Comments Off on Weekly Market Update – 06 March 2017 BMO

Weekly Market Update – 06 March 2017 BMO

indices

The stock market continued its relentless push higher, which resulted in the sixth consecutive weekly advance for the S&P 500 and the Dow Jones Industrial Average cruising past 21,000. The benchmark index gained 0.7% for the week, extending its first quarter advance to 6.4%. The Nasdaq underperformed during the week (+0.4%), but remains ahead so far in 2017 (+9.1%).

The first two days of the week were highlighted by sideways action as most participants sat on their hands ahead of President Donald Trump’s first address to Congress, which took place on Tuesday evening. There was some profit taking ahead of the evening address on Tuesday, but not only was the selling limited, it took place after a strong run in February that ended with the S&P 500 gaining 3.7% for the month.

Tuesday’s modest downtick was wiped out in short order as equity indices charged out of the gate on Wednesday, jumping to new record highs. The upbeat disposition was attributed to President Donald Trump’s address, which was free of surprises and deemed ‘presidential’ by pundits. President Trump reiterated his commitment to a $1 trillion infrastructure plan and made another mention of a big tax reform plan on the horizon. Details, however, remain to be seen.

However, it wasn’t all President Trump as investors received some positive news from the global economic front on Thursday. China’s Manufacturing PMI for February (51.6; expected 51.1) beat expectations while eurozone Manufacturing PMI (55.4; expected 55.5) ticked down slightly, but remained in expansion.

On the domestic data front, fourth quarter GDP was left unrevised at 1.9% in the second estimate, while more recent data like February Chicago PMI (57.4; Briefing.com consensus 53.0), February Consumer Confidence (114.8; Briefing.com consensus 111.5), and February ISM Index (57.7%; Briefing.com consensus 56.1%) beat expectations. That combination, and some hawkish comments from Fed officials, contributed to a notable shift in rate hike expectations.

The fed funds futures market ended the week showing a 79.9% implied probability of a rate hike in March, indicating a prevailing belief that the Federal Reserve is likely to raise the target range for the fed funds rate at its March 14-15 FOMC meeting. Fed Chair Yellen herself contributed to those increased expectations with a speech on Friday in which she indicated a further adjustment in the fed funds rate would likely be appropriate at the March meeting if the FOMC’s evaluation of matters concludes that employment and inflation are continuing to evolve in line with its expectations.

This week also featured the widely-hyped, and closely-followed, IPO of social media company Snap (SNAP) on Thursday. The IPO priced at $17, yet the stock snapped higher when it first opened for trading, hitting the $24.00 mark before closing the session at $24.48 and finishing the week at $27.08.

The major averages finished Friday’s session near their unchanged marks as investors digested the latest remarks from Fed Chair Janet Yellen. The Nasdaq (+0.2%) outperformed while the S&P 500 (+0.1%) finished with a slim gain. The Dow closed the day unchanged.

(Excerpts from Briefing.com)

The U.S. Dollar Index went down 0.79% to 101.34 today (but still 0.08 higher for the week) as FX traders “sell the fact” on Fed Chair Yellen’s indication that a March 15 rate hike is all but assured. The British pound, loonie, Aussie, and kiwi remain near one-month lows but the euro has held up admirably in the face of all of this week’s Fed hawkishness. The international economic data showed continued strength in the eurozone’s service sector but the U.K.’s disappointed. China and Russia also saw slower growth in their service sectors. Retail sales in the eurozone unexpectedly declined in January. Historically, the dollar has not performed well in the wake of Fed rate hikes as Treasury yields have tended to move lower. That is not a forecast but simply a word of caution

Bonds yields rose across the board for the week to match the volatile greed in the risk space as investors saw reasons to get out of safety.

Commodities were again divergent for the most part. In a reverse of the previous week, this week saw weakness in energy and precious while there was strength in copper.

