The Morning Hammer: Let’s Talk About the Royal Institution of Chartered Surveyors
Attention! This afternoon, T3 Live’s Dave Green is hosting a FREE trading webinar. Click here to learn how Dave crushes the market! We’re looking at another potential snooze-fest with US stock futures showing fractional gains. Gold, oil, and US Treasuries are basically flat. Alibaba (BABA) is up nicely on a solid earnings beat and acceleration in growth, while Shake Shack (SHAK) is getting smacked up on a revenue miss. Europe is up at a 7-week high on solid earnings from European financials. The Stoxx Europe 600 Index is now inches away from erasing all its post-Brexit losses. That’s just another example of why you should always think twice about buying into stories of ultimate doom & gloom. There are meteors flying around all across the universe, but very few will ever actually hit the Earth. However, the Royal Institution of Chartered Surveyors said the Brexit is hurting the UK housing market, which is keeping a lid on the FTSE 100. And yes, that’s how boring today is — I’m talking about the Royal Institution of Chartered Surveyors. So it’s back to the waiting game. We’ve gone 23 days without a 1% move in the S&P 500. Typically, the S&P moves 1% on about 1 of every 3 days, so during normal times, we’d have seen 7 1% moves during this time span. But what can you do? This aint normal times. It’s August, sentiment is mostly positive, and the indices need to digest big post-Brexit gains. I’m long VIX calls so I obviously have a vested interest in a big market shakeup, but I’d also like a reason to pay attention to the market! Now, one reason we may get a big move soon is the street is short volatility in a big way. The short VIX futures trade is huge right now, and as we know, when everyone leans the same way, Mr. Market likes to pull the rug out. The only question is the only question that matters in financial markets: when? I’m sitting tight… not that I have a choice. Click here to check out Dave Green’s webinar this Thursday!
Continue Reading -->Crude’s Big Move… and 4 Other Thoughts on Today’s Action
Attention! On Thursday afternoon, T3 Live’s Dave Green is hosting a FREE trading webinar. Click here to learn how Dave crushes the market! 1) Crude Move Crude oil got a nice lift on this morning’s EIA inventory numbers. We saw a substantial builds in overall and Cushing, OK inventories, but massive draws in gasoline and distillate inventories. However, we’ve gotten other recent data (Saudi pumping levels, API data) that is bearish, and it’s now down a little. If crude oil can’t hold, it will embolden the bears. 2) Bio/Pharma Weakness Biotech and pharma are getting hit today on negative news from Eli Lilly (LLY) and Mylan (MYL), which is not good because health care is a key bull driver However, they’ve rocketed off post-Brexit lows so it’s fair to accept some consolidation after big, dramatic moves. A move off the lows would be encouraging, though I wouldn’t count on it. 3) Sentiment The ISE Sentiment Index is reading 100 as of 10:30 a.m. ET, which is perfectly neutral. (100 calls bought for every 100 puts) However, there is opposing action between individual names and the index/ETF sides. On the index side, traders look pretty bearish. (just 35 calls for every 100 puts) In individual names, the reading is 155 (155 calls for every 100 puts). Meanwhile, the Investors Intelligence survey was released today, showing that 54.3% of newsletter writers are bullish. This is very close to II’s 55% danger zone. 4) Large Cap Tech Sagging Big tech names like Apple (AAPL) and Facebook (FB) are looking “saggy” today, for lack of a better term. Like the health care complex, they could use a little consolidation time after posting big gains. That said, traders may get discouraged of tech loses its leadership status, since it’s played a big role in keeping equities at all-time highs. 5) Still No Vol… Volatility is still nowhere to be found. So far today, the S&P has trade in a less than 5-point range, which is threatening to put me to sleep all over again. I still think we’ll get a volatility spike soon, but there’s no sign of it yet today. Look at oil. We’ve gotten a lot of news is the past 18 hours, and it’s still barely doing anything. Click here to check out Dave Green’s webinar this Thursday!
Continue Reading -->Kurt Capra’s Morning Call Express Video
In today’s Morning Call Express video, T3’s Kurt Capra discusses the action in SPY and QQQ, plus individual names like BABA, FOSL, and RL. Click here to check out Dave Green’s FREE trading webinar this Thursday!
