Weekly Market Update – 13 August 2018 BMO

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WEEK IN REVIEW – 06 July to 10 August 2018 :
Rattled by the Lira

The S&P 500 started the week on a positive note, extending last week’s winning streak and coming within 0.5% of its January 26 record high. However, the index struggled in the back half of the week, especially on Friday amid a sharp drop in the Turkish lira, eventually settling with a weekly loss of 0.3% — its first weekly loss since late June.

As for the other major averages, their performances were mixed, with the tech-heavy Nasdaq climbing 0.4% and the blue-chip Dow dropping 0.6%.

Eight of eleven S&P sectors declined this week, with industrials (-1.0%), materials (-0.9%), consumer staples (-1.9%), and real estate (-1.9%) leading the retreat. On the flip side, consumer discretionary (+0.8%), information technology (+0.3%), and telecom services (+0.7%) were the three advancing groups.

In corporate news, Tesla (TSLA) rallied on Tuesday after CEO Elon Musk tweeted that he’s considering taking the company private for $420/share and has already secured funding to do so. However, shares gave back nearly all of those gains following headlines that the SEC is investigating whether Mr. Musk’s funding claim is truthful.

Meanwhile, on the earnings front, Dow component Walt Disney (DIS) slid 2.2% on Wednesday after missing quarterly earnings estimates, and Snap (SNAP) tumbled 6.8% during the same session after its better-than-expected results were overshadowed by a decline in daily active users (DAUs). This week’s wave of Q2 reports was the last big wave of the Q2 earnings season.

The week was light in terms of economic data, but investors did receive some influential readings on inflation. The July Consumer Price Index and the July core Consumer Price Index, which excludes the volatile categories of food and energy, came in as expected, both showing month-over-month increases of 0.2%. On a year-over-year basis, total CPI is up 2.9% and core CPI is up 2.4%.

In short, the report showed that consumer inflation trends are running above the Fed’s longer-run target, providing further support for additional rate hikes this year.

The Turkish lira took center stage on Friday, dropping more than 15% against the U.S. dollar. That drop, which comes after the U.S. and Turkey failed to reach an agreement regarding the release of American pastor Andrew Brunson, created concerns over the financial health of banks with heavy exposure to economically-struggling Turkey.

Out of desperation to stabilize the currency, Turkey’s president, Recep Tayyip Erdogan, asked citizens to convert their holdings of gold and foreign currencies, especially the U.S. dollar, into lira. U.S. President Donald Trump responded by increasing economic pressure, doubling tariffs on steel and aluminum imports from Turkey.

(Excerpts from Briefing.com)

Thu 09 August – Initial Claims & Producer Price Index

Fri 10 August – Consumer Price Index; Core CPI Highest Since 2008

Fri 10 August – Turkish Lira Rattles Investors Around the Globe

A plunging Turkish lira sent shock waves through global equity markets on Friday, causing concerns over the financial health of lenders with heavy exposure to the economically-struggling country. The S&P 500 lost 0.7%, dropping into the red for the week (-0.3%), and the Nasdaq (-0.7%) and the Dow (-0.8%) suffered similar declines.

The lira was down nearly 16% against the U.S. dollar at Wall Street’s closing bell, weighed down by continued tensions between the U.S. and Turkey, which made no progress during talks this week regarding the detainment of American pastor Andrew Brunson, who is accused of supporting a group blamed for an attempted coup in 2016.

Trying to stop the bleeding, Turkey’s president, Recep Tayyip Erdogan, encouraged citizens to convert their holdings of gold and foreign currencies into lira on Friday morning. However, President Trump swiftly responded by turning up the pressure, announcing that he’s authorized a doubling of tariffs on Turkish steel and aluminum.

Stock markets in Europe and Asia ended Friday with sizable losses, although China’s tariff-ridden Shanghai Composite finished flat. Investors in the U.S. flocked to the Treasury market, sending yields lower across the curve. The benchmark 10-yr yield, for instance, dropped eight basis points to 2.86%, a fresh three-week low.

The drop in yields – and, more specifically, the flattening of the yield curve – weighed on the financial sector (-1.2%), which finished with materials (-1.4%) at the bottom of the sector standings. 10 of 11 sectors finished in the red, with energy (+0.3%) being the lone exception, helped by a 1.3% rise in WTI crude futures ($67.67/bbl).

Within the tech space (-0.8%), chipmakers were particularly weak with Intel (INTC) losing 2.6% after being downgraded to ‘Sell’ from ‘Neutral’ at Goldman, and Microchip (MCHP) tumbling 10.9% after issuing disappointing revenue guidance. The PHLX Semiconductor Index declined by 2.5%.

Friday’s batch of corporate earnings — which also included results released Thursday evening – was the last heavy batch of the Q2 earnings season. In addition to Microchip, Dropbox (DBX) declined after reporting its results, losing 9.8%, but both Planet Fitness (PLNT) and Overstock.com (OSTK) rallied, adding 6.5% and 7.9%, respectively.

Looking ahead, next week’s earnings lineup is retail-heavy with Walmart (WMT), Home Depot (HD), Macy’s (M), Nordstrom (JWN), J.C. Penney (JCP), Advance Auto (AAP), and Dillard’s (DDS) all on the docket.

Market Internals – Friday 10 August

Dollar: Dollar Index Surges to Fresh 2018 High

The U.S. Dollar Index was up as high as 0.9% at 96.39 on Friday, looking to end the day at its highest level since early July 2017. The Dollar Index finished Thursday’s session within striking distance of its mid-July high (95.65), cruising past that level in overnight action. The overnight rally accelerated notably after the Turkish lira plunged to a fresh record low against the dollar, widening this week’s loss to 23.0%. The lira fell beneath the overnight low in morning action, which kept the euro under pressure due to worries about the exposure of large European banks to the Turkish economy.

Bonds: Treasuries Jump Amid Emerging Markets Angst

U.S. Treasuries climbed for the third consecutive day on Friday, ending the week on a sharply higher note. Treasury futures built on yesterday’s gains during overnight action, accelerating their advance amid significant weakness in the Turkish lira, which led to concerns about the impact of the lira’s swoon on European banks with exposure to Turkey. Treasuries pulled back from their opening levels in morning trade, but it wasn’t long before the market resumed its climb, continuing the advance into afternoon trade. The daylong flight to safety likely included a fair share of short covering, considering last week’s Commitment of Traders report from the CFTC showed record-level net short positioning in longer-dated Treasuries. Today’s action exerted pressure on the slope of the yield curve, flattening the 2s10s spread by three basis points to 26 bps, just two basis points shy of the cycle low. For its part, the 2s30s spread compressed by a basis point to 42 bps.

The belly of the yield curve fell  against the 2-yr maturity, flattening the curve for the week. The spread between the 5s10s remained unchanged at 13bps from 13bps the previous week while the 10s30s widened to 16bps from 14bps the previous week. The 2s5s tightened to 13bps from 19bps the previous week.

 Commodities 

The Bloomberg Commodity Index settled at 84.23, lower than 84.90 the previous week as Oil, Silver, Copper and Grains fell. 

WTI oil climbs back above $67 but settles lower for the sixth straight week for its worst losing streak in three years. The spread between WTI and Brent widened to $5.18 from $4.72 the previous week.

EIA petroleum data for the week ended August 03

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.4 mln barrels from the previous week. At 407.4 mln barrels, U.S. crude oil inventories are about 1% below the five year average for this time of year. Total motor gasoline inventories increased by 2.9 mln barrels last week and are about 4% above the five year average for this time of year. Finished gasoline and blending components inventories both increased last week. Distillate fuel inventories increased by 1.2 mln barrels last week and are about 10% below the five year average for this time of year. Propane/propylene inventories increased by 0.1 mln barrels last week and are about 13% below the five year average for this time of year. Total commercial petroleum inventories increased last week by 3.3 mln barrels last week.

Natural gas inventory showed a build of 46 bcf vs a build of 35 bcf in the prior week- nat gas spikes. Working gas in storage was 2,354 Bcf as of Friday, August 3, 2018, according to EIA estimates. This represents a net increase of 46 Bcf from the previous week. Stocks were 671 Bcf less than last year at this time and 572 Bcf below the five-year average of 2,926 Bcf. At 2,354 Bcf, total working gas is below the five-year historical range.

Baker Hughes total U.S. rig count increased by 13 to 1057 following last week’s decrease of 2.

Metals: Copper continues its seasonal weakness

Agriculture: USDA releases WASDE report, Grains close lower for the week

Read the entire report here: World Agricultural Supply and Demand Estimates

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THE WEEK AHEAD

Week 33 (August 13 to 17) on the DIA begins very bullish on Monday, becomes mildly bearish mid week and ends mildly bullish on Friday

The SPY starts the week bullish, becomes very bearish on Wednesday and ends very bullish on Friday.

Benchmarks (21 year average) for wk33:

Key Economic Dates

Week 33

In the coming week, the US will publish retail trade, industrial output, housing data and Michigan consumer sentiment. Elsewhere, important releases include: UK inflation, wage data, unemployment and retail trade; Germany Q2 GDP growth; China industrial output, retail sales and fixed asset investment; Japan foreign trade; Australia business and consumer morale, and employment figures.

Mon 13 August

Tue 14 August

Wed 15 August

Thu 16 August

Fri 17 August

Earnings – August 13 to 17

Second quarter earnings season is wrapping up with 91% of the S&P 500 having reported quarterly results.

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SUMMARY

Last week; “If the last two weeks have been divergent and wild, then the coming week should see some normalcy return.”

I take that back … there is nothing “normal” about what’s going on with Turkey. If this thing becomes systemic, we’re possibly looking at another Greek-styled meltdown. Maybe not as terrible as Greece but the contagion could lead to worse things in the Eurozone.

So just when we thought the crazy earnings season was ending and that things would return to normal, we now have something else to excite the market. The drama never ends in Q3.

Happy Hunting!

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

For more than 12 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 enviroment 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, consider the Pattern Trader™ Tutorial.

If you want to know more about the Tutorial, come for our three-hour Introductory Session. It will be the most educational preview you will ever attend.

Register here:

Pattern Trader™ Introductory Session

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

The schedule for the November 2018 batch is here:
Pattern Trader™ Tutorial – November 2018

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

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

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

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Comments Off on Weekly Market Update – 06 August 2018 BMO

Weekly Market Update – 06 August 2018 BMO

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WEEK IN REVIEW – 30 July to 03 August 2018 :
Apple Becomes First $1 Trillion Company

Stocks climbed this week as investors digested the Fed’s latest policy directive and Apple’s (AAPL) quarterly earnings report, which helped boost the company’s market cap above the unprecedented $1 trillion mark. The S&P 500 advanced 0.8%, and the tech-heavy Nasdaq rose 1.0%. The Dow lagged though, adding just 0.1%.

