Weekly Market Update – 24 April 2017 BMO

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After closing last week with three consecutive losses, the stock market returned to its winning ways on Monday. The financial sector had a hand in the bullish bias, shooting 1.6% higher, after shrugging off solid earnings reports from JPMorgan Chase (JPM) and Citigroup (C) the session before.

However, financials left investors scratching their heads, yet again, on Tuesday and Wednesday after a pair of upbeat earnings reports from Bank of America (BAC) and Morgan Stanley (MS) sent the financial sector back towards its flat line for the week. To be fair, Goldman Sachs (GS) did disappoint with misses on top and bottom lines, however, the lone report did little to change the overall tone of the earnings season, which has been mostly positive for financials.

The focus on the financial group stems from its leadership in the stock market’s post-election rally, a period in which the sector grew by 26.0%. Since then, the showing from the financial space has been closely mimicked by the broader market, which has used the sector’s performance to navigate the recent waters of uncertainty.

That’s not to say the financial sector deserves all the blame for the equity market’s mid-week slump. Crude oil was a guilty party on Wednesday, dropping 3.6%, after the EIA reported a smaller than expected draw in U.S. crude inventories. In addition, angst on the geopolitical front, especially in regards to the French presidential election, lingered throughout the week.

On Thursday, investors shifted their attention to Washington amid reports that the Freedom Caucus, the group credited with blocking the GOP’s first attempt at health care reform, is now on the same page with the moderate wing of the House GOP. Progress on health care reform has been elusive, but it would be a positive for investors as it should clear the way for more comprehensive tax reform. As a result, the S&P 500 broke its two-session losing streak to close higher by 0.8%.

The first round of the French presidential election, which will narrow the race to two candidates, kept the bulls at bay on Friday. Far-right candidate Marine Le Pen and far-left candidate Jean-Luc Melenchon, both of which have expressed interest in France leaving the European Union, are two of the top four hopefuls vying for the final round, giving some investors angst regarding the future of the single market. French citizens will take to the polls on Sunday.

After all was said and done, the S&P 500 closed the week higher by 0.9%. However, the up-and-down action led to a dip in rate hike expectations; the fed funds futures market points to a 48.5% implied probability of a June rate hike, down from last week’s 57.3%. Market participants now point to July as the most likely time for the Fed to announce the next rate hike with an implied probability of 53.6%.

(Excerpts from Briefing.com)

Bonds yields continued their slide from the previous week with the shorter maturities falling more than the longer maturities to steepen the curve. This could suggest a flight to short term safety as investors looked to the shorter maturities as a hedge against the coming month of May and weak earnings after the poor showing from the financial in the past week.

Commodities; Crude closes below $50p/b for the week.

Agriculture:

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Screen Shot 2017-04-22 at 9.34.39 PMTHE WEEK AHEAD

Monday 24 to Friday 28 April (Week 17)

The seventeenth week of 2017 (wk17) is bullish for the DIA and SPY with an average 70% over the 5, 10 and 15 year averages.

The 2017 Stock Trader’s Almanac’s averages for the week are bearish at the start, bullish midweek and bearish at the end of the week:

Screen Shot 2017-04-22 at 9.49.13 PM

Key Economic Dates

Mon 24 Apr

Tue 25 Apr

Wed 26 Apr

Thu 27 Apr

Fri 28 Apr

Key Earnings Announcements

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SUMMARY

Earnings Season heats up this week with no less than a dozen DOW components on the line. The big name industrials are also announcing their results which could provide some insights into whether this industrial purple patch will continue the run up the charts in the coming quarter.

The week after this (wk 18) is typically bearish as we kick off the month of May, notorious for having the worst sell-off of any month. Be mindful of your bullish positions as we head into the end of the week.

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Weekly Market Update – 17 April 2017 BMO

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Last week’s headlines kept on giving as investors displayed caution in light of the ongoing situations in Syria and North Korea. The S&P 500 ended the week with a loss of 1.1%, but, more notably, the benchmark index finished the week below its 50-day moving average (2352).

