Monday, December 25, 2017

Winning the 1st Quarter

Hi fellow traders, I want to wish all that are celebrating a very Merry Christmas and to everyone a safe and happy holiday season.  I feel one of the most beautiful things about the world we live in are the diverse cultures we have and how much we can learn from one another.   With the emerging technologies and our ability to reach some previously untouched facets of our society, we are becoming closer than ever.  This is an exciting time to be alive!

Last year we focused on starting where you were with what you had.  I started over 6 times with $1500 in my Suretrader account this year.  We only have 4 days left in this quarter but to put this in perspective, I have made $45339.30 to date in this year trading small.  I started a community in the time span of a weekend and have spent all year trying to turn it into something special.  All of this while trying to focus on my trading and teaching in chat.  I proved what you can do because you in the community saw it unfold live.

The focus again this year is starting where you are with what you have.  Getting started perusing a goal or dream is one of the hardest things we face as adults.  Too often we wait for the perfect time or the perfect opportunity and it never comes.  It doesn’t take near as much to get started as you think.  I changed the dynamic of my community going into this year to provide all those who are sitting on the fence waiting to get the money, or the time to get started an opportunity to do so.  Just by joining the AJT community you get a first-class education free.

So, you can start now, work at your own pace, and develop the skills you need to be a successful trader.  Don’t worry about trying to save 3k to 4k to join a community and start learning, or saving for extra monitors or a trading computer.  For as little as $50 a month, if you elect an annual subscription, you can learn and trade live beside me every day.  You get access to the live day, swing, and trading psychology classes as well as the recordings. My goal is to educate you and help you develop the skills needed to build a successful trading career.

Back in October I started the 4th quarter challenge.  We needed to finish the fourth quarter strong to set us up for the next year.  I pointed out the obvious:
The first 3 quarters are history
The only thing that mattered then was the 4th quarter
If you were unhappy with your first 3 quarters performance, then:
You had to change your mindset and habits
You had to identify and change everything that created your poor performance
The worse thing we could have done was continue to do the same thing and expect different results.

Let’s look at some numbers.  I had 21 traders to sign up.  I had a goal of 25 so this was good.  However, I had 9 to not stay past the 1st month.  I started with $1500 in the toughest market that I have seen recently, and I struggled to make any progress through the first 3 weeks of October. I only ended up making $399. The struggle was real and in the back of my mind even though I was frustrated I was happy that you were able to see the real deal.  Unfortunately, some did not see it that way. In my experience in education I have a good feeling that these are the prospective traders that may not have what it takes to see these tough times through and become successful.  You have to have mental fortitude and take the bad times with the good.  Now I am sitting at $10,304.30

This 4th quarter challenge was about facing adversity head on and building a foundation that we can take into the next year.  If you stuck with me, you saw this transition first hand and the mental fortitude needed to get through the hard times and into prosperity.  You saw exactly what it took live and unscripted, which at times was very embarrassing.  I didn’t quit.  I didn’t give up. But if you quit during this process, you missed the most important and valuable lessons of the 4th quarter.
To finish summing it up I had 12 stay active and out of that 12, I have 7 that have subscribed for the 1st quarter and one took advance of the early bird yearly subscription deal.  4 I guess are still on the fence!

You guys know by now that I am a college sports junkie so in line with that I want to share this example with you.  I watched South Florida and Texas Tech in the Birmingham Bowl.  As you can see, Texas Tech won the 1st quarter but they didn’t finish it strong. They lost the 2nd, won the 3rd, but didn’t finish it strong.  Meanwhile South Florida stayed consistent and continued to build momentum and finished the 4th quarter strong. That’s what won them the game. The body of work they put in during the 1st quarter, not folding up under adversity, and finishing the 4th quarter strong!


This year, we are not only looking toward the first quarter and wining it, we’re looking at finishing it strong.  Here is an example of a team, who didn’t have the skill, talent, or the capital backing them that their opponent had, but they won the 1st half and finished strong, and in turn won the game.  The game for Wofford was one in the foundation they laid in the first half.  The blows they landed in the 1st half set the stage and they followed through.  Sure, they took hits as well, but they remained focused and stuck to their game plan, UNC did not. Wofford College is a very small independent liberal arts school here in South Carolina.   Enrollment was 1,683 this past semester.  UNC is a public institution with an enrollment of 18,523 this semester and is a college basketball powerhouse.


This is what we need to do as traders going into this first quarter.  Don’t worry about the professional traders who may be more talented, experienced, or capitalized.  We stick to our game plan and see it through.  There is a lane for us.  Sure, we will take hits in the form of losing trades, but if we stay in our lane and stick to our game plan, we will be victorious.  So lets make 2018 our best year yet!

Ed

Sunday, October 8, 2017

Weekly Stock Market Outlook 11/9/2018

U.S. markets took a breather on Friday as the major indexes closed mixed to finish the week.
The Dow and S&P 500 traded lower for the first time in 7 and 10 sessions, respectively, while the Russell 2000 slipped for the second time in three sessions. Meanwhile, the Nasdaq is riding a 9-session winning streak with micro-caps in a holding pattern heading into the start of 3Q earnings season.   Materials and Financials were the strongest sectors for the week, rising 1.9%. The only sector laggards were Energy and Consumer Staples after giving back 0.6% and 0.3%, respectively.

Global Economy -European markets finished mostly lower as the political drama in Spain continued with the financial and political squeeze on the separatist government in Catalonia tightening. The Belgium20, France's CAC 40 and the Stoxx Europe 600 fell 0.4% while Germany's DAX 30 slid 0.1%. UK's FTSE 100 gained 0.2%

UK Q2 unit labor costs rose 1.6% year-over-year, the slowest pace of increase since Q4 of 2015.

Germany August factory orders jumped 3.6% month-over-month, stronger than expectations of +0.7%.

Asian markets traded higher with China and South Korea still closed on Friday for holidays. Australia's S&P/ASX 200 jumped 1% while Singapore's Straits Times index rallied 0.9%. Japan's Nikkei and Hong Kong's Hang Seng Index advanced 0.3%.

Japan's August labor cash earnings rose 0.9% year-over-year, stronger than expectations for an increase of +0.5%.

The Japan August leading index CI rose 1.6 to 106.8, weaker than expectations for a gain of 1.9 to 107.1. The August coincident index rose 1.9 to 117.6, stronger than expectations for a rise of 1.8.

September nonfarm payrolls declined 33,000 while the unemployment rate fell to 4.2%, down from 4.4%. Expectations were for an increase of 120,000 jobs added.

U.S. consumer credit rose $13.1 billion in August versus expectations of $16 billion for the month.

U.S. wholesale sales jumped 1.7% in August with inventories up 0.9%.

Market Sentiment - St. Louis Fed dove James Bullard did not address either current monetary policy or the economic outlook in his prepared remarks.

New York Fed Dudley repeated the gradual rate hike rhetoric that has been a recent theme, despite surprisingly low inflation, which he expects to rebound in the medium-term. He views falling unemployment and dollar, although it has been rebounding of late, and financial conditions as reasons to tighten.

He believes inflation has been held down by fundamental structural issues and hopes for clarity after the hurricane impact, which he says will boost growth over time.

The iShares 20+ Year Treasury Bond ETF (TLT) traded to a low of $123.03 shortly after Friday's open with lower support at $123.50-$123 holding. A move below the latter opens up risk to $122-$121.75 and the 200-day moving average. This area served as strong support throughout July.

Resistance at $124.50-$124.75 held on the rebound afterwards to $124.10. RSI is still in a downtrend and is pushing July lows. A continued backtest to 30 could be in the works and would signal oversold conditions.


Market Analysis- The iShares Micro-Cap ETF (IWC) has been in a holding pattern for four sessions following the September surge and breakout above $88 and the 50-day moving average. Friday's high reached $96.50 but failed the recent all-time high of $96.71.

Fresh resistance is at $96.75-$97.50 with a move above the latter likely leading to triple-digits. A close below $96-$95.75 could lead to a continued backtest towards $94.50-$94 to retrace the gap higher.  RSI tapped 90 last week and is signaling overbought conditions at current levels.


The Consumer Staples Select Spiders (XLP) traded to a low of $53.74 with July support at $53.50 still in play on continued weakness. A close below $53.50 would likely lead to a continued backtest towards $52.50-$50. The 52-week low is at $49.98.

Current resistance is at $54 and the 200-day moving average followed by $54.25. The 50-day moving average remains in a downtrend with RSI showing signs of continued weakness to the low 30's.


The percentage of Nasdaq 100 stocks trading above the 50-day moving average is currently at 70% and has cleared the 69% level from the first of September.  Continued closes above 70% would be bullish for possibly reaching 75%. The area held in April, May and July and could signal a short-term market top, if reached. A move back below 65% would signal upcoming market weakness.

The percentage of S&P 500 stocks trading above the 200-day moving average is currently near 73% with Thursday's peak reaching nearly 75% and a 6-month peak. The one-year high reached 80%-82% at the beginning of the year. A move below 70% would be a signal for a possible pullback towards 65%.



