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T3’s Take 3: Booming Oil Revs Up the Bulls
1) Crude Oil Booms on Production Cut Hopes Oil prices rose for the third straight day as traders continue to hope for a production cut at the September OPEC meeting. This morning, Russian news agency Interfax reported that OPEC may not in fact make a cut, which caused a small dip that was very quickly bought, implying that traders really do believe a cut is coming. WTI crude rose 3.0% to $45.83, while the S&P Energy ETF (XLE) rose 0.8%, making it the best performing major sector ETF. Oil service stocks and energy master limited partnerships also performed well. 2) Oil Inspiration Inspired by crude oil’s hard bounce, the S&P 500 made another all-time high today at 2193.81 before finishing at 2190.15, up 0.3% on the day. While this was the 26th straight trading day without a 1% move in the index, there were some very positive signs below the surface. The biotechnology sector put in a big gain today, and the Russell 2000significantly outperformed the S&P. We also saw notable strength in cybersecurity software, regional banks, and transports. This indicates that even with equity markets at record highs, traders are still very comfortable putting on risk. 3) More Weak Economic Numbers Post-Brexit, one pleasant surprise we’ve seen has been a pretty nice streak of positive economic data surprises. But starting with the 7/29 GDP report, we’ve seen quite a few lousy reports, culminating in today’s Empire Manufacturing miss. Individual economic data points are little more than noise. The trend is far more important. Look at this chart of the Citi US Economic Surprise Index — it is definitely sliding: For now, the weak data is being ignored. But I wonder if that changes with the avalanche of big reports coming over the next 2 days (Housing Starts, Building Permits, CPI, Industrial Production, etc.). If they’re mostly bad, the market may start caring about the numbers. In the meantime, why argue? P.S. Don’t forget to sign up for Dave Green’s FREE trading webinar. US Economics (Time Zone: EDT) 08:30 Housing Starts (Jul): exp. 1180k, prior 1189k 08:30 Housing Starts MoM (Jul): exp. -0.80%, prior 4.80% 08:30 Building Permits (Jul): exp. 1160k, prior 1153k 08:30 Building Permits MoM (Jul): exp. 0.60%, prior 1.50% 08:30 CPI MoM (Jul): exp. 0.00%, prior 0.20% 08:30 CPI Ex Food and Energy MoM (Jul): exp. 0.20%, prior 0.20% 08:30 CPI YoY (Jul): exp. 0.90%, prior 1.00% 08:30 CPI Ex Food and Energy YoY (Jul): exp. 2.30%, prior 2.30% 08:30 CPI Index NSA (Jul): exp. 240.805, prior 241.038 08:30 CPI Core Index SA (Jul): exp. 247.872, prior 247.495 08:30 Real Avg Weekly Earnings YoY (Jul): prior 1.20% 09:15 Industrial Production MoM (Jul): exp. 0.30%, prior 0.60% 09:15 Capacity Utilization (Jul): exp. 75.60%, prior 75.40% 09:15 Manufacturing (SIC) Production (Jul): exp. 0.30%, prior 0.40% 12:30 Fed’s Lockhart Speaks to Rotary Club of Knoxville Global Economics 00:30 JPY Industrial Production 09:00 CAD Existing Home Sales 16:30 NZD RBNZ Governor Wheeler Speaks in Tauranga 21:30 AUD RBA Aug. Meeting Minutes Earnings Before Open: Advance Auto Parts (AAP) Dick’s Sporting Goods (D TJX (TJX) After Close: Cree (CREE) Jack Henry JKHY) Urban Outfitters (URBN)
Continue Reading -->I Won’t Argue With the Results.. and 4 Other Thoughts on Today’s Action
Want to Start Earning Bigger, More Consistent Profits? Dave Green can show you how! 1) More Lousy Data Post-Brexit, one pleasant surprise we’ve seen has been a pretty nice streak of positive economic data surprises. But starting with the 7/29 GDP report, we’ve seen quite a few lousy reports, culminating in today’s Empire Manufacturing miss. Individual economic data points are little more than noise. The trend is far more important. Look at this chart of the Citi US Economic Surprise Index — it is definitely sliding. For now, the weak data is being ignored. But I wonder if that changes with the avalanche of big reports coming over the next 2 days (Housing Starts, Building Permits, CPI, Industrial Production, etc.). 2) Can’t Argue With the Results Crude oil got shaken up by this morning’s Interfax report that OPEC will not pursue an output cut at the September meeting. However, oil prices surged right back and oil stocks are outperforming the major indices. It’s probably best if traders do not expect an output cut. Last time around at the 6/2 OPEC meeting, traders came in expecting a cut and didn’t get it, and that was right near the interim top in oil. 3) Mr. Russell One common complaint the bears are throwing around is that the Russell 2000 has not confirmed the all-time highs in SPX/DJIA/NASDAQ/NDX. It would be nice if the Russell could make new all-time highs, but there’s no so such thing as a perfect bull move. Besides, the Russell is rapidly making up the difference and outperforming SPX today by a more than 2:1 ratio. 4) Bio-POWER! Biotech is back on the warpath and making its way toward IBB’s $299.49 high on 8/4. Round numbers are meaningless but I bet traders would be excited to see it make a clean move about $300. And better yet — XBI, which is more representative of the broader spectrum of biotech stock — is outperforming IBB by a big margin today. IBB makes bigger headlines, but XBI is actually more important. 5) Headline of the Day S&P 500 Dregs Stage Uprising in Bull Market That Now Makes Sense There’s something odd about declaring that the market “now makes sense” after a series of record highs, and adding that “there’s a lot to like in a market as hated as this one.” This article “feels” like the type of thing you would read towards the end of a frustrating rally — not the middle of one. That said, the bulls are putting on a good show today and again, I don’t argue with the results, even when they hurt me.