North Korea took center stage at the beginning of the week after the U.S. Navy ordered the Carl Vinson Strike group towards the Korean Peninsula. This prompted rumors of Chinese troop movement along the North Korean border, but these claims were later refuted by China’s Defense Ministry.

President Trump added some fuel to the fire on Tuesday morning, tweeting that he would like China’s help in diffusing the North Korean situation, but the U.S. is willing to solve the problem on its own. However, through all the noise, the S&P 500 was flat through the first two days of the week as its 50-day moving average provided a measure of support.

North Korea celebrated the birth anniversary of founder Kim Il-sung on April 15 and there was speculation that another nuclear test failed that day.

The conflict in Syria took precedence on Wednesday as U.S. Secretary of State Rex Tillerson made a stop in Moscow. Mr. Tillerson met with Russian President Vladimir Putin, despite earlier reports that the U.S. diplomat would not have access to the Russian president, but conversations were reportedly heated. Nonetheless, the two countries agreed to establish a working group to iron out their issues.

Investors shifted their focus back to the home front on Thursday with JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) kicking off the earnings season. All three companies reported better than expected earnings, but were mixed when it came to revenues; JPM and C beat top line estimates while WFC fell short. However, the banks were unable to capitalize on the upbeat reports, which acted as a discouraging signal to the broader market.

If one thing can be said for sure after reflecting on this week’s activity, it’s that investors are becoming more skeptical about the future, evidenced by the CBOE Volatility Index (VIX 15.67, -0.10), which increased three points for the week. The VIX index now sits at its highest level since the presidential election.

The lingering geopolitical issues led to a notable dip in rate hike expectations. The fed funds futures market ended the week pointing to a 57.3% implied probability of a June hike, down from last week’s 70.6%.

ECONOMIC DATA

(Excerpts from Briefing.com)

Bonds yields fell with the the belly of the curve taking the biggest drop. The decline in yields was consistent throughout the week as investors ran into safety during a shortened week of geopolitical uncertainty.

Commodities saw Copper close lower while Crude and Precious close higher for the week.

Agriculture Closing Prices all closed higher for the week, snapping a three week losing streak:

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wk16THE WEEK AHEAD

The coming week is the first of two of the most bullish consecutive weeks in the market – weeks 16 and 17 – for most equity issues.

Monday 17 to Friday 21 April (Week 16)

The sixteenth week of 2017 (wk16) is bullish for the DIA with more than 70% over all the averages and very bullish for the SPY with 80% over all the averages.

The 2017 Stock Trader’s Almanac’s averages for the week are all bullish:

Alma

Key Economic Dates

Mon 17 Apr

Tue 18 Apr

Wed 19 Apr

Thu 20 Apr

Fri 21 Apr

Sat 22 Apr

Sun 23 Apr

Key Earnings Announcements

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SUMMARY

As we dive into the heart of earnings season on the back of more geopolitical uncertainty against the backdrop of two of the most bullish weeks in the trading calendar, I almost want to be 100% bullish as the broader market reels in doubt/fear. Such trepidation usually becomes unfounded as the facts unfold and any little good news will rally the markets in a huge way.

The only concern for me is earnings as no less than a third of the DOW components put their numbers on the line this week. I am not expecting downside surprises but I will be watch the language for any hint of hawkishness moving forward.

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Dow Jones

This respite in the market since March has seen the benchmark indices correct by more than 3% and could serve as the perfect springboard for the next leg up or at least return to its historical high.

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Weekly Market Update – 10 April 2017 BMO

Dexes Fri07Apr17

The DOW completed its fifth consecutive DFDM on the first day of April while the S&P did three in a row. And looking at the way the week ended, me might get another one on Monday.

The stock market saw limited movement during the past week, leaving the S&P 500 just below its closing level from last Friday. The benchmark index bounced around a 34-point range before locking in a modest weekly loss (-0.3%) while the Dow Jones Industrial Average (unch) outperformed.