Courtesy of Market Geeks

Sunday, September 24, 2017

Weekly Stock Market Outlook 9/25/2017

U.S. markets rebounded off their lows on Friday to finish mostly higher aside from the Dow which traded lower for the second-straight session. The blue-chips and the S&P 500 ended the week with slight gains while the Nasdaq gave back 0.3%.  The Russell 2000 quietly made a run at its all-time high of 1,452 from July and fell shy by just over a half-point after gaining 0.5%. For the week, the small-caps were up 1.3%.  Sector action for the week was mixed with Energy, Industrials and Consumer Discretionary leading on the upside. Losing sectors included Utilities, Real Estate, Basic Materials and Consumer Staples.  The rotation out of safety, such as the Utilities (and gold), and into the small-caps could continue if market momentum stays strong.

Global Economy - European markets gained on signs the European economy continues to expand at a better-than-expected pace. UK's FTSE 100 jumped 0.7% while France's CAC 40 advanced 0.3%. The Stoxx Europe 600 gained 0.1%. Belgium20 fell 0.3% and Germany's DAX 30 slid 0.1%.

The Purchasing Managers Index (PMI) for the eurozone hit 56.7, topping expectations for a drop to 55.6. The manufacturing component rose to 58.2 and the services component checked-in at 55.6, both also topping expectations.  Germany's September Markit/BME manufacturing PMI unexpectedly rose 1.3 to 60.6, stronger than expectations of a -0.3 dip to 59.

German voters go to the polls this Sunday where Chancellor Merkel is expected to secure a fourth term, although she may not win an outright majority.

Asian markets were down, with stocks in Japan reversing early gains following fresh threats from North Korea, while China's markets declined on a credit-rating downgrade. Hong Kong's Hang Seng Index sank 0.9% and South Korea's Kospi tumbled 0.7%. Japan's Nikkei declined 0.3% and China's Shanghai index slipped 0.2%.

Bucking the trend was Australia's S&P/ASX 200 after climbing 0.9%.

Standard & Poor downgraded China's sovereign credit rating due to risks associated with its increasing debt. The downgrade had been widely anticipated, and brings its rating in line with Moody's, which downgraded China in May, and Fitch, which made its cut back in 2013.

The U.S. Markit's flash manufacturing PMI for September edged up 0.2 points to 53, matching expectations. The services PMI fell to 55.1 and below the 55.8 that was forecast.  September Atlanta Fed Business Inflation Expectations were up 1.9% for the year.


Market Sentiment- Fedspeak returned on Friday following from the blackout period ahead of last Wednesday's FOMC minutes.

San Francisco's Fed John Williams talked about balance sheet normalization, targeting a 2.5% Fed funds rate as the new normal with one more hike this year and three more next year. Williams said the Fed was very close to its mandate targets and that the economy is in very strong shape with the markets understanding what the Fed is trying to do.

Kansas City Fed Esther George said the full employment mandate appears to have been met going by the most recent Fed projections, while the weak inflation reading does not appear related to the economy.  She expects job growth to weaken but to remain at levels needed to absorb new workers and to keep unemployment levels low. However, she's concerned that loose financial conditions cannot be perceived until they become a problem.  George went on to add consumers are in a good position to keep spending and said the balance sheet plan was well telegraphed to the public and markets, saying she's gratified that the announcement did not cause a strong market reaction.
As far as the economy, she said it's a good sign that the balance sheet reduction can begin, while quantitative easing (QE) is kept in a box and used for emergencies only. She views gradual interest rate moves as appropriate, but said the Fed needs to keep the momentum on rates underway.

Dallas Fed Robert Kaplan is open minded about one more hike this year in December, but he said he has not made a decision. He said structural headwinds, including technology could hold inflation down.  He also sees a shortage of construction workers around Houston though he anticipates a snap-back in growth from Harvey.

Risk from China remains a danger zone in terms of rising debt levels there. He also said the oil industry is in a fragile equilibrium at around $50 barrel.

The iShares 20+ Year Treasury Bond ETF (TLT) held positive territory throughout Friday's session while trading up to $126.73.  Resistance at $126.25-$126.50 was cleared but levels that failed to hold into the closing bell.  Support is trying to move up to $126 with $125.75-$125.50 and the 50-day moving average serving as backup.


Market Analysis- The Russell 2000 ETF (IWM) made a run to $144.67 and a fresh all-time peak with continued closes above $144 being a bullish development.  This area served as prior resistance on the July highs and will try to hold as near-term support with IWM reaching $146-$147.50 on continued momentum.  A move back below $143-$142.50 would be a slightly bearish development and would likely signal a short-term double-top.

For the week, the largest single fund inflow was to the iShares Russell 2000 which was over 20% on ETF fund inflows.



The iShares Transportation Average (IYT) has been volatile this month but is approaching fresh 52-week peaks with Friday's push to $175.20.  A move above $175.75-$176 could lead to a continued breakout towards the $180 level. Shaky support is at $174-$173.50.  A move below $173-$172.50 would be a bearish development for continued weakness and would also signal a near-term double-top.


The percentage of Nasdaq 100 stocks trading above the 50-day moving average is currently at 56%.
Last Thursday's low reached 50% and represents the late August breakout above this level that led to a quick run to 75%.  The is risk to the 45%-40% area on continued Tech weakness and mid-August support levels. A move back above 60% could signal a return of market strength.



Courtesy of:  Market Geeks

Sunday, September 17, 2017

Weekly Stock Market Outlook 9/17/2017

U.S. markets finished the week strong with the Dow and S&P 500 hitting fresh all-time highs into the closing bell. In fact, it was the best week of the year for the blue-chips after gaining just over 2%. The Nasdaq also set an intra-day lifetime high with the Russell 2000 showing the most strength on Friday.
Most sectors finished in the green with Industrials showing the most strength. Consumer Discretionary and Health Care were the only laggards with both falling 0.3%. For the week, the best performing sectors were Energy, Health Care, and the Financials. The worst performing sectors were Consumer Cyclicals and the Utilities.

The Q3 earnings season doesn't start for a few more weeks, but the earnings season will officially be underway before that as companies with fiscal quarters ending in August start reporting results next week. Total Q3 earnings for the S&P 500 index are expected to be up 3.3% from the same period last year on 5.1% higher revenues. This would follow double-digit earnings growth in each of the preceding two quarters. The Q3 earnings growth drops to 1.5% (from 3.3%) when the strong Energy sector growth is excluded. The Construction and Conglomerates are the other sectors, in addition to Energy, with expected double-digit earnings growth in Q3. Growth is expected to be strong for the Technology sector, as well, with Tech earnings expected to be up 8.6% from the same period last year on 6.4% higher revenues.

For full-year 2017, total earnings for the S&P 500 index are expected to be up 7.5% on 4.6% higher revenues, which would follow 0.7% earnings growth on 2.1% higher revenues in 2016. Index earnings are expected to be up 11% in 2018 and 8.9% in 2019.

Global Economy - European markets pulled back on Friday following another terrorist attack in London. The FTSE 100 sank 1.1% and the Belgium20 fell 0.6%. The Stoxx Europe 600 was down 0.3% while France's CAC 40 index and the DAX 30 gave back by 0.2%.  ECB Executive Board member Sabine Lautenschlaeger said it was time to take a decision now on scaling back Germany's bond purchases at the beginning of next year. She went on to say that there is little doubt that buoyant growth and monetary accommodation would take Germany back to an inflation rate which is in line with their goal.

Elsewhere, The Bank of England policy maker, Gertjan Vlieghe, seen as least likely to back a rise in interest rates has changed his view and now thinks a hike may be needed soon. In a speech to economists, he said the U.K. economy was running through its spare capacity quicker than he had expected, while household spending was stronger.  Based on his previous comments, Mr. Vlieghe had been regarded as the member of the nine-strong Monetary Policy Committee most inclined to oppose a rise in the key rate from a record low of 0.25%.

Eurozone wages rose at the fastest pace in more than two years during the three months to June.

Eurostat said wages were 2% higher in the three months, the fastest rise since the first quarter of 2015 and up from 1.3% in the previous three-month period.

The ECB's recently forecast that wage growth would rise to 2% next year and 2.3% in 2019 from 1.5% in 2017, although they still see inflation running below target in the final year.

Asian markets traded mixed following North Korea's firing of another missile launch over Japan, but equities there rose slightly even as the yen strengthened. Japan's Nikkei gained 0.5% while South Korea's Kospi jumped 0.4%. Hong Kong's Hang Seng Index advanced 0.1%. Australia's S&P/ASX 200 sank 0.8% and China's Shanghai index dropped 0.5%.

U.S. industrial production fell 0.9% with capacity utilization at 76.1% in August. The numbers were weaker than expected, but the Fed said Hurricane Harvey reduced IP by about 0.75%.  Retail sales fell 0.2% in August, versus expectations for a rise of 0.1%. Excluding cars, sales rose 0.2%, which was less than the 0.5% forecast.  The Empire State manufacturing survey headline reading fell slightly in September to 24.4 from a 3-year high of 25.2 in August. Expectations were for a reading of 19.  The University of Michigan consumer-sentiment index dropped to 95.3 in its preliminary September reading, down from the final August reading of 96.

Market Sentiment - Atlanta Fed's Q3 GDPNow estimate was slashed to 2.2% from 3% previously (4% initial estimate), as hurricane season begins to undo some of the promising rebound in U.S. growth.

Fed Policy Outlook: Expectations for a December Fed hike have risen and are currently near 47%. This is up from around 25% back in mid-August. Analysts continue to forecast one more 25 basis-point increase this year, which is also the Action Economic Survey median estimate.

