 2018 :
S&P 500 Sets New Yearly Low amid Continued Uncertainty

The S&P 500 dropped 7.1% this week, setting a new yearly low at 2408.12, amid ongoing concerns over economic growth, trade, politics, and fear the Federal Reserve could be on course for making a policy mistake. This week’s losses brought the benchmark index’s decline to 12.5% in December.

The Dow Jones Industrial Average (-6.9%), Nasdaq Composite (-8.4%), and Russell 2000 (-8.4%) also extended monthly losses to 12.1%, 13.6%, and 15.7%.

Losses were widespread with all 11 S&P 500 sectors posting weekly losses, ranging from 4.5% (utilities) to 9.0% (energy) as there was a broad-based de-risking effort.

The S&P 500 would test its February low (2532.69) three times this week: twice before the Fed’s decision and once after the Fed’s decision.

The first two re-tests invited some late buying interest that enabled stocks to close off their worst levels in their respective sessions. The third test, however, failed on Wednesday due to a sense of disappointment that the Federal Open Market Committee, and Fed Chair Powell, didn’t deliver on the market’s wishes for a more dovish-sounding perspective regarding the interest rate outlook for 2019 and the Federal Reserve’s balance sheet management.

In terms of the Fed decision, the target range for the fed funds rate was increased by 25 basis points to 2.25% to 2.50%, as expected, and the so-called dot-plot was revised to show a median projection for two rate hikes in 2019, versus three previously.

Fed Chair Powell irked the market during his press conference when he said (1) policy does not need to be accommodative now and that he doesn’t believe the current policy is restrictive and (2) he does not see the Fed altering its approach to balance sheet normalization and sees the preferred policy method being use of the fed funds rate.

New York Fed President John Williams offered a seemingly more dovish-minded perspective on Friday when he said in a CNBC interview that the Fed is listening to the market and that a balance sheet runoff is not “inflexible.” Those remarks triggered a rally effort, but true to recent form, there was selling into strength.

Some other nettlesome elements that weighed on investor sentiment this week included (1) the possibility of a partial government shutdown due to disagreements over a funding request for a border wall (2) a bothersome sense that the U.S. and China aren’t going to be able to reach a trade agreement on structural issues in their prescribed 90-day window (3) the understanding that credit markets appear to be anticipating a growth slowdown due to tighter monetary policy and (4) falling oil ($45.59/bbl, -$5.50, -10.7%) and copper ($2.67/lb, -$0.09, -3.4%) prices that fed into growth concerns.

Uncertainty, and the inability to sustain any rebound effort from short-term oversold conditions, ultimately held back buying interest and led to a flight to safety in U.S. Treasuries. The Fed-sensitive 2-yr yield and benchmark 10-yr yield dropped 10 basis points each to 2.63% and 2.79%.

U.S. ECONOMIC UPDATE
(Economic Excerpts from Briefing.com)

Tuesday 18 December:

Housing starts and permits lack single-unit boost in November

The Housing Starts and Building Permits Report for November wasn’t as strong as the headline figures suggested, as it featured little to no growth in both permits and starts for single-family units.

Total starts increased 3.2% to a seasonally adjusted annual rate of 1.256 million units (consensus 1.230 million), yet starts for single-family units declined 4.6% to 824,000, which is the lowest since May 2017. Total permits increased 5.0% to a seasonally adjusted annual rate of 1.328 million (consensus 1.270 million), yet permits for single-family units were up just 0.1% to 848,000.

The key takeaway from the report is that it substantiates the weakening levels of homebuilder confidence and is a reflection of the impact rising interest rates are having on single-family construction activity.

Wednesday 19 December:

Existing Home Sales Exceed November Expectations

Existing home sales increased 1.9% month-over-month in November to a seasonally adjusted annual rate of 5.32 million (consensus 5.20 million). Total sales were 7.0% lower than the same period a year ago.