Continue Reading -->The Morning Hammer: Another Day, Another Yawn
On Thursday, my buddy Dave Green is hosting a FREE trading webinar. Click here to check it out! Yesterday after the close, the American Petroleum Institute reported a 2.1 million barrel increase in crude oil inventories, which is pushing oil prices down a bit overnight. We have EIA inventories coming at 10:30 a.m. ET, with economists expecting a -1.5% million barrel drop. They also expect drops in Cushing, OK inventories and gasoline inventories. We also have JOLTS Job Openings at 10:00 a.m. The People’s Bank of China said it will promote greater international use of the yuan, though the bank didn’t promote much detail. The dollar is down as traders believe the Fed will be less hawkish… ALLEGEDLY. That’s the picture some outlets are painting, though I’m not buying it. Fed Funds futures are now pricing in a 45% chance of a December rate hike, down from 47% last week. That’s not much considering this number was 9% on June 27, just after the Brexit. The reality is that Fed expectations can turn on a dime. A few more hot economic data points and hawkish Fed head chatter, and it could go above 60-70%. And of course, it could go to 30% just as easily. Crude oil has climbed off overnight lows and that’s pushed SPX futures into the green. So we’re back in the waiting game as the August doldrums continue. Yesterday morning, I went long VIX calls, which means I’m effectively short the market in the near-term. (I also have long-term equity/HY exposure through AAPL, BGR, KYN, PHK, VIG, and UTF, none of which I would buy now, except for closed-end fund dividend reinvestments) But for now, it looks like Mr. Market is quite happy to stay in this go-nowhere range. Crude oil was saved from breaking $42, though the 10:30 a.m. inventory numbers could change that. Also keep your eyes on the other usual suspects — the Russell 2000, biotech (IBB), and high-yield (HYG). The bulls have done a great job of defending these key areas, so see if they can keep it it up.
Continue Reading -->More All-Time Highs, More Yawns!
1) Another Day, Another Yawn! US markets put in yet another astoundingly boring session, and I’m trying as hard as ever to put an interesting spin on these August doldrums. The S&P 500 and Nasdaq Composite notched new all-time highs shortly after the open, but the action quickly turned to yet another yawn-fest. The S&P rose +0.04% to 2181.74, which means we’ve now gone 22 days without a 1% move in the index. Year-to-date prior to this astoundingly boring stretch, the S&P moved 1% on about 1 of every 3 trading days. Crude oil gave up an early gain to sink back below $43, which had traders selling energy stocks. Meanwhile, bonds and gold picked up a little steam following their recent Fed-driven selloffs. 2) A VIX Explosion on the Way? Over the past week, I’ve written extensively that I thought the VIX was set to drop below 11. But after analysis of historical market data, I decided to take a long position in VIX calls just as the S&P 500 was making its latest all-time high this morning. This is not a low-risk trade by any stretch of the imagination since the VIX can stay low for extended periods of time. But prolonged bouts of low market volatility – like the one we’re going through now – are sometimes followed by explosions in the VIX, which could mean profits on VIX calls. Plus today, Bloomberg reported that net short positions on CBOE VIX futures are the biggest they’ve been since 2013. That means that traders are betting aggressively that the VIX will drop from here. Now may be the time to take the other side of the trade, so I stepped up and put my money where my mouth is. 3) The Importance of SPX 2174 This morning, T3 Live’s Jeff Cooper commented on the important of SPX 2174: An hourly SPX shows a breakout above a flat line that started on our key July 20 date from our key 2174 level. The index is pulling back from record highs this morning and testing its 20 period m.a., a break of which could elicit a test of 2174ish. If 2174 is lost, it could signal a Bull Trap being sprung. Follow through will be key here… in either direction now that we are in what is an important anniversary week. If it looks like we will close below 2174, I will repurchase SPXU before the bell at the market. Theoretically, it is possible that one more push below last week’s low plays out that stops in its tracks prior to a run for the roses. This resembles the analogue from 1929. If we do get a little test of last week’s lows which is followed by a momentum move above 2200, a last ditch rally could be on the table, but let’s take one move at a time as the market is not a fine Swiss watch and patterns do not have to play out with precision. The bottom line: any sell signal here, we must take, and if we get stopped out on a new high, we will know what to look for. Click here to learn about Jeff’s Daily Market Report Today’s Trading Calendar US Economics (Time Zone: EDT) 07:00 MBA Mortgage Applications (8/5): prior -3.50% 10:00 JOLTS Job Openings (Jun): exp. 5500, prior 5500 10:30 DOE U.S. Crude Oil Inventories (8/5): exp. -1500k, prior 1413k 10:30 DOE Cushing OK Crude Inventory (8/5): exp. -100k, prior -1123k 10:30 DOE U.S. Gasoline Inventories (8/5): exp. -1300k, prior -3262k 10:30 DOE U.S. Distillate Inventory (8/5): exp. 500k, prior 1152k 10:30 DOE U.S. Refinery Utilization (8/5): exp. -0.50%, prior 0.90% 10:30 DOE Crude Oil Implied Demand (8/5): prior 16996 10:30 DOE Gasoline Implied Demand (8/5): prior 10206.4 10:30 DOE Distillate Implied Demand (8/5): prior 4871.4 14:00 Monthly Budget Statement (Jul): exp. -$115.0b, prior -$149.2b Global Economics 17:00 NZD RBNZ Rate Statement 21:10 NZD RBNZ Gov Wheeler Speaks Earnings Before the Open: Michael Kors (KORS) Ralph Lauren (RL) After the Close: Shake Shack (SHAK)
Continue Reading -->Why the VIX Could Explode
Attention! On Thursday afternoon, T3 Live’s Dave Green is hosting a FREE trading webinar. Click here to learn how Dave crushes the market! I’ve been vocal about my expectation that the VIX could go under 11, and it’s now at 11.08 — just about there. After further analysis, I’m starting to suspect that it will explode. The VIX has dipped below 12 during 10 of the last 16 trading days. This is very reminicent of what we saw in July-August 2015. Between 7/15/2015 and 8/5/2015, the VIX was sub-12 on 7 of 15 trading days — a similiar low-volatility streak. That led to the 8/24/2015 mini-crash, which saw the VIX trade as high as 53.29 intraday before closing at 28. We can also go back to August-September 2014. Then, we saw the VIX go sub-12 for 15 of 25 trading days. It then broke 30 that October. So the pattern seems to be a few weeks of nothing followed by a small grind up in the VIX, and then a VIX-plosion. However, if we go back to June-July 2014, we see a very long pattern of nothing — 39 of 45 days with a sub-12 VIX. If the pattern holds (we are dealing with tiny sample sizes here so this isn’t even close to scientific), the VIX could easily be over 30 within a couple months. The only problem is, that spike could happen next week… or in 2 months. That said, I’m dipping a toe in the water to speculate on a VIX-plosion. SPX just hit a new record high at 2186.65, and I am now long VIX October 20 calls from $1.45. Downside risk is 100% if the VIX goes flat or only rises modestly, but I suspect the VIX will be over 30 within 2 months. The reason I’m putting it on now is that it feels like the absolute hardest trade, which sometimes mean it’s the best trade. Click here to check out Dave Green’s webinar this Thursday!
