Sector Report 1611 : Transportation 2016

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It has been almost two years since we last featured the Transports. Now with the Trump win behind us, the market seems to be betting that industrials are going to be back in form when he takes office in January.

I personally have a soft spot for this industry that has seen better days in years past. Let’s see if the Trump era can bring this industry back to its glory days.

Get your issue here: Sector Report 1611 : Transportation 2016

 

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Candlestick & Breakout Patterns Workshop (Singapore)

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Don’t miss this upcoming …

8-HOUR CANDLESTICK &
BREAKOUT PATTERNS WORKSHOP

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CS

sinflag

Next Workshop in Singapore will be:
Saturday 13 June, 2015 from 9:30am to 5:30pm

Public Admission Fee: S$199 (cards incl)
Pattern Trader Graduates: F.O.C.

VENUE:
51 Cuppage Road,
#06-16 Starhub Center
Singapore229469

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Reserve your seat for the next session now!

Click here for the booking form (For classes in Singapore)

*LIMITED SEATS, SO BOOK EARLY!!

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November 2016 In Review, December Preview

Donald-Trump-wins-graphic

November began with much doubt and confusion. Now that the month is done and dusted, there is less confusion but more doubt. America has voted and Trump is going to take the White House in January. Going by his current actions, it will be the same old Wall Street oriented government with all the same type of toxic office bearers in place to serve Broad and Wall with policies that won’t help the street much. I wonder if America did indeed vote the worse of two evils.

It was also a month of political madness in South East Asia but I am not going to get into all that happened in the Philippines, Malaysia and Thailand. Suffice to say, my home country has more than enough of its own problem to keep me busy without worrying about the affairs of our neighbours. And it is not looking too bright for the Little Red Dot.

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TUTORIAL MATTERS

On the weekends of 4th to 7th and 11th to 13th November, PTT87 got their Bootcamp and are now working hard on their Post Graduate Assignments. Great gang with lots of energy. Keep that energy going and keep working together. This is only the start of a long journey.

PTT87

On 29 November, the third batch of the revised Post Graduate Tutelage completed their four week session with much enlightenment. Now to put into practice everything you’ve learnt and make it work. Remember to stay defensive and conservative as you start out. Good luck!

PGT03

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MARKET UPDATE

At the end of October, I mentioned that major markets of the world weren’t able to make higher highs from more than a year ago and looked very congested at their tops. However, a month and a US election later, the US indices have broken new highs.

DOW

Of course, it remains to be seen if this Trump Rally has the legs to carry on into 2017. As it stands, the US economy doesn’t seem weak enough to warrant a bearish outlook. On Tuesday 28 November;

The second estimate for third quarter GDP showed growth was revised up to an annual rate of 3.2% (consensus 3.0%) from 2.9% in the advance estimate while the GDP Deflator was revised down to 1.4% (consensus 1.5%) from 1.5%.

The important takeaway from the second estimate is that the upward revision was driven by an increase in personal consumption expenditures growth, which contributed 1.89 percentage points to third quarter GDP growth versus 1.47 percentage points in the advance estimate.

The contribution from net exports was revised slightly higher while the contributions from the change in private inventories, government spending, and gross private domestic investment were all revised lower.

The third quarter of 2016 marked the first time since the third quarter of 2014 that there was at least a three-handle on GDP growth.”

~ Briefing.com

Employment is still buoyant and the industrial side of America seems to be on the mend with Trump promising to bring jobs back and companies responding by bringing back production and manufacturing.

Given that the market is embarking on its “Best Six Months’ on the DOW and S&P, I have little reason to be bearish, save the volatility of January in the last three years.

Fed Chair, Janet Yellen’s language has had more conviction towards higher rates that could well happen on December 14 at 2pm EST. If it happens, this should give the market a jolt in the immediate days following that announcement but the US will be better for it in the longer term seeing how higher rates have always benefitted an America that produces and manufactures.

In Asia, however, the picture is not as bright.

SINGAPORE UPDATE

DeflationSGThe Little Red Dot yet again extended its longest historical run of negative inflation to 24 consecutive months. However, the most recent number revealed that inflation may finally be on its way back up again.

The rest of the economy, sadly, remains mired in doubt as more jobs get cut and businesses shut down or scale down.

To add to the Island State’s woes, China confiscated nine military vehicles from the Singapore Armed Forces on the way back from Taiwan being shipped through Hong Kong. It is still unknown if the reason for this retaliatory tactic is because of Singapore’s stance on the disputed islands that rubbed China up the wrong way or if it is because China felt offended that Singapore kept alliances with Taiwan with no due respect for China.

