Weekly Market Update – 20 February 2017 BMO

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Another week, another round of gains for the major averages. The S&P 500 climbed 1.5% to record its fourth consecutive weekly advance. The benchmark index has now posted gains in five of the first seven weeks of 2017, rising 5.0%.

The past week was highlighted by Fed Chair Janet Yellen’s semiannual testimony to Congress, which took place on Tuesday and Wednesday. The market handled the testimony well even though Chair Yellen’s comments showed the Fed may need to adjust its rate hike outlook as the year goes on. Specifically, Senator Pat Toomey asked Ms. Yellen why the Fed didn’t really bump up its growth projections at all at the December meeting when many other bodies, like the IMF, have bumped up their 2017 growth prospects based on a belief that the implementation of fiscal stimulus in the U.S. will have a positive effect on growth.

Ms. Yellen said most of her colleagues refrained from doing so because they wanted greater clarity on the time, scope, and composition of any fiscal changes before making assumptions on the growth outlook. In sum, the comments showed that the Fed will be required to raise rates faster than it currently expects if fiscal measures end up boosting economic growth—a notion that has been bought fully by the stock market.

The market also saw continued support stemming from President Donald Trump’s announcement that a “phenomenal” tax reform package was going to be announced in the next couple weeks.

The visions of tax reform and nothing but good things on the fiscal front kept a bid under the stock market, even though the latest round of inflation data showed hotter than expected PPI (+0.6%; Briefing.com consensus 0.3%) and CPI (+0.6%; Briefing.com consensus 0.3%) in January.

Last week’s steady rise in the stock market took place even though rate hike expectations were pulled forward, briefly showing a 50.0%+ likelihood of a rate hike in May. By the end of the week, the implied likelihood of a May hike was down to 44.1% while the probability of a June hike ended the week at 69.9%, up slightly from last Friday’s 68.3%.

(Excerpts from Briefing.com)

Bonds saw an about-face this week as its curve steepen after the previous week’s flight-to-safety.

Commodities closed mostly lower except for Precious .

Agriculture Closing Prices

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Screen Shot 2017-02-19 at 10.23.28 AMTHE WEEK AHEAD

Tuesday 21 to Friday 24 February (Week 08)

The eighth week of 2017 (wk8) is bullish for the SPY and DIA over the last 5 years with more than 80% reliability. However, the stats over the last 10 and 15 years are flat-to-bearish with less than 60% reliability.

The 2017 Stock Trader’s Almanac’s averages for the DOW are bullish on Tuesday and Wednesday at 52% and bearish on Thursday (62%) and Friday (52%). S&P500 is bullish on Wednesday at 57% and bearish on Tuesday (52%), Thursday (57%) and Friday (52%).

Key Economic Dates

Mon 20 Feb
• Australia Monetary Policy Meeting Minutes

Tue 21 Feb
• UK Inflation Report Hearings

Wed 22 Feb
• EU – European Flash Manufacturing PMI and Flash Services PMI, Final CPI y/y, French Flash Manufacturing PMI, French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI, German Ifo Business Climate,
• US Existing Home Sales, FOMC Meeting Minutes
• Australia Private Capital Expenditure q/q

Thu 23 Feb
• Australia Second Estimate GDP q/q, Prelim Business Investment q/q
• US Housing Starts

Fri 24 Feb
• EU German Prelim CPI m/m, Spanish Flash CPI y/y
• US New Home Sales, Revised UoM Consumer Sentiment

SUMMARY

12.3% Growth. Seriously?

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I must be way behind the economy or must’ve missed something huge to not see or know that our economy hit double-figure growth. This is the best return in six years since Q1 2011 … wait a minute … the economy today is no where near the kind of health it had in the last six years. With so many jobs lost, empty shops, vacant properties and fewer jobs available than there are candidates, how does a spike in manufacturing boost the overall GDP by that much?

Or are the manipulators of this statistics setting Singapore up for a major downside next quarter when we find out that this number is not sustainable. Or perhaps they’ll have downward “revisions” before the next reading to quell the enthusiasm.

This is beyond me. It was already questionable when the estimate was 9.1%. This is really something for the number-crunchers to mull over.

Happy Hunting.

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Weekly Market Update – 13 February 2017 BMO

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The stock market secured its third consecutive weekly advance with the S&P 500 rising 0.8%. The benchmark index posted gains in four of the first six weeks of 2017 while the two down weeks in the middle of January shaved a whopping 0.25% off the index.

The first half of the week featured sideways action just below record highs from late January, but the market snapped out of that range on Thursday after comments from President Donald Trump reminded investors that tax reform remains a priority. Mr. Trump announced that something “phenomenal” on the tax front would be announced in the next two or three weeks. The comments, which did not include specific details, were enough to encourage investors, who were starting to worry that a major campaign promise may go unaddressed.