Geopolitical developments were in focus from the jump. On Monday, President Donald Trump was quoted as saying he is ready to act alone on North Korea if China does not change the current situation on the Korean peninsula. The comments were made just days before Chinese President Xi Jinping’s visit to President Trump’s resort in Florida and ahead of a joint military exercise held by South Korea, the United States, and Japan. North Korea was back in the headlines on Wednesday when it conducted another missile test.

The geopolitical conversation did not end there. On Friday morning, participants learned that the U.S. Navy conducted an overnight strike against the Shayrat airbase in Syria, which was deemed responsible for a chemical attack that was reportedly conducted on Tuesday. The action was supported by several U.S. partners while Russia suspended its information sharing agreement with the U.S. that was put into effect when Russia launched an air campaign in Syria in 2015.

In addition to the geopolitical developments, participants received the latest Employment Situation report, which was a disappointment. Only 98,000 nonfarm payrolls were added in March, which was a far cry from the Briefing.com consensus estimate of 180,000. Average hourly earnings increased 0.2% (Briefing.com consensus 0.3%) and February earnings growth was revised up to 0.3% from 0.2%.

The report spoke to the ongoing disconnect between the hard data and the soft data and it should challenge the stock market’s economic growth assumptions. The growth assumptions may also be put to a test by policy actions from the Federal Reserve, considering the FOMC Minutes that were released on Wednesday revealed a discussion about a reduction to the Fed’s balance sheet in the near term.

As for rate hike expectations, the fed funds futures market does not expect a rate hike to be announced in May (4.3%), but expectations for a June hike have firmed a little, with the corresponding probability rising to 70.6% from last week’s 62.5%.

Employment Situation Report
March nonfarm payrolls increased by 98,000 (Briefing.com consensus 180,000) and March private sector payrolls increased by 89,000 (Briefing.com consensus 175,000)

(Excerpts from Briefing.com)

Bonds yields rose during the week to steepen the curve a little but still closed lower from the previous week’s close.

Commodities saw Energy closed lower, Precious closed higher while Agri closed lower for the third straight week.

Agriculture Closing Prices

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Screen Shot 2017-04-06 at 11.33.01 AMTHE WEEK AHEAD

The coming week is a shortened week as Friday 14 is Good Friday and the US markets will be closed

Monday 27 to Friday 31 March (Week 15)

The fifteenth week of 2017 (wk15) is bullish for the DIA with more than 60% over all the averages and mildly bullish with less than 60% over all the averages.

The 2017 Stock Trader’s Almanac’s averages are mostly bullish:

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Key Economic Dates

Tue 11 Apr

Wed 12 Apr

Thu 13 Apr

Fri 14 Apr (US Markets Closed)

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SUMMARY

April began with a whimper instead of living up to its reputation of being the most bullish week of the month. This is yet another sign that not all is well nor normal with the market this year. I won’t be holding my breath for this coming week. However, I am impatient for weeks 16 and 17 which have been reliably bullish over the years. If the market is to return to normal, weeks 16 and 17 should give the bulls something to cheers about. But if it doesn’t …

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Sector Report 1703 : Undervalued S&P Big Caps 2017

 

With the market being so overbought and yet still so enthusiastic about making new highs, I thought it was worth an exercise to see if there are any big cap stocks that are still undervalued.
 
To my surprise, a search amongst the S&P500 turned up some familiar names and in sectors that you’d assume were in a huge bubble. And most of these are good to go in the bullish month of April.
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March 2017 Review, April Preview

March came and went so quickly that its tough to fathom that so much happened in that time. I have been busy, busy, busy so much so I honestly thought the Academy Awards Best Picture cock-up was in March when it was on the 27 of Feb instead – that’s how fast time has flown for me.

About all I can remember is having meeting after meeting, attending a 80’s style dinner-and-dance …

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IMG_4987

… starting the third Commodities & Futures Workshop on the 10th and wrapping it up on the 14th ..

Fut1

Fut2

… doing a public talk on the 26th …

SMART1

SMART2

… and starting a Tutelage Batch on the 13th which I am wrapping up tonight.

