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The Morning Hammer: Tension Is On the Tape
European equities are down again this morning on bank weakness. German Chancellor Angela Merkel ruled out state assistance for Deutsche Bank (DB) before next year’s national election, which is hitting the stock hard, and in turn, other European banks. DB faces a $14 billion bill from the Department of Justive related to MBS activities during the bubble. They are appealing, but shareholders are very concerned that the bank will have to raise cash. The Euro Stoxx 600 is down -1.4% with financials down -2.0%. The drama is driving demand for safety assets, and the yen, (BTW, you should read Kurt Capra’s great work on USDJPY) German bunds, and US Treasuries are ticking higher. Crude oil is near $45 after Algerian Energy Minister Noureddine Boutarfa said Sunday that Saudi Arabia offered to cut production to January levels. But keep in mind that oil headlines are running wild ahead of the OPEC meeting this week, which is an “anything goes” event. German business sentiment hit a 2-year+ high. However, UK mortgage approvals dropped sharply in August. The Bank of Japan reported that corporate cash and household deposits hit an all-time high as business and consumers remain reluctant to spend. On the deal front, CBOE (CBOE) is buying BATS Global (BATS) for $3.2 billion. Funny, last week there was a rumor that CBOE itself could be in play — but I guess someone got their wires crossed. Tonight, we’ll have the first Presidential debate between Hillary Clinton and Donald Trump. If either candidate gets a decisive victory, we could see a real move in biotech tomorrow. (down if Clinton wins, up if Trump wins) SPX futures are down in the early going, and I guess we’re going to see if bears are ready to make a real stand. Friday was a modestly ugly day, but the bears have been flopping bretty bad since June. It’s hard to tell when that will stop, but tension is starting to build on the tape again.
Continue Reading -->The Morning Hammer: Let’s Go Super Mario!
Crude oil is up 1.7% this morning after the American Petroleum Institute reported a massive 12 million barrel drop in crude stocks. I’d have thought oil would be up even more on that massive numbers, but there are likely 2 factors at play: 1) The E.I.A. numbers hit at 10:30 a.m. ET, and traders may want confirmation. (consensus here is +905K, but the huge API drop would imply that traders expect the E.I.A. numbers to also show a drop. 2) The question of whether OPEC will freeze or cut output at the big meeting in Algiers is a mystery. Iran said it’s too early to discuss a freeze, while Iraq said it coudl support one. Good luck sorting out the confusing and contradictory news flow, which is very reminiscent of what we saw in the lead-up to the June OPEC meeting, which ended with no change in policy. So let’s lump OPEC in with the Fed — there is just no telling what’s next! SPX futures are flat as an ironing board, which is no surprise given that we haven’t had a 1% move in the index since July 8. Traders are complacent… or they’re falling asleep. So far, it looks like we have 1 chance for excitement today — Mario Draghi’s press conference at 8:30 a.m. ET this morning. The ECB rate decision hits at 7:45 a.m. ET, and odds are nothing changes there. Twitter (TWTR) is off a little after CNBC reported that there are “no bids on the table.” Twitter is starting to remind me of the old Research In Motion (RIMM) (now known as BBRY) — I can’t go 10 minutes without hearing a made-up takeover rumors. Supermarket chain Supervalue (SVU) lowered guidance due to competition and deflation — exactly what we heard from Sprouts Farmers Market (SFM) yesterday. Wells Fargo (WFC) downgraded Apple (AAPL) following yesterday’s product launch event, saying the positives are priced in and shares are likely to remain range-bound. Apple is quickly recovering pre-market losses though and is nearly back to flat. Citi is recommending overweighting Russian stocks, saying dividends may increase — though Russia just seems like part of the oil trade. Yesterday afternoon, Reuters reported that GW Pharma (GWPH) hired advisers after being approached by potential buyers. Cantor is out saying it could be worth $165/share. It’s off a few bucks in premarket trading. The GWPH chatter pushed biotech up hard into the close yesterday — I wonder if there’s any follow-through today. Good luck out there!
