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Weekly Market Update – 25 September 2017 BMO

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Holding Steady

Friday was another quiet day on Wall Street as the major U.S. indices hovered near their flat lines from start to finish. The S&P 500 (+0.1%) finished just a tick above its unchanged mark, as did the Nasdaq (+0.1%), thanks to a late-afternoon rally that left the benchmark index at its best level of the day. Meanwhile, the Dow (unch) settled with a slim loss and the Russell 2000 (+0.5%) outperformed, settling at a new all-time high.

Equities held steady this week as investors digested the latest FOMC policy directive, which was released on Wednesday afternoon. The major indices ticked up to new record highs in the first half of the week, but faltered a bit on the back nine. The S&P 500 ticked up 0.1% while the Dow (+0.4%) did a little better and the Nasdaq (-0.3%) did a little worse.

The Fed’s latest policy directive came in pretty much as expected. The FOMC unanimously voted to leave the fed funds target range at 1.00%-1.25% and announced that it will start its balance sheet normalization process in October. Meanwhile, the Fed’s so-called “dot plot” was unchanged from the one released in June, showing that the median FOMC member still anticipates an additional rate hike in 2017 and three rate hikes in 2018.

Accordingly, investors upwardly adjusted their rate-hike expectations, evidenced by the fed funds futures market, which now places the chances of a December rate hike at 72.8% – up from 57.8% last week and 31.9% the week before that. Bonds sold off for the second week in a row following the FOMC announcement, sending yields higher across the curve. The 2-yr yield climbed six basis points to 1.44%, hitting its highest level in nearly nine years, while the benchmark 10-yr yield also jumped six basis points to 2.26%.

Within the equity market, the heavily-weighted financial sector (+2.7%) finished near the top of the sector standings, benefiting from the prospect of heightened interest rates and some sector rotation. The financial group has trailed the broader market for much of the year, but has been making a come back over the last two weeks; the sector has added 6.9% since September 7.

The telecom services group (+3.8%) also put together a solid performance this week, trimming its year-to-date loss to 8.5%, amid reports that Sprint (S) and T-Mobile US (TMUS) are nearing a merger deal after more than four months of on-and-off talks. The two companies settled the week with gains of 10.8% and 4.7%, respectively.

On the flip side, the top-weighted technology sector (-0.7%) underperformed, thanks in large part to Apple (AAPL), which dropped 5.0%. There were rumors of softer-than-expected demand for the new iPhone 8, which hit stores on Friday, but this week’s slide was also likely due to some end-of-quarter profit taking following yet another solid three-month stretch for the company. AAPL shares will enter Monday’s session with a quarter-to-date gain of 5.5% and a year-to-date gain of 31.1%.

Countercyclical groups like health care (-1.2%), consumer staples (-2.3%), and utilities (-2.8%) also struggled this week while cyclical groups like materials (+1.0%), industrials (+2.0%), and energy (+2.0%) finished with sizable gains. Meanwhile, the growth-sensitive consumer discretionary and real estate groups lost 0.1% and 2.8%, respectively.

Sector year-to-date performance;

In politics, President Trump made his United Nations debut on Tuesday, taking a hard stance against North Korea. The hermit nation later criticized the president for his comments and threatened to test a hydrogen bomb in the Pacific Ocean.

Meanwhile, a new health-care bill written by Senators Lindsey Graham (R-SC) and Bill Cassidy (R-LA) gained support within the GOP this week, but its passage looks unlikely after Senators Rand Paul (R-KY) and John McCain (R-AZ) voiced their opposition and Senator Susan Collins (R-ME) said she is leaning towards voting ‘no.’ The GOP can only afford to lose two votes in the Senate, assuming Vice President Mike Pence votes in favor of the bill in the event of a tie.

Interesting to note that the Russells made significant gains in a week when the major indices were flat.

(Excerpts from Briefing.com)

Currencies: Dollar Trims Weekly Gain

The U.S. Dollar Index is lower by 0.1% at 92.15, narrowing this week’s gain to 0.3%. All in all, the Friday session proved to be quiet and not particularly volatile. The greenback saw light overnight selling, which boosted the yen, after North Korea threatened to conduct a nuclear test over the Pacific Ocean. The index notched its low around the start of the European session and spent the next few hours inching higher. Investors did not receive any economic data on Friday.

Bonds Yields: Down Week Ends on Higher Note

U.S. Treasuries ended the week on a mostly higher, but generally quiet, note. The Friday affair began with modest gains after the overnight session featured KCNA’s release of a statement that was attributed to North Korea’s Supreme Leader Kim Jong-un. The statement noted that ‘the highest level of countermeasure’ will be considered in response to President Donald Trump’s speech to the United Nations General Assembly. Later in the Asian session, North Korea’s Foreign Minister revealed that his country may conduct a nuclear test over the Pacific. The cash session featured sideways action as Treasuries built on their opening gains through the first hour of action, but returned to their opening levels in the late morning. The 10-yr yield rose six basis points for the week, but that masked flattening in the yield curve. Granted, the 2s10s spread remained unchanged for the week at 82 bps, but the 2s30s spread compressed to 136 bps from last week’s 139 bps and the 5s30s spread contracted to 93 bps from last week’s 97 bps.

Shorter maturity yields continue to strengthen to flatten the curve further.

Commodities: Oil gains, Metals fade

Crude continued its strength from the last two weeks to close above $50/barrel. Baker Hughes total U.S. rig count declined by 1 to 935 following last week’s decline of 8. Gold and Silver fell for another consecutive week, Copper consolidated below $3.00 for a second week. 

Agriculture: Corn continues to consolidate, Soy falls back, Wheat stalls. 

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

THE WEEK AHEAD

Week 39 is the most treacherous week of September. It usually starts out bearish, becomes volatile midweek and sells off at the end of the week.

Monday 25 to Friday 29 September (Week 39)

The thirty-ninth week of 2017 (wk39) is bearish for the DIA and SPY across the 5, 10 and 15 year averages.

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The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 39;

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Key Economic Dates

Next week, the most important data for the US include the final estimate for GDP growth, PCE inflation, personal income and spending, durable goods and new home sales. Investors will also be looking for updated UK GDP figures; inflation for the Euro Area, Germany, France and Italy; Japan inflation and unemployment and China PMIs.

Mon 25 September

Tue 26 September

Wed 27 September

Thu 28 September

Fri 29 September

SUMMARY

MarketWatch published a great report with an amazing graphic regarding the current bubble.

MW-FU804_everyt_20170921125201_NS

Click to expand and zoom in

In 2000, we had the dot-com bubble.
In 2007, we had the housing bubble.
In 2017, we have the everything bubble.”

I like how its called, “The Everything Bubble”. It comes as no surprise because historically, whenever the government or central bank threw cheap money at the market, it always resulted in a bubble of sorts. So they threw $4Tr over eight years at the market, act surprised that the market did well and now gawk at this massive asset (everything) bubble and ask, “how did that happen?”.

If and when this bursts, it will be the most massive capitulation of our time. If it doesn’t burst, then it will just delay the inevitable and make the eventuality even more spectacular.

