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FEAR NOT Brave Investors
Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.
Trade Wars, Greed and No Fear
The Week That Was:
The week highlights how little fear the market has of the high valuation of stocks and the number of weak points in the global economy. It harps back to Gordon Gekko and “Greed is Good”. There is more a fear of missing out then of loss. The S&P 500 fell 1.8% in August, and during the first week in September it has completely erased that decline. The rise has much to do with bumps in sectors such as energy and consumer discretionary that contain stocks with high dividend yields.
The U.S. started a 15% tariff on about $110 billion in apparel, footwear and other Chinese imports last Sunday, with same duty on the balance of almost $300 billion in toys, phones and laptops and other products delayed until Dec. 15. The levy is increasing on that already in effect on $250 billion in other Chinese goods to 30% from 25% starting Oct. 1, the 70th anniversary of the founding of the People’s Republic of China.
Given the history markets seem overly optimistic about trade. The RBA and BoC both met and left rates unchanged. The US manufacturing sector via the regional Chicago ISM Manufacturing PMI contracted under 50 to the lowest since January 2016 in August. Employment index lowest since March 2016. New orders lowest since June 2012. The US Labor Department August jobs report on Friday came in lower than expected at 130k v 165,000 NFP jobs added. In August the US added 3,000 manufacturing jobs. Unemployment stayed at 3.7% just off the lowest since December 1969. Private payrolls added 96,000 new jobs.
We still have confusion with the whole mess that is Brexit though Italy’s political situation improved. Negative rates, as foolish as history will remember them are the theme of the moment.
Still the market wants to believe the trade war is constructive, we have warned for over a year about the nonsense of the trade war nearing an end. Very simply you have two different cultures two different political systems and shaming doesn’t do well in either.
This is a market full of players that think its different this time, sure its different negative rates all around, trillions of worthless debt, unstable politics and Central Bankers putting their thumb in their mouths and seeing which way the wind blows. The fear of missing out and blind partisan politcs creates intertesting bed fellows. Be alert and put your ear plugs in and watch the whole spectrum its all related, geopolitical, debt markets, commodities, stocks, herds, greed and entitlement,
The spectre of Deutschbank overhangs Europe as does the new British PM, Boris Johnson. Their are other spectres out their we just don’t know it, or want to.
“Negative yields on long-dated government securities are more reflective of distorted market conditions than of stronger sovereign credit profiles, Fitch Ratings says. Lower interest service costs support sovereign creditworthiness, but this must be weighed against the impact of the economic conditions leading to lower yields and historically high government debt levels in a number of countries.- Fitch”
The indices are gamed by a few high delta stocks leading the way with massive leverage and a game of chicken on daily.
We remind you to stay on your toes, ad nauseum we repeat; In this surreal world that market prices can only go up, with bizzare acceptance that we can’t go down and you are a fool if you think otherwise. We have had mixed economic data, no concrete decision on the China and EU trade wars and a No Deal Brexit looking more likely. Here we are (see what ya wanna see).
The Week Ahead
Another big week for potential volatility, led by trade wars and rate theories. In the U.S. will be watching data that can help us gauge trade war fallout. We have JOLTS, the Apple event, Producer and Consumer price indices, Retail sales and Consumer sentiment. We also have the European Central Bank policy announcement.
To repeat AGAIN …With the trade war, most analysts still say a US-China trade deal will remain out of reach regardless for some time. On repeat “Again the issue is the disconnect between the story telling about the China deal and inconclusion between the Tories and Labor in the UK. What could go wrong?”
It is now over six months since the latest trade deal between the United States with China deadline of March 1. The White house said it needs more time, then turned around and slapped more tariffs on and said hey we are still talking. Are we the only one that sees the constant reset to keep markets elevated? If you have half a non partisan brain it should be all pretty clear the great game going on.