The Fed left interest rates unchanged as expected on Wednesday, keeping its target range at 1.75% to 2.00%, and characterized the economy as strong, signaling that the central bank is still on track to raise rates two more times this year. The next rate hike will likely come in September, with the CME FedWatch Tool placing the chances at 93.6%.

Overseas, the Bank of Japan and the Bank of England also held policy meetings this week. The BoJ decided to leave its ultra-loose monetary policy intact, but the BoE voted to raise rates for just the second time in a decade and surprised some by saying it anticipates raising rates further despite the looming uncertainty over Brexit.

In Washington, President Trump ordered his top trade representative to consider increasing proposed tariffs on $200 billion worth of Chinese goods to 25% from 10%. Beijing threatened to retaliate with tariffs on about $60 billion worth of American goods. The news didn’t have much impact on U.S. markets, but China’s Shanghai Composite lost 4.6% for the week, retesting a nearly two-and-a-half year low.

On the earnings front, Apple gobbled up all the attention after releasing its fiscal Q3 results on Tuesday evening. The world’s largest tech company beat earnings and revenue estimates and issued positive guidance for Q4, helping to restore faith in FAANG names after a disappointing report from Facebook (FB) last week.

In response, Apple shares rallied 5.9% on Wednesday and then another 2.9% on Thursday, making Apple the first ever company with a market cap of $1 trillion.

Tesla (TSLA) shares also soared, spiking 16.2% on Thursday, after above-consensus revenues, reaffirmed guidance, and an apology from CEO Elon Musk for last quarter’s abrasive earnings call helped the electric automaker overcome a larger-than-expected earnings per share loss of $3.06.

As for economic data, the July Employment Situation report was released on Friday, showing a below-consensus increase in nonfarm payrolls (157K actual vs 190K consensus). However, the June increase was upwardly revised to 248K from 213K, helping to offset the disappointing headline figure. Average hourly earnings increased 0.3%, as expected, and the unemployment rate ticked down to 3.9%.

The key takeaway from the report is, when accounting for the revisions and the fact that the year-over-year increase in average hourly earnings held steady at 2.7%, it’s essentially the same ‘Goldilocks’ report that the market cheered last month.

(Excerpts from Briefing.com)

Thu 02 August – Initial Claims 218K vs 220K consensus; Prior 217K

The weekly initial jobless claims count totaled 218,000, while the consensus expected a reading of 220,000. Thursday’s tally was above the unrevised prior week count of 217,000. This is the 178th straight week they have been below 300,000. As for continuing claims, they declined to 1.724 million from a revised count of 1.747 million (from 1.745 million).

Wed 01 August – FOMC reiterates economic activity has been rising at a strong rate

The Fed left interest rates unchanged as expected, keeping its target range at 1.75% to 2.00%, and characterized the economy as strong, signaling that the central bank is still on track to raise rates two more times this year. The next rate hike will likely come in September, with the CME FedWatch Tool placing the chances at 91.2%.

Fri 03 August – Stocks Climb on Jobs Report Friday, Extending Weekly Gains

Stocks added to their weekly gains on Friday as investors took the July Employment Situation report in stride, pushing the S&P 500 higher by 0.5%. The Dow Jones Industrial Average advanced 0.5% as well, and the tech-heavy Nasdaq ticked up 0.1%. Small caps struggled though, sending the Russell 2000 lower by 0.5%.

The monthly jobs report showed the economy added 157K nonfarm payrolls last month, less than the 190K that the consensus was expecting. However, the June increase was upwardly revised to 248K from 213K, helping to offset the disappointing headline number for July. Meanwhile, average hourly earnings increase 0.3% as expected, and the unemployment rate ticked down to 3.9%.

In short, the July Employment Situation report was essentially the same ‘Goldilocks’ report that the market cheered in June when accounting for the revisions and the fact that the year-over-year increase in average hourly earnings held steady at 2.7%. Equity futures slipped following the release, but the reaction was pretty mild overall.

The S&P 500 opened the session a tick higher and trended sideways for much of the morning before climbing to new highs in the afternoon. Countercyclical sectors, which are generally seen as less risky, led the charge, with consumer staples (+1.2%) closing near the top of the sector standings, helped by Kraft Heinz (KHC), which rallied after beating both top and bottom line estimates.

In other earnings news, CBS (CBS), Take-Two (TTWO), DISH Network (DISH), and GoPro (GPRO) rallied after their releases, while Activision Blizzard (ATVI) and Shake Shack (SHAK) sold off.

The top-weighted technology sector held the broader market back in early action but eventually picked up the pace, closing higher by 0.3%. Energy was the only sector to finish Friday in negative territory, losing 0.5% and extending its weekly loss to 1.8% — the worst among the 11 sectors.

Looking at other markets, U.S. Treasuries climbed on Friday, sending yields lower across the curve; the benchmark 10-yr yield dropped three basis points to 2.95%. Meanwhile, West Texas Intermediate crude futures slid 0.8% to $68.48 per barrel, and the U.S. Dollar Index finished flat at 95.00, just below a 13-month high.

Reviewing Friday’s economic data, which included the Employment Situation report for July, the June Trade Balance, and the July ISM Services Index:

Market Internals – Friday 03 August

Dollar: Dollar Index Remains Buoyant

The U.S. Dollar Index was down 0.1% at 95.10 after surrendering a slim gain. Overnight dollar strength put the Dollar Index on track for its fourth consecutive advance, but the euro, pound, and other major currencies rebounded in morning trade, putting the greenback’s streak in jeopardy. Still, the Index closed for its second consecutive weekly advance, having added 0.4% since last Friday. The most notable activity took place outside the Dollar Index basket, as the People’s Bank of China fixed the yuan at an eleven-year low, but later announced that the foreign exchange risk reserve requirement ratio will be increased to 20.0% from 0.0%. The announcement accelerated a rebound in the yuan, which began a few hours after the lower fix. On a side note, Chinese officials have identified $60 billion worth of imports from the U.S. that could become subject to new tariffs.

Bonds: 5-yr Note Leads Treasuries Higher

U.S. Treasuries ended Friday on a higher note, which helped all tenors register modest gains for the week. The trading day started on a mixed note as shorter tenors opened in negative territory while the 10-yr note and the 30-yr bond started modestly higher. However, the entire complex climbed after the release of a July Employment Situation report, which missed headline estimates, but stayed true to trend, especially when factoring in upward revisions to readings from the previous two months. In addition, morning trade was highlighted by news indicating Chinese officials have prepared a list of $60 billion worth of U.S. goods that may become subject to new tariffs. Treasuries marked session highs in mid-morning trade and revisited those levels just ahead of the cash close. Afternoon action saw some flattening in the yield curve, but the 2s10s spread still ended the week three basis points wider, at 32 bps. For its part, the 2s30s spread expanded to 46 bps from last week’s 42 bps.

The yield curve steepened for the week as the shorter maturities’ yields fell against the longer maturities’ yields. The spread between the 5s10s widened to 13bps from 11bps the previous week while the 10s30s also widened to 14bps from 13bps the previous week. 

 Commodities 

The Bloomberg Commodity Index settled at 84.90, higher than 84.84 the previous week as grains made great gains while energy and metals consolidated to the downside. 

WTI oil closes above $68/barrel for a second week. The spread between WTI and Brent narrowed to $4,72 from $5.60 the previous week to break a three-week widening streak.

EIA petroleum data for the week ended June 27

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.8 mln barrels from the previous week. At 408.7 mln barrels, U.S. crude oil inventories are about 1% below the five year average for this time of year. Total motor gasoline inventories decreased by 2.5 mln barrels last week and are about 3% above the five year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 3.0 mln barrels last week and are about 11% below the five year average for this time of year. Propane/propylene inventories increased by 1.8 mln barrels last week and are about 12% below the five year average for this time of year. Total commercial petroleum inventories increased last week by 10.6 mln barrels last week.

Natural gas inventory showed a build of 35 bcf vs a build of 24 bcf in the prior week- nat gas spikes. Working gas in storage was 2,308 Bcf as of Friday, July 27, 2018, according to EIA estimates. This represents a net increase of 35 Bcf from the previous week. Stocks were 688 Bcf less than last year at this time and 565 Bcf below the five-year average of 2,873 Bcf. At 2,308 Bcf, total working gas is below the five-year historical range.

Baker Hughes total U.S. rig count decreased by 4 to 1044 following last week’s increase of 2.

Metals: Precious weakness persists, Copper falls

Agriculture: Wheat strengthens for a fourth week

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THE WEEK AHEAD

Week 32 (August 06 to 10) on the DIA tends to start the week bearish then turns very bullish on Wednesday before turning bearish again on Thursday and closing the week out very bearishly on Friday.

The SPY tends to start the week bearish on Monday, more bearish on Tuesday then turns very bullish on Wednesday before turning bearish again on Thursday and closing the week out very bearishly on Friday.

Benchmarks (21 year average) for wk32:

Key Economic Dates

Week 32

In the coming week the US will be publishing inflation rate, producer prices and JOLTs job openings. Elsewhere, important releases include: UK Q2 GDP growth, business investment, industrial production and trade balance; Germany factory orders, industrial output and foreign trade; Japan Q2 GDP growth, household spending and machinery orders; China trade balance, inflation and producer prices; and interest rate decisions from Australia, New Zealand and the Philippines.

Mon 06 August

Tue 07 August

Wed 08 August

Thu 09 August

Fri 10 August

US – CPI and Core CPI m/m

Earnings – August 06 to 10

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SUMMARY

On 22 July, I wrote; “The coming week is the first of three very heavy weeks of earnings reports … Expect volatility to go through the roof with wild swings amidst this jittery and nervous market.

The coming week is the last of the three most busiest weeks of the most volatile earnings season in the trading calendar. While most of the big name players have already called their numbers, we still have some significant names remaining on the earnings call-sheet.

This will be a week that is light on global macro news and the US is devoid of any market moving data. Wall Street is likely to renew its concerns over the U.S.’s trade spats with China while being optimistic over economic and corporate earnings that have been outstanding by most measures.

If the last two weeks have been divergent and wild, then the coming week should see some normalcy return. The market should finish lower for the week as investors would have digested the jobs reports thoroughly over the weekend to realise that “not-as-bad-as-expected” is still bad by any measure.

Happy Hunting!