In between there somewhere, Ferrari won their first race in yonks and finally look good for taking the challenge to the Silver Arrows, Liverpool had a great March by destroying Arsenal, taking revenge on Burnley, holding Manchester City away and took Everton apart for Jurgen Klopp’s third derby win since he took charge (that’s a heck of a record) and Janet Yellen raised the Fed Fund Rate to 0.75% to 1.00% … finally.

And it is not over yet … the madness and busyness is going to carry into April. But I am not complaining! I am loving it!!

MARKET UPDATE

March closed in a loss, its first lower month since October last year. March has typically been a bullish month. Even in 2008, March closed as a Doji. However, March 2015 and 2017 have been bearish which is unusual. We’re going to find out if it means anything in the coming months as there are clear and present dangers already warning us to take the side of caution.

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Also, the DOW has done something not seen in two decades – four consecutive DFDMs (Down Friday, Down Monday) – usually indicating market tops and bottoms … and we’re definitely not at a bottom. The S&P500 is currently on two consecutive DFDMs. If the benchmarks go down on the first trading day of April 2017, the DOW will have an unprecedented five consecutive DFDMs with the S&P making the hat-trick.

PEratiosFor about two weeks in March, the US market was arguably in the biggest bubble in stock market history, surpassing even the 1929 bubble.

As of Friday’s close, the S&P500 has 368 (73.6%) companies above the PE of 15. 280 (56%) of them have Pes above 20.

At the start of the month, the percentage of companies above 15 was close to 80%.

In spite of the down month, the major indices are still yielding more than 5% year-to-date;

After falling into the red for the year, the Russell 2000 managed to fight its way back into the black, barely closing out the month with a gain and +2.1% YTD.

RUT

Such weakness amongst the mid-caps and small-caps usually accompany an overbought market and should not come as a surprise. Like the Transports ($TRAN/$DJT), these hardworking companies are struggling in the current economy.

Such divergences amongst the major indices are foreboding signs of a bear market ahead.

APRIL PREVIEW

April has been the most bullish month of the calendar year with an average gain of 1.9% since 1950. The last eleven years were up, including 2008, with an average gain of 3.1%. April is the first month ever to have seen a 1000-point gain on the DOW in 1999.

This April 2017 has 19 trading days and one public holiday. It is the start of Quarter 2 and the beginning of Earnings Season for Q1 results. April is also the last of the “Best Six Months” on the DOW and S&P500.
SeasonalsApril Trivia

Key Economic Dates

Mon 03 Apr

Tue 04 Apr

Wed 05 Apr

Thu 06 Apr

Fri 07 Apr

Tue 11 Apr

Wed 12 Apr

Thu 13 Apr

Fri 14 Apr (US Markets Closed)

Mon 17 Apr

Tue 18 Apr

Wed 19 Apr

Thu 20 Apr

Fri 21 Apr

Sat 22 Apr

Sun 23 Apr

Mon 24 Apr

Tue 25 Apr

Wed 26 Apr

Thu 27 Apr

Fri 28 Apr

Commodities

SUMMARY

So the bubble brews on and the world holds its breath for the next big drop. Will it happen in April, historically the most bullish month of the year? I am tempted to say “not likely” but then, we all know about famous last words, don’t we.

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CANDLESTICK & BREAKOUT PATTERNS WORKSHOP (K.L.)

CS

Don’t miss this upcoming …

7-HOUR CANDLESTICK &
BREAKOUT PATTERNS WORKSHOP

Next Workshop in Kuala Lumpur, Malaysia will be:
Sunday 09 April, 2017 from 09:30am to 17:00pm
(Tutorial Preview on Saturday 08 April at 2pm)

Public Admission Fee: RM250
Pattern Trader Graduates: F.O.C.

VENUE:
PJ Trade Centre, B-07-02
(8, Jalan PJU 8/8A, Damansara Perdana, 47820 PJ)
The iSpace Venue @ Chicago Training Room

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

Reserve your seat for the next session now!

For bookings, costs and queries, Drop an email to:

ptradermy@akltg.com (For classes in Malaysia)

*LIMITED SEATS, SO BOOK EARLY!!