Agriculture Closing Prices

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THE WEEK AHEAD

Screen Shot 2017-03-05 at 8.47.10 PMMonday 06 to Friday 10 March (Week 10)

The tenth week of 2017 (wk10) is flat for the SPY and DIA over the last 5 years but bullish over the last 10 and 15 years with an average 60% reliability.

The 2017 Stock Trader’s Almanac’s averages for the DOW are bearish on Monday (53%) and bullish for the rest of the week; Tuesday (62%), Wednesday (52%), Thursday (57%)  and Friday (62%)S&P500 is bullish all week Monday (52%), Tuesday (62%), Wednesday (57%), Thursday (52%) and Friday (52%).

Key Economic Dates

Mon 06 Mar

Tue 07 Mar

Wed 08 Mar

Thu 09 Mar

Fri 10 Mar

SUMMARY

With the DOW barely clinging on to 21,000, the coming week should see it struggle to hold above it as the week is historically uneventful and boring. I reckon the last five years’ bearish returns will hold true as the market takes a breather. Not surprising if it does as the week, void of other economic data, waits for the employment numbers on Wednesday and at the end of the week.

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Comments Off on Monthly Sector Report 1702 : Mid Cap Semi-Con 2017

Monthly Sector Report 1702 : Mid Cap Semi-Con 2017

 

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This month’s feature is mostly focused on Tech Mid Cap Semi-conductor companies as NASDAQ goes into its second half of its “Best Eight Months” (between November and June) and its seasonally best (bullish) period between March and June.

As usual, we also have the monthly market updates on the US and this month’s economic update on Singapore is massive!

Get yours here: Sector Report 1702 : Mid Cap Semi-Con 2017

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Comments Off on February 2017 In Review, March Preview

February 2017 In Review, March Preview

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February was a quick month with little activity on the Tutorial front apart from the usual weekly classes, February Gathering on Trading Psychology and a Candlestick & Breakout Patterns Workshop on Sat 25.  I find it amazing that the Candlestick Workshop has been running for 10 years now and it still delivers the same, if not better “wow” factor as it did ten years ago. Participants still get a kick and a joyous time learning about this old and tested technique that marries financial, risk and psychological management all at the same time. I love teaching it and it remains the most under-rated workshop in this region (mostly because the public thinks its a sales gimmick) even though it is a genuine extension of the Pattern Trader Tutorial.

FullSizeRender 2Then there was Chinese New Year and the usual gathering amongst friends. This year, I was too tied up to organise the usual get-together at my place so Ariane and Brian did the honours at their place. It was no less noisy and wild and guess who clean up the card game … again

Most of my time since the start of the year has been spent developing my plans and organising my life for after I’ve left AKLTG some time after May this year. Lots of meetings and tying up of loose ends and lots of administrative matters to attend to.

FullSizeRenderThe transition is more energy-draining that I had imagined and it didn’t help that most of the month was spent coughing and fighting a really stubborn flu bug. Because of that, I’ve not been able to keep up my usual fitness regime and have not been in the pool since December last year. I should really re-start my program before I get too out of shape.

And that’s the plan for March. Just hope the weather plays ball.

MARKET UPDATE

DOW1yr

This has been one of the most bullish Februarys in recent years when the month has been the flattest in market history. In the last three weeks alone, the major indices more than tripled their gains since the start of the year. Year-to-date (as of Fri 24 Feb close);

YieldsAnd this run looks to be able to continue in the coming two months as March and April are typically the year’s most bullish consecutive months in history.

However, whether this run is sustainable becomes the main question when there has been a huge divergence from the behaviour of bonds.

Yields have fallen in the same period that risk has risen suggesting a flight to safety in spite of rising risk.

DXYMeanwhile the dollar strengthened in February as more speculation of higher rates peppered the market. Although, the past week was very quiet on the economic front, investors did receive the most recent policy minutes from the Federal Open Market Committee.

The minutes acknowledged that a rate hike will be in order fairly soon, if incoming data on jobs and inflation remains in line with expectations, which seems highly likely.