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

For more than 12 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 enviroment 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, consider the Pattern Trader™ Tutorial.

If you want to know more about the Tutorial, come for our three-hour Introductory Session. It will be the most educational preview you will ever attend.

Register here:

Pattern Trader™ Introductory Session

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

The schedule for the November 2018 batch is here:
Pattern Trader™ Tutorial – November 2018

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

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

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

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Trading On Predictability & Eventuality

Some of the most common questions I get from the public are;

All these questions demand that I be a fortune-teller, which I obviously am not. For reasons I’d rather not get into, the majority of the public have been under the influence of self-styled gurus, mass/social media and the internet. The impression they get is that the financial market strategy is to get a jump on everyone else if they could find the secret to knowing the future.

Most resort to technical analysis (with lagging indicators) while others look at what the big players are doing (ironically, by reading dated news). Some get so caught up in sales pitches that they actually buy into expensive software and subscriptions thinking that they found the edge that will get them ahead of the pros and even the market itself.

The truth is, if it was so effective, you’d probably not be able to afford it, realistically speaking. If it were so simple, it wouldn’t have the edge anymore because everyone would be using it. It if were that great, there’d be more rich people than those who are losing.

However, there is profitable and simple strategy that keeps your risk low and is more consistent that any indicator, screener or scanner. You only need to use a little common sense to know how you can profit from the market by knowing what habitually moves prices and when these movements usually take place.

PREDICTABILITY 

The market, especially in the US, Europe and Japan, is mostly a seasonal and cyclical creature. There are sectors and industries that move according to changes in weather and seasons such as agriculture, mining, retail apparel and energy. These are reliably seasonal by nature and will (more often than not) trend at certain times of the year every year.

Then there are those that have a cyclical nature as a result of their business cycle, annual events, scheduled news releases or conferences, etc, such as financials, aerospace, transports and construction. These also happen several times a year every year just as the broader market also has its own annual cycle of reliably bullish, bearish and volatile periods. Not all seasonal and cyclical trades go up. In fact, there is quicker money to be made in bearish cycles.

The strategies for such trades can range from weekly executions to fortnightly to monthly to quarterly, depending on your risk appetite/profile.

The reliability of each season and/or cycle can be measured to give the trader a read on the level of risk in that trade. Obviously, the higher the reliability level, the less risky the trade. But that doesn’t mean that low reliability factors are not tradable – there are strategies that can be employed to reap a profit even in low reliability factors.

There are also a host of securities that tend to trend predictably and reliability when certain macroeconomic factors are in place. Such trends tend to be longer term which is great for the medium to long term investors.  

EVENTUALITY

Ever so frequently, good securities with sound fundamentals take the occasional hit. Depending on the circumstance, such events usually don’t kill the security. Having an understanding of macroeconomics will help determine if and when the security is likely to find a bottom and recover from its lows.

This is a very reliable strategy that is low risk, predictable and very manageable in that entries are easy to identify and exits have already been pre-determined. It is a strategy that doesn’t rush you into taking a position hastily and allows you to book profits along the recovery process. 

Of course, one must know the security well and have done all the proper research and planning to ensure the eventual return of the price from whence it fell.

The great news is that such opportunities are frequent and often in the headlines. Thus, you don’t have to go looking high and low for good trades when its right in front of you. The trouble is identifying them and how to turn that information into low risk cash. 

TAKE A CHANCE, MANAGE THE RISK

Obviously, there is no trading/investing without risk. Thus, it is imperative that we measure our risk factors before placing the bet. The good news its that such strategies don’t have to be complicated and stressful. But they do require a high level of discipline, research and planning. Common sense will tell you that nothing good can come from being haphazard and unprepared. The planning also includes contingencies should something unexpected happen. This could be in the form of a derivative hedge, price-to-price hedge, counter-trades and the good old fashion stop/cut loss in worst case scenarios.

These strategies are also affordable with a US$5,000 account with stops that are conservative and controllable. After all, the market will give you what it wants to give you – you have no control over that. However, you have 100% control over what the market can take from you. Thus, keep your losses small and let your profits run.

And that’s how you stay profitable and consistent without the need for sophisticated analyses and unreliable chart-guessing.

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

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

For more than 12 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 enviroment 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, consider the Pattern Trader™ Tutorial.

If you want to know more about the Tutorial, come for our three-hour Introductory Session. It will be the most educational preview you will ever attend.

Register here:
Pattern Trader™ Introductory Session

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

The schedule for the November 2018 batch is here:
Pattern Trader™ Tutorial – November 2018

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

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

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

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Comments Off on Why The Pattern Trader™ Still Rocks After 12 Years

Why The Pattern Trader™ Still Rocks After 12 Years

For more than 12 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 enviroment 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.

This is what graduates have to say …

“Conrad has a way of teaching that makes it fun and easy to understand. Through his passionate and interactive teaching style, he has successfully set up a very conducive learning environment. The course is very comprehensive as it covers everything from the introduction to the stock market, to macroeconomics, fundamental analysis, right down to the individual stock and options trading strategies.

Not only that! He also covers psychological and financial management which is always taken for granted. A community platform is also created for all the students to post questions and share their learning journey.”

Ting See Hung

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

“The Pattern Trader Tutorial is very comprehensive as it covers everything from the bigger picture such as macroeconomics to individual trading strategies, right down to the art of writing a detailed trading plan that we can put into action

I really enjoyed Conrad’s extensive sharing of his life’s experiences. Many interesting concepts were taught in a way that is easy to understand. This program also includes well-thought out assignments that helps us reduce our learning curve.

Apart from the knowledge imparted, I have made friends with people sharing the same goals as me, which is beneficial to my learning journey and growth as a trader in the future. I am now more confident in pursuing my goal to be a competent trader.

All in all, I would say that the Pattern Trader Tutorial™ is definitely value for money.”

Jessica Ng

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

“I really enjoyed Conrad’s Pattern Trader Tutorial™ because not only did he share lots of trading techniques, but he also shared with the class the rich history, culture and stories behind many trading terms & jargon. In addition, Conrad also provided a lot of explanations to the reasoning behind his strategies and why he does certain things a certain way.

For the amount paid, It is value for money compared to the other courses I have attended, and I am glad that my friend introduced me to the Pattern Trader Tutorial™.

I would highly recommend it to anyone who is interested in trading.”

Kee Joo Yee

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

“Even though I am only 22 years old and have not attended courses in Economics in school before, I am still able to understand how the market works and the inter-relationship between the different components of the market and the economy.

Conrad is a very down-to-earth person who will answer all your queries. You will learn everything from macroeconomics to technical analysis, options, and equities, Conrad even posts up motivational posts on Facebook. After the tutorial, homework is given. All the content provided in the course is backed by valid real-world explanations.

Apart from being taught how to trade, we are also taught Financial Management and Psychological Management. Throughout the entire Tutorial, Conrad showed us real-life applications to the content taught in the Tutorial and guided us step-by-step.

Truly, the Pattern Trader Tutorial is really the most holistic syllabus you will find, and this is definitely the only Tutorial you will ever need to attend.”

Allison Yee

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

Make a huge difference in your financial life by considering the Pattern Trader™ Tutorial. Learn more about the Tutorial by coming to our three-hour Introductory Session on 21st August at 7pm. It will be the most educational preview you will ever attend.

Register here: Pattern Trader™ Introductory Session

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

The schedule for the November 2018 batch is here:
Pattern Trader™ Tutorial – November 2018

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

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

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

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

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Comments Off on Weekly Market Update – 30 July 2018 BMO

Weekly Market Update – 30 July 2018 BMO

Screen Shot 2017-06-28 at 3.00.52 PM

WEEK IN REVIEW – 23 to 27 July 2018 :
Facebook Flop Steals Trade-Deal Thunder

Stocks moved mostly higher this week, sending the S&P 500 within 1.5% of its January 26 record high, with investors focused on a potential U.S.-EU trade deal and the latest batch of Q2 earnings, which featured results from high-flying FAANG names like Facebook (FB), Amazon (AMZN), and Alphabet (GOOG).

The S&P 500 advanced 0.6%, and the Dow Jones Industrial Average climbed 1.6%. The tech-heavy Nasdaq struggled, however, losing 1.1%, due in large part to Facebook’s 19% plunge on Thursday – which marked the biggest-ever one-day drop in market value for a U.S.-listed company (-$119.1 billion).

Facebook tumbled in response to its Q2 earnings report, which showed below-consensus revenues and slowing user growth, due in part to the #DeleteFacebook movement following the Cambridge Analytica data scandal. In addition, the social media giant also issued below-consensus revenue guidance. However, Google’s parent company Alphabet and internet-retail behemoth Amazon helped balance things out with better-than-expected results.

Still, the top-weighted technology sector, which houses most FAANG names, was the worst-performing group this week, diving 1.2%. Conversely, financials was among the top-performing spaces with a gain of 2.0%, benefiting from a rise in interest rates; the yield on the benchmark 10-yr Treasury note climbed six basis points to 2.96%.

On the data front, the preliminary reading for second quarter GDP showed an annualized increase of 4.1%, in line with the Briefing.com consensus estimate and the best reading since the third quarter of 2014. Consumer spending was the main engine of growth, increasing 4.0% and contributing 2.69 percentage points.

In politics, President Trump met with European Commission President Jean-Claude Juncker at the White House on Wednesday. Stocks spiked that afternoon on headlines that Mr. Trump has secured trade concessions from the EU, including a pledge to import more soybeans and natural gas from the U.S. and to improve market access for U.S. medical devices. The two sides also decided to table auto tariffs while they continue to negotiate.

The European Central Bank decided on Thursday to keep its key policy rate unchanged, as expected, and reiterated that net asset purchases will likely cease at the end of December, with the reinvestment of principal payments continuing for an extended period of time thereafter.

Looking ahead, the Federal Reserve will release its latest policy directive on Wednesday. The market isn’t expecting a rate hike, but investors will be interested to see what the central bank has to say about future rate increases this year; currently, the market is anticipating two additional hikes by year’s end.

(Excerpts from Briefing.com)

Wed 25 July Initial Claims 217K vs 215K; Prior revised to 208K from 207K

The weekly initial jobless claims count totaled 217,000, while the consensus expected a reading of 215,000. The tally was above the revised prior week count of 208,000 (from 207,000). Continuing claims declined to 1.745 million from a revised count of 1.753 million (from 1.751 million).

Friday: Tech Tumble Trims Weekly Gains

Stocks started Friday stable, but began tumbling in the afternoon, with tech shares pacing the broad-based retreat.

