Comments Off on Weekly Market Update – 5 March 2018 BMO

Weekly Market Update – 5 March 2018 BMO

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Week in Review: Selling Resumes

Stocks tumbled this week, with the S&P 500 dropping 2.0%. The Nasdaq Composite did a little better, and the Dow Jones Industrial Average did a little worse, losing 1.1% and 3.1%, respectively. The small-cap Russell 2000 showed relative strength, but still finished lower by 1.0%.

The week actually began on a positive note, with the S&P 500 jumping 1.2% on Monday, but took a turn for the worst on Tuesday when new Fed Chairman Jerome Powell testified before the House Financial Services Committee. Mr. Powell’s prepared remarks didn’t contain any surprises, calling for a continued path of gradual rate hikes. However, in the Q&A session, Mr. Powell noted that his economic projections have increased since the December FOMC meeting, prompting a negative reaction on Wall Street due to concerns that the Fed may hike rates more than expected.

The Fed forecasted three rate hikes for 2018 at its December meeting, but, in light of Mr. Powell’s upwardly revised growth projections, investors have increased their expectations for a fourth hike. The CME FedWatch Tool places the chances of a fourth rate hike at 30.7%, up from 24.4% last week. The chances of a March rate hike are at 83.1%.

Fast-forwarding to Thursday, the equity market was dealt another blow, this time from President Trump, who announced that he’ll be imposing tariffs on steel and aluminum imports–25% for steel and 10% for aluminum. Mr. Trump’s decision prompted concerns about higher prices and retaliation from China and other trading partners.

However, outside of fundamental factors affecting this week’s sell off, it’s also important to note that the S&P 500 broke below its 50-day moving average, a key technical level that’s provided the market with support since the 2016 presidential election. The benchmark index dropped below its 50-day moving average for the first time in five months during the big sell off at the beginning of February and has ticked back above it a few times since–most notably on Monday, when the S&P 500 hit a three-week high.

The S&P 500 initially found support at its 50-day moving average on Wednesday, but selling accelerated after the index broke through the level on its second attempt. If this week’s selling continues, investors will be looking for other potential areas of support, including the S&P 500’s February low (2581) and its 200-day moving average (2561).

11 of 11 S&P 500 sectors finished the week in negative territory, with industrials (-3.3%) and materials (-4.0%) being the weakest performers. The technology (-0.8%), consumer staples (-1.3%), and telecom services (-0.7%) groups exhibited relative strength, but the remaining sectors lost between 2.0% and 2.9%.

A slew of retailers reported earnings this week. TJX (TJX) rallied 7.0% on Wednesday after reporting better-than-expected earnings and revenues for the fourth quarter and raising its profit guidance. Conversely, Lowe’s (LOW) dropped 6.5% in the same session after missing Q4 earnings estimates and lowering its profit guidance for fiscal year 2019. The SPDR S&P Retail ETF(XRT) finished the week lower, but ahead of the broader market, losing 1.4%.

In other corporate news, Comcast (CMCSA) dropped 7.4% on Tuesday after upping a bid from 21st Century Fox (FOXA) for a large stake in British broadcaster Sky.

(Excerpts from Briefing.com)

Friday Update: Ending the Week on a Positive Note

Wall Street finished a disappointing week with a mostly positive outing on Friday. The S&P 500 and the Nasdaq finished with gains of 0.5% and 1.1%, respectively, largely thanks to a late rally that left the two indices at their best marks of the day. Meanwhile, the Dow lost 0.3%, and the small-cap Russell 2000 jumped 1.7%.

President Trump’s decision to impose tariffs on steel and aluminum imports, which was announced on Thursday, prompted threats of retaliation from leaders around the globe and sent stocks lower in Asia and Europe overnight. Wall Street joined the global sell off at the opening bell, with the S&P 500 quickly dropping 1.0%, but the market started to regain its footing about an hour into the session. By midday, the S&P 500 had climbed all the way back to its unchanged mark.

The outperformance of the heavily-weighted health care (+1.0%) and technology (+1.0%) sectors, which represent around 40.0% of the broader market combined, helped lift the benchmark index. Within the health care group, biotechnology shares showed particular strength, evidenced by the 2.4% increase in the iShares Nasdaq Biotechnology ETF (IBB 109.65, +2.61). Meanwhile, chipmakers were among the top performers in the tech space, pushing the PHLX Semiconductor Index higher by 1.8%.

In total, seven of eleven S&P 500 sectors finished in the green. Health care and technology were the best performers, while real estate (-0.4%) was the worst.

The latest batch of fourth quarter earnings included several retail names, including Gap (GPS 34.18, +2.48, +7.8%), Nordstrom (JWN 53.04, +2.93, +5.9%), Foot Locker (FL 40.04, -5.84, -12.7%), and J.C. Penney (JCP 3.71, -0.21, -5.4%). The results were mostly better than expected (GPS, FL, and JCP all beat earnings estimates, while JWN missed).

Meanwhile, Dow component McDonald’s (MCD 148.27, -7.43) dropped 4.8%, hitting its lowest level in more than nine months, after RBC Capital Markets trimmed its target price for MCD shares to $170 from $190, citing a disappointing launch for the fast food giant’s $1, $2, $3 menu.

Elsewhere, U.S. Treasuries gave back most of their Thursday advance on Friday, pushing yields higher across the curve; the benchmark 10-yr yield jumped five basis points to 2.86%. The 10-yr yield finished the week lower by one basis point and nine basis points below the four-year high it hit on February 21.

In currencies, the yen advanced 0.5% against the U.S. dollar to 105.72, which is its best level since November 2016, after Bank of Japan Governor Haruhiko Kuroda said the BoJ would consider exiting from its aggressive monetary easing as early as 2019. Meanwhile, the euro jumped 0.5% against the greenback to 1.2329.

Friday’s economic data was limited to the final reading of the University of Michigan Consumer Sentiment Index for February:

Market Internals – Friday 23 Feb – AMC

Dollar: Pressured Again

The U.S. Dollar Index finished down 0.4% at 89.99, trimming this week’s gain to just 0.1%. On Friday, the Dollar Index failed to hold above its 50-day moving average (90.56), spending the afternoon in a steady retreat. The greenback saw a bit more selling overnight and it has struggled to put together a rebound, spending U.S. trade in the lower half of the day’s range.

Bonds: Selling Resumes

U.S. Treasuries finished the week on a lower note with the long bond reversing yesterday’s entire advance. Treasuries started the day with modest losses and continued sliding until the 10-yr note reached its closing level from Wednesday around 11:20 ET. After finding support at that level, the 10-yr note edged up off its low during afternoon action. Meanwhile, the long bond reached Wednesday’s intraday low in late-morning action, but modest afternoon buying lifted it back near Wednesday’s closing level. The volatile week ended with slim gains for 10s and 30s while 2s and 5s ended the week in negative territory.

The long end of the yield curve flattened a little. The spread between the 5s10s narrowed to 24bps from 25bps the previous week while the 10s30s spread narrowed to 27bps from 29bps the previous week.

Crude: Falling Back

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.0 million barrels from the previous week. At 423.5 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories increased by 2.5 million barrels last week, and are in the upper half of the average range. Finished gasoline and blending components inventories both increased last week. Distillate fuel inventories decreased by 1.0 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories decreased by 0.4 million barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories increased by 3.7 million barrels last week.

Baker Hughes total U.S. rig count increased by 3 to 981 following last week’s increase of 3.

Metals: Downtrend continues

Agriculture: Higher for the week

Commodities measured by the Bloomberg Commodity Index closed at 88.1477, lower than 88.6922 the previous week.

THE WEEK AHEAD

Monday 05 to 09 March (Week 10)

The tenth week of 2018 (wk10) is supposed to be bullish over the 5, 10 and 15 year averages on the SPY and DIA according to our seasonal models.

Key Economic Dates

For week 10, the most important release will be the US jobs report. Other indicators include the ISM non-manufacturing PMI, factory orders and trade balance. Elsewhere, China inflation and trade balance; GDP growth for Japan and Australia and monetary policy decisions from the ECB, the BoJ, the RBA and the RBC will also be in the spotlight.

Sun 04 March

Mon 05 March

Tue 06 March

Wed 07 March

Thu 08 March

Fri 09 March

TECHNICALS

On weekly candles, the DOW and S&P500 are wearing Bearish Engulfing patterns while the NASDAQ sports an ugly Dark Cloud implying that the coming week could see more downside action before and recovery bounce can be expected.

Looking at the DSMAs on the DOW and S&P500, it would seem that the benchmarks could struggle against their respective 50DSMAs in the coming week when they break upwards. S&P on daily candles has a Thrusting Pattern that should continue to the downside at the open of the coming week. Both the DOW and S&P remain below their 20/50DSMA Death Crosses for the second week. 

SUMMARY

Statistically, the coming week is supposed to be bullish. Technically, the signs are pointing to some downside before any reversal can happen. Seasonally, we in a bullish window. However, the yield curve is signalling warnings as it flattens again. To add to the confusion, rhetorically, Trump and Powell have kept the market down and given it more reason to be fearful.

This gives us more reason to be cautious if we’re anticipating the return of the Bulls in March and April. Concerns about inflation and the Federal Reserve agreeing to four rate hikes this year will be a major concern going forward and could present the resistance that stops the market from rallying further. Chances of more volatility in the coming months is definitely on the cards. It would take a brave man to bet that this correction is all done and dusted.