We’ll find out between Wednesday 1 March and Friday 3 March when we get the numbers from the ADP Employment report, Initial Claims, Non-Farm Payrolls and Unemployment Rate, along with a host of Fed members making public appearances including Kaplan, Brainard, Evans, Fischer, Powell and FOMC Chair, Janet Yellen. That could shift market sentiment ahead of their FOMC meeting on Wed 15 Mar at 2pm (EST).

With economic numbers showing that America is indeed healthy and earnings returns showing that businesses are running well, there is little to worry about regarding life on the street.

PE SnP

The market, however, is bubbling yet again.

SINGAPORE

STI

The STI has made some nice gains YTD with more than a 7% gain for the year, something that hasn’t happened in more than half a decade.

SG GrowthThe GDP advanced an annualized 12.3% on quarter in the last three months of 2016, recovering from a 0.4 percent contraction in the previous quarter and above earlier estimates of 9.1 percent. It is the strongest growth rate since the first quarter of 2011, mainly due to a rebound in manufacturing.

This 12.3% growth highly contradicts what the streets of Singapore are implying when it seems we’re in the worst economic health since Q3 of 2010. Between Q3 2011 and Q2 2014, the economy was doing much better with less than 2% unemployment and high wages everywhere. Yet, growth never topped 11%.

SG UnemployThese days, many have been laid off, many others have had pay cuts and the malls are more vacant than they’ve been between Q3 2011 and Q2 2014.

It’s hard to fathom that an uptick in manufacturing could have such an impact on the numbers even as the manufacturing sector has been struggling on the import/export front.

The GDP number hasn’t yet factored a massive 12-point drop in Industrial Production m/m between December 2016 and January 2017 and a 20-point collapse in Manufacturing Production y/y.

SG Manu mmSG Manu yy

Properties continued their slump into its fourth year with 13 consecutive quarters of decline while Business Confidence in the Island State stayed negative for its sixth straight quarter.

SG Res

SG BizConfi

Whether that 12.3% growth number is sustainable now becomes the question because the numbers now are not encouraging for the outlook of the Red Dot’s current quarter. There is no way that 12% can be sustained (short of a miracle or creative accounting) and any pullback to single figures will be no less than a 2.3% contraction which could spell more woes for business and consumer confidence.

Screen Shot 2017-02-27 at 5.51.43 PMMARCH PREVIEW

March 2017 has a total of 23 trading sessions and one public holiday. March is known as a bullish month especially towards the middle of the month. March starts well and can end poorly. It is the last month of the first quarter and is known for its December Low indicator where if the market closes above the low of the previous December, the year is likely to end higher and vice versa.

Recent years have seen a change in the end-of-quarter window dressing that used to rally the market in the last week. These days, March ends poorly especially since 2008 as fund managers’ participation in the equity space has dropped off significantly post Sub-prime.

March Trivia

Key Economic Dates

Mon 27 Feb

Tue 28 Feb

Wed 01 Mar

Thu 02 Mar

Fri 03 Mar

Mon 06 Mar

Tue 07 Mar

Wed 08 Mar

Thu 09 Mar

Fri 10 Mar

Tue 14 Mar

Wed 15 Mar

Thu 16 Mar

Fri 17 Mar

Mon 20 Mar

Tue 21 Mar

Wed 22 Mar

Thu 23 Mar

Fri 24 Mar

Mon 27 Mar

Tue 28 Mar

Wed 29 Mar

Thu 30 Mar

Fri 31 Mar

Commodities

SUMMARY

As Asia struggles with contracting growth (except for Singapore), the U.S. struggles to contain a bubble. These are interesting times and at the same time, daunting. I grow more cautious with each passing session.

Safe Hunting, everyone.

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Comments Off on Weekly Market Update – 27 February 2017 BMO

Weekly Market Update – 27 February 2017 BMO

DOW5days

The major indices extended their run with the DOW clocking a third straight week of gains and the S&P500 going five weeks up.

The stock market appeared to be in jeopardy of recording its first down week in a month, but a recovery on Friday afternoon helped the S&P 500 add 0.7% for the week, extending its first quarter gain to 5.7%.