Market participants received another heavy dose of quarterly reports, but the earnings had more influence on individual stocks than the broader market. At the end of the week, more than 71.0% of S&P 500 components had reported their results, generating blended earnings growth of 4.9%, according to FactSet. This represented a modest shortfall relative to the estimate from the end of September, which called for growth of 5.2%.

The past week was quiet on the economic front, leaving investors with just a few second-tier reports to digest. The preliminary reading of the Michigan Sentiment index for February declined to 95.7 from 98.5, almost entirely due to a pullback in the Expectations Index. That index fell to 85.7 from 90.3 while the Current Economic Conditions Index ticked down to 111.2 from 111.3.

Rate hike expectations barely budged on a week-over-week basis. The fed funds futures market ended the week showing a 67.3% implied probability of a rate hike in June, up from last week’s 63.5%, but down slightly from 69.2% two weeks ago.

The benchmarks traded on a very narrow breadth on Thursday and Friday with significantly lower volumes as Algo systems dominated the trade after Trump’s mention of ‘phenomenal’ tax reforms’.

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The week ahead is not likely to be affected by earnings as most of the big guns have already run the gauntlet and left a lot of optimism ahead of us. However, the Dollar and Bond Yields are not behaving in a way that is convergent to a risk-on market.

Dollar Rallies but Hesitates After Michigan Sentiment
The U.S. Dollar Index rose 0.20% to 100.85 today as the dollar gained against all of the majors. The greenback rallied up until mid-morning in the U.S. when a weaker-than-expected Michigan Sentiment reading sent Treasury yields lower and the dollar back down. The euro made a one-month low as eurozone core/periphery yield spreads widened again and investors concerned themselves with France’s presidential election in April. Bloomberg says that right-wing Marine Le Pen has a 31% chance of victory, which is probably too high, but her victory could easily lead to French departure from the eurozone. Industrial production in Italy grew at its fastest year-on-year pace since 2011 during December but French industrial production missed forecasts. In the U.K., economic reports continue to show strength and industrial production growth there hit a five-year high in December while the trade deficit narrowed more than expected. The Aussie dollar is near a one-year high as labor unrest pushed copper prices to their highest level since early 2015

January Treasury Budget $51.3 bln vs. $55.2 bln prior
The Treasury Budget for January showed a surplus of $51.3 billion versus a surplus of $55.2 billion for January 2016.  The Treasury Budget data is not seasonally adjusted, so the January surplus cannot be compared to the $27.3 billion deficit registered in December.

(Excerpts from Briefing.com)

Bonds saw its curve flatten as longer maturities received a flight-to-safety in spite of the bullish nature of the risk trade.

Commodities had a flattish week with nary a gain or loss across all the trading complexes.

Agriculture Closing Prices

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Screen Shot 2017-02-10 at 11.10.05 PMTHE WEEK AHEAD

Monday 13 to Friday 17 February (Week 07)

The seventh week of 2017 (wk7) is bullish for the SPY (more than 70%) and DIA (60%) over the last 5, 10 and 15 years.

The 2017 Stock Trader’s Almanac’s averages for the DOW are bullish on Monday and Wednesday at around 66% and bearish on Tuesday (53%), Thursday (57%) and Friday (62%). S&P500 is bullish on Monday and Wednesday at around 71% and bearish on Tuesday (53%), Thursday (62%) and Friday (57%).

Key Economic Dates

Earnings Calendar for the week of February 13th 

SUMMARY

As earnings season winds down, things look to be getting back to normal and the market looks ready for another leg up. But before it does, it will have to overcome the next two weeks of volatility from expiration Friday this week and a slew of economic data the following week. I closed out my long positions on Friday and will be looking for go short before the middle of the week.

Happy Hunting!

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Candlestick & Breakout Patterns Workshop (Singapore)

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Don’t miss this upcoming …

8-HOUR CANDLESTICK &
BREAKOUT PATTERNS WORKSHOP

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

CS

sinflag

Next Workshop in Singapore will be:
Saturday 25 February 2017  from 9:30am to 5:30pm

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

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

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Reserve your seat for the next session now!

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

*LIMITED SEATS, SO BOOK EARLY!!

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Comments Off on Weekly Market Update – 06 February 2017 BMO

Weekly Market Update – 06 February 2017 BMO

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After enjoying a solid 1.0% gain two weeks ago, the stock market returned to its range-bound ways. The S&P 500 spent the week inside a 31-point range, ending the week higher by 0.1%.

The past week was rife with earnings, economic data, and commentary from two major central banks, but the market shrugged off the busy event calendar, remaining near record levels.

Most notably, the Federal Open Market Committee concluded its latest two-day meeting on Wednesday. The central bank maintained its policy stance and gave little indication that a rate hike could be announced at the next policy meeting in May.

