All posts by Michael Comeau
T3’s Take 3: Biotech Booms Amid Epic Snoozefest!
Get Started in Forex! My buddy Kurt Capra is hosting a FREE introductory webinar on forex trading tomorrow after the close. Click here to check it out. You can also read this article if you’d like to get to know Kurt a little better. 1) Biotech Booms! It was an altogether lackluster day for the major averages, but biotech put in a booming performance that had the NASDAQ Biotech Index ETF (IBB) up a whopping 2.0%. Traders were pumped up by Pfizer’s (PFE) $14 billion acquisition of cancer drug maker Medivation (MDVN), which could set off even more deal activity. Reuters had reported that several other players, including Gilead (GILD) and Merck (MRK) considered buying Medivation, so presumably, these suitors will seek other targets now that Pfizer has sealed the deal here. 2) Yawn! At the open this morning, the S&P 500 dipped and the VIX spiked, which had many market observers (including myself) hoping that we’d finally see some real downside volatility. It wasn’t to be. The hot action in biotech kept the bears at bay, and the Russell 2000 put in a pretty decent performance as well. Crude oil took a big hit today as traders are becoming less certain that OPEC will freeze or cut production at the big meeting in December. The S&P finished down -0.1% at 2183, making today the 31st day without a 1% move in the index. 3) Hawks Fly? On Sunday, Fed vice-chairman Stanley Fischer said the US economy was closing to hitting full employment and the Fed’s 2% inflation goal. Right now, traders are pricing in a 51% chance of a December rate hike, so markets are split right down the middle. We may get some clarity with FOMC Chair Janet Yellen’s speech at Jackson Hole on Friday. But I’d like to caution traders against making a rush to judgement on what Yellen may say. Don’t forget that many Fed officials came out hawkish ahead of the June meeting, only to be shocked by a dovish statement. P.S. Don’t forget to check out Kurt’s FREE forex webinar! Tuesday’s Trading Calendar US Economics (Time Zone: EDT) 10:00 New Home Sales (Jul): exp. 580k, prior 592k 10:00 Richmond Fed Manufacturing Index (Aug): prior 10 Global Economics 12:00 JPY BOJ Gov Kuroda Speaks 03:00 EUR French Flash Manufacturing PMI 03:30 EUR German Flash Manufacturing PMI 04:00 EUR Flash Manufacturing PMI 18:45 NZD Trade Balance 21:30 AUD Contruction Work Done q/q Earnings Before Open: Best Buy Co (BBY) Toll Brothers (TOL) After Close: Intuit Inc (INTU) Lannett Company (LCI)
Continue Reading -->Biotech powers up! And 4 other thoughts on today’s action…
1) BIo-Defense Biotech (IBB) put up a nice defense against that first little dip that started at 9:45 a.m. ET, and IBB is up 1.5% on the day — good stuff! The rest of the market was looking a little shaky, but traders tend to feel good when biotech is going strong. I’m positioned bearish near-term so I want biotech to get hit hard, but I’m not holding my breath just yet. 2) OPEC Reality? It seems like traders are finally remembering the disappointment at the June OPEC meeting meeting, when many people were expecting a production freeze. Crude oil is down -2.8% and oil service names are feeling the ugly stick. Let’s see if the rest of the market starts to notice. 3) HYG HYG has been quite strong as of late courtesy of the oil rebound. (crude oil prices and high-yield energy bond prices are closely tied for obvious reason). I’d closely track it, particularly its relative performance against Treasury ETFs like IEF. Bad high-yield makes equity markets nervous. 4) Declining Earnings — Who Cares? The permabears are out chattering about the fact that we’re on a 5-quarter streak for negative earnings — something we haven’t seen since the 2008-2009 crisis. Does it matter? Sure! But you know what matters even more? The fact that while bad, earnings are not quite as awful as expected. I’m choosing not to care about this until Mr. Market tells me it’s important via price action. 5) And the Swoon…. As I’m writing this, SPX has come off morning highs by a few points and approaching the morning low of 2175.96. It’s been a long, long time since we’ve seen a hard intraday reversal that turned into a meaningful down day. Will we get it today? Biotech and oil have the answer, so watch em!