Equity indices motored higher to start the week, but investor sentiment soured a bit on Thursday, after Axios reported that Republican lawmakers are likely to delay a decision on infrastructure spending until 2018, giving Congress time to focus on tax and health care reform in 2017. The news weighed on construction and engineering names with Caterpillar (CAT) falling 3.3% during the final two sessions of the week.

However, the overall stock market took the news in stride, which was impressive, considering pro-growth policies were cited for the post-election charge that lifted the S&P 500 to a fresh record. The market did see some selling on Friday morning, but dip buyers helped the benchmark index turn positive by the close.

The past week was very quiet on the economic front, but investors did receive the most recent policy minutes from the Federal Open Market Committee. The minutes acknowledged that a rate hike will be in order fairly soon, if incoming data on jobs and inflation remains in line with expectations.

It is worth noting that some members of the FOMC expressed concern that low volatility in equity markets is inconsistent with considerable uncertainty attached to the outlook for changes to the fiscal landscape. The CBOE Volatility Index (VIX) held its ground in the 11.50% area, ending the week well below its 200-day moving average (13.80).

Rate hike expectations saw limited movement during the past week. The implied likelihood of a hike in May ticked up to 50.4% from last week’s 44.1% while the implied probability of a rate hike in June slipped to 66.5% from last Friday’s 69.9%.

The Dollar Index tested the 101 level for resistance. The greenback was trending lower Friday but saw some buyers jump in right ahead of the open. But that rally has fizzled out at 101. We will be getting a steady flow of data next week which will help set up the March meeting expectations. The biggest headwind at the moment appears to be the dollar and the low yields in Europe as the Fed is worried about the divergence. Of note, the jobs report is not out until March 10. This is due to how the timing of the three week period at the BLS plays out.

(Excerpts from Briefing.com)

Bonds yields retreated with the belly of the curve falling by double figures in the week to flatten the curve rather drastically in spite of the gains in risk.

Commodities closed mostly higher except for copper that was divergent for the most part.

Agriculture Closing Prices

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Screen Shot 2017-02-27 at 5.51.43 PM
THE WEEK AHEAD

Monday 27 to Friday 03 March (Week 09)

The eighth week of 2017 (wk9) is bullish for the SPY and DIA over the last 5 years with more than 80% reliability on SPY. However, the stats over the last 10 and 15 years are bearish with less than 50% reliability.

The 2017 Stock Trader’s Almanac’s averages for the DOW are bearish on Monday (52%) and Tuesday (57%) and Thursday (57%) while Wednesday (61.9%) and Friday (57.1%) are bullish. S&P500 is bullish on Monday (52.4%), Wednesday at (61.9%) and Friday (66.7%) and bearish on Tuesday (57%) and Thursday (62%).

Key Economic Dates

Mon 27 Feb

Tue 28 Feb

Wed 01 Mar

Thu 02 Mar

Fri 03 Mar

Some notable earnings this week …

SUMMARY

The week ahead looks like its going to be another frustrating roller-coaster without huge gyrations. Boring.

Happy Hunting.

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Comments Off on Weekly Market Update – 20 February 2017 BMO

Weekly Market Update – 20 February 2017 BMO

Screen Shot 2017-02-18 at 11.02.47 PM

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?

Screen Shot 2017-02-19 at 11.53.04 AM

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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Comments Off on Weekly Market Update – 13 February 2017 BMO

Weekly Market Update – 13 February 2017 BMO

Screen Shot 2017-02-12 at 3.47.40 PM

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’.

Screen Shot 2017-02-12 at 5.10.18 PM

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

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

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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Comments Off on Candlestick & Breakout Patterns Workshop (Singapore)

Candlestick & Breakout Patterns Workshop (Singapore)

 Screen Shot 2016-12-02 at 11.00.26 AM

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

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

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

Screen Shot 2017-02-04 at 1.12.04 PM

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

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

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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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;

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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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