Wednesday’s FOMC announcement followed the release of a stronger than expected ADP Employment Report for January (246,000; consensus 165,000). Friday’s release of the Employment Situation report also showed above-consensus headline growth (227,000; consensus 170,000), but average hourly earnings increased just 0.1% (consensus 0.3%) and last month’s growth was revised down to 0.2% from 0.4%. As a result, the year-over-year average hourly earnings growth rate slowed to 2.5% from 2.8% in December.

The combination of solid job growth and lackluster wage growth was welcomed by the stock market, considering it did not foreshadow an inflationary spike that would prompt a hawkish response from the Fed.

Rate hike expectations saw a moderate downtick. On Friday afternoon, the fed funds futures market pointed to a 63.5% implied likelihood of a June hike, down from last week’s 69.2%. Friday’s economic data gave investors the confidence to finally break the week’s sideways trend and push the stock market higher. The major averages hit their session highs within an hour of the opening bell and maintained said levels into the close.

On the earnings front, investors received a set of results from heavyweights like Amazon (AMZN), Apple (AAPL), Facebook (FB), Visa (V), UPS (UPS), and others. Amazon and UPS missed estimates while Apple, Facebook, and Visa surpassed expectations. However, it is worth noting that while Apple reported above-consensus results, the company faced reduced competition during the quarter after the recall of Samsung’s Note 7 in early October.

January Employment Situation Report

(Excerpts from Briefing.com)

Bonds saw a run into shorter maturities while the longer maturities sold off to significantly steepen the curve this past week. This could be suggesting a return to risk in the coming weeks.

The Bank of Japan announced last September that it would continue doing asset purchases but that it would pursue a policy dubbed “yield curve control” in which it would target the 10-year JGB yield around 0.00%. That yield has not been negative since November, so traders began to question the symmetry of the BoJ’s target this week and pushed the 10-year yield as high as 0.155%.

Since last September, government debt yields in both the U.S. and Europe have marched higher and rising yields, if unchecked, were bound to test the Bank of Japan eventually.

The Bank of Japan responding during Japan’s Friday trade by increasing its Fixed Rate Operation to JPY450 bln from JPY410 in the prior operation. That measure did not convince the market for long and the BoJ eventually offered to buy an unlimited quantity of five and 10-year JGBs (the latter at a yield of 0.11%) and that pushed the 10-year JGB yield back below 0.10%.

Former Fed Chair Ben Bernanke warned at the outset of the yield curve control policy that the BoJ gave up control over the size of its balance sheet, particularly if the BoJ’s target is not seen as credible. A perhaps more urgent problem for the Bank of Japan is that it will eventually run out of securities to buy, which is why BoJ Kuroda has pledged to limit annual purchases to JPY80 tln. Setting both a price and a quantity at the same time is hard to do.

It will be interesting to see if the BoJ gets tested again next week.

(Excerpts from Briefing.com)

Commodities had a flattish week with nary a gain or loss across all the trading complexes.

Agriculture Closing Prices

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Screen Shot 2017-02-04 at 2.28.47 PMTHE WEEK AHEAD

Monday 06 to Friday 10 February (Week 06)

The sixth week of 2017 (wk6) is bullish for the SPY and DIA over the last 5, 10 and 15 years with the benchmarks at more than 60%.

The 2017 Stock Trader’s Almanac’s averages for the DOW are bullish on Monday, Tuesday, Thursday and Friday at around 57% and flat-to-bearish on Wednesday at 53%. S&P500 is bullish on Monday, Tuesday, Wednesday and Friday at around 60% and flat-to-bearish on Thursday at 53%.

Key Economic Dates

Mon 06 Feb
• China Caixin Services PMI
• Australia Cash Rate, RBA Rate Statement

Tue 07 Feb
• UK Halifax HPI m/m
• China Trade Balance

Wed 08 Feb
• China CPI, PPI

Fri 10 Feb
• UK Good Trade Balance, Manufacturing Production m/m
• US Prelim UoM Consumer Sentiment, Import Prices m/m, Mortgage Delinquencies

Sun 12 Feb
• Japan Prelim GDP q/q

 Earnings Calendar for the week of February 6th 

SUMMARY

Let’s see if things are truly back to “normal” in the market in the coming week. If, like the stats suggest, the week is bullish, we should be able to scrape a profit off the table by being long for the week. With no major economic news to pose a serious threat, I reckon we should ease past the week with little stress.

Then again, be prepared just in case.

Happy Hunting!

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Comments Off on Sector Report 1701 : Retail – Home Improvement, Discount and Broadline 2017

Sector Report 1701 : Retail – Home Improvement, Discount and Broadline 2017

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After three years, it is time to check out the Retail industry again, right in the middle of earnings season when most of them will be calling out their Q4 performance over the next couple of weeks. Let’s see if they have what it takes to make its seasonal run between February and April.

As usual, we have market and economic updates on the US and Singapore for the month of February 2017.

