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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 -->The Morning Hammer: Famous Last Words?
Want to Start Earning Bigger, More Consistent Profits? Dave Green can show you how! Crude oil poked its head above $45 in early trading, which is giving emerging markets a pop today. China is ripping on a report saying that an exchange link between Shenzen and Hong Kong will be announced shortly, as well as takeover speculation among property developers. The DAX is up 0.4%, putting it in the green on the year for the first time. European bonds are mostly flat. SPX futures are slightly green and showing very little volatility in early action, which means today could be our 26th straight day without a 1% move in the index. And unfortunately, the economic calendar is pretty light, with the Empire Manufacturing and NAHB Housing reports coming out. Neither is likely to make a big dent in the action. However, we may finally get some action with tomorrow’s heavy calendar (CPI, industrial production, housing starts, building permits), and Wednesday’s FOMC Meeting Minutes and crude oil inventories combo. On the deal front, Mid-America Apartment Communities (MAA) is buying Post Properties (PPS) for $3.9 billion to form a REIT giant. The CBOE equity put call ratio went out at 0.55, which is right around yearly lows. The ISE Sentiment Index hit 136 Friday (136 calls for every 100 puts). This implies some near-term complacency, but we’ve had near-term complacency for quite a while now and it hasn’t mattered. It still feels like folks are waiting for “something” to happen — a news event or a good-old fashioned breakdown/breakout — to bring some life back into the market. It feels like it’s in the wings, but since so many people are thinking it, maybe we don’t get it soon. But seriously, 25 days without a 1% move? That can’t last forever. Famous last words?
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 -->T3’s Take 3: Strong Oil Means More Bull Action
1) Crude Oil Booms Crude oil surged over $43 today in an extension of the rally off the August 2 lows. Saudi Arabia’s energy minister said that next month’s OPEC meeting in Algiers could include plans to stabilize the oil market. Plus, the International Energy Agency said that demand from refiners will help the global oil market rebalance this year, which quieted fears about record oil production in Saudi Arabia and other OPEC nations. This news had traders forgetting about this week’s bearish US oil inventory reports, and energy stocks rallied with a vengeance today, with oil service names especially strong. The Vaneck Vectors Oil Services ETF (OIH) rose 1.4% to $28.51 today. 2) Stocks Bounce Stocks responded well to the oil price surge, and the S&P 500 rose 0.5% to 2185.79, setting an all-time intraday high at 2188.14 The solid stock action had the VIX continuing its dip from yesterday’s 12.50 intraday high. Retail stocks got a nice bump on strong earnings from Macy’s (M) andKohl’s (KSS), while biotechnology (IBB) rebounded from a weak open to rise 1.1% to $291.91. The US dollar and Treasury yields rose today, putting pressure on bonds, and the real estate and utility stocks. 3) Jeff Cooper on the SPX This morning, my buddy Jeff Cooper issued a report with in-depth analysis of the SPX, saying the following: The SPX is either topping just below 2200 or is going to run to 2290 ish into the end of August/early September. Youse puts up ya money, yousetakes ya chances. Although the market does its diabolical best to misdirect players, it should be easy to see which one once Mr. Market shows its hand –probably over the next 2 to 3 days. We have had two quick downdrafts since last August. I suspect there could be 2 to 3 air pockets between August and October if the above Gann symmetry plays out — despite The Hand unleashing a swarm of V’s since last summer. Click here for the full report Friday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Retail Sales Advance MoM (Jul): exp. 0.40% , prior 0.60% 08:30 Retail Sales Ex Auto MoM (Jul): exp. 0.10% , prior 0.70% 08:30 Retail Sales Ex Auto and Gas (Jul): exp. 0.30% , prior 0.70% 08:30 Retail Sales Control Group (Jul): exp. 0.30% , prior 0.50% 08:30 PPI Final Demand MoM (Jul): exp. 0.10% , prior 0.50% 08:30 PPI Ex Food and Energy MoM (Jul): exp. 0.20% , prior 0.40% 08:30 PPI Ex Food, Energy, Trade MoM (Jul): exp. 0.20% , prior 0.30% 08:30 PPI Final Demand YoY (Jul): exp. 0.20% , prior 0.30% 08:30 PPI Ex Food and Energy YoY (Jul): exp. 1.20% , prior 1.30% 08:30 PPI Ex Food, Energy, Trade YoY (Jul): exp. , prior 0.90% 10:00 Business Inventories (Jun): exp. 0.10% , prior 0.20% 10:00 U. of Mich. Sentiment (Aug P): exp. 91.5 , prior 90 10:00 U. of Mich. Current Conditions (Aug P): exp. 109.5 , prior 109 10:00 U. of Mich. Expectations (Aug P): exp. 80 , prior 77.8 10:00 U. of Mich. 1 Yr Inflation (Aug P): prior 2.70% 10:00 U. of Mich. 5-10 Yr Inflation (Aug P): prior 2.60% 13:00 Baker Hughes U.S. Rig Count (8/12): prior 464 13:00 Baker Hughes U.S. Rotary Gas Rigs (8/12): prior 81 13:00 Baker Hughes U.S. Rotary Oil Rigs (8/12): prior 381 Global Economics 02:00 EUR German Prelim GDP q/q 05:00 Flash GDP q/q Earnings Before the Open: J C Penny Co. (JCP) After the Close: None of significance
Continue Reading -->Crude Oil Goes Boom… and 4 Other Thoughts on Today’s Action
Attention! This afternoon, T3 Live’s Dave Green is hosting a FREE trading webinar. Click here to learn how Dave crushes the market! 1) Crude Rips Crude oil is slamming above $43 on an International Energy Agency report saying the market will continue to rebalance as demand from refiners grow. Predictably, energy stocks (especially oil service names) are doing great work on the upside, and it’s also pulling up high-yield (HYG). The bull run off post-Brexit lows may ‘feel’ long in the tooth, but strong crude oil could help extend it. 2) If You’re a True Believer… If you think oil’s going to continue running higher, look at energy closed-end funds. They are still showing large discounts, which could close if oil prices rise. Names to watch include KMF, KYE, and GMZ. 3) ANOTHER Record High? Assuming crude oil can keep moving higher, SPX may be in for yet another record high today. A colleague commented today that since the market’s so high, it’s probably destined to crash soon. I’m technically short the market, but I fully understand the reality on the ground: what goes up must come down — but before it comes down, it may go up. A lot. 4) Still No Vol The VIX had a 13% spike from Tuesday’s low to Wednesday’s high, but it’s round-tripped most of the move. I popped in a daily chart of the VIX vs. 20-day realized volatility on the SPX: Both are at yearly lows as the sideways grind continues. Unless something drastic happens, we’re going on 24 days without a 1% move. I really should have gone on vacation this week because the action is so boring! 5) Bio-Blah Biotech is up a little but it’s still showing pretty anemic action overall. It’s partly good old-fashioned consolidation after a big run higher, but it could also be a sign of exhaustion. If IBB starts surging towards $300, I imagine it would give the bears quite a scare. Click here to check out Dave Green’s webinar today!
Continue Reading -->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 -->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)
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