The tech-heavy Nasdaq dropped 1.5%, ending the week lower by 1.1%. The S&P 500 and the Dow also declined, losing 0.7% and 0.3%, respectively, but managed to keep in positive territory for the week (+0.6%; +1.6%). The small-cap Russell 2000 underperformed (-1.9%), extending its weekly loss to 2.0%.

All eyes were on Amazon (AMZN) coming into Friday’s session, with investors hoping that its better-than-expected Q2 earnings report could restore some faith in FAANG names, which lost a lot of momentum on Thursday due to Facebook’s (FB) earnings-induced plunge.

Amazon was up around 4.0% in pre-market trading, but weakened substantially intraday, trimming its gain to just 0.5% by the closing bell. The petering out didn’t do much good for the bulls, which, just a few days ago, were looking to ride another FAANG-led rally back into record territory.

The top-weighted technology sector finished a ways behind the ten other groups on Friday, losing 2.0%. Intel (INTC) weighed heavily on the group as concerns over its slow roll out of next-generation chips overshadowed its better-than-expected Q2 earnings report. Twitter (TWTR) was also a drag on the tech space, plunging 20.5%, after reporting a decline in monthly active users and disappointing guidance.

No other sector lost more than 0.9%, and three groups – financials (+0.2%), consumer staples (+0.2%), and telecoms (+1.9%) – actually finished in the green.

Health care (-0.7%) ended near the bottom of the sector standings, with Merck (MRK) slipping despite upbeat earnings results. Energy (-0.5%) was another decliner following a mixed post-earnings performance from Chevron (CVX) and Exxon Mobil (XOM).

Elsewhere, U.S. Treasuries finished the week with a modest rally, pushing yields lower across the curve; the benchmark 10-yr yield slipped two basis points to 2.96%. Meanwhile, WTI crude futures broke a three-day win streak, dropping 1.3% to $68.72/bbl, and the U.S. Dollar Index ticked down 0.1% to 94.45.

Reviewing Friday’s economic data, which included the preliminary reading of Q2 GDP and the final reading for the July University of Michigan Consumer Sentiment Index:

Market Internals – Friday 27 June

Dollar: Slim Overnight Gain Surrendered

The U.S. Dollar Index was down 0.1% at 94.69, revisiting levels from Thursday afternoon. The Index held its ground in overnight trade, overtaking Thursday’s high during the early portion of Friday’s European session. However, the Index pulled back after the release of a second quarter GDP report (4.1%; consensus 4.1%) that was in-line with expectations. The Index continues hovering near its low in afternoon trade, on track to add 0.3% for the week.

Bonds: Treasuries Tick Higher Ahead of Busy Week

U.S. Treasuries ended Friday on a higher note, putting a modest dent in losses recorded earlier in the week. Broadly speaking, the Friday session was quiet with the bulk of the action unfolding in morning trade. Treasuries started the day with slight losses that were reclaimed promptly after the release of a second quarter GDP report (actual 4.1%; Briefing.com consensus 4.1%), which pointed to a strong annualized rate of growth, but not as strong as some speculated at the beginning of the week. To be sure, the second quarter reading was strong enough to support the belief that the Federal Reserve will remain undeterred from steady tightening, which will eventually weigh on growth. The market will receive the latest FOMC Statement next week, but a rate hike is not expected due to the lack of a press conference after the policy meeting. Keep in mind that starting in 2019, every FOMC meeting will be followed by a press conference. Treasuries backed off their session highs in mid-morning trade, hovering inside a narrow range until the close.

The 2s10s spread tightened by a basis point for the week (to 29 bps) while the 2s30s spread also ended the week one basis points tighter, at 42 bps. Next week will be unusually busy on the central banking front, considering the market will receive the latest policy statements from the Bank of Japan (Tuesday), Reserve Bank of India (Wednesday), Federal Reserve (Wednesday), Central Bank of Brazil (Wednesday), and Bank of England (Thursday).

The yield curve flattened for the week as the shorter maturities’ yields gained against the longer maturities’ yields. The spread between the 5s10s narrowed to 11bps from 13bps the previous week while the 10s30s remained unchanged at 13bps from 13bps the previous week. 

 Commodities 

The Bloomberg Commodity Index settled at 84.84, higher than 83.68 the previous week as energy and grains find some strength. 

WTI oil closes above $68/barrel for the week. The spread between WTI and Brent widened for a third week to $5.60 from $4.81 the previous week.

EIA petroleum data for the week ended June 20

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 6.1 mln barrels from the previous week. At 404.9 mln barrels, U.S. crude oil inventories are about 3% below the five year average for this time of year. Total motor gasoline inventories decreased by 2.3 mln barrels last week and are about 4% above the five year average for this time of year. Finished gasoline and blending components inventories both decreased last week. Distillate fuel inventories decreased by 0.1 mln barrels last week and are about 13% below the five year average for this time of year. Propane/propylene inventories decreased by 0.8 mln barrels last week and are about 12% below the five year average for this time of year. Total commercial petroleum inventories decreased last week by 9.7 mln barrels last week.

Natural gas inventory showed a build of 24 bcf vs a build of 46 bcf in the prior week. Working gas in storage was 2,273 Bcf as of Friday, July 20, 2018, according to EIA estimates. This represents a net increase of 24 Bcf from the previous week. Stocks were 705 Bcf less than last year at this time and 557 Bcf below the five-year average of 2,830 Bcf. At 2,273 Bcf, total working gas is within the five-year historical range.

Baker Hughes total U.S. rig count increased by 2 to 1048 following last week’s decrease of 8.

Metals: Precious weakness continues, Copper bounces

Agriculture: Wheat strengthens for a third week

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

THE WEEK AHEAD

Week 31 (July 30 to August 03) on the DIA tends to volatile with a very bearish Tuesday and ending with week very bullishly on Friday on our 5, 10 and 15 year averages.

The SPY tends to be very bullish on Monday but becomes bearish on Tuesday and Wednesday before becoming flat for the rest of the week on our 5, 10 and 15 year averages.

Benchmarks (21 year average) for wk31:

Key Economic Dates

Week 31

In the coming week the Fed, the BoE and the BoJ will decide on monetary policy. Other important releases include: US jobs report, trade balance, personal income and spending, PCE prices and ISM PMIs; UK monetary indicators and PMIs; Eurozone GDP growth and inflation; Japan unemployment and consumer confidence; and China PMIs.

Mon 30 July

Tue 31 July

Wed 01 August

Thu 02 August

Fri 03 August

Earnings – July 30 to August 03

Just over 52% of the S&P 500 has reported earnings so far. Second quarter earnings are currently expected to grow 21.4% with sales up 9.1%. Third quarter earnings are expected to grow 20.8% with sales up 7.3%.

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

THE MONTH AHEAD

August is the second month of Quarter Three, the “worst” quarter of the financial year. August and September are the most bearish months on record. 

August 2018 is the longest trading month this year with twenty-three (23) trading sessions and no public holidays. August tends to start out bullishly but becomes volatile mid month and becomes bearish in the final week of the month.

August Trivia

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

SUMMARY

Last week, I mentioned that this would be the first of three weeks when earnings season gets crazy. This is especially so in quarter three. However, I never expected it to be this divergent. I have not seen this many consecutive days where the benchmarks have been so divergent.

I reckon more volatility lies ahead in the coming week and that it will be more than just earnings that will gyrate the market. With the Japanese, UK and US central banks calling out their latest rate decisions within the week along with a slew of employment numbers, things are going to look more divergent and bearish than the past week.

So strap in tight, hang on for dear life and hold your breath because it is going to be a very bumpy ride!

Happy Hunting!

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

The Pattern Trader™ Tutorial
is coming back to PENANG, Malaysia in October!!

 

Register here to attend the
Preview to get our Early Bird offer:
Pattern Trader™ Tutorial
Penang Introductory Session

 

 

Details of the October Batch can be found here:

PTTPG07, OCTOBER 2018 (Penang)

<<<<<==>>>>>

For more than 12 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 enviroment 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, consider the Pattern Trader™ Tutorial.

If you want to know more about the Tutorial, download our promo slides here: The Pattern Trader™ Tutorial 2018

Send your queries, requests, bookings to:
ptt.finscents@gmail.com

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

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

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

The schedule for the October (PG) 2018 batch is here:
Pattern Trader™ Batch PG07 October 2018

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

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Comments Off on Weekly Market Update – 23 July 2018 BMO

Weekly Market Update – 23 July 2018 BMO

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WEEK IN REVIEW – 16 to 20 July 2018 :
Investors Shrug Off Headline-Heavy Week

There were a heap of headlines out of Washington this week, but Wall Street kept its cool, finishing little changed. The S&P 500 finished flat, while the Dow Jones Industrial Average finished a tick higher (+0.2%), and the Nasdaq Composite finished a tick lower (-0.1%). The small-cap Russell 2000 outperformed, rallying 0.6%.

President Trump capped a week-long trip to Europe on Monday by meeting with Russian president Vladimir Putin in Helsinki, Finland. The leaders met for roughly four hours, discussing a wide range of topics, including arms control, the future of Syria, and, of course, Russian interference in the 2016 U.S. election, which Mr. Putin again denied.

Mr. Trump faced criticism for appearing to reject his own intelligence agencies’ conclusion that Russia meddled in the election in favor of Mr. Putin’s plea of innocence. President Trump later clarified his remarks, replacing the word would with wouldn’t in the following statement referring to Russian interference: “I don’t see any reason why it would be [Russia].”

On to U.S.-China trade relations, NEC Director Larry Kudlow said on Wednesday that he believes some lower-ranking Chinese officials would like to reach a trade deal, but Chinese President Xi is refusing to compromise. China’s foreign ministry responded to Mr. Kudlow’s comment, calling it “shocking” and “bogus.”

Back to Mr. Trump, the president did an exclusive interview with CNBC on Thursday in which he criticized the Fed, saying he’s “not thrilled” about interest rate hikes, and said he is willing to slap tariffs on $500 billion worth of Chinese goods – virtually every Chinese product coming into the U.S. – if necessary. Mr. Trump also commented on the strengthening dollar, saying it puts the U.S. at a disadvantage.

The president followed up that interview with a tweet on Friday, saying “China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day – taking away our big competitive edge…Tightening now hurts all that we have done.”

Mr. Trump’s comments on the Fed were particularly controversial as presidents typically refrain from speaking on monetary policy in an effort to protect the Fed’s independence. The White House issued a follow-up statement after the CNBC clip aired on Thursday, clarifying that Mr. Trump respects the Fed’s independence.