The key takeaway from the report is that while sales have now increased for two consecutive months, the trajectory remains challenged by higher mortgage rates and limited affordability.

Thursday 20 December:

December Philadelphia Fed 9.4 vs consensus of 17.5; November was 12.9

Initial claims running low, bolstering December nonfarm payroll expectations 

Initial claims for the week ending December 15 increased by 8,000 to 214,000 (consensus 221,000). Continuing claims for the week ending December 8 increased by 27,000 to 1.688 million.

The key takeaway from the report is that it covers the period in which the survey for the December employment report is conducted. Accordingly, the low level of initial claims should translate into an expectation for solid nonfarm payroll growth in December.

Leading Indicators Increase Modestly in November

The Conference Board’s Leading Economic Index increased 0.2% in November (consensus 0.1%) after decreasing a revised 0.3% (from +0.1%) in October.

The key takeaway from the report is that the Conference Board expects the pace of economic growth to continue moderating in the second half of 2019.

Friday 14 December:

Durable goods orders data disappoints in November

Durable goods orders increased 0.8% in November (consensus 1.7%) after an upwardly revised 4.3% decline (from -4.4%) in October. Excluding transportation, orders declined 0.3% (consensus +0.3%) after increasing an upwardly revised 0.4% (from 0.1%) in October.

The key takeaway from the report is that business investment was weak, evidenced by the 0.6% decline in nondefense capital goods orders excluding aircraft. Moreover, a 0.1% decline in shipments of those same goods will be accounted for as a negative input in Q4 GDP forecasts.

Q3 GDP sees small downward revision with third estimate

The third estimate for Q3 GDP showed a downward revision to 3.4% from 3.5% (consensus 3.5%) and an upward revision to the GDP Price Deflator to 1.8% from 1.7% (Briefing.com consensus 1.7%).

The key takeaway from the report was the same as before, which is that real final sales grew at their slowest rate since the fourth quarter of 2016.

November sees boost in personal income and spending 

Personal income increased 0.2% month-over-month in November (consensus 0.3%). Personal spending rose 0.4% (consensus 0.3%).  The PCE Price Index increased 0.1% (consensus 0.0%) while the core PCE Price Index, which excludes food and energy, also increased 0.1% (consensus 0.2%).

The key takeaway from the report is that it showed PCE inflation continues to run below the Federal Reserve’s longer-run target of 2.0%, which could raise the market’s angst level about the Fed being on course to make a policy mistake with further tightening action.

Consumer sentiment holds up in December despite stock market losses 

The University of Michigan Index of Consumer Sentiment checked in at 98.3 with the final reading for December (consensus 97.5) versus a preliminary reading of 97.5 and the final reading of 97.5 for November.  That left the 2018 average at 98.4, which was the best year since 2000.

The key takeaway from the report is that sentiment wasn’t dented with the stock market’s losses; however, expectations were tempered a bit amid burgeoning concerns about income and job prospects.

KEY ECONOMIC DATA UPDATE
FOR ASIA-PAC & EUROPE

Asia-Pacific

Europe

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

FOMC RATE DECISION
Wednesday 19 December 2019

FOMC raises FFR 25 bps to 2.25-2.50% (2.375% midpoint); signals two rate hikes in 2019

Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term. The Committee judges that risks to the economic outlook are roughly balanced, but will continue to monitor global economic and financial developments and assess their implications for the economic outlook.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Loretta J. Mester; and Randal K. Quarles.

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

Friday 21 December
Stocks Tumble in Risk-Reducing Efforts

The S&P 500 fell 2.1% on Friday, as uncertainty surrounding a host of issues, which included politics and trade, continued to provide a justification to reduce risk. Friday’s decline pushed the benchmark index to a new yearly low of 2408.12 and a weekly loss of 7.1%.

The Dow Jones Industrial Average (-1.8%), the Nasdaq Composite (-3.0%), and the Russell 2000 (-2.6%) also posted considerable declines to cap weekly losses at 6.9%, 8.4%, and 8.4%, respectively.