One thing is clear, Singapore has continually been left out of China’s expansion plans into the region. Their construction of an island airport in the South China Sea, a port in Malacca to rival Singapore’s and major development projects around the Johor Straits hint at targeting Singapore as an economic rival. Rather than to tie up alliances and work with the Island State, China has preferred to look at Singapore as a cause for concern. Their expansion plans and trade deals have continually left Singapore out of the equation and is likely to leave the Little Red Dot in isolation, surrounded by China’s economic allies in Malaysia, Philippines and Indonesia. This will be a major cause for concern for Singapore if it loses its grip on being a transportation, trade and financial hub.

USDSGDThe SGD is currently taking a beating from the USD as regional currencies also tumble against the strength of the Greenback.

This has alarmed the MAS especially if the US raises its Fed Fund Rate and triggers capital outflows. This will play right into the hands of China. The Singapore Dollar has long been the strongest currency in Asia. For long stretches in recent history, it was the strongest in the Asia-Pacific region too. It is this strength and stability that has kept investors confident in the country’s financial services. Investor confidence will be affected if China’s ostracization of Singapore does not serve the needs of these investors who wish to do business in with China. This may lead to massive capital outflows to places like Indonesia who have been restructuring their financial system to attract investor monies out of Singapore and into their capital, Jakarta. Such capital outflows will surely hurt Singapore’s position as a regional financial hub.

STIAs of the close of Wednesday 30 November 2016, the STI was barely up by 0.70% year-to-date at 2,904.14 and down 17.65% from the high of April 2015 (3,525.19).

This is going to be a painful period for the Little Red Dot going into 2017.

DECEMBER PREVIEW

December 2016 has 21 full trading sessions and one trading holiday (Monday 25th). December is the second of the market’s best six months the year between November and April and the last month of Q4.

December is famous for its Santa Claus Rally that traditionally begins three to five days before Christmas and ends three days after the New Year. However, when we don’t get a Santa Claus Rally, it usually means that the following year is going to be weak or extremely volatile.

DECEMBER TRIVIA

DIA Thursday 01 December to Friday 02 December (Week 48)

The first two days of December 2016 (48) ends a usually bullish week, carrying more than an 80% probability on the DIA and SPY over the last 5 years, more than 70% on the DIA and SPY over the last 10 years and more than 60% for the DIA and 73% for the SPY over the last15 years.

The 2016 Stock Trader’s Almanac’s averages for the S&P500 is bearish on Thursday at (52%). DOW gets bearish on Thursday (57%) and Friday (52%) and the S&P500 closes the week slightly stronger for the bulls at 52%.

Monday 05 December to Friday 09 December (Week 49)

The second week (49) has less than an average 60% probability for a short trade on the SPY and DOW over 5, 10 and 15 year averages.

The 2016 Stock Trader’s Almanac’s averages for Monday are 66% bullish with Tuesday turning bearish. On Wednesday and Thursday, DOW and S&P stay more than 55% bearish and finishes the week with a 60% probability of being bullish.SPY

Monday 12 December to Friday 16 December (Week 50)

The third week (50) has less than a 50% probability for a long trade on the DIA and SPY over 5, 10 and 15 year averages.

The 2016 Stock Trader’s Almanac’s averages for Monday and Tuesday are around 55% for a bearish trade on the DOW and S&P500. The S&P500’s weakness continues into Wednesday at 57%. However, DOW strengthens on Wednesday at 52. Both benchmarks finish the week stronger at 52% bullish on Thursday and a 59% average on Friday.

Monday 19 December to Friday 23 December (Week 51)

The fourth week of December (51) is bullish for the SPY and DIA over the last 5 years at 100%. Over 10 and 15 years on the SPY and DIA, there is an 80% for a long trade.

The 2016 Stock Trader’s Almanac’s averages for the DOW and S&P500 on Monday and Tuesday are around 55% bearish but Wednesday and Thursday are bullish at 75%. Friday stays bullish for both indices at 52%

Monday 26 December to Friday 30 December (Week 52)

The final week of December (52) have extremely divergent probabilities over the 5, 10 and 15 year averages on the DIA and SPY. It has been extremely bearish on both benchmarks over the last 5 years at 100%

The 2016 Stock Trader’s Almanac’s averages for Tuesday is bullish at 81% for the DOW and S&P500. Wednesday to Friday is slightly bearish for the DOW (55%) while S&P500 is slightly bullish on Wednesday and Thursday at 57% and bearish on Friday at (66%).

