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T3’s Take 3: A Record High in a Serious Snoozefest
What do you really know about prop trading? Join my friends Amber Capra and Sami Abusaad for a FREE live webinar on the exciting world of prop trading, including: The unique financial benefits of a prop trading account How to select a program that’s right for you Pitfalls you must avoid Click here for more information 1) New All-Time Highs… and Not Much Else The S&P 500 opened higher today and quickly made another record high at 2185.44. However, the index quickly settled into a tight trading range, extending the summer snoozefest. The S&P has not made a 1% move since July 8, a span of 21 trading days. This action is reminiscent of the exceedingly boring April-May stretch, which is odd considering that we’re in the middle of earnings season with plenty of central banks news and economic data surprises. Health care was weak today after drug giant Allergan (AGN) reported a revenue miss, though to be fair, the sector rose just rose 12% in a straight line off the post-Brexit lows. The S&P fell -0.1% to 2180.86 today, and the Nasdaq and Russell 2000 also posted small losses. 2) Crude Oil Bounces Back Oil’s revival off the August 3 low continued today on OPEC bullishness, with WTI crude hitting $43 for the first time since July 27. OPEC President Mohammad Al Sada said today that the current bear market in oil is “only temporary,” and that higher crude oil demand will push up prices later this year. OPEC will also meet in Algeria next month to continue discussions about a possible output ceiling, though it’s not clear that the meeting will result in any actual output changes. While the equity markets were lackluster overall, crude oil’s bounce drove solid gains in energy stocks, particularly oil service names. The Vaneck Vectors Oil Service ETF (OIH) rose 2.3% to $28.96 today. The strong oil action also boosted the high-yield bond market, which is sensitive to oil prices. 3) Not Completely Awful Is Good Enough FactSet just updated their second-quarter earnings season stats for S&P 500 companies so let’s take a look at just how awful things are: 69% of companies are beating earnings estimates (vs. 5-year average of 67%) 54% of companies are beating sales estimates (vs. 5-year average of 55%) Q2 earnings have declined -3.5%, which is less awful than the -5.5% estimated as of June 30. Health care and tech have had the highest percentage of companies reporting earnings beats This means that the same trend that’s persisted for several quarters is still in place — earnings are nothing to write home about, but they are just a little better than expected. And that’s enough to get investors to hold their noses and buy. Or maybe they’re just fooled by central banks drenching the market in monetary perfume? Tuesday’s Trading Calendar US Economics (Time Zone: EDT) 06:00 NFIB Small Business Optimism (Jul): exp. 94.5, prior 94.5 08:30 Nonfarm Productivity (2Q P): exp. 0.40%, prior -0.60% 08:30 Unit Labor Costs (2Q P): exp. 1.80%, prior 4.50% 10:00 Wholesale Inventories MoM (Jun): exp. 0.00%, prior 0.10% 10:00 Wholesale Trade Sales MoM (Jun): exp. 0.50%, prior 0.50% 10:00 IBD/TIPP Economic Optimism (Aug): exp. 47.3, prior 45.5 12:00 DOE Short-Term Crude Outlook (Aug): prior 52.15 12:00 DOE Short-Term Mogas Outlook (Aug): prior 2.28 12:00 DOE Short-Term Diesel Outlook (Aug): prior 2.71 12:00 DOE Short-Term Ht Oil Outlook (Aug): prior 2.64 12:00 DOE Short-Term NatGas Outlook (Aug): prior 10.57 Mortgage Delinquencies (2Q): prior 4.77% MBA Mortgage Foreclosures (2Q): prior 1.74% Global Economics 04:30 GBP Manufacturing Production 04:30 GBP Goods Trade Balance 23:05 AUD RBA Gov Stevens Speaks Earnings Before the Open: Bitauto Holdings (BITA) Coach Inc (COH) Incyte Corp (INCY) Norwegian Cruise Line (NCLH) Wayfair (W) After the Close: Clean Energy Fuels (CLNE) Cyberark Software (CYBR) Exone (XONE) Fossil Group (FOSL) Infinity Pharma (INFI) Solar City (SCTY) SunPower (SPWR) Twilio (TWLO) Walt Disney (DIS) Yelp Inc (YELP)