The iShares 20+ Year Treasury Bond ETF (TLT) showed some weakness after the open with the low tapping $126.54. Support at $126.50-$126.25 held with a move below the latter leading to a further backtest to $126-$125.50 and the 50-day moving average. Short-term resistance remains at $127-$127.25.

ETF flows overall for the week were comparable to the prior week, with creations substantially outpacing redemptions at over two to one. For the top ten creations, the iShares 20+ Year Treasury Bond ETF (TLT) led the way at over 21.9% of inflows.


Market Analysis- The Russell 2000 ETF (IWM) made higher highs and high lows following last Monday's breakout above the 50-day moving average. Friday's peak reached $142.47 with near-term resistance at $142.50-$143 holding.  A move above the latter gets $144-$144.25 and the all-time high in play. Rising support is at $141.50-$141 with a move below $140 and 50-day moving average being a bearish development.


The Russell 2000 has failed to make a new life high which makes it the relative laggard for the time being. However, last week's strength looked bullish and the close above 1,430 gets the all-time high at 1,452 in play as the next major resistance hurdle.


The Energy Select Sector Spider (XLE) has been in a strong uptrend throughout September after bottoming at $61 in August.  Friday's slight gain was the 11th in the past 12 sessions with the high reaching $65.87. Prior resistance at $66-$66.25 from late July and mid-June held on back-to-back sessions to end the week.  Continued closes above $66.25-$66.50 should lead to a run towards $68-$68.50 and the 200-day moving average. Current support is at $65.50-$65 with a move below the latter signaling a further backtest towards $64-$63.75 and the 50-day moving average.  It would also represent a triple-top breakdown. Current RSI could be peaking just above 70 as this level held last December when XLE was pushing $77 and 52-week peaks.


The percentage of Nasdaq 100 stocks trading above the 50-day moving average is currently at 61%. This level reached 69% at the beginning of the month.  A move above 70% would be bullish but a market peak could be reached when this level hits 75%.  The area held in April, May and July. A move back below 55% could signal upcoming market weakness.

The percentage of S&P 500 stocks trading above the 200-day moving average is currently at 66%. Last week's breakout above 65% was slightly bullish and a level that needs to hold to show continued market strength.  A move above 67.50% would signal a broader based rally that could led to 70% of S&P 500 stocks trading above the 200-day moving average.



Coutesy of :Roger Scott
Head Trader
Market Geeks.

Sunday, August 20, 2017

Weekly Stock Market Outlook 8/21/2017

U.S. markets finished slightly lower on Friday with the Energy and Utilities sectors showing strength while Consumer Discretionary and Healthcare led the decliners.

Another shakeup in the White House caused some midday volatility after news Steve Bannon is out. Overall, is was another losing week for the Dow and S&P 500, their second-straight, with losses of less than 1%. The Nasdaq fell 0.6% to extend its losing streak to fourth-straight.

Global Economy –European markets fell following the terrorist attacks in Barcelona with Airline stocks suffering the steepest pullback. The FTSE 100 declined 0.9% while the Stoxx Europe 600 dropped 0.7%.  France’s CAC 40 index gave back 0.6% while the Belgium20 declined 0.5%. The DAX 30 slipped 0.3%.  Germany’s July PPI rose 0.2% month-over-month and was up 2.3% year-over-year, stronger than expectations of unchanged and 2.2%, respectively.

Asian markets traded mostly in the red with Japan’s Nikkei hitting a three-month low. The Nikkei Stock Average sank another 1.2% on Friday to close at its lowest level since May.  Hong Kong’s Hang Seng Index stumbled 1.1% and Australia’s S&P/ASX 200 declined 0.6%. South Korea’s Kospi index dipped 0.1% while China’s Shanghai index edged up 0.02%.  China July new home prices rose in 56 of 70 cities, down from 60 cities that rose in June.

U.S. Economy-Consumer sentiment sentiment surged 4.2 points to 97.6 in the August preliminary read from the University of Michigan survey, much better than expected.  The U.S. QSS figures that track activity for the service sector revealed a 6.2% Q2 year-over-year gain in the aggregate “selected services” measure that was similar to last quarter’s 6.3% gain.

Market Sentiment –The iShares 20+ Year Treasury Bond ETF (TLT) was basically flat after testing a high of $127.15 shortly after the open.  Lower resistance at $127-$127.50 was cleared but failed to hold with a move above $128 being a bullish development. Rising support is at $126.25-$126 with backup help at $125-$124.75 and the 50-day moving average easily holding.


Market Analysis  The Spider S&P 500 ETF (SPY) traded down to $242.20 to hold support at $242-$241 and the 100-day moving average. This area market the early July breakout above this level and has now been retraced.  A move below $240 would be a bearish development. Resistance is at $244-$244.50 and the 50-day moving average.


The Utilities Select Sector Spider (XLU) made a run to $54.76 and a fresh 52-week peak on Friday. A move above resistance at $54.75-$55 could lead to a triple-top breakout towards $56-$57.50. Support is at $54-$53.75.



The percentage of Nasdaq 100 stocks trading above the 50-day moving average is just below 40% and levels last seen in early July.  The late July low reached the 35%-33% area. Continued selling pressure could lower this number to 30%-25% and levels last seen in October and November 2016. Continued closes above the 40% level could lead to a short-term rebound.



Courtesy of Market Geeks

Sunday, August 13, 2017

Weekly Stock Market Outlook 8/14/2017

U.S. markets suffered their second worst week of the year despite Friday’s slight rebound that ended a three-session slide. The technical damage to the major indexes hit the small-caps the hardest with the Russell 2000 breaching its 200-day moving average before holding this level into the closing bell.
Meanwhile, the S&P 500 and Nasdaq failed to recover their 50-day moving averages following Thursday’s close below these levels. Sectors were mixed for the week with Energy, Basic Materials, Financials, and Industrial leading on the downside.  Consumer Staples and the Utilities were the stronger sectors.

Q2 earnings results from 448 of the S&P 500 companies are up 10.9% from the same period last year on 5.8% higher revenues. Nearly 74% of the companies have beat EPS estimates with roughly 68% clearing revenue estimates. The proportion of companies beating both EPS and revenue estimates is an above-average 54%.  Q2 results from 23 of the 42 retailers in the S&P 500 index are down 1.7% from the same period last year on 6.7% higher revenues. So far, 74% of the companies have topped EPS estimates with 78% beating revenue estimates.

Estimates for Q3 have come down, but they appear to be following the moderate revisions pace seen ahead of the start of the Q2 earnings season. For 2017, total earnings for the S&P index are expected to be up 7.5% on 4.2% higher revenues, which would follow 0.8% earnings growth on 2% higher revenues in 2016. Additionally, index earnings are expected to be up 10.9% in 2018 and 8.6% in 2019.

Global Economy –European markets posted their worst week in nine months following Friday’s drubbing. The FTSE 100 index fell 1.1% to a 3-month low while France’s CAC 40 index, the Stoxx Europe 600, and the Belgium20, all dropped 1%. The DAX 30 was basically flat after slipping a quarter-point.

Asian markets were also weak across the board on continued geopolitical tensions. Hong Kong’s Hang Seng Index sank 2% and South Korea’s Kospi index declined 1.7%.  Shanghai index gave back 1.6% while Australia’s S&P/ASX 200 tumbled 1.2%. Japan’s Nikkei Stock Average slipped 0.1%.
Hong Kong’s economy for the second quarter expanded by 3.8% and topped the 3.2% growth rate forecast. Private consumption rose 5.3% year-over-year, up from a 3.9% expansion in the first quarter. Total exports of goods reached 5.6% from year ago levels, compared with a 9.3% expansion in the previous quarter.  China’s fiscal spending slowed in July as the Chinese government spent 1.35 trillion yuan, or $202.7 billion, in its fiscal budget in July, up 5.4% from a year earlier. The rate was down from the 19.1% increase in June.  China’s car sales were up 4.3% from a year earlier, accelerating from June’s 2.3% clip, on 1.68 million cars sold. Sales for the first seven months of 2017 were up 2% from the year-earlier period.

U.S. Economy-The Consumer Price Index for the month of July rose 0.1% for both the headline and core rates. There were no revisions to June, where the headline price reading was unchanged while the core edged up 0.1%.

Philly Fed’s Livingston Survey noted a slightly slower pace of growth is projected for the U.S. economy over the next three years than it did three months ago. Growth of 2.6% is projected for the current quarter, up from 2.5% previously. A 2.3% pace for the next quarter is expected, down from 2.4% previously.

For the annual average, growth is seen unchanged at a 2.1% year-over-year clip, but it’s expected to accelerate to 2.4% year-over-year in 2018 that was revised from 2.5%. A dip back to 2.2% year-over-year is expected in 2019, revised from 2.1%. The unemployment rate is projected to fall to 4.2% in Q4, from 4.3% this quarter.  Meanwhile, CPI is seen steady at a 2.3% year-over-year pace in Q4, and slowing to 2.2% in Q1 versus the prior 2.4% estimate.