Key Economic Dates

Thursday 01 December

Friday 02 December

Monday 05 December

Tuesday 06 December

Wednesday 07 December

Thursday 08 December

Friday 09 December

Monday 12 December

Tuesday 13 December

Wednesday 14 December

Thursday 15 December

Friday 16 December

Sunday 18 December

Monday 19 December

Wednesday 21 December

Thursday 22 December

Friday 23 December

Monday 26 December

Tuesday 27 December

Wednesday 28 December

Thursday 29 December

Friday 30 December

Commodities

SUMMARY

I have only one more weekend to fulfil in KL next weekend as I finish up my teaching year for 2016. It has been an amazing year that saw six out of ten batches in all of SG, KL and PG totally sell out. Needless to say, I have had a busy year but busy is always a good thing.

Next year could be a different story but it is still a month away. I am only interested in the month ahead because it is my favourite month for vacationing!! And that is all I am looking forward to right now!

Happy Hunting!!

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Comments Off on Market Update – 21 November 2016 BMO

Market Update – 21 November 2016 BMO

bird+flu+640

Bird Flu is back. And this time, it’s spreading quicker than last time. Germany, Austria, Switzerland, Hungary, Poland, Holland, Denmark and Croatia with H5N8, Korea with H5N6 … you kinda wonder if we’re not taking this seriously enough though? This shit is getting real thick at a time when we really don’t need more shit.

The European report: Bird Flu Hits Europe
The Korean report: South-korea-confirms-highly-pathogenic-h5n6-bird-flu-outbreaks

Every time in recent history, before a major economic downturn, we had some major outbreak to help springboard the economy into recession and exacerbate the situation. Looks like history is out to repeat itself.

Have you gotten your flu jabs and masks yet? (GSK, HEB, NVAX, SVA, VICL)

US MARKETS

The DOW broke to a record high on Tuesday, closing at 18.923 before stalling out for the rest of the week while on Thursday, the S&P500 came within three points of August’s historical high of 2,190.

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Has the Trump Rally run out of steam? For the time being, maybe. But I am guessing that it won’t be for long more. The markets are going into its best period of the year to be a Bull and I am not discounting the possibility of more upside in the coming weeks especially when Black Friday/Cyber Monday is this weekend.

Yields

Yields jumped to their 2016 highs as if to indicate that this rally has more legs to come as the U.S. Dollar Index rallied for its 10th consecutive session to close out Friday’s session +0.33% up at 101.22. (Click chart to expand)

Commodities has had a wild November so far with Gold getting pummelled from 1305/troy oz to 1209/troy oz while copper rose from 2.21/lb to 2.54/lb and settled at 2.47/lb on Friday. Crude oil seems to be holding its uptrend after getting hit in October.

For the pattern aficionados, check out this Symmetrical Flag (daily candles) on Copper (/HG) if you were wondering if the metal had any more potential upside. 

Screen Shot 2016-11-21 at 10.02.54 AM

But as with all things, patterns can also fail … and that’s what I am hoping for because prices move down faster than they rise.

Agriculture Closing Prices

More than 95.0% of S&P 500 components have now reported their third-quarter results, showing an earnings growth rate of 3.0%. Results for the quarter have exceeded expectations as more than 72% of the S&P500 beat their estimates with an increase in revenues not seen in more than 2 years. With earnings season and election season over, we can now focus on getting back to normal trading.

THE WEEK AHEAD

Monday 21 November to Friday 25 November (Week 47)

The fourth week of November (47) is flat for the SPY and DIA over the last 5 years. Over 10 and 15 years on the SPY, there is between 60% to 70% for a long trade. DOW remains unimpressive over its 10 and 15 year averages.

The 2016 Stock Trader’s Almanac’s averages for Monday, Tuesday, Wednesday and Friday are between 52% to 66% bullish on the DOW and S&P500.

Key Economic Dates

Monday 21 November

Wednesday 23 November

Thursday 24 November

Friday 25 November

SUMMARY

Singapore’s economy is on the brink of Recession. The US market looks like breaking higher. Europe is fighting a pandemic. South America’s economic problems worsen. Asia is banking on China to keep things buoyant. However, China’s economy and market are not all that great.

What happens in the next weeks leading into January is going to determine where all this ends up in 2017. Right now, there is very little to suggest that we’re going to have a good time. The job losses are mounting on The Little Red Dot and businesses are scaling down and even winding up more regularly now than all through 2016. And as with recessions past, things on the street don’t look worrying as people still continue to spend and have a good time. But lest we forget, the economy lags behind the market by six months to a year.

Screen Shot 2016-11-21 at 10.45.11 AM

And that picture paints a thousand fears.

Happy Hunting!!

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Comments Off on Market Update – 14 November 2016 BMO

Market Update – 14 November 2016 BMO

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That poster is NOT about Trump ruining the US economy. It is about the great divide that this election has created. America is now a country divided. It is also about the future of corporate America because the result if not going to favour the big banks, large conglomerates and oligopolies in the long term. Maybe that’s a good thing because it will favour the street instead. It is time for change and it is time for the small guy in the street to get some instead of making the rich richer anymore. (I hope some of our out-of-touch, over-entitled ministers are reading this – I hope you realise what this warning shot is about.)