Continue Reading -->T3’s Take 3: SPX Makes Record High on Huge Jobs Report
1) Jobs Report Delivers, and Then Some! For the second month in a row, the monthly nonfarm payrolls report blew away expectations. The US economy added 255,000 jobs in July, easily smashing the 180,000 consensus. Plus, June and May’s numbers were revised higher, and average hourly earnings beat forecasts with a 0.3% gain. With two strong months in the bag, the awful May jobs report now looks like a statistical anomaly, and traders are also quickly forgetting last Friday’s weak GDP report. The market’s conclusion reaction was clear… 2) The Fed Is Gonna Hike. Really? In the aftermath of the report, investors see a higher probability of a Fed rate hike this year. Fed Funds futures now imply a 47% chance of a December rate hike, up from 37% yesterday, and just 9% post-Brexit on June 27. Plus, all the usual hawkish trades quickly fell into place today: The US dollar ripped Gold took a major hit US Treasuries fell Now as far as whether this report actually moves the Fed, I have my doubts. The Fed’s been sitting still for so long that I doubt a couple data points makes a huge difference at this point. The Brexit is also still an issue. The Bank of England made a huge downgrade to its growth forecasts, and European commercial/investment banks are doing the same, which implies a good degree of fallout. This could give the Fed another reason to hold off. But either way, the numbers had equity traders in a great mood today… 3) New Record Highs! After the numbers hit, I said I would not count out a strong rally in stocks today. I thought it would take an upward reversal in bonds to make that happen, but that was wrong. Unlike in last month’s post-NFP rally, bonds stayed down, as did gold. The S&P 500 hit a new all-time record high at 2182.87, led by a big move in bank stocks, which benefit from higher interest rates. The index rose 0.9% to close right on the highs. Regional banks were especially strong with the KRE ETF powering 3.5% higher. Small caps and transports also posted strong gains. The decliners’ column was led by the G.U.T.S complex that has dominated the action in 2016: Gold, Utilities, Treasuries, and Silver, all instruments that suffer from higher rates. Crude oil was down for most of the day on the dollar’s rise, but nearly squeezed into the green by day’s end. Monday’s Trading Calendar US Economics (Time Zone: EDT) 10:00 Labor Market Conditions Index Change (Jul): prior -1.9 Mortgage Delinquencies (2Q): prior 4.77% MBA Mortgage Foreclosures (2Q): prior 1.74% Global Economics 08:30 CAD Building Permits 21:30 AUD NAB Business Confidence 21:30 CNY CPI y/y 21:30 CNY PPI y/y Earnings Before the Open: Allergan (AGN) Dean Foods (DF) Horizon Pharma (HZNP) After the Close: Arena Pharma (ARNA) Ctrip.com (CTRP) Hertz Global (HTZ) Nuance Comm. (NUAN)
Continue Reading -->This Is the Most Boring Market Since December 2014
Kick Your Options Trading Up a Notch My buddy Doug Robertson is hosting a FREE options trading webinar this afternoon where he’s teaching his secrets for generating major options profits in volatile markets. Click here for more information 1) The Bank of England Throws Money at the Brexit The Bank of England is afraid of the Brexit, so they’re throwing everything including the kitchen sink at the problem. This morning, the BoE cut rates by 25 bps, expanded its QE program by 60 billion pounds, and started a new 10 billion-pound corporate bond purchase plan. The BoE took a massive hack at its growth forecasts, and now sees 2017 GDP at 0.8% vs. 2.3% previously, the biggest cut in its history. 30-year UK Gilt yields dropped to all-time lows, and European equity markets rebounded intraday. The UK’s FTSE 100 Index rose 1.6%, while the German DAX was up 0.6%. 