Get your issues here: Sector Report 1701 : Retail – Home Improvement, Discount and Broadline 2017

 

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Comments Off on January 2017 In Review, February Preview

January 2017 In Review, February Preview

US-vs-China-1

I thought Singapore had problems with China working to effectively cut off our trade routes with the Beijing-London rail, the ports in the Johor Straits and South China Sea and the coming Kra Canal. But all the parts for a perfect storm have gathered and like so many times in the past history is once again repeating itself with familiar patterns that often paint one outcome – War.

TUTORIAL MATTERS

In January, I announce the end of my ten-year association with Adam Khoo. (The End Of My Ten-Years At AKLTG). So for those who didn’t get the message, AKLTG will no longer be Pattern Trader’s exclusive marketing agent and/or exclusive event manager after 30 June 2017. (But that is not to say that we won’t be collaborating on ad-hoc projects in future.) So between now and 30 June 2017, AKLTG will still continue to market and manage the final few batches between now and June 2017 as part of the closing transition;

The Pattern Trader Tutorial will continue running on its own after June 2017 under a new entity as we evolve into the next phase of growth. All Pattern Trader Graduates are advised to find out more on our Facebook Alumni Page (Members only).

With all that is happening, January 2017 was a month of networking and making new acquaintances. It was also a month of catching up with old friends as I dig up contacts and alliances to help/advice/offer any and all avenues for the many directions I will be taking in 2017 as I look to grow and expand my career(s).

The ground work is almost done and dusted which means the elbow grease is coming up next. There is a lot of work ahead of me and much to do with little time to do it all in. But it is doable and I intend to meet my own deadlines.

MARKET MATTERS

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DOW broke above 20,000 but couldn’t hold the highs after three sessions and promptly washed out in a triple-digit loss on Monday 30 January.  Now questions are being asked of this Trump Rally and its sustainability. I personally am staying on the side of caution after believing that the US economy was doing okay. A slow down in its growth in Q4 2016 is giving me second thoughts about the real health of the US economy even as earnings in the first three weeks of earnings season have not been bad at all.

Now the DOW has completed 2 DFDMs (Down Friday, Down Monday) in 3 weeks at the top. Such congestions of DFDMs often lead into corrections after a top.

Yields have remained broadly unchanged since the start of the year placing the yield curve in a normal-to-steep position for the month. This would usually suggest greed in the risk markets.

Yields

However, there has been hardly any change in yields since the start of December 2016 to the start of January 2017 and now the end of January 2017. If anything, the yield curve has seen some flattening with the shorter maturities’ yields rising against the longer term yields by as much as 10bps in these two months. With the steepening stalling for more two months now, doubt seems to be creeping into risk.

Those of you who have been following my posts, know that I treasure the Transports ($TRAN/$DJT) more than the other benchmarks.

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Both Transport Indices are showing perfect Double Tops with their necklines at 2015’s opening price. 9,000 is going to be a critical support level going into February, a month that’s not particularly friendly with the Transports.

SINGAPORE

The Island State has been having a rough time of it but there have been a few upticks to brighten our days like improved manufacturing numbers and inflation rate. For the first time in 25 months, inflation came in at a positive 0.2% y/y. And we got our Terrexes back from China. But that’s as good as it gets.

Singapore’s seasonally adjusted jobless rate rose to 2.2 percent in the three months to December of 2016 from 2.1 percent in the September quarter making it the highest jobless rate since the fourth quarter 2010.

SGemploy

Singapore’s Property prices fell for a thirteenth consecutive quarter. This is the country’s longest consecutive property decline in its history.

SGPropertyJan2017

For the record, between 2000 and 2004, property prices fell for 15 quarters but had two quarters of upticks in 2002. The last times Singapore had extended runs of falling property prices were 1984 to 1986 (10 quarters) and 1996 to 1999 (10 quarters).

In terms of index points lost, the 1996-1999 drop still stands as the worst. The current drop is the country’s second worst index points loss.

FEBRUARY PREVIEW

February 2017 is the shortest trading month of the year with only 19 trading sessions and one public holiday. February usually opens well but finishes poorly.

February is the worst of the three months in quarter one and tends to be flat-to-bearish in most years past. The month is also known as “the weakest link” in the best six month on the DOW and S&P between November and April, with the exception of January between 2014 and 2016.

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Post-election years have not been good to February either.