The Donald is President … at least he will be on 20 January next year. Futures tanked -800+ when it became obvious that he was on track to win it but retraced as quickly as it tanked to recover to -200 before the open. The market then rallied as if to approve of his Presidency to close Wednesday with a more than 1% gain.

Screen Shot 2016-11-10 at 2.45.00 PM

In a week that was supposed to flat, the week became one of the most volatile for the year.

Going into the third week of November, we’ll be looking for the dust to settle and hopefully return the market into some sort of normalcy. After breaking to historical highs on Thursday and Friday in five straight sessions to the upside, the DOW is starting to look a little worn out with the UVOL and DVOL in a  1-for-1 match throughout Friday’s session.

DOW11-11YTD

During the week, December copper spiked to an 18-month high at 2.70 before settling at $2.51/lb, bonds sold off sending yields to 11-month highs, the Dollar strengthen against all the major currencies, Gold closes near a 4-week low settling at $1225.10/oz and December crude oil futures fell to $43.39/barrel.

Quite a week. The question now is whether those prices will stick or are they going to return to whence they came. Here’s how the various industries settled;

Screen Shot 2016-11-14 at 11.44.51 AM

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EARNINGS UPDATE

With earnings season winding down this week, it is quite safe to say that this round of earnings have been the best batch of reports after five consecutive quarters of year-over-year earnings declines. Out of the 91% of the S&P500 companies that have reported so far, 70% have beat earnings estimates while 22% have missed. These are the usual types of percentages we often see in normal markets. Furthermore, third quarter sales and earnings for the S&P500 are up 3% YonY.

Earnings growth were predominantly from Real Estate (+35%), Utilities (+16%), Staples (+8.5%), Financials +(8%), Technology (+7%), Materials (+6.4%), Discretionary (+6.3%), and Health Care (+5.7%). Earnings were lower in among Energy (-62%), Telecommunications (-1.6%) and Industrials (-1.3%). Third quarter sales were up 2.9% and are now expected to end the quarter up 2.7% after growing 0.2% last quarter (2Q16) and falling 3.8% last year.

This week’s reporting will focus on Retail earnings. Notable reports out this week include:

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THE WEEK AHEAD

Monday 14 November to Friday 18 November (Week 46)

The third week (46) has less than a 60% to 70% probability for a long trade on the DIA over 5, 10 and 15 year averages. The SPY is weak with 50% of a chance for a short trade.

The 2016 Stock Trader’s Almanac’s averages for Monday and Tuesday are around 60% for a bullish trade on the DOW and S&P500. The S&P500’s strength continues for the rest of the week at 52% for the bulls. However, DOW weakens on Wednesday and Thursday with a 53% bearish factor before giving the bulls a 52% chance on Friday.

Monday 14 November

Tuesday 15 November

Wednesday 15 November

Thursday 17 November

SUMMARY

A host of critical economic data should be a nice distraction in the coming week from the election fallout. I don’t expect it to be as bullish as we’ve had it last week but don’t expect a tanker either. I reckon it is going to be an uneventful week that should close flat-to-upside.

Over the weekend, a 6.2 magnitude quake near the east coast of Honshu, Japan and Wellington, New Zealand where a 7.8 magnitude quake killed two and triggered a tsunami warning were timely reminders that life is way too fragile and precious to worry about the opinions of a nation divided by a President. Latest news is that a magnitude of 6.2 has struck northwestern Argentina.

Pray for the affected. And pray that this is the last of it for a long time to come. Three in one weekend is more than we should bear.

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Comments Off on Market Update – 7 November 2016 BMO

Market Update – 7 November 2016 BMO

Janet Yellen again failed to deliver any committed monetary policy after yet another highly anticipated Fed Meeting that ended with the same ineffectual rhetoric.

On Friday, the Non-farm payrolls increased by 161,000 which was worse than the 175,000 expected. Job gains have averaged 181,000 per month so far this year versus an average of 229,000 per month in 2015.

The market broke the record for the consecutive number of bearish sessions since October 2008 by recording nine straight losses on Friday. Now the S&P500 is only 2 points above above its very critical 200DSMA and looking likely to complete 6 DFDMs in 12 weeks.

Screen Shot 2016-11-06 at 8.54.48 PM

Having broken below the 2,120 Support, the next level of support below that will be 2015’s opening price of 2,060. On the DOW, support after breaking below the critical 18,000 level will be 2015’s opening price at 17,800 and thereafter, 17,600. DOW is only 21 points above its 200DSMA after Friday’s close

The VIX has risen for nine consecutive sessions to top out at 23.00 before closing at 22.51 on Friday.