Continue Reading -->The Morning Hammer: The Broken Record Market
Don’t Fear Forex… Attend my buddy Kurt Capra free webinar tomorrow and learn why so many stock and options traders are embracing the lucrative world of forex. Click here for more info. SPX futures are taking a small hit today as oil pulls back and the dollar keeps rising on Fed rate hike speculation. Morgan Stanley and Barclays both issues notes stating that crude prices would correct. There is also growing doubt that OPEC will institute a production freeze or cut at its September meeting. As I pointed out last week, oil ran up big into the June OPEC meeting on speculation of an output freeze. OPEC did nothing, and oil topped out shortly thereafter. It seems like folks are finally starting to remember that. On Sunday, Fed vice-chairman Stanley Fischer said the US economy was closing to hitting full employment and the Fed’s 2% inflation goal. Right now, traders are pricing in a 51% chance of a December rate hike, so markets are split right down the middle. We may get some clarity with FOMC Chair Janet Yellen’s speech at Jackson Hole on Friday. But I’d like to put an emphasis on the word MAY. Don’t forget that many Fed Heads came out hawkish ahead of the June meeting, only to be surprised by a dovish statement. The US economic calendar is pretty light — we just have the Chicago Fed National Activity Index hitting at 8:30 a.m. ET. At 12:00 p.m., German Chancellor Angela Merkel, French President Francois Hollande, and Italian Prime Minister Matteo Renzi will hold a press conference on the state of the European Union. On the deal front, Pfizer (PFE) is buying cancer drug maker Medivation (MDVN) for $14 billion. Reuters reported that several other players including Gilead (GILD) and Merck (MRK) were interested in Medivation. And a US security panel approved ChemChina’s $43 billion takeover of pesticide/seed giant Syngenta (SYT). The VIX is up 13%, which implies some more tension on the tape, but the bears still need to deliver some real downside follow-through to provide a real scare. We’ve gone 30 trading days without a 1% move in the SPX. I’ve got my fingers crossed that we’re finally passing this stretch of boredom, but I’m not holding my breath. P.S. Don’t forget to sign up for Kurt Capra’s free forex trading event!
Continue Reading -->T3’s Take 3: 30 Days of Nothing…
Don’t Fear Forex… Are you a stock or options trader in search of new profit opportunities? Click here to attend a FREE forex trading webinar 1) 30-Day Grind Today was the 30th straight day that the S&P 500 index failed to make a 1% move. Year-to-date ahead of this stretch the S&P moved 1% about once every 3 days, so I’m not exaggerating when I say this is the most boring market I’ve ever seen. The index finished down -0.2% at 2184, while the Russell 2000 and Nasdaq Composite did slightly better. Deere (DE) and Foot Locker (FL) both rose sharply on their strong earnings reports, while biotech and oil service names fell. 2) Fed Follies! On Wednesday, the Fed released the dovish-leaning Minutes from its July meeting. But on Thursday, Fed officials Williams and Dudley both said rate hikes are on the table in the near-term, which has traders ratcheting up their rate hike expectations once again. That sent bond and gold lower today, while regional banks (which benefit from higher rates) caught a small bid. Next week, Fed Chair Janet Yellen will speak at an annual meeting of central bankers in Jackson Hole, Wyoming, and will likely give some more clues on the Fed’s near-term trajectory. Given the Fed’s erratic nature this year, there is no telling what she’ll say, so be very careful if you’re placing bets! 3) Kurt Capra on SCTY Today on T3 Live’s Virtual Trading Floor, my colleague Kurt Capra provided the following analysis on controversial solar stock Solar City (SCTY): SolarCity (SCTY) has been showing weakness and an inability to bounce. The daily chart is set up to break down: Look for a move under the bottom of the range sometime next week. P.S. Don’t forget to sign up for our FREE forex trading webinar. Monday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Chicago Fed Nat Activity Index (Jul): prior 0.16 Global Economics 08:30 CAD Wholesale Sales m/m Earnings Before Open: None of significance After Close: NQ Mobile Inc (NQ)
Continue Reading -->Crude Oil Rocks… and 4 Other Thoughts on Today’s Market