Happy Hunting!

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Comments Off on Weekly Market Update – 26 February 2018 BMO

Weekly Market Update – 26 February 2018 BMO

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Week in Review: Eking Out a Last-Minute Win

Equities advanced this week thanks to a last-minute rally on Friday that reclaimed losses registered on Tuesday and Wednesday. The S&P 500 and the Dow Jones Industrial Average added around 0.5% apiece, while the tech-heavy Nasdaq Composite outperformed, jumping 1.4%. Markets were closed on Monday (February 19) in celebration of Presidents’ Day.

The Wednesday release of the minutes from the January FOMC meeting was perhaps the most notable event of an otherwise relatively quiet week. The minutes were somewhat outdated considering the last FOMC meeting took place before a host of events that may have altered the Fed’s perspective a bit, including the release of the CPI and PPI reports for January, the passing of a two-year budget deal in Congress that will increase spending by approximately $420 billion, and a sharp sell off on Wall Street.

Nonetheless, the minutes did reveal that almost all FOMC members expect inflation to increase in 2018 and that a majority of members believe a stronger outlook for economic growth raises the “likelihood that further gradual policy firming would be appropriate.”

The yield on the benchmark 10-yr Treasury note ticked up to a four-year high on Wednesday following the minutes, closing at 2.94%, but slipped back to 2.87% by Friday’s close–finishing flat for the week. Meanwhile, the 2-yr yield jumped to 2.26% following the minutes, its highest level since September 2008, but finished Friday at 2.24%–locking in a weekly gain of five basis points. In addition to the minutes, the 2-yr yield was also bolstered by a relatively weak 2-yr note auction on Tuesday.

In corporate news, shares of Wal-Mart (WMT) tumbled 10.2% on Tuesday after the world’s largest retailer reported lower-than-expected earnings for the fourth quarter and issued disappointing profit guidance for fiscal year 2019. Conversely, Hewlett Packard Enterprise (HPE) rallied 10.5% to a new all-time high on Friday after reporting better-than-expected earnings and revenues and issuing upbeat profit guidance. HPE also announced a plan to return $7 billion to shareholders via share repurchases and a dividend increase.

As for the sector standings, seven of eleven S&P 500 groups finished the week in positive territory. The technology (+1.9%), materials (+1.3%), and energy (+1.0%) groups finished at the top of the leaderboard, while the consumer staples (-2.3%) and utilities (-2.4%) sectors finished at the bottom.

The S&P 500’s 50-day simple moving average (2731) proved to be an area of resistance for the benchmark index on several occasions this week, the most notable of which was on Thursday when the S&P 500 retraced the entirety of a 1.2% intraday gain after hitting the key technical level. However, the S&P 500 finally managed to climb above its 50-day simple moving average on Friday, which helped fuel further buying to bring the index into positive territory for the week.

Following this week’s trading, the S&P 500 is down 4.4% from the record high it hit on January 26.

(Excerpts from Briefing.com)

Friday Update: Friday Rally Leaves Stocks Higher for the Week

Stocks rallied on Friday, turning what was a disappointing week into a modest success. The Nasdaq Composite led the charge, adding 1.8%, while the S&P 500 and the Dow Jones Industrial Average climbed 1.6% and 1.4%, respectively. For the week, the three major averages finished with gains between 0.4% and 1.4%.

After trending sideways through the first hour of trading, the major averages began building on their opening gains, which were around 0.5% apiece, and nearly doubled them by midday. The rally then paused for about two hours as the S&P 500 wrestled with its 50-day simple moving average (2731), which proved to be an area of resistance on Thursday. The benchmark index eventually jumped above the key technical level and continued climbing–alongside the Dow and the Nasdaq–until the closing bell.

Friday’s rally was broad, with 11 of 11 S&P 500 sectors finishing in positive territory.

The rate-sensitive utilities sector was the top-performing group, adding 2.7%, as Treasury yields slipped across the curve; the yield on the 2-yr note declined two basis points to 2.24%, while the yield on the benchmark 10-yr note tumbled five basis points to 2.87%. The top-weighted technology group (+2.2%) and the energy group (+2.2%) also outperformed on Friday.

Within the tech space, Hewlett Packard Enterprise (HPE 18.14, +1.73) and HP (HPQ 22.13, +0.74) rallied 10.5% and 3.5%, respectively, after the companies beat both earnings and revenue estimates, in addition to issuing upbeat profit guidance. HPE shares finished at a fresh all-time high.

As for energy, its outperformance was helped by an increase in the price of crude oil; WTI crude futures jumped 1.3% to $63.56/bbl, hitting a two-week high.

On the downside, the industrial sector (+0.8%) underperformed as Dow components Boeing (BA 356.66, +0.74), General Electric (GE 14.49, -0.01), and 3M (MMM 237.02, +1.02) finished the session little changed. The lightly-weighted telecom services sector (+0.8%) also struggled to keep pace with the broader market.

In corporate news, Nordstrom (JWN 53.56, +3.29) rallied 6.5% following reports that the Nordstrom family hopes to seal a deal to take the high-end retailer private before next Thursday, when the company is due to report its results for the fourth quarter. Meanwhile, General Mills (GIS 52.98, -1.97) declined 3.6% after agreeing to acquire Blue Buffalo (BUFF 40.00, +5.88) for $40 per share in cash.

Investors did not receive any economic data on Friday, but the Fed did release its Monetary Policy Report, which is expected to be a blueprint for new Fed Chair Jerome Powell’s testimony before Congress next week. The Fed stayed on message in the report, calling for a path of gradual rate hikes and noting that it expects inflation to creep closer to the 2.0% year-over-year target as economic activity continues to expand at a moderate pace.

Market Internals – Friday 23 Feb – AMC

Dollar: Dollar Fights to Defend Overnight Gain

The U.S. Dollar Index is up 0.2% at 89.88, looking to add 0.9% for the week. While the Index is set to end the week higher, it has failed to reclaim its loss from two weeks ago. The Index is trying to rebound from levels not seen in more than three years, but it has run into resistance just below its February high. The dollar followed yesterday’s stumble with an overnight rally, but it has struggled to hold that gain through European and U.S. trade.

Bonds: Abbreviated Week Ends on Higher Note

U.S. Treasuries ended Friday on a higher note, which helped most tenors turn positive for the week. The final session of the week was free of economic data and none of today’s four Fed speakers made market-moving remarks. However, it is worth pointing out that New York Fed President and FOMC Vice Chair William Dudley said the Fed should stop shrinking its balance sheet when it reaches about $2.90 trillion. The Fed’s balance sheet was below $1 trillion before the financial crisis. The Treasury complex started the day in positive territory and continued its push into the afternoon, squeezing out some short positions that were established earlier this week when yields reached fresh cycle highs. The daylong advance helped 2s, 5s, and 10s turn positive for the week while the long bond logged its seventh weekly decline in the past ten weeks.

The long end of the yield curve steepend as the belly of the curve fell. The spread between the 5s10s remained unchanged at 25bps for a third week while the 10s30s spread widened to 29bps from 26bps the previous week.

Crude: WTI recovers, closes higher above $63.50

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.6 mln barrels from the previous week. At 420.5 mln barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories increased by 0.3 mln barrels last week, and are in the upper half of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories decreased by 2.4 mln barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories decreased by 2.5 mln barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories decreased by 7.9 mln barrels last week.

Baker Hughes total U.S. rig count increased by 3 to 978 after being flat last week.

Metals: Falling back again

Agriculture: Corn stalls, Wheat strengthens, Soy breaks above $10.00

Commodities measured by the Bloomberg Commodity Index closed at 88.6922, higher than 88.2043 previous week.

MARCH TRIVIA

March is the last month in Quarter One and the penultimate month of the “best six months” on the DOW and S&P500. March is known for its good start, mid-month strength and end month weakness. March 2018 has 21 trading sessions and one public holiday.

THE WEEK AHEAD

The coming week09 is the last week of February and the start of March.

Monday 26 February to Friday 02 March (Week 09)

The ninth week of 2018 (wk09) is supposed to be bullish over the 5 and 10 year averages but is unreliably bearish on the 15 year average on the SPY and DIA according to our seasonal models.

The daily averages for the benchmark indices (based on 21 years) for week 09;

Key Economic Dates

Next week, the US will publish the second estimate of GDP growth, durable goods, ISM Manufacturing PMI, new and pending home sales, personal spending and income. Elsewhere, important releases include the UK PMIs; Japan industrial output; and China PMIs. Canada, India, Brazil and Hong Kong will report GDP growth for Q4.

Mon 26 February

Tue 27 February

Wed 28 February

Thu 01 March

Fri 02 March

OBSERVATION

Fed Monetary Policy Report Excerpts – Fed Message Stays on Point Under Powell

U.S. economic strength will warrant further gradual hikes; Most expect inflation to move closer to 2% tgt; Labor market near or a little beyond full employment; vulnerabilities are moderate and balanced on risk

From Briefing.com

SUMMARY

As of Friday’s close, the benchmarks are barely above the year’s open with only the NASDAQ managing more than a 1% gain year-to-date. The three benchmarks are also well above their respective December Lows as we go into the final month of the quarter to determine if the DL indicator closes in convergence with the January Barometer.

With the market behaving like it is “back to normal”, I am likely to be looking for upside trades in the coming weeks and probably resume my usual portfolios of seasonal trades.

Happy Hunting!