Monday 07 November to Friday 11 November (Week 45)

The second week (45) has less than a 50% probability for a short trade on the SPY and DOW over 5, 10 and 15 year averages.

The 2016 Stock Trader’s Almanac’s averages for Monday and Tuesday are averagely 52% bullish on the DOW but becomes bearish on Wednesday and Thursday at 60% and finishes the week with a 66% probability of being bullish. The S&P500 is bullish on Monday and Friday at 57% while Tuesday, Wednesday and Thursday are bearish at around 55%.

Key Economic Date
Tuesday 08 November

Wednesday 09 November

Friday 11 November

Summary

With the elections dominating the coming week. it will be a brave trader to make a committed trade in any direction. I will be staying on the side to watch the outcome before deciding if going long into the year-end is still a viable bet. I won’t be too impatient to take any position till after next week as the stats don’t really favour any sort of directional trade anyway.

Till then, I wish you Happy Hunting, as always.

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Comments Off on Sector Report 1610 : Metals 2016

Sector Report 1610 : Metals 2016

blast-furnace-image-e709ac3d6c29f395

Since the last report on basic materials two years ago, raw materials saw massive drawbacks on demand that in turn saw lot of these issues have steep declines that make this sector a tempting bet for the future. If the global economy goes into a tailspin, this will be one of the main sectors I will pick up going into the recovery.

Get your edition here: http://www.patterntrader.com/product/sector-report-1610-metals-2016/

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Comments Off on October 2016 In Review, November Preview

October 2016 In Review, November Preview

I don’t remember much about October 2016 except that I was sick as a dog and busy as a bee. I have been struggling with a nagging cough since last August that got to its worst at the end of September. Several visits to the doctor and lots of water have improved the situation but I am still coughing, albeit at the tail end of this bout. I wondered why they call it “The Hundred-Day Cough“.

TUTORIAL MATTERS

On the first weekend of October, I went back to Penang to give them their Post-Graduate Tutelage.

IMG_4484 IMG_4485

It was a struggle for some but it opened their eyes and minds up to why we take so much effort before we put on a trade and how we appreciate the top-down macroeconomic approach to anything we trade.

Then the following weekend between 7 and 10 October, we ran the second Commodities and Futures Workshop. From the feedback I got, these were more than satisfied students who definitely benefitted from the little tips and tricks that have helped me as a Futures trader.

FullSizeRender 2

On the 18th, PTT86 completed the Tutorial after nine lessons in eight weeks. This was another sold-out batch with enthusiastic and keen learners. I wish them all the best in the weeks to come as they get their Post-Graduate Assignments that will surely test their knowledge against what they’ve learnt.

FullSizeRender

I guess the only other thing I remember about October 2016 is how I got buggered unnecessarily by three attention seekers who had nothing else better to do than judge me and give me a hard time about something they didn’t even know about. That was an unnecessary drain on my energies and a real waste of my time.

I just wish such people took the effort to look me up first before judging me and before picking on me. I am not like any other educator out there. What I do is what most gurus wouldn’t dare or care to do. And that’s why I am not a guru.

MARKET UPDATE

The major markets of the world haven’t been able to make higher highs from more than a year ago and look very congested at their tops. Even local markets have been struggling to not fall down;
Screen Shot 2016-10-29 at 9.15.20 PM

This has been the longest congestion at the top without making new highs since 1929. The Dow Jones Industrial Average has been struggling to stay above 18,000 since December 2014 and has come down to test 16,000 three time since. DOW crossed below its 50DSMA on 9 September this year and has not been able to close above it since. The 200DSMA now looms ever closer with barely 1,000 points separating it from the current close.

DOW

The US economy expanded by 2.9% y/y in Q3, more than 1.4% in Q2, better than the estimated 2.5% expectation. This is the strongest growth since Q3 2014, as inventories recovered and exports grew the most in nearly three years. However, personal consumption slowed. The good news was not enough to keep the market buoyant.

Friday 29 October closed in the red yet again to set up what might turn into a 4th DFDM in 7 weeks and 8 in 5 months. This is the most congested period of DFDMs since before the Sub-Prime Crisis.

This makes three monthly candles to the downside for the S&P500 and the DOW. As of Friday 29 October 2016 year-to-date, the DOW is +4.22% while the S&P500 is +4.03%. Year-on-year, Dow is +5.6% while the S&P500 is SnP Triangle+4.51.

Monday 31 October is the last day of trading for the month.

The S&P500 seems to have broken out to the downside while the VIX has climbed for the fourth straight session to close above 16 points for the second time in a month.

SINGAPORE UPDATE

The Little Red Dot extended its longest historical run of negative inflation to 23 consecutive months.