Market Sentiment –Minneapolis Fed Neel Kashkari cited weak CPI inflation data as yet another reason to hold off on rate hikes, after warning repeatedly that inflation was undershooting the Fed’s 2% target.  Dallas Fed President Robert Kaplan wants to see more evidence of inflation picking up to the 2% target before another rate hike. He said he was a strong advocate of the two rate hikes seen so far this year, but now he’s willing to be patient as he looks for progress toward the price goal.  He also cautioned that the FOMC is not as accommodating as people might think and it would be healthy for the FOMC to start winding down its balance sheet.  Fed speak for the upcoming week includes Dallas Fed Kaplan and Kashkari on Thursday. Kaplan is scheduled to make another appearance on Friday.

The iShares 20+ Year Treasury Bond ETF (TLT) tested a high of $126.46 with lower resistance at $126.50-$127 holding. A move above the latter could lead to a double-top breakout towards $128-$130. Support is at $126-$125.50 with backup help at $124.75 and the 50-day moving average.



Market Analysis-The Spiders Dow Jones Industrial Average ETF (DIA) is trying to hold the late July breakout above the $218 level and current support. There is risk to $216-$215 and the 50-day moving average on a close below $218-$217.75.  A move back above resistance at $219.50-$220 would be a bullish signal for a return to all-time highs towards $222-$224.


The Technology Select Spider (XLK) traded higher on Friday following a 3-day pullback off the recent 52-peak of $58.33. Upper support at $56.75-$56.50 and the 50-day moving average held with risk to $55.50-$55.25 and the 100-day moving average if $56 failed.  This would retrace the early July breakout above the 50-day moving average. Resistance is at $57.50-$58 with a move above the latter likely signaling a run towards $60.


The number of S&P 500 stocks trading above their 50-day moving average is just above 40% and levels last in mid-April and mid-May.  Both times, the recovery back above the 50% level came in three and two sessions, respectively. A move below 40% would signal further weakness in the index as this level has held since early November 2016.


Courtesy of Market Geeks

Sunday, August 6, 2017

Weekly Stock Market Outlook 8/7/2017

U.S. markets finished Friday on a high note but the week was mixed despite the Dow setting its 8th-straight record high and is riding a 9-session win streak.  The S&P 500 also edged higher for the week but has traded in a 20-point range since mid-July, or 13 trading sessions. The Nasdaq was slightly lower for the week while the 1% pullback in the Russell 2000 held near-term support.
Utilities were the strongest sector last week with the Financial and Industrial sectors posting moderate gains. Oil and Energy led the laggards, falling 3%, followed by Business Services and Technology. Medical, Basic Materials, and Consumer Discretionary were also weak.

Q2 results from 420 S&P 500 companies combined accounted for 86.7% of the index’s total market capitalization.  Total earnings for these companies are up +11.6% from the same period last year on +5.6% higher revenues, with 74.3% beating EPS estimates and 68.3% beating revenue estimates.
With another 35 index members reporting results this week, the Q2 earnings season will have come to an end for 91% of S&P 500 members by the end of the upcoming week.

Global Economy –European markets gained ground, led by consumer goods, industrial and telecom stocks. France’s CAC 40 index surged 1.4% while Germany’s DAX 30 jumped 1.2%. The FTSE 100 index climbed 0.5% and the Stoxx Europe 600 advanced 1%. The Belgium20 index added 0.5%.
The flash estimate of the consumer price index for the euro area remained steady at 1.3% growth in July. Core inflation, excluding food and energy prices, rose to 1.2% in July.

The overall Eurozone manufacturing PMI checked in at 56.6, a tad under the 56.8 consensus forecast.
The Eurozone Q2 GDP met the consensus with quarter-over-quarter growth of 0.6% a year-over-year increase of 2.1%.

Asian markets traded mixed on Friday as traders awaited the U.S. employment report.

Japan’s Nikkei Stock Average fell 0.3% to fall back below the 20,000 level while China’s Shanghai index gave back 0.4%. Australia’s S&P/ASX 200 slipped 0.3%. South Korea’s Kospi index gained 0.4% while Hong Kong’s Hang Seng Index added 0.1%. The Bank of Japan said it will keep its August bond purchase plans unchanged from July. Additionally, Japanese worker earnings unexpectedly fell in June at the fastest pace in 2 years and can be attributed to some of the weakness.

China’s official government reading of its manufacturing PMI came in at 51.4, which was down from 51.7 in June.  The China Caixin manufacturing PMI for July came in at 51.1, up from 50.4 in June, where it was expected to remain.

U.S. Economy-Non-farm payrolls rose 209,000 in July, topping the forecast for 180,000 job additions. Average hourly earnings grew 0.3% month-over-month and the unemployment rate fell from 4.4% to 4.3%, both as expected.

The trade deficit narrowed 5.9% to $43.6B billion in June from $46.4B in May.

The ISM manufacturing index slipped 1.5 points to 56.3 in July and slightly below the 56.4 forecast.
Markit’s manufacturing PMI for July came in at 53.3, and just ahead of the forecast of 53.2. Markit’s services PMI rose 0.5 points to 54.7 in the final July reading. The ISM non-manufacturing index dropped 3.5 points to 53.9 in July, hitting an 11-month low. Factory orders rebounded 3.0% in June.

Market Sentiment –Fedspeak returns with a number of events throughout the week. St. Louis Fed’s James Bullard will give a presentation on the U.S. economy and monetary policy from on Monday, while Minneapolis Fed’s dovish dissenter Kashkari will moderate a Rotary Club Q&A session.
New York Fed’s William Dudley will open and take part in a panel discussion on New York economic trends on Thursday. And finally, Dallas Fed’s Robert Kaplan will take part in a Q&A session on Friday and Neel Kashkari will being doing the same at a community bankers conference.

The iShares 20+ Year Treasury Bond ETF (TLT) traded in negative territory throughout the session with the low reaching $124.44.  Lower support at $125-$124.50 and the 50-day moving average held with additional risk to $124-$123.50 on a close below the latter. Resistance is at $125.50-$125.75.


Market Analysis-The Spiders Dow Jones Industrial Average ETF (DIA) stair-stepped its way past upper resistance at $219-$220 after setting another all-time high of $220.67. Continued closes above $220-$219.50 keeps blue-sky territory open up to $222-$222.50. Rising support is at $219.50-$218.50.  A move, or close, below $218 would be a slightly bearish development for a possible quick trip towards $216-$214 and the 50-day moving average.


The Utilities Selector Sector Spider (XLU) pulled back on Friday after lower resistance at $54-$54.50 held during the prior session. This level held twice in June and the recent attempt is forming a triple-top. These technical setups can be bullish, or bearish, with XLU needing to close above resistance to form a new base and possible breakout towards $55-$56. Near-term support is at $53.50-$53 and a rising 50-day moving average.




Ref:  Market Geeks

Sunday, July 30, 2017

Weekly Stock Market Outlook 7/31/2017

U.S. markets opened lower on Friday and spent most of the morning trying to gain traction. The Dow was the only index to make it into positive territory in the afternoon while notching a new all-time high and closing the week 1% higher.

The Nasdaq, S&P 500, and Russell 2000 managed to pare their losses but ended the week slightly lower. The indexes held up well during the heaviest reporting week of the second quarter earnings season, but this week will be just as hectic with a number of marquee companies reporting.

Earnings Outlook-With results from 171 S&P 500 members already out, total earnings are up +8.8% from the same period last year on +3.4% higher revenues, with 78.9% beating EPS estimates and 70.8% beating revenue estimates.

For Q2 as a whole, combining the actual results with estimates for the still-to-come companies, total earnings are expected to be up +8.7% from the same period last year on +4.7% higher revenues. This would be coming after +13.3% earnings growth on +7% higher revenues in Q1.

Beyond Q2, total earnings for the S&P 500 index are currently expected to grow by +4.6% on +4.1% higher revenues in the September quarter and +8.6% on +5% higher revenues in Q4. Estimates for the September quarter have started coming down, but they appear to be following the moderate revisions pace seen ahead of the start of the Q2 earnings season, at least at this stage.

For full-year 2017, total earnings for the index are expected to be up +7.7% on +4.0% higher revenues, which would follow +0.7% earnings growth on +2% higher revenues in 2016. Index earnings are expected to be up +11.4% in 2018 and +8.9% in 2019.

Global Economy –European markets closed lower on Friday with financial stocks leading the pullback and the oil and gas sector showing some strength. The Stoxx Europe 600 fell 1% to end the week down 0.5%. The FTSE 100 index also dropped 1% while France’s CAC 40 index gave back 1.1%. Germany’s DAX 30 declined 0.4%.

U.K’s consumer confidence slipped 2 points following a five-point drop the previous month, and came in at -12.

France’s Consumer Price Index rose 0.7% on year in July, the same rate as June and matched expectations.

Germany’s Consumer Prices rose by 0.4% in July and 1.5% for the year. Forecasts were at 0.3% for the month and 1.4% for the year.

Asian markets traded mostly in the red with South Korea’s Kospi index taking the biggest hit, sinking 1.7%.  Australia’s S&P/ASX 200 tumbled 1.4% while Hong Kong’s Hang Seng Index fell 0.6%. Japan’s Nikkei Stock Average declined 0.6% and China’s Shanghai index gained 0.1%.