Continue Reading -->The Morning Hammer: Maybe the Fed Went Too Far
One key trend we’ve been pointing out here again and again has been the degrading trend in US economic data, culminating in yesterday’s trio of misses. Now all of a sudden, the market’s thinking that maybe the Fed went too far in pushing its rate hike case because we’ve seen such lousy data as of late. Traders are now pricing in a 52% chance of a December rate hike, down from 60% last week. September odds are down to 24% from 34% last week. Gold has been on a rampage while the dollar’s taking heat. Equities of course, are still going nowhere. SPX volatility is at a near 2-year low. We haven’t had a 1% SPX move since July 8, and we haven’t had a 1% down down day since June 27. I’m long VIX calls, so I have good reason to be bitter. But I’m also just plain bored out of my mind. Individual stocks are moving around nicely, but I’d love to see a little excitement in the broader indices. Chipotle (CMG) is up this morning on news that Bill Ackman’s Pershing Square took a 9.9% position. Ackman’s going after the board to shake things up. Grovery chain Sprouts Farmers Market (SFM) cut its earnings outlook on competitive pressures and ongoings deflation. Whole Foods (WFM) is down in sympathy with it, The economic calendar is pretty light with no market-moving reports, so it looks like we’ll be in a holding pattern today ahead of tomorrow morning’s ECB rate decision. Good luck… staying awake, that is.
Continue Reading -->Morning Hammer: 40 Days and 40 Nights
Join This Week’s Training Sessions! They’re FREE! Tuesday 9/6: Day and Swing Trading Signals You Need to Know Thursday 9/8: How to Start Trading Forex Like a Pro ********* Labor Day was not a cure for the summer snoozefest. SPX futures are flat as an ironing board as we come off 40 trading days without a 1% move in the S&P 500. And it’s been 48 days since the last 1% down day, which happened on June 27 after the Brexit. Overnight, German factory orders missed, while Swiss GDP and euro-area exports strengthened. Australia’s central bank held steady on interest rates as expected. Europe is slightly green, though it may remain in a holding pattern until the ECB rate decision on Thursday. Crude oil popped yesterday on news that Saudi Arabia would make a “significant” statement on the oil market. However, they did not announce any changes to output. Iran said it will support efforts to stabilize markets, but will not necessarily participate in a coordinated production freeze. Saudi Arabia’s energy minister also said there is no need to freeze output just yet. Gold is extending Friday’s gains on the slightly weaker-than-expected NFP report. Market perception of Fed rate hikes haven’t changed as much — this looks more like a relief rally after a hard decline. Traders are pricing in a 59% chance of a December rate hike, which isn’t much of a chance from Friday’s 60%-ish levels. In deal news, pipeline/storage giant Enbride (ENB) is buying Spectra Energy (SE) in a $28 billion transaction, creating the largest MLP in North America. On today’s economic calendar, we have the Labor Market Conditions Index and ISM Services numbers on tap. The Fed’s Williams (non-voter) will be speaking at 9:15 p.m. ET. Things don’t really pick up until next week, when we have retail sales and CPI. One trend worth watching is the degradation of US economic data starting with the weak GDP report in late July. Check out this chart of the Citi US Economic Surprise Index, which measures economic data strength relative to market expectations: It’s clearly sliding lower. The Fed always calls itself “data dependent,” which gives them a convenient back door. If the data continues to slip, maybe folks will start pricing in a smaller chance of a rate hike, or at least become convinced that the Fed is one and done. P.S. Check out our FREE webinars and learn from our top traders!
Continue Reading -->The Morning Hammer: More of the Same Yawns…
Crude oil is dipping below $46 on the American Petroleum Institute’s inventory report, which said US crude stocks rose 942K barrels last week. Remember, we get EIA data today at 10:30 a.m. ET. Traders are looking for a 1300K build. It should be interesting. Two weeks ago, we saw a massive beat, but last week was a huge miss. We’ve also got the ADP Employment Change, Chicago PMI, and Pending Home Sales on the calendar, but folks are really waiting for Friday’s big jobs report. SPX futures are flat, which shouldn’t be a surprise to anyone given the past 2 months of basically no volatility. The dollar is up as the hawk trade is still raging, though gold is down only fractionally. The miners got destroyed yesterday and I’m curious to see if there are any dip buyers there. In deal news, cloud software name Interactive Intelligence (ININ) is being acquired by Genesys for $60.50 a share, or $1.4 billion. ININ had been rumored to be exploring a sale. Overnight, European markets are mostly positive. EU inflation beat expectations in August, which extends the streak of better-than-expected post-Brexit economic data. German and Italian unemployment, and UK house prices were also solid. Irish airline Ryanair warned that it may reduce earnings guidance if ticket prices continue to drop. Looking out today, crude oil is obviously important, but I’m closely watching biotech. The major indices are holding up well, but IBB has been deteriorating over the past week or so, implying profit taking. I’d also watch the hot new issues like Acacia (ACIA), Twilio (TWLO), and Line Corp (LN). They’re all over the place as a group, but if they start declining in concert, that could be a sign of trouble. But for now, the bull is holding things together pretty well. Maybe Friday’s jobs report will be a catalyst for volatility, but that feels like wishful thinking after a horribly boring August.