Continue Reading -->21 Days of Nothing: Fun Market Stats to Chew On
We really are getting a big-time summer slowdown. Some stats to chew on: -The SPX has now gone 21 trading days without a 1% move -YTD before this 21 day span, SPX moved more than 1% on nearly 1 out of 3 trading days. -During this 21 day span, SPX has moved an average of 0.3% per day -YTD before this 21 day span, SPX moved an average of 0.7% each day The VIX is now at just 11.32, levels it hasn’t seen since summer 2014’s extended downdraft, and August 2015’s spike lows. However. the VIX is actually still trading at a premium to realized SPX volatility. The premium is currently 5.5 percentage points. According to Bloomberg data, this is higher than it’s been 76% of the time over the past 5 years. Therefore, traders are to some extent already pricing in a modest volatility expansion. It does “feel” like the VIX should go up, but also keep in mind that it can stay stuck at very low levels for extended periods of time — and “should” is a dangerous word in these boring summer months. For reference, I am popping in a daily VIX chart from 2014 since so many folks are making the comparison: As you can see, the VIX traded in the 11-14 range for 4 months from April to July, had a modest spike to 17ish in August, but didn’t break 20 until October. UPDATE: Please read my latest views on the VIX here.
Continue Reading -->Steve Levay’s Morning Call Express Video
In today’s Morning Call Express Video, T3’s Steve Levay discusses the action in SPY, as well as individual names like SINA, TWLO, and VRX.
Continue Reading -->The Sleepy Time Market
The big bad euro bond trade is still in place with UK and Spanish 10-year yields hitting record lows. Meanwhile, the Bank of England’s Ian McCafferty said more easing will likely be required to fight the after-effects of the Brexit, and it’s steppinig up its bond purchases. That’s sending the pound lower, while the FTSE 100 is up about 0.3%. Crude oil is getting a little follow-through and is up through $43. Yesterday, oil popped on chatter that OPEC may cut output, but that is no guarantee. Remember, a lot of folks were expecting output cuts from February through June, and they never happened. So don’t get your hopes up — they could simply be trying to keep oil sellers unnerved. Coach (COH) reported better-than-expected earnings, which is a nice surprise given all the doom & gloom around luxury retail. However, Japanese cosmetics giant Shiseido cut its forecast. Troubled pharma giant Valeant (VRX) reported a sales and earnings miss, but kept its full-year forecast unchanged. The stock is up about $1.50 in early trade, indicating traders were bracing for a disaster. This is one of those odd days where there’s just not much to talk about, and the lack of movement in futures reflects that. The VIX is down again today, and I would not be surprised to see the VIX break below 11 soon. We’re basically past earnings, the Brexit, and a lot of important economic data, so it feels like the media (myself included) is reaching for stuff to talk about. Each day, I write T3 Live’s Daily Recap newsletter. I always break the day’s action into 3 easily digestible stories. And when I have trouble coming up with 3 things to talk about — like I did yesterday — you know it’s bad. I expect the same today. Yesterday, the SPX and other major indices basically grinded gears. Crude oil’s bump got oil service stocks and high-yield bonds moving hot and heavy, while health care and biotech soured. Beyond that, there wasn’t much to look at. Market volatility is still around 2-year lows, and it seems that everyone’s waiting for an excuse to do something. I’d keep the same game plan on — watch biotech, oil, high-yield, and small caps. As long as they behave decently enough, we’ll stay in good shape.
Continue Reading -->What’s Moving in the Forex Markets
In this week’s What’s Moving in the Forex Markets video, T3’s Kurt Capra delivers an in-depth analysis of the action in USDCAD.
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