Till then, I remain cautiously bullish.

Happy Hunting!

 

 

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Comments Off on Weekly Market Update – 18 September 2017 BMO

Weekly Market Update – 18 September 2017 BMO

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Movin’ On Up

Stocks rallied to new record highs this week–more than making up for last week’s decline–following Hurricane Irma’s weaker-than-expected Florida landfall and ahead of next week’s FOMC meeting. The Dow led this week’s advance, climbing 2.2%, followed by the S&P 500 (+1.6%), and then the Nasdaq (+1.4%). For the year, the S&P 500 now holds a gain of 11.7%.

The bulk of this week’s gain came right off the bat as investors happily dialed back their estimates on Monday for damages related to Hurricane Irma, which quickly petered out after hitting the Florida Keys on Sunday. Insurers like Travelers (TRV) led the Monday rally, underpinned by the prospect of fewer-than-expected hurricane related claims, but much of their gains were unwound by the end of the week.

Equities followed up their stellar Monday performance with another win on Tuesday, but conviction was much more modest. Apple (AAPL) held its annual product event, in which the company unveiled a trio of iPhones, including the iPhone 8, the iPhone 8 Plus, and the high-end iPhone X–which CEO Tim Cook called “the biggest leap forward since the original iPhone.”

On the whole, Tuesday’s product event provided little new information as many of the details had been leaked beforehand. Apple sold off immediately following the event, with some investors citing concerns related to the iPhone X’s later-than-expected release date (November 3). However, the tech giant bounced back on Friday, extending its massive year-to-date gain to 38.0%.

Following Tuesday’s modest victory–which sent all three major U.S. indices to new record highs–the stock market took a breather, ending the week in a sideways trend. The Nasdaq ticked lower in the latter half of the week, settling just a step below its record high, while the S&P 500 and the Dow ticked up, further extending their record marks.

Investors largely ignored North Korea’s latest missile launch, which flew over northern Japan on Friday morning, continuing the week’s safe-haven sell off. After hitting a 10-month low last week, the yield on the benchmark 10-yr Treasury note climbed 14 basis points this week, settling at 2.20%. Meanwhile, the 2-yr yield climbed 13 basis points to finish at 1.38%.

A hotter-than-expected August CPI reading (+0.4% actual vs +0.3% consensus), which showed a year-over-year increase of 1.9%, prompted an adjustment in rate-hike expectations. According to the CME FedWatch Tool, investors currently place the chances of a December rate hike at 57.8%, up from last week’s 31.0%.

However, the Fed’s massive balance sheet will be the focus of next week’s FOMC meeting as it is widely expected that Fed Chair Janet Yellen will announce the start of a gradual reduction of assets bought in response to the 2008 financial crisis. The two-day FOMC meeting will kick off on Tuesday with the announcement due at 2pm (EST) on Wednesday.

Reviewing Friday’s big batch of economic data, which included August Retail Sales, August Industrial Production & Capacity Utilization, the preliminary reading of the University of Michigan Consumer Sentiment Index for September, the September Empire State Manufacturing Index, and July Business Inventories:

(Excerpts from Briefing.com)

Currencies: Dollar Bounces Despite Weak Data

The U.S. Dollar Index went down Friday 0.3% at 91.89, trimming this week’s gain to 0.6% after being up nearly 1.5% for the week on Thursday.. The greenback slumped in overnight action, hitting its session low right after the release of a disappointing Retail Sales report for August (actual: -0.2%; consensus: 0.1%), which prompted the Federal Reserve Bank of Atlanta to lower its GDPNow forecast for Q3 GDP to 2.2% from 3.0%. The remaining data points were mostly disappointing as well, but the dollar spent the day climbing off its morning low nonetheless. The British pound distinguished itself once again, spiking 1.3% against the dollar amid a seven-basis point increase in the 10-yr gilt yield (1.31%) as the market starts giving more serious consideration to a rate hike being announced as early as November.

Bonds Yields: Market Holds Despite Weak Data

U.S. Treasuries finished a down week on a modestly lower note. In a way, the Friday session resembled Thursday’s affair when the market saw some intraday volatility only to end little changed. Interestingly, a disappointing batch of data invited only a short-lived bid, leaving the 10-yr note near this week’s low while the 2-yr finished the week on its low. The market didn’t see sustained buying interest even though Q3 GDP estimates were lowered in response to weak Retail Sales for August (actual: -0.2%; consensus: 0.1%). The 10-yr yield rose 14 bps for the week and the 2s10s spread ticked up a basis point to 82 bps.

Shorter maturity yields rebounded to flatten the curve.

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Commodities: Commodities end the week up noticeably higher

Crude continued its strength from last week’s retracement. Gold and Silver fall back, Copper continues to weaken to close below $3.00. Overall, commodities, as measured by the Bloomberg Commodity Index, are currently up +0.12% at 85.1949. Baker Hughes total U.S. rig count decreased by 8 to 936 following last week’s increase of 1.

Agriculture: Corn stalls, Soy shows continued strength. Wheat bounces off its low. 

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

THE WEEK AHEAD

The week is expected to start in a very bullish fashion and end in an extremely bearish mood leading into the final and most treacherous week of September.

Monday 18 to Friday 22 September (Week 38)

The thirty-eight week of 2017 (wk38) is extremely bearish for the DIA and SPY across the 5, 10 and 15 year averages.

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The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 38;

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Key Economic Dates

The coming week’s most important events will be Fed and Bank of Japan monetary policy decisions. Other key data to be published include US flash PMIs, housing statistics, existing home sales and current account; UK retail trade and CBI factory orders; the Eurozone flash PMIs, consumer sentiment and inflation; and China house prices.

Mon 18 September

Tue 19 September

Wed 20 September

Thu 21 September

Friday 22 September

SUMMARY

A little bird told me to expect a huge amount of dumping between the last week of September and the first two weeks of October. Even if the bird is an unreliable source, the next three weeks are the most notorious weeks in market history. Then come the last two weeks of October which hosts a slew of catastrophic anniversaries like the 1987 and 1929 crashes.

I am not going to discount irrational fear bringing the indices down in the coming weeks. However, I won’t bet my house on it either.

Happy Hunting!

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

FOOTNOTE:

Tell a friend about this week’s Preview for the last batch of 2017. The next one won’t be for another three to four months after that.

Details here: TUTORIAL PREVIEW – LAST PTT FOR 2017

Or register here: PATTERN TRADER TUTORIAL INTRODUCTORY SESSION

 

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TUTORIAL PREVIEW – LAST PTT FOR 2017

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We’re having two Preview Sessions for the November Tutorial which will be our last batch for 2017. The next batch thereafter will be after Chinese New Year 2018.

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FCMY04 copyIt has been the starting ground for many novice retail traders and has groomed many an institutional trader, financial analysts, bunker traders, dealers, brokers, remisiers and financial graduates from all over the world.

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The belief is that financial education never ends and is always evolving. To stay the course and maintain this level of dedication takes a lot of Passion, Energy and Stamina, all of which the Pattern Trader™ has proven to have beyond any doubt.

