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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 -->T3’s Take 3: Gold Screams on NFP Miss
Join Next 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 ********* By Michael Comeau 1) NFP Miss Today we got the big bad August nonfarm payrolls report, and unfortunately, it disappointed. The 151K headline number missed expectations by 29K, and unemployment came in below consensus. And perhaps most importantly, average hourly earnings rose just 0.1% month-over-month, missing the 0.2% consensus. The Fed doesn’t make decisions based on a single data point, but watch the trend: US economic data has been on a downtrend as of late, as you can see in this chart of the Citi US Economic Surprise Index: 2) Gold Rocks – But Has Anything Changed? Gold had been selling off since mid-August on an endless stream of hawkish comments from Fed officials. However, with today’s NFP miss, traders decided to once again buy what now looks like an oversold dip. Gold rose 0.9% to $1329/oz and the gold miners ETF (GDX) rallied an impressive 3.6%, putting it up 7.3% in 2 days. However, the rally in gold does not imply that traders believe the Fed will go on hold. The US dollar was remarkably strong today after an early dip, and US Treasury yields rose. The dollar and yields tend to go up when traders believe the Fed will raise rates. 3) Bulls Fight Back In recent days, tension clearly appeared on the tape, but today’s NFP miss wasn’t bad enough to derail the bull. The S&P 500 rose 0.4% to 2179.98, while the Russell 2000 rose an impressive 1.0%. And much to my chagrin, the VIX fell 11.4% to 11.95. Regional banks were strong again, and we also saw a nice intraday rally in large-cap tech names, with Apple (AAPL) pushing up 0.9% to $107.76. On the downside, biotech (IBB) fell on Presidential Candidate Hillary Clinton’s drug pricing plan, which is aimed at curbing “unjustified” drug price hikes. P.S. Don’t forget to check out our FREE trader training sessions.
Continue Reading -->The Morning Hammer: Happy Jobs Day!
It’s been about a decade since the market’s made a real move, but maybe we’ll get some excitement with this morning’s August NFP report, which hits the wires at 8:30 a.m. ET. Traders are looking for 180K on the headline number with a 4.8% unemployment rate and 0.2% month-over-month growth in average hourly earnings. With the way the dollar’s been acting, it seems like the market is expecting a beat, which would help clear the way for the Fed to raise rates. The Fed heads have been out in force as of late preparing the market for coming rate hikes, but the market itself may need a little more convincing. Fed funds futures are currently pricing in a 60% chance of a December rate hike. That’s up from just 9% post-Brexit, but still — it doesn’t exactly scream total certainty. So maybe if we get big numbers today (headline number above 220K and 0.3% growth average hourly earnings), those odds push higher. On the flip side, if we get an in-line report or a miss, I’d expect the gold bugs to have a big party while equities pull back. I’d especially watch for a selloff in regional banks (KRE). But no one really knows. SPX futures are doing nothing this morning, which should come as no surprise since they’ve been doing nothing for 2 months. As I’ve said about 10 million times, the SPX hasn’t had a 1% down day since June 27. But with jobs numbers hitting, I guess today’s as good a day as any to break this miserable streak. Crude oil is up this morning, giving us a break from the downtrend. Russian President Vladimir Putin said he’s like OPEC and Russia to reach a deal to freeze supply. Nigerian exports also fell in August. So for now, it’s steady as she goes, though I’m hoping that changes when the big jobs report hits.
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 Apple Bounce, and 4 Other Things I’m Watching
1) Apple Bounces Apple (AAPL) is down but well off its morning low, which was driven by the EU tax ruling. The final verdict is unknown, but even in the worst case scenario, Apple may not feel a thing from a financial standpoint. The real significance, however, is seen in other tech names who have Ireland tax exposure: Facebook (FB) and Google (GOOGL) are off today. But for now this seems more like an excuse to take profits rather than an end-of-world scenario. An excuse may be enough though… 2) Crude Oil Crude oil is pretty weak today ahead of inventory numbers from the API (reported after the close today) and the EIA (tomorrow morning). Iraq will support an output freeze at next month’s OPEC meeting in Algeria, according to Prime Minister Abadi. However, what OPEC actually will do remains a mystery. A lot of traders got stung by OPEC’s failure to freeze production in June, and some folks are justifiably afraid of a repeat. 3) Biotech Biotech (IBB) is pretty listless today. I regularly harp on biotech’s importance to any serious bull move, but it does feel like it’s getting worn out. Check out the chart — IBB lost the 20 day and the 50 is coming up fast. 4) The Hawk Trade The big hawk trade is still going as Fed rate hike expectations have increased quite a bitver the past month. Gold is getting roughed up and the dollar’s in full rip mode. Active stock traders should be watching the Regional Banks ETF (KRE). It’s not nearly as followed as XLF, but it moves a heck of a lot more. 5) Dove Soup And on the flip side, the dove trades (utilities, Treasuries, housing) are coming under pressure. Like Jeff Cooper, I’m closely watching the junior gold miners (GDXJ). They’re still up 131% YTD, so if gold keeps flopping, the miners have an awful lot of room to drop. However, just be aware that these trades really can go anywhere. At the Brexit, traders were pricing in basically zero chance of a rate hike. Now they see 60% odds. Any big shifts in the broader markets or economic data could shake things up.