On a separate – but related – note, Fed Chair Jerome Powell gave Congress his semiannual update on the economy and monetary policy, speaking before both the Senate Banking Committee and the House Financial Services Committee. Mr. Powell’s testimony provided no new information; he simply reinforced the view that improving economic conditions should allow the Fed to continue hiking rates gradually.

Whew. With all of that in mind, let’s turn away from Washington and towards this week’s trading on Wall Street.

The second quarter earnings season heated up this week with several influential names reporting their latest results. Netflix (NFLX) dropped sharply on Tuesday – although shares did rebound notably intraday- after the streaming media company missed subscriber growth estimates. Ahead of earnings, Netflix was up more than 100% on the year.

Fellow tech names Microsoft (MSFT), IBM (IBM), and eBay (EBAY) also reported their quarterly results this week. Microsoft and IBM rallied after beating earnings estimates, but eBay tumbled after reporting below-consensus results. The top-weighted technology sector finished the week with a gain of 0.1%, extending its yearly advance to 15.4%.

Several financial giants also reported earnings this week, including Bank of America (BAC), Goldman Sachs (GS), and Morgan Stanley (MS), all of which topped estimates. The positive results helped the heavily-weighted financial sector climb 2.2% and finish atop the week’s sector standings.

In other corporate news, Comcast (CMSA) said it will not counter Disney’s (DIS) offer for 21st Century Fox’s (FOXA) entertainment assets, and Amazon (AMZN) held its annual Prime Day, saying the 36-hour special was its biggest shopping event ever – even despite having to deal with some technical glitches.

Energy was the worst-performing sector this week, losing 1.9%, as crude oil extended last week’s tumble; WTI crude futures dropped 3.9% to $68.23/bbl and are now 8.0% below the nearly three-and-a-half year high they’ve touched several times this month. Fears that the U.S. may give some countries waivers to continue buying oil from Iran was one of several factors weighing on the commodity.

(Excerpts from Briefing.com)

Friday: Flat Week Ends With Flat Friday Session

Stocks finished a range-bound Friday session little changed, shrugging off potentially rattling comments from President Trump. The S&P 500 and the Nasdaq Composite both lost 0.1%, while the Dow Jones Industrial Average finished unchanged. Friday’s stumble left the S&P 500 flat for the week.

In a CNBC interview aired on Friday morning, President Trump said he is ready to put tariffs on $500 billion worth of Chinese goods — approximately the entire amount of goods shipped to the U.S. from China in 2017. Later, in a tweet, the president doubled down on his criticism of the Fed, saying rate hikes hurt what his administration has accomplished, and reiterated his concern over a strengthening dollar.

The U.S. Dollar Index tumbled 0.8% to 94.20 in response to the president’s comments, retreating from a 12-month high.

Microsoft (MSFT) headlined the earnings front, climbing 1.8% on the back of a better-than-expected quarterly report. Its outperformance helped the top-weighted technology sector get off to a good start – the group was up as much as 0.7% – but the bullish momentum faded as the day wore on. The tech group finished higher by 0.1%.

Elsewhere on the earnings front, Honeywell (HON) and Capital One (COF) also rallied on better-than-expected results, adding 3.8% and 2.0%, respectively. However, General Electric (GE) declined 4.4% despite beating estimates, and Skechers (SKX) plunged 21.0% after missing estimates and issuing disappointing guidance.

The consumer staples sector (+0.6%) was the top-performing group on Friday, and financials (+0.2%) eked out a slim victory. Meanwhile, eight of the eleven sectors finished in the red, with utilities (-0.8%) and real estate (-0.9%) being the weakest performers. No other space lost more than 0.5%.

In the bond market, Treasuries sold off in a curve-steepening trade, with the 2-yr yield climbing one basis point to 2.60% and the 10-yr yield climbing five basis points to 2.90%. Some analysts saw the increased 2-10 spread as a sign that investors believe President Trump’s criticism of the Fed could slow down the pace of rate hikes.

The S&P 500 tested the 2800 level several times on Friday, but it held through each attempt, with the low of the day coming in at 2800.01.

Investors did not receive any economic data on Friday. Looking ahead, Existing Home Sales for June is the lone release on Monday.

Market Internals – Friday 20 June

Dollar: Dollar Index Nears 50-Day Average

The U.S. Dollar Index was down 0.7% at 94.52, turning negative for the week. The Dollar Index edged higher at the start of the Thursday’s overnight session, but the slight strength faded by the start of European trade. The Index faced another downdraft in Friday morning’s trade, shortly after President Trump criticized rising rates once again, and voiced his displeasure with recent dollar strength. The Dollar Index, which now hovers just above its 50-day moving average (94.27), has lost 0.2% for the week after being up 1.0% for the week on Thursday morning.

Bonds: Longer Tenors Pull Back

U.S. Treasuries ended the week on a lower note with longer tenors showing relative weakness after a prolonged stretch of outperformance. Longer-dated Treasuries started the day with modest losses and continued sliding in steady fashion into the afternoon while shorter tenors climbed in the early going, but could not avoid a lower finish. This morning featured the airing of a CNBC interview, in which President Trump voiced his displeasure with rising rates and threatened to impose tariffs on all imports from China. Mr. Trump later took to Twitter, calling out China, the European Union, and “others” for “manipulating their currencies and interest rates lower while the U.S. is raising rates.” St. Louis Fed President James Bullard, who expressed concern with the pace of rate hikes three weeks ago, said President Trump is just one more voice in the interest-rate debate and that the Fed will not be swayed by public criticism from the president. Today’s selling pressure on the long end lifted the 30-yr yield to a three-week high while the slope of the yield curve saw some steepening after more than a month of near-daily flattening. The 2s10s spread widened by four basis points to 30 bps while the 2s30s spread expanded by five basis points to 43 bps.

The yield curve steepened as the longer maturities gained against the shorter maturities’ yields. The spread between the 5s10s widened to 13bps from 10bps the previous week while the 10s30s widened to 13bps from 10bps the previous week. 

 Commodities 

The Bloomberg Commodity Index settled at 83.68, lower than 83.83 the previous week as energy and metals continue their seasonal weakness.  

WTI oil fell below $67/barrel but closes above $68.00 for the week. The spread between WTI and Brent widened for a second week to $4.81 from $4.30 the previous week.

EIA petroleum data for the week ended June 13

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.8 mln barrels from the previous week. At 411.1 mln barrels, U.S. crude oil inventories are about 2% below the five year average for this time of year. Total motor gasoline inventories decreased by 3.2 mln barrels last week and are about 5% above the five year average for this time of year. Finished gasoline and blending components inventories both decreased last week. Distillate fuel inventories decreased by 0.4 mln barrels last week and are about 13% below the five year average for this time of year. Propane/propylene inventories increased by 1.7 mln barrels last week and are about 10% below the five year average for this time of year. Total commercial petroleum inventories increased by 6.0 mln barrels last week.

Natural gas inventory showed a build of 46 bcf vs a build of 51 bcf in the prior week- nat gas pops higher. Working gas in storage was 2,249 Bcf as of Friday, July 13, 2018, according to EIA estimates. This represents a net increase of 46 Bcf from the previous week. Stocks were 710 Bcf less than last year at this time and 535 Bcf below the five-year average of 2,784 Bcf. At 2,249 Bcf, total working gas is within the five-year historical range.

Baker Hughes total U.S. rig count decreased by 8 to 1046 following last week’s increase of 2.

Metals: Seasonal weakness persists

Agriculture: Wheat strengthens for a second week

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

THE WEEK AHEAD

Week 30 (July 23 to 27) on the DIA tends to start out bullish (with some divergence) on Monday,  very bearish on Tuesday and becomes bullish on Wednesday, Thursday and Friday across our 5, 10 and 15 year averages on our seasonal model

The SPY tends to start out bullish (with some divergence) on Monday,  bearish on Tuesday, bullish on Wednesday and Thursday then becomes very bearish on Friday across our 5, 10 and 15 year averages on our seasonal model.

Benchmarks (21 year average) for wk30:

Key Economic Dates

Week 30

The week ahead sees the US publishing the advance estimate of second-quarter GDP growth, existing and new home sales, durable goods orders and flash Markit PMIs. Elsewhere, the ECB will be deciding on monetary policy. Other important releases include: UK CBI factory orders; Eurozone flash Markit PMIs and consumer confidence; France and South Korea Q2 GDP growth rates; Japan Nikkei Manufacturing PMI; and Australia inflation.

Sun 22 July

Mon 23 July

Tue 24 July

Wed 25 July

Thu 26 July

Fri 27 July

Earnings – July 23 to 27

The coming week is the first of three very heavy weeks of earnings reports with about a third of the S&P500 and 11 of the DOW components reporting their quarterly results.

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

SUMMARY

The range-bound trend continues into its fifth month in this rather troubled market ahead of this week’s massive earnings schedule and next week’s FOMC Meeting. Expect volatility to go through the roof with wild swings amidst this jittery and nervous market. 

Happy Hunting!

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

The Pattern Trader™ Tutorial
is coming back to PENANG, Malaysia in October!!

 

Register here to attend the
Preview to get our Early Bird offer:
Pattern Trader™ Tutorial
Penang Introductory Session

 

 

Details of the October Batch can be found here:

PTTPG07, OCTOBER 2018 (Penang)

<<<<<==>>>>>

For more than 12 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 enviroment 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, consider the Pattern Trader™ Tutorial.

If you want to know more about the Tutorial, download our promo slides here: The Pattern Trader™ Tutorial 2018

Send your queries, requests, bookings to:
ptt.finscents@gmail.com

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

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

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

The schedule for the October (PG) 2018 batch is here:
Pattern Trader™ Batch PG07 October 2018

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

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Comments Off on Weekly Market Update – 16 July 2018 BMO

Weekly Market Update – 16 July 2018 BMO

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WEEK IN REVIEW – 09 to 13 July 2018 :
Entering Earnings Season on a Positive Note

Wall Street advanced for the second week in a row, with the Nasdaq (+1.8%) touching a new record and the S&P 500 (+1.5%) hitting its best level since the big drop in early February. The Dow Jones Industrial Average (+2.3%) outperformed its peers, returning to positive territory for the year, but the small-cap Russell 2000 (-0.4%) struggled.

Stocks started the week on a positive note, rallying on Monday and Tuesday, but sold off on Wednesday after the White House escalated its ongoing trade dispute with Beijing, publishing a new list of tariffs. This round of duties is the largest yet, calling for a 10% tariff on $200 billion worth of Chinese goods, but it won’t be official for at least two months. As it did with earlier tariffs, China promised to retaliate.