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Come and experience a mind-blowing session with me as I share ideas on how Macrotraders turn macroeconomics into trading and investing opportunities for the short term and long term. I will show you how to reduce your risk when timing the markets with clever methods, smart techniques and the intelligent use of economic indicators and macroeconomic data. Most importantly, I will show you how you can preserve and grow your capital.

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PATTERN TRADER TUTORIAL INTRODUCTORY SESSION

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Comments Off on Weekly Market Update – 11 September 2017 BMO

Weekly Market Update – 11 September 2017 BMO

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Still Within Striking Distance

The major U.S. indices all moved lower this week as geopolitical tensions with North Korea, declining confidence in the feasibility of tax reform, and Hurricane Irma–which is expected to hit Florida this weekend–weighed on investor sentiment. The Nasdaq led the retreat, dropping 1.2%, while the Dow and the S&P 500 finished with respective losses of 0.9% and 0.6%.

Even though the equity market settled lower for the week, it remains within striking distance of its all-time high; the S&P 500 finished Friday’s session just 0.8% below its record-high close of 2,480.91. Treasuries rallied this week, sending yields to new lows for the year. The benchmark 10-yr yield dropped 11 basis points to 2.06%, hitting its lowest level since early November.

Similarly, other safe-haven assets–like gold and the Japanese yen–moved higher, jumping 1.6% and 2.3%, respectively. The yellow metal settled at a 13-month high ($1,351.10/ozt) while the dollar/yen pair finished at a ten-month low (107.78). In addition, the CBOE Volatility Index (VIX) spiked 20.2% to 12.18. The financial sector (-2.8%) was pressured by the decline in Treasury yields, but most of the remaining groups finished with losses of no more than 1.1%.

Relative strength in heavyweight names like Home Depot (HD), Exxon Mobil (XOM), and Pfizer (PFE) prevented the stock market from a significant decline, but there were some soft spots in small-cap and high-beta pockets of the market. The small-cap Russell 2000–which is seen as a leading indicator given that small-cap companies largely rely on domestic consumers–underperformed, dropping 1.0%. After pacing the stock market’s post-election rally, the small-cap index now holds a year-to-date gain of just 3.1%, far below the S&P 500’s year-to-date advance of 9.9%.

High-beta chipmakers also struggled, sending the PHLX Semiconductor Index lower by 2.3%. Large-cap names like Qualcomm (QCOM) and NVIDIA (NVDA) showed particular weakness, settling with losses of 4.6% and 4.0%, respectively. Still, for the year, the PHLX Semiconductor Index is higher by 20.6%.

Following this week’s events, the fed funds futures market places the chances of a December rate hike at 31.9%, down from last week’s 43.7%.

The major U.S. indices closed out the abbreviated week on Friday on a mixed note as investors looked ahead to the weekend, which could see Hurricane Irma’s arrival in Florida and another North Korean missile test in celebration of the country’s 69th anniversary. The Dow ticked up 0.1% while the S&P 500 and the Nasdaq settled with losses of 0.2% and 0.6%, respectively. For the week, the S&P 500 lost 0.6%.

Investors will not receive any economic data on Monday.

(Excerpts from Briefing.com)

Currencies: Dollar Index Hits Fresh 2017 Low … Again

The U.S. Dollar Index went down 0.4% at 91.32, having erased roughly half of its earlier loss on Friday. The intraday rebound is a small victory, considering the index lost 1.6% for the week, ending at its lowest level since the start of 2015. The greenback saw broad-based weakness in overnight action, retreating against the yen and commodity currencies while the People’s Bank of China kept the pressure on the dollar by setting the yuan fix higher for the tenth day in a row. Surprisingly, the higher fix was followed by a Reuters report, which revealed that policymakers in China are now worried about yuan’s strength after the recent (PBoC-assisted) push to a high not seen since the end of 2015. The greenback climbed off its low in morning action, maintaining a narrow intraday range. The S&P 500 hovers just below its flat line while the Nasdaq (-0.5%) underperforms.

Bonds Yields: 10-yr Yield Logs Lowest Weekly Close Since November

U.S. Treasuries finished a strong week on a quiet note. An overnight bid pressured yields to yesterday’s lows, putting the cash market on track for a higher start. The higher open was followed by modest selling, which slowed shortly after Treasuries dipped back to their flat lines. The morning retreat gave way to a sideways drift, which continued into the close. The 2-yr note bucked the trend, ending in the green. The 2-yr yield fell nine basis points for the week while the 10-yr yield dropped 10 basis points, ending at its lowest level since the start of November. Hurricane Irma is expected to make landfall over the weekend and a North Korean missile test is expected to take place tomorrow. The U.S. Treasury will auction $56 billion in 3-yr, 10-yr, and 30-yr notes and bonds next week.

Yields fell across the board in a huge flight-to-safety causing spreads to narrow even more this week.

Commodities: Commodities end the week up noticeably higher

Crude broke its five-week losing streak, Gold and Silver continue to strengthen, Copper falls back down. Baker Hughes total U.S. rig count increased by 1 to 944 following last week’s increase of 3

Agriculture: Corn, Soy shows more strength. Wheat drops back down. 

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

THE WEEK AHEAD

The week ahead is the most bullish week of quarter three but is usually followed by the most vicious sell-off of the quarter too. Be advised not to get ahead of the market and get too caught up in the run up.

Monday 11 to Friday 15 September (Week 37)

The thirty-seventh week of 2017 (wk37) is extremely bullish for the DIA and SPY across the 5, 10 and 15 year averages.

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The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 37;

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Key Economic Dates

The week is light on key data to move the market in any serious or sustainable fashion. In the US, the most important events will be inflation rate, retail trade, industrial production and the preliminary reading of Michigan consumer sentiment. Elsewhere, the BoE will announce its interest rate decision; the UK will release inflation, unemployment and wage growth; the Eurozone industrial production; China industrial output, retail trade and fixed asset investment.

Mon 11 September

Tue 12 September

Wed 13 September

Thu 14 September

Fri 15 September

SUMMARY

Last week, I mentioned;

In spite of the tensions, given that week 37 is usually incredibly bullish (ahead of the notorious September sell-off), I remain cautiously bullish for now.

I don’t think Irma will make a huge dent in the market. In fact, I think several key and major listing could make gains as a result of Irma. Still, I remain cautiously bullish.

Happy Hunting!

 

 

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Comments Off on Weekly Market Update – 05 September 2017 BMO

Weekly Market Update – 05 September 2017 BMO

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Wall Street Ends Week On A High Note

Equities ended another positive week on a positive note as investors took a relatively disappointing August jobs report in stride, pushing the Nasdaq (+0.1%) to a new record high (6,435.33). The S&P 500 and the Dow climbed 0.2% apiece, ending the day in the middle of their trading ranges. Trading volume was especially light as many investors got a jump start on the extended Labor Day weekend.