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Comments Off on Weekly Market Update – 19 February 2018 BMO

Weekly Market Update – 19 February 2018 BMO

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Week in Review: Bouncing Back

The equity market rallied this week, reclaiming about half of the losses it registered over the previous two weeks. The tech-heavy Nasdaq Composite climbed 5.3% as technology shares outperformed, while the S&P 500 and the Dow Jones Industrial Average added 4.3% apiece. The S&P 500 and the Dow ended Friday on a six-session winning streak.

This week’s gains put the S&P 500, the Nasdaq, and the Dow back into the green for the year and back above their respective 50-day simple moving averages. They’re still a ways below record territory, however, settling Friday about 5.0% beneath the record highs they posted on January 26.

11 of 11 S&P 500 sectors finished the week in positive territory, with gains ranging between 1.8% and 5.8%. The top-weighted technology group (+5.8%) was the strongest sector, while the energy (+1.9%), utilities (+2.9%), telecom services (+2.4%), and real estate (+1.8%) groups were the weakest.

In general, cyclical sectors, which tend to do well when the economic outlook is favorable, outperformed their countercyclical peers.

Within the tech group, Apple (AAPL), surged 10.2% this week, reclaiming most of the 13.5% it lost between January 18 and February 8, and Cisco Systems (CSCO) rallied 4.7% on Thursday–hitting its best level in nearly 20 years–after reporting better-than-expected profits for the quarter ending in January and raising its earnings and revenue guidance.

Investors received a big batch of economic data this week, highlighted by a hotter-than-expected CPI reading: the Consumer Price Index increased 0.5% month over month in January (consensus +0.4%) and the core CPI, which excludes food and energy, rose by 0.3% (consensus +0.2%). The headline month-over-month figures sparked a knee-jerk reaction from the market, which has been fighting fears of inflation – and, in turn, fears of a more hawkish Fed – in recent weeks.

However, the year-over-year figures helped restore order and keep the week’s upward trajectory intact, showing that both the CPI and the core CPI are still within a range they’ve held to for some time; the total CPI is up 2.1% year over year and has been between 2.0% and 2.2% for five months, while the core CPI is up 1.8% year over year and has been between 1.7% and 1.9% for ten months.

The yield on the benchmark 10-yr Treasury note climbed to a four-year high on Wednesday following the CPI release, closing at 2.91%, but gave up some ground on Thursday and Friday to finish the week little changed at 2.88%. Meanwhile, the 2-yr yield climbed 12 basis points this week, closing at 2.19%–its highest level in nearly a decade.

Meanwhile, in the currency market, the U.S. Dollar Index returned to a three-year low on Thursday (88.50), but bounced back a bit on Friday to finish the week with a loss of 1.4%. The greenback showed particular weakness against the Japanese yen, dropping 2.4% to 106.22, which is its lowest level since November 2016.

In Washington, the White House released its infrastructure plan on Monday, which is designed to stimulate $1.5 trillion in spending over a decade. (See “Observation” below)

U.S. markets will be closed on Monday in observance of Presidents’ Day.

(Excerpts from Briefing.com)

Friday Update: Flat on Friday

Stocks kept their weekly gains intact ahead of the extended Presidents’ day weekend, finishing Friday’s session little changed.

The S&P 500 (unch) and the Dow Jones Industrial Average (+0.1%) eked out their sixth consecutive victories, while the Nasdaq Composite underperformed, finishing lower by 0.2%. For the week, the three major stock indices settled with gains between 4.3% and 5.3%.

Equities rose steadily throughout the morning, but reversed course in the early afternoon following news that a federal grand jury has indicted 13 Russian nationals and three Russian entities on accusations of interference in the 2016 presidential election. Some of those defendants allegedly communicated with unwitting individuals associated with the Trump campaign.

Trading was choppy following the headline, which, more than anything, gave investors a convenient excuse to pull back following five straight days of gains.

Six of eleven S&P 500 sectors finished Friday in the green, with the heavily-weighted health care group (+0.7%) being among the top performers. In general, countercyclical sectors outperformed their cyclical peers on Friday after trailing them throughout the week. The consumer discretionary (-0.4%), energy (-0.3%), and technology (-0.2%) sectors were among the worst-performing groups.

In the bond market, U.S. Treasuries ended the week on a flat note. The yield on the benchmark 10-yr Treasury note slipped one basis point to 2.88%, while the 2-yr yield ticked up one basis point to 2.19%. For the week, the 10-yr yield added two basis points, and the 2-yr yield jumped 12 basis points.

Reviewing Friday’s batch of economic data, which included Housing Starts and Building Permits for January, Import and Export Prices for January, and the preliminary reading of the University of Michigan Consumer Sentiment Index for February:

Market Internals – Friday 16 Feb – AMC

Dollar: Strengthening

The U.S. Dollar Index was up on Friday  at 0.6% at 89.14, to snap a four-day skid. The Index dipped to a new cycle low in overnight action, but rebounded swiftly, embarking on a steady advance that paused before the Index could reach last week’s low. A recent wave of dollar buying has lifted the Index to a fresh session high, but it has yet to overtake last week’s low. Friday’s advance was extended after the day’s first batch of data showed that import prices excluding oil increased 0.4% in January, which adds to inflationary pressures. The Dollar Index has trimmed this week’s loss to 1.4%.

Bonds: Morning Gains Surrendered Amid Trade Policy Concerns

U.S. Treasuries ended the week on a flat note after surrendering the bulk of their Friday morning gains. Longer-dated Treasuries began the Friday session on a modestly higher note and continued their climb until the late morning, but the 10-yr note found resistance near levels from Tuesday while the long bond reversed after nearing its opening high from Wednesday. At its best level of the day, the long bond was on track to erase last week’s loss, but the early-afternoon pullback left the 30-yr bond little changed for the week. The pullback accelerated after news from the Commerce Department fueled the argument that the administration’s policies could spark a trade war. Specifically, the Commerce Department recommends (1) a global tariff of 24.0% on all steel imports, (2) a 53.0% tariff on steel imports from 12 countries (including China) and a quota on imports from elsewhere, or (3) a quota on all steel imports. The Department made similar recommendations regarding aluminum, proposing (1) a 7.7% tariff on all aluminum imports, (2) a 23.6% tariff on aluminum products exported from China, Hong Kong, Russia, Venezuela, and Vietnam, or (3) a quota on all aluminum imports. President Trump has until April to accept or reject the recommendations.

The yield curve flattened as the shorter maturities’ yields rose while the 30yr yield stayed rooted. The spread between the 5s10s remained unchanged at 25bps from last week while the 10s30s spread is at 26bps from 31bps the previous week.

Crude: WTI recovers, closes above $61.00

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.8 million barrels from the previous week. At 422.1 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year. Total motor gasoline inventories increased by 3.6 million barrels last week, and are in the upper half of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.5 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories decreased by 3.3 million barrels last week, and are in the middle of the average range. Total commercial petroleum inventories decreased by 2.7 million barrels last week.

Baker Hughes total U.S. rig count was flat following last week’s increase of 29.

Metals: Gold, Silver and Copper bounce back impressively

Agriculture: Corn continues strength, Wheat bounces, Soy gains momentum

Commodities measured by the Bloomberg Commodity Index closed higher at 88.2043 from 86.3257 the previous week.

THE WEEK AHEAD

The coming week08 is a shortened week as Monday is a holiday. It is the most bearish week of the month of February that often carries its bearishness into the end of the month.

Tuesday 20 to 23 February (Week 08)

Like I said last week, let’s not get carried away with the weekly statistics below because the month of February is a tricky month for our models. It is a short month and one or two days’ deviation can make the week look very different. If the first day of the week was Monday or Tuesday instead of Thursday, everything would look very different.

The eighth week of 2018 (wk08) is supposed to be bullish over the 5 and 10 year averages but is unreliably bearish on the 15 year average on the SPY and DIA according to our seasonal models.

The daily averages for the benchmark indices (based on 21 years) for week 08;

Key Economic Dates

Next week, the Federal Reserve, the ECB and the RBA will be publishing the minutes of last monetary policy meetings. Other important releases include: US existing home sales; UK second estimate of GDP growth, unemployment and wages; Japan inflation and trade balance; Australia wages; and flash PMIs for the US, Eurozone and Japan.

Mon 19 February

Tue 20 February

Wed 21 February

Thu 22 February

Fri 23 February

OBSERVATION

$1.5 trillion in infrastructure spending over the next decade. That’s $150 billion annually. That’s a shitload of money that will sure stimulate the economy … if only I could believe it … and if the next president chooses to continue the program. There’s no denying that the initial euphoria of that news should spur the market to higher highs in the interim.

However, its continuity depends on how they disperse those monies into what kind of infrastructure spending. If, like the Sub-Prime stimulus, the monies go through Wall Street or to conglomerates that are expected to re-disperse the monies, then the rich are only going to get richer with the bulk of the payout while drips and draps actually trickle into the economy.

But read the full bill carefully and it appears to NOT be a $1.5 trillion stimulus at all …

Right now, I am not too blown away by that projection because Trump seems to be talking with a forked-tongue. How quickly we forget that his previous bill looked at cuts to Fast Starts, Amtrak, and the Highway Trust Fund, indicating a $40 to $75 billion net reduction over the next decade on infrastructure spending.