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Comments Off on Weekly Market Update – 27 March 2017 BMO

Weekly Market Update – 27 March 2017 BMO

DOWFri24Close

Investors who have gotten accustomed to a steady string of gains in the stock market were taken aback by this week’s action, which sent the S&P 500 lower by 1.4%. This marked the fourth weekly decline of 2017 and was the largest weekly drop since early November.

The week got off to an unassuming start as Monday’s action was confined to a narrow range. There was no noteworthy earnings or economic news to digest, and the impending House vote on the plan to repeal and replace the Affordable Care Act led to caution among participants.

That caution turned into outright selling on Tuesday, sending the S&P 500 lower by 1.2%. A number of factors were cited for the decline, but the day’s selling was most aggressive in the financial sector as the SPDR S&P Bank ETF (KBE) fell 4.8%. The industry group stumbled as the yield curve continued flattening in a manner that contradicts the pro-growth narrative that accompanied the stock market on its charge to a fresh record.

Furthermore, the prospect of health care reform making its way through the legislative process dimmed as the week went on. The House of Representatives was scheduled to take part in a Thursday vote, but that vote got put on hold and cancelled on Friday afternoon due to a lack of support. Investors are acutely aware that a delay in passing health care reform means that tax reform will also need to wait.

Although the week was quiet on the economic front, it is worth noting that February Existing Home Sales (5.48 million; consensus 5.54 million) missed estimates while February New Home Sales (592K; consensus 560K) and February Durable Orders (+1.7%; consensus 1.3%) were better than expected. The Durable Orders report caused the Atlanta Fed to nudge its GDPNowcast for the first quarter up to 1.0% from 0.9%. To be fair, excluding transportation, Durable Orders (+0.4%; consensus 0.7%) came up shy of estimates, indicating relatively weak business spending.

Taking a look at rate hike expectations, the fed funds futures market spent the week pointing to a 50.0%+ likelihood of a June hike, but that implied probability dropped to 49.6% on Friday afternoon after the news of the health care vote being pulled made the rounds. One week ago, the fed funds futures market showed a 58.3% implied probability of a hike in June.

The major averages opened Friday with modest gains as investors were cautiously optimistic that the American Health Care Act would pass in the House. However, that positive sentiment faded as the day wore on and reports from Washington indicated that the GOP still hadn’t acquired the necessary votes. In the end, the health care bill was pulled from consideration and the major averages finished mixed. The S&P 500 (-0.1%) settled just below its unchanged mark while the Dow (-0.3%) and the Nasdaq (+0.2%) closed on opposite sides of the benchmark index.

The Russell 2000 closed out the week in the red YTD for the second time this year.

(Excerpts from Briefing.com)

Bonds yields fell yet again for another week, flattening the curve taking as the longer term maturities saw a flight to safety for most of the week.

Commodities saw Energy closed lower, Precious closed higher while Agri closed lower for the third straight week.

Agriculture Closing Prices

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Screen Shot 2017-03-26 at 9.33.27 PMTHE WEEK AHEAD

Monday 27 to Friday 31 March (Week 13)

The thirteenth week of 2017 (wk13) is bullish for the DIA and SPY with 80% over 5 and 10 year averages and more than 60% over 15 years.

The 2017 Stock Trader’s Almanac’s averages are more bearish:

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Key Economic Dates

Mon 27 Mar

Tue 28 Mar

Wed 29 Mar

Thu 30 Mar

Fri 31 Mar

SUMMARY

It is interesting to note that the seasonal model for the coming week is rather bullish whereas the Almanac’s stats are bearish. Maybe when you consider the Almanac’s stats are based on 21 years of data, you’ll see how the 15 year seasonal model makes sense. The 5 and 10 are the most recent years’ performance and given the bullish nature over the last eight years, it shouldn’t come as surprise that the stats for the 5 and 10 are 80% for the bulls.

So is the final week of March 2017 going to be bullish or bearish? Traditionally, The last week of Q1 should see a modest amount of Window Dressing that should rally the market. However, after last week’s fear factors, it might take quite a bit of convincing that this is going to be a bullish week. With earnings season two weeks away, I reckon not many will be ready to chance it and the stats quo should prevail. In a worst case, it should be a wild week where economic numbers will rock and roll the markets further south.