The Employment Situation Report for August disappointed on nonfarm payrolls (156K actual vs 183K consensus), nonfarm private payrolls (165K actual vs 173K consensus), the unemployment rate (4.4% actual vs 4.3% consensus), and the average workweek (34.4 actual vs 34.5 consensus). However, another tepid average hourly earnings reading (+0.1% actual vs +0.2% Briefing.com consensus) overshadowed the less-than-stellar metrics.

Average hourly earnings have been reluctant to pick up despite a tightening of the labor market, effectively tempering inflation and, therefore, the market’s rate-hike expectations. The fed funds futures market currently places the chances of an additional rate hike this year–which the Fed needs to meet its forecast of three rate hikes in 2017–at 41.4%.

Treasury yields moved solidly higher on Friday to end the week relatively flat. The 10-yr yield climbed four basis points to 2.16%, registering a weekly loss of one basis point, while the 2-yr yield jumped three basis points to 1.35%, settling the week higher by one basis point. Meanwhile, the U.S. Dollar Index (92.77, +0.18) added 0.2% to end the week higher by 0.1%.

Seven of the eleven sectors settled Friday’s session in positive territory, but the underperformance of the influential health care (-0.1%) and technology (-0.2%) spaces kept the broader market’s gain in check. Still, the two groups ended the week at the top of the leaderboard–in first and second place, respectively. Health care climbed 3.0% for the week while technology added 2.1%.

The energy sector (+0.8%) was the top performer on Friday, followed closely by the financials (+0.4%), consumer discretionary (+0.5%), and materials (+0.7%) groups. Within the consumer discretionary space, automakers outperformed after reporting their U.S. sales for the month of August.

Fiat Chrysler (FCAU 15.86, +0.73), Ford Motor (F 11.35, +0.32), and General Motors (GM 37.36, +0.82) showed notable strength, climbing 4.8%, 2.9%, and 2.2%, respectively. However, GM was the only one to report an increase in sales (+7.5%). FCAU and F reported respective year-over-year declines of 11.0% and 2.1%.

On the earnings front, Lululemon Athletica (LULU 61.68, +4.13) jumped 7.2% after beating both top and bottom line estimates and issuing above-consensus guidance. The SPDR S&P Retail ETF (XRT 39.70, +0.53) finished higher by 1.4%.

In Washington, reports indicate that the White House will not shut down the government in October in an attempt to gain funding for President Trump’s promised barrier along the U.S.-Mexico border. The decision will potentially make it easier for Congress to reach a deal on a short-term budget.

Reviewing Friday’s economic data, which included the Employment Situation Report for August, the August ISM Manufacturing Index, July Construction Spending, and the final reading of the University of Michigan Consumer Sentiment Index for the month of August:

The U.S. equity market will be closed on Monday in observance of Labor Day.

(Excerpts from Briefing.com)

Currencies: Dollar Rises From 2017 Low

The Dollar Index was up 0.1% at 92.79 after bouncing back from a Friday morning dip, which followed the release of a disappointing Employment Situation report for August. In a way, Friday’s session made for a mirror image of Thursday’s affair when the index climbed in the morning only to give back that entire gain in the afternoon. The Index added 0.1% for the week after recovering from a fresh 2017 low that was posted on Tuesday.

Bonds Yields: Treasuries Retreat After Disappointing Data

U.S. Treasuries ended the week on a lower note after making a failed morning run at this week’s highs. Treasuries jumped in response to a disappointing Employment Situation report for August, which not only missed headline expectations (actual: 156K; consensus: 183K), but also showed weak average hourly earnings growth (actual: 0.1%; consensus: 0.2%). However, the morning charge reversed almost as swiftly as it developed. After surrendering their gains, Treasuries continued sliding through the release of today’s second batch of data, which was also mostly disappointing. Session lows were notched in the late morning and light buying in the early afternoon lifted the market off the lows. The 10-yr note ended the week with a slight gain while the long bond ended the week slightly lower. The 2s10s spread finished the week at 81 bps, down from 84 bps one week ago.

For another consecutive week, spreads continued to narrow as the yield curve continued to flatten by pivoting on the belly of the curve.

Commodities: Commodities end the week up noticeably higher

Crude falls for the fifth week, Gold breaks above 1,300, Metals continue to strengthen. Baker Hughes total U.S. rig count broke the declining trend with an increase by 3 to 943 following last week’s decline of 6.

Agriculture: Corn, Wheat bounce, Soy continues uptrend.

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

THE WEEK AHEAD

Coming off a dovish reaction to Non-Farm Payrolls last week, the coming shortened week (Monday 04 September is a holiday) looks like pushing this rally further up.

Tuesday 05 to Friday 08 September (Week 36)

The thirty-sixth week of 2017 (wk36) is mildly bullish for the DIA and SPY across the 5, 10 and 15 year averages.

Wk26Sea

The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 36;

Wk36Alma

Key Economic Dates

In the US, the most important events will be trade balance, factory orders and ISM non-manufacturing PMI. Elsewhere, the ECB and the RBA will announce their interest rate decisions; Australia will release the first estimate of GDP growth, and the Eurozone and Japan will publish final figures for GDP growth. China inflation rate and foreign trade; and UK industrial output and trade balance will also be in the spotlight.

Tue 05 September

Wed 06 September

Thu 07 September

Fri 08 September

SUMMARY

The geo-political situation in the Korean Peninsular is getting hotter as North Korea conducted its 6th nuclear test since 2006 and was its most powerful test yet. North Korea claimed that the test was a hydrogen bomb and the bomb could be attached a long-range missile. President Trump responded to the test saying that North Korea’s words and actions continue to be very hostile and dangerous to the United States. He claims North Korea is a rogue nation which has become a great threat and embarrassment to China, which is trying to help but with little success.

In spite of the tensions, given that week 37 is usually incredibly bullish (ahead of the notorious September sell-off), I remain cautiously bullish for now.

Happy Hunting!

 

 

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August 2017 In Review, September Preview

August came and went so quick that I hadn’t realised it was time to write another monthly article until September 1st was upon me.

The month began with Lucy and me making a mad dash to K.L. in our trusty Grand Vitara for a last minute meeting in Mid-Valley. The old girl (the GV) still had her legs and ran like she wasn’t nine-and-a-half years old. She was to be retired two days later and this was our last adventure together. In the time we had her, she only ran 101,200km before this K.L. run. So in terms of mileage, she was still a young adult. In spite of her age, she still had the muscle, stability and reliability to outrun most of the other cars on the road. It was going to be painful to let her go.

ZUKI KL 3Aug17_03

ZUKI KL 3Aug17_01ZUKI KL 3Aug17_02
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The next day, I made another appearance at UOB Kay Hian. This was a private event for clients and again, I had a blast sharing with them the wonderful world of Macroeconomics.

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UOBKHgirls UOBKHgirls_Dinner

To my Kay Hian girls, thanks so much for the event and the wonderful dinner!

The following day was one of mixed emotions. Normally you’d be excited to receive your new car but I wasn’t. I was actually more upset to be giving up the baby that kept my family and me safe and sound for almost a decade. My kids grew up from little primary schoolers riding in her back till they were old enough to drive her. We have all driven her and this is one memory we will all cherish as a family as we say goodbye to her.