In its infrastructure bill released on Monday 12 February 2018, the White House proposed spending $200 billion in federal funds on a series of undefined programs. But in its fiscal year 2019 budget request, which was also released on Monday, Trump laid out a remarkably austere path for roads, bridges and especially transit systems, with as much as $275 billion in cuts to infrastructure programs.

Rebuilding Infrastructure in America” proposes taking some federal funds – $200 billion – and, over the next ten years, portioning out half of that amount in “infrastructure incentivegrants to states and localities that can show they have the means to pay for 80 percent of their project costs.

Thus, the actual plan is to leverage the $200 billion to stimulate a total of $1.5 trillion in infrastructure spending, the vast majority public and private investments.

Read it all here: https://www.nytimes.com/interactive/2018/02/12/business/infrastructure-spending.html

SUMMARY

Interesting technicals to leave you something to think about;

Friday was interesting session to see the benchmarks get wedged between the 20 and 50DSMAs. If you’re wondering why the session was so constricted and flat, there’s your answer. The DOW refused to break below its 50DSMA while getting rejected at its 20DSMA.

The session closed in an ugly Shooting Star implying downside (or consolidation) when the market resumes trading on Tuesday. The real test will be breaking above the 20DSMA or below its 50DSMA.

The weekly perspective is also just as interesting. Having finished in a Bullish Harami last week, the candlestick formation is hinting at a sideways consolidation or an upside reversal in the coming week. The price, again, is trapped between its 10week and 20week MAs, prompting me to believe that it is likely to be a downside consolidation if the DOW is unable to break above or below those weekly averages.

Then comes the most interesting analysis; the Weekly MACD (12, 26, 9). The first red histogram has appeared in spite of the bullish bounce last week. It isn’t often that the MACD histograms turn red for just one week to become bullish the next. Just drag out a 10 or 20 year chart on weekly candles and you’ll see how significant the histograms are to indicate sentiment and strength in a longer timeframe.

One last exercise for you to drop your jaw … drag about the DOW for 50 or 60 or 80 years … whatever … put up the MACD (12,26,9) on daily, weekly and monthly charts. And in one jaw-dropping moment, you’re going to realise why I have become so conservatively bullish – the MACD has never been this high in history than in the last three months!

Despite my bullish outlook based on current macros, I am skeptical that the market can keep this up for longer. Let’s not forget that the market can crash without the economy going into recession. This has usually happened in bubble scenarios which inevitably dragged the economy into recession as a lagging effect. This is not likely to be like the Sub-Prime where the economy dragged the market down. I reckon the worst-case scenario will be a 70s style stagflation where the market becomes volatile and sideways until some revolutionary monetary policy balances everything out. In the mid-70s to mid-80s, it was Greenspan’s tightening and easing policies. Today, Blockchain perhaps?

Happy Hunting!

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Comments Off on Weekly Market Update – 12 February 2018 BMO

Weekly Market Update – 12 February 2018 BMO

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Week in Review: A Wild Ride

The equity market dropped sharply this week, with the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite losing around 5.0% apiece in volatile trading. Sizable gains on Tuesday and Friday helped keep losses somewhat in check, but they couldn’t keep the major indices positive for the year.  The three averages are down between 0.4% and 2.1% year to date.

This week’s selling was related to fears about rising interest rates, and the realization that stocks have gone too far, too fast, but it was a collective de-risking effort following the implosion of short volatility ETFs that acted as the expedient for broad-based and indiscriminate selling activity.  The S&P 500 soared 7.5% in the first four weeks of 2018 on top of last year’s 19.4% rally.

Technical, mechanical, and psychological forces all came together to knock back the market in an abrupt fashion.

The S&P 500 breached its 50-day simple moving average for the first time in five months. Weak-handed investors were consistently shaken out of “buy-the-dip” trades this week, sending stocks, and investor sentiment, even lower.

Congress missed a midnight spending deadline on Thursday–forcing a partial government shutdown–but passed a two-year budget deal a few hours later. The bill will boost spending by approximately $300 billion over the next two years, provide an additional $90 billion for disaster aid, and extend the debt ceiling until 2019.

The increase in spending prompted concerns about fiscal discipline, especially considering debt issuance was already expected to rise due to changes to the U.S. tax code. These concerns kept Treasuries in check and yields at multi-year highs.

However, outflows from the stock market ultimately edged out fiscal concerns, leaving Treasuries modestly higher–and thereby Treasury yields modestly lower–for the week.  The benchmark 10-yr yield finished one basis point below the four-year high it touched last Friday at 2.83%.

Meanwhile, the CBOE Volatility Index (VIX), often referred to as the “investor fear gauge,” ended the week higher by 66.7% at 28.86.

All 11 S&P 500 sectors finished the week in the red, with losses ranging between 2.8% (utilities) and 8.5% (energy). In general, cyclical sectors–including the heavily-weighted financial sector (-5.8%)–underperformed their countercyclical peers.

The energy sector struggled as West Texas Intermediate crude futures dropped 9.5% to $59.23 per barrel–their lowest level since the end of December.

Overseas, equity markets in Asia and Europe finished the week solidly lower, following Wall Street’s lead. China’s Shanghai Composite and Hong Kong’s Hang Seng led the retreat in Asia, dropping 9.5% apiece, while Germany’s DAX and France’s CAC set the pace in Europe with losses of 5.3% apiece.

The market still anticipates that the next rate hike will occur at the March FOMC meeting as Fed officials minimized this week’s sell off, continuing to emphasize a path of gradual rate increases. The CME FedWatch Tool places the chances of a March rate hike at 71.9%, virtually unchanged from last week’s 76.1%.

(Excerpts from Briefing.com)

Friday Update: Ending On a Positive Note

U.S. equities reclaimed a nice chunk of their losses for the week on Friday in another volatile trading session. The S&P 500 gained 1.5%, while the Dow Jones Industrial Average and the Nasdaq Composite advanced 1.4% apiece. The small-cap Russell 2000 also rallied, climbing 1.0%.

The S&P 500 covered a wide range of about 105 points–up 2.2% at its high and down 1.9% at its low.

Stocks opened in positive territory, but began moving lower shortly thereafter. The market hit negative territory in the late morning, but the retreat came to a halt as the S&P 500 approached its 200-day simple moving average (2539), which it had not tested since right before the 2016 presidential election.

The S&P 500 dipped slightly below that key technical level, which served as a springboard for renewed buying efforts which culminated in a late rally that left equities at their session highs.

The defense of the 200-day simple moving average proved to be a silver lining for investors, who endured an otherwise terrible week.  The S&P 500, the Dow, and the Nasdaq lost a little more than 5.0% apiece this week and now trade roughly 9% below the record highs they hit on January 26.

10 of 11 sectors finished Friday in the green as advancing issues outnumbered declining issues 1.4 to 1 at the New York Stock Exchange.

Market Internals – Friday 09 Feb – AMC

Dollar: Rebound Extended

The U.S. Dollar Index was up 0.3% at 90.51, for its second consecutive weekly gain. With the advance, the Dollar Index has climbed 2.0% since hitting a three-year low at the end of January. The ongoing bounce in the greenback might be put to a test, considering the sentiment surrounding the greenback is unlikely to improve significantly after Moody’s warned that a downgrade could be in the cards due to the deteriorating fiscal discipline of the U.S. government. This warning followed the early-morning passage of a spending plan that will increase spending on military and domestic programs by $300 billion over two years, leading to increased debt issuance.

Bonds: Mixed Week Ends on Higher Note

U.S. Treasuries ended a mixed week on a mostly higher note. The day’s biggest headline came from Moody’s, as the ratings agency warned about a potential credit downgrade due to the deteriorating fiscal discipline of the U.S. government. The warning followed an early-morning passage of a budget that will increase spending on military and domestic programs by $300 billion over two years, leading to increased debt issuance at a time where there are growing concerns about the market’s ability to handle the incoming supply. Longer-dated Treasuries showed some weakness in the early going of the Friday session, but that hint of selling spooked the stock market once again. The shaky ground on the equity side lured some money into fixed income, allowing Treasuries to bounce. The 30-yr bond continued this week’s underperformance, lifting its yield (3.14%) four basis points for the week. For its part, the 10-yr note ended the week with a modest gain, pressuring its yield (2.83%) two basis points. High-yield debt remained under pressure with the iShares iBoxx $ High Yield ETF (84.92, -0.27) extending this week’s loss to 1.5%, though it did recover from its intraday low.

The 2yr and 5yr yields fell during the week to steepen the curve as the 30yr yield rose. The spreads between the 10s30s and the 5s10s have now widened to 31bps from 25bps last week.

Crude: WTI falls further, closes below $60.00

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U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.9 million barrels from the previous week. At 420.3 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Total motor gasoline inventories increased by 3.4 million barrels last week, and are in the middle of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 3.9 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories decreased by 4.1 million barrels last week, but are in the middle of the average range. Total commercial petroleum inventories increased by 4.4 million barrels last week.

Baker Hughes total U.S. rig count increased by 29 to 975 following last week’s decrease of 1

Metals: Gold, Silver and Copper continue falling

Agriculture: Corn continues strength, Wheat Corrects, Soy bounces

Commodities measured by the Bloomberg Commodity Index were up 1.6% at 85.6442.

THE WEEK AHEAD

The coming week07 is February Expiration Week. Wednesday is Valentine’s Day (watch for the VD Indicator).