Meanwhile, NATO leaders held a two-day summit in Brussels this week. President Trump dominated the headlines, criticizing Germany for approving a major gas deal with Russia and taking a hard stance on increased military spending. Member states recommitted to a military spending target of 2% of GDP by 2024, prompting Mr. Trump to verbally confirm his commitment to the alliance.

The U.S. president then jetted to the UK for a meeting with Prime Minister Theresa May. Before the meeting, Mr. Trump suggested that Ms. May’s Brexit plan may prevent the U.S. from entering a bilateral trade deal with the UK, but he walked back those comments in a latter press conference, reaffirming the leaders’ “special relationship.”

Back on the home front, West Texas Intermediate crude futures tumbled from a three-and-a-half year high on Wednesday, plunging 5.0% in their worst daily performance in over a year. Investors shrugged off a bullish inventory report – which showed a huge drop of 12.6 million barrels for the week ended July 6 – and instead focused on resurgent Libyan supply and increased June output for Saudi Arabia.

The energy sector, which is sensitive to crude prices, finished behind the broader market, but still added 0.8%. Eight of eleven spaces finished the week in the green, with information technology (+2.3%), consumer discretionary (+2.1%), and industrials (+2.2%) being the top performers. Utilities (-1.2%), telecom services (-1.6%), and real estate (-0.8%) were the three decliners.

In corporate news, big banks JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) unofficially kicked off the second quarter earnings season on Friday with mixed results; JPMorgan and Citigroup beat earnings estimates, but Wells Fargo missed. The financial sector lost 0.5% on Friday, but still finished the week with a gain of 1.1%.

Elsewhere, 21st Century Fox (FOXA) lost 4.0% on Wednesday following reports that Comcast (CMCSA) may forego countering Disney’s (DIS) offer for Fox’s entertainment assets and focus on upping its bid for British media company Sky instead; Broadcom (AVGO) tumbled 13.7% on Thursday after agreeing to acquire software company CA Tech (CA) for approximately $18.9 billion in cash; and AT&T (T) lost 1.7% on Friday after the Department of Justice appealed the company’s acquisition of Time Warner.

In the bond market, U.S. Treasuries moved lower in another curve-flattening trade this week, bringing the 2-10 spread down two basis points to 26 bps – its lowest level in more than a decade. The yield on the benchmark 10-yr note ticked up one basis point to 2.83%, while the yield on the 2-yr note climbed three basis points to 2.57%.

(Excerpts from Briefing.com)

Friday: Stocks Tick Higher Despite Bank Underperformance

Stocks eked out a slim victory on Friday following a range-bound day of trading on lighter-than-usual volume. The S&P 500 (+0.1%) hit some technical resistance at the 2800 level, which it hasn’t been able to conquer since early February. The Dow Jones Industrial Average (+0.4%) did modestly better, and the Nasdaq Composite finished flat.

Big banks, including JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC), unofficially kicked off the Q2 earnings season Friday morning. The results were mixed; JPMorgan and Citi beat profit estimates, but Well Fargo came up short. The three lenders slid between 0.5% and 2.2% in the aftermath, and the influential financial sector declined 0.5%.

The top-weighted technology space also lagged, finishing a tick below its unchanged mark. Within the space, Dow component Cisco Systems (CSCO) dropped 4.1% following news that Amazon (AMZN) is mulling entry into the data switches market; AMZN rallied 0.9%, hitting a new record high.

Meanwhile, telecom services (-0.8%) was the worst performer, led lower by AT&T (T), which lost 1.7% following news that the DOJ has appealed the company’s acquisition of Time Warner.

On the flip side, industrials (+0.6%), energy (+0.6%), and consumer staples (+0.6%) finished at the top of the sector standings. The energy space was helped by a rebound in the price of crude oil, which plunged 5.0% on Wednesday. WTI crude futures advanced 1.1% on Friday to $71.03 per barrel.

President Trump was in the UK on Friday, fielding questions from reports in a joint press conference with Prime Minister Theresa May and stopping for tea with Queen Elizabeth II. Mr. Trump reaffirmed the United States’ “special relationship” with the UK and said the U.S. will pursue a free trade deal with the UK once it leaves the EU.

U.S. Treasuries rallied on Friday, pushing yields lower across the curve; the yield on the benchmark 10-yr Treasury note slipped two basis points to 2.83%. Meanwhile, the U.S. Dollar Index finished slightly lower (-0.1%) at 94.47, and the CBOE Volatility Index declined 2.9% to 12.22.

Reviewing Friday’s economic data, which included June Import/Export Prices and the preliminary reading of the University of Michigan Consumer Sentiment Index for July:

Looking ahead, investors will receive on Monday the Retail Sales report for June, the Empire State Manufacturing Index for July, and the Business Inventories report for May. Bank of America(BAC) and BlackRock (BLK) will report earnings before the open, and Netflix (NFLX) will report after the close.

Market Internals – Friday 13 June

Dollar: Dollar Index Little Changed

The U.S. Dollar Index closed at 94.68, after looking like it was going to finish the week unchanged from last week’s close of 94.83. The greenback saw a continuation of this week’s strength in overnight action, but the Dollar Index could not push above its closing high from late June (95.53). The Index peaked during the European session, spending the past several hours in a steady retreat. 

Bonds: 30-yr Yield Nears Six-Month Low

U.S. Treasuries ended the week on a higher note with the 2-yr note rebounding from its recent show of relative weakness. The Friday affair was not particularly active, as Treasuries spent the day in a range that narrowed as the day progressed. The market saw some volatility in morning trade as opening gains were briefly surrendered, but Treasuries crept back to their morning highs and remained near those levels into the afternoon, when another wave of buying interest lifted all tenors to fresh session highs. The 30-yr yield finished at its lowest level since late January, reflecting relentless outperformance in the long bond. The yield curve ended the day at a slightly steeper level, but flattened when compared to last Friday. The 2s10s spread ended the week four basis points tighter at 26 bps while the 2s30s spread compressed by five basis points to 36 bps.

The yield curve tightened yet again as the 30-year yield fell while the shorter maturities’ yields rose. The spread between the 5s10s tightened to 10bps from 11bps the previous week while the 10s30s tightened to 10bps from 11bps the previous week. 

The Federal Reserve released its semiannual Monetary Policy Report, which showed little concern over recent strength in the U.S. dollar and did not point to discomfort among policymakers about staying on the tightening path. Fed Chairman Jay Powell will appear before the Senate Committee on banking, Housing, and Urban Affairs on Tuesday to deliver the semiannual report and answer questions from lawmakers.

 Commodities 

The Bloomberg Commodity Index settled at 83.83, lower than 86.21 the previous week as energy and metals continue their seasonal weakness. 

WTI oil falls to $71/barrelThe spread between WTI and Brent widened, breaking a seven-week narrowing streak to $4.30 from $3.31 the previous week.

EIA petroleum data for the week ended June 06

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 12.6 million barrels from the previous week. At 405.2 million barrels, U.S. crude oil inventories are about 4% below the five year average for this time of year. Total motor gasoline inventories decreased by 0.7 million barrels last week and are about 6% above the five year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 4.1 million barrels last week and are about 12% below the five year average for this time of year. Propane/propylene inventories increased by 2.4 million barrels last week and are about 10% below the five year average for this time of year. Total commercial petroleum inventories decreased by 7.2 million barrels last week.

Natural gas inventory showed a build of 51 bcf vs a build of 78 bcf in the prior week. Working gas in storage was 2,203 Bcf as of Friday, July 6, 2018, according to EIA estimates. This represents a net increase of 51 Bcf from the previous week. Stocks were 725 Bcf less than last year at this time and 519 Bcf below the five-year average of 2,722 Bcf. At 2,203 Bcf, total working gas is within the five-year historical range.

Baker Hughes total U.S. rig count increased by 2 to 1054 following last week’s increase of 5.

Metals: Gold resumes falling, Silver and Copper continue to seasonal weakness

Agriculture: Wheat bucks the trend

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

THE WEEK AHEAD

Week 29 (July 16 to 20) tends to be bullish across our 5, 10 and 15 year seasonal models.

Benchmarks (21 year average) for wk29:

Key Economic Dates

Week 29

In the coming week, the US will publish retail trade, industrial production, building permits and housing starts. Elsewhere, important releases include: China Q2 GDP growth, industrial output, retail sales and fixed asset investment; Japan inflation and foreign trade; UK inflation, wages and unemployment; and Australia employment.

Sun 15 July

Mon 16 July

Tue 17 July

Wed 18 July

Thu 19 July

Fri 20 July

Sat 21 July

Earnings – July 16 to 20

Week 2 of earnings season gets into full swing with at least seven DOW components on the line. Former recent DOW components AA, GE, BAC and HON are also calling out their numbers.

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

OBSERVATION

Having dug itself out from beneath the 200DSMA six sessions ago, the DOW closed the week at the critical 25,000 retracement that has been dogging it since February. It has managed five consecutive closes above its 50DSMA. The coming week will be a stern test for the benchmark to break above and close firmly above all its average and that 25,000 retracement with a third candle reversal imminent on Monday.

SUMMARY

The coming week suggests that we’re in for some volatility as earnings season kicks into full gear. Although there is still no economic weakness that could threaten the US economy, some early signs of an economic top appear to be manifesting like a 6-year high on inflation, 9-year high on employment, 18-year low on unemployment, 11-year low on bond yield spreads and then there’s this …

I am going to continue on the safe side of bullish and stay hedged with quick timeframes and tight stops for all my trades.

Happy Hunting!

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

The Pattern Trader™ Tutorial
is coming back to PENANG, Malaysia in October!!

 

Register here to attend the
Preview to get our Early Bird offer:
Pattern Trader™ Tutorial
Penang Introductory Session

 

 

Details of the October Batch can be found here:

PTTPG07, OCTOBER 2018 (Penang)

<<<<<==>>>>>

For more than 12 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 enviroment 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, consider the Pattern Trader™ Tutorial.

If you want to know more about the Tutorial, download our promo slides here: The Pattern Trader™ Tutorial 2018

Send your queries, requests, bookings to:
ptt.finscents@gmail.com

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

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

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

The schedule for the October (PG) 2018 batch is here:
Pattern Trader™ Batch PG07 October 2018

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

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PATTERN TRADER™ TUTORIAL (PENANG)

 

The Pattern Trader™ Tutorial
is coming back to PENANG, Malaysia in October!!