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Smart Expo 2017

SG17B2C_edm_Speaker10_01-2

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Weekly Market Update – 20 March 2017 BMO

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After snapping a streak of six consecutive weekly gains, the stock market returned to its winning ways. The S&P 500 added 0.2% for the week, but did not overtake its record high from the start of March, which may count as a loss for investors starved for more. The tech-heavy Nasdaq (+0.7%) outperformed, climbing near its early-March high to flirt with another record close. The index is now up 9.6% for the year while the S&P 500 has climbed 6.2%.

The first two days of the trading week were highlighted by reduced trading volume as the East Coast braced for a winter storm. In addition, the looming FOMC rate decision contributed to reduced activity. Although overall trading volume on Monday and Tuesday was down about 15% from average, activity on the M&A front was alive and well, as Intel (INTC) agreed to acquire Mobileye(MBLY) for $15.30 billion in cash, paying a 34.0% premium to Mobileye’s share price from the previous session.

On Wednesday, the Federal Open Market Committee raised the federal funds target range by 25 basis points to 0.75%-1.00%. This move was widely-expected going into the day of the announcement, but investors were somewhat surprised to see the Fed maintain its measured outlook. The central bank nudged up its median target rate for the end of 2019 to 3.0% from 2.9%, but left its long-run target unchanged at 3.0%.

It is worth noting that the Fed tightened policy at a time when growth forecasts have shifted lower. The Federal Reserve Bank of Atlanta now expects that first quarter GDP will be up only 0.9% after calling for growth of more than 3.0% at the start of February. To be fair, first quarter GDP readings have a known tendency to underperform the remaining three quarters. For her part, Fed Chair Janet Yellen said, “GDP is a pretty noisy indicator”, adding that the central bank expects growth to average 2.0% over the course of 2017.

With the March hike in the books, the market’s expectations are now in line with FOMC projections for two more hikes before the end of the year. The fed funds futures market sees almost no chance of a hike in May (6.4%), but is starting to price in a rate raise for June (58.3%). Looking at the remainder of the year, the fed funds futures market sees a pause into the second half, currently expected to conclude in December when the range should be boosted to 1.25%-1.50%.

On Friday, defying the spirit of St. Patrick’s Day, the major averages failed to turn shamrock green, closing just a ‘wee bit’ below their flat lines. The Nasdaq finished flat while the S&P 500 and the Dow closed with losses of 0.1% apiece.

(Excerpts from Briefing.com)

Friday saw a handful of economic reports, including February Industrial Production, February Leading Indicators, and the University of Michigan Consumer Sentiment Index for March, but their influence was minimal:

Investors will not receive any economic data on Monday.

Bonds yields fell for the week with the belly of the curve taking most of the decline. Yields still remain higher for the month and higher YTD as well.

Treasuries Rally to Close Week on Strong Note

Commodities saw Energy and Metal prices close higher while Agri mostly closed lower for the week.

Agriculture Closing Prices

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Screen Shot 2017-03-19 at 8.18.23 AMTHE WEEK AHEAD

Monday 20 to Friday 24 March (Week 12)

The twelfth week of 2017 (wk12) is mixed for the DIA and SPY with varied averages over all three time averages (5, 10 and 15 years) but does have a slightly bearish bias over recent years.

The 2017 Stock Trader’s Almanac’s averages the DOW and S&P500:

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Key Economic Dates

Mon 20 Mar

Tue 21 Mar

Wed 22 Mar

Thu 23 Mar

Fri 24 Mar

SINGAPORE: Jobless Rate Confirmed At 6-Year High In Q4

Singapore’s seasonally adjusted unemployment rate rose to 2.2 percent in the fourth quarter of 2016 from 2.1 percent in the previous two quarters and in line with preliminary estimates. It was the highest jobless rate since the December quarter 2010, as more people entered the labour force while layoff went up the most since the June quarter 2009.