The -0.2 percent compared to the -0.3 percent drop in August was the smallest drop since December 2014, as cost of housing & utilities and transport dropped further while prices of food rose at a faster pace.

SG Inflation

The island state also ran into its first quarter of contraction, falling 4.1%, its largest dip since 2012.

SG GDP Q

It was also the biggest drop y/y, losing 1.4% from 2% last year. At 0.6% yearly growth, this is the weakest growth since the June Quarter of 2009, as manufacturing and services sectors shrank while construction slowed.

SG GDP Y

Job losses also mounted, mall vacancies rose to 10 year highs, corporate bond defaults continue to add up, earnings forecasts are falling at the fasted rates in the world and our central bank is holding off stimulus after Temasek’s phenomenal losses.

As of the close of Friday 28 October 2016, the STI was down 2.31% year-to-date and down 2.43% year-on-year.

STI

Singapore’s property prices have now fallen for 12 straight quarters. That’s three years in a row. The most recent quarter-on-quarter decline was a 1.5% decline, the steepest decline in those three years.

SG Prop

If there is one chink in Singapore’s economic armor, it is its property prices. The country has never done well when its property prices capitulated in the past.

This time, the country’s problems are its massive household’s debt that is still more than 60% of its GDP. The global slowdown has affect its import-export business and its related shipping industries. This, I suspect, is going to take a long time to heal.

OCTOBER PREVIEW

November begins well, flattens in the middle of the month and goes on to finish very well. November is the first of the historically best three consecutive months of the trading calendar between November and January (January has been down for the last three years). It is also the start of the “best six months” on the DOW and the S&P and the start of the “best eight months” on NASDAQ.

This year, November has 20 full trading sessions, one Bond trading holiday in observance of Veteran’s Day on 11 November, one half-day session on 25 November and one trading holiday on 24 November in observance of Thanksgiving.

NOVEMBER TRIVIA

DIA NovemberMonday 31 October to Friday 04 November (Week 44)

The first week of November (44) has an 80% probability for a profitable long position on the on the SPY over the last 5 years but only 60% over 10 and 15 years. The DOW has less than 60% for a long trade over 5, 10 and 15 years.

The 2016 Stock Trader’s Almanac’s averages for Monday, Tuesday and Wednesday are averagely 55% bullish on the DOW and S&P500 while Thursday and Friday get more and more bullish into the weekend at around 73% on the DOW and S&P500.

Monday 07 November to Friday 11 November (Week 45)

The second week (45) has less than a 50% probability for a short trade on the SPY and DOW over 5, 10 and 15 year averages.

The 2016 Stock Trader’s Almanac’s averages for Monday and Tuesday are averagely 52% bullish on the DOW but becomes bearish on Wednesday and Thursday at 60% and finishes the week with a 66% probability of being bullish. The S&P500 is bullish on Monday and Friday at 57% while Tuesday, Wednesday and Thursday are bearish at around 55%.

SPY NovemberMonday 14 November to Friday 18 November (Week 46)

The third week (46) has less than a 60% to 70% probability for a long trade on the DIA over 5, 10 and 15 year averages. The SPY is weak with 50% of a chance for a short trade.

The 2016 Stock Trader’s Almanac’s averages for Monday and Tuesday are around 60% for a bullish trade on the DOW and S&P500. The S&P500’s strength continues for the rest of the week at 52% for the bulls. However, DOW weakens on Wednesday and Thursday with a 53% bearish factor before giving the bulls a 52% chance on Friday.

Monday 21 November to Friday 25 November (Week 47)

The fourth week of November (47) is flat for the SPY and DIA over the last 5 years. Over 10 and 15 years on the SPY, there is between 60% to 70% for a long trade. DOW remains unimpressive over its 10 and 15 year averages.

The 2016 Stock Trader’s Almanac’s averages for Monday, Tuesday, Wednesday and Friday are between 52% to 66% bullish on the DOW and S&P500.

Monday 28 November to Friday 02 December (Week 48)

The final three days of November and the first two days of December (48) make up a very bullish week, carrying more than an 80% probability on the DIA and SPY over the last 5 years, more than 70% on the DIA and SPY over the last 10 years and more than 60% for the DIA and 73% for the SPY over the last15 years.

The 2016 Stock Trader’s Almanac’s averages for Monday and Tuesday are bullish at an average of 65% for the DOW and S&P500. Wednesday flat for the DOW while S&P500 is bearish at 62% and bearish on Thursday at (52%). DOW gets bearish on Thursday (57%) and Friday (52%) and the S&P500 closes the week slightly stronger for the bulls at 52%.