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February this year is going to be a tricky month as there are plenty of reasons why a correction may happen. MarketWatch has a good paper on this which can be summarised in a handful of points;

MW-FE770_mkmFeb_20170131043502_NS

FEBRUARY TRIVIA

Key Economic Dates

Mon 30 Jan
• EU Spanish Flash CPI y/y
• US Core PCE Price Index m/m, Personal Spending m/m, Pending Home Sales
• Japan Monetary Policy Statement, BOJ Outlook Report, BOJ Policy Rate

Tue 31 Jan
• Japan BOJ Press Conference
• EU CPI and Core CPI Flash Estimate y/y, Prelim Flash GDP q/q,
• EU German Retail Sales m/m, German Unemployment Change
• US Chicago PMI, Consumer Confidence
• China Manufacturing PMI, Non-Manufacturing PMI

Wed 01 Feb
• UK Manufacturing PMI
• EU Economic Forecast
• US ADP Non-Farm Employment Change, ISM Manufacturing PMI, FOMC Statement, Fed Funds Rate
• Australia Building Approvals, NAB Quarterly Business Confidence, Trade Balance

Thu 02 Feb
• UK Construction PMI, BOE Inflation Report, MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate
• US Prelim Unit Labor Cost q/q, Prelim Nonfarm Productivity q/q
• Australia RBA Monetary Policy Statement
• China Caixin Manufacturing PMI

Fri 03 Feb
• UK Services PMI
• US Non-Farm Employment Change, Unemployment Rate, ISM Non-Manufacturing PMI

Mon 06 Feb
• China Caixin Services PMI
• Australia Cash Rate, RBA Rate Statement

Tue 07 Feb
• UK Halifax HPI m/m
• China Trade Balance

Wed 08 Feb
• China CPI, PPI

Fri 10 Feb
• UK Good Trade Balance, Manufacturing Production m/m
• US Prelim UoM Consumer Sentiment, Import Prices m/m, Mortgage Delinquencies

Sun 12 Feb
• Japan Prelim GDP q/q

Tue 14 Feb
• EU Flash GDP q/q, German Prelim GDP q/q, German ZEW Economic Sentiment
• UK CPI y/y, RPI y/y, PPI Input m/m
• US PPI m/m, Core PPI m/m

Wed 15 Feb
• UK Average Earnings Index 3m/y, Claimant Count Change, Unemployment Rate
• US CPI m/m, Core CPI m/m, Core Retail Sales m/m, Retail Sales m/m, Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production m/m
• Australia Employment Change, Unemployment Rate

Thu 16 Feb
• EU ECB Monetary Policy Meeting Accounts
• US Housing Starts, Philly Fed Manufacturing Index, Building Permits

Fri 17 Feb
• UK Retail Sales m/m, Public Sector Net Borrowing

Mon 20 Feb
• Australia Monetary Policy Meeting Minutes

Tue 21 Feb
• UK Inflation Report Hearings

Wed 22 Feb
• EU – European Flash Manufacturing PMI and Flash Services PMI, Final CPI y/y, French Flash Manufacturing PMI, French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI, German Ifo Business Climate,
• US Existing Home Sales, FOMC Meeting Minutes
• Australia Private Capital Expenditure q/q

Thu 23 Feb
• Australia Second Estimate GDP q/q, Prelim Business Investment q/q
• US Housing Starts

Fri 24 Feb
• EU German Prelim CPI m/m, Spanish Flash CPI y/y
• US New Home Sales, Revised UoM Consumer Sentiment

Mon 27 Feb
• EU M3 Money Supply y/y
• US Core Durable Goods Orders m/m, Durable Goods Orders m/m, Pending Home Sales m/m
• Australia Current Account

Tue 28 Feb
• EU Core CPI Flash Estimate y/y, CPI Flash Estimate y/y, German Retail Sales m/m
• US Prelim GDP q/q, Chicago PMI, CB Consumer Confidence
• Australia GDP q/q
• China Manufacturing PMI, Non-Manufacturing PMI, Caixin Manufacturing PMI

Commodities

SUMMARY

Whether February turns into a buying opportunity or the catalyst of longer term fear will largely depend on its head-to-head, toe-to-toe confrontation with China and Trump’s ongoing agenda to be a tyrant. In barely two weeks since taking office, he has signed two executive orders that hint that the man has no intention of putting his policies through congress or debating the point of such policies. Only God knows how much more of this is waiting for the U.S. in February.

My main concern, as I’ve mentioned, is the possibility of war. What we don’t know about on The Little Red Dot, is how seriously China is taking this. The whole country is preparing itself for war and patriotism is running at fever pitch. We don’t get this news here or in the western media but those who are in business in China will not deny this.

This scares me.

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Comments Off on Weekly Market Update – 30 January 2017 BMO

Weekly Market Update – 30 January 2017 BMO

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The stock market enjoyed a solid week, which saw the three major averages climb to fresh record highs. The S&P 500 gained 1.0% for the week while the Dow Jones Industrial Average (+1.3%) and Nasdaq Composite (+1.9%) outperformed. The Dow received added attention in the media during the second half of the week after making its first appearance above the 20000 level on Wednesday.

The past week was highlighted by a healthy dose of quarterly reports from influential market components like Alphabet (GOOGL), Boeing (BA), Microsoft (MSFT), McDonald’s (MCD), Intel (INTC), Texas Instruments (TXN) and Qualcomm (QCOM) among others. In general, results from the tech sector were strong while earnings from other areas of the market were more mixed.