Want to get an edge in today’s algo/HFT-driven markets? Click here to learn about Rob Smith’s FREE Quant Edge Webinar 1) The Beast! Crude oil is an absolute beast with 2 key catalysts pushing it: 1) Fed dovishness, which is pushing down the dollar and 2) hopes for an output freeze or cut at the September OPEC meeting. It seems like everyone forgot that OPEC disappointed at the June meeting after a ton of anticipation that a policy change was in the wings. But that’s the nature of momentum. And oh yeah — check out the nice, slow grind up in HYG. That is a good sign for the bulls. 2) Buh-Buh-Buh-Biotech Biotech (IBB) is putting in a nice bounce off the lows this morning and outperforming by a solid margin. As with HYG, this is a good sign for the bulls And it’s an area the bears need to break to get a real downside move. 3) Russell 2000 Same story as HYG/IBB. 4) Zee VIX! Yesterday’s intraday rally in SPX and today’s rally up to break-even is sending the VIX down below 12 again. This is bad news for me since I’m very much long volatility through VIX calls. I admit I’m growing restless. We haven’t had a 1% down day since June 27, which seems crazy. This stretch is even more boring than the April-May snoozefest. 5) Twilio (TWLO) The other day, I listed 3 reasons I would not short Twilio. That post received a lot of attention. The stock has pulled back a bit, but it still looks like a pretty dangerous short. Put option open interest has gone from 9,710 on Friday, August 5 to 34,394 yesterday. Plus, on August, 5, call open interest was almost double the put open interest. And as of yesterday, the put open interest exceeds the call side. The stock is also Hard Borrow, has big short interest, and there is still a massive put skew. Unless the broader markets really break down, I suspect Twilio shorts will get steamrolled.
Continue Reading -->T3’s Take 3: The Fed Hits and Nothing Changes
1) Fed Schmed… Today, the Fed released the Minutes from its July meeting. Traders were pricing in a 51% chance of a December rate hike, which meant expectations were split right down the middle. Unfortunately, we did not get much on the Fed’s near-term trajectory. Some FOMC officials are waiting for signs of improved inflation trends. Others were more optimistic, saying that the labor market is approaching maximum employment, and that progress in reaching the Fed’s inflation goals is expected continue. But overall, the Fed leaned dovish, which sent the dollar lower, and commodities higher. 2) The Grind Continues Following lackluster action overseas, US markets were weak in early trading, and the S&P 500 looked like it may even put in its first down day since July 27. But after dipping to 2168.50, the index ran up in a straight line, aside from a tiny dip following the release of the FOMC Minutes. By day’s end, the S&P managed to squeeze into the green with a 0.2% gain. Utilities led the winners’ column on the Fed’s dovishness, while small caps showed relative weakness. And much to my chagrin, the VIX hit an early high at 13.71, but collapsed to 12.17 as stocks climbed off the lows. 3) Crude Oil Keeps on Chugging Oil prices rallied again today after a bullish inventory report from the Energy Information Administration. Economists expected a 950,000 increase in inventories, but they fell a whopping -2.5 million. Gasoline inventories also fell significantly. Oil was also boosted by the weak dollar, and ongoing hopes an OPEC production freeze or cut. As a result, energy stocks outperformed today. Thursday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Initial Jobless Claims (8/13): exp. 265k, prior 266k 08:30 Continuing Claims (8/6): exp. 2141k, prior 2155k 08:30 Philadelphia Fed Business Outlook (Aug): exp. 2, prior -2.9 09:45 Bloomberg Economic Expectations (Aug): prior 44.5 09:45 Bloomberg Consumer Comfort (8/14): prior 41.8 10:00 Fed’s Dudley Answers Questions at Press Briefing in New York 10:00 Leading Index (Jul): exp. 0.30%, prior 0.30% 10:30 EIA Natural Gas Storage Change (8/12): exp. 26, prior 29 10:30 EIA Working Natural Gas Implied Flow (8/12): exp. 26, prior 29 16:00 Federal Reserve President John Williams Speaks in Anchorage 20:00 Fed’s Kaplan to Speak in Dallas Global Economics 04:30 GBP Retail Sales m/m 08:30 CAD Foreign Securities Purchases Earnings Before Open: Canadian Solar Inc (CSIQ) Wal Mart Stores (WMT) After Close: Gap Inc (GPS) Ross Stores (ROSS)
Continue Reading -->The Morning Hammer: Is Today the Day for a Real Move?