For emerging markets the high US dollar means the Fragile 5 continue to shake. Argentina and Turkey are red letter risks. Argentine markets did end the week on a high after capital controls helped arrest the sharp plunge in the peso and local bond prices. The peso finished the week up 6.6%. Argentina’s OTC bonds rose 10.7% for the week. Debt prices however remained deeply discounted, having tumbled 39% in August. All eyes are the Oct. 27 general election. Current President Macri, a free-marketeer came to power in 2015 and is expected to lose the general election to Fernandez, whose running mate, populist ex-leader Cristina Fernandez de Kirchner sends chills down the spine of global investors and big business. Voters will also be going to the polls in Poland,Indonesia, the Philippines and Thailand this year.
Over $4 trillion of EM debt matures by the end of 2020, of which around a third is denominated in foreign currency, according to the Institute of International Finance. Nevertheless Banks are telling investors to buy, buy, buy, who is selling you should ask?
If you wanted to play in the big room at Vegas, you are living it. Understand risk and the madness of crowds for your own sanity and wealth.
Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2019. One suspects it will be a year long Groundhog day for Trump, the GOP and the Democrats. We still have China and the U.S.trade wars.
Earnings last week included; Coupa Software, American Eagle Outfitters, Michael Cos, Vera Bradley, Pivotal Software, Slack, Cloudera,Ciena, Navistar, Barnes and Noble, John Wiley, Signet Jewelers, Donaldson, Zoom Video, CrowdStrike, Dave and Buster’s, DocuSign, bebe Stores and Lululemon
We start off on Monday with: Ctrip.com (CTRP)
Tuesday Earnings Include: GameStop (GME), RH (RH) the rebranded Restoration Hardware, Dave & Buster’s Entertainment (PLAY),ZScaler (ZS)
Wednesday Earnings Include: Aurora Cannabis (ACB), Tailored Brands (TLRD)
Thursday Earnings Include: Oracle (ORCL), Kroger (KR), Broadcom (AVGO), Duluth Trading (DLTH)
Friday Earnings Include: Energy Focus (EFOI)
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Geopolitical Tinderbox Radar
Last Week’s Big Stories
- U.S. Took Down 4 Oil Rigs and 2 Natural Gas Rigs From Service
- US Non Payroll Jobs Lower Than Expected as Worker Participation Rises
- Around The Barrel – Crude Oil Draws -4771k Bbls and Gasoline -2396k Bbls
- Into The Vortex – EIA Reports +84 Bcf in Natural Gas Storage
- Bank of Canada Hold Interest Rate at 1.75% Says Housing Activity Has Regained Strength
- US Manufacturing Employment, Exports and New Orders All Contact as Trade War Bites
- RBA Holds Rates Steady at 1.00% Record Low
The Week That Was – Last Weeks Recap
- Applied Materials Earnings Beat Expectations But China Trade War Drags
- NVidia Beat Earnings and Revenue Targets, Focus on AI Growing
- Tilray Reports Another Big Loss With Marijuana Selling Price Down A Third
- Barrick Gold Higher Production Doubles Profits With Rising Prices
Biggest Stock Winners and Losers Last Week*
Which Stocks Moved US ETF’s Last Week
US Stock Indices Performance
There was a reason why we kept harping on about this risk: The performance in shares of small-cap companies which are domestically focused than the large-cap firms is a concern for the optimism in the markets, belies the ATH optimism. The small-cap Russell 2000 index had gained 16.6% for the year, which has underperformed the benchmark S&P 500 index which had risen over 19.5%. Whereas the DJIA, NDX and SPX have marked new records highs, it remained 9.7% below its August 2018 high.
The $SPX continues to trade off our daily speed lines interspersed here with the spit to 4/8 before rallying back through the cloud and tenkan and continued though the recent highs, the pennant with the bullish euphoria having the hall marks of an ABC double zig zag. This was the 7th flip of 61.8% indicating the supply here. Note developing pennant (pink) Best alternatives are a (ii) of wave V higher, A of a larger 2 or this is i of something more powerful down. There is the alternative that the high was a B Plus and the recent low is a C also. Speed and channel lines in tune with algo calibration curve.