At the end of the week, roughly 34% of S&P 500 components had reported their results, showing a blended earnings growth rate of 4.0% versus market expectations for growth of 5.2%, according to FactSet.

The economic calendar also featured a fair share of reports, but the market did not appear particularly concerned with disappointing December Existing Home Sales (5.49 million; Briefing.com consensus 5.55 million), December New Home Sales (536,000; Briefing.com consensus 589,000), advance fourth quarter GDP (+1.9%; Briefing.com consensus 2.2%), nor December Durable Orders (-0.4%; Briefing.com consensus 3.0%).

Rate hike expectations held firm with the fed funds futures market pointing to a 71.9% implied likelihood of a rate hike in June.

Net Exports Weigh Down Q4 GDP
The advance estimate for fourth quarter GDP showed real GDP increase at an annual rate of 1.9% (Briefing.com consensus 2.2%) after increasing 3.5% in the third quarter.  The Price Deflator was up 2.1%, as expected, versus a 1.4% increase in the third quarter.

The key takeaway from this report is that fourth quarter activity revealed the strong third quarter growth was as an aberration, yet that point aside, the salient takeaway for many is that this is a backward-looking report and the markets have their sights set on a brighter economic outlook for 2017, which is expected to feature deregulation, tax reform, and infrastructure spending among other items.

Dollar Rallies Despite Soft GDP Report
The U.S. Dollar Index gained 0.19% to 100.57 today as the greenback rallied against the Japanese yen and British pound. The dollar traded higher despite a weaker-than-expected Q4 U.S. GDP Report, likely because of its oversold condition following a difficult start to 2017. After reaching 103.82 on the first trading day of the year, the Dollar Index fell under 99.80 on Wednesday. European yields have shown a lot more enthusiasm on the upside on the past few sessions so it is possible that the euro and British pound begin to made headway higher against the dollar. It was the sharp divergence between German Bund and U.S. Treasury yields that drove the dollar’s strength against the euro in November and December

(Excerpts from Briefing.com)

Bonds remained generally unchanged from the previous week’s close, thus maintaining its normal-to-steep personality.

Commodities had a flattish week with nary a gain or loss across all the trading complexes.

Agriculture Closing Prices

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THE WEEK AHEADFebStats

Monday 30 January to Friday 03 February (Week 05)

The fifth week of January (wk5) is bullish for the SPY and DIA over the last 5, 10 and 15 years with the benchmarks with an average 60%.

The 2017 Stock Trader’s Almanac’s averages for the DOW and S&P500 are flat on Monday,  mildly bullish on Tuesday at around 54%, very bullish on Wednesday at 76% and flat-to-bearish on Thursday and Friday at an average 53%.

Key Economic Dates

Mon 30 Jan
• EU Spanish Flash CPI y/y
• US Core PCE Price Index m/m, Personal Spending m/m, Pending Home Sales
• Japan Monetary Policy Statement, BOJ Outlook Report, BOJ Policy Rate

Tue 31 Jan
• Japan BOJ Press Conference
• EU CPI and Core CPI Flash Estimate y/y, Prelim Flash GDP q/q,
• EU German Retail Sales m/m, German Unemployment Change
• US Chicago PMI, Consumer Confidence
• China Manufacturing PMI, Non-Manufacturing PMI

Wed 01 Feb
• UK Manufacturing PMI
• EU Economic Forecast
• US ADP Non-Farm Employment Change, ISM Manufacturing PMI, FOMC Statement, Fed Funds Rate
• Australia Building Approvals, NAB Quarterly Business Confidence, Trade Balance

Thu 02 Feb
• UK Construction PMI, BOE Inflation Report, MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate
• US Prelim Unit Labor Cost q/q, Prelim Nonfarm Productivity q/q
• Australia RBA Monetary Policy Statement
• China Caixin Manufacturing PMI

Fri 03 Feb
• UK Services PMI
• US Non-Farm Employment Change, Unemployment Rate, ISM Non-Manufacturing PMI

 Earnings Calendar for the week of January 30

SUMMARY

Last week’s call was spot on which gives me a hint that the market may be back to its normal patterns;

I will be holding out on buying and will remain on my long Puts for now. But I will be watching for any sign of reversals towards the end of this week just in case.

This week is the reverse of last week but don’t let the slightly bullish nature of the start of the week fool you into complacency. February can be a disappointing month for the bulls as history has proven so often. I will be long this week but I won’t holding the long beyond Wednesday.

Happy Hunting!

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Lunar New Year 2017

LNY2017

As the new lunar year draws upon us, take the time to mull over how you’re going to make the Year Of The Rooster a better year than last year in spite of the difficulties and hurdles that lay before us.
• If you never give up, you don’t fail.
• You may falter but you can get up. 
• They can beat you down but you can fight back.
• Many will discourage you but you can do better.
• For everything that happens, there will be an outcome you can control.