The S&P 500 had climbed to session highs in morning action (+1.5%) amid some market-soothing commentary from New York Fed President John Williams. Specifically, Mr. Williams indicated that the Fed is listening to the market and that the path of balance sheet runoff in 2019 is not “inflexible.”

That recovery effort, however, was yet again met with selling resistance that drove the market further into negative territory. Disappointment in the inability to sustain a rebound effort from short-term oversold conditions effectively led to a buyers strike that weighed heavily on the indices.

Some discouraging headlines that compounded risk-reduction efforts included (1) the threat of a partial government shutdown due to disagreement over funding for a border wall, and (2) a late-day report that Director of the White House National Trade Council Peter Navarro told Nikkei that an agreement with China in 90 days will be difficult to attain.

All 11 S&P 500 sectors finished in negative territory with the communication services (-3.1%), information technology (-3.0%), and consumer discretionary (-2.6%) groups leading the retreat.

Dow component Nike (NKE), for its part, was the best-performing stock in the S&P 500 after it released a strong earnings report and issued an encouraging FY19 currency neutral revenue growth outlook.

U.S. Treasuries remained resistant to selling pressure amid the equity sell-off. The 2-yr yield dropped four basis points to 2.63%, and the 10-yr yield was unchanged at 2.79%.

There are no companies we cover scheduled to report earnings next week. The market will be open until 13:00 ET on Monday, December 24 and will be closed for Christmas on Tuesday, December 25.

Market Internals – Friday 21 December 2018

Dollar:

The U.S. Dollar closed lower for the week at $96.95 from $97.45 after nearing nearing the yearly high the previous week.

Bonds:

US Treasuries remained resistant to selling pressure as stocks continued to be sold, prompting a continuation of flight-to-safety trades this week that helped drive yields down between nine and 11 basis points for securities ranging from the 2-yr note to the 30-yr bond.  The bulk of today’s buying interest was concentrated in shorter-dated instruments, which transpired as talk surfaced that the U.S government looks set for a partial shutdown at midnight tonight due to a political fight over funding for a border wall.  The S&P 500, up as much as 1.5% in early action, was down 2.0% as of this post.

The yield curve flattened to the downside. The spread on the 2s5s is +1bps  after being flat the previous weekThe spread between the 5s10s narrowed to 15bps from 16bps the previous week while the 10s30s narrowed to 24bps from 25bps the previous week. The 2-30 spread has narrowed to 40bps from 41bps a week ago while the spread that matters most, the 2s10s, remained unchanged 16bps from 16bps the previous week.

The spread that really matters most to me, is the one between the Fed Fund Rate and the 10year yield which has narrowed considerably in the last week. With the Fed raising the benchmark rate 25bps to 2.50% and the 10year falling 10bps to 2.79%, the FFR/10yr spread is now at its narrowest since December 2007 at 29bps.

Read up on the effects of the FFR/10yr spread here: The Fed Fund Rate & The Market 2016

Commodities 

The Bloomberg Commodity Index settled at 78.70, lower than 81.27 the previous week as Grains and Energy lost ground.

WTI oil closed at $45.59 p/b, lower than the week before at $51.20. The spread between WTI and Brent narrowed to $8.23 from $9.08 the previous week as Brent settled at $53.82 p/b.

EIA petroleum data for the week ended December 14

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.5 million barrels from the previous week. At 441.5 million barrels, U.S. crude oil inventories are about 7% above the five year average for this time of year. Total motor gasoline inventories increased by 1.8 million barrels last week and are about 3% above the five year average for this time of year. Finished gasoline and blending components inventories both increased last week. Distillate fuel inventories decreased by 4.2 million barrels last week and are about 11% below the five year average for this time of year. Propane/propylene inventories decreased by 3.3 million barrels last week and are about 6% below the five year average for this time of year. Total commercial petroleum inventories decreased last week by 10.3 million barrels last week.