Continue Reading -->The Morning Hammer: Apple Slammed on Tax Ruling
Don’t Fear Forex… Attend Kurt forex’ free webinar today after the close and learn why so many stock and options traders are embracing the lucrative world of forex. ******* Shares of Apple (AAPL) are getting slammed this morning after the European Commission found that Ireland gave the iPhone maker an illegal “selective tax treatment. Apple has been ordered to repay 13 billion euros ($14.5 billion) plus interest, though Ireland will appeal the ruling. The stock traded as low as $103.50 in the early going but it’s come back a bit. Apple has well over $200 billion in cash so it won’t have any problem fitting the bill. The real issue is whether investors will start worry about the tech sector’s ability to cut taxes by using Ireland-based entities. NDX futures are down -0.2%, so it seems that no one really cares for now. But keep an eye out on this issue. Overseas markets are mostly in the green today, led by the banks, even with negative economic data. Euro-area economic confidence, UK mortgage approvals, and Adzuna advertised salaries were all weak. UK economic data has generally been solid post-Brexit, so these numbers are bucking the trend. Check out this of the Citi UK Economic Surprise Index (starts on 6/1/2016): The dollar is up and gold is down on increased confidence that the Fed is ready to move. The gold miners (GDX) look especially weak this morning. The news flow is pretty slow and the economic calendar is light, with just S&P CoreLogic home price and consumer confidence numbers on tap. Fed Vice Chairman Fischer appeared on Bloomberg TV this morning, expressing optimism that productivity growth will rebound. He also said that incoming economic data will determine the trajectory of interest rate increases. So for now, it looks like we’re back to the range, which makes sense ahead of Friday’s big jobs report. Maybe that will give traders an excuse to start taking real action? One can dream… P.S. Don’t forget to sign up for our FREE forex training session!
Continue Reading -->The Morning Hammer: Let’s Eat Some Dove Soup
Traders are buying into the Fed’s hawkish narrative. On Friday, FOMC Chair Janet Yellen very clearly put rate hikes on the table, and market are buying in. Fed Funds futures now imply a 65% chance of a December rate hike, up from 47% a week ago. And September is up to 42% This has gold and silver slightly offf and the dollar up huge Overnight, Italian business manufacturing missed expectations, as did Greek GDP, Swedish retail sales, and Hong Kong retail sales. Australian home sales were also weak. European equity markets are red, while SPX futures are flat. We’ve got some important economic data today, with personal income/spending, PCE deflator, and Dallas Fed numbers on tap. Even though the Fed’s signalling pretty hard that rate hikes are en route, folks will be watching the PCE deflator closely since it’s the Fed’s preferred inflation indicator. If it’s strong, I’d assume folks push those rate hike odds up even more, and we could probably see an intraday selloff in US Treasuries (which are up fractionally in the early going). Beyond that, it looks like we’re going to close out August the way we came in — quietly. The VIX has been ticking up after putting in what looks like a major low on August 8, but we’re still not seeing much actual movement. We haven’t had a 1% down day in SPX since June 27. And it feel slike the more people look for one, the less likely it is to happen. Volatility is mean reverting. Things go crazy, and then they get quiet. And things get quiet, and then they go crazy. This quiet period today though, it’s one for the ages. I just wanna wake up, you know?
Continue Reading -->The Morning Hammer: The Bears Are Long F.O.M.O.