Key Economic Dates

Tuesday 01 November

Wednesday 02 November

Thursday 03 November

Friday 04 November

Tuesday 08 November

Wednesday 09 November

Friday 11 November

Sunday 13 November

Monday 14 November

Tuesday 15 November

Wednesday 15 November

Thursday 17 November

Monday 21 November

Wednesday 23 November

Thursday 24 November

Friday 25 November

Monday 28 November

Tuesday 29 November

Wednesday 30 November

Thursday 01 December

Friday 02 December

Commodities

SUMMARY

About three years ago, I mentioned in one of my reports and also in several public speaking events that I expected the next downturn to be a really nasty and long one … with the emphasis on “long one”.

It has been too long and way too much printed monies since the last downturn. The banks and large corporations have benefitted massively from all that paper. However, it would seem that benefit came at a cost – their earnings.

It hasn’t helped that the commodity prices have fallen massively over the years, especially Crude Oil, that remains stubbornly below $50p/b. In spite of OPEC’s efforts to raise the price of oil by slowing output, it is getting no help from the other oil producing nations who are more interested in their own bottom lines than the greater good of the global economy. Such is the nature of humans – self-preservation first.

So I am going with my human nature in the coming weeks, and maybe even months and be conservative in the name of self-preservation.

Happy Hunting!

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Comments Off on Market Update – 24 October 2016 BMO

Market Update – 24 October 2016 BMO

Things are really hotting up on the political front as tensions in the South China Sea and on the European front against Russian’s mount. With the Philippine’s President denouncing the U.S. and formalizing an alliance with China, this opens up a huge political fight for the disputed islands in the South China Sea which is reputed to hold a large oil reserve. The U.S. is taking exception to this alliance. This is going to be a serious problem for the region.

On the market front …

“Market participants received another batch of quarterly results with the reporting season set to hit full stride next week. Investors did receive above-consensus results from a large share of DOW components like American Express (AXP), General Electric (GE), Goldman Sachs (GS), IBM (IBM), Johnson & Johnson (JNJ), Microsoft (MSFT), McDonald’s (MCD), UnitedHealth (UNH) and Verizon (VZ). Interestingly, the batch of beats did not spark a buying frenzy. On the whole, tech earnings were received with the warmest reception, evidenced by the outperformance in the NASDAQ Composite.” ~ Briefing.com

Amongst the sectors, Telcos (-2.3%), Health Care (-0.9%) and Energy (-0.7%) led the losers. Consumer Discretionary (+0.8%), Technology (+0.6%) and Staples (+0.5%) led the Leaders. Industrials, Financials and Materials were unchanged.

DOW ytd 21:10

The week began with both the DOW and S&P500 completing their third DFDM (Down Friday, Down Monday) in five weeks. The DOW has now completed five DFDMs in 11 weeks at the top, the most since Dec 2013/Jan2014 (4 in 10 weeks).

The DOW and S&P500 remain firmly below their 20 and 50 DSMAs. The DOW closed above its key 18,000 support while the S&P500 stayed above its 2,125 support. Trading was unimpressive with most of the action in the Dollar and Commodity spaces.

Amongst currencies, the Euro and the Pound finished down a respective 0.4% (1.0882) and 0.2% (1.2226) against the Dollar.

The Dollar’s strength (98.64) during the week kept Crude Oil from getting above $52.00 and settled the week at $50.85/bbl, just above last week’s close. The main agriculture issues, Wheat (414.25), Corn (352.25) and Sugar (22.71) closed lower along with Copper (2.09) and Nat Gas (2.961). Gold (1,266.70) and Silver (17.53) made gains for the week.

The Week Ahead

“The European Central Bank meets on Thursday. The market is currently expecting a six-month extension of the current EUR80 bln/month asset purchase program to September of 2017. Any indication that the extension will not materialize would be very bearish for EuroZone government bonds and bullish for the euro. This is highly unlikely.

The ECB could tweak its current program to allow it to buy securities yielding less than the deposit rate (currently -0.40%) or, more controversially and so less likely, the governing council could decide to abandon the capital key which restricts the program to buying government bonds in proportion to each country’s GDP. The latter move would compress core/periphery spreads.

The ECB could refer to the probability of an extension of asset purchases or, less likely, even announce the extension. The ECB established a working group in September to review the asset purchase program and to report back in December of this year, so it is unlikely that the central bank would take action before seeing the results of the review.” ~ Briefing.com

It will be another busy week as earnings season gets into its peak along with lots of key economic data and significant historical statistics.

Monday 24 to Friday 28 and Monday 31 October

The last week of October (43) has more than 70% probability for a profitable long position on the DIA and more than 80% on the SPY over the last 5, 10 and 15 years.