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 -->T3’s Take 3: Janet Yellen Sets Off a Rollercoaster
1) Fed Follies: Jackson Hole Edition Traders were looking for a hawkish Yellen and a hawkish Yellen is what they got. At her highly-awaited Jackson Hole speech, Federal Reserve Chair Janet Yellen said that the case for rate hikes “has strengthened in recent months,” echoing recent hawkish comments from other Fed officials. Initially, the market made the obvious moves — the US dollar spiked, and gold and US Treasuries collapsed. However, the moves were very quickly retraced, with the dollar and gold falling. This implied the market was having a massive “sell the news” reaction to Yellen meeting market expectations. 2) The Reaction to the Reaction to the Reaction Following that counter-reaction, the big hawk trade — strong dollar and weak gold/bonds — continued. Here is an intra-day chart of the US dollar index starting at 8:00 a.m. ET, which is a pretty good illustration of the market reaction to Yellen’s speech: As you can see, the dollar briefly dove before skyrocketing into the equity market close. We saw similar zaniness in gold and US Treasuries. 3) Equity Traders Take a Little Ride Fed funds futures now imply a 63% probability of a December rate hike, up from 47% a week ago. The prospect of higher rates had equity traders taking profits. At one point, the S&P 500 looked like it may have its first 1% down day since June 27, and the VIX hit 14.93, a level not seen since early July. However, stocks crawled up into the close, with the index finishing down -0.2% at 2169.04. Stocks that benefit from lower interest rates, like utilities, gold miners, and real estate names, took major hits. On the plus side, biotechnology had a solid up day after afternoon failures on Wednesday and Thursday. P.S. Want to up your trading skills? Check out our free webinars! Monday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Personal Income (Jul): exp. 0.40%, prior 0.20% 08:30 Personal Spending (Jul): exp. 0.30%, prior 0.40% 08:30 Real Personal Spending (Jul): exp. 0.20%, prior 0.30% 08:30 PCE Deflator MoM (Jul): exp. 0.00%, prior 0.10% 08:30 PCE Deflator YoY (Jul): exp. 0.80%, prior 0.90% 08:30 PCE Core MoM (Jul): exp. 0.10%, prior 0.10% 08:30 PCE Core YoY (Jul): exp. 1.50%, prior 1.60% 10:30 Dallas Fed Manf. Activity (Aug): exp. -3, prior -1.3 Global Economics All Day GBP Bank Holiday 19:30 JPY Household Spending y/y 21:30 AUD Building Approvals m/m Earnings Before Open: None of significance After Close: None of significance
Continue Reading -->The Morning Hammer: Will Yellen Pull a Fast One at Jackson Hole?
All eyes are on FOMC Chair Janet Yellen’s 10:00 a.m. ET speech in Jackson Hole. Fed officials have been out in force the past few weeks pushing a hawkish narrative, and the market has responded. Fed fund futures now imply a 57% chance of a December rate hike, up from 47% a week ago and just 9% after the 6/24 Brexit. 57% is far from certain. However, the trend has been up, and the trend is what counts. This has been pushing up bank stocks and putting pressure on gold, particularly the miners (GDX). So now we’re at an interesting juncture. If Yellen indeed comes out hawkish as many traders expect, I wonder if we get an immediate spike in the dollar and dip in gold, with both moves getting reversed by the end of the day. I almost feel like all the Fed heads have been overselling the idea that rate hikes are coming, which could set up a sell the news situation. On the flip side, if we get a repeat of June — doves flying when everyone’s looking for hawks — expect a monumental rally in GDX. SPX futures are as flat as an ironing board, and crude oil is down fractionally. Aside from all the Fed-sanity, I’m really interested to see what biotech does. For 2 straight days, IBB has gone from first in the morning to worst in the afternoon on heavy volume. (see chart) The alleged cause has been Presidential candidate Hillary Clinton’s attacks on Mylan’s (MYL) pricing practices, which raises fears about future price controls. The reality is that no politician — not even the President of the United States — can simply wave a magic wand and lower drug prices. So I wonder if traders have been looking for excuses to sell, and Hillary happened to serve it up. IBB is down -16% on the year, but it’s also up 19% from its February low. We’ve also got GDP, U. of Michigan Sentiment, and the Baker Hughes Rig Count on the economic calendar. So maybe, just maybe we’ll get some excitement today after 34 days without a 1% move in SPX.