2) The Grind Continues Markets have been in a holding pattern over the past few days ahead of tomorrow’s pivotal NFP report, which could move markets in a big way. (more on this below) And the S&P 500’s epic boring sideways grind continued today with the index rising 0.02% to 2164.25. Not 2%, not 0.2%, but 0.02%. So you have some perspective on the action, the index has not made a 1% move since July 8, and market volatility is even lower now than during the April-May snoozefest. In fact, S&P 500 volatility hasn’t been this low since December 2014! Check out this chart of S&P 500 volatility: No wonder we can’t stay awake… Once again, the Russell 2000 showed a smidge of outperformance, though biotech (IBB) cooled off after 2 days of solid action. The Bank of England’s stimulus package pushed up gold and US Treasuries, and crude oil notched a 2.4% gain on what appears to be short covering. Energy stocks were mixed, but high-yield bonds were strong. When crude oil goes up, high-yield energy bonds perform well because default expectations fall. 3) NFP Preview Traders are expecting a 180K increase on nonfarm payrolls with a 4.8% unemployment rate. (see the full consensus estimates below) Last month, we saw a huge 107K beat on the headline number, which just about made up for the 122k miss the month before. Gold and bonds dipped on that report, and then ripped like mad. Equities followed through on the decline in rates with a big 1.5% rally in SPX. At this point, it seems like it may take a big headline number to get traders believing the Fed will hike rates — perhaps 250K or more — and it would also help to have the June number revised up. Click here for my in-depth NFP preview. Friday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Trade Balance (Jun): exp. -$43.0b, prior -$41.1b 08:30 Change in Nonfarm Payrolls (Jul): exp. 180k, prior 287k 08:30 Two-Month Payroll Net Revision (Jul): prior -6k 08:30 Change in Private Payrolls (Jul): exp. 171k, prior 265k 08:30 Change in Manufact. Payrolls (Jul): exp. 4k, prior 14k 08:30 Unemployment Rate (Jul): exp. 4.80%, prior 4.90% 08:30 Average Hourly Earnings MoM (Jul): exp. 0.20%, prior 0.10% 08:30 Average Hourly Earnings YoY (Jul): exp. 2.60%, prior 2.60% 08:30 Average Weekly Hours All Employees (Jul): exp. 34.4, prior 34.4 08:30 Change in Household Employment (Jul): prior 67 08:30 Labor Force Participation Rate (Jul): prior 62.70% 08:30 Underemployment Rate (Jul): prior 9.60% 13:00 Baker Hughes U.S. Rig Count (8/5): prior 463 13:00 Baker Hughes U.S. Rotary Gas Rigs (8/5): prior 86 13:00 Baker Hughes U.S. Rotary Oil Rigs (8/5): prior 374 15:00 Consumer Credit (Jun): exp. $16.000b, prior $18.558b Global Economics 02:00 EUR German Factory Orders m/m 03:00 CHF Foreign Currency Reserves 03:30 GBP Halifax HPI m/m 08:30 CAD Unemployment Rate 10:00 CAD Ivey PMI Earnings Before the Open: Cognizant Technology Solutions (CTSH) SouFun Holding (SFUN) After the Close: None of significance
Continue Reading -->T3’s Take 3: This Bull Can’t Be Killed by Conventional Weapons
Want to Kick Your Options Trading Up a Notch? My buddy Doug Robertson is hosting a FREE options trading webinartomorrow where he’s teaching his secrets for generating major options profits in volatile markets. Click here for more information 1) This Market of Ours… The bull kept on charging ahead today, once again frustrating naysayers crying “what goes up must come down!” The S&P 500 rose 0.3% to 2163.79 today, which is not exactly a huge move. But markets looked very strong below the surface. The Russell 2000 was up 0.9%, showing pretty solid outperformance. The action in biotech was particularly impressive. Even with Biogen Idec(BIIB) down 2.7% on media outlets denying yesterday’s takeover rumors, theIBB ETF rose 1.1% to $297.92. That’s pretty surprising given that BIIB constitutes 8.7% of IBB. We also saw a major intraday rebound in crude oil prices on today’s E.I.A. inventory report, which in turn pushed up energy stocks. And on the flip side, traders took profits in safety assets like gold, silver, and utilities stocks. 