Continue Reading -->T3’s Take 3: Oil Moves, and That’s About It. Seriously.
Did you miss Dave Green’s webinar last night? Click here to check out a replay. By Michael Comeau 1) Lousy, Lousy, Lousy Numbers US economic data missed across the board today: -Retail sales were flat in July vs. consensus of +0.4% -PPI was -0.4% vs. consensus of +0.1% -U. of Michigan Sentiment for August was 90.4 vs. 91.5 consensus Let’s dive in and look at the trend: The Citi US Economic Surprise Index has surged this year — especially after the June 24 Brexit. This indicates that economic data was beating expectations However, it started diving with the weak July 29 GDP report. So while one day of weak numbers isn’t worth getting excited over, the trend is indeed turning down and should be watched. 2) YAWN… US stocks put in yet another remarkably boring low-volatility day. The S&P 500 traded in a very tight 7-point range before finishing -0.1% at 2184.05. The Nasdaq and Russell 2000 also barely moved. The real action today was in crude oil, which rose 2.7% to $44.65 after Saudi Arabia’s energy minister said OPEC may act to prop up the oil market. We also saw a nice intra-day rebound in biotechnology and pharmaceutical stocks, which slumped yesterday. The VIX dropped again today to reflect the lackluster action, though not everyone thinks that condition will last… 3) Jeff Cooper’s Volatility Play This afternoon, T3 Live’s Jeff Cooper initiated a long trade in UVXY from $21.14: An hourly SPX from 8/8 shows a possible Megaphone Top pattern on the hourlies. The index is trying to stabilize at its 50 period on the hourlies here, but if it falters before the bell the Megaphone pattern will be triggered. While this is a very short-term pattern, bull markets in a Friday (particularly summer Fridays) like to close at/near session highs so a meaningful extension to the downside before the close could indicate a reaction is on the table next week. Let’s initiate a PILOT long in UVXY, which is a leveraged volatility play. Timed correctly, UVXY is very explosive. But keep in mind this is a very volatile vehicle and may not be for everyone. Last August it went from $130 to $450 in 9 trading days. Click here for more information on Jeff Cooper’s Daily Market Report Monday’s Trading Preview US Economics (Time Zone: EDT) 08:30 Empire Manufacturing (Aug): exp. 2, prior 0.55 10:00 NAHB Housing Market Index (Aug): exp. 60, prior 59 16:00 Total Net TIC Flows (Jun): prior -$11.0b 16:00 Net Long-term TIC Flows (Jun): prior $41.1b Global Economics Sunday 19:50 JPY GDP Monday 00:30 JPY Industrial Production 09:00 CAD Existing Home Sales 21:30 AUD RBA Aug. Meeting Minutes Earnings Before the Open: 500.com (WBAI) After the Close: Fabrinet (FN) Vipshop Holdings (VIPS) Sysco (SYY)
Continue Reading -->Economic Data Stinks. Does It Matter?
So far this morning, US economic data has missed across the board: -Retail sales were flat in July vs. consensus of +0.4% -PPI was -0.4% vs. consensus of +0.1% -U. of Michigan Sentiment for August was 90.4 vs. 91.5 consensus There is often a major disconnect between economic data and stock prices, but let’s dive in anyway. Individual economic data points are not very important. They may have a short-term impact, but trends are what really matter for markets (and central banks for that matter.) The trend is what really matters. So let’s look at the trend. The Citi US Economic Surprise Index has surged this year — especially after the June 24 Brexit: However, it took a big hit on the weak July 29 GDP report, and this recent streak of mixed data may be hurting the trend. And now, perception of the Fed (which is way more important than what the Fed actually does), is shifting back towards dove territory. Fed funds futures now indicate a 39% chance of a December rate hike, down from 47% last week. This is giving the big G.U.T.S. trade (gold, utilities, Treasuries, silver) quite a revival. And we are seeing weakness in banks, particularly the regionals (KRE). That means the numbers are on the verge of starting to matter. But this is just a start — follow-through is what matters. If the banks really start faltering and the G.U.T.S. trade takes on new life, then the data may in fact mean something. Let’s not get excited until things get exciting.