 

Register here to attend the
Preview to get our Early Bird offer:
Pattern Trader™ Tutorial
Penang Introductory Session

 

 

Details of the October Batch can be found here:

PTTPG07, OCTOBER 2018 (Penang)

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Comments Off on Weekly Market Update – 09 July 2018 BMO

Weekly Market Update – 09 July 2018 BMO

Screen Shot 2017-06-28 at 3.00.52 PM

WEEK IN REVIEW – 02 to 06 July 2018 :
Independence Day Bring Gains For The Week

It was an abbreviated week of trading due to the Fourth of July holiday, yet there were plenty of fireworks for the bulls who enjoyed a winning week for the major indices.

The bullish bias was remarkable in that concerns about protectionist trade measures were discussed throughout the week.  Those concerns did not derail the stock market, yet they did not go unnoticed.

Some of this week’s best-performing sectors were the defensive-oriented health care (+3.1%), utilities (+2.4%), and telecom services (+2.2%) sectors. Meanwhile, the yield on the benchmark 10-yr note dropped three basis points to 2.82%, which gave a lift to the real estate sector (+1.8%).

By and large, though, it was a risk-on week in the stock market, which moved up on the back of gains in every sector but the energy sector (-0.3%). 

The latter moved in tandem with oil prices, which dropped 0.5% to $73.77/bbl, pressured by a bearish inventory report from the Department of Energy and assumptions that Saudi Arabia will tap into its spare capacity to maintain stability in the oil market.

The information technology sector (+2.3%), supported by the usual mega-cap suspects, was a standout yet again, bringing its year-to-date gain to 12.7%.  Facebook (FB) for its part increased 4.6% for the week, with the entirety of its gain coming over the last two trading sessions.

Those last two trading sessions were governed by insouciant trading behavior, as the major indices advanced resolutely in the face of the FOMC Minutes highlighting how business contacts in some districts were scaling back, or postponing, capital spending plans as a result of the uncertainty over trade policy and the U.S. and China pressing ahead with the implementation of tariffs on $34 billion worth of imported goods from each other.

There was no uncertainty on Friday following the release of the June employment report.  Market participants seemingly rejoiced in the understanding that the report once again had a Goldilocks hue to it, featuring solid nonfarm payrolls growth (+213,000) and a subdued 2.7% year-over-year gain in average hourly earnings that kept inflation worries, and aggressive rate-hike worries, at bay.

That economic report overshadowed the gloomy trade developments, which also included a contention by President Trump that the U.S. could possibly levy tariffs on more than $500 billion of Chinese goods if necessary.   The stock market made note of the remark, yet it was not unnerved by it.

The US. Dollar Index settled the week 0.7% lower at 94.01 while the CBOE Volatility Index plunged 16.9% to 13.37, underscoring a lack of hedging interest to protect for near-term downside risk.  The entirety of the decline in the CBOE Volatility Index came over the last two trading days of the shortened week.

Not surprisingly, trading volume was on the light side this week as many participants took vacation.

(Excerpts from Briefing.com)

Friday: Market Trades Trade Concerns for Labor Market Relief

Apparently, a trade war started on Friday – or so it was said – yet the stock market acted as if there was a daisy stuck in the barrel of every trade threat.  For the second day in a row, the stock market ignored the trade conflict between the U.S. and China (and other countries for that matter) and rallied around a pleasing employment report for June.

It was clear to see in the futures market this morning how the employment report was the inflection point for a shift in trading sentiment.  Prior to its release at 8:30 a.m. ET, the S&P futures were down as many as seven points and signalling a modestly lower start for the broader market.

Following the release, they turned positive, and although the open to today’s session was a bit tentative, the bulls soon took command of today’s tape, ceding some ground only in a profit-taking retreat in the last 30 minutes of trading.

The catalyst for the upside bias was the recognition that the June employment report had a familiar Goldilocks hue to it.  Specifically, it featured solid nonfarm payrolls growth (+213,000) and a subdued 2.7% year-over-year gain in average hourly earnings that kept inflation worries, and aggressive rate-hike worries, at bay.

The stock market wasn’t the only beneficiary of that fairy-tale theme.  The Treasury market also enjoyed the not-too-hot-not-too-cold narrative.

The 2-yr note yield, which is more sensitive to changes in the fed funds rate, fell three basis points to 2.53% while the 10-yr note yield, which is more sensitive to inflation, slipped one basis point to 2.83%.

Within the stock market, every sector was a winner.

Gains ranged from 0.3% (consumer staples) to 1.4% (health care).  The latter was helped by a huge gain in Biogen (BIIB), which surged after announcing encouraging, and surprising, Phase II trial results for its Alzheimer’s drug.

A 1.2% increase in the information technology sector, which flowed from the outperformance of Apple (AAPL), Facebook (FB), Alphabet (GOOG), and Microsoft (MSFT), solidified the upside bias and drove the outperformance of the Nasdaq Composite (+1.3%).

Trade matters were talked about widely.  The U.S. and China both pressed ahead with tariffs on $34 billion worth of imported goods from each country, which was not a surprise, and President Trump suggested it’s possible tariffs on more than $500 billion of Chinese goods could be levied over time if necessary.

The latter was a surprise, but judging by the stock market’s performance, it was not unnerved by the remark.

Taking a closer look at today’s economic data:

Market Internals – Friday 06 June

Dollar: Pullback Extended

The U.S. Dollar Index closed down 0.46% at 93.96 on Friday, completing its fifth decline out of the past six sessions. The greenback retreated in overnight action, dropping to a fresh session low after the release of a June Employment Situation report, which exceeded headline expectations (213K; consensus 195K), but once again showed sluggish average hourly earnings growth (+0.2%; consensus 0.3%). The Dollar Index hit its low in Friday’s mid-morning trade, pausing just above its 50-day moving average (93.86). With Friday’s decline, the Dollar Index is down 0.6% for the week.

Bonds: Holiday Week Ends with Gains

U.S. Treasuries ended the abbreviated week on a broadly higher note, though intraday action saw a pullback from morning highs. The Treasury market began the day with modest gains, rallying to session highs after the release of an Employment Situation report for June, which stayed true to trend. The report showed a healthy increase in payrolls, but average hourly earnings growth remained subdued. On the whole, the report is unlikely to alter the policy course at the Federal Reserve, which is why the long bond hit its best level in five weeks in morning trade. The 30-yr bond retreated from its high in midday action, but that pullback could not prevent the 30-yr yield from ending the day at its lowest level since the end of January. The slope of the yield curve steepened today, but flattened over the course of the week. The 2s10s spread expanded by two basis points to 30 bps, but tightened by two basis points for the week. For its part, the 2s30s spread widened by two basis points to 41 bps, but tightened by four basis points for the week.

The yield curve tightened for yet another week as longer maturities’ yields fell more than the shorter maturities. The spread between the 5s10s tightened to 11bps from 12bps the previous week while the 10s30s tightened to 11bps from 13bps the previous week. This is the flattest curve since December 2006/January 2007 with the spread between the 2yr and the 30yr at only 41bps.

 Commodities 

The Bloomberg Commodity Index settled at 86.21, lower than 87.41 the previous week as energy and metals weaken.

WTI oil closes below $74/barrel. The spread between WTI and Brent narrowed for the seventh straight week to a more reasonable $3.31 from $5.29 the previous week (from $6.25 the week before).

EIA petroleum data for the week ended June 29

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.2 mln barrels from the previous week. At 417.9 mln barrels, U.S. crude oil inventories are about 2% below the five year average for this time of year. Total motor gasoline inventories decreased by 1.5 mln barrels last week and are about 6% above the five year range. Finished gasoline and blending components inventories both decreased last week. Distillate fuel inventories increased by 0.1 mln barrels last week and are about 13% below the five year average for this time of year. Propane/propylene inventories increased by 2.9 mln barrels last week and are about 10% below the five year average for this time of year. Total commercial petroleum inventories increased by 3.3 mln barrels last week.

Natural gas inventory Natural gas inventory showed a build of 78 bcf vs a build of 66 bcf in the prior week. Working gas in storage was 2,152 Bcf as of Friday, June 29, 2018, according to EIA estimates. This represents a net increase of 78 Bcf from the previous week. Stocks were 717 Bcf less than last year at this time and 493 Bcf below the five-year average of 2,645 Bcf. At 2,152 Bcf, total working gas is within the five-year historical range.

Baker Hughes total U.S. rig count increased by 5 to 1052 following last week’s decrease of 5.

Metals: Gold stops falling, Silver and Copper continue to weaken

Agriculture: Corn stalls, Wheat resumes its weakness, Soy bounces

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

THE WEEK AHEAD

Week 28 (July 09 to 13) tends to be bullish across our 5, 10 and 15 year seasonal models.

Benchmarks (21 year average) for wk28:

Key Economic Dates

Week 28

This coming week, the US will publish inflation rate, the preliminary estimate of Michigan consumer sentiment, producer and foreign trade prices. Other key economic data include: UK first publication of monthly GDP; China inflation, producer prices and foreign trade; Japan machinery orders; and Australia business and consumer morale.

Mon 09 July

Tue 10 July

Wed 11 July

Thu 12 July

Fri 13 July

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

OBSERVATION

The DOW Industrials and Transports broke and closed above its 200DSMA after languishing for eight sessions below that critical indicator. However, leadership in the last few sessions have come from the defensive sectors like healthcare, utilities and telecom amidst businesses that were “scaling back, or postponing, capital spending plans as a result of the uncertainty over trade policy“. The last two weeks’ action has also been against lower average volumes and rather divergent market internals.

One would be forgiven for thinking that this is usually the case leading up to the start of Q3’s earnings season. Earnings season for Q2 results begin in the coming week. JPM, WFC and C kicks starts what is usually the year’s most volatile earnings season on Friday 13 July – an ominous sign?

So while on the surface, things look to be back to normal and hunky dory, the undercurrents are starting to look threatening and worrisome again.

SUMMARY

Last week, I wrote; “Keep watching the yield curve – I am guessing that’s where the bulls have been running to.

With the yield curve spreads narrowing to yet another multi-year low, the volatile months (of August and September) ahead may just force this flattening into an inversion. According to historical tradition, this will give the market another six months (to a year) before we see any serious weakness in the economy. Thus, with the Fed’s language still bullish on rates, this market may still have legs to stay up till the end of the year unless August and September bring a difference perspective.

Till then, I remain cautiously bullish

Happy Hunting!

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

For more than 12 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 enviroment 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, consider the Pattern Trader™ Tutorial.