In the three months to December, the jobless rate for residents were up to 3.2 percent (from 2.9 percent in the third quarter) and the rate for citizens also increased to 3.5 percent (from 3.0 percent). Some 5,440 workers were laid off, up from 4,220 workers in the September quarter and was the highest since Q2 2009 (5,980).

The rate of re-entry among residents made redundant rose for the second straight quarter. About 52 percent of residents made redundant in the third quarter of 2016 secured employment by December 2016, up from 49 percent from the previous quarter.Job vacancies decreased to 44,500 (from 53,800 in the September quarter) and was also lower compared to the same period a year earlier (50,600). Reflecting seasonal hiring for year-end festivities, total employment grew in the fourth quarter of 2016 (2,300), compared to a contraction in the prior quarter (-2,700), but growth was lower than the fourth quarter 2015 (16,100).

For full 2016, the annual average unemployment rate increased to 2.1 percent from 1.9 percent in 2015. It was the highest annual jobless rate since 2010. Unemployment among resident went up to 3.0 percent (from 2.8 percent in 2015) while those among citizens went up to 3.1 percent (from 2.9 percent). The increase was broad based across most age and education groups.

Total employment in 2016 increased by 8,600, the lowest growth since 2003 (-11,700).

Source: Ministry of Manpower

SUMMARY

Through 2016 and going back to end 2014, I mentioned in my posts and public talks that I expected a long-term slow-down in the coming years as opposed to a market crash. I didn’t expected major gyrations in the markets but I did expect economic numbers to decline and contract at a gradual pace. 

This meant that any sort of recession or slow down was going to hit the economy more than the market and that the general population would hurt more than those in the markets. Crash-type recessions tend to hurt the market players more than the general population (in most cases).

My greatest fear at that time regarding long-term slowdowns was that the majority of the working population were not aware of the significance or threats of such slow economic climates as the last one was in the 70’s through to the early 80’s. Since then, every recession has been a quick crash-styled downturn that came back relatively quickly. On the Little Red Dot, the three-year Dot.com decline between 2000 and 2003 and the full effects of the Sub-Prime in the U.S. were hardly felt at all. This only served to put us deeper in denial of what a real slow down means.

As of writing this, I am vindicated. But it doesn’t please me to be.

These days, slowly but surely, more and more are starting to realise what this all means. The malls continue to empty out, big name retailers/restaurants are cutting back on their branches and lowering inventories, Consumer Spending slowed over the past year and Households Debt rose to an all time high of 62.10% of GDP in the third quarter of 2016. The luxury cars have been accumulating at the second-hand lots as many begin to default on their payments. Property prices had fallen for 13 straight quarters and it remains to be seen if this one-month rise in real estate prices has a rebounding effect.

The frightening fact is that the pain may not yet be fully manifested as people flocked to buy properties upon the easing of some measures and snapped up cars as soon as COEs made a modest dip. Landlords also remain stubborn to their high yield demands, preferring to keep their properties vacant than yield less.

Such behaviour is not that of an economy in full recession yet. It could be because some have made a wealthy harvest over the last seven years and are good for it … for now. However, the rate of borrowing, spending and savings amongst the general population of the Little Red Dot are not in-line with the behaviour of a truly healthy economy.

I reckon that we’re looking good on the surface but deep down inside, we’re hurting but we’re not going to let the other guy know about our pain. For some, that pain is already obvious and showing clearly. Until that pain surfaces so clearly that the government acknowledges it, we’re going to drag this slow-down out for a long time more.

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Comments Off on Weekly Market Update – 12 March 2017 BMO

Weekly Market Update – 12 March 2017 BMO

NOTICE: Monday 13 March 2017, US markets will open at 21:30 (9:30pm) (SG).

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U.S. Benchmark Indices – Mon 6 to Fri 10 March, 2017

A rate hike at next week’s FOMC meeting appears to be a mere formality following the better than expected Employment Situation Report for February, which crossed the wires early Friday morning. That seemed to be alright with investors as they pushed the major averages higher to finish a slightly disappointing week on a positive note. For the week, the benchmark S&P 500 lost 0.4%.