Continue Reading -->Market Analysis: There Is No Such Thing As a Perfect Rally
If you look for perfection, you’ll never be content. -Leo Tolstoy Markets are mostly in a happy mood following Friday’s NFP-driven rally. I have serious doubts as to whether the Fed’s going to raise this year, but traders are now pricing in a 47% chance of a December rate hike, up from 9% post-Brexit. I peg the odds as more like 20-25%, though admittedly, that’s based on a feeling more than anything. The yen is down on news that Japan’s Emperor Akihito publicly hinted that he will be stepping aside. German industrial production beat expectations in June (pre-Brexit data), while Visa and Market said UK consumer spending accelerated in July from June, thouhg it was Q1 numbers. France’s central bank said its economy will rise 0.3% in Q3. Economists expected a 0.2% increase. This data implies that perhaps the UK really kitchen-sinked its growth forecast, creating low expectations it can beat. As you can see in these charts of the Citi UK and EU economic surprise indexes, European economic data remains pretty solid relative to Wall Street forecasts: UK: EU: The hot bio/pharma complex may get a lift today on solid numbers from Allergan (AGN) and Horizon Pharma (HZNP). Crude oil is still on the upswing with a move over $42 this morning. OPEC’s president predicted the current dip in oil will be short-lived, and that OPEC members are in “constant deliberations” on stabilizing the market. The group will hold talks in Algiers in September. Gold is selling off as the aforementioned rate hike expectations get ratcheted up. However, bonds are pretty flat — there’s no big rush to sell. On the deal front, TIAA said it is acquiring Everbank (EVER) for $19.50/ share in cash. Everbank has been rumored to be in play for a while and just surged big-time, which explains the small premium over Friday’s $18.64 close. Sentiment is still leaning bullish, as based on the shape of the VIX curve, ISE Sentiment Index, and the Investors Intelligence Survey. The AAII survey shows that individual investors are bearish, but overall, the bulls are still quite giddy. This is why it’s important to respect price above all else. A lot of folks were declaring the market as overheated at 2100, then 2150. And today, with futures up a few points, the S&P looks like it will open at all-time highs around 2190. As far as game planning goes, I wouldn’t think too hard. Watch small caps, biotech, oil, and high-yield. When they’re moving in the right direction, it’s hard to stop the bull. I’m really zoning in on oil right now. Its ascent off the $26 February low was a major factor in the bull’s revival this year. But when it broke down from $51 to $39, the bulls didn’t skip a beat. We could be a situation where the bulls ignore oil when it goes down, and they get encouraged when oil goes back up. I hear a lot of folks complaining that the Russell 2000 hasn’t confirmed the SPX record highs, but remember: there is no such thing as a perfect rally. In almost every rally in the past few years, there’s been one type of problem or another — lousy earnings, lousy economic data, low volume, narrow leadership, etc. Good enough can be good enough. Good luck friends.
Continue Reading -->July NFP Report Instant Analysis: Is a Reversal in the Wings?
The July NFP report hit this morning at 8:30 a.m. ET and it was pretty impressive. The headline number was 255k, smashing the 180k consensus. We also saw an 18k upward revision to the past 2 months and better-than-expected hourly earnings. This is the second big beat in a row, which has the big May miss looking like a one-time statistical aberration. We’re seeing a big rip in the dollar, a big dip in gold, and US and German government bonds are sliding. The big question now is whether this will be a repeat of last month. Last time around, we had a huge dip in bonds and gold that was bought very, very quickly. Then, equities followed through after a bad start with SPX ripping 1.5%. I would watch USD/JPY very closely. If the dollar pulls back, that means the dovish status quo trade may keep on raging. Also watch gold. If it bounces back, maybe the doves still wanna rock. Keep in mind we’re less than 30 minutes past the report and NFP is an anything goes day. But as I write this, USDJPY is dipping back. SPX futures are now up 8 handles I am not counting out a big run up in stocks today. I would watch the following levels as possible signals for a reversal: USD/JPY: 101.05 Gold: $1367/$1368 10YR US Treasury Yield: 1.500% 10YR German Bund Yield: -0.085%
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