SubyZuki02SubySuki01

As one chapter ends, another begins. After driving my new Subaru Forester for almost a month now, I have begun to appreciate and love the way it moves. It is a damn fine car and I have no regrets choosing it. I am enjoying driving it more and more. But I still miss my GV.

SubyZuki03

On 18 August, the Pattern Trader Tutorial did its first independent Tutorial to a full house. What a thrill! This batch was held over two weekends.

PTT91Day01

Then for the first time, I went ‘live’ on the Alumni Page for the monthly Pattern Trader™ Gathering at 9:30pm on 18 August. The session was an hour long, initially meant as a test-run but turned into a full-blown, one-way gathering as graduates kept their queries coming. Looks like I’ll be keeping this format for future Gatherings until I have my own place.


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23 August saw me at FuckUp Nights … yes, you read right … an international event held all over the world where entrepreneurs share their failures and mistakes in the name of sharing and learning.

FUN01 FUN02 FUN03 FUN04

I thoroughly enjoyed the event as it was a breath of fresh air after hearing and reading too much about success stories. To hear how one screws up and learns from mistakes to become better is so much more realistic than extraordinary success stories. Kudos to all the participants who came and RESPECT to my two other co-speakers for the night, Joelle and Tara for being brave enough to step up.

Friday 25 August brought me back to Phillip Capital for another round of institutional education. As in the previous sessions, this one garnered a lot of interest and very encouraging feedback.

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On Sunday night, 27 August, PTT 91 finally completed the two weekends of the Tutorial and still wanted more!!

PTT91Aug2017

Thanks PTT91, for a fulfilling and gratifying two weekends of really good sharing!

And just like that, August came and went and before I knew it, I am in September, facing another month of packed schedules of engagements, meetings, appointments and classes. I am not complaining.

TUTORIAL MATTERS

PTTLogo MinusOneFull

I have gotten a lot of queries as to why I chose to go independent rather than stay in a comfort zone.

My answer is simple; I want to slow down on the retail front and focus more on those who really want and need my services rather than waste time and resources having to sell the hell out of someone who isn’t convinced about his/her own financial needs. With so many new gurus in the market, I simply want to take a different route instead of being in that crowd.

Last month, I wrote;

I am in the business of educating and I educate those who want to learn. I shouldn’t have to convince you about how important it is and why you need it. You shouldn’t have to ask why it is necessary to take a complete and holistic approach to learning everything regarding your finances and the economic factors that will affect your wealth. I shouldn’t have to teach you the importance of not being complacent and ignorant. If I have to influence you into accepting all that has been mentioned in this paragraph, I strongly recommend that you look elsewhere for your education because you’re obviously not serious enough about your financial future.

It has been 17 years since I became bankrupt as a result of my financial ignorance and naiveté. It has been 10 years since I was discharged from that financial prison. I still wear the scars of my stupidity and my family will never forget the nightmare we went through. I still fear the possibility of history repeating itself. Thus, I continue to educate myself in the ever-growing, ever-evolving world of finance and economics so that I take nothing for granted.

And for the like-minded, I will continue to teach them and grow with them. This is my job because it is my #1 Passion.

I would rather share my passion with like-minded and hungry people than to spend time convincing someone that what I do is an integral part of our lives. I believe that sooner or later, everyone will have their moment of regret. That is the time they will seriously consider a solid financial education instead of dreaming of getting rich quick, financial freedom or becoming a millionaire. No one should be that financially ignorant and naive. However, most get caught up in the lies and the hard selling. So even if they’re not ignorant or naive, they end up being gullible. These people are not ready for the financial markets if their mind sets are so weak.