Monday 12 to 16 February (Week 07)

Before getting carried away with the weekly statistics below, please note that the month of February is a tricky month for our models as it is a short month and one or two days’ deviation can make the week look very different. If the days of the week fell differently, these stats can look very bearish because February’s Expiration Friday is one of the most bearish Expiration Fridays on the trading calendar that can turn the whole week bear.

The seventh week of 2018 (wk07) supposed to be bullish over 5, 10 and 15 year averages on the SPY and DIA according to our seasonal models.

The daily averages for the benchmark indices (based on 21 years) for week 07;

Key Economic Dates

In the US, the most important releases will be inflation rate, retail trade, industrial production and the preliminary reading of Michigan consumer sentiment. The UK will also publish inflation and retail sales, while Germany, Italy, Japan and Malaysia will report preliminary figures of GDP growth for Q4. Australia employment figures will be also in the spotlight.

Mon 12 February

Tue 13 February

Wed 14 February

Thu 15 February

Fri 16 February

Earnings Calendar for Week of February 12

Earnings Season winds down with only 2 DOW representatives in the week.

Monday (February 12)

Tuesday (February 13)

Wednesday (February 14)

Thursday (February 15)

Friday (February 16)

OBSERVATION

In an interesting conversation with my graduates regarding the future of Cryptocurrencies, it was mentioned that; “That is what makes bitcoin so appealing in the first place, its decentralisation that takes power away from potential brokers and consolidators.

Indeed, it is a valid point. However, that point alone tells you that it won’t ever happen as long as Central Banks and the IMF have something to say about it.

There already is, in current existence, an instrument that serves the purpose of free trade (without limitations to a great extent) where monies can be moved by the billions from nation to nation, corporation to corporation, individual to individual without the violent fluctuations that crypto poses nor the uncertainly of its value … its called the financial markets.

The Dark Pools have been doing it for more than a century and they are not likely to stand by idly while crypto takes away their century-old rice bowl.

We’ve had plenty of alternative currency channels in the past when the world thought it would become the next phase of currency exchange such as Traveller’s, Diners and AMEX. They all evolved to become part of the existing system rather than become a new norm.

The same can be said for commodities. There was a time just within the last decade when everyone believed that Rare Earth would replace Gold as the precious metal of choice. It never happened. History showed that there were other occasions when Titanium, Platinum and Palladium were thought to be the next big thing to replace Gold … never happened. They all evolved to become part of the existing system.

So, you still think crypto will become an independent system, with a clean disconnect from the current system? Let’s take in one simple fact that obviously answers all questions; Crypto is still valued against major currencies … that means, it is already part of the current system.

Thus, with all the banks and many nations pulling out and banning crypto, I reckon the time will be soon that this form of trading and currency takes the effort to regulate and administer proper governance if they want their product to be taken seriously in the current system.

Something to think about while we watch the drama unfold.

SUMMARY

The markets have begun to look very shaky with little doubt that this is that long-awaited correction that is way over-due. I am tempted to think that this is nothing more than the usual seasonal gyration that has been typical of February in the past. The month has always been known as “the weakest link” in the DOW’s and S&P500’s “best six months between November and April.

What makes it so spectacular is that majority of the players in the market now (outside of the seasoned pros) have never experienced such a gyration or have not seen anything like this since 2012 and to an extent, 2015. So the reactions were to be expected.

The question now is whether this correction is done and dusted or if we’ve only just begun to shake the unsteady pillars of this nine-year rally.

I am still holding to the analyses that the US economy is still holding strong and that there is no reason for it to fall into recession. Thus, the market should not capitulate like it did in 2008 or 2002.

But keep watching the skies because if it starts falling too far too irrationally, its capitulation will surely hurt corporate America and thus send it into recession. It has happened before.

Happy Hunting!

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Weekly Market Update – 05 February 2018 BMO

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Monday 29 January to Friday, 2 February, 2018

Week in Review: Pulling Back

Stocks tumbled this week, denting their impressive 2018 gains; the Dow Jones Industrial Average dropped 4.1%, the S&P 500 slid 3.9%, and the Nasdaq lost 3.5%.

While investors had a lot of news to digest, including President Trump’s first State of the Union address, a tech-heavy batch of fourth quarter earnings, and the Employment Situation report for January, the selling was more so a natural response to a market that’s moved too far too fast–although, a spike in Treasury yields did help strengthen a case for the bears.

Technology names dominated this week’s batch of earnings, with Apple (AAPL), Microsoft (MSFT), Facebook (FB), and Alphabet (GOOGL) reporting their fourth quarter results, which were mostly better-than-expected. However, the companies’ shares settled the week mostly lower; MSFT, GOOGL, and AAPL shares lost 2.4%, 5.8%, and 6.4% for the week, respectively, while FB shares advanced 0.2%, touching a new all-time high.

Apple reported above-consensus earnings on in-line revenues, but iPhone sales for the holiday season came in weaker than expected, and the company lowered its sales forecast for the first three months of 2018. Meanwhile, Facebook beat earnings and revenue estimates and reassured investors that its ad business would remain highly profitable despite changes to its news feed, which have prompted users to spend less time on the site–about 50 million hours less per day (in aggregate).

As for the others, Microsoft reported above-consensus earnings and revenues on the back of its rapidly-growing cloud computing business, while Alphabet, the parent company of Google, missed earnings estimates–despite beating revenue forecasts–largely due to rising costs.

Outside the technology space, Amazon (AMZN) and Boeing (BA) also reported their quarterly results this week. Amazon ended with a weekly gain of 2.0% after blowing past earnings estimates–thanks in part to changes in the U.S. tax code–while Boeing jumped 1.7% after also soundly beating earnings estimates, beating revenue estimates, and issuing much better-than-expected guidance for fiscal year 2018.

In other corporate news, the health care sector struggled this week, losing 5.1%, after Amazon (AMZN),Berkshire Hathaway (BRK.A), and JPMorgan Chase (JPM) announced on Tuesday that they will be partnering to form a company focused on reducing health care costs for hundreds of thousands of their U.S. employees.

In Washington, President Trump delivered his first State of the Union address on Tuesday evening. The president stayed on script, calling for a $1.5 trillion infrastructure plan and a compromise on immigration that would allow a path to citizenship for “Dreamers” in exchange for his promised barrier along the Mexico border and added border security. Mr. Trump also noted that lowering prescription drug prices is a top priority of his administration and took a firm, but relatively calm, stance against North Korea.

Meanwhile, Fed Chair Janet Yellen wrapped up her time at the Federal Reserve on a rather uneventful note as the Federal Open Market Committee unanimously voted on Wednesday to leave the fed funds target range unchanged at 1.25%-1.50%, as expected. In its statement, the central bank said near-term risks to the economic outlook appear roughly balanced, but added that officials are keeping an eye on inflation, which has been slow to pick up despite a tightening of the labor market.

The policy directive did little to change the market’s rate-hike expectations; the CME FedWatch Tool still points to the March FOMC meeting as the most likely time for the next rate-hike announcement, with an implied probability of 77.5% (up from 74.7% last week), and calls for an additional two hikes before the end of the year.

On the data front, investors received the Employment Situation report for January on Friday: Nonfarm payrolls came in better-than-expected (+200,000 actual vs +180,000 consensus), average hourly earnings hit estimates (+0.3% MoM), and the unemployment rate stayed at 4.1% as expected. U.S. Treasuries were lower for the week ahead of the report’s release, but extend their losses in the aftermath, sending yields to multi-year highs.

The yield on the benchmark 10-yr Treasury note spiked 19 basis points to 2.85% this week, its best level since January 2014, while the 2-yr yield climbed two basis points to 2.14%, its best level in nearly a decade–dating back to the financial crisis. The recent rise in Treasury yields–the 10-yr yield has climbed 50 basis points in seven weeks–is seen by some as a positive sign for economic growth, but it could also be a headwind for equities, which are trading at very high valuations.

Friday Update: Wall Street Gives Back Good Chunk of Yearly Advance

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Friday, 2 February, 2018

The sky fell on Friday. Just kidding. The stock market just had a bad day–which has kind of felt as impossible as the prospect of a falling sky since the start of the year.

The Dow Jones Industrial Average tumbled 2.5%, and the S&P 500 and the Nasdaq Composite lost 2.1% and 2.0%, respectively, but the three major indices still hold year-to-date gains between 3.2% and 4.9%. Equities opened Friday with sizable losses and extended those losses throughout the session, finishing at session lows.

Declining issues outnumbered advancing issues 9 to 1 at the New York Stock Exchange. In terms of S&P 500 sectors, 11 of 11 finished in negative territory, with the energy space (-4.1%) pacing the retreat following fourth quarter earnings from Chevron (CVX) and Exxon Mobil (XOM). Both companies missed revenues estimates; Exxon missed profit estimates as well. In addition, a decline in the price of crude oil also weighed on the sector; West Texas Intermediate crude futures slid 0.8% to $65.30 per barrel.

The top-weighted technology sector (-3.0%) also had a rough outing, with Apple (AAPL), Alphabet (GOOGL), and Visa (V) losing between 3.8% and 5.3% after releasing their Q4 results. Apple and Visa beat earnings estimates, but Alphabet came up short despite reporting better-than-expected revenues. Apple’s iPhone sales were disappointing, and the company lowered its sales forecast for the first quarter.

Dow component Merck (MRK) also reported Q4 results, beating bottom-line estimates, but slid 2.2% nonetheless.