Japan’s Consumer Price Index rose 0.4% in June rose 0.4% from a year earlier, matching the pace of the previous month and in line with expectations.  Also in Japan, Household Spending rose for the first time in 16 months, gaining 2.3% from a year earlier in June, and much better than a 0.5% rise that was forecasted.  Japan’s unemployment rate also improved, falling to 2.8% in June from 3.1% in the previous month. Another very interesting indicator showed tightness in the labor market as there were 151 jobs available for every 100 job seekers, the strongest showing in more than 43 years.

U.S. Economy-U.S. GDP grew 2.6% in Q2 after a 1.2% Q1 gain (revised down from 1.4%) and 1.8% in Q4 (revised down from 2.1%).  Q2 ECI rose 0.5% after the 0.8% gain in Q1. Consumer Sentiment Index at 93.4 compared to a forecast of 93.1 for July.

Market Sentiment –Fed President Neel Kashkari wants to slowly shrink the balance sheet over the next several years as he noted in his town hall comments on Friday. The big balance sheet hasn’t done a lot to boost the recovery. He went on to say the job market remains strong, while there was very little sign of the inflation pick-up that had been expected to follow. Indeed, inflation has been low year after year, he added.  As to last Wednesday’s FOMC, he said that analysts decided not do anything with interest rates, as they likely wanted to wait to see more data.

The iShares 20+ Year Treasury Bond ETF (TLT) rebounded to trade a penny shy of the $124 level. Upper resistance at $123.50-$124 held with further hurdles at $124.50 and a rising 50-day moving average. Support remains at $123-$122.50 and the 100-day moving average.


Market Analysis-The iShares Russell 2000 ETF (IWM) traded lower for the third-straight session after peaking at all-time highs above the $144 level. Current support is at $141.50-$141 with Friday’s low tapping $141.47.  A move below the latter could lead to a continued back-test to $140 and the 50-day moving average that remains in a strong uptrend. Current resistance is at $142-$142.50. A move back above $143 will likely lead to another run at record highs.


The Spider S&P Retail XRT (ETF) made a nice recovery last week after clearing both the 50/100-day moving averages. Current resistance is at $41.50 with Friday’s high reaching $41.36.  Continued closes above this level would be a bullish development for a possible push towards $42-$42.50 and the 200-day moving average. Support is at $41-$40.75.


The number of Nasdaq 100 stocks trading above the 50-day moving average dropped below the 60% level after testing 55% on back-to-back sessions to close out the week. This represents a crucial level of support as there is risk to 50%-45% on a continued Tech pullback. There was some sector rotation out of Tech last week and it will be important to see if it continues this week.



Courtesy of Market Geeks

Sunday, July 16, 2017

Weekly Stock Market Outlook 7/17/2017

U.S. markets wrapped up a strong week following Friday’s second half breakout to fresh all-time highs and prior resistance levels from early June.

The Financial sector lagged on mixed earnings results while the Transports continued their run to record highs. The beginnings of a summer rally appears to be in play and will be tested as 2Q earnings season starts to heat up.

Global Economy –European markets largely finished lower on Friday, with Financial stocks slipping after their U.S. earnings season got underway.  Energy and Mining stocks traded higher and helped limit the losses. The markets in Germany, France, Spain, Italy and the U.K. closed slightly in the red while the Stoxx Europe 600 ended higher led by the Commodity stocks.  While the major U.S. banks posted higher-than-anticipated profit, weaker trading revenue fell shy of expectations.  This raised questions about what European lenders will say about the lower revenues when they begin releasing financial results in the coming weeks.

The U.K. published its first draft legislation on Brexit that is designed to revoke a 1972 law that made European Union (EU) law applicable in the country. The bill marks the initial step in what is expected to be a rough battle in negotiating the U.K.’s exit from the EU.

U.S. Economy-U.S. CPI was flat in June, with the core up 0.1%, as analysts forecast, following a 0.1% dip in the May headline, and a 0.1% gain in the ex-food and energy component.  Compared to last June, overall prices slowed to a 1.6% year-over-year pace from 1.9% y/y, while the core rate was steady at 1.7% y/y.

U.S. retail sales slipped 0.2% in June, with the ex-auto component also declining 0.2%. The 0.3% May decline was revised to -0.1%, while the -0.3% for the ex-auto figure was not changed.

U.S. industrial production rose 0.4% in June, pulling capacity up to 76.6%. The flat reading on May production was revised up to 0.1%, with the capacity figure nudged down to 76.4% from 76.6% previously.

The 0.4% U.S. June industrial production rise beat estimates to leave a fifth consecutive gain from weather-depressed winter readings, though analysts saw downward revisions that left a slightly weaker than expected report.  The University of Michigan consumer confidence index fell another 2 points to 93.1 in the preliminary reading for July.

May Business Inventories up 0.3% versus consensus of 0.3% for the month.

U.S. consumer sentiment slipped another 2 points to 93.1 in the preliminary read from the University of Michigan survey, after falling 2 points to 95.1 in June.

The index has ranged from 93.1 to 98.5 so far this year with the former the lowest since October, and the latter the best since January 2004.

Market Sentiment –Fed’s Robert Kaplan said some of the weakness in inflation is transitory, some is not, noting that some technical disruptions are helping soften pricing power.  He went on to say he expects wage pressures to be picking up in the months ahead with the U.S. close to full employment.

The Fed voter also believes the balance sheet unwind will have a limited impact on the markets and could happen as early as September.  The FOMC will likely take a pause from hiking rates at the upcoming July 25, 26 meeting and there is chatter they could announce QT, quantitative tightening while beginning it in October.  Wall Street had expected the announcement in September, to begin in October, and suspect that might be the case after the recent Fed reports, with the next rate increase coming in December.

The iShares 20+ Year Treasury Bond ETF (TLT) traded to a high of $124.16 but was unable to hold its 50-day moving average and upper resistance at $123.75-$124. Support is at $122-$121.75 and the 100/200-day moving averages if $123 fails to hold over the near-term.


Market Analysis-The Spiders S&P 500 (SPY) gained 0.5% on Friday to settle at $245.56. SPY slipped 8 cents to $244.31 at the start of trading with rising support at $245-$244.50 holding.  There is additional help at $242.50 followed by $241 and the 50-day moving average. The surge to nearly $296 afterwards and all-time high gets fresh resistance at $247.50-$250 in play.


The percentage of S&P 500 stocks trading above their 50-day moving average jumped nearly 10% on Friday and is now at 69.50. Continued closes above the 70 level could lead to 74-74.50 and the early June highs.  The June 14th peak reached 74.25 followed by a run to 73.80 five days later. While this could signal a short-term market peak, if tested, it is important to remember January’s high cleared 82.  Continued closes above the June highs could get 78-80 in the mix at some point this month, or next.



Courtesy of Market Geeks

Sunday, July 9, 2017

Weekly Stock Market Outlook 7/10/2017

U.S. stocks closed higher after the government reported a solid pickup in hiring in June. Technology and consumer-focused companies made some of the biggest gains Friday.  The positive sign for the job market came a day after a disappointing measure of hiring by private companies, which sent stocks to their biggest loss since mid-May.

Global Economy – European stocks are down ahead of U.S. monthly payroll data. Weakness in energy stocks was a negative for equity prices with Aug WTI crude oil down sharply  to a 1-week low on technical fund selling.

The 10-year German bund yield rose to a fresh 17-1/2 month high of 0.581%, which also undercut European stock prices.  Bund yields rose on hawkish comments from ECB Governing Council Member Knot who said, “our monetary policy decisions will always be dictated by the economic circumstances and the economic circumstances at this point are that reflation has clearly replaced deflation.”

Losses in European stocks were limited after German May industrial production rose more than expected. Asian stocks settled mostly lower:

China’s Shanghai Composite erased early losses and rallied up to a 2-1/2 month high on reports of state-sponsored buying of equities.

ECB Governing Council Member Knot said, “our monetary policy decisions will always be dictated by the economic circumstances and the economic circumstances at this point are that reflation has clearly replaced deflation, the deflation risk is gone.”

German May industrial production rose +1.2% m/m, stronger than expectations of +0.2% m/m.

U.S. Economy – U.S. employers added a robust 222,000 jobs in June, the most in four months, a reassuring sign that businesses may be confident enough to keep hiring despite a slow-growing economy.  The government also revised up its estimate of job growth for April and May by a combined 47,000. Hiring has averaged nearly 180,000 jobs a month this year, only slightly below last year’s pace.  The unemployment rate for June ticked up to 4.4 percent from 4.3 percent in May, a 16-year low. The jobless rate rose because more Americans began looking for work and not all of them found it.

Friday’s jobs report from the government suggested that after eight years of a grinding but resilient recovery, companies still have room to hire at a healthy pace.

Earnings Watch: The Q2 earnings season takes the spotlight with quarterly reports from the big banks next week, but companies with fiscal quarters ending in May have been reporting results already.  Q2 Estimates have come down since the quarter got underway, but the magnitude of negative revisions nevertheless compares favorably to other recent periods.  Total Q2 earnings for the S&P 500 index are expected to be up +5.7% from the same period last year on +4.6% higher revenues.

The Energy, Aerospace, Finance, Technology, Construction and Industrial Products are expected to be big growth drivers in Q2, with the quarterly earnings growth pace dropping to +3.3% on an ex-Energy basis.

Market Sentiment – Bonds continue driving lower and 10 day RSI is now below 30 level. We could see lower prices, since we haven’t had increase in volatility, but more than likely, the odds of seeing consolidation and slight pullback is likely in the next few weeks.