There is always one more thing you can do to make your year a better one. There is always something to be thankful for. There will always be something worth fighting for. There is every reason to want to be better than the person you were last year.

Have a safe and great weekend everyone!!

 

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Comments Off on Weekly Market Update – 23 January 2017 BMO

Weekly Market Update – 23 January 2017 BMO

Dexes

The DOW refused to break above 20,000 again as it completed the flattest month in 50 years. The Dow’s high and low prices over the past month was a thin 1.4 percent, the narrowest gap in data going back to 1957. It also seems to be completing a rather flat Double Top as of Friday’s close. All the benchmarks closed lower for the week with the Russells falling into negative for the year.

Expectations for a stronger economy have not only been bolstered by policy hopes from the new administration, but also by the slew of better-than-expected economic data. Weekly jobless claims remain around their lowest levels in decades, while the consumer price index rose 2.1 percent in December on a year-over-year basis. In fact, the Citi U.S. Economic Surprise index has risen to its highest level since 2014. A higher reading on the index indicates more positive economic data surprises.

Sector standings were consistent throughout the day, with telecom services (+0.9%) and materials (+0.9%) camping out at the top of the leaderboard, and health care (-0.3%) and industrials (unch) setting up shop at the bottom. Each of the remaining seven sectors closed in the green. Energy (+0.5%) broke its two-session losing streak, piggybacking on crude oil’s 2.1% advance. The commodity finished at $53.25/bbl, climbing for the second consecutive day as investors eyed this weekend’s OPEC/non-OPEC compliance meeting, hoping for indications of a tightening market. The financial sector (+0.5%) had a poor showing this week, despite ending Friday with an uptick. The space lost 1.6% for the week as better-than-expected quarterly earnings results from some of its top components were met with a sell-the-news response in the wake of the sector’s huge 20.5% fourth quarter gain.

The top-weighted technology sector (+0.5%) also finished the day higher. Technology started the day on a positive note after both IBM (IBM 170.55, +3.74) and Skyworks Solutions (SWKS 88.67, +10.21) reported better-than-expected earnings, adding 2.2% and 13.0%, respectively. Skyworks Solutions’ spike also had a ripple effect on other chipmakers, evidenced by the 1.3% increase in the PHLX Semiconductor Index.

In addition to IBM, three more Dow components reported before today’s opening bell, including American Express (AXP 76.20, -0.49), General Electric (GE 30.53, -0.68), and Procter & Gamble (PG 87.45, +2.75). American Express and General Electric declined 0.6% and 2.1%, respectively after reporting disappointing results while Procter & Gamble jumped 3.3% on better than expected earnings-per-share and upbeat organic sales growth.

Looking ahead, investors will not receive any economic data on Monday, but they will see a slew of earnings reports. Most notably, McDonald’s (MCD 122.26, +0.08) and Halliburton (HAL 56.45, +1.11) will report before the open, while Yahoo! (YHOO 42.05, -0.04) will report after the close.

(Excerpts from Briefing.com)

Bonds

YieldsThe bond yield curve steepened from the 13 Jan close with the longer maturity yields rising as the 2yr yield fell.

At the start of the week on Tuesday, yields across the board actually fell to flatten the curve from the previous Friday’s close. However, yields rose during the shortened week to steepen the curve.

(From 13 Jan 17 to 20 Jan 17)

Commodities had a mixed week with Precious and Energy prices finishing higher for the week.

Agriculture Closing Prices mostly rose from the week before, making it two straight weeks of gains.

THE WEEK AHEAD

Tuesday 23 to Friday 27 January (Week 04)

The fourth week of January (wk4) is flat for the SPY and DIA over the last 5, 10 and 15 years with the benchmarks with  less than a 60%.

The 2017 Stock Trader’s Almanac’s averages for the DOW and S&P500 are bearish on Monday and Tuesday at around 66% on the DOW and 53% on S&P500. Wednesday, Thursday and Friday get bearish with the DOW at an average 59% and the S&P500 at an average 57%.

Key Economic Dates

Mon 23 Jan
• EU, French, German Flash Manufacturing PMI, Flash Services PMI, German Iso Business Climate

Tue 24 Jan
• US Existing Home Sales
• Australia CPI q/q, Trimmed Mean CPI q/q

Thu 26 Jan
• EU German Prelim CPI m/m, Spanish Unemployment Rate
• UK Prelim GDP q/q
• US New Home Sales
• Japan Household Spending y/y, Tokyo Core CPI y/y

Fri 27 Jan
• EU Spanish Flash GDP q/q, M3 Money Supply y/y
• US Durable Goods Orders m/m, Advance GDP Price Index q/q, Consumer Sentiment

Earnings out next week for Q4 earnings

Earnings Season really hots up now with the industrial big-hitters releasing their results this week. No less than a third of the DOW components will be announcing their Q4 results in the week along with the big metal/steel makers and towards the second half of the week, the tech companies.