On the weekly SPX we see chaotic moves, spitting the Kijun and closing over it and tenkan. We are back at +2/8 Murrey Math confluence. Tenkan and 50 wma with a sharply climbing Kijun flattening with the cloud and channel much lower.
10 Year Treasury Note
Energy and Commodities
US Crude Oil (WTI)
WTI spat back and forth the channel channel and cloud and through the 50dma, kijun and daily tenkan, Clear battle between specs and hedges. Signalling stairstepping ahead. Finished inside the outer daily downtrend channel at the cloud. Watch for spits now with fear in the pricing.
WTI again finished the week under the weekly Kijun, 50wma (green) but over a very flat Tenkan under the cloud after rejecting the weekly channel. Key From Last Week ” Expect more work and volatility. Watch Murrey confluence with the cloud acting as support, failure.”
US Natural Gas (Henry Hub)
Natural Gas continued to rally after the tenkan crossed through the Kijun and closed last week over the 50 dma and just under the daily cloud. Prices moved orderly through the cloud as record low futures longs sniffed at offers. The 1-2 set up paving the way with Chikou in balance.
Natural Gas continued out of the weekly channel after it closed over the tenkan and eventually the Kijun which was min target. We also tested they breakdown as marked. Resistance MM & 50wma, support the weekly channel and the tenkan
Baltic Dry Index (BDI)
Gold completed it’s minimum target from the breakout. The question is this a C or 3? Like Silver watch Fibs and Tenkan and Kijun. Watching for corrective 2 waves to tell us what this move is.
Silver rallied in 3 waves to retest the September 2017 breakdown. Third wave was impulse – meaning C or 3 and we came back to rebalance Chikou. We watch fibs and tenkan and Kijun below.
Australian Dollar – AUDUSD
The Aussie dollar finally got some impulse since it sold off Kijun and daily cloud after held outside channel and oversold at -1/8 Murrey Math. Still much repair work to be done into the cloud to get a meaningful bounce in with flat Kijun pulling.
New Zealand Dollar – NZDUSD
The Kiwi broke back through inside channel, regaining some strength since the RBNZ cut, weekly channel in focus above tenkan holds it back. Chikou confluence at the downward channel rebalancing helped impulse.
Canadian Dollar – USDCAD
The USDCAD bounce failed at 50% and fell back through top of cloud finding some support at the tenkan. Loonie continues to find balance in the cloud. The tenkan is now seen as the pivot aspect. Support is cloud base
Euro – EURUSD
Euro broke under the long weekly channel pennant after rejected by Kijun and Tenkan but managed to find support at the outer band. Unless this is a spit the potential of the measured move becomes in around 1.0630 and lower. EUR remains a battle between EURJPY and EURCHF selling with EURGBP joining in this week.
EuroPound – EURGBP
EURGBP relecting the madness of #Brexit politics after reversed perfectly at the chikou and Murrey 6/8 (+2/8 recalc) to finish back under channel break under Tenkan, Below 50 wma with Kijun & top of channel support. Ask Boris?
Japanese Yen – USDJPY
The dollar yen recovery reflects trade war tweets under the tenkan. Still firmly in the channel needing to break the tenkan cleanly to get legs higher. Yen buying continued on the crosses, EURJPY and AUDJPY taking away the cloud twist that drew the dollar up.
Mexican Peso USDMXN
Mexican peso spat the upper channel hard to come all the way back to the Kijun and tenkan. The cloud will be a good focus for now. USDMXN is rebalancing chikou. Trade Wars and Argentina were not helping Mexico
Turkish Lire USDTRY
The USD Turkish Lire corrected much of the emerging market downdraft after the coiling between daily Kijun and tenkan brought impulse. The correction took it back to the cloud base and Kijun.