Expect price to remain near 50 day line and don’t expect more direction till end of summer, since there’s no catalyst on the horizon that can cause price to move directionally in the short term.

Stock Market Analysis – Chips remain the biggest influence on tech at this time. I’m not ruling out a rally, since price did reach oversold price territory, but I want to see price reach above the 50 day line once again.

If SOXX trades above the 50 day line over the next few sessions, the odds are strong that institutional traders would begin accumulating once again.


At the present time, price remains completely below the 50 day line to the downside and if we can get a few positive earnings surprises next few sessions, the odds are fair that price may trigger institutional accumulation in the broader NASDAQ 100 as well.

Few weeks back, tech was broadly ahead of the blue chips and the overall market. Since we’ve seen corrective pressure from the tech over the past few weeks, both the QQQ and SPY are now near the 50 day moving average and SPY is actually leading at this time, since price is above the 50 day line.


If SPY can hold current price level, the odds are strong that tech will regain some degree of directional bias and we will see more upside from the overall tech sector, which is driving the current market cycle.  The next few sessions are going to be crucial, since most indices are trading near the 50 day line, which attracts institutional traders into the market.

Volatility remains low and with fundamentals pointing to solid job growth, the odds of seeing a rally is not unlikely, especially if we get a bit of upside from the SP 500, which will help drag the SOXX and QQQ along for the ride.


Courtesy of Market Geeks

Sunday, July 2, 2017

Weekly Stock Market Outlook 7/3/2017

U.S. stock indexes were mixed Friday, recovering some of their losses from a day earlier. Utilities and industrial companies led the gainers. Banks were the only laggard. Investors were sizing up the latest company earnings and deal news and adjusting portfolios in the final hours of the second quarter.

Global Economy – European stocks are up as a rebound in technology stocks boosts the overall market. Energy stocks are higher as well with Aug WTI crude oil up, the seventh consecutive session of gains, as oversupply concerns ease.

Signs of strength in Chinese manufacturing also improves confidence in the global economic outlook and gave equities a lift after the China Jun manufacturing PMI unexpectedly rose.  Weakness in industrial output undercut Japanese stocks as the Nikkei Stock Index fell to a 2-week low after Japan May industrial production fell -3.3% m/m, the biggest decline in 6-years.

The Eurozone Jun CPI estimate rose +1.3% y/y, stronger than expectations of +1.2% y/y. Jun core CPI rose +1.1% y/y, stronger than expectations of +1.0% y/y.

China Jun manufacturing PMI unexpectedly rose +0.5 to 51.7, stronger than expectations of -0.2 to 51.0.

German May retail sales rose +0.5% m/m, stronger than expectations of +0.3% m/m.  German Jun unemployment unexpectedly rose +7,000 to 2.547 million, weaker than expectations of -10,000.

Japan May industrial production fell -3.3% m/m, weaker than expectations of -3.0% m/m and the biggest decline in 6 years.

U.S. Economy – May was not a strong month for the consumer. Income did rise 0.4 percent but it wasn’t because of wages & salaries which could manage only a 0.1 percent gain.  Spending was weakest in non-durable goods, down 0.5 percent in the month but, in an important note, reflected low energy prices not low demand.  But spending on durables was also negative, down 0.3 percent. The positive is a moderate 0.3 percent gain for the biggest category and that’s services.

The consumer sentiment index slipped back to the least optimistic reading since the November election, falling 2.6 points in preliminary June to 94.5 with both the current conditions and expectations components falling.  The report said the move lower reflected easing confidence among both Republicans and Democrats. Econoday’s consensus for final June to remain at 94.5.

Earnings Outlook – Estimates have come down since the quarter got underway, but the magnitude of negative revisions nevertheless compares favorably to other recent periods.

Total Q2 earnings for the S&P 500 index are expected to be up +5.9% from the same period last year on +4.6% higher revenues. The Energy, Aerospace, Finance, Technology, Construction and Industrial Products are expected to be big growth drivers in Q2, with the quarterly earnings growth pace dropping to +3.3% on an ex-Energy basis.

Market Sentiment – James Bullard, president of the St. Louis Federal Reserve said weak data has undermined the Fed’s hawkish stance and the U.S. central bank should take a more reactionary approach if and when it sees more solid signs of economic growth.  The probability that the Federal Open Market Committee will increase its fed funds rate at the December 13 meeting is 54%, which compares to 53% yesterday.

Technically, bonds remain bearish, even though stocks are slightly weaker. I’m anticipating more downside to develop over the near term or possibly a bit of congestion, before price violates the 50 day line and reverts back to the main trend, which is lower.



We may experience a week or even two of congestion or slight bounce from the current levels, but ultimately, the long term trend is lower and it’s a matter of time till we see more corrective pressure develop in the near term.

Stock Market Analysis – Stocks are going through major rotation at this time. If you recall, over the past few months, tech has been leading, while blue chips have been lagging behind. Over the past few sessions, we’ve seen increased weakness in the overall tech sector, due to extreme weakness in semiconductor stocks.

At the present time, the top leading sectors over the short term are blue chips and are helping NYSE and SPY remain near record high price levels.


Keep in mind, my analysis only covers very short term time period and the long term trend in tech remains bullish. Till we see major violation of the up trend, I will assume the weakness in semiconductors, which is spilling in to the broader tech sector is temporary.

As you can see from the chart below, the SOXX index is now trading completely below the 50 day line and 10 day RSI is in the upper 30th level, which tells us that price is approaching oversold territory in the short term.


Once we get closer to 30 level, we can expect some degree of institutional accumulation to move into the overall market and cause mild upside to develop. July is typically not a busy month for institutional accumulation, but with earnings season approaching and without major fundamental damage, we can expect a reasonable pullback to the upside in the overall tech sector, which will be triggered by SOXX index.

The SP 500 touched the 50 day line and bounced back yesterday. I’m anticipating choppy conditions over the near term, since there’s no major catalyst till earnings to propel price higher.


Expect less volatility and more congestion in the near term, followed by more upside, since earnings are expected to outperform last few quarters.

Volatility as measured by the VIX remains near historic lows and during low volatility environment, the odds of seeing aggressive accumulation from stocks is likely in the near term.




Courtesy of Market Geeks

Sunday, June 25, 2017

Weekly Stock Market Outlook 6/25/2017

U.S. stocks were mixed on Friday, as the overall market ended the week close to where it started. Energy stocks are driving the markets lower and medical and biotech is exhibiting unusual strength. Blue chips are seeing minor selling pressure and we can expect more consolidation ahead.

Earnings Outlook – We have to wait another few weeks before the Q2 earnings season really takes the spotlight.  Total Q2 earnings are expected to be up +5.8% from the same period last year on +4.6% higher revenues. This would follow +13.4% earnings growth in 2017 Q1 on +7.0%, the highest growth pace in all most two years.  Estimates for Q2 came down as the quarter unfolded, with the current +5.8% growth down from +7.9% at the end of March.

Global Economy – A  gain in Aug WTI crude oil prices is also lifting energy stocks in the pre-market. Mining stocks are higher as well with Aug COMEX gold up  at a 1-week high and Jul COMEX copper up at a 2-week high.

European stocks are down after the Eurozone Jun Markit composite PMI weakened to its slowest pace in 5 months.  Brexit negotiations are under way with residency rights and clearing of euro-denominated financial instruments among the first issues being debated between the UK and the European Union.

China’s Shanghai Composite erased early losses and moved higher in the last hour of trading on reports that state-sponsored funds had stepped in to support stock prices.

The Eurozone Jun Markit composite PMI fell -1.1 to 55.7, weaker than expectations of -0.2 to 56.6 and the slowest pace of expansion in 5 months.  The Eurozone Jun Markit manufacturing PMI unexpectedly rose +0.3 to 57.3, stronger than expectations of -0.2 to 56.8 and the fastest pace of expansion since the data series began in 2014.

France Q1 GDP was revised upward to +0.5% q/q and +1.1% y/y from +0.4% q/q and +1.0% y/y.

The Japan Jun Nikkei manufacturing PMI fell -1.1 to 52.0, the slowest pace of expansion in 7-months.

U.S. Economy – Sales of new homes rebounded in May, helped by strong sales gains in the South and West.  The Commerce Department says sales of new single-family homes rose 2.9 percent last month to a seasonally adjusted annual rate of 610,000. That followed a 7.9 percent drop in sales in April which was the biggest monthly decline in eight months.  Sales gains of 6.2 percent in the South and 13.3 percent in the West overcame big declines of 25.7 percent in the Midwest and 10.8 percent in the Northeast.

The median price of a home sold last month rose to a record $345,800, up 16.8 percent from a year ago. Prices have been increasing as demand has outstripped supply, in part because of a shortage of available building lots.

Market Sentiment – The long bond stopped moving higher few days back and is clearly running out of upside momentum at this time. I’m expecting the downside pressure to increase in the short term and price to move back to the 50 day line to the downside.


The long term trend remains bearish and with FED anticipated to continue raising rates for the next few years, the prospect of seeing bonds trade higher is not feasible, since the long bond and interest rates trade inverse to each other over time.

Stock Market Analysis – The sector that’s been driving the market higher past week is healthcare and biotech sectors, which have been bucking the overall trend of the market in the past several days.
The overall market is stagnate and consolidating, while medical stocks have been moving higher and making aggressive gains in the past few sessions.