Monday (January 23)

Tuesday (January 24)

Wednesday (January 25)

Thursday (January 26)

Friday (January 27)

SUMMARY

Screen Shot 2017-01-23 at 5.46.55 PM

Overlooking Friday’s volumes as it was Expiration Friday, the volumes during the last three weeks’ consolidation somehow don’t favour the bulls. The MACD is also hinting at more downside as the bearish momentum gains traction the closer it gets to its convergence. The Double Top on all the benchmarks also hint at bearish tendencies.

I will be holding out on buying and will remain on my long Puts for now. But I will be watching for any sign of reversals towards the end of this week just in case.

Happy Hunting!!

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Weekly Market Update – 16 January 2017

The market finished the week in unimpressive style given that it was the eve of a three-day weekend ahead of Martin Luther King Jr Day on Monday 16 January. The S&P 500 took a breather during the past week, logging a modest downtick of 0.1%, while the Nasdaq Composite added 1.0% thanks to relative strength in the technology sector.

The benchmark index spent the week inside a 25-point range as participants awaited the start of the fourth-quarter earnings season. On Friday, Bank of America (BAC), JPMorgan Chase(JPM), and Wells Fargo (WFC) got things going with a set of mixed results. Bank of America and JPMorgan Chase topped bottom-line expectations while Wells Fargo reported below-consensus results. The three names surged at the start of Friday’s session, but saw intraday profit taking. It is worth remembering that the financial sector enjoyed a huge post-election run, soaring more than 15.0% in just one month. During the past week, the sector shed 0.1%.

Investors received a small batch of economic reports last week with the most noteworthy pair crossing the wires on Friday. December PPI (+0.3%; consensus +0.3%) and core PPI (+0.2%; consensus +0.1%) were close to expectations while December Retail Sales (+0.6%; consensus +0.7%) and Retail Sales ex-auto (+0.2%; Briefing.com consensus +0.6%) disappointed. Recall that two weeks ago, several apparel retailers made cautious comments about their expectations for fourth-quarter earnings. The consumer discretionary sector added 0.8% for the week, extending its January gain to 3.2%.

Rate hike expectations barely budged during the past week. The implied probability of a hike in June ticked up to 69.7% from last Friday’s 69.0%, according to the fed funds futures market. (Parts taken from Briefing.com)

The World Economic Forum begins on Tuesday and has a track record of moving the financial markets in the past. But the highlight of the week (may not move markets) is Friday’s Inauguration Day when Donald Trump takes the Presidential Oath of Office at Noon Eastern.

Bonds

The bond yield curve fell from the 6 Jan close with the belly of the curve selling falling more than the 2 and 30 year maturities.

For the week (Monday to Friday), yields actually steepened the curve as Monday’s session closed with longer maturity yields falling more than the 2 and 5 years yields to flatten the curve at the start of the week.

(From 6 Jan 17 to 13 Jan 17)

Commodities mostly had a good week with Precious and Base Metals gaining while Energy prices finished weaker for the week.

Agriculture Closing Prices

THE WEEK AHEAD

Tuesday 17 to Friday 20 January (Week 03)

The third week of January (wk3) is bearish for the SPY and DIA over the last 10 and 15 years with the DOW carrying an average of 50% reliability and the SPY at than 50%. Over the last five years, however, both benchmarks have been bullish at 80%.

The 2017 Stock Trader’s Almanac’s averages for the DOW on Tuesday and Wednesday have a slightly bullish bias at 57% averagely. Thursday is bearish for DOW at 57% and bullish on  S&P500 at 52%. Friday is bearish for both DOW and S&P500 at an average 65%.

Key Economic Dates

Tue 17 Jan
• WEF (World Economic Forum) Annual Meetings
• UK CPI, PPI, RPI
• EU German ZEW Economic Sentiment
• US Empire State Manufacturing Index

Wed 18 Jan
• WEF Annual Meetings
• UK Unemployment Change, Average Earnings
• EU Final CPI y/y
• US CPI, Capacity Utilisation, Industrial Production
• Australia Employment Change, Unemployment Rate

Thu 19 Jan
• WEF Annual Meetings
• EU ECB Press Conference
• US Building Permits, Philly Fed Manufacturing Index, Housing Starts

Fri 20 Jan
• WEF Annual Meetings
• UK Retail Sales
• Inauguration Day: Donald Trump to take the Presidential Oath of Office at Noon Eastern

Earnings out next week for Q4 earnings

SUMMARY

A tale of three very different indices from the same economy. I have not seen such drastic divergences on the benchmarks since 2008. There’s no way to know what it all means but it is telling us that not all is well or proper in the market these days.

I have been on the sidelines for the most part as the last three years’ January months have given me reason to doubt January’s sentiment anymore. Apart from oil scalps, I am likely to not trade anything till I get really reliable statistics and low risk opportunities. For now, this equity market scares me.

Happy Hunting!! … if you can find anything to hunt.

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