Continue Reading -->T3’s Take 3: The Fed Is Dead Ahead
The power of quantified trading… Next Thursday, T3’s Rob Smith is hosting a special strategy session on his unique Quant Edge methodology. Learn more about it. 1) All Eyes on Yellen Traders are eagerly awaiting Fed Chair Janet Yellen’s speech in Jackson Hole at 10:00 a.m. ET tomorrow. Fed officials have been very hawkish as of late, and today, Kansas City Fed President Esther George said on Bloomberg TV that higher rates were warranted since the US is near full employment with rising inflation. Dallas Fed President Robert Kaplan also offered hawkish comments on CNBC,. Traders are now pricing in a 55% chance of a December rate hike, up from 47% 2 weeks ago and just 9% after the June 24 Brexit. However, keep in mind that the Fed has been fairly unpredictable this year. So it will be interesting to see if Yellen gives the hawkish statements everyone is expecting. 2) Flat as an Ironing Board The market once again went nowhere, with the S&P putting in its 34th day without a 1% move. The index finished down -0.01% at 2172.47, and there wasn’t much action in the other indices either. Economic data mostly solid today, with jobless claims and durable goods coming in better-than-expected. The data supports the case for Fed rate hikes. This and all the hawkish chatter sent up regional bank stocks, and pushed gold lower. And in a near-perfect repeat of yesterday, biotech stocks led in the early going before falling hard in the afternoon on pricing controversies. The Nasdaq Biotech ETF (IBB) fell -1.2% to 282.87. 3) Jeff Cooper’s Take on Biotech Here’s what Jeff Cooper had to say about the action in IBB: Yesterday, I mentioned that the fall in the biotechs on the heels of Hilary’s comments reminded me of the pop in the bubble in 2000 on Bill Clinton’s and Tony Blair’s comments on biotech and the genome. A daily IBB chart shows yesterday’s large range outside down day (LROD or Lighting Rod) on a large increase in volume. Yesterday’s lows nominally undercut the prior peaks from the spring and summer and the previous breakout pivot. IBB is in a potentially weak position if today is a Pause Day prior to downside follow-though. P.S. Sign up for one of our FREE trading webinars. US Economics (Time Zone: EDT) 08:30 Advance Goods Trade Balance (Jul): exp. -$63.0b, prior -$63.3b 08:30 Wholesale Inventories MoM (Jul P): exp. 0.10%, prior 0.30% 08:30 GDP Annualized QoQ (2Q S): exp. 1.10%, prior 1.20% 08:30 Personal Consumption (2Q S): exp. 4.20%, prior 4.20% 08:30 GDP Price Index (2Q S): exp. 2.20%, prior 2.20% 08:30 Core PCE QoQ (2Q S): exp. 1.70%, prior 1.70% 10:00 Fed Chair Yellen to Speak at Jackson Hole Policy Symposium 10:00 U. of Mich. Sentiment (Aug F): exp. 90.8, prior 90.4 10:00 U. of Mich. Current Conditions (Aug F): prior 106.1 10:00 U. of Mich. Expectations (Aug F): prior 80.3 10:00 U. of Mich. 1 Yr Inflation (Aug F): prior 2.50% 10:00 U. of Mich. 5-10 Yr Inflation (Aug F): prior 2.60% 13:00 Baker Hughes U.S. Rig Count (8/26): prior 491 13:00 Baker Hughes U.S. Rotary Gas Rigs (8/26): prior 83 13:00 Baker Hughes U.S. Rotary Oil Rigs (8/26): prior 406 Global Economics 04:00 EUR M3 Money Supply y/y 04:30 GBP Second Estimate GDP q/q 04:30 GBP Prelim. Business Investment q/q All Day Jackson Hole Symposium Earnings Before Open: Big Lots (BIG) After Close: None of significance
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