On a positive note, Amazon (AMZN) jumped 2.9%, touching a new intraday record, after soundly beating earnings estimates for the fourth quarter, thanks in large part to changes in the U.S. tax code. The consumer discretionary sector (-0.9%), which houses Amazon, was among the top-performing groups.

It’s also worth pointing out that the CBOE Volatility Index, often referred to as the “investor fear gauge,” spiked about four points, or 29.0%, on Friday to 17.40–its highest level since the U.S. presidential election on November 8, 2016.

(Excerpts from Briefing.com)

Fed Leaves Rates Unchanged at 1.25-1.50%

Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Gains in employment, household spending, and business fixed investment have been solid, and the unemployment rate has stayed low. On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2 percent. Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12-month basis is expected to move up this year and to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1/4 to 1-1/2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Voting for the FOMC monetary policy action were Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Jerome H. Powell; Randal K. Quarles; and John C. Williams.

January Job Growth and Wages on the Rise

Job growth was solid again in January, but the focal point was the 0.3% jump in average hourly earnings. That was in-line with the consensus estimate, but after taking revisions into account, it left average hourly earnings up 2.9% year-over-year — the highest growth rate since May 2009.

There has been a burgeoning assumption that the strengthening economy and the tight labor market are going to invite higher wages and wage-based inflation pressures that have been dormant for years. The key takeaway, then, is that the January report has given some data-based life to that assumption and has offered a reasonable basis for the Federal Reserve to move ahead with a rate hike at its March meeting.

The notable headlines from the Employment Situation Report are as follows:

  • January nonfarm payrolls increased by 200,000 (consensus 180,000). Over the past three months, job gains have averaged 192,000 per month
    • December nonfarm payrolls revised to 160,000 from 148,000
    • November nonfarm payrolls revised to 216,000 from 252,000
  • January private sector payrolls increased by 196,000 (consensus 175,000)
    • December private sector payrolls revised to 166,000 from 146,000
    • November private sector payrolls revised to 217,000 from 239,000
  • January unemployment rate was 4.1% (consensus 4.1%) versus 4.1% in December
    • Persons unemployed for 27 weeks or more accounted for 21.5% of the unemployed versus 22.9% in December
  • January average hourly earnings were up 0.3% (consensus 0.3%) after increasing an upwardly revised 0.4% (from 0.3%) in December
    • Over the last 12 months, average hourly earnings have risen 2.9%, versus 2.7% for the 12 months ending in December
  • The average workweek in January was 34.3 hours (consensus 34.5) versus 34.5 hours in December
    • January manufacturing workweek ticked down to 40.6 hours from 40.8 hours in December
    • Factory overtime was unchanged at 3.5 hours
  • The labor force participation rate was 62.7% in January, versus 62.7% in December

Dollar: Skid Snapped

The U.S. Dollar Index was up 0.5% at 89.09, seeking to reclaim Thursday’s loss. The greenback bounced against most other currencies on Friday, but the move comes after an extended wave of selling. Going into Friday’s session, the index was down 4.0% in 2018 and down 6.2% over the past three months. Friday’s move received a boost from a better than expected Employment Situation report for January (actual 200K; consensus 180K), which showed the strongest average hourly earnings growth since 2009 (+2.9% year-over-year). With this advance, the Index looks to record its first weekly gain in seven weeks.

Bonds: Down Week Ends on Weak Note

U.S. Treasuries ended a down week on a lower note with longer durations bearing the brunt of today’s weakness. The trading day began with modest losses, but the selling picked up after the release of a better than expected Employment Situation report for January (actual 200K; consensus 180K), which showed that average hourly earnings increased 2.9% year-over-year, marking the sharpest growth rate since 2009. That figure received a boost from a decline in the average workweek (actual 34.3; consensus 34.5), but capital markets have shown increased sensitivity to signs of inflation as of late, and today’s report has invited chatter about the Fed stepping up the pace of rate hikes. Dallas Fed President Robert Kaplan, who is not an FOMC voter this year, said that while the base case calls for three rate hikes in 2018, more hikes could take place. The continued ascent in yields coupled with chatter about a more aggressive Fed weighed on the stock market after a torrid start to the year. The S&P 500 (-2.0%) is on track to surrender 3.8% for the week, narrowing its 2018 gain to 3.4%. Typically, a trend-down day in the stock market would lead to some buying in the Treasury market, but stocks and Treasuries retreated throughout the day, suggesting risk parity funds were forced to conduct some deleveraging and raise cash.

While the 2yr made modest gains, the 5yr, 10yr and 30yr yields spiked during the week to steepen the curve. The spreads between the 10s30s and the 5s10s are 25bps after tightening last week.

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Crude: WTI falls back, closes above $65.00

Crude

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 6.8 million barrels from the previous week. At 418.4 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Total motor gasoline inventories decreased by 2.0 million barrels last week, and are near the top of the average range. Both blending components and finished gasoline inventories decreased last week. Distillate fuel inventories decreased by 1.9 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories decreased by 0.9 million barrels last week, but are in the middle of the average range. Total commercial petroleum inventories increased by 2.1 million barrels last week.

Baker Hughes total U.S. rig count decreased by 1 to 946 following last week’s increase of 11.

Metals: Gold, Silver and Copper drop

Agriculture: Corn, Wheat continues strength, Soy corrects

Commodities measured by the Bloomberg Commodity Index, are down 0.83% at 89.1213.

Comms

(Top down, left )Brent, WTI, Nat Gas, (Centre) Gold, Silver, Copper, (Right) Corn, Wheat, Soy

THE WEEK AHEAD

The coming week06 is the penultimate week of Q4 Earnings Season.

Monday 05 to 09 February (Week 06)

The sixth week of 2018 (wk06) is bullish over 5, 10 and 15 year averages on the SPY and DIA according to our seasonal models.
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The 2018 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 06;

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Key Economic Dates

Next week, the most important data for the US include trade balance, ISM non-manufacturing PMI, JOLTs job openings and consumer credit change. Elsewhere, the BoE, the RBA and the RBI will provide an update on their monetary policy. Investors will also be looking for the UK industrial output and China trade balance, inflation and producer prices.

Sun 04 February

Mon 05 February

Tue 06 February

Wed 07 February

Thu 08 February

Fri 09 February

Earnings Calendar for Week of January 29

Earnings Season begins winding down with fewer big hitters and DIS as the only DOW representative in the coming week.

Monday (February 05)

Tuesday (February 06)

Wednesday (February 07)

Thursday (February 08)

Friday (February 09)

TECHNICALS

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After the biggest weekly drop since 2008, one of two scenarios will surely play out to reveal if this market is doomed for its long overdue correction or not;

Friday’s session revealed that the bears do indeed have the sustainable ability to continue this correction given that the week had been in their favour and they still had the strength to muster one of the most bearish sessions on Friday since 24 June 2016.

The bulls at lunchtime were only able to muster 60,000 ticks against the bears’ 330,000 downticks. That’s a ratio of 5.5:1 in favour of the bears. By the closing bell, the bulls retreated and the bears didn’t cover their shorts in spite of a very profitable week. The session finished 712,000 down-volumes to 48,000 up-volumes for a ratio of almost 15:1 in favour of the bears.

If the bears follow-up in the coming week (given its historically bullish tradition for week06), it will have to start on Monday to complete a Down-Friday-Down-Monday (DFDM), a phenomenon that often marks tops and bottoms on indices. The last DFDM was at the start of December last year, exactly 2 months ago.

Internals

TransThe leading indicator that brought my awareness to a possible correction amongst the major indices was the Transportation Index. Those who follow my postings closely, know that I closely track the Transports and rely on it’s signals more than any other index.

As you can clearly see, the Transports were falling for two weeks prior to any other index. It fell below the 20DSMA on Tuesday and is now threatening the 50DSMA by closing just 34 points above it on Friday. On Thursday, 1 Feb, the Transports became the first index to form a Death Cross on its 10 and 20 DSMAs.

The DOW, NASDAQ and S&P500 all crossed below the 20DSMA on Friday and are just two or three session from dropping below their critical 50DSMAs if the coming week continues to fall.

SUMMARY

Interesting times, these. As an observation, another interesting development was the fall of BitCoin and its counterparts.

BTC

That is the most impressive collapse I have ever witnessed after the October 1987 crash and the Shanghai Composite collapse in June 2015.

Falling from 19,783 on 17 December 2017 to 7,695 on Thursday 1 February 2018 meant that BTC has fallen by as much as 61% in only 47 sessions or one and a half months. Truly spectacular. Not my cup of tea but definitely entertaining.

However, it wasn’t at all peasant to recall hearing many a conversation about investors who had proudly claimed to have bought in at around 11,500 and 12,000 from two and three weeks ago. They must be hurting by now and I do feel sorry for them.

Do these people buy it because its a fad? Or is it greed? Or maybe even out of pride to prove the Crypto Nay-sayers and Doubters wrong?

Whatever the reason, regardless of who is right or wrong, whether or not you were greedy, never mind who taught it to you and even though you didn’t buy the high, the fact remains – you bought it and now its hurting you.

The signs were always there and this very forum was already screaming “bubble” at 15,000 and “danger” at 18,000 as it was rising. It was only a matter of time that this would happen. And for good and valid reasons too. Yet people bought into it then. Now that it has fallen, the bargain hunters are getting their hands cut up badly for Catching A Falling Knife.