I often wonder why we can be so gullible when the obvious truth is right in our faces. We only see what we want to see and hear only good things. How I wish the markets were that straightforward and easy.

~~~~~~~~~~

Fut1

I can only be glad that the students who do come my way aren’t gullible and/or naive. They know the hard work that lies ahead of them. They have no illusions and are prepared to put in the time and effort in order to build that secondary income or that financial career.

Natasha Bounaparte
Batch 83 (2015) and Batch 91 (2017) Singapore

Conrad teaches economics and finance in a very easy to understand and interesting fashion. Not only do his tips apply to trading, it is applicable to our everyday lives as well. He provides a holistic approach and leave no stone unturned. This is my 2nd time attending the Tutorial and discovered that what he teaches is always current and relevant. He shares personal stories, real life experiences and even setbacks.

Kitson Yoon
Batch 51 (2011) and Batch 91 (2017) Singapore

My initial Tutorial was in 2011. Conrad has never failed to wow his students and always has something new to offer every single session. There is no doubt that Conrad is the undisputed top financial trainer/coach/mentor in the region. The course fees require to have him as your mentor is truly value for money.

HS Ng
Batch 88 (2017) Singapore

I dropped out of university due to financial problems and almost quit in life until I discovered Conrad’s Pattern Trader Tutorial. It compelled me to work towards putting myself back in school so I can further work to fulfil my financial goals. Thanks Conrad. Now I don’t have to resign my life to living from paycheck to paycheck.

CY Chen
Batch 88 (2017) Singapore

I was sold when Conrad shared what he would cover in his Tutorial and it is perhaps the best decision I have made with regard to my aim to be fully responsible for my own trades and investments. True to what was shared in his Preview, the Pattern Trader Tutorial is a very comprehensive financial program that gave me a lot of insights on Sector Rotation, Seasons & Cycles and other things that move the markets.

Click here to read more testimonials: Testimonials 2017

Click here to register for the next Pattern Trader Introductory Preview.

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~~~~~~~~~~

MARKET MATTERS

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The DOW is looking like resuming its parabolic run if it can break above the 22,142 resistance. With the first two weeks of September expected to be bullish (according to historical data) this break-above is highly likely but not without some stiff resistance. With the FOMC minutes due on the 20th, this could be a short-lived breakout as it remains to be seen if the Fed will keep to its view of reducing the balance sheet along with one more rate hike for the year.

The Transports fell into negative for the year in the fourth week of August but clawed its way back into the black before the month ended. It had also fallen below its 200DSMA for eight straight closes before fighting back and closing out the month above the critical indicator.

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The Russell2000 also briefly fell into negative YTD but recovered to close the month in the black. The Benchmarks were looking more and more divergent as August came to an end but seems to have found some positive footing in the last week.

Another scary prospect is the constantly narrowing spread on the Yield Curve. Since the start of this year, it is becoming increasingly clear that the curve is pivoting on the belly and threatening to flatten. The flattening accelerated during the month of August with the 30year yield falling 13bps as the longer maturities saw a flight to safety
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30-Aug-17
2yr: 1.33%
5yr: 1.70%
10yr: 2.12%
30yr: 2.73%

The spread between the 10 year yield (2.12%) and the 30th year yield (2.73) closed to 61bps.

This flattening is becoming a worrying factor as investors see this as a sign of serious doubt in the risk markets that often leads into fear and an inversion in the Yield Curve. (An Inverted Yield Curve has always been an ominous sign ahead of major economic weakness.)

September Preview

September is the last and worst month of quarter three which is traditionally the worst quarter of the year. September 2017 has twenty trading days and one public holiday. In the last 67 years since 1950, September has been the most bearish month of the trading year for the DOW and S&P. It is also the worst month of the worst four months (July to October) on NASDAQ.

September Trivia

Key Economic Dates For September 2017

Friday 01 September

Mon 04 September

Tue 05 September

Wed 06 September

Thu 07 September

Fri 08 September

Mon 11 September

Tue 12 September

Wed 13 September

Thu 14 September

Fri 15 September

Mon 18 September

Tue 19 September

Wed 20 September

Thu 21 September

Friday 22 September

Mon 25 September

Tue 26 September

Wed 27 September

Thu 28 September

Fri 29 September

Commodities

SUMMARY

With September comes more volatility as the market has historically been unstable and even bearish for the last 86 year on the DOW and S&P500. Although there are more signs to be bullish, one cannot help but feel that the time to correct is near. I will remain bullish but very cautiously so.

This is also the month I get crazy busy again as more and more engagements come in and I get more hard pressed for time to deliver my new website. This is going to get hectic. But what the heck … bring it on!

Happy Hunting & Safe Trading!

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Weekly Market Update – 28 August 2017 BMO

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Stocks Finish Week on a Positive Note

No news proved to be good news for the bulls the past week, giving them an opportunity to reclaim control of the U.S. equity market, which rode a two-week slide into Monday’s session. The S&P 500 and the Dow finished with gains of 0.7% apiece while the Nasdaq (+0.8%) finished a tick above its peers.

Ten sectors settled the week in the green–real estate (+2.3%), telecom services (+2.0%), materials (+1.3%), health care (+1.1%), technology (+1.0%), utilities (+1.0%), energy (+1.0%), financials (+0.8%), consumer discretionary (+0.4%), and industrials (+0.4%)–while one group finished in the red–consumer staples (-1.0%).

No News is Good News

The week’s most notable headlines in chronological order:

One of the most talked about news items this week was the possibility of a government shutdown. Without going into the political details, the gist for the market is simple; the probability of a government shutdown appears to be higher now than it was a week ago.

A shutdown may stifle economic growth a bit, but the market has traditionally held up pretty well during halts in government spending. To avoid a shutdown, Congress will need to pass a new spending bill, and President Trump will have to sign it, by the end of September.

Following this week’s events, the fed funds futures market now points to the June 2018 FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 58.0%. Last week, the market expected the next rate hike to occur in March 2018 with an implied probability of 51.5%.

(Excerpts from Briefing.com)

Currencies: Dollar Nearing 2017 Low

The U.S. Dollar Index is down 0.6% at 92.74, hovering within a point of its 2017 low, which was recorded at the start of August. The Index traded little changed in morning action, but dropped in response to Fed Chair Janet Yellen’s speech at the Jackson Hole Symposium. Chair Yellen used the forum to praise the Fed’s regulatory efforts and did not provide any updates about near-term changes to the central bank’s policy course. With no news about balance sheet reduction or rate-hike plans, the greenback retreated.

Bonds yields: Jackson Hole Doesn’t Rock the Boat

U.S. Treasuries ended the week on a higher note, helping longer-dated issues record slim gains for the week while the 2-yr note ended modestly lower. Way up front, the four-week bill also retreated this week, pushing its yield up three basis points to 0.99%. Treasuries climbed to highs as Fed Chair Janet Yellen delivered her speech at the Jackson Hole Symposium, giving no hints about plans for balance sheet reduction. Instead, the Fed Chair praised the central bank’s regulatory efforts. ECB President Mario Draghi spoke in the afternoon, but avoided mentioning the euro exchange rate. The ECB chief spoke in favor of open trade and argued for raising potential output growth, which was received as dovish. In sum, the two central bankers provided little to no new information. Treasury Secretary Steven Mnuchin reiterated that the debt ceiling will be raised in time to avoid technical default. The 2s10s spread ended the week at 84 bps, down from 88 bps last Friday. The S&P 500 is higher by 0.2% with the closing bell approaching.

For the week, spreads yet again narrowed as the yield curve continued to flatten by pivoting on the belly of the curve.

Commodities: Crude falls for the fourth week, Metals rebound. Baker Hughes total U.S. rig count decreased by 6 to 940 following last week’s decrease of 3.

Agriculture: Corn, Wheat close lower, Soy rebounds.

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

THE WEEK AHEAD

August ends and the most bearish month of the trading year begins. More volatility ahead?

Monday 28 August to Friday 01 September (Week 35)