Quantitative Analysis is the future of trading. Rob Smith will show you why. Click here for more info. World markers are a little shaky following yesterday’s late-day selloff in the S&P 500, and hawkish comments from Fed officials. However, Japan is up after the yen took a little break, which is helping shares of exporters. UK jobless claims were better-than-expected in July, while Singapore’s exports dropped on weak orders from China, Indonesia, and the US. Crude oil is down this morning after the American Petroleum Institute reported a 1 million barrel drop in US crude inventories. This was a bigger reduction than expected, but gasoline supplies were up 2.2 million barrels, raising concerns about a glut. The EIA reports its inventory numbers at 10:30 a.m. ET so keep an eye out. Target (TGT) cut its annual guidance due to weak sales, and Lowe’s (LOW) reported a miss. This is disappointing as we’re coming off a couple days of positive retail stock news. On the deal front, Bloomberg is reporting that United Bankshares (UBSI) is in talks to acquire Cardinal Financial (CNFL). SPX and NDX futures are as flat as an ironing board, so the holding pattern continues in the early going. However, yesterday I reiterated my view that the VIX indeed hit a bottom last week, and today we could see vol continue to pick up. Aside from the important crude oil inventories at 10:30 a.m., we’ve got FOMC minutes hitting the tape at 2:00 p.m. Right now, traders are pricing in a 51% probability of a December rate hike, which means the market is split right down the middle. So there’s a chance that at least half the market comes away disappointed, which could be a catalyst for movement. The regional banks (KRE) could be especially big movers, and of course, the dollar and gold will be in play. Yesterday, NY Fed President Dudley (voting member) said a rate hike could come next month, so some folks are thinking that’s on the table. But the big problem with trying to game the Fed is that you not only have to predict the timing of policy actions, but the wording of commentary. Markets can make huge moves on the inclusion or exclusion of a few words, so you can drive yourself batty trying to make sense of it all, ESPECIALLY since the Fed always has the back door of “data dependency.”
Continue Reading -->T3’s Take 3: Volatility Returns for a Small Bear Victory
1) Volatility Returns! Volatility finally returned as stocks finally showed some signs of weakness following the past month’s upward grind. The S&P 500 fell -0.6% to 2178.15, making today 27 days without a 1% move. However, we saw relative weakness in tech, biotechnology (IBB), andsmall caps (IWM), which have led the market up since the 6/24 Brexit dip. This indicates that traders are entering profit-taking mode, which is introducing volatility back into the equation. The VIX rose 6.6% to 12.59, putting it 14% above last week’s low of 11.02. We also saw a significant increase in put-call ratios today, which means more traders betting against the market. And with tomorrow’s crude oil inventory report and the release of the FOMC Minutes, we may see even more volatility. 2) Crude Oil Booms, but Will It Last? Crude oil hit a fresh high of $46.62 today as the US dollar fell amid ongoing speculation that OPEC may freeze or cut output at its September meeting. This is a repeat of oil’s run higher into the June OPEC meeting, which did not result in any policy changes. Shortly thereafter, crude oil topped out before dropping to a $39.19 low on August 3. Given that crude oil inventories have been rising in recent weeks, it seems that traders are once again pricing in OPEC taking action to support prices. So in all likelihood, the oil rally will get derailed if OPEC does not deliver the goods. 3) Is Twilio a Short? Internet infrastructure play Twilio (TWLO) is one of the hottest stocks in the market, having nearly tripled off the June lows. This has many traders thinking it’s time to short the stock. However, not only is short interest in Twilio very high, but options traders have been placing massive bearish bets on the stock. This implies that Twilio is a very crowded short, which could cause a squeeze higher. You can read my thoughts on Twilio in more detail by clicking here. Wednesday’s Trading Calendar US Economics (Time Zone: EDT) 07:00 MBA Mortgage Applications (8/12): prior 7.10% 10:30 DOE U.S. Crude Oil Inventories (8/12): exp. 950k, prior 1055k 10:30 DOE Cushing OK Crude Inventory (8/12): exp. 500k, prior 1163k 10:30 DOE U.S. Gasoline Inventories (8/12): exp. -1700k, prior -2807k 10:30 DOE U.S. Distillate Inventory (8/12): exp. -600k, prior -1959k 10:30 DOE U.S. Refinery Utilization (8/12): exp. -0.60%, prior -1.10% 10:30 DOE Crude Oil Implied Demand (8/12): prior 16698 10:30 DOE Gasoline Implied Demand (8/12): prior 10223.3 10:30 DOE Distillate Implied Demand (8/12): prior 5202.9 13:00 U.S. Fed President James Bullard Speaks in St. Louis 14:00 U.S. Fed Releases Minutes from July 26-27 FOMC Meeting 14:00 FOMC Meeting Minutes (7/27) Global Economics 04:30 GBP Average Earnings Index 04:30 GBP Claimant Count Change 21:30 AUD Unemployment Rate Earnings Before Open: American Eagle Outfitters (AEO) JA Solar Holdings (JASO) After Close: Cisco Systems (CSCO) L Brands (LB)