Bitcoin testing bottom of pennant thrown back at the 61.8% of the major move at pace once to the 38% and tenkan confluence to bounce to the 50%. Use your MM rules as algos control the herd here, support is the cloud and tenkan, be wary of sharp ABC, 1-2 moves.
The Week Ahead
Key US Economic and Central Bank Events This Week
Sun Sept 8, 2019
- Tentative CNY Exports (YoY)
- Tentative CNY Imports (YoY)
- 18:45 NZD Manufacturing Sales Volume (QoQ) (Q2)
- 19:50 JPY Bank Lending (YoY) (Aug)
- 19:50 JPY Current Account n.s.a. (Jul)
- 19:50 JPY GDP (QoQ) (Q2)
- 19:50 JPY GDP Price Index (YoY)
- 21:30 AUD Home Loans (MoM) (Jul)
Monday, Sept 9, 2019
- 01:00 JPY Economy Watchers Current Index (Aug)
- 01:45 CHF Unemployment Rate (Aug)
- 02:00 EUR German Trade Balance (Jul)
- 04:00 GBP MPC Member Vlieghe Speaks
- 04:30 GBP Construction Output (MoM) (Jul)
- 04:30 GBP GDP (MoM) 0.0%
- 04:30 GBP Industrial Production (MoM) (Jul)
- 04:30 GBP Manufacturing Production (MoM) (Jul)
- 04:30 GBP Trade Balance (Jul)
- 04:30 EUR Sentix Investor Confidence (Sep)
- Tentative GBP NIESR GDP Estimate
- 10:00 USD CB Employment Trends Index (Aug)
- 11:30 USD 3-Month Bill Auction
- 11:30 USD 6-Month Bill Auction
- 15:00 USD Consumer Credit (Jul)
- 21:30 AUD NAB Business Confidence (Aug)
- 21:30 AUD NAB Business Survey (Aug)
- 21:30 CNY CPI (YoY) (Aug)
- 21:30 CNY CPI (MoM) (Aug)
- 21:30 CNY PPI (YoY) (Aug)
Tuesday Sept 10, 2019
- All Day Holiday India – Moharram
- 01:30 EUR French Non-Farm Payrolls (QoQ)
- (Q2) 02:00 JPY Machine Tool Orders (YoY)
- 02:45 EUR French Industrial Production (MoM) (Jul)
- 04:00 EUR Italian Industrial Production (MoM) (Jul)
- 04:30 GBP Average Earnings (Jul)
- 04:30 GBP Employment Change 3M/3M (MoM) (Jul)
- 04:30 GBP Unemployment Rate (Jul)
- 06:00 USD NFIB Small Business Optimism (Aug)
- 08:15 CAD Housing Starts (Aug)
- 08:30 CAD Building Permits (MoM) (Jul)
- 08:55 USD Redbook (MoM)
- 10:00 USD JOLTs Job Openings (Jul)
- 11:30 USD 52-Week Bill Auction
- 13:00 USD 3-Year Note Auction
- 16:30 USD API Weekly Crude Oil Stock
- 19:50 JPY BSI Large Manufacturing Conditions (Q3)
- 20:30 AUD Westpac Consumer Sentiment (Sep) )
Wednesday, Sept 11, 2019
- 03:00 EUR Spanish Industrial Production (YoY) (Jul)
- 07:00 USD MBA 30-Year Mortgage Rate
- 07:00 USD MBA Mortgage Applications (WoW)
- 07:00 USD MBA Purchase Index
- 07:00 USD Mortgage Market Index
- 07:00 USD Mortgage Refinance Index
- 07:00 USD OPEC Monthly Report
- 08:30 USD PPI (MoM) (Aug)
- 08:30 CAD Capacity Utilization Rate (Q2)
- 10:00 USD Wholesale Inventories (MoM)
- 10:00 USD Wholesale Trade Sales (MoM) (Jul)