Natural gas inventory showed a draw of 141 bcf vs a draw of 77 bcf in the prior week. Working gas in storage was 2,773 Bcf as of Friday, December 14, 2018, according to EIA estimates. This represents a net decrease of 141 Bcf from the previous week. Stocks were 697 Bcf less than last year at this time and 720 Bcf below the five-year average of 3,493 Bcf. At 2,773 Bcf, total working gas is below the five-year historical range.

Baker Hughes total U.S. rig count increased by +9 to 1080 following last week’s decrease of -4.

Metals: Precious Gains

Agriculture:  Grains sell off

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

THE WEEK AHEAD
Week 52 (December 24 to 28)

According to our 5, 10 and 15 year seasonal models;


Benchmarks Indices (21 year average) for wk52:

Week 52 Key Economic Dates

The coming week will be light on data given the holiday season.

Mon 24 December

Tue 25 December

Wed 26 December

Thu 27 December

Fri 28 December

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

COMMENTARY

I reckon there’s going to be fireworks … and it won’t be because Santa is coming. On the contrary, the market seems to be scaring Santa away this Christmas.

The DOW needs to recover 2,274 points to close 2018 in the black while the S&P500 requires 257 points with only four-and-a-half trading days remaining. That’s a tall order given that the DOW needs to recover an average of 501 points (+2.23%) a day over the remaining 4.5 days. That is an even taller order if you consider that the last week of the trading year always has the lowest trading volumes. With the yield curve flattening, the dollar weakening and crude prices falling, this will crush any remaining confidence in risk for the coming year.

Any talk of a Santa Claus Rally seems to have all but faded into oblivion. The only thing rising quietly is Gold … and those who know what that means are counting the months downs. 

I am holding to the opinion that this is still only a correction, the one that was long overdue and expected. All the talk of an economic slowdown or recession have been nothing more than speculative projections by Wall Street and some cautious corporations.

Cut through all that noise and you still have a lofty U.S. economy that is still gainfully employed that is still recording growth that is still not dangerously inflated nor deflated that is still high on consumer spending and confidence that is still manufacturing and producing at normal levels. There are no obvious signs of economic weakness that would say that a recession is near.

There is, however, the possibility that the market could continue falling to new lows. That could have a telling effect on corporate performance and earnings come Q1 Earnings Season for Q4 results starting in three weeks’ time. Should that happen, we then could have the catalyst for the next recession. 

But for now, the numbers don’t say it. For now, this is just another correction.

Happy Hunting!

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

HIGHLY ACCURATE AND LOW RISK, SIMPLE AND ELEGANT,
THE JAPANESE HAVE BEEN TRADING USING
CANDLESTICKS & BREAKOUT PATTERNS
FOR
MORE THAN 400 YEARS
AND THE RESULTS SPEAKS FOR ITSELF.

With more than eight hours of pure education, this mind-blowing workshop is designed with short-term traders, swing traders, scalpers, and long-term investors in mind. Created and designed by Veteran Trader & Teacher, Conrad Alvin Lim, this value for money holistic technical analysis workshop will definitely open your eyes to the real world of trading and how Technical Analysis can be simple and elegant without cluttering your screen with confusing technical indicators.

When you attend this workshop, you will learn how to marry the Five Elements of Effective Technical Analysis with Sound Psychological & Financial Management Principles and how this will make you a better and more profitable trader.

This workshop has been running for 10 YEARS and remains the top choice amongst professional traders in Singapore, Kuala Lumpur, Penang and Jakarta.

CLICK HERE BOOK YOUR SEAT NOW!

OR

CLICK THE BANNER TO FIND OUT MORE!

Date: 12th Jan 2019, Saturday
Time: 9.30am to 5.30pm (registration starts at 9am)
Venue:
International Plaza
10 Anson Road
#34-08 (ChartNexus)
Singapore 079903

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

Screen Shot 2017-10-01 at 1.38.39 PM

Connect with me at LinkedIn

Share