I do wish that everyone takes the market seriously and stop treating it like a gambling den or some destination for your financial panaceas. If you don’t know enough about the business, you shouldn’t get involved. Don’t come into the markets half-assed and hope to take on the big boys in their own back yard. You’re seriously asking for trouble … if you don’t get lucky. And in the long term, the markets are never about luck, magic tricks, secret formulae or the best tips.

The markets are a professional place where people like myself, my graduates and many other well trained professional make a living or a secondary income from. It takes a lot of learning, months and months of practice, years of experience and gobs of passion.

Stop dreaming, get out before it’s too late or get yourself a PROPER mentor with the right stuff to teach it to you.

Happy Hunting!

By the way … we’re having our last Introductory Session to the Pattern Trader™ Tutorial on Wednesday, February 7th. The batch is confirmed to go ahead in March and there are only a few seats remaining. Miss this batch and it will be a long wait till the next one. So book that date early, bring a friend/relative and really do yourself a favour by knowing what you really need in order make it in this business.

After 12 years of educating professionals in the arts and sciences of Finance and Economics, I don’t need to bullshit you into knowing that this is the only financial education you should consider.

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Click here now to make a huge difference in your life:
Pattern Trader Tutorial Introductory Session

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Find out more about the Pattern Trader Tutorial here:
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The schedule for the March batch is here:
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Comments Off on Weekly Market Update – 29 January 2018 BMO

Weekly Market Update – 29 January 2018 BMO

Screen Shot 2017-06-28 at 3.00.52 PM

Dexes

Week in Review: Politics, Earnings, and New Records

Wall Street continued its strong start to 2018, posting gains for the fourth consecutive week. The Nasdaq jumped 2.3% this week, while the S&P 500 climbed 2.2%, and the Dow Jones Industrial Average advanced 2.1%. The three major indices finished Friday at new all-time highs and now hold year-to-date gains between 7.5% and 8.7%.

The first government shutdown since 2013 lasted just three days, coming to an end on Monday evening when Congress passed a short-term funding bill that will keep the government running until February 8. Republicans, who control the Senate 51 to 49, needed help from Democrats to pass the funding measure, as it requires 60 votes. Democrats resisted at first, forcing the shutdown, but eventually gave in after Republicans promised to soon address the fate of the so-called “Dreamers”–undocumented immigrants who were brought to the U.S. as children.

Meanwhile, President Trump made his way to Davos, Switzerland for the World Economic Forum, where he pitched to international companies and investors in a speech on Friday, saying “America is open for business.” He also did an interview with CNBC in Davos, during which he clarified his administration’s stance on the U.S. dollar, saying that he ultimately wants to see a stronger dollar. Earlier in the week, Treasury Secretary Steven Mnuchin said he welcomes a weakening of the dollar as it’s “good for trade.”

The U.S. Dollar Index made sharp moves in reaction to the aforementioned comments, ultimately ending the week lower by 1.6% at 88.92–its lowest level in three years.

Currency traders also chewed on the latest policy decisions from the Bank of Japan and the European Central Bank, which crossed the wires on Tuesday and Thursday, respectively. The two central banks voted to leave their policy rates unchanged, as expected, and the ECB reiterated that it intends to leave net asset purchases at the new pace of EUR30 billion per month until the end of September, or beyond, if necessary.

In U.S. corporate news, the fourth quarter earnings season continued this week with around 80 S&P 500 companies delivering their results. Netflix (NFLX) spiked 10.0% on Tuesday after wowing investors with its subscriber growth and first quarter guidance, while Intel (INTC) jumped 10.6% on Friday after reporting better-than-expected earnings and revenues and saying it believes there will be no material impact from the Meltdown and Spectre security concerns first reported at the beginning of the month.

On the downside, Texas Instruments (TXN) tumbled 8.5% on Wednesday after its latest earnings report came in as expected, but didn’t impress investors enough to justify the chipmaker’s 25.0% gain over the prior seven weeks. Airlines also struggled–evidenced the U.S. Global Jets ETF (JETS), which lost 4.7% for the week–following mixed results from Southwest Air (LUV), American Airlines (AAL), United Continental (UAL), Alaska Air (ALK), and JetBlue Airways (JBLU).

The advance estimate of fourth quarter GDP crossed the wires on Friday, showing a lower-than-expected expansion of 2.6% (Briefing.com consensus +2.9%). The key takeaway from the report is that consumer spending, which accounts for roughly 70.0% of GDP, was alive and well in the fourth quarter, increasing 3.8%–the fastest growth rate since the first quarter of 2015. Moreover, business spending also increased, with spending on equipment increasing 11.4%–the strongest since the third quarter of 2014.

The Federal Open Market Committee is set to release its latest policy decision this upcoming Wednesday, but the market doesn’t expect the FOMC to make any changes; the CME FedWatch Tool places the chances of a rate hike at 3.6%. The market projects the next hike will occur at the March FOMC meeting with an implied probability of 79.7%.

(Excerpts from Briefing.com)

Consumer Spending Drives Up Q4 GDP Growth

Real GDP increased at an annual rate of 2.6% in the fourth quarter, according to the advance estimate (consensus +2.9%) while the GDP Price Deflator increased 2.4%, as expected.

Durable Orders Rise Again in December

New orders for durable goods increased 2.9% in December (consensus +0.9%) on top of an upwardly revised 1.7% increase for November (from +1.3%). Excluding transportation, orders increased 0.6% (consensus +0.7%) following an upwardly revised 0.3% increase for November (from -0.1%).

The deficit for international trade in goods widened to $71.6 billion for December (consensus -$68.5 bln) from $70.0 billion in November. That widening fit with the drag from net exports that was seen in the advance Q4 GDP report.

Dollar: Dollar Remains Weak

The U.S. Dollar Index stayed down 0.5% at 88.91 after recovering a portion of Friday’s losses. The slight uptick off Friday morning’s low doesn’t change the fact that the index has been battered this week, having given up 1.9% since last Friday. The index hit a session low as the euro and pound showed continued strength. That was followed by a partial rebound, which accelerated after the release of the advance reading of Q4 GDP (actual 2.6%; consensus 2.9%), but could not stick, returning the index to levels from the morning.

Bonds: Week Ends on Lower Note

U.S. Treasuries ended the week in negative territory with the 5-yr note pacing Friday’s retreat. Treasuries slipped out of the gate, continuing their slide through the first three hours of the cash session. However, the selling abated shortly after the 10-yr note and the 30-yr bond dipped to yesterday’s intraday lows, where support was found. 10s and 30s inched up off those lows during afternoon action while the 5-yr note slipped, and remained, beneath yesterday’s session low. The long bond outperformed this week, which caused the yield curve to return to its flattest level in a decade. The 2s10s spread compressed to 54 bps from 59 bps one week ago while the 2s30s spread compressed to 79 bps from last week’s 86 bps.

While the 2yr, 5yr and 10yr yields rose during the week, the 30 year remained rooted to flatten the curve. The  10s30s spread tightened to 25bps from 27bps the previous week. The 5s10s spread tighten by 2bps to 19bps from 21bps the previous week.

Screen Shot 2018-01-28 at 2.55.34 PM

Crude: WTI closes above $66.00 for the first time since May 2015

Crude

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.1 million barrels from the previous week. At 411.6 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Total motor gasoline inventories increased by 3.1 million barrels last week, and are in the middle of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 0.6 million barrels last week but are in the lower half of the average range for this time of year. Propane/propylene inventories decreased by 4.0 million barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories decreased by 2.9 million barrels last week.

Baker Hughes total U.S. rig count increased by 11 to 947 following last week’s decrease of 3.

Metals: Gold, Silver and Copper bounce 

Agriculture: Grains gain strength

Commodities, as measured by the Bloomberg Commodity Index, are currently up 0.04% at 90.4989.

FEBRUARY PREVIEW

February is the shortest trading month with 19 trading sessions and one public holiday. 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 months on the DOW and S&P between November and April, with the exception of January between 2014 and 2016.

FEBRUARY TRIVIA

THE WEEK AHEAD

The coming week05 is the fourth and busiest week of Q4 Earnings Season. It is also the start of the Month of February, the most uneventful month of the first quarter.

Tuesday 29 January to 02 February (Week 05)

The fifth week of 2018 (wk05) is bullish over the 10 and 15 year averages while bearish over the last five years on the SPY and DIA according to our seasonal models.

Screen Shot 2018-01-28 at 2.57.18 PM

The 2018 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 05;

Screen Shot 2018-01-28 at 2.57.09 PM

Key Economic Dates

Next week, the most important event will be the Fed monetary policy decision. Other key data include: the US nonfarm payrolls, ISM Manufacturing PMI, personal spending and factory orders; the UK Gfk consumer confidence; the Eurozone GDP growth, inflation and unemployment; Japan unemployment; China manufacturing PMIs; and Australia inflation.

Mon 29 January

Tue 30 January

Wed 31 January

Thu 01 February

Fri 02 February

Earnings Calendar for Week of January 29

The busiest week of earnings season sees a third of all the DOW components announcing their results this week along with some significant big-hitters including FB, LMT, BABA, AMZN, GOOG and MO. It is going to be a volatile week for earnings.

Monday (January 29)

Tuesday (January 30)

Wednesday (January 31)

Thursday (February 01)

Friday (February 02)

SUMMARY

The bullish euphoria just keeps getting better (worse) and better (worse) for the bulls (depending on where you stand in the market). Take a very good look at this;

DOW5YR

Sure looks good for the bulls … but it sure looks better for the pessimists.