2) Rumor Has It… Twitter Edition Twitter (TWTR) was once again the subject of takeover rumors, and traders are buying in even though we’ve seen this story play out all too many times. The alleged buyer is Steve Ballmer and Saudi Prince al-Waleed. Twitter call options traded at 3.2X normal volume and the stock rose 7.3% today. The recent wave of reminiscent of the nonstop rumored takeovers of BlackBerry (BBRY) back when we called it Research In Motion (RIMM). Frankly, I have a hard time believing any company’s going to pony up the $15 billion+ required to acquire Twitter, given its collapsing growth during a booming news and social media ad cycle. Plus, Twitter almost feels like it’s out of style. Ask any teens or college students what they’re hooked on, and you’ll hear Instagram and Snapchat way more than Twitter. And if you know anyone doing online marketing, ask where they’re putting their ad dollars. Many industry folks I know are throwing piles of money at Facebook (FB) because of its sophisticated targeting technology. Twitter… not so much. 3) Is Gold About to Correct? This morning, my colleague Jeff Cooper gave his views on why the Junior Gold Miners ETF (GDXJ) may be set to pull back: As the daily GDXJ below for 2016 shows, there have been 3 tests/undercuts of the 20 day line this year. Each has perpetuated a continuation in keeping with the idea of pullbacks to a rising 20 day as a Holy Grail Buy signal. When the 20 day m.a. was regained in early June, a new high followed. Ditto late July. 50 is a key level squaring out the low of the year. GDXJ broke out in the first week of February and this week is 180 degrees/days opposite early Feb. Yesterday, GDXJ gapped up setting an opening high and tailed off a tad, leaving a little Gilligan sell signal. Markets often play out in 3’s and GDXJ shows 3 tests which perpetuated 3 drives to new highs. So theoretically, a stab back below the prior swing high from July 13 at the key 50 level probably indicates a correction is on the table. P.S. T3’s Doug Robertson is hosting a free options trading webinar tomorrowafter the close. Click here for more information.
Continue Reading -->Did We Just See the Return of Volatility?
Want to Kick Your Options Trading Up a Notch? My buddy Doug Robertson is hosting a FREE options trading webinar this Thursday where he’s teaching his secrets for generating major options profits in volatile markets. Click here for more information By Michael Comeau 1) The Return of Volatility Over the past two weeks, market volatility collapsed as the S&P 500 made a succession of all-time highs within an extremely tight trading range. And in fact, the S&P hasn’t had a real down day since June 27, when it fell -1.8% in the aftermath of the June 24 Brexit vote. The zero-volatility trend felt like it started to break today as the index dropped as much as -1.1% intraday before finishing at 2156.2, down -0.7%. The Nasdaq Composite and Russell 2000 showing even bigger losses as traders cut down risk. Japan set off the selling by announcing a much smaller-than-expected increase in government spending, which sent the yen higher and global equities lower. The yen is seen as a key safety asset, and thus it tends to rise when markets are uncertain. But that wasn’t the only issue today… 2) Oil, Economic Data, Banks Crude oil gave up an early gain to slide back below the $40/barrel mark, which means it’s nearly 25% off the highs. Given that crude oil’s ascent was a major driver of equity market sentiment in the rally off the February 11 lows, a fast drop down can’t be good. We also saw some disappointing economic data, with Personal Income and PCE Deflator numbers missing expectations. This followed Friday’s lousy GDP report, which ended a pretty impressive streak of economic data beats. And finally, Germany’s Commerzbank lowered its full-year earnings forecast, with its stock dropping -8.5% intraday to a 24-year low. That put a chill under US banks. 