At the present time, both healthcare and biotech are grossly overbought, with 10 day RSI moving into the 80th level, which tells us that the most likely scenario will be pause in the trend, consolidation or most likely a pullback taking us back to the 50 day line to the downside.


As you can see from the chart above, volatility levels have been rising in the past few days, which is negative for stock prices and typically causes stocks to experience mild pullback or retracement against the trend.  Most traders don’t pay attention to increase in volatility or trading range which is a big mistake. Massive rise in volatility or trading range is the biggest indication that price is about to stagnate or reverse and that’s what we are seeing in both healthcare and biotech at this time.

I’m also seeing increased selling pressure in industrial and broader blue chip stocks as Dow Jones begins trading lower and losing upside momentum in the short term. We anticipated this would occur, since Dow reached steep overbought price levels in the short term earlier in the week, which typically leads to minor corrective pressure to the downside.


At one point the 10 day RSI actually reached close to 80th level, which confirms that Dow Jones industrial is running out of momentum and with energy stocks increasing downside pressure, the odds of seeing directional upside momentum in the Dow Jones OR the NYSE is highly unlikely, till we see some degree of balance throughout individual sectors over time.

In summary – don’t expect major upside till stocks see some degree of corrective pressure and unity from various key sectors. Blue chips are not seeing accumulation and investors are waiting to see if funds begin accumulating tech once again.

Major funds are out of the market in July and I’m volatility levels are near historic lows. We can anticipate less volatility as we head into July and more consolidation and corrective pressure from the overall stock market in the next few sessions, unless there’s Global uncertainty develops, which will only increase selling pressure and cause spike in VIX.



Complements of Market Geeks

Sunday, June 18, 2017

Weekly Stock Market Outlook 6/18/2017

Amazon’s $13.4 billion deal for Whole Foods sent grocery stores, big retailers, and food makers and distributors plunging Friday. Energy companies rose while other stocks were little changed.

Earnings Outlook – Total Q2 earnings are expected to be up +5.7% from the same period last year on +6.5% higher revenues. This would follow +7.4% earnings growth in 2016 Q4 on +3.7% revenue growth, the highest growth pace in all most two years.  Estimates for Q2 came down as the quarter unfolded, with the current +5.7% growth down from +7.9% at the end of March.

U.S. Economy – Housing starts dropped 5.5% in May from the previous month to a seasonally adjusted annual rate of 1.092 million. The median estimate was 1.22 million.  Residential building permits, fell 4.9% to an annual pace of 1.168 million last month, which compares to expectations of 1.249 million. Economists had expected a 3.4% increase for starts and a .8% gain for permits.

Market Sentiment – Based on financial futures contracts, the probability that the Federal Open Market Committee will increase its fed funds rate at the December 13 meeting is 46%, which compares to 50% yesterday.


Technically, there’s not much data on the horizon to increase buying pressure above the current price level, especial with the long term trend pointing lower.  Expect price gap to the upside to fill as bonds trade lower and decline form overbought price levels in the near term.  RSI remains above 70 and unless we see global uncertainty ahead, the odds of more accumulation at the current price level is unlikely.

Stock Market Analysis – Key blue chip sectors continue to lag behind the overall market at this time, which opens up increased vulnerability in NYSE and Dow Jones in the near term.


If more blue chip sectors begin trading lower in the medium term time frame, the overall marke will gravitate towards the 50 day line and that will limit the number of institutional traders entering the market.  More importantly, as more and more sectors become weaker, we are seeing Dow Jones increase in price value, which tells us that less sectors are causing upside to the broader market and that creates vulnerability in the coming days.  RSI is now in the mid 70’s and price is showing major divergence against the RSI oscillator, which confirms that price is getting a bit ahead of itself in the short term time period.


Expect more congestion in the near term and lack of directional bias as stocks look for catalyst to drive price higher in the near term. Earnings season doesn’t officially start for some time and the majority of economic data is priced into the market at this time.  Tech is already near the 50 day line and more downside in the tech sector will cause more pressure to overall stock market, which will drag the SP 500 and Dow Jones lower.


Without such corrective pressure, it will become increasingly difficult for stocks to generate sufficient momentum to trade higher over the next few months.  Unless we see institutions coming into tech over the next few days, the odds of seeing QQQ break below the 50 day line is probable, which would create more downside pressure for the broader market.

Keep your eye on VIX index since it gives us accurate assessment of fear in the market. At this time, fear level is hear historic lows and unless something unexpected develops, I’m not expecting too much increase in volatility or corrective pressure to the downside ahead…only minor corrective pressure.


Courtesy of Market Geeks

Sunday, June 11, 2017

Weekly Stock Market Outlook 6/12/2017

U.S. stocks were again mixed on Friday. Banks and other financial stocks led the gainers. Energy companies also rose. Utilities stocks were the biggest laggard.  I prepared a full momentum analysis for you below, please review since all three market analysis methods [price, momentum and internals] are pointing to increased vulnerability and selling pressure to begin over the near term time frame.

Global Economy – European equities moved higher even after UK Prime Minister May’s Conservative Party lost its majority in parliament, which weakens her hand in Brexit talks with the European Union that are scheduled to begin in 10 days.   GBP/USD fell to a 1-1/2 month low on the fallout from the surprise UK election results, but the impact on the rest of the global markets was muted.

European stocks found support on signs of strength in the German economy, the Eurozone’s largest, after trade date showed German Apr exports and imports rose more than expected.

Expectations of a hung parliament in the UK failed to dent optimism in Asian markets as China’s Shanghai Composite rose to a 1-1/2 month high and found support on an as-expected increase in China consumer prices and a slower-than-expected pace of increase in Chinese producer prices.

The German Apr trade balance was in surplus by +18.1 billion euros, narrower than expectations of +23.0 billion euros. Apr exports rose +0.9% m/m, stronger than expectations of +0.3% m/m. Apr imports unexpectedly rose +1.2% m/m, stronger than expectations of -0.5% m/m.

UK Apr industrial production of +0.2% m/m and -0.8% y/y was weaker than expectations of +0.7% m/m and -0.3% y/y.  UK Apr manufacturing production of +0.2% m/m and unch y/y was weaker than expectations of +0.8% m/m and +0.7% y/y.

China May CPI rose +1.5% y/y, right on expectations. May PPI rose +5.5% y/y, weaker than expectations of +5.6% y/y.

U.S. Economy – In yet another negative for second-quarter GDP, wholesale inventories fell a sharper-than-expected 0.5 percent in April.  The draw is centered in autos but also includes other durable goods and non-durable goods as well. Sales at the wholesale level were weak, down 0.4 percent in the month and justifying the inventory draw.

The wholesale stock-to-sales ratio holds unchanged at a still lean 1.28.

Market Sentiment – Long bond continues to weaken as we get closer to upcoming FED rate hike.
Flight to quality longs continue to liquidate as the odds of FED raising rates during June 14th meeting appears to be almost a certainty.  Technically, the probability of a rate hike is 99%, which compares to 96% yesterday.

june9bonds

Expect price to continue moving south as we head towards the 50 day moving average to the downside. Once price hits the 50 day line, I’m expecting congestion and consolidation, followed by further downside action, as the long bond finally reverts back to the long term trend.

If you expand the bond chart to a further time frame, you will notice that the long term trend is bearish and unless the stock market sees major selling pressure and increased volatility in the short term, the odds of seeing major spikes in the bond market over the next few sessions is highly unlikely.

Stock Market Analysis – Stocks are slightly higher in spite of the uncertainties  stemming from former Director of the FBI Comey’s testimony on Thursday with SP 500 and Dow Jones making new highs for the session, which is unexpected, since the level of uncertainty entering the market is substantial.

Technically, all indices except for the Russell 2000 is trading substantially higher and moving extensively into overbought price territory and we are seeing massive narrowing of momentum at this time.

If you look at percentage of stocks in the SP 500 trading above the 200 day moving average, you will notice that the percentage moved from 80% percentile to 70% percentile, but price is making new highs…this is called narrowing of momentum and occurs when smaller percentage of stocks in the index are working harder or generating more momentum and causing price to go higher, even though there’s a substantially lower number of stocks causing the upside.

june9momentum

This is equivalent to having to push harder on the gas pedal to generate the same speed in the car because the engine is weakening.  And that’s exactly what we are seeing in the current market cycle at the present time from the overall stock market.  When there’s a lower percentage of stocks causing upside momentum it creates much more vulnerability in the overall market, which taken together with the current overbought price levels in major sectors and indexes creates strong possibility for corrective pressure in the near term.

Once momentum levels decline below 60% percentile, institutional traders will be less inclined to buy into the current market cycle, which will increase volatility and cause price to plummet or correct over a short period of time.  This typically creates balance to overall market and allows the market to trade higher once again.

To show you more evidence of “narrowing of momentum” take a look at the QQQ – which tracks the top 100 NASDAQ stocks. Few weeks back 85 out of 100 stocks were trading above the 200 day line and now only 75 stocks are trading above the 200 day line, but price is at or near all time highs.


As you can see from the chart below – while internally the index is weaker and as result more vulnerable, price remains near all time highs.  However, RSI levels are extremely stretched out and overbought, which tells us momentum levels have more than likely peaked out, especially with the renewed uncertainty in Britain and in U.S. in relation to Comey testimony.