The thirty-fourth week of 2017 (wk35) is mildly bearish with mixed averages across the DIA and SPY on the 5 and 15 year averages. The 10 year average, however, shows a 70% possibility of a bearish week on the DIA and SPY.

The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 35;

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Key Economic Dates

In the US, the most important events are the second estimate of GDP growth, non-farm payrolls, unemployment rate and ISM manufacturing PMI. Elsewhere, key data include UK and Germany consumer morale; Eurozone inflation rate; Japan unemployment; China PMIs and GDP growth for India, Brazil and Canada.

Mon 28 Aug

Tue 29 Aug

Wed 30 Aug

Thu 31 Aug

Fri 01 Sep

SUMMARY

In last week’s update, I mentioned;

With Friday’s close, the Transports are now two closes below its 200DSMA which puts it in a technical bear market and only 13.7 points (0.15%) away from the year’s open. The Russell2000 index is also two closes below its 200DSMA and below the year’s open by 0.2 points.

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The Transports briefly fell into negative YTD but recovered on Friday but stays below its 200DSMA for seven straight closes. The Russell2000 is also seven straight closes below the 200DSMA but rose very impressively to close the week out above the year’s open after closing out the previous week in the red YTD.

The Benchmarks are looking more and more divergent as August closes in. This is a very nervous market right now.

Happy Hunting!

 

 

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Weekly Market Update – 21 August 2017 BMO

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Equities End the Week on a Lower Note

Wall Street had another disappointing week, its second in a row, as investors continued to drag the major U.S. indices from their all-time highs. The Dow, the S&P 500, and the Nasdaq finished with losses of 0.8%, 0.7%, and 0.6%, respectively, while the small-cap Russell 2000 underperformed (-1.2%), dropping to its flat line for the year.

Five sectors settled the week in the green–utilities (+1.3%), materials (+0.4%), real estate (+0.2%), consumer staples (+0.1%), and technology (unch)–while six groups finished in the red–energy (-2.7%), telecom services (-1.8%), consumer discretionary (-1.8%), industrials (-1.1%), health care (-0.8%), and financials (-0.5%).

The week’s most notable headlines in chronological order:

Thursday’s session was perhaps the most notable of the week as the S&P 500 registered its second-worst performance of the year. The major indices opened Thursday’s session with modest losses, but moved deeper into negative territory following a rumor that President Trump’s chief economic advisor Gary Cohn plans to resign from his position following the president’s controversial comments regarding last weekend’s events in Charlottesville, VA. The White House later declared that the rumor was “100% false”, but it did little to reverse the market’s downward trend.

True or not, the rumor didn’t do much to dispel the notion that working with the president could be a political liability, especially considering that it came on the heels of Mr. Trump’s Wednesday decision to disband his Manufacturing Council and Strategy & Policy Forum in response to several CEOs leaving the two groups. The chief executives cited Mr. Trump’s controversial Charlottesville comments as the reason for their departures. If Republicans in Congress start distancing themselves from Mr. Trump, it will be that much harder for him to push through his pro-growth agenda.

However, those concerns eased a bit on Friday after President Trump fired White House Chief Strategist Steve Bannon, a decision that was well received by the market. Mr. Bannon was the chief executive of Mr. Trump’s presidential campaign and has been described as perhaps the most polarizing figure within President Trump’s inner circle. Therefore, in the absence of Mr. Bannon, the thinking is that the president might dial back his rhetoric a bit, making it easier for the White House to work with Congress in passing the president’s pro-growth agenda.

The major averages finished in negative territory for the second day in a row on Friday, adding to their losses for the week. The Dow led the retreat, losing 0.4%, while the S&P 500 and the Nasdaq finished lower by 0.2% and 0.1%, respectively. For the week, the Dow, the S&P 500, and the Nasdaq finished with respective losses of 0.8%, 0.7%, and 0.6%.

Following this week’s events, the fed funds futures market now points to the March 2018 FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 51.5%. Last week, the market expected the next rate hike to occur in June 2018 with an implied probability of 57.5%.

(Excerpts from Briefing.com)

Currencies: Dollar Defends Weekly Gain

The U.S. Dollar Index is off 0.2% at 93.47, but looking to remain slightly positive for the week. The Index started the week with two consecutive gains, but after two failed attempts at overtaking Tuesday’s high, the Index finds itself near the middle of this week’s range, up 0.4% since last Friday. The greenback saw overnight weakness against the yen, but recouped a portion of that loss intraday. A better than expected preliminary Michigan Sentiment Index for August (97.6; consensus 94.0) helped the dollar climb off its morning low and the modest rebound continued amid mild risk-on flows that followed late-morning reports of White House chief strategist Steve Bannon’s imminent departure from the administration. Mr. Bannon has been described as a polarizing figure within the administration, so his departure is being viewed as a chance to bridge the gap between Congress and the Oval Office. The S&P 500 hovers just above its flat line after backing off its midday high.

Bonds yields: Bumpy Week Ends on Quiet Note

U.S. Treasuries finished Friday on a mixed note after backing off their morning highs. The complex settled little changed for the week thanks to a mid-week rebound that erased losses from Monday and Tuesday. The long bond recorded a slim gain for the week while shorter maturities posted modest losses. The market climbed in morning action, hitting highs just ahead of the release of a better than expected preliminary Michigan Sentiment Index for August (97.6; consensus 94.0). The selling that developed in the data’s wake accelerated after it was reported that Steve Bannon will be leaving the administration. The chief strategist has been described as perhaps the most polarizing figure within President Trump’s inner circle, so it could be argued that his departure will make it easier for President Trump to find common ground with Congress. However, it could also be argued that the headline simply provided a good excuse for some selling after two days of solid gains. The 10-yr note briefly dipped beneath its overnight low around noon, but inched up into the close. Meanwhile, 2s settled near lows, compressing the 2s10s spread to 88 bps from 90 bps on Thursday, thus flattening the curve further for the second week.

Commodities: Crude falls for the third week, Precious drops, Copper gains. Baker Hughes total U.S. rig count decreased by 3 to 946 following last week’s decrease of 5.

Agriculture: Corn drops, Soy closes lower for the third week, Wheat rebounds.

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

THE WEEK AHEAD

Looks like a rock-and-roll week ahead with a little bullish respite.

Monday 21 to Friday 25 August (Week 34)

The thirty-fourth week of 2017 (wk34) is usually mildly bullish but only after a volatile week. According to our Seasonal Model, the DIA, QQQ and SPY are showing an average of 60% reliability for a bullish trade across the 5, 10 and 15 year averages.

The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 34;

Screen Shot 2017-08-21 at 2.04.42 PM

Key Economic Dates

In the US, investors will be waiting for new and existing home sales, durable goods orders and flash Markit PMIs. Elsewhere, key data include UK and Germany GDP growth; Japan inflation rate and manufacturing PMI; and flash PMIs for the Eurozone, Germany and France.

Mon 21 Aug

Tue 22 Aug

Wed 23 Aug

Thu 24 Aug

Fri 25 Aug

Sat 26 Aug

SUMMARY

In the previous update, I mentioned;

With the Transports leading the way down and the small and mid caps showing increasing weakness, I am becoming wary (not bearish) as September pulls closer.

DIADJT

With Friday’s close, the Transports are now two closes below its 200DSMA which puts it in a technical bear market and only 13.7 points (0.15%) away from the year’s open. The Russell2000 index is also two closes below its 200DSMA and below the year’s open by 0.2 points.

As September closes in, it would be wise to keep your eyes wide open and tighten your stops in case we get a catalyst for the traditional sell-down or suffer the proverbial Portfolio Dumping phenomenon that tends to happen towards the end of Quarter.

Happy Hunting!

 

 

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Comments Off on Weekly Market Update – 14 August 2017 BMO

Weekly Market Update – 14 August 2017 BMO

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Wall Street Slips Alongside U.S.-North Korea Relations

Wall Street took it to the chin this week as a war of words between the U.S. and North Korea prompted investors to take some profits on the heels of the stock market’s most recent run to new record highs. Small caps paced the retreat, sending the Russell 2000 lower by 2.7%. The benchmark S&P 500 dropped 1.4% while the Dow (-1.1%) did a little better and the Nasdaq (-1.5%) did a little worse.