3) So What’s Next? The pickup in volatility is a good thing, because it means fear is coming back into the market. That could be exactly what we need to reload for another leg higher following this sideways consolidation. But near-term, there’s a decent chance the market goes nowhere until Friday, when the eagerly-awaited July nonfarm payrolls report hits. Traders’ rate hike expectations have been declining since Friday’s GDP report. But strong jobs numbers could flip that around in a jiffy, which could send positive reverberations throughout global markets, which is exactly what we saw last month. Wednesday Preview US Economics (Time Zone: EDT) 07:00 MBA Mortgage Applications (7/29): prior -11.20% 08:15 ADP Employment Change (Jul): exp. 170k, prior 172k 09:45 Markit US Services PMI (Jul F): exp. 51, prior 50.9 09:45 Markit US Composite PMI (Jul F): prior 51.5 10:00 ISM Non-Manf. Composite (Jul): exp. 55.9, prior 56.5 10:30 DOE U.S. Crude Oil Inventories (7/29): exp. -2000k, prior 1671k 10:30 DOE Cushing OK Crude Inventory (7/29): exp. 275k, prior 1110k 10:30 DOE U.S. Gasoline Inventories (7/29): exp. -1000k, prior 452k 10:30 DOE U.S. Distillate Inventory (7/29): exp. -500k, prior -780k 10:30 DOE U.S. Refinery Utilization (7/29): exp. 0.00%, prior -0.80% 10:30 DOE Crude Oil Implied Demand (7/29): prior 16713 10:30 DOE Gasoline Implied Demand (7/29): prior 10250.9 10:30 DOE Distillate Implied Demand (7/29): prior 5122.4 Global Economics 04:30 GBP Services PMI 21:30 AUD Retail Sales m/m Earnings Before the Open: 3D Systems (DDD) Charles River Laboratories (CRL) Humana (HUM) After the Close: Albemarle Corp (ALB) Allstate Corp (ALL) Continental Resources (CLR) J2 Global (JCOM) Oasis Petroleum (OAS) Tesla Motors (TSLA)
Continue Reading -->The Morning Hammer: Weak Oil Means Nothing to This Bull
I’ve been out since last Thursday to get my eyeballs upgraded but not much has changed. When I’m not working, I make a point of not looking at the market or reading anything related to it. But I didn’t miss a thing. Crude oil is still deteriorating, yet SPX cracked yet another all-time high. The index has been consolidating in a remarkably tight range between 2160ish and 2180ish. I’ve been predicting that the market would head into a snoozefest like the one in April-May, and we’ve been getting it thus far. Futures are down slightly on weak earnings from Germany’s Commerzbank and a smaller-than-expected spending package from Japan which is sending the yen up. As you probably know, a strong yen means risk-off, though US markets have been yawning at everything including the kitchen sink. Sentiment is cooling off just a smidge. The ISE Sentimenmt Index fell to 72 yesterday and hasn’t been over 100 since July 18. That means call option demand is waning a bit, a good sign for the bulls because it means we’re still digesting and doubt is building. Pfizer (PFE) beat analysts’ expectations but is trading off slightly. We’re also seeing good numbers out of CVS (CVS), Procter & Gamble (PG), and Shire Plc. Watch closely to see how the pharma/biotech complex reacts. We’ve got some big economic data points on tap today, with Personal Income/Spending and the PCE Deflator (the Fed’s preferred inflation measure) on the way. As of late, US economic data has been generally strong relative to expectations, though Friday’s GDP report was lousy. Check out the chart below of the Citi US Economic Surprise Index: I added the UK index just for the fun of it so you can see that the Brexit impact hasn’t been that bad so far: Now, what’s interesting is that the weak GDP numbers turned traders a little more dovish. Fed Funds futures now imply a 36% probability of a December rate hike, down from 48% last week. Strong economic data this morning could flip it back. As I’ve been emphasizing, perceptions of the Fed’s forward path are EXTREMELY volatile. Remember, after the Brexit, traders priced in a 9% chance of a December rate hike. And in less than a month, that number was up to 50%. So if you’re trading bonds, golds, forex, or anything else that’s rate-sensitive, you may be in for quite a ride. Good luck friends.