After posting six consecutive weekly gains, the stock market saw its third weekly decline of 2017. However, just like the other two weekly downticks, this week’s retreat was minor. The S&P 500 shed 0.4%, narrowing its first quarter gain to 6.0%.

The trading week started on an unassuming note with stocks showing limited reaction to a proposal put forth by House Republicans to replace the Affordable Care Act. President Donald Trump spoke favorably about the proposal, but Republicans in Congress have yet to fully support the effort, which has led to concerns that slow progress on the health care front would stymie corporate and personal tax reform, which the market has been anxiously awaiting.

Equity indices inched lower through the first three days of the week, but on Wednesday, it was crude oil that stole the attention, falling more than 5.0% to a fresh 2017 low near $50.30/bbl. The energy component snapped out of a five-point range that has held since the start of the year, responding to the news of yet another significant inventory build. Crude’s retreat continued over the next two days, leaving the energy component near $48.50/bbl at the end of the week. Oil lost more than 9.0% during the week while the energy sector surrendered 2.6% since last Friday.

There wasn’t much change on the central bank front as Wednesday came and went without any major surprises from the European Central Bank. The ECB made no changes to policy and did not hint at impending tightening even though the 2017 GDP growth forecast for the Eurozone was nudged up to 1.8% from 1.7%. It is worth noting that reports that circulated on Friday suggested the ECB may begin raising rates prior to the end of its asset purchase program. The news coincided with comments from Bundesbank President Jens Weidmann, who said 2017 eurozone inflation is likely to be “far higher” than projected.

As for the Fed, the central bank is now widely expected to announce its next rate hike on March 15 after the Employment Situation report for February did not upset the overall economic picture. With the report showing the addition of 235,000 payrolls, headline expectations (Briefing.com consensus 188K) were beat handily while average hourly earnings increased an in-line 0.2%, bringing the year-over-year growth rate to 2.8%.

The CME Fed Watch Tool now assigns an implied probability of 93.0%, up from 88.6% on Thursday, to a rate hike at the March 14-15 FOMC meeting after the February jobs report showed that nonfarm payrolls increased by 235,000 (Briefing.com consensus 188,000) and average hourly earnings rose 0.2% (Briefing.com consensus +0.2%). The Federal Reserve will announce its decision on Wednesday at 2:00 pm ET.

(Excerpts from Briefing.com)

Employment Situation Report for February and the February Treasury Budget:

Treasury Budget Maintains Similar Deficit Line in February

The Treasury Budget for February showed a deficit of $192.0 billion versus a deficit of $192.6 billion for February 2016. The Treasury Budget data is not seasonally adjusted, so the February deficit cannot be compared to the $51.3 billion surplus registered in January. Total receipts in February were $171.7 billion while total outlays were $363.8 billion. Receipts were $2.6 billion more than receipts in February 2016. Total outlays were $0.32 billion less than the same period a year ago.

Bonds yields

Commodities were mostly lower for the week with Crude falling below $50. The Friday’s tumble left the energy component 8.8% lower. Wednesday’s bearish EIA inventory report, which showed record high U.S. inventories. WTI crude finished the Friday session at $48.49/bbl.

Agriculture Closing Prices

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Screen Shot 2017-03-12 at 8.29.43 PMTHE WEEK AHEAD

Monday 06 to Friday 10 March (Week 11)

The eleventh week of 2017 (wk11) is Bullish for the DIA and SPY with more than 80% over 5 years, more than 70% over 10 years and more than 60% over 15 years.

The 2017 Stock Trader’s Almanac’s averages the DOW and S&P500:

Screen Shot 2017-03-12 at 8.49.02 PM

 

 

 

 

 

Key Economic Dates

Tue 14 Mar

Wed 15 Mar

Thu 16 Mar

Fri 17 Mar

SUMMARY

Without doubt, I am long next week given the statistical advantage favouring the Bulls. But before we get too carried away with the long trades, let’s keep in mind that next week (wk12) has been bearish for the last five years. Thus, I will be booking profits before the weekend just in case.

Happy Hunting!

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