- 10:30 USD Crude Oil Inventories
- 13:00 USD 10-Year Note Auction
- 18:45 NZD FPI (MoM) (Aug)
- 19:00 JPY Reuters Tankan Index (Sep)
- 19:01 GBP RICS House Price Balance (Aug)
- 19:50 JPY Core Machinery Orders (MoM) (Jul)
- 19:50 JPY PPI (MoM) (Aug)
- Tentative CNY Trade Balance (USD)
Thursday Sept 12, 2019
- All Day Holiday South Korea – Chusok – Full Moon Festival
- 00:30 JPY Tertiary Industry Activity Index (MoM)
- 02:00 EUR German CPI (MoM) (Aug)
- 02:00 EUR German HICP (MoM) (Aug)
- 02:30 CHF PPI (MoM) (Aug)
- 02:45 EUR French CPI (MoM)
- 02:45 EUR French HICP (MoM) (Aug)
- 04:00 EUR Italian Quarterly Unemployment Rate
- 05:00 EUR Industrial Production (MoM) (Jul)
- 05:30 ZAR Gold Production (YoY) (Jul)
- 05:30 ZAR Mining Production (Jul)
- 06:00 USD OPEC Meeting
- 07:45 EUR Deposit Facility Rate (Sep)
- 07:45 EUR ECB Marginal Lending Facility
- 07:45 EUR ECB Monetary Policy Statement
- 07:45 EUR ECB Interest Rate Decision (Sep)
- 08:30 USD Continuing Jobless Claims
- 08:30 USD CPI (MoM) (Aug)
- 08:30 USD Initial Jobless Claims
- 08:30 USD Jobless Claims 4-Week Avg.
- 08:30 USD Real Earnings (MoM) (Aug)
- 08:30 CAD New Housing Price Index (MoM) (Jul)
- 08:30 EUR ECB President Draghi Press Conference
- 10:30 USD Natural Gas Storage
- 11:00 USD Cleveland CPI (MoM) (Aug)
- 11:30 USD 4-Week Bill Auction
- 11:30 USD 8-Week Bill Auction
- 12:00 USD WASDE Report
- 13:00 USD 30-Year Bond Auction
- 14:00 USD Federal Budget Balance (Aug)
- 18:30 NZD Business NZ PMI (Aug)
Friday Sept 13, 2019
- All Day Holiday South Korea – Chusok – Full Moon Festival
- All Day Holiday China – Mid-Autumn Festival
- 00:30 JPY Capacity Utilization (MoM) (Jul)
- 00:30 JPY Industrial Production (MoM) (Jul)
- 02:00 EUR German WPI (MoM) (Aug)
- 03:00 EUR Spanish CPI (MoM) (Aug)
- 03:00 EUR Spanish HICP (MoM) (Aug)
- Tentative CNY FDI
- 05:00 CNY M2 Money Stock (YoY)
- 05:00 CNY New Loans
- 05:00 CNY Outstanding Loan Growth (YoY)
- 05:00 EUR Wages in euro zone (YoY) (Q2)
- 05:00 EUR Labor Cost Index (YoY) (Q2)
- 05:00 EUR Trade Balance (Jul)
- 06:00 EUR Eurogroup Meetings
- 08:30 USD Export Price Index (MoM) (Aug)
- 08:30 USD Import Price Index (MoM) (Aug)
- 08:30 USD Retail Sales (MoM)
- 10:00 USD Business Inventories (MoM) (Jul)
- 10:00 USD Michigan Consumer Sentiment (Sep)
- 10:00 USD Retail Inventories Ex Auto (Jul)
- 13:00 USD U.S. Baker Hughes Oil Rig Count
- 15:30 USD CFTC Speculative net positions
Stock Buyback Watch
Via Emad Mnati @EmadMnati and MarketBeat
Note these charts, opinons news and estimates and times are subject to change and for indication only. Trade and invest at your own risk.