Continue Reading -->T3’s Take 3: Apple Hulk-Smashes the Bears
Want to start trading like a pro? Then click here. Trust me. By Michael Comeau 1) Apple Wins, Bears Cry As I wrote yesterday, expectations appeared to be very low heading into Apple’s (AAPL) Tuessday night earnings report. The numbers confirmed that suspicion as Apple reported better-than-expected revenues, earnings, and iPhone unit sales. The company also delivered very strong revenue guidance, which indicates that iPhone sales are holding up much better than the bears have expected. Apple shares ripped 6.6% to $103.03 today, helping to push the Nasdaq Composite and Nasdaq 100 indices to within striking distance of all-time highs. And let’s give Warren Buffett some credit — he disclosed his stake in Apple in mid-May when Apple hit its 2016 low. 2) The Bull Returns… Sort of Equity markets were a little odd today. Apple set off a rally in the Nasdaq and the widely-watched biotechnology was very strong, but the S&P 500 barely budged. The index fell -0.1% to 2066.58 — not exactly a barnburner! Oil prices and energy stocks slumped on higher-than-expected oil inventories, and we also saw weakness in utilities, real estate, consumer staples, and transports. Overall, the action felt like run-of-the-mill digestion, though with a clearly bullish tinge. If biotech makes another run like this tomorrow, we could see the S&P hitting new highs and the Nasdaq finally making its own new record. 3) Fed Schmed As expected, the Fed left rates unchanged today and issued a somewhat hawkish statement. The Fed said that employment data points to an increase in labor utilization, and that near-term risks to the economic outlook have diminished. Initially, gold fell and the dollar spiked, which are consistent with a more hawkish Fed. However, almost immediately, those moves reversed themselves and gold ended up 1.6% higher at $1,349/oz at the equity market close. And the dollar ended up at daily lows. Presumably, traders still believe the Fed will move very slowly as Fed Funds futures indicate that the next rate hike won’t happen until well into 2017.
Continue Reading -->Maybe the Brexit Didn’t Kill Planet Earth After All…
European stocks are up this morning after German’s Ifo’s business confidence reading came in better-than-expected, implying once again that Brexit-related fears have gone too far. As we’ve been noting on the Virtual Trading Floor again and again, global economic data has actually outperformed expectations since the Brexit. Below, you can see 2 charts showing the Citi economic surprise indices for Europe (first chart) and the US (second chart): In both cases, the trend is UP, not down. Plus this morning, Irish airline Ryanair kept its 2017 profit forecast in place even though presumably, the Brexit and recent string of terrorists attacks could impact air travel volume. And in fact, traders are once again pricing in Fed rate hikes this year. Fed funds futures now show a 45% implied probability of a rate hike this year, up from 9% after the Brexit. So faith in the economy is returning… whether that marks a near-term top remains to be seen. We’ve got some deal activity this morning. Yahoo (YHOO) is selling its main web properties to Verizon (VZ) for $4.8 billion. Yahoo will operate as a publicly-traded investment company with holdings in Alibaba (BABA) and Yahoo Japan. CEO Marissa Mayer says she will stay with Yahoo. AMC Entertainment (AMC) raised its bid for Carmike Cinemas (CKEC) by about 10% to $1.2 billion. SPX futures are as flat as an ironing board this morning. We are seeing minor profit-taking in commodiites, with oil, gold, and silver all off as US Treasury and Euro bond yields rise. The 10-year German bund is still negative though. Sentiment measures including CBOE equity put/call, VIX spreads, and the II survey still show that traders are in a pretty bullish mood, so the best past forward may be a little break that lets moving averages catch up, and lets the bears reload. I still think we’re heading for a summer stalemate that looks like the amazingly boring April-May stretched, and that’s ultimate a good scenario for the bulls. My main worry now is that crude oil just trades horribly. Crude was a major catalyst for equities off the February 11 low, and with oversupplly worries coming back to the forefront, it could just as easily serve as a downward catalyst. It would also be nice to see the Nasdaq and Russell 2000 confirm the SPX all-time high. But it’s very rare that markets behave cooperatively across the board, so keep your eyes on the important stuff. As long as biotech (IBB), high-yield (HYG), and the Russell don’t break down, equities will likely keep it together. And oh yeah — the Pokemon-driven Nintendo hype train just got derailed. The stock is down 18% today after investors that Nintendo’s clearly not going to make enough money from Pokemon to justify a doubling in the stock price.
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