After closing Monday at record highs, the S&P 500 and the Dow showed no signs of slowing down on Tuesday morning, further extending their all-time intraday highs. But then sentiment began to shift. The major averages retraced the bulk of their gains as the heavily-weighted financial sector, which led the early rally on Tuesday, began to weaken. Then a second wave of selling took Wall Street into the red.

The second round of selling followed a statement from President Trump, in which he warned that North Korea will be “met with fire and fury like the world has never seen” if it continues to threaten action against the United States. Mr. Trump’s comment came just a few hours after the Washington Post reported that North Korea now has the capability to load its missiles with miniaturized nuclear warheads.

Selling extended into Wednesday’s session after Pyongyang responded to President Trump’s Tuesday comment by saying that it’s examining a plan to send missiles towards the U.S. territory of Guam. However, it’s important to note that selling on Tuesday and Wednesday was very modest, leaving the S&P 500 with a two-day loss of just 0.3%.

That changed on Thursday though as investors began selling with conviction, sending the S&P 500 lower by 1.5%. While the jawboning between the U.S. and North Korea certainly threw the bulls off balance, Thursday’s slide, which marked the S&P 500’s worst one-day loss since May, pointed to a market that was probably overdue for a pullback following yet another run to new record highs.

In other words, the U.S.-North Korea spat certainty didn’t help investor sentiment, but, more than anything, it provided a convenient excuse for investors to take some money off the table.

Boosted by another lukewarm inflationary reading and an ever-persistent “buy the dip” mentality, the bulls won out on Friday, pushing the stock market slightly higher. The Consumer Price Index ticked up just 0.1% in July, missing the Briefing.com consensus of +0.2%. The Fed prefers the PCE Price Index, but it’s clear that the latest CPI reading didn’t help the case for a third rate hike in 2017.

The fed funds futures market now points to the June FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 57.5%. Last week, the market expected the next rate hike to occur in December with an implied probability of 50.4%.

It’s also worth pointing out that the CBOE Volatility Index (VIX) spiked 5.5 points, or 54.7%, this week after drifting near an all-time low from mid-July to early August. The VIX shows what kind of a move, in percentage terms, the market is pricing in for a one-month period from the spot reading. The index is derived from near-dated options on the S&P 500.

(Excerpts from Briefing.com)

Currencies: Dollar Index Nears 2017 Low

Bonds yields: The Yield Curve falls for the second week

Commodities: Crude slides for the second week, Metals gain. Baker Hughes total U.S. rig count decreased by 5 to 949 following last week’s decrease of 4.

Agriculture: Wheat and Soy closed lower for the third week, Corn rebounds

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

THE WEEK AHEAD

As earnings season ends this week, focus will shift to the Fed and the GDPs of Japan and Germany. We will also find out if the N.Korean-US spat will still have an effect on the market … I think not.

Monday 14 to Friday 18 August (Week 33)

The thirty-third week of 2017 (wk33) is usually bullish with un reliable averages. (Sorry, the seasonal model is still a work in progress)

The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 33;

Screen Shot 2017-08-13 at 5.07.40 PM

Key Economic Dates

In the US, the Fed meeting minutes will be the most important release, followed by retail sales, industrial production and Michigan consumer sentiment. Elsewhere, key data include Japan and Germany GDP growth; UK inflation, unemployment and retail sales; China industrial output and retail trade; and Australia employment figures.

Sun 13  Aug

Mon 14 Aug

Tue 15 Aug

Wed 16 Aug

Thu 17 Aug

EARNINGS CALLS

WMT’s earnings on Thursday traditionally ends Earnings Season in the US.

Mon 14 Aug

Tue 15 Aug

Wed 16 Aug

Thu 17 Aug

Fri 18 Aug

SUMMARY

Last week, I mentioned;

The past week has also revealed weakness amongst the small and mid-caps that seem to be in-line with the transports. The coming week should be interesting as the bulk of small and mid-cap companies come forward with their numbers. This could be a telling sign if this rally still has legs or not.

The Russells took the largest hit amongst the indices last week falling 2.8% from +4.1%YTD the previous Friday to +1.3%YTD. With the Transports leading the way down and the small and mid caps showing increasing weakness, I am becoming wary (not bearish) as September pulls closer.

Happy Hunting!

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Comments Off on Weekly Market Update – 07 August 2017 BMO

Weekly Market Update – 07 August 2017 BMO

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Dexes4Aug17

DOW JONES DOMINATES, RUSSELLS TAKE A HIT

According to the Dow Jones Industrial Average, the stock market had yet another bullish week; the industrial average ended Friday at a record high, for the eighth session in a row, and a weekly gain of 1.2%. However, the S&P 500 and the Nasdaq tell a less conclusive story; the S&P 500 muscled its way to a modest victory, adding 0.2%, while the Nasdaq dropped 0.4%.

Regardless of this week’s mixed performance, there’s no question that investors are still bullish as stocks hover near all-time highs and the CBOE Volatility Index (VIX) hovers near an all-time low.

The major averages eked out another win on Friday following the release of the Employment Situation Report for July, which showed an impressive increase in nonfarm payrolls. The Dow (+0.3%) cruised to its eighth-consecutive record close, finishing a tick above both the S&P 500 (+0.2%) and the Nasdaq (+0.2%). For the week, the S&P 500 advanced 0.2%.

The week’s most notable headlines in chronological order:

Of those headlines, two are worth a closer look–Apple’s earnings report and the Employment Situation Report for July. Apple is the S&P 500’s largest component by market cap and has played a huge role in the stock market’s 2017 advance, evidenced by the massive 29.6% year-to-date gain it took into Tuesday night’s earnings release.

Needless to say, it’s quite impressive that the company was able to deliver in the face of such lofty expectations. However, it’s also important to note that much of the positive sentiment surrounding the company has to do with its upcoming iPhone 8 release, which has been generating hype for months. So far, everything looks to be on track for the fall release, but if that changes, so might the bullish bias.

As for the July jobs report, the key take away is it hit the sweet spot once again as job growth was strong but wage growth was not, keeping inflationary concerns at bay. The fed funds futures market points to the December FOMC meeting as the most likely time for the next rate-hike announcement with an implied probability of 50.4%. Last week, the market expected the next hike to occur in January.

Four sectors settled the week in the green–financials (+1.8%), utilities (+1.5%), industrials (+0.8%), and technology (+0.4%)–while seven groups finished in the red–energy (-1.0%), materials (-0.8%), health care (-0.6%), consumer staples (-0.6%), consumer discretionary (-0.4%), real estate (-0.2%), and telecom services (-0.1%).

Outside of the equity market, the benchmark 10-yr yield slipped three basis points to 2.26%, crude oil dropped 0.5% to $49.44/bbl, and the U.S. Dollar Index climbed 0.3% to 93.35.

(Excerpts from Briefing.com)

Currencies: Dollar Index Snaps Three-Week Skid

Bonds yields: The yield curve flattened for the week with the longer maturities’ yields falling faster then the shorter maturities.

Commodities: Crude, Metals slide back down after consecutive weeks of gains. Baker Hughes total U.S. rig count decreased by 4 to 954 following last week’s increase of 8.

Agriculture: Grains closed lower for the second week.

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

THE WEEK AHEAD

More volatility ahead as earnings season peaks out this week with some of the big industrials and tech names on earnings call.

Monday 07 to Friday 11 August (Week 32)

The thirty-second week of 2017 (wk32) has a bearish history. However, I can’t verify the statistics as our model is undergoing some trouble shooting at this time. Apologies for the breakdown in service.

The 2017 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 32;

Screen Shot 2017-08-06 at 4.49.20 PM

Screen Shot 2017-08-06 at 3.49.17 PM

Key Economic Dates

Mon 07 Aug

Tue 08 Aug

Wed 09 Aug

Thu 10 Aug

Fri 11 Aug

Sun 13  Aug

SUMMARY

What started out as a promising earnings season is now faltering and starting to give investors some serious doubt. The most obvious analysis amongst the pros is that the industrials and transports are divergent again with the transports hinting (as a reliable leading indicator) of some major downside in the making.

INDvTRAN

The past week has also revealed weakness amongst the small and mid-caps that seem to be in-line with the transports. The coming week should be interesting as the bulk of small and mid-cap companies come forward with their numbers. This could be a telling sign if this rally still has legs or not.

Happy Hunting!

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