Get a Quant Edge in Today’s Markets Tomorrow after the close, Rob Smith is hosting a FREE webinar on his unique Quant Edge Trading Strategy. Read all about it The waiting game continues. We’ve now gone 32 trading days without a 1% up move, and 40 days without a 1% down move. It’s been a beautiful ride for the bulls becuase they’ve been enjoying a picture-perfect grind up. But it’s been hell for bears, particularly those buying put options. The slow upward movement and declining volatility slowly kills the value of those puts a penny at a time. I always think it’s far better to lose fast, because at least you get it over with. Now it seems like a lot of bears are tempted to capitulate to stop the slow bleed. But at the same time, there’s a big FOMO (fear or missing out) element. What if you cover just ahead of what seems like an inevitable market drop? I’m long VIX calls (which is basically a highly leveraged SPX short), so that’s the boat I’m in. I’m down about 9%, which isn’t the end of the world on an options positions, but I admit I’m growing restless. SPX futures are up fractionally following a decent up day in Europe. The stalemate looks set to continue ahead of FOMC Chair Janet Yellen’s Jackson Hole speech this Friday. It seems like traders are starting to buy into the recent hawkish trend in Fedspeak. Fed fund futures now imply a 53% chance of a December rate hike, up from 45% a month ago and 9% post-Brexit on June 27. That has gold and Treasuries sagging a bit. Crude oil is off a little on the American Petroleum Institute inventory report. The API said we had a 4.5 million barrel build in US crude stocks last week, which was a surprise. We get EIA data today at 10:30 a.m. ET. The current consensus calls for an -850K decline in inventories. However, remember that oil has been moving on chatter about the September OPEC meeting. We’re seeing a lot of conflicting news reports about whether OPEC will institute an output freeze or cut, so it’s getting hard to gauge the importance of data. I’m long oil (through the KYN and BGR closed-end funds), but I’m not going to hazard a guess as to what OPEC’s going to do. We’ve also got Existing Home Sales and the FHFA House Price Index on tap today. Housing stocks were up huge on yesterday’s big New Home Sales numbers, so maybe there’s action there again today. But I think biotech (IBB) may tell the tale for now. That group’s been pretty strong the past couple of days, and recent history shows that when biotech does well, the bears tend to fail. Good luck out there. P.S. Don’t forget to sign up for Rob Smith’s FREE webinar.
Continue Reading -->The Morning Hammer: Something’s Gotta Give!
Don’t Fear Forex… Attend my buddy Kurt Capra free webinar tonight and learn why so many stock and options traders are embracing the lucrative world of forex. Click here for more info. European markets are up this morning on solid economic data. Euro area PMI rose to 53.3 in August from 53.3, which implies little impact from the Brexit. France’s was better than expected, while Germany’s was a little weaker. On the US economic calendar, we’ve got the Markit US manufacturing PMI, Richmond Fed, and New Home Sales. Best Buy (BBY) beat by a mile and is up 14%, extending what’s generally been a pretty decent earnings season for big box retailers. Meanwhile, the Bank of Montreal (BOM) beat on strong retail banking activity. SPX futures are in modestly positive territory following yesterday’s yawnfest. Biotech is indicated higher following massive outperformance on the back of the Pfizer (PFE)/Medivation (MDVN) deal. Bloomberg is reporting that Bayer and Monsanto (MON) are closer to closing their deal, which has been stuck on issues like the price and termination fee. Crude oil is down again this morning after Iraq’s Oil Minister asked foreign oil companies to increase oil production and exports. The dollar is down after making solid gains on hawkish comments from the Fed’s Fischer and other officials. Some traders may be taking their feet off the gas ahead of FOMC Chair Janet Yellen’s Jackson Hole speech this Friday. I’m not in the business of trying to game the Fed, so I’ll just point out that in June, Yellen came out dovish after a barrage of hawkish comments from Fed officials. So please, tread carefully. Otherwise, we’re back to the same old grind. The action’s been so lame that it makes the April-May lull look like a firestorm in comparison. I am long VIX calls and I’m sitting on a loss of about 8%. That’s not the end of the world, but now I’m in that no man’s land where I’m worried about getting shaken out at the worst possible moment. But I’m going to stick it out for now. Arguing with the market is for fools, but we’ve gone 31 days without a 1% move. And we’ve gone 39 days without a 1% down move. Something’s gotta give. Right? P.S. Don’t forget to sign up for Kurt Capra’s free forex trading event!
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!
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