If you want to know more about the Tutorial, download our promo slides here: The Pattern Trader™ Tutorial 2018

Send your queries, requests, bookings to:
ptt.finscents@gmail.com

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

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

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

The schedule for the November 2018 batch is here:
Pattern Trader™ Tutorial Batch 95 November 2018

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

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Comments Off on Weekly Market Update – 02 July 2018 BMO

Weekly Market Update – 02 July 2018 BMO

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WEEK IN REVIEW – 25 to 29 June 2018 :
Trade Tensions Strike Again

U.S. equities declined for the second week in a row as investors continued to focus on U.S.-China trade tensions. The S&P 500 and the Dow Jones Industrial Average dropped 1.3% apiece, while the tech-heavy Nasdaq Composite slid 2.4%. Small caps were hit especially hard, sending the Russell 2000 lower by 2.5%.

Trade war fears weighed at the start of the week due to reports that the White House is looking to bar Chinese companies from investing in U.S. tech firms. The Trump administration first responded to the reports with a mixed message; Treasury Secretary Steven Mnuchin said the White House is targeting all countries, not just China, while President Trump’s top trade adviser, Peter Navarro, said the administration doesn’t have any plans to impose investment restrictions, regardless of country.

However, the administration eventually cleared things up, deciding to defer foreign investment regulation to the Committee on Foreign Investment in the United States (CFIUS). That decision was seen as a positive alternative to direct White House intervention and helped the equity market rebound in the second half of the week.

Separately, the U.S. State Department threatened to impose powerful sanctions on countries that don’t cut oil imports from Iran to “zero” by November 4. That headline, paired with a larger-than-expected draw in U.S. crude inventories (9.9 million barrels), pushed crude prices back to a three-and-a-half year high. WTI crude futures added 8.1% for the week, closing at $74.12 per barrel.

Also out of Washington, Supreme Court Justice Anthony Kennedy announced his retirement, effective July 31. Although he identifies as a conservative, Mr. Kennedy has often sided with his liberal colleagues. His retirement gives President Trump the chance to strengthen the court’s conservative majority.

In corporate news, Amazon (AMZN) made headlines after announcing a deal to acquire online pharmacy start-up PillPack. That news sent shares of drug distributors like CVS Health (CVS) and Walgreens Boots Alliance (WBA) solidly lower. Amazon also announced it is inviting entrepreneurs to form small companies to carry packages over the last leg of the delivery journey.

Elsewhere, General Electric (GE) announced plans to spin off its health care business and to sell its 62.5% stake in oil and gas company Baker Hughes (BHGE); Walt Disney (DIS) won DOJ approval to buy most of Fox’s assets for $71.3 billion, subject to the condition that Disney sells 22 regional sports networks; and Nike (NKE) spiked to a new record on Friday after beating both top and bottom line estimates and announcing a new $15 billion share repurchase program.

As for this week’s S&P sector standings, utilities (+2.3%), telecom services (+1.2%), real estate (+1.1%), and energy (+1.0%) were the top-performing groups, while the heavily-weighted technology (-2.2%), financials (-1.9%), consumer discretionary (-1.9%), and health care (-1.8%) sectors finished at the back of the pack.

(Excerpts from Briefing.com)

Friday Update: Disappointing Finish

Stocks got off to a good start on Friday, but gave back nearly everything during the final hour of trading. The S&P 500 was up 1.0% at its best mark of the day, but ended with a gain of just 0.1%, closing a tick above its 50-day moving average. The Nasdaq also added 0.1%. The Dow climbed 0.2%.

Financials led the market higher out of the gate after the Fed cleared most big banks to increase their dividends and share buybacks. However, the heavily-weighted sector faded as the day went along, entirely retracing a gain of 1.8%, and ended lower by 0.1%.

Despite the disappointing finish, eight of eleven sectors closed Friday in the green. Energy (+0.7%) was the top-performing space as crude prices climbed for a fourth straight session. WTI crude futures advanced 1.0% to $74.12 per barrel, hitting a new three-and-a-half year high and locking in a weekly gain of 8.1%.

In corporate news, Nike (NKE) spiked 11.1%, hitting a new all-time high, after reporting better-than-expected earnings and revenues and announcing a $15 billion share repurchase program. Conversely, General Motors (GM) struggled, losing 2.8%, after warning President Trump that the proposed tariffs on imported vehicles could lead to “a smaller GM”. It’s worth noting that selling in the broader market started picking up around the same time that GM made the announcement, although it’s unlikely that it was the sole cause as financials led the reversal.

In politics, Fox News correspondent Maria Bartiromo reported that President Trump is working on a phase two of his tax plan and is considering cutting the corporate tax rate to 20% from 21%. Separately, European Union leaders reached a deal on a migration, which has been an especially contentious issue since the Syrian refugee crisis.

Reviewing Friday’s economic data, which included Personal Income, Personal Spending, and PCE Prices for May, the Chicago PMI for June, and the final reading of the University of Michigan Consumer Sentiment Index for June:

Market Internals – Friday 29 June

Dollar: Dollar Index Pulls Back

The U.S. Dollar Index closed down at 94.47, returning to levels from Tuesday afternoon. The greenback stumbled against the euro in Thursday’s overnight action, which opened the door to a broader pullback after a quarter that saw the Index gain 6.0% going into Friday’s session. The overnight pullback took place as the euro jumped in response to news from the EU summit in Brussels. Leaders gathered at the summit struggled to reach agreement on a joint statement, which resulted in nine hours of negotiations. The marathon session was concluded with a statement that acknowledged plans for “controlled centers” within the EU to process asylum requests and that Italy would no longer bear sole responsibility for rescues at sea. However, the statement was vague on details, suggesting more work remains to be done. The Dollar Index notched a low in midday trade, narrowing its Q2 gain to 5.2%.

Bonds: First Half Ends With Whimper

U.S. Treasuries ended the first half of 2018 on a generally flat note. Today also marked the final session of the month and the quarter, but intraday action was mostly restrained. The long bond saw a bit more intraday movement, but was pressured back beneath its flat line by the close. That outperformance was consistent with the established trend of relative weakness in shorter tenors and relative strength on the long end. The 30-yr bond hit its session high in midday action, briefly pressuring its yield to 2.954%, which matched the session low from May 29. However, a late-afternoon pullback sent the long bond to a fresh low, lifting its yield back above the 200-day moving average at 2.968%.

The yield curve flattened as longer maturities’ yields fell against the shorter maturities. The spreads between the benchmark yields are now tighter than they’ve ever been since pre-subprime. The spread between the 5s10s tightened to 12 bps from 13bps the previous week while the 10s30s tightened to 13bps from 15bps the previous week. 

 Commodities 

The Bloomberg Commodity Index settled at 87.41, higher than 86.42 the previous week as oil makes great gains.

WTI oil closes above $74/barrel. The spread between WTI and Brent narrowed for the sixth straight week to $5.29 from $6.25 the previous week (from $8.38 the week before).

EIA petroleum data for the week ended June 22

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 9.9 mln barrels from the previous week. At 416.6 mln barrels, U.S. crude oil inventories are about 4% below the five year average for this time of year. Total motor gasoline inventories increased by 1.2 mln barrels last week and are about 6% above the five year range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories remained unchanged last week and are about 14% below the five year average for this time of year. Propane/propylene inventories increased by 4.3 mln barrels last week and are about 12% below the five year average for this time of year. Total commercial petroleum inventories decreased by 4.6 mln barrels last week.

Natural gas inventory showed a build of 66 bcf vs a build of 91 bcf in the prior week- nat gas drops initially. Working gas in storage was 2,074 Bcf as of Friday, June 22, 2018, according to EIA estimates. This represents a net increase of 66 Bcf from the previous week. Stocks were 735 Bcf less than last year at this time and 501 Bcf below the five-year average of 2,575 Bcf. At 2,074 Bcf, total working gas is within the five-year historical range.

Baker Hughes total U.S. rig count decreased by 5 to 1047 following last week’s decrease of 7.

Metals: Weakness persists

Agriculture: Corn, Wheat halt the drop, Soy continues falling

USDA’s annual acreage report and quarterly grains stocks reports

USDA Quarterly Grain Stocks Report:

USDA Annual Acreage Report :

The annual acreage report is one of three annual reports the USDA releases each year that discusses planting expectations. (Not to be confused with the WASDE report, which gives a running estimate each month of what they think inventory levels will be at the end of each given crop year.)

Thus, the third one is the most legit, final report that the USDA releases each year that says how much of what crop was actually planted in the U.S.

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THE WEEK AHEAD

Week 27 (July 02 to 06) tends to be bullish across our 5, 10 and 15 year seasonal models.

Benchmarks (21 year average) for wk27:

Key Economic Dates

Week 27

The Fed will be publishing the minutes of its last meeting while the RBA will be deciding on monetary policy. Key economic data include: US jobs report, trade balance, ISM PMIs, ADP employment change and factory orders; UK Markit PMIs; Eurozone unemployment and retail sales; Japan quarterly business survey and household spending; China Caixin PMIs; and Australia trade balance.

Mon 02 July

Tue 03 July

Wed 04 July

Thu 05 July

Fri 06 July

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THE MONTH AHEAD

July is the first month of Quarter Three, the “worst” quarter of the financial year with August and September being the most bearish months on record. July is also the start of Q3’s Earnings Season for Q2 results and tends to be rather volatile. July is the start of NASDAQ’s “worst four months” and is the third month in “the worst six months” on the DOW and S&P500.

July 2018 has twenty-one (21) trading sessions including one half-day and one public holiday on the 4th of July in observance of Independence Day. July tends to start out very bullishly but becomes volatile and even bearish in the second half of the month.

July Trivia

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OBSERVATION

The Dow Jones Industrial Average fell below its critical 200DSMA on Monday, putting it in technically bearish territory. The last time it closed below that key average was two years ago on 27 June 2016. 

Following on the heels of the Industrials, the Transports have also fallen below its 200DSMA for the first time since end-August 2017.

Both the Industrials and Transports are negative year-to-date.

SUMMARY

It is becoming increasing nervous in the markets as the yield curve accelerates its flattening and the DOW indices become technically bearish (below the 200DSMA) and drop into negative for the year yet again. On the economic front, there is very little to suggest that the US is anywhere near an economic slow down. This could suggest that the current volatility is probably just seasonal weakness as is usually the case between June and September.

So on we go into the worst quarter of the year to be a bull. I suspect we’re in for a really bumpy ride with lots of bearish surprises ahead. The bulls have not been in the game since January this year and are not likely to want to venture into risk at this point of time. Keep watching the yield curve – I am guessing that’s where the bulls have been running to.

Happy Hunting!

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