Expect price to decline to 50 day line in the near term and VIX levels to begin spiking over the next few weeks. There’s too many mixed signals to see further momentum levels and that’s based on price, momentum and market internals.



Courtesy of Market Geeks

Sunday, June 4, 2017

Weekly Stock Market Outlook 6/5/2017

Bond yields touched their lowest level of the year and the dollar’s value dipped against other currencies Friday after the nation’s job growth slowed more than expected last month. Stock indexes hugged close to their record highs.

I’m seeing increases vulnerability in the stock market at this time, due to overbought price levels and key blue chip sectors nearing the 50 day moving average to the downside.

Global Economy –  European stocks are up at a 2-week high. Global stocks rallied on optimism in the economic outlook ahead of Friday’s monthly U.S. payroll report.  European stocks also received a boost after a gauge of UK May construction activity expanded at the fastest pace in 17-months.UK May Markit/CIPS construction PMI unexpectedly rose +2.9 to 56.0, stronger than expectations of -0.5 to 52.6 and the fastest pace of expansion in 17 months.  Eurozone Apr PPI was unch m/m and up +4.3% y/y, weaker than expectations of +0.2% m/m and +4.5% y/y.

On the negative side is a -2.50% plunge in Jul WTI crude oil prices to a 3-week low on concern about abundant global oil supplies. EIA data Thursday showed U.S. crude production increased to its highest level in 2-years while OPEC May crude output rose +315,000 bpd to 32.21 million bpd, a 3-month high.

Improvement in the global economy has investors buying Japanese stocks as the Nikkei Stock Index rose to a 1-3/4 year high.

U.S. Economy – Employers added 138,000 jobs last month, short of economists’ expectations. The government also said that hiring was weaker in March and April than it had earlier reported, and pay raises remain middling with average hourly earnings up 2.5 percent over the past year.  Economists aren’t sure how much of the weakness in the report was due to seasonal issues, or whether it indicates a longer-term trend. Still, many say they don’t expect it to dissuade the Federal Reserve from raising interest rates again at its next policy meeting in two weeks.  The central bank has been trying to pull rates gradually off their record low following the Great Recession, and it has raised rates twice since December.

Market Sentiment – Bond yields touched their lowest level of the year and the dollar’s value dipped Friday after the nation’s job growth slowed more than expected last month.  Bonds are now officially overbought  – as 10 day RSI moves above 70 level. Bonds are technically in an interesting position, since the long term trend is bearish and the short term trend remains bullish.  This creates very low risk trade opportunities to the downside, especially in light of the fact that FED will more likely than not raise rates in the next few weeks.

                              

Expect price to start reverting back down inline with the main trend in the near term, which will cause price to start trading lower.  The upside is limited and the odds are strong that over the next few sessions, we will see the main trend beginning to take control over the long bond once again.

Stock Market Analysis – Stocks are mixed with very little directional bias. Major blue chip sectors have been the weakest over the past month and I’m expecting minor pressure to increase, since markets are becoming more vulnerable at the current levels, especially without meaningful catalyst driving price higher.

                               

Technically, NYSE which tracks mostly large cap blue chip and industrial stocks is diverging from the 10 day RSI oscillator and is now approaching overbought price levels.


The blue chips remain vulnerable to downside pressure, especially if FED raises rates over the next few weeks, which remains highly probable at this time.  I’m not looking for massive corrective pressure since volatility levels remain near historic lows, which tells me that the most likely scenario is a pullback to the 50 day line, which will cause some degree of balance between the various sectors that are out of balance at this time.  One of the major factors that’s causing such strong distortion in the overall market is the strength out of tech, which has been causing bullish fund activity and overlaps the vulnerability we’ve seen out of the overall stock market.


When tech begins seeing downside, these vulnerabilities that I’m pointing out will become much stronger and that will cause blue chips to decline more rapidly, since there’s more weakness there.

Keep your eye on the SOXX index, since that’s the biggest catalyst in the tech right now and when price begins trading lower in the chip sector, I can assure you, that tech will suffer as a result and will begin pushing down on blue chips.



Courtesy of Market Geeks

Monday, May 29, 2017

Weekly Stock Market Outlook 5/29/2017

U.S. stocks were mixed Friday as technology companies, which have led the market’s recent rally, began seeing minor selling pressure.  Video game companies are slipping as Wall Street was disappointed by forecasts from GameStop. Banks are down and consumer-focused companies are rising. Stocks are still near record highs following a six-day winning streak.

Global Economy – European stocks are down to a 1-week low as German automakers slide after comments from President Trump.  Volkswagen AG, Daimler-Benz and BMW are all down 1% after Der Spiegel reported that President Trump in a closed-door meeting with EU officials chided German automakers for selling too many vehicles in the U.S. saying that contributes to a huge German trade surplus that is hurting the U.S. economy and that “we are going to stop that.”

China’s Shanghai Composite erased early losses and climbed to a 3-week high on reports of state-sponsored buying of stocks. The yuan rose to a 4-month high against the dollar after at least two Chinese banks sold dollars in the offshore market.  Speculation the PBOC is intervening in the forex market to prop up the yuan has led to short-covering after Moody’s earlier this week cut China’s sovereign debt rating.

U.S. Economy – The U.S. economy started 2017 out with a whimper, but it wasn’t quite as weak as first thought. The government revised up its January-March growth reading to a rate of 1.2 percent — better than an earlier estimate of 0.7 percent but well below President Donald Trump’s ambitious growth targets.  Growth in the gross domestic product, the broadest measure of economic health, is down from a 2.1 percent annual growth rate in the fourth quarter and marks the weakest result in a year, the Commerce Department reported Friday.  The upgrade to 1.2 percent reflected new-found strength in consumer spending, business investment and state and local government spending.  Many economists believe growth in the current April-June quarter will rebound sharply to above 3 percent, helped by stronger consumer spending that reflects solid employment gains and an unemployment rate that has fallen to a decade low of 4.4 percent.

U.S. orders for long-lasting manufactured goods dropped in April for the first time in five months, and a key category that tracks business investment went nowhere for the second straight month.
The Commerce Department said Friday that durable goods orders fell 0.7 percent in April after rising 2.3 percent in March. The April downturn was the first since durable goods orders fell 4.6 percent in November.  Despite the April drop, American manufacturing has bounced back in recent months from a slump early last year.  Overall, American manufacturing has regained momentum after being hurt early last year and in late 2015 by cutbacks in the energy industry and a strong dollar that makes U.S. products pricier overseas.

Market Sentiment – Jun 10-year T-note prices are up +5.5 ticks on dovish comments from St. Louis Fed President Bullard who said the Fed is “very close” to where it needs to be on policy rate.  St. Louis Fed President Bullard said the Fed is “very close” to where it needs to be on policy rate. He said he could be persuaded to do another rate increase at some point, but objects to the idea that the U.S. needs 200 bps of more normalization to get inflation near the Fed’s 2% target.

Technically, bonds could not take out the last swing high, even though GDP data was better than expected and volatility remains below historic high levels.  One of the main reasons why the upside will be limited is because of the type of transparency we are seeing from the FED and because historically, bonds are near all time lows and pressure is building to increase rates in the near term.

                        may26bonds

I’m expecting price to revert back down to the 50 day line, unless there’s a major Global set back in the coming weeks.

Stock Market Analysis – Stocks are showing very little reaction to quarterly GDP data, since the numbers are not far out of line with estimates.  VIX Index which measures market volatility remains near historic lows, which tells me that investors are not expecting major volatility or global turmoil in coming days.  Expect to see VIX rise in the coming days, due to stocks reaching overbought levels, which usually cause VIX levels to rise. One factor helps volatility remain lower is lack of volatility or institutional sponsorship during summer months.

                         may26vix

However, Global uncertainty remains the biggest cause of volume spikes in the stock market and if negative Geo political tension increases in coming weeks, which is more than likely, we will see VIX levels spike once again.

Looking at the overall stock market, the SPY and the Dow Jones are coming off overbought price levels in the short term, but more importantly, price is making higher highs, while 10 day RSI is making lower highs.  Divergence between RSI and price tells me that price is rising too quickly in the short term and is overdue for a pullback.

                        may26spy

I’m expecting the major indices to back away from all time highs and move down to the 50 day line in the short term time period. Market internals are pointing to overbought price and narrowing of momentum.  Aside from overbought indices, weakness in several key blue chip sectors and narrowing of momentum, we are also seeing a slump in the small cap index.

Keep in mind, small cap stocks are more speculative than blue chips or even tech stocks and typically lead the market ahead of larger, institutional grade stocks. There’s much less market cap in Russell stocks which makes the index more reactive to aggressive buying as well as selling pressure.

                     may26small

Usually, when markets are near all time highs, small caps are leading ahead, but in the present case scenario the small caps failed to trade higher during the last upside in the stock market and that’s causing me to become increasingly bearish in the short term.

There’s very little upside catalyst in the U.S. markets at this time and I’m expecting corrective pressure to develop in the short term. Expect to see major indices near the 50 day line and few blue chip sectors move down below the 50 day line and head towards the 200 day average.

Keep your eye on retail and industrial stocks ans well as tech over the near term.



Courtesy of Market Geeks