Continue Reading -->3 Reasons I Would Not Short Twilio (TWLO)
Internet infrastructure play Twilio (TWLO) is one of the hottest stocks in the market, having nearly tripled off the June lows. This morning, it hit fresh a high of $64.16 before pulling back to $60.71. A lot of folks are now talking about betting against Twilio, but I would not consider shorting it for 3 simple reasons: 1) Put Skew There is a significant put skew in TWO options, meaning traders are paying up a lot more money for puts than they are for calls. For example, October $60 put is going for $11.20 while the call is just $7.50. This is a sign that options traders are desperate to bet against the stock, a sign of massive embedded negativity. 2) Ramping Put Volume Put options volume has exploded. Today, 6,300 TWLO puts have traded. Yesterday, 27, 308 traded. The day before, 5,578 traded. In the 29 days prior, it traded an average of just 1,306 puts a day. This is another sign that traders are desperate to bet against the stock. 3) High Short Interest Short interest is 24% of the float as of 7/29, and judging by the options action, it’s probably even higher today. Conclusion The current setup in Twilio is eerily reminiscent of GoPro (GPRO) and Ambarella (AMBA) in late 2014. In both cases, we were looking at fad stocks with huge momentum that were also very crowded shorts. The bears arguing that “what goes up must come down” got steamrolled. If the market falls, odds are Twilio (TWLO) drops too. But make no mistake — if you short this stock, you are playing with fire, because it is indeed a very crowded short. P.S. Have you signed up for Dave Green’s FREE trading webinar yet?
Continue Reading -->The VIX Has Bottomed… and 4 Other Thoughts on Today’s market
Want to Start Earning Bigger, More Consistent Profits? Dave Green can show you how! 1) Return of Volatility? Volatility may finally be returning. As you can see in this chart, the VIX hit a bottom last week at 11.02. It’s now above 12 and I think it moves much, much higher from here. (full disclosure: I am long VIX calls) We just went through 26 straight days without a 1% move in the SPX. Volatility is mean-reverting. You never know exactly when the pendulum swings back, but I believe we are eyeing the seeds of it. For example… 2) Russell Down? The Russell 2000 is underperforming today, which is a reversal of the recent trend. This could be a sign that traders are growing a little wary and taking some profits off the table. Right now, the Russell is at the lows of the day. If it makes even lower lows, the bulls will get more nervous. 3) Biotech! The bios are underperforming a little bit today, but like the Russell, traders will get nervous if we see a real breakdown here. For the past couple of years, biotech has been ground zero for speculative money, and when it breaks higher, the bulls tend to feel pretty good. And of course, the flipside is equally true. Bulls get nervous when the bios give up. IBB needs to hold $290ish. 4) Apple & Berkshire Apple’s (AAPL) mega rally off $91.50 was ignited by Berkshire Hathaway’s buy of the stock. Today, it’s getting a little pop on news that Berkshire increased its stake. It would be funny if Warren Buffett marked the bottom and the top. 5) Tomorrow Is a BIG Day Tomorrow we’ve got crude oil inventories and the FOMC Minute, both of which could set off some fireworks. Traders are once again completely confused over the Fed’s direction, and maybe we get some clues as to whether a September rate hike is on the table as some folks have intimated. And with the marketing teetering back and forth, maybe traders get worried if oil breaks down. 6) Twilio! (BONUS ROUND!) Twilio (TWLO) is the current poster child for momentum trader wackiness. It’s still going strong even though some others like ACIA and FN are falling off. If TWLO follows suit, it could be another sign of profit-takers cashing in. By the way, a lot of traders are talking about TWLO as if it’s a sure-thing short, but I would not touch it on the short side. P.S. Have you signed up for Dave Green’s FREE trading webinar yet?
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