The coming week with its massive earnings schedule along with critical macro data such as Non-Farm Payrolls, Eurozone GDP, FOMC and Fed Funds Rate announcements, plus President Trump making his State Of The Union address are all going to make this the most interesting week to date.

Happy Hunting!

We’re having our last Introductory Session to the Pattern Trader™ Tutorial on February 7th. The batch is confirmed to go ahead in March and there are only a few seats remaining. Miss this batch and it will be a long wait till the next one. So book that date early, bring a friend/relative and really do yourself a favour by knowing what you really need in order make it in this business.

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Weekly Market Update – 22 January 2018 BMO

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Week in Review: Bulls Dominate Another Week

It was another good week on Wall Street; the Dow Jones Industrial Average jumped 1.0%, the Nasdaq Composite climbed 1.0%, and the S&P 500 added 0.9%. However, the bulls looked somewhat fatigued, at least in comparison to the first two weeks of the year; the S&P 500 rose 2.6% in the first week of 2018 and 1.6% in the second. This week, the S&P 500 posted losses in two of four sessions (markets were closed on Monday for Martin Luther King Jr. Day).

Maybe it’s the beginning of the end for the new year rally. Maybe not.

What is certain is that 2018 has been a great year for the stock market thus far. The Dow, the Nasdaq, and the S&P 500 have advanced between 5.1% and 6.3% year to date and have notched a handful of new records along the way. And that’s to say nothing of the stock market’s 2017 campaign, during which the major averages climbed between 19.4% and 28.2%.

Financials dominated the earnings front this week with Citigroup (C), Bank of America (BAC), Goldman Sachs (GS), U.S. Bancorp (USB), Charles Schwab (SCHW), Morgan Stanley (MS), and American Express (AXP) reporting their fourth quarter results. All seven companies beat earnings estimates, but revenues came in mixed; Goldman Sachs, Morgan Stanley, and American Express reported above-consensus revenues, while Bank of America missed estimates. The S&P 500’s financial sector (+1.0%) finished roughly in line with the broader market.

Meanwhile, the health care sector (+1.9%) was among the top-performing groups this week. Within the space, UnitedHealth (UNH) rose 6.4% after reporting better-than-expected earnings for the fourth quarter, and Merck (MRK) jumped 4.5% after announcing that its drug Keytruda was successful, in combination with two chemotherapy drugs, as a first line treatment for lung cancer.

The consumer staples (+2.4%) and technology (+1.5%) sectors finished alongside health care at the top of the sector standings. The tech group’s largest component by market cap – Apple(AAPL) – announced that it will make a one-time tax payment of $38 billion to repatriate cash holdings overseas and will invest over $30 billion in the U.S. over the next five years, creating 20,000 new jobs. Apple said its decision was the result of recent changes to the U.S. tax law.

Meanwhile, IBM (IBM) slipped 0.5% despite reporting year-over-year revenue growth for the first time in 23 quarters.

The industrial sector (-0.9%) slid this week with General Electric (GE) pacing the retreat. GE shares tumbled 13.3%, hitting a six-year low, after the industrial giant said its legacy reinsurance business will take a larger-than-expected charge of $6.2 billion for the fourth quarter. In addition, the company was reported to be considering a major breakup.

The energy sector (-1.3%) also underperformed as crude oil retreated from a three-year high; West Texas Intermediate crude futures dropped 1.6% to $63.30 per barrel.

In Washington, the House of Representatives passed a one-month spending measure on Thursday evening, but that bill doesn’t appear to have enough support to pass in the Senate, where it needs Democratic votes to reach the 60-vote threshold. If an agreement cannot be reached by 12:01 AM ET Saturday morning, the government will start closing nonessential operations.

Investors didn’t appear to be shaken though, pushing the S&P 500 and the Nasdaq to new records on Friday.

(Excerpts from Briefing.com)

Dollar: Dollar Index Trims Weekly Loss

The U.S. Dollar Index was up 0.2% at 90.63, narrowing the week’s loss to 0.4%. While the dollar index traded modestly higher, the uptick came after yet another slip in overnight action. The Index returned above its flat line around the start of the U.S. session on Friday, but was not able to extend its gain. Despite the lack of follow-through from the Index, the greenback has displayed underlying strength against some minor and exotic currencies.

Bonds: 10-yr Yield Overtakes 2016 High

U.S. Treasuries ended the week on a lower note, though intraday action was very limited. The market began the day with modest losses that lifted the benchmark 10-yr yield to its highest level since the middle of 2014. The opening retreat was followed by a dip to fresh session lows, which gave way to sideways action until the close. With the deadline to fund the government fast approaching, the focus was on Washington throughout the day, but reports coming out of the capital suggested that negotiations will go down to the wire, boosting the likelihood that lawmakers will not meet the deadline. The yield curve steepened a bit this week, as the 2s10s spread expanded to 59 bps from 55 bps. The 2s30s spread, however, expanded by just one basis point to 86 bps.

For the week, the yield curve rose with the belly of the curve gaining the most. The  10s30s spread tightened to 27bps from 30bps the previous week. The 5s10s spread widened by 1bps.

Crude: WTI Pulls Back Below $64.00

Crude

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 6.9 million barrels from the previous week. At 412.7 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Total motor gasoline inventories increased by 3.6 million barrels last week, and are in the middle of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories decreased by 3.9 million barrels last week and are in the lower half of the average range for this time of year. Propane/propylene inventories decreased by 3.7 million barrels last week, and are in the lower half of the average range. Total commercial petroleum inventories decreased by 13.8 million barrels last week.

Baker Hughes total U.S. rig count decreased by 3 to 936 following last week’s increase of 15

Metals: Gold, Silver and Copper slide further

Agriculture: Grains recover

Commodities, as measured by the Bloomberg Commodity Index, are currently down 0.2% at 88.5425.

THE WEEK AHEAD

The coming week is the third week of Q4 Earnings Season the first of two of the busiest weeks of earnings season.

Tuesday 22 to 26 January (Week 04)

The third week of 2018 (wk04) is unreliably bullish over the 10 and 15 year averages while modestly bearish over the last five years on the SPY and DIA according to our seasonal models.

Screen Shot 2018-01-20 at 3.38.50 PM

The 2018 Stock Trader’s Almanac’s averages for the benchmark indices (based on 21 years) for week 04;

Screen Shot 2018-01-20 at 3.20.54 PM

Key Economic Dates

Next week, the most important data for the US include the advance estimate of Q4 GDP growth, durable goods orders, new and existing home sales, and flash Markit PMIs. Elsewhere, the ECB and the BoJ will provide an update on their monetary policy. Investors will also be looking for the UK GDP growth and unemployment; the Eurozone flash PMIs; and Japan inflation.

Mon 22 January

Tue 23 January

Wed 24 January

Thu 25 January

Fri 26 January

Earnings Calendar for Week of January 22

Monday (January 22)

Tuesday (January 23)

Wednesday (January 24)

Thursday (January 25)

Friday (January 26)

SUMMARY

The bulls look like they’re losing steam … or is it purely the volatile nature of earnings season? The coming week will further test the bulls’ resilience as earnings season heats up with no less than eight DOW components on the line and plenty of big hitters from the defense, metals and airline industries.

I remain cautiously bullish but will increase my risk in the coming weeks if the market continues to give us regular dips to buy into. Positions will be quick and moderately leveraged over a week and I am keeping nothing over the weekends.

Happy Hunting!

If you haven’t already considered upping your game in the financial markets, join me this Thursday for an Introductory Session to the Pattern Trader™ Tutorial and really do yourself a favour by knowing what you really need to make it in this business.

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Candlestick & Breakout Patterns Workshop – Q1 2018

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HIGH PROBABILITY, HIGH ACCURACY AND LOW RISK
400 YEARS OF TRADITION CAN’T BE WRONG

For more than 400 years, the traditional way of charting using Breakout Patterns and Candlestick Analysis has prevailed above all other forms of technical analysis.

While technology and modern technicals have only made things more complicated and unreliable, the traditional time tested simplicity of Breakouts and Candlesticks remains the choice favourite method of price analysis amongst professionals.

Join Conrad for the best value-for-money workshop with more than eight hours of pure education that will surely open your mind to low risk-high reliability analysis coupled with financial management and psychological mastery!

This one-of-a-kind workshop is in its tenth year and has been a favourite amongst all technicians and chartist in Singapore, Malaysia and Jakarta.

Don’t miss this grossly under-valued workshop. No gimmicks, no hard-selling and certainly, no bullshit.

Find out more: Candlestick & Breakout Patterns Workshop – January 2018

Date:
4
th Feb 2018, Sunday

Time:
9.30am to 5.30pm
(registration starts at 9am)

Venue:
CMC Markets
9 Raffles Place
Republic Plaza Tower 1
#30-02/03
SINGAPORE 048619

Book Your Seat Now For Only SGD 199.00!
(Includes a FREE set of Candlestick & Breakout Patterns Quick Reference Cards)

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PATTERN TRADER TUTORIAL INTRODUCTORY SESSION

THE NEXT TUTORIAL is in March. If you’re looking to make a huge difference in your financial life, consider attending the Pattern Trader Tutorial Introductory Session first.

If you want to know more about the Tutorial, read up everything here: The Pattern Trader Tutorial 2018

After 12 years of educating professionals in the arts and sciences of Finance and Economics, I don’t need to bullshit you into knowing that this is the only financial education you should consider.

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