The 2016 Stock Trader’s Almanac’s averages for Monday and Tuesday are averagely 57% bearish on the DOW and 55% bearish on the S&P500 while Wednesday, Thursday and Friday get more and more bullish into the weekend at around 63.5% on the DOW and 60% on the S&P500. Monday 31st October is 57% bullish on the DOW and 62% bullish of the S&500.

Economic Dates

Tue 25 Oct

Wed 26 Oct

Thu 27 Oct

Fri 28 Oct

Sun 30 Oct

Mon 31 Oct

Fed Speak

Monday 24 October

Tuesday 25 October

Earnings

About a third of S&P 500 companies are scheduled to report in the coming week, including Apple on Tuesday. Amazon.com and Google’s parent Alphabet are set to post quarterly results on Thursday, the busiest day of the earnings season.

Monday 24 October

Tuesday 25 October

Wednesday 26 October

Thursday 27 October

Friday 28 October

Summary

The biggest news this weekend is the acquisition of Time Warner (TWX) by AT&T (T) for between $105 and $110 a share in a deal valued at more than $85.4 billion that will transform the telco giant into a media powerhouse. This is going to give the market a little boost in the final week of October.

Towards the end of the week, watch out for the Advance GDP which should give us more indications about the health of the U.S. economy. More importantly, the language within the report should be more influential as a market mover than the actual number as investors seek any reason to keep this market up.

On the political front, I will be watching with keen interest, how the tensions in the South China Sea will play out. I just hope this isn’t going to lead to unnecessary conflicts in East Asia just because one dope of a leader thinks his ego is bigger than the lives of an entire region.

Happy Hunting!

Conrad.

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Comments Off on Market Update – 17 October 2016 BMO

Market Update – 17 October 2016 BMO

The highly anticipated Fed Minutes was a non-event in the end. Fed Chairwoman, Janet Yellen, yet again failed to deliver on her threat to hike rates. The market instead chose to react to disappointing Chinese data that pointed to lower exports that sent the market into a frenzied sell-off on Thursday.

The week had promised to be a bullish one but instead hosted the year’s third steepest sell-offs on Tuesday. Having noted that however, it would seem that the market is not quite ready to crash as shown by its ability to still buy on dips. I suspect that the bears are also not ready for it because shorts are covered quickly.

The US Dollar Index increased 1.5% in the week to 98.09, benefiting mostly at the expense of a weaker euro, a weaker yen, and a weaker British pound.  The greenback’s strength was partly a function of safe-haven flows and partly a function of interest-rate differentials. ~ Briefing.com

Earnings reports from Alcoa (AA), JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) failed to produce a bullish response despite none of those companies missing consensus earnings estimates. In fact, the banks all beat expectations while Alcoa was in-line. I am inclined to think that the fear in the market was overcooked and the reaction to China’s numbers grossly exaggerated.

The week’s best-performing sectors were the Utilities (+1.3%), Real Estate (+1.2%), Telecos (+0.7%) and Staples (+0.04%) – except for Real Estate, the rest were Defensive Sectors, but all favoured on the basis that they offer more attractive dividend yields – never a good sign for the bulls.

DOW Fri14Oct AMC

The DOW and S&P500 closed out the week below their 10, 20 and 50 DSMAs and below their 10 and 20 Week MAs. The benchmarks are now poised for another DFDM depending on how Monday 17 October closes. On weekly candles, the DOW and S&P500 have had two consecutive bearish weeks that give rise to the possibility of a third candle reversal this week.

With October expiration week being reliably bullish, this could rally the market on the back of some significant earnings from the likes of Bank of America (BAC), IBM (IBM), Goldman Sachs (GS), Johnson & Johnson (JNJ), UnitedHealth (UNH), Intel (INTC), American Express (AXP), Travelers (TRV), Verizon (VZ), Microsoft (MSFT), General Electric (GE) and McDonald’s (MCD) amongst the DOW components this week.

Monday 17 to Friday 21 October

The third week of October (42) has been bullish on the DIA (100%) and SPY (100%) over the last 5 years but has been flat to bearish on low reliability over the last 10 and 15 years.

The 2016 Stock Trader’s Almanac’s averages for Monday are flat to bearish at 55% on the major indices while Tuesday, Wednesday, Thursday and Friday are bullish at around 54.7% on the DOW and 64.3% on the S&P500.

Economic Dates

Mon 17 Oct

Tue 18 Oct

Wed 19 Oct

Thu 20 Oct

Fri 21 Oct

Fed Speak

Summary

It is going to be a busy week and one that has a historical significance – The Crash of October 19, 1987 when the DOW went down 22.6% in a single day to record the Worst Single Day Loss in the history of the stock markets.

Happy Hunting!

Conrad

Download the